OIL, GAS AND MINERAL LEASE
THIS AGREEMENT made this day of April 26, 1996, between XXXXXX XXX XXXXXX
1992 INVESTMENT TRUST, Xxxxxxxxx Xxxxxx Xxxxxx, Trustee of 0000
Xxxx 00xx Xx., Xxxxxx, Xxxxx 00000
Lessor (whether one or more), and PILARES OIL & GAS, INC. 0000 X 0XX XXXXXXX,
XXXXX 00000
Lessee, WITNESSETH:
1. Lessor in consideration of TEN DOLLARS Dollars ($10.00) in hand paid,
of the royalties herein provided, and of the agreements of Lessee herein
contained, hereby grants, leases and lets exclusively unto Lessee for the
purpose of investigating, exploring, prospecting, drilling and mining for
and producing oil, gas and all other minerals, laying pipe lines,
building tanks, power stations, telephone lines and other structures
thereon to produce, save, take care of, treat, transport, and own said
products, and housing its employees, the following described land in
PECOS county, Texas, to-wit:
484.25 ACRES OUT OF SURVEY 9 A-4884 CERT 1598, XXX 000 T.C.R.R. CO. 483.1
ACRES OUT OF SURVEY 16 CERT 1598, XXX 0000 T.C.R.R. CO. A-5450 817. 07 ACRES
OUT OF SURVEY SF 14162 X.X. XXXXXXXXXX A-9333 (WEST) 722 ACRES OUT OF SURVEY
24 BLK-170 T.C.R.R. CO. 570.67 ACRES OUT XX XXXXXX 00, XXX 000 X.X.X.X. XX.
X-0000 640 ACRES OUT OF SURVEY 20, BLK 170 T.T.R.R. CO.
and containing 3,717.09 acres more or less. In the event a resurvey
of said lands shall reveal the existence of excess and/or vacant lands
lying adjacent to the land above described and the lessor, his heirs,
or assigns, shall, by virtue of his ownership of the lands above described,
have preference right to acquire said excess and/or vacant lands, then in
that event this lease shall cover and include all such excess and/or vacant
lands which the lessor, his heirs, or assigns, shall have the preference
right to acquire by virtue of his ownership of the lands above described
as and when acquired by the lessor; and the lessee shall pay the
lessor for such excess and/or vacant leads at the same rate per acre
as the cash consideration paid for the acreage hereinabove mentioned.
2. Subject to the other provisions herein contained, this lease shall be for
a term of ten years from this date (called "primary term") and as long
thereafter as oil, gas or other mineral is produced from said land hereunder.
3. The Royalties to be paid Lessor are (a) on oil, one-eighth of that
produced and saved from said land, the same to be delivered at the xxxxx or
to the credit of Lessor into the pipe line to which the xxxxx may be
connected: Lessee may from time to time purchase any royalty oil in its
possession, paying the to market price therefor prevailing for the field
where produced on the date of purchase: (b) on gas, including casinghead
gas or other gaseous substance, produced from said land and sold
or used off the promises or in the manufacture of gasoline or other product
therefrom, the market value at the well of one-eighth of the gas so sold
or used, provided that on gas sold at the xxxxx the royalty shall be
one-eighth of the amount realized from such sale; where gas from a well
producing gas only is not sold or used. Lessee may pay as royalty
$50.00 per well per year, and upon such payment it will be considered that
gas is being produced within the meaning of Paragraph 2 hereof; and (c)
all other minerals mined and marketed, one-tenth either in kind or
value at the well or mine, at Lessee's election, except that on
sulphur the royalty shall be fifty cents (50c) per long ton.
Lessee shall have free use of oil, gas, coal, wood and water
from said land, except water from Lessor's xxxxx, for all operations
hereunder, and the royalty on oil, gas and coal shall be computed after
deducting any so used. Lessor shall have the privilege at his risk
and expense of using gas from any gas well on said land for stoves
and inside lights in the principal dwelling thereon out of any surplus
gas not needed for operations hereunder.
4. If operations for drilling are not commenced on said land on or before
one Year from this date the lease shall then terminate as to both parties
unless on or before such anniversary date Lessee shalt pay or tender to
Lessor or to the credit of Lessor in _______ Bank at _________ (which
bank and its successors are Lessor's agent and shall continue as
the depository for all rentals payable hereunder regardless of
changes in ownership of said land or the rentals) the sum of
SEVEN THOUSAND FOUR HUNDRED THIRTY-FOUR AND 18/100 Dollars
(herein called rental), which shall cover the privilege of deferring
commencement of drilling operations for a period of twelve (12) months.
In like manner and upon like payments or tenders annually the commencement of
drilling operations may be further deferred for successive periods of
twelve (12) months each during the primary term. The payment or tender
of rental may be made by the check or draft of Lessee
mailed or delivered to said bank on or before such date of payment if such
bank (or any successor bank) should fail, liquidate or be succeeded by
another bank, or for any reason fall or refuse to accept rental. Lessee
shall not be held in default for failure to make such payment or tender of
rental until thirty (30) days after Lessor %hall deliver to Lessee a proper
recordable instrument, naming another bank as agent to receive such payments
or Lenders. The down cash pay Is consideration for this lease according to
Its terms and shall not be allocated to were rental for a period. Lessee may
at any time execute and deliver to Lessor or to the depositors above named
or place of record it release or releases covering any portion or portions
of the above described premises slid then by surrender this lease as to such
portion or portions and be relieved of all obligations an to the acreage
surrendered. and thereafter the rentals payable hereunder shelf be reduced
at the proportion that the acreage covered hereby is reduced by said release
or releases. In this connection the above described premises shall be
treated as comprising 3717.09 acres whether there be more or less.
5. If prior to discovery of oil or gas on said land Lessee should drill a
dry hole or holes thereon, or if after discovery of oil or gas the
production thereof should cease from any cause, this lease shall not
terminate if Lessee commences additional drilling or re-working
operations within sixty (60) days thereafter or (if it be within the
primary term) commences or resumes the payment or tender of rentals
on or before the rental paying date next ensuing after the expiration
of three months from date of completion at dry hole or creator of production.
If at the expiration of the primary term oil, gas or other mineral is not
being produced on said land but Lessee is then engaged in drilling or
re-working operations thereon, the lease shall remain in force so long as
operations are prosecuted with no cessation of more the than 90 consecutive
days, and if they result in the production of oil, gas or other minerals so long
thereafter as oil, gas or other mineral is produced from said land.
In the event a well or xxxxx producing oil or was in paying quantities should
be brought in on adjacent land and within one hundred fifty (150)
feet of and draining the leased premises. Lessee agrees to drill such
offset xxxxx as a reasonably prudent operator would drill under the
same or similar circumstances.
6. Lessee shall have the right at any time during or after the expiration
of this lease to remove all property and fixtures placed by Lessee on said
land. Including the right to draw and remove all casing. When required by
Lessor, Lessee will bury all pipe lines below ordinary plow depth, and no
well shall be drilled within two hundred (200) feet of any residence or barn
now on said land without Lessor's consent.
7. The rights or either party hereunder may be assigned in whole or in part
and the provisions hereof shall extend to the heirs, successors and assigns,
but no chance or divisions in ownership of the land, rentals, or royalties,
however accomplished, shall operate to enlarge the obligations or diminish
the rights of Lessee. No sale or assignment by Lessor shall be binding on
Lessee until Lessee shall be furnished with it certified copy of recorded
instrument evidencing same. In event of assignment of this lease as to
a segregated portion of said land, the rentals payable hereunder shall
be apportionable as between the several leasehold owners ratably according
to the surface area of each, and default in rental payment by one shall
not affect the rights of other leasehold owners hereunder. If six or more
parties become entitled to royalty hereunder, Lessee may withhold
payment thereof unless and until furnished with a recordable instrument
executed by all such parties designating an agent to receive payment for
all.
8. [OMITTED]
9. Lessor hereby warrants and agrees to defend the title to said land
and agrees that Lessee at its option may discharge any tax, mortgage
or other lien upon said land and in event Lessee does so, it shall be
subrogated to such lien with the right to enforce same and apply
rentals and royalties accruing hereunder toward satisfying same.
Without impairment of Lessdee's rights under the warranty in event
of failure of title, it is agreed that if Lessor ownds an interest
in said land less than the entire fee simple estate, then the royalties
and rentals to be paid Lessor shall be reduced proportionately.
10. If any operation permitted or required hereunder, or the
performance by Lessee of any covenant, agreement or requirement
hereof is delayed or interrupted directly or indirectly by any
past or future acts, orders, regulations or requirements of
the Government of the United States or of any state or other
governmental body, or any agency, officer, representative or
authority of any of them, or because of delay or inability to get
materials, labor, equipment or supplies, or on account of any other
similar or dissimilar cause beyond the control of Lessee, the
period of such delay or interruption shall not be counted against
the Lessee, and the primary term of this lease shall automatically be
extended after the expiration of the primary term set forth in
Section 2 above, so long as the cause or causes for such delays
or interruptions continue and for a period of six (6) months
thereafter; and such extended term shall constitute and shall
be considered for the purpioses of this lease as a part of the
primary term hereof. The provisions of Section 4 hereof, relating
to the payment of delay rentals shall in all things be applicable
to the primary term as extended hereby just as if such extended term
were a part of the original primary term fixed in Section 2 hereof.
The Lessee shall not be liable to Lessor in damages for failure
to perform any operation permitted or required hereunder or to
comply with any covenant, agreement or requirement hereof during the
time Lessee is relieved from the obligationsd to comply with
such covenants, agreements or requirements.
11. Further provisions of this Lease are set forth in the
attached "Addendum to Lease."
IN WITNESS WHEREOF, this instrument is executed on the date
first above written.
XXXXXX XXX XXXXXX 1992 INVESTMENT TRUST
By:/s/Xxxxxxxxx Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx Xxxxxx, Trustee
Witnesses:
/s/Xxxxxx X. Xxxx
SINGLE ACKNOWLEDGMENT
THE STATE OF TEXAS )
COUNRY OF )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared XXXXXXXXX XXXXXX XXXXXX, Trustee
of the XXXXXX XXX XXXXXX 1992 INVESTMENT TRUST known to me to be the
person whose name subscribed to the foregoing instrument, and acknowledged
to me that he executed the same for the purposes and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 26th day of April A.D. 1996
XXXXXXXXX X. XXXXXX) /s/Xxxxxxxxx X. Xxxxxx
Notary Public)
State of Texas)
My Commission Expires 01/27/97)
ADDENDUM TO LEASE
ATTACHED TO AND MADE A PART OF THAT CERTAIN OIL, GAS AND MINERAL LEASE DATED
APRIL 26,1996, BY AND BETWEEN THE XXXXXX XXX XXXXXX 1992 INVESTMENT TRUST,
LESSOR, AND PILARES OIL & GAS, INC., LESSEE.
1. Lessee and/or its employees and agents shall have the exclusive right to
enter on said lands, or any portion thereof, for the purpose of conducting
seismic survey(s) and/or other geophysical explorations ("Survey"). The
"Survey" shall consist of conducting geophysical operations over and across
the said lands that Lessee, in its sole discretion, shall determine and deem
reasonable and necessary subject to the terms and conditions set out herein.
2. The consideration for the execution of this lease shall be $5.00 per
net surface acre of the said lands owned by Lessor.
3. Lessor agrees that the payment of the consideration hereinabove recited
includes and is accepted by Lessor as payment for damages if any, to the
described lands resulting from said seismic operations except however, for
any damages that may result from Lessee, its assigns or agent's negligence,
and except for damages, if any, to growing crops on the lands hereinabove
described will be paid to Lessor by Lessee based upon the reasonable market
value thereof assuming the harvest of a normal crop. Upon receipt of
payment, as set forth hereinabove, Lessor, Lessor's heirs, successors, and
assigns, shall forever remise, release, acquit, and discharge Lessee,
Lessee's affiliates, Lessee's agents, and independent contractors hired by
Lessee from and all manner of action and actions, cause and causes of
action, suits, claims, and damages that may arise as a result of geophysical
operations being conducted by the same.
4. Lessee shall at all times use reasonable care in all of its operations on
the leased premises to prevent injury or damage to the cattle, livestock,
building or other property of Lessor or Lessor's tenant situated on the
surface of said land, or Lessor's water xxxxx and without limitation, all
other property of Lessor situated on the surface of the leased premises
resulting from Lessee's operations on the leased premises.
5. Notwithstanding anything herein to the contrary, it is agreed and
understood that the lease premises shall not be pooled with any acreage not
owned by Lessor without Lessor's consent unless it is necessary to comply
with the spacing regulations or unit regulations of the Railroad Commission
of Texas or other governmental, authority having jurisdiction, so as to
permit the drilling of a well, or the production of a well, on the lease
premises or upon adjacent acreage not covered by this lease, therefore not
requiring Lessor's consent.
6. It is agreed and understood that the term of 'ten (10)" years as set
out in Paragraph No. 2 of this lease is changed to read "five (5)" years.
7. Notwithstanding anything in this lease to the contrary royalty on oil and
gas, shall be twenty percent (20%) of oil and gas produced and saved under
the terms of this lease, and wherever in Paragraph No. 3 of this lease the
fraction one-eighth (1/8) appears, same shall be deemed to read twenty
percent (20%).
8. (a) Notwithstanding any provision herein to the contrary, it is agreed that
at the end of the "primary term" of this lease, this lease shall terminate
insofar as it pertains to all lands not then included in the proration unit
of a producing well as designated by Lessee in accordance with the spacing
regulations of the Railroad Commission of Texas, provided that the proration
unit of a producing well shall never be designated to consist of more than
the smallest number of acres necessary to obtain the maximum allowable for
such well under applicable rules and orders of the Railroad Commission.
Lessee agrees to file for record a release covering those lands so terminated.
Notwithstanding the termination of this lease as to a portion of the lands
described above, if any Lessee shall continue to have the right of ingress
and, egress on all of said lands for all purposes described and allowed
under the terms of this lease as necessary to Lessee's continuing operations
on the lands remaining under this lease together with easements,
rights-of-way roads, pipelines and other, facilities on, over and across all
the lands originally covered by this lease for access to and from the lands
still subject to this lease and for the
gathering or transportation of oil, gas and associated hydrocarbons produced
from tile retained lease premises.
(b) If after the expiration of tile primary term, production from any well
should cease for any cause, this lease shall not terminate as to that
portion of the leased premises included in a proration unit for such well if
reworking operations are commenced within (90) days or actual drilling
operations are commenced within one hundred twenty (120) days from that date
such well ceased to produce and such operations are conducted continuously
with no cessation greater than this (30) days, and upon the termination of
such (30) day term upon which no operations have been conducted and no oil
and gas, or either of them is being produced in paying quantities, this
lease shall terminate as to that portion of the leased premises included in
the proration unit for such well upon which operations were so conducted.
(C) The right of continuous development provided for herein below shall be
commenced solely at Lessee's option and the actual date for commencement of
said continuous development shall be determined as follows. If Lessee has
drilled a dry hole on the leased premises within sixty (60) days prior to
the end of the primary term, the commencement date of the continuous
development shall be ninety (90) days from the date such well was plugged
and abandoned. If Lessee has completed a well on the leased premises capable
of producing oil and gas and other hydrocarbons produced with oil and gas in
commercial quantities prior to the end of the primary term, then the
commencement date of the continuous development shall be ninety (90) days
after the primary term. In the event a well has not been completed on the
leased premises prior to the end of the primary term, and no dry hole has
been drilled as provided above, then in order to commence the continuous
development Lessee must commence operations for drilling on the leased
premises before the end of the primary term. Once the continuous development
has commenced this lease shall remain in full force and effect as to the
lands as long as Lessee drills, or causes to be drilled, xxxxx on the leased
premises with a lapse of not more than ninety (90) days between the
completion or abandonment of one well and the commencement of operations for
drilling of the next well. For the purposes of interpretation of this
provision a well shall be deemed to be commenced on that date actual
drilling first occurs for such well, and the completion or abandonment date
of a sell shall be deemed to be on that date the official Texas Railroad
Commission potential test occurs or that date that actual plugging occurs
for such well, but in no event more than one hundred twenty (120) days
following the commencement of actual drilling of such well.
(d) It is understood and agreed that should Lessee fail to commence timely
the continuous development or if at any time said maximum time for
commencement of operations for drilling a well under the continuous
development should expire without the commencement of operations for
drilling of any such additional well then it shall be considered that such
continuous development was discontinued at the expiration of said period.
The only penalty to Lessee for the discontinuance of such continuous
development shall be the termination of this lease, save and except as to
all acreage which is included in proration units allocated to either xxxxx
which are capable of producing oil, gas and other minerals in commercial
quantities or xxxxx upon which Lessee is then conducting operations to
establish or restore oil and/or gas production.
9. Notwithstanding anything herein to the contrary, Lessee shall have the
right of ingress and egress to and from the lease premises across any land
now or hereafter owned by Lessor, their heirs, successors or assigns solely
to the extent necessary to the operations of any lands covered by this
lease. Such ingress and egress shall be along such routes as Lessor and
Lessee shall mutually agree upon.
10. Lessee agrees to pay to Lessor surface damages in the amount of
$2,000.00 for each location drilled hereunder in proportion to Lessor's
surface ownership of said lands. Lessee shall pay such surface damages to
the surface owner(s)( in proportion to such ownership, as determined by
public record.
11. Lessor reserves the right to restrict Lessee's use of Lessor's above
ground water for drilling purposes. However, should Lessee accept Lessor's
offer to use such above ground water, then Lessee shall pay Lessor and the
other surface owners their proportionate part of an amount equal to twenty
cents ($0.20) per foot drilled in Lessee's well. Upon the termination
of this Lease, any water well drilled and constructed on the premises for
the purposes of providing water for operations shall become the property of
Lessor.
12. Prior to the construction of any road on said property, Lessee shall
first advise Lessor of the- specific location or route thereof and obtain
Lessor's consent, which consent will not be unreasonably withheld. In the
event an existing road cannot be used to afford access by Lessee to a part
of the subject land (which access is necessary to Lessee's operations
thereon) and Lessee must construct an access road, it is agreed that any
such road shall be constructed and over such a route to minimize any
interference with Lessor's farming or other operations on the surface of
such land. Lessee shall install an adequate culvert system to facilitate
drainage under the road or through canals. Any access road not otherwise
maintained by the county or other governmental entity, whether existing or
newly constructed, shall be maintained in a workmanlike manner and at the
expense of Lessee, including but not limited to the installation of rock or
other suitable material necessary to inhibit erosion and promote access. At
such time said road is no longer necessary for the purpose for which it was
constructed (but in no event later than the termination of Lessee's activity
at the site to be accessed by such road), Lessee shall advise Lessor that
Lessee no longer intends to use such road, and (unless directed otherwise in
writing by Lessor) properly restore the surface of said land.
13. At the end of each drilling operation the Lessee shall proceed with
reasonable diligence to restore the surface of the leased premises to as
near its original condition as practicable, including the leveling of all
slush pits, excavations and ruts.
14. This lease including the Exhibit(s) attached hereto constitutes the
entire understanding between Lessor and Lessee with respect to the subject
matter hereof and supersedes all negotiations, prior discussions, and prior
agreements and understandings relating to such subject matter. No
representation, warranty, covenant, agreement, promise, inducement, or
statement, whether oral or written, has been made by Lessor or Lessee and
relied upon by the other that is not set forth herein or in any instrument
referred to herein, and neither Lessor nor Lessee, its agents or independent
contractors hired by Lessee shall be bound or liable for any alleged
representation, warranty, covenant, agreement, promise, inducement, or
statement not so set forth.
END OF EXHIBIT
SIGNED FOR IDENTIFICATION:
/s/Xxxxxxxxx Xxxxxx Xxxxxx
