iSTATE OF __________ ) Return
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)ss.
COUNTY OF _________ )
THIS AGREEMENT, made and entered
into and effective December 1, 2004 between RED CROWN ROYALTIES, LLC, a
Colorado Limited Liability Company, whose mailing address is P.O. Box 888,
Littleton, Colorado 80160-0888, hereinafter referred to as “Lessor,” and
Company, whose mailing address is Street, City, State Zip Code, hereinafter referred to as “Lessee”;
WITNESSETH, that the said Lessor
for and in consideration of the sum of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
and of the covenants and agreements hereinafter contained on the part of Lessee
to be paid, kept and performed, has granted, demised, leased and let and, by
these presents, hereby does grant, demise, lease and let, unto Lessee, for the
purpose of investigating, exploring, prospecting, and drilling for and
producing oil and/or gas, laying pipelines and building tanks, roads, power
stations and other structures thereon necessary to produce, save, store and
collect such products from the land covered by this Oil and Gas Lease, the oil
and gas mineral rights lying in and under the following described tract
situated in County, State to wit:
Township:, Range:
Section
:
Encompassing
_____, more or less, said lands above specified being hereinafter referred to
as the “lease acreage,” subject to the following provisions:
1. PRIMARY
TERM: This lease shall remain in force for a primary term of three (3)
years effective date hereof, and as long thereafter as oil or gas shall be
produced and saved in paying quantities from the lease acreage, or drilling or
reworking operations are conducted thereon without cessation of more than
thirty (30) days.
2. RELEASE
OF LEASE: At the end of the primary term, Lessee shall execute and record a
release of this lease insofar as it covers any part of the lease acreage not
being extended past the primary term by the operative provision set forth in
Paragraph 1. above.
3. ROYALTIES:
Royalties on oil and gas produced and saved hereunder shall be paid monthly to
Lessor as follows:
(a) For oil, the royalty shall be the greater of (i) three sixteenths
(3/16) of the gross proceeds realized by Lessee from the sale thereof, free of
cost to the point of sale or (ii) three sixteenths (3/16) of the market value of
the oil, free of cost through the lease tanks.
(b) For gas, including casinghead gas, the royalty shall be the
greater of (i) three sixteenths (3/16) of the gross proceeds realized by Lessee
from the sale thereof (including the sale of residue gas and extracted
liquids), free of cost through the point of sale or (ii) three sixteenths
(3/16) of the market value of the gas (including extracted liquids), free of
cost at the tailgate of the plant if the gas is processed for the extraction of
liquids and at the point of delivery into an interstate pipeline if the gas is
not processed for the extraction of liquids.
(c) In no event will royalties hereunder be based on a value or price
per unit of production that is less than the value or price per unit upon which
royalties would be due if this lease had been issued by the United States of
America under the Minerals Land Leasing Act.
(d) Lessor reserves the right, but shall not have the obligation, to
take its three sixteenths (3/16) royalty share of oil and/or gas in kind, to be
delivered to Lessor (i) into lease tanks in the case of oil, (ii) at the
tailgate of the liquids extraction plant in the case of gas processed for the
extraction of liquids, and (iii) at the point of delivery into an interstate
pipeline if the gas is processed for the extraction of liquids.
(e) The royalty set forth in this paragraph 3 is exclusive of, and
not diminished by, any other burden of any nature that may be associated with
the minerals being leased hereunder.
4. DELAY
RENTALS: In addition to the bonus, this lease shall have a delay rental of
$______ equals a payment of $1.00 per acre per year for the last two years of
the primary term of the lease. These delay rentals shall be paid, in full, at
the time the lease bonus is paid, and shall be received by Lessor before the
lease is issued. For purposes of calculation of rental payments, the acreage
listed in this lease shall be controlling.
5. POOLING:
Lessee is hereby authorized to pool and combine the lease acreage with other
leases and lands, or interests therein, so as to form a consolidated unit, as
prescribed by appropriate governmental authority, but, in the event said lease
acreage shall be pooled and unitized by Lessee with other leases and lands, or
interests therein, so as to form a consolidated unit, a proportionate part of
all production from said consolidated unit, without regard to the location of
the well or wells within said consolidated unit from which produced, equal to
that proportionate part thereof of which the aggregate number of surface acres
in said lease acreage bears to the aggregate number of surface acres in all of
said consolidated unit, shall be treated as though produced in its entirety
from said lease acreage; and the royalties hereinabove specified shall be
applicable to, and shall constitute a burden against, such proportionate part
of said production from said consolidated unit. If not spaced by the
governmental authority having jurisdiction, said spacing unit shall be deemed
to be 160 acres for gas and 40 acres for oil.
6. SHUT-IN
PAYMENTS: While there is a well on this lease or on acreage pooled
therewith, which well is capable of producing only gas, gas condensate, or some
combination of gas and gas condensate in paying quantities, but from which
production is not being sold or used, this lease shall be extended for a period
of one year (1 year) from the date such well is shut-in, and the Lessee may
tender or pay annually as royalty the sum of One Dollar ($1.00) for each net
mineral acre covered hereby, payment or tender of such royalty may be made by
check or draft of Lessee mailed or delivered to Lessor, with the first payment
to be made on or before one year (1 year) from and after the date on which such
well is shut-in, and if such payments are so made, it shall be considered that
gas, gas condensate, or a combination of gas and gas condensate is being
produced in paying quantities from such well under all the terms, conditions
and limitation of this lease. In no event may this lease be extended under the
provisions of this paragraph 6. for more than twenty-four (24) months in any
five year period.
7. LESSER
INTEREST: If Lessor owns a lesser interest in the lease acreage than the
entire and undivided oil and gas fee simple estate therein, then, all royalties
herein shall be paid Lessor only in the proportion which its interest bears to
the whole and undivided oil and gas fee.
8. SURFACE
RIGHTS: When requested by the surface owner, or by a lessee of the surface
owner, Lessee shall bury its pipelines below plow depth. No well shall be
drilled nearer than two hundred (200) feet to the house or barn now on the
lease acreage, without the written consent of the surface owner. Lessee shall
pay for damages to the surface of said land caused by its operations. Insofar
as Lessor has the right to grant such privilege, Lessee shall have the right at
any time during the term of this lease and for six (6) months thereafter to
remove all machinery and fixtures placed on said lease acreage, including the
right to draw and remove casing.
9. GEOLOGICAL
REQUIREMENTS: FURNISHING SAMPLES, DATA, AND WELL INFORMATION.
Unless other written arrangements are made prior to reaching total depth, it is
the responsibility of the LESSEE, at its own cost, to transport all sample
logs, survey and furnish all other information and data to LESSOR. The
following geologic and well information requirements must be furnished to
fulfill the contract obligations of this Oil and Gas Lease:
(a) Daily drilling reports faxed daily to (303) 794-9261.
(b) One copy of the following reports and information mailed, faxed
or couriered to Lessor at Lessor’s address on a timely basis.
Report/Form
1) Permit application; plugging reports, and completions reports
2) Compilation of daily drilling reports
3) All Wireline Logs (Final Prints); Final Mudlog and Mudlogger’s
Report (if applicable)
4) Final drillstem, RFT, core analysis reports as prepared by the testing
companies (no photocopies)
5) Final reports of water analyses and/or hydrocarbon analyses
6) Samples and cores
7) Name and address of oil and gas sales purchasers together with
date of first sales
(c) Lessee shall furnish Lessor the information and data described
herein and shall otherwise comply with the provisions of, the Geological
Requirements set forth in this Oil and Gas Lease . Lessee shall furnish to
Lessor authentic itemized monthly reports of all production from or attributable
to the lease acreage. Such reports shall be mailed to Lessor not later than the
fifteenth (15th) date of the month following that for which the reports are
made. In recognition of the business necessity of Lessor receiving these
reports in a timely fashion, Lessee, by acceptance of this lease, agrees to pay
as partial liquidated damages to Lessor, the sum of Two Hundred Dollars
($200.00) for each month or portion thereof that Lessee fails to furnish these
reports in a timely manner, together with interest at the highest rate allowed
by law plus all costs of collection, including attorneys’ fees. The foregoing
payment shall be in addition to any share of revenue attributable to any
interest in the lease acreage owned by Lessor. In addition, Lessor shall have
the right to audit and review all information (including without limitation,
all books, records, contracts, correspondence, run tickets, evidence of sales
and shipments, reports and analyses, and electronically stored information and
data) possessed by or available to Lessee which may be pertinent to the
determination of the payment of royalty or other amounts due under this lease,
at the office where such information is maintained. Such information shall
include that submitted to third parties (including government entities)
respecting production from the lease acreage or lands pooled therewith and
relating to any royalty or to any tax based upon the value of production. In
conjunction with any audit Lessee shall, to the fullest extent practicable, assemble
and present the information so that it is complete.
10. INDEMNITY:
Lessee shall defend, indemnify and save and hold harmless Lessor and Lessor’s
members and managers, and their respective shareholders, directors, members,
managers, partners, officers, employees and agents (the “indemnified parties”)
for, from and against and shall promptly reimburse each indemnified party with
respect to any and all claims, demands, suits, causes of action, losses,
damages, liabilities, fines and sanctions, punitive and exemplary damages,
judgments, amounts paid in settlement, assessments, costs and expenses
(including, without limitation, attorneys’, consultants’ and experts’ fees and
expenses, other expenses of litigation, and court costs) of any kind or of any
nature whatsoever that are asserted against, incurred or suffered by an
indemnified party, which in any way arise from or are attributable to (i) the
breach of any covenant, agreement or undertaking of Lessee contained in this
lease, (ii) any violation of any law, rule or regulation by Lessee (including,
without limitation, any law relating to the protection of the environment or
public or worker health or safety), or (iii) to the extent attributable to any
operation, act or omission of Lessee, whether on or off the lease acreage: (A)
any personal injury or property damage, including, without limitation claims by
surface owners, (B) the presence, release, threatened release, discharge or
emission into the environment of any hazardous, toxic or other substance (including,
without limitation, any oil, gas or associated liquids) arising on, beneath or
above the lease acreage and/or emanating or migrating and/or threatening to
emanate or migrate to or from the lease acreage to or from another acreage, or
(C) physical disturbance of the environment. For purposes of this paragraph 10
and the other provisions of this lease (but expressly without creating any
rights or claims in third persons other than the indemnified parties), and
action or omission of any of Lessee’s employees, agents, contractors, operators
or invitees shall be deemed to be the act or omission of Lessee. Lessee shall
cause any insurance policies maintained by Lessee relating to Lessee’s
interests under this lease or Lessee’s operations on the lease acreage to name
Lessor as an additional named insured and Lessee shall provide certificates
describing such coverages to Lessor.
11. ASSIGNABILITY:
Lessee shall not assign this lease or any interest therein without the specific
written consent of Lessor. The covenants hereof shall extend to the respective
successors or assigns of Lessor and Lessee, but no change in the ownership of
the land or assignment of royalties shall be binding on Lessee until after
Lessee has been furnished with a true copy thereof.
12. NO
WARRANTY: This lease is executed and delivered by Lessor, and said lease is
accepted by Lessee, without warranty of title or any other matter, express or
implied. This lease shall not cover or extend to any additional interests of
any kind acquired by Lessor in the lease acreage or any well located thereon
after the date of this lease and such additional interests, if any, shall be
deemed to be owned and held separately by Lessor and shall not be deemed to
have merged into the interests of Lessor covered by this lease.
13. EFFECT
OF LEASE: The terms and provisions of this lease shall be binding upon, and
shall inure to the benefit of, Lessor, and Lessee and their respective heirs,
successors and assigns.
14. TAXES:
Lessee shall pay before the same become delinquent all taxes, assessments or
other governmental charges whatsoever levied upon or assessed or charged
against any of Lessee’s rights hereunder or any equipment, facilities, plants,
machinery, improvements or any other real or personal property placed upon the
lease acreage by Lessee. In addition, Lessor shall pay its royalty share, and
Lessee shall pay the balance, of all real property, ad valoren and other taxes
assessed upon the oil and gas mineral estate or upon oil and gas upon in place in
the lease acreage, and all severance, production, net proceeds or other taxes
or assessments based on or measured by production of oil or gas from or
attributable to the lease acreage.
15. COMPLIANCE
WITH LAW; PLUGGING AND ABANDONMENT; RETENTION OF IMPLIED COVENANTS; INSPECTION:
Lessee shall comply with all laws, rules and regulations applicable to its
operations and activities on or associated with the lease acreage or acreage
pooled therewith. Without limiting the generality of the foregoing, Lessee agrees
to plug and abandon all wells and facilities and reclaim all well and facility
sites on the lease acreage in accordance with and when required by all
applicable laws, rules and regulations, but no later than the expiration,
termination or surrender of this lease. Lessee shall pay or cause to be paid
when due all costs and charges for work done by it or caused to be done by it
on the lease acreage. Notwithstanding any other provision of this lease or any
express covenant made herein, Lessor retains and shall be entitled to the
benefit of and to enforce all of Lessee’s implied covenants, including without
limitation, Lessee’s implied covenant to explore, develop, operate prudently,
protect from drainage and market production from the lease acreage. Lessor shall
have the right, at its sole risk and expense, to enter upon the lease acreage
and to examine work done and in progress thereon and to inspect Lessee’s
equipment, works, tanks, facilities, pipelines and other improvements thereon.
16. LEASE
RECORDING: Lessee, at its sole cost,
shall furnish Lessor with a recorded copy of this Oil and Gas Lease after
recording same in the records of the county where the LEASE ACREAGE is
situated.
IN WITNESSETH WHEREOF, this instrument
is executed as of the day and year first above written.
RED CROWN ROYALTIES, LLC
________________________________________
By:
Ronald E. Hornig, Manager
STATE
OF
)ss.
The foregoing instrument was
acknowledged before me this ________ day of
____________________________________ , 2004 by Ronald E. Hornig,
as
Manager on behalf of Red Crown Royalties, LLC, a
WITNESS my hand and official
seal. _________________________________________________________________
Notary Public