An Oil Lease allows a land owner (the "lessor") to grant an oil company (the "lessee") rights to explore and extract oil from a private property. It may also cover rights to extract gas and related minerals. When it is drafted properly, this contract may help to reduce disputes by ensuring that there is a mutual understanding between the signers. When ready, you can tap or click on the "Make document" button to check out the sample Oil Lease and preview the questions that you'll need to answer to personalize your lease.
When to use an Oil Lease:
You would like to lease your land for oil and/or gas exploration and production.
You are engaged in the business of oil and/or gas exploration and production and you would like to lease property for exploration.
What we’ll cover
Sample Oil Lease
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, , , ("Lessor"), and , at , , ("Lessee"), agree as follows:
GRANT OF LEASED PREMISES
Lessor, in consideration of the total payment of which reflects an annual rental fee of , receipt of which is acknowledged by Lessor, and the covenants and conditions contained in this lease, does lease and demise to Lessee exclusively that certain tract of land in the County of State of , with an address of , , and legally described as follows: and containing acres, more or less ("the Premises"), for the purpose of exploring, mining, drilling, and operating for, and extracting, storing, and removing of oil, gas, hydrocarbons, and all associated substances.
Lessor leases to Lessee the Premises for a term of years from and after the date of this lease and so long thereafter as (a) any oil, gas, or other hydrocarbon substances are produced from the Premises; (b) drilling operations are being continuously prosecuted on the Premises; or (c) the term is extended by agreement of the parties.
During the term of this lease, Lessee shall have the exclusive right to explore, drill, and mine for, and extract, store, and remove oil, gas, hydrocarbons, and other associated substances on and from the Premises and for the following purposes:
(a) To enter and occupy the Premises;
(b) To erect, construct, maintain, operate, use, repair, and replace on the Premises structures, buildings, plants, machinery, casing, instruments, equipment, tanks, houses for employees, pipe lines, pole lines, power lines, telephone lines, telegraph lines, roads, and other structures and facilities as may be necessary or convenient;
(c) To inject in the Premises gas, water, and other fluids;
(d) To drill on the Premises for water and use, without charge, any water obtained by its operations on the Premises; and
(e) To construct, erect, maintain, use, operate, repair, and replace on the Premises a plant, with all necessary appurtenances, for the extraction of oil and gas produced from the Premises or other land in the vicinity of the Premises.
Lessee shall pay to Lessor as royalty for all oil produced and removed from the Premises an amount equal to of the value of all oil produced and removed from the Premises after the customary adjustments are made for temperature, water, and basic sediment. The value of the oil shall be the posted available market price in the district in which the Premises is located for oil of like gravity on the day the oil is removed from the Premises. Lessor, by giving 90 days' notice in writing to Lessee, may elect to receive the royalty provided for in this paragraph in kind, in which event Lessee shall, at no cost to Lessor, deliver to Lessor's tanks on the Premises or to a pipe line designated by Lessor at the mouth of each well on the Premises the percentage or fraction of all oil produced and removed from the Premises as specified in this paragraph; provided, however, that a change from payment in kind to payment in value, or vice versa, may be made no more often than once each calendar year. No royalty shall be due Lessor for or on account of oil lost through evaporation, leakage, fire, or other casualty before marketing, or, when royalty oil is being taken in kind by Lessor, before delivery.
Lessee shall pay to Lessor as a royalty for all gas, including residual dry gas, produced, removed, saved, and sold from the Premises an amount equal to of the net proceeds received by Lessee from the sale of the gas; provided, however, that nothing contained in this paragraph shall obligate Lessee to produce, save, or sell gas from the Premises. Should Lessee, for purposes of having gasoline extracted from the gas, transport the gas, or cause it to be transported, to a gasoline extraction plant located on the Premises or on other land, the cost of so transporting the gas shall be deducted from the amount received for it by Lessee before determining the net proceeds received by Lessee from the sale of the gas. Further, no royalty shall be payable to Lessor for any gas that is (a) Lost, used, or consumed in the operation of the gasoline extraction plan; or (b) Used by Lessee to repressure any oil bearing formation from which oil is being produced by a well or wells on the Premises though the repressuring is accomplished by injecting the gas into wells not situated on the Premises.
CASINGHEAD GAS ROYALTY
Any casinghead gasoline extracted from gas produced from the Premises may, at the option of Lessee, either be returned to the oil or gas formation from which it was produced or sold by Lessee at the best price and on the best terms reasonably obtainable. When the gasoline is returned to the oil or gas formation from which it was produced, no royalty shall be payable to Lessor for this gasoline. When the gasoline is sold, a royalty shall be paid by Lessee to Lessor equal to of the net proceeds received by Lessee for the sold casinghead gasoline. The term "casinghead gasoline" shall include natural gasoline produced by a gas well. When sold, casinghead gasoline shall be sold for not less than the public or open market price for this gasoline, when it exists, at its place of extraction.
NO ROYALTY FOR OWN USE
Lessee is not required to account for or pay royalties to Lessor for any oil, gas, or water produced from the Premises and used by Lessee in its operations under this lease.
PAYMENT OF ROYALTIES
On or before the day of each month, Lessee shall pay to Lessor in the manner specified in this lease all royalties due to Lessor under this lease for any oil, gas, or other substances produced and removed or sold from the Premises during the preceding month. All royalties, regardless of amount, shall be fully paid, if not otherwise already paid, at the end of the calendar year in which they accrue.
Lessee has paid to Lessor the rental in full for the primary term of this lease. Unless Lessee terminates this lease sooner, as provided in this lease, Lessee, on or before the last day of that period, shall either commence drilling operations on the Premises or pay to Lessor as rental the sum of per year and make a like payment of rental to Lessor on the first day after the end of the primary term and on the same day every year thereafter, until drilling operations are actually commenced on the Premises or this lease is terminated.
MANNER OF PAYMENT OF RENT
All rent and royalties payable under this lease shall be deemed duly paid when a check for the same, payable to the order of Lessor jointly, is deposited in the United States mail, first-class postage prepaid, addressed to Lessor at , , . Lessor may at any time, and from time to time, change its address for the purpose of this paragraph by giving written notice to Lessee.
PAYMENT FOR LESSOR INTEREST
The rentals and royalties specified in this lease are based on the assumption that all the oil and gas rights in the Premises are owned by Lessor and leased to Lessee under this lease. Should it hereafter appear that Lessor, at the time of making this lease, owns less than a fee simple in the Premises and therefore less than all oil and gas rights in the Premises, the rentals and royalties accruing under this lease to Lessor shall be reduced proportionately.
Should oil or gas be produced in paying quantities by any well drilled by Lessee on the Premises, Lessee shall continue to drill additional wells on the Premises as rapidly as can be done with one drilling rig working with reasonable diligence until as many wells have been drilled on the Premises.. Thereafter, all drilling obligations of Lessee on the Premises shall be deemed fully performed.
Should Lessee complete a well or wells on the Premises that fail or fails to produce oil in paying quantities but produces gas in paying quantities, Lessee shall either sell so much of the gas as it may be able to find a market for and pay Lessor the gas royalties specified in this lease or suspend operations of the gas well or wells and pay Lessor a yearly rental in advance of per acre for each acre held under this lease at the commencement of the suspension until producing operations on the Premises are again resumed by Lessee. Should Lessee complete a well on the Premises that fails to produce oil in paying quantities but produces gas in paying quantities, Lessee shall not be obligated to conduct any further drilling operations on the Premises, except to drill offset wells as described in the following paragraph, Offset Wells, of this lease, until in its judgment the drilling of additional wells under the provisions of this lease is warranted by existing or anticipated market conditions.
Should oil or gas be discovered in paying quantities by means of any well drilled on property adjoining the Premises and within feet of the exterior boundary of the Premises, Lessee shall offset this well by commencing the drilling of an offset well on the Premises provided both of the following conditions are met:
(a) Oil or gas in paying quantities is produced by the adjoining well for longer than a 30-day production test period; and
(b) The drilling obligations of Lessee expressed in the previous section, Gas Developments of this lease have not been fully performed.
CONDUCT OF OPERATIONS
All operations to be performed by Lessee on the Premises in accordance with this lease shall be performed by Lessee at Lessee's own cost and expense and not at the expense of Lessor or any of them. Further, Lessee shall conduct all operations in a careful workmanlike manner, in accordance with all laws, statutes, and regulations relating to the operations of oil and gas production, and shall allow no liens to attach to the Premises as a result the oil and gas operations.
Lessee shall pay all taxes on any improvements placed or oil stored by it on the Premises and of the taxes levied and assessed on the petroleum mineral rights in the Premises. Lessor shall pay all taxes levied or assessed against the Premises and of the taxes levied and assessed against the petroleum mineral rights in the Premises.
Lessor shall have the right to use the surface of the Premises, and all of it, for agriculture and any purposes that do not interfere with Lessee's rights under this lease.
Should Lessee default in the payment of any rent or royalty due under this lease or in the performance of any other obligation imposed on it by this lease, and this default is not corrected within 15 days after written notice of the default has been served on Lessee by Lessor, then Lessor may terminate this lease and all rights of Lessee in and to the Premises or under this lease shall cease. However, if any oil well has been drilled or is being drilled on the Premises by Lessee and Lessee is not in default in connection with this well, Lessee's right to this well and to one acre surrounding the well, together with Lessee's right to any rights-of-way necessary for egress and ingress to the well, shall not be affected by the default or terminated by Lessor.
TERMINATION OF LEASE
On termination of this lease, Lessee shall peaceably surrender possession of the Premises, or the portion surrendered to Lessor or its successors in interest in as good condition, reasonable wear and tear excepted, as it was on the date of this lease. Lessee shall have the right, on termination of this lease or surrender of any part of the Premises, to all improvements placed on the Premises or the surrendered part of the Premises by Lessee under this lease including all structures, buildings, plants, machinery, casing, instruments, equipment, or tanks erected or installed by Lessee.
Lessor and Lessee shall each have the right to assign its interests in this lease, in the Premises, and in the oil and gas rights to the Premises; provided, however, that no assignment by Lessor shall increase Lessee's obligations under this lease and no assignment by Lessor shall be binding on Lessee until Lessee has been given written notice, signed by Lessor, of the assignment.Neither party may assign or transfer this Contract without prior written consent of the other party, which consent shall not be unreasonably withheld.
Any notice or communication required or permitted under this Lease shall be sufficiently given if delivered in person or by certified mail, return receipt requested, to the addresses listed above or to such other address as one party may have furnished to the other in writing. The notice shall be deemed received when delivered or signed for, or on the third day after mailing if not signed for.
BINDING ON HEIRS
This lease shall be binding on and shall inure to the benefit of the heirs, executors, administrators, successors, and assigns of the parties to this lease.
If any litigation is commenced between the parties to this lease concerning the Premises, this lease, or the rights and duties of either in relation to the Premises or to this lease, the party prevailing in that litigation shall be entitled to, in addition to any other relief that may be granted in the litigation, a reasonable sum as and for its attorneys' fees in that litigation that are determined by the court in that litigation or in a separate action brought for that purpose.
This instrument constitutes the entire agreement between Lessor and Lessee respecting the Premises, the leasing of the Premises to Lessee, or the lease term created under this lease, and correctly sets forth the obligations of Lessor and Lessee to each other as of its date. Any agreements or representations respecting the Premises or their leasing by Lessor to Lessee not expressly set forth in this instrument are null and void. This lease may not be extended, amended, modified, altered, or changed, except in a writing signed by Lessor and Lessee.
STATE OF ss:, ss:
STATE OF ss:, ss:
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Oil Lease FAQs
Is my Oil Lease Contract legally binding?
As with any legal contract, Oil Leases are not legally binding until all parties have signed. Different from the other sites that you might come across, Rocket Lawyer offers more than any run-of-the-mill Oil Lease template or fillable PDF that you could download elsewhere. In the event of nonpayment or any other problem related to your Oil Lease Contract, your membership provides the optional benefit of Document Defense® protection.
Why do land owners make Oil Lease Contracts?
Regardless of how few days or months the rental will last, it is critical to capture in writing the details of your commitments to the renter. Using this document will most likely be helpful because of the benefits shown here:
Roles and responsibilities are understood by everyone
There are no surprises about how long the lease lasts
There is no confusion about rent or fees charged
A few repercussions of not signing this document might include unauthorized or illegal usage, late payments, unexpected changes to the arrangement, and property damage.
What should an Oil Lease template cover?
Specific details that you might want to add are:
Your description of the property
The legal name of the lessee
How much you will charge
What the start and end dates are for the lease
As expected, your agreement from Rocket Lawyer also contains guidelines about late fees, liability, and governing law. The lease will also lay out a structure for paying royalties from any oil that is discovered. Generally, oil royalties are paid as a percentage of the oil that is produced. You can also decide up front whether the lessor can assign their rights to another party. More modifications are allowed, if needed.
Where can I create my own Oil Lease Contract online?
The good news is that you won't need to start from scratch when putting your agreement in writing. With the document tools on Rocket Lawyer, anyone should feel empowered to make Oil Leases very easily. Your document is constructed step by step, so you can be certain that it contains all of the relevant details. Ordinarily, for this level of customization, you might end up paying a traditional attorney a few hundred dollars, if not more, in fees.
Would I have to do anything else once I have drafted an Oil Lease?
Each Oil Lease will come with its own list of tips on what comes next after the document is completed. With a membership, you can edit it, make copies, save it as a Word or PDF document, sign it online using RocketSign®, and print it out when needed. Finally, you will need to provide a copy of your signed agreement to the oil company. You should also feel free to browse the other documents in our library.
Will my Oil Lease Contract be evaluated by an attorney before it is signed?
Finding a lawyer to proofread your contract might be costly. Some lawyers will not even accept requests to review a document if they did not draft it. In the event that an attorney does offer assistance, they are still going to demand their standard rate for doing it. An easier and more cost-effective way to double-check your document would be to request help from the Rocket Lawyer On Call® network . As a Premium member, you can get your agreements reviewed or ask specific questions. Whether you decide to make Oil Leases or other legal documents, we will be here for you.
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