What can Lease Administration or Lease Maintenance entail?
- Understanding “Pugh” clauses, differentiating “Continuous Operations” from “Continuous Development,” and noting “Consent to Assign” requirements are just the beginning.
- There are potentially hundreds of Special Provisions in a lease. One paragraph can contain multiple clauses. Or one Special Provision can span multiple paragraphs, but not be contiguous within the lease document itself.
- These clauses can have huge impacts on your drilling requirements, lease expirations, and other facets of your business.
- The Lessee is the first Working Interest holder. However, The Lessee may take on partners, sell the lease, or have an agreement already in place that assigns a portion of the Working Interest to another party.
- Updating records to reflect these transfers of interest is a common lease maintenance task that affects many Lease Administration duties.
- Any clause in a lease that requires you to do something isn’t just a Provision if it creates an obligation.
- For example, tracking if a “Shut-in payment,” “Delay payment,” or “Rental payment,” needs to be paid, to whom it must be paid, and in what amount, is a critical function of Lease Administration and Maintenance.
- Proper Lease administration means tracking and fulfilling your obligations, including those beyond simple Rent, Extension, and Royalty payments.
- Knowing what payments have been tendered or paid for a Lease is an important Lease Administration function.
- Payment history can be useful when:
- A Landowner disputes having received a payment
- During a due diligence period, if a purchaser wants to verify the necessary payments have been made to preserve the Lease
- Or if a report is needed to gather expense metrics related to an asset.
- Lease Administration may entail making rental payments that preserve the Lease under certain circumstances, triggered by actions described in the Lease, whether they be monthly, annually or at another frequency.
- Eventually, leases do expire, in whole or in part, and records need to be updated.
- While on the surface this may seem like a simple lease maintenance task, it can be a very complex process to figure out exactly what acreage of a lease is expiring, when it is expiring (after taking all payments and provisions into account), and what your options are after the acreage or whole lease expires.
- Not only can P&P help determine proper expiration, but we can also help guide you on the next steps.
- When a Well is drilled on lands that are leased, there is a lot that needs to be done to properly track that acreage. This is a core function of Lease Maintenance.
- Is the entire Lease held? Are there any depth issues? Do tracts need to be split in the Land system? These questions, and more, are addressed by overlapping Lease Administration roles.
- Just as the Lease is seen as a whole and complete document, Lease Administration is an involved process that must be completed in its entirety to be truly effective and efficient.
- “Paid Up Leases” will not have a Delay Rental payment obligation, but instead may allow, via a provision in the Lease, for an Extension to be taken.
- Payment of a set amount made by the Lessee to the Lessor can extend the Lease, depending on the provision language.
- Making sure that mandatory payments are timely made, while unnecessary payments are not made, is essential to holding onto acreage and not wasting money or time.
- Some consider this to be the most important part of Lease Maintenance.
- Similar to how a Lessee can assign Working Interest, a Lessor can assign their Mineral Interest to other parties with various conveyance documents, including via deed or probate.
- Part of Lease Administration is knowing how a Mineral Interest transfer affects the tracts associated with a Lease.
- A Lease Analyst performing Lease Maintenance will need to transfer this interest in the company’s Lease Record system and may need to request further documentation from the Lessor.
- When a lease is “subject to” certain interests which require payments, it is also said to be “burdened” by those interests
- In addition to traditional Royalty owners (RI), a Lease may also be subject to Overriding Royalty Interest (ORRI) owners and Non-Participating Royalty Interest (NPRI) owners.
- These burdening interests can transfer just like other interests and must be tracked properly during the lease maintenance period
- To be prepared for production and handling of the Division of Interest process.
- Keeping Lease files up to date, whether they are physical or digital, is an important Lease Administration function.
- Adding check stubs, copies of correspondence, legal documents, and other paperwork helps in due-diligence situations, data handoffs, and researching the history of the Lease when questions arise.
- Organizing the available documentation in a way that can easily be accessed, located, and cross-referenced is essential.
- P&P will leverage PDF bookmarks, Metadata tagging, and other forms of virtual linking/mapping to avoid duplication and easy access to your data.
PUGH clauses can be categorized in several ways:
◊ Vertical ◊ Horizontal ◊ Stratigraphic
◊ Geographic ◊ Depth ◊ Area
… the list goes on!
To boil it down: a PUGH clause determines what acreage outside of a producing zone or unit expires and when. PUGH clauses can sever acreage from a lease outside of a unit or above/below a certain depth. Interpreting PUGH clauses and understanding how they affect the expiration date of a lease can have a major impact on your drilling schedule and Leasing operations.
It is mission-critical to have quality Lease Administration to identify, monitor, and comply with these Special Provisions. P&P Oil and Gas Solutions can help provide quality Analysts trained on identifying the myriad of Lease provisions tied to your assets. P&P performs both maintenance and updates on a project-basis or can handle all transfers on an on-going basis, either in-house or remotely. We can also provide comprehensive outsourced department-level support that will do the heavy lifting for you, as well as deliver reporting to satisfy regulatory and internal company bodies.
A Full-Service Land Administration Department at Your Disposal
Our team of highly skilled Lease Analysts, Division Order Analysts, and GIS Mapping Technicians are available to your organization in supporting your efforts to manage your land records. We also offer due diligence services, preparation of legal documents, and title curative.
Some companies use a Land database as an inventory system, others to track Special Provisions in Leases, create Division Orders, maintain Wells, or manage Farm-out & Farm-in situations. The staff of P&P Oil & Gas Solutions is capable of delivering projects based on your needs, covering any of these tasks, and more. From standardized data entry and extraordinary reports to complete Land Records Administration–P&P will formulate a success plan to meet your needs.
There are many benefits to partnering with us for your Land Administration needs. By allowing P&P Oil & Gas Solutions to take care of your Land Department needs, you will benefit from the payroll cost-savings of a full-time employee, or even multiple employees, (which includes several additional employment costs on top of salary). In addition to the cost-savings, a staff of trained professionals will be available to you, ready and able to address your needs on an “as needed” ad hoc or a la carte basis. Allow our P&P team to demonstrate what we can do for you! Please contact us to schedule a partnership success meeting today.
Lease Record Services We Provide:
- Input Leases, Contracts and Wells into a fully integrated Tract-Based Land Management System, or into any Land system of your choice.
- Consult on choosing a Land System that fits your needs.
- Review and analyze Leases for vital clauses and obligations
- Extensive reporting covering Acreage Reports, Payment Obligations, Special Obligations, Lease Schedules and other Land Management Reports available by Tract or Lease basis
- Research and determine Mineral Acreage and Company Net Acreage
- Analyze and comply with Title Opinion curative requirements
- Obtain curative documentation to clear cloud-of-title
- Digitize Land Records to make them available for secure Online Cloud viewing, printing, or sharing from any computer or mobile device.
- Secure Data Room creation and hosting with customizable password-protected access
- Acquisition and Divestiture Lease Data integration
- Calculate Gross Working Interest (GWI), Net Revenue Interest (NRI), Overriding Royalty Interests (ORRI) on a Lease and depth basis
- Paper or Digital File Setup of lease, tract, contract, and well files
- File Maintenance of complete lease, tract, contract, and well files
- Obtain recorded documents and file instruments for record
- Make and track payments such as: Bonus, Delay Rental, and Shut-In Royalty Payments
- Liaise and manage communications with lease brokers, attorneys, abstractors, and landowners as needed
- Owner Relations Management
- Scan Land Files for Land System integration, Archiving of paper files, Due Diligence or Acquisition/Divestiture File Room creation
- Correspondence handling for maintenance of lease records
- Notice or Mail-out Drafting, Mailout and Tracking
- Manage Mineral Tax Accounting and Compliance
At P&P Oil & Gas Solutions, a core focus is Lease Maintenance, Lease Administration, and Land Administration–because without proper Maintenance and Administration, other workflows begin to breakdown. This breakdown can place an undue burden on the Division Order Analyst, Accounting department, and Land Managers. Lease setup is key to tracking your assets and lease maintenance is key to knowing the current status of your assets. Both of these processes incorporate into efficient Lease and Land Administration practices.
If your data is in need of being entered into a Land System, has already been set up but now needs to be maintained, or is in need of some other sort of organization — P&P Oil & Gas Solutions is ready to be your Lease or Land Administration team!