as to payment Lessee pays 116th subject to any outstanding royalty interests

As to payment lessee pays 116th subject to any

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as to payment - Lessee pays 1/16th * subject to any outstanding royalty interests” - Operator pays 1/16th * provides for proportionate sharing of overriding royalty - Both Lessee and Operator pay 1/16 th (here, 50/50)
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Overriding Royalty “Operator agrees to bear its share of burdens created by any overriding royalty carved out of the lease ... Operator’s share of any burden will be proportional to its working interest ownership in the oil and gas lease from which the burden was created.”
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Lease Provision Lease Provision “In case Lessee assigns this lease, in whole or in part … Lessee shall be relieved of all obligations with respect to the assigned portion or portions upon furnishing the Lessor with a written transfer or assignment or a true copy thereof.”
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Assignment Provision Alternatively, the following language may appear in the assignment: “Assignee agrees to indemnify Lessee against any future claims …”
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“Wash Out” Lessee-Assignee : How does lessee prevent assignee from “washing out” non-operating interest (e.g., overriding royalty), which can occur when assignee lets lease terminate and then re-leases property ?
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“Wash Out” Lessee-Assignee : How does lessee ensure overriding royalty recognized under new lease ?
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Assignment Provision Include language in assignment recognizing overriding royalty: “… overriding royalty applies to renewals and extensions of the lease”
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Assignment Provision Alternatively, include a “reassignment” clause * Assignee must offer to reassign lease before letting it terminate
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Partial Assignment Company A takes lease on 640-acre tract and subsequently assigns east half (320 acres) to Company B * If Company B completes productive well, does entire lease survive? * If instead Company B fails to pay delay rentals, does entire lease terminate?
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Partial Assignment Rights and duties of lessor-lessee are set when lease signed * Lease survives as long as there is production - Production by B Company keeps lease alive for both halves of property
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Partial Assignment Failure by A Company or B Company to pay delay rentals properly causes lease to terminate on both halves … … unless lease provides otherwise (common in modern leases): “Rentals are apportioned between leasehold owners ratably based on the surface acreage of each … default by one has no effect on other owners”
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Farmout Agreement If, close to the end of lease’s primary term, lessee not interested in drilling … then lessee (“farmor ”) may assign working interest in leased acreage (“farm out”) to an operator (“farmee ”) … in return for farmee agreeing to drill well(s)
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