Lease of Oil Rights

This Lease of Oil Rights is used between a lessor and lessee to grant the lessee the

right to drill and explore on lessor's land for the sole purpose of extracting oil. This

document contains the material terms and conditions of the agreement including the

lease term, rental payment, lessee's rights, and an oil royalty. It includes numerous

standard provisions that are commonly included in these types of leases, and may be

customized to fit the particular needs of the contracting parties.

LEASE OF OIL RIGHTS

THIS LEASE OF OIL RIGHTS AGREEMENT (the “Agreement”, is made the

____ day of _____________, 2____ (the “Effective Date”) by and between ______________

(the “Lessor”) and _________________ (the “Lessee”).



THE LESSOR AND THE LESSEE HEREBY ACKNOWLEDGE AND AGREE AS

FOLLOWS:



1. Granting Clause

The Lessor, in consideration of the rent payment of $______________, [specify the

amount of rental for primary term], receipt of which is acknowledged by Lessor, and the

covenants and conditions contained in this lease, hereby grants and leases to the Lessee the right

to drill and explore the lands legally described as ____________________________ and

containing _______ [number of] acres, (the “Lands”) for the sole purpose of extracting, storing,

and removing oil, including but not limited to, the laying of any and all necessary pipes and the

installation of oil tanks.



2. Lease Term

The Lessor leases to the Lessee the Lands for a term of __________ years from and after

the date of this lease and so long thereafter as (a) oil is being produced from the Lands; (b)

drilling operations are being continuously prosecuted on said Lands; or (c) the term is extended

by the agreement of the parties. The lessee shall request an extension for a further term of

______ (___) years upon _____ (___) days’ written notice to the Lessor prior to the expiry of the

lease term.



[Comment: the lease term, also known as the “habendum clause,” is the provision in

an oil and gas lease that sets the duration of the tenant’s interest in the lease. The purpose

of this clause is to limit and define the estate granted or conveyed.]



3. Termination

This Agreement may be terminated by either the Lessor or the Lessee prior to the expiry

of the Term in the event the said Lands described herein fail to or stop producing oil. In the

event the said Lands fail to or stop producing oil, the Lessor or the Lessee shall provide the other

party with ______ (__) days’ advance written notice of its intention to terminate this Agreement.

In the event such notice is received by a party, the Lessee agrees that it shall remove any and all

of its equipment and storage tanks from the Lands within ______ (___) days.



4. Lessee’s Rights

During the term of this lease, Lessee shall have the right to explore, drill, and mine for

and extract, store, and remove oil from the Lands for the following purposes:

A. To enter and occupy the Lands;

B. To erect, construct, maintain, operate, use, repair, and replace on the Lands

structures, buildings, plants, machinery, casing, instruments, equipments, 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 drill on said Lands for water and use, without charge, any water obtained by its

operations on the Lands;

D. To construct, erect, maintain, use, operate, repair, and replace on the Lands a plant,

with all necessary appurtenances, for the extraction of oil and other products from the

Lands or other land in the vicinity.



5. Oil Royalty

The Lessee agrees that it shall pay to the Lessor Royalties (the “Royalties”) at the rate of

_______ [Instruction: insert a fraction or percentage, e.g. one sixth or one eighth or 12 ½

percent] of the value of all oil produced and removed from the Lands 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 Lands is located for oil of like

gravity on the day the oil is removed from the Lands. 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.



6. Payment of Royalties

The Royalties which become due and payable to the Lessor by the Lessee shall be paid to

the Lessor on a monthly basis by no later than the ____ day of each and every month; provided

however, that should the amount of royalties due for any month be less than $_________

[Instruction: specify amount, e.g. $50], payment of this amount may be withheld until it equals

$_________ [Instruction: specify amount, e.g. $50], or until the end of the calendar year. 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.



7. No Royalty for Own Use

Lessee is not required to account for or pay royalties to Lessor for oil produced and used

by Lessee in its operations under this lease. Any and all oil retrieved and extracted from the

Lands by the Lessee, shall be used by the Lessee for its own use.



8. Development Clause

Should operations for the drilling of a well for oil not be commenced on said Lands on or

before ___________________ [Instruction: state time period or date], this lease shall

terminate as to both parties, unless Lessee shall, on or before the last day of that period, pay or

tender to Lessor the sum of $_________ per acre for each acre of the Lands remaining subject to

this lease as delay rental deferring the commencement of dril