O all evidence showed that the well had been

o All evidence showed that the well had been
completed by the end of the primary term.
 However, there had never been
production from the well
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 Lessee’s rely on a reworking
operations and the production
from a second well to continue the
lease
o Lease terms have reworking provision and
cessation clause
 Analysis:
o If production never began, it could not “cease”
and by ceasing give the lessee 60 days in which
to commence additional drilling
o Reworking clause is the saving grace
 Reworking operations means: actual
work or operations which have
theretofore been done, being done over,
and being done in good faith endeavor to
cause a well to produce oil and gas or oil
or gas in paying quantities as an
ordinarily competent operator would do
in the same or similar circumstances.
 Is there evidence that the reworking
were good faith efforts to make the well
producing?
 The court holds that bleeding or
“periodic flowing” is included in
reworking operations
o However, after finding out that the lease was
being contested the well was not continued
and no production occurred.
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 Thus, the well was not producing after
the cessation for reworking and the lease
expired
 Takeaway:
o Finding that the well was not a dry-hole
worked to the detriment of the lessee because
this prevented them from being able to rely on
the second well
o “thereon” why can’t we impute the meaning of
operations from the first sentence to the
second sentence  because we are a special
limitation state we want to tightly construe
lease terms
o where there is strict language, it will be
interpreted strictly
 What is a dry-hole?
 Duster or a well that fails to produce in paying
quantities?
o If so, when is the well completed
 Force Majeure : superior force that prevents
operation/production from occurring
 Wont operate as production but will toll the
requirement for operation
 Pooling Clause: Modifying the Granting, Habendum, and Royalty Clause
o Drilling units in many states are set on the basis of section and
quarter section lines and require minimum acreage
commitments, which may not coincide with land ownership
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o Pooling Clause : an oil and gas lease gives a lessee the right to
combine small tracts or fractional mineral interests for drilling
and apportions production to each interest
 Because the lessor grants this power to the lessee, and
because the lessee must elect to exercise the power,
pooling pursuant to a pooling clause is often described as
“voluntary” pooling
 Changes the result that would normally occur under the
lease in three ways: a) benefits lessee; b) benefits lessor
 1a) expands the lease grant by giving the lessee the
power of attorney to pool the lessor’s interests.
o Principle/agent relationship
 Not a fiduciary relationship requiring full-
disclosure but a good-faith relationship
o Ongoing relationship that makes this difference
than a simple contract situation
 2a) provides that operations anywhere on a pooled
area will have the same effect in maintaining the
lease as if they were conducted on the lease itself.