Frequently Asked Questions

What is an oil and gas lease?

An oil and gas lease is essentially an agreement between parties to allow a Lessee (the oil and gas company and their production crew) to have access to the property and minerals (oil and gas) on the property of the Lessor (who owns the mineral rights). The lease agreement is a legal contract of terms. It contains certain elements, which confirm all the terms of the agreement.

What are the Terms of the Lease?

A lease remains in effect for a certain period of time, called the primary term, as long as the lessee pays the annual rental. The lease expires after the primary term, unless drilling or oil and gas production has started on the lease. If production is established, the lease will remain in effect past the primary term, as long as the lease continuously produces oil or gas. The lease can however, be revived by virtue of delay rentals. Delay rentals are fees paid to the lessor, to delay production or commencement of drilling, without terminating the lease. There are other clauses that also revive the lease.

What do payments to the Lessor mean?

Payments to the Lessor typically take three forms: bonus, rental, and royalty. The bonus is an up-front payment made at the time the lease takes effect. The rental is an annual payment, usually made until such time as the property begins producing oil and gas in commercial quantities. The royalty is a portion of the value of any oil or gas produced form the lease.

What are royalties?

This is the interest retained by the mineral owner. These are usage-based payments made by one party (the "licensee") to another (the "licensor") for the right to ongoing use of an asset. A royalty interest is the right to collect a stream of future royalty payments, often used in the oil and gas industries to describe a percentage ownership of future production or revenues from given leasehold, which may be divested from the original owner of the asset.

What is a license agreement?

A license agreement defines the terms under which a resource of property such as petroleum, minerals, patents, trademarks, and copyrights are licensed by one party to another, either without restriction or subject to a limitation on term, business or geographic territory, type of product, etc. License agreements can be regulated, particularly where a government is the resource owner, or they can be private contracts that follow a general structure.

What is a bonus consideration?

This is the amount paid per net mineral acre for the extraction of an oil and gas lease to the Lessor once the oil and gas lease is signed. It is reserved as a bonus by the Lessor. If you have any other questions please call us.

Why horizontal drilling is more productive:

Explanation:

How does horizontal drillling work? Horizontal drilling is the process of drilling a well from the surface to the subsurface location just above the target oil or gas reservoir called the "kickoff point", then deviating the well bore from the vertical plane around a curve to intersect the reservoir at the "entry point" with a near-horizontal inclination, and remaining within the reservoir until the desired bottom hole location is reached.


Purpose:

Most oil and gas reservoirs are much more extensive in their horizontal dimensions than in their vertical (thickness) dimension. By drilling a well which intersects such a reservoir parallel to its plane of more extensive dimension, horizontal drilling exposes significantly more reservoir rock to the well bore than would be the case with a conventional vertical well penetrating the reservoir perpendicular to its plane of more extensive dimension.

Horizontal Drilling

Want to know more? Please watch the video below.

Products made with petroleum

 There are thousands of products that are made with petroleum. In our photo gallery we have listed only 29. Some of them might take you by surprise. One 42-gallon barrel of oil creates 19.4 gallons of gasoline. The rest (over half) is used to make things like: