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OIL AND GAS LEASE
(PAID UP):
00051116
THIS OIL AND GAS LEASE (the "Lease") is executed as of November I, 2006, between Anadarko Land
Corp., a Nebraska corporation, whose address is P. 0, Box 1330, Houston, Texas 77251-1330 ("Lessor") and Kerr-
McGee Oil & Gas Onshore LP, a Delaware limited partnership, whose address is 1999 Broadway, Suite
3700, Denver, Colorado 80202 ("Lessee").
WIT N E SSE T H:
I. LEASED PREMISES, For and in consideration ofTen dollars ($10,00), the adequacy, receipt and sufficiency of
which are hereby acknowledged, and in consideration of the royalties herein provided and of the agreement of Lessee
herein contained and subject to the limitations set forth herein, Lessor hereby grants, leases and lets exclusively unto
Lessee one hudred percent (100%) of Lessor's right, title and interest in and to the oil and gas, including, without
limitation, nitrogen, carbon dioxide, hydrogen sulfide, and other gaseous substances (except steam and helium) and
products associated therewith, and associated liquid hydrocarbons contained therein (all such substances are sometimes
collectively referred to herein as "covered minerals") in and under the following described property (the "Leased
Premises"):
Section 15, Township 21 North, Range 113 West, Lincoln County, Wyoming
for the purposes of exploring, drilling, operating, producing and saving, the covered minerals produced from the Leased
Premises; provided, however, Lessor reserves all rights, horizons, strata and fonnations which are not affected by this
Lease, including, but not limited to, the right to the concurrent use of the drill pad and surface and the right to drill
through the covered interval; and further provided, Lessee shall have the non-exclusive right to conduct geophysical
operations and evaluations upon the Leased Premises; and further provided, Lessee shall have the non-exclusive right to
construct, maintain and remove pipelines, roads, buildings, tanks (but not tank fanns), power and telephone lines and
other structures and facilities on the Leased Premises as may be necessary to explore and drill for, produce, save, treat,
store and transport, the covered minerals produced hereunder; and further provided that this Lease is made subject to all
existing roads, easements and any other property interests in the Leased Premises and is further subject to any restrictions
or limitations set forth in any recorded instruments affecting the Leased Premises. For shut-in royalty payment purposes
only, the Leased Premises shall be deemed to contain 640 acres, whether it actually comprises more or less.
2, DELAY RENTALS. This is a paid-up lease and there shall be no requirement for Lessee to pay delay rentals,
3, PRIMARY TERM, Subject to the other provisions herein contained, this Lease shall be for a primary tenn of
three (3) year from the date hereof(the "Primary Tenn") and shall continue in full force and effect as long thereafter as
oil, gas, or associated liquid hydrocarbons or any of them are produced from the Leased Premises in paying quantities
hereunder, or as long as this Lease is maintained in force in any other manner as provided for herein, For purposes of
this Lease, "paying quantities" shall mean quantities sufficient to pay the cost of overhead, plus a reasonable profit,
exclusive of drilling and completion costs,
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4. ROYALTIES AND STATEMENTS. Subject to the right of election reserved to Lessor below to take its share of
production in kind, the royalties to be paid by Lessee are two and one-half percent (2.5%) of eight- eighths ofthe value of
all covered minerals produced and saved from the Leased Premises, delivered free and clear of all costs at the tailgate of
the plant to which the covered minerals are delivered or, for covered minerals that are not processed, at the inlet of the
market transmission pipeline to which the same are delivered, said value being determined as follows: (a) for any oil and
liquid hydrocarbons recovered at the well, the greater of the market value at the well or the amount realized from the sale
of such oil and liquid hydrocarbons; (b) for gas used by Lessee off the Leased Premise, the highest prevailing Gas
Market Price of such gas in the area so used; (c) for gas that is sold by Lessee but not processed, the Gas Market Price at
the inlet of the market transmission pipeline to which such gas is delivered; and (d) for gas that is sold by Lessee and
delivered for processing, the Gas Market Price ofthe residue gas at the tailgate ofthe plant to which the gas is delivered,
plus the market value ofthe products recovered when such gas is processed; provided that in the event gas, including gas
ftom oil wells, is processed in any facility or plant in which Lessee, or any subsidiary, parent or affiliate of Lessee, has,
directly or indirectly, an ownership or operating interest, then the value of such gas shall not be less than: (x) the
combined values at the plant of all products extracted therefrom and the residue gas, (y) the Gas Market Price of such
gas, or (z) the value Lessee is receiving for its production, whichever value is greater; and provided further that the
royalty shall never be based on an amount realized from such sale that is less than the amount which Lessee is receiving
for its production, As used herein the term "Gas Market Price" shall mean the arithmetic average of the prices reported in
the first issue of the month of delivery for the price references included in the Market Price Index. As used herein, the
tenn "Market Price Index" for a particular point of delivery shall mean the Inside FERC Gas Marketing Report-Monthly
Index Price Published for Northwest Pipeline, Rocky Mountains, as published in the Inside FERC Gas Market Report, If
none of the indices referred to are reported or ifthe Inside FERC Gas Market Report ceases to be available, then Lessor
and Lessee will mutually agree to a similar index or publication. For avoidance of doubt, royalty is to be paid on all
payments received by Lessee under or as a result of a gas purchase contract, including, but not limited to, reservation
charges and, when gas for which payment has been made earlier is eventually produced, take-or-pay or contract
settlement proceeds and amounts paid for gas not taken, I
Lessee shall have free use of oil and gas from the Leased Prem ises for operations \)n the Leased Premises, and the
royalty on oil and gas shall be computed after deducting any production so used. Lessor shall bear all severance taxes
levied against its royalty percentage of all production hereunder, and payment of royalties shall be made after deduction
Page I of 12
Land Grant Paid-Up Oil, Gas & Mineral Lease (Non-CBM)
Rev. 01116/06
RECEIVED 12/2612006 at 3:40 PM
RECEIVING # 925606
BOOK: 644 PAGE: 566
JEANNE WAGNER
LINCOLN COUNTY CLERK, KEMMERER, WY
0925G06
0005tGti'
of the severance taxes paid by Lessee thereon. Subject to the foregoing, the royalties payable under this Lease shall be
free and clear of costs or deductions for exploration, drilling, development, operation and production, including, but not
limited to, costs of separating by mechanical means, gathering, dehydrating, compressing, processing, treating, storing,
transporting, marketing, delivering, or any other charge or deduction whatsoever whether of the same or different
character unless expressly authorized and agreed to in writing between Lessor and Lessee.
On or before the 180th day after the first day of the month following the date of first sales of any of the covered
minerals, Lessee shall mail or deliver to Lessor an itemized statement showing the total production of each substance,
including products extracted from gas, during the preceding calendar month, the royalties payable thereon, the data used
to compute such royalties, an explanation of the manner in which such royalties were determined and computed and any
other information required by applicable statute or regulation (collectively, the "Statement"). At the same time, Lessee
shall remit to Lessor the royalties due hereunder on production during the period of time covered by the Statement.
Thereafter, on or before the 30th day of each calendar month following the month of production, Lessee shall deliver the
Statement and remit royalties due hereunder on production during the period of time covered by the Statement. In
recognition ofthe business necessity of Lessor receiving the Statements in a timely fashion, Lessee, by acceptance of this
Lease, and in addition to any other remedy available to Lessor, agrees to pay as partial liquidated damages to Lessor, the
sum of Two Hundred Dollars ($200.00) for each month or portion thereof that Lessee fails to furnish the Statements in a
timely manner from the date due until paid, together with interest on the cumu lative amount at the highest rate allowed by
law plus all costs of collection, including attorney's fees, In addition, Lessor shall have the right to audit and review all
information (including without limitation, all books, records, contracts, correspondence, run tickets, evidence of sales and
shipments, reports and analyses, and electronically stored information and data) possessed by or available to Lessee
which may be pertinent to the determination ofthe payment of royalty or other amounts due under this Lease, at the office
where such information is maintained, Such information shall include that submitted to third parties (including
government entities) respecting production from the Leased Premises or lands pooled therewith and relating to any
royalty or to any tax based upon the value of production. In conjunction with any audit Lessee shall, to the fullest extent
practicable, assemble and present the information so that it is complete, Iffor any reason whatsoever royalties hereunder
are not paid when the same are due, then Lessor shall notify Lessee ofthe failure to pay. Lessee shall promptly remit the
payment to Lessor, If Lessee fails to remit the payment to Lessor on or before the thirtieth (30th) day following delivery
of such notice, then Lessor shall have the option to terminate this Lease and be relieved from any obligation hereunder
unless there is a good faith dispute as to the amount of royalties due and provided all undisputed royalties have been paid
when due. Lessor's right to terminate this Lease is exercisable by filing with Lessee and of record a notice of
termination. In addition to any other remedy available to Lessor, all such unpaid royalties shall bear interest at the
maximum legal rate from the date due until paid and payable out of Lessee's share of production hereunder. THE
,PROVISIONS OF TH~S SECTION 4 SHALL SURVIVE ANY TERMINATION OF THIS LEASE.
5. RIGHT TO TAKE PRODUCTION IN KIND. Lessor expressly reserves the right, at any time and from time to
time, to take in kind or separately dispose of its proportionate share of (i) oil and other liquid hydrocarbons saved at the
well and placed into storage tanks on the Leased Premises; (ii) products recovered in a processing plant and placed into
storage tanks or onto storage sites at the plant; (iii) gas, at the tailgate of the plant, ifprocessed; and (iv) gas at the inlet of
the market transmission pipeline, ¡fnot processed. In the event of such election with respect to oil and products, Lessor
shall give to Lessee not less than sixty (60) days notice of its election and shall take its proportionate share in kind for a
period of not less than six (6) months following the termination of said sixty (60) day period, Any deliveries of
production are to be made free of all costs from Lessee's facilities at times and amounts which equitably adjust deliveries
between the parties. With respect to residue gas at the tailgate of the plant or unprocessed gas at the inlet of the market
transmission pipeline to which such gas is delivered by Lessee free of all costs, Lessee shall give Lessor notice if it
intends to enter into a gas contract on its share of the gas, and Lessor shall have a period ofthirty (30) days from receipt
ofa copy of the gas sales agreement which Lessee is willing to execute to notify Lessee in writing that Lessor elects to
take its proportionate share in kind. If Lessor fails to take in kind or separately dispose of its proportionate share of
production within such 30-day period, then Lessee may sell such production to others, for the account of Lessor, at the
best price obtainable in the area for such production, but in no event for less than the amount which Lessee is receiving
for its production and will account to Lessor for the royalty on the full value thereof, as herein provided. Any such sale
by Lessee shall be subject always to the right of Lessor to exercise its right to take in kind or separately dispose of its
share of production and in no event shall the period of time be in excess of one year. Lessor hereby reserves the right to
nominate an affiliate, or other third party, to act on its behalf relative to Lessor's right to take production in kind.
6, CONTINUOUS OPERATIONS. Ifat the expiration ofthe Primary Term Lessee is engaged in operations for the
drilling, reworking or completion of a well upon the Leased Premises or lands pooled therewith, this Lease shall continue
in full force and effect as long as drilling, reworking or completion operations are prosecuted with no cessation of more
than ninety (90) consecutive days, and if such drilling, reworking or completion operations result in production of oil or
gas or associated liquid hydrocarbons in paying quantities, then for so long thereafter as such production in paying
quantities continues or this Lease is otherwise maintained in full force and effect under the provisions hereof. If
production on this Lease ceases after the expiration ofthe Primary Term, this Lease shall continue in full force and effect
if drilling, reworking or completion operations are commenced within ninety (90) days after such cessation of production;
and if production is restored or new production is discovered as a result of any such operations, conducted without
cessation of more than ninety (90) consecutive days, this Lease shall continue so long thereafter as production in paying
quantities, or additional drilling, reworking or completion operations are prosecuted without cessation of such production
for more than ninety (90) consecutive days. In the event Lessee fails or ceases to prosecute or conduct continuous
operations on the Leased Premises as herein provided, this Lease shall immediately terminate and all of the rights of
Lessee hereunder shall immediately cease, terminate and be forfeited, without notice, demand or putting in default, as to
all of the Leased Premises except those portions, if any, which Lessee may be permitted to retain under the terms of
Section 9. LESSEE'S RETENTION OF INTERESTS hereof. Except as provided in this Section 6 and in Section 9, in
Page 2 of 12
Land Grant Paid-Up Oil, Gas & Mineral Lease (Non-CBM)
Rev. 01/16/06
0925G06
the event any portion ofthe Leased Premises should be pooled or unitized with other property so as to create one or more
units, then operations on or production from any such pooled area or unit shall not serve to maintain this Lease in effect
as to any portion of the Leased Premises located outside of said pooled area or unit.
0005IGS
7. OFFSET OBLIGATION. Ifa well capable of producing oil, gas or other hydrocarbons in paying quantities
should now exist or hereafter be completed on property, whether or not owned by Lessor, other than the Leased Premises
and within 460 feet of the Leased Premises for an oil well and within 460 feet of the Leased Premises for a gas well, and
ifno well offsetting same should have been drilled on the Leased Premises, then, within ninçty (90) days after production
reports for the first month of production and the two succeeding months thereafter are reported by the state or are
otherwise available to the Lessee, or within ninety (90) days from the date hereof, whichever is later, Lessee shall
commence operations for and thereafter diligently prosecute the drilling of an offset well on the Leased Premises at a
location which will adequately protect the Leased Premises from drainage. If Lessee is prevented or delayed by any
causes mentioned in Section 12. Force Majeure hereof from drilling an offset well or wells pursuant to this provision, this
Lease may be maintained by payment to Lessor ofa compensatory royalty ("Compensatory Royalty Payments") equal to
one-half(1I2) of the royalties which would have been payable to Lessor under this Lease if the well to be offset had been
located on the Leased Premises based on the actual production of the offset well, such Compensatory Royalty Payments
to be effective as of the date upon which Lessee should have commenced operations for the drilling of an offset well, as
stipulated herein and shall terminate the day upon which Lessee commences operations for the drilling of such offset well
but in no event can Lessee satisfy its obligation for the drilling of an offset well by making Compensatory Royalty
Payments beyond the earlier to occur of (i) the expiration of the Primary Term, or (ii) a period of two (2) years after the
required date for commencement of such operations. If Lessee fails to timely drill a required offset well or maintains this
Lease in the manner stipulated herein by payment of Compensatory Royalty Payments or in the event Lessee is prevented
or delayed by causes mentioned in Section 12. Force Maiuere hereof from drilJing an offset well, it shall promptly
surrender this Lease except as to existing wellbores. Prior to the termination or forfeiture of this Lease and prior to any
assignment thereof, Lessee may at any time execute and place of record a release or releases covering all or any portion
ofthe Leased Premises, but shall not thereby be relieved as to the acreage surrendered of any obligations arising from or
caused by activities of Lessee prior to said release other than the obligation for the drilling of an offset well pursuant to
this Section 7 provided such release is recorded prior to the date upon which Lessee should have commenced operations
for the drilling of an offset well. All such releases shall be made free of encumbrances created by or under Lessee and
Lessee shall provide Lessor a copy of the recorded release within ninety (90) days of its effective date.
8. SHUT-IN WELLS. After the expiration of the Primary Term, for each completed well located on the Leased
Premises or lands pooled therewith which is capable of producing only gas, or only gas and condensate, in paying
quantities, but which is shut in because of the lack of a regularly available market for the gas to be produced therefrom,
shall nevertheless be deemed to be a well producing gas in paying quantities, and Lessee shall pay to Lessor, as royalty, a
sum equal to Ten and No/l 00 Dollars ($10.00) per net acre covered by this Lease ("Shut-in Well Payments"), which
payment shall be made to Lessor at P.O, Box 1330, Houston, Texas 77251-1330, ATTN: Manager, Land
Administration, on or before the ninetieth (90th) day from and after the date on which such well is or was shut-in, and
annually thereafter a similar payment may be made on or before the anniversary date on which such well was shut-in, If
such payment, or payments, are timely made, it shall be considered that gas is being produced in paying quantities from
the Leased Premises under all the terms and provisions of this Lease (but only for so long as the well continues to be
capable of producing in paying quantities). Notwithstanding the foregoing, Lessee may not maintain this Lease by making
Shut-in Well Payments as to any well more than three (3) cumulative years during any five (5) year period,
. Lessee shall be obligated to use diligence to market gas capable of being produced in paying quantities from a
shut-in well, but shall be under no obligation to market same under terms, conditions or circumstances which are
unreasonable.
9. LESSEE'S RETENTION OF INTERESTS, At the expiration of the Primary Term, this Lease shall terminate as
to all land which is not located in a drillsite spacing unit (as hereinafter defined) in which there is a well on the Leased
Premises or on lands pooled therewith which is producing oil or gas in paying quantities, or a shut-in gas well (as
described in paragraph 8 above), and in any such producing drillsite spacing unit or units, this Lease shall terminate as to
those depths lying below the stratigraphic equivalent of the base of the deepest producing horizon in each dri\lsite
spacing unit of land. For purposes hereof, "driIl site spacing unit" is defined as the land included in the drilling and
production unit established for the well Dr attributed to the well by the state or federal regulatory authority having
jurisdiction; if no unit or spacing rule exists, then drillsite spacing unit shall be defined as the 640 acre tract surrounding
an oil well 640 acre tract surrounding a gas well. If at the expiration of the Primary Term Lessee is engaged in actual
drilling, reworking or completion operations on the Leased Premises or lands pooled therewith, this provision shall be
suspended for so long as Lessee continues such operations on the Leased Premises or lands pooled therewith with no
cessation of more than ninety (90) consecutive days between the completion or abandonment of such operations on one
well and the commencement of actual drilling, reworking or commencement operations on the next well; provided,
further, that regardless of any such continuous drilling, reworking or completion operations, the termination of this
Lease as to non-producing land and depths shall not be suspended for more than three (3) years from the expiration ofthe
Primary Term hereof. In the event a drillsite spacing unit, affecting any well then located on the Leased Premises or on
lands pooled with the Leased Premises, should subsequently be established or revised by order of governmental authority,
after notice and hearing, then this Lease shall terminate as to all land which is not then located in the newly established or
revised drillsite spacing unit. Ifthe Leased Premises are included in a federal unit, then for the purposes of this provision
the references to "lands pooled with the Leased Premises" shall include only that land which is included in an appròved
participating area and Lessee shall re-assign to Lessor that portion of the Leased Premises not included in an approved
participating area, but which will continue to be included in a federal unit.
Page 3 of 12
Land Grant Paid-Up Oil, Gas & Mineral Lease (Non-CBM)
Rev. 01/16/06
09:-~ 5G06
0005C9
10. POOLING. Lessee may not commit the Leased Premises or any portion thereofto a federal unit withoutthe prior
written consent of Lessor. Except as expressly provided in the preceding sentence, Lessee, at its option, is hereby given
the right and power to pool or combine the Leased Premises or any portion thereof, as to oil and gas, or either of them,
with any other land, lease or leases, when in Lessee's judgment it is necessary or advisable to do so in order to properly
develop and operate the Leased Premises. Any such pooling shall be into a well unit or units not exceeding forty (40)
acres, plus an acreage tolerance often percent (10%), for oil, and not exceeding one hundred sixty (160) acres, plus an
acreage tolerance often percent (10%), for gas, except that larger units may be created to conform to any spacing or well
unit pattern that may be prescribed by state governmental authorities having jurisdiction. Lessee may pool or combine
acreage covered by this Lease, or any portion thereof, as above provided, as to oil or gas in anyone or more strata, and
oil units need not conform as to area with gas units. The pooling in one or more instances shall not exhaust the right of
the Lessee hereunder to pool this Lease or portions thereof into other units. Lessee shall execute in writing and place of
public record in the county or counties in which the pooled Leased Premises are located an instrument or instruments
identifYing and describing the pooled acreage. In order to be effective, Lessee shall promptly furnish to Lessor a copy of
the document pooling the acreage, The entire acreage so pooled into a unit shall be treated for all purposes, except the
payment of royalties, as ifit were included in this Lease, and drilling, reworking and completion operations thereon, and
production of oil and gas therefrom, or the completion thereon of a well as a shut-in gas well, shall be considered for all
purposes, except the payment of royalties, as if such operations were on, or such production were from, or such
completion were on the Leased Premises, whether or not the well or welJs be located on the Leased Premises. In lieu of
the royalties elsewhere herein provided, Lessor shall receive from a unit so formed, only such portion of the royalty
stipulated herein as the amount of its net mineral acres placed in the unit bears to the total acreage so pooled in the
particular unit involved. Should any unit as originally created hereunder contain less than the maximum number of acres
hereinabove specified, then Lessee may at any time thereafter, whether before or after production is obtained on the unit,
enlarge such unit by adding additional acreage thereto, but the enlarged unit shall in no event exceed the acreage content
hereinabove specified. In the event an existing unit is so enlarged, Lessee shall execute and place of record a supple-
mental declaration of pooling identifYing and describing the land added to the existing unit; provided, that if such
supplemental declaration of pooling is not filed until after production is obtained on the unit as originally created, then
and in such event the supplemental declaration of pooling shall not become effective until the first day ofthe calendar
month next folJowing the filing thereof and the furnishing to Lessor of a copy of such supplemental declaration. In the
absence of production, Lessee may terminate the unitized area by filing with Lessor and of record a notice of termination,
II. ASSIGNMENT, The rights of Lessor may be assigned in whole or in part. This Lease may not be assigned by
Lessee in whole or in part, without the prior written consent of Lessor, which consent shall not be unreasonably withheld.
Withholding consent shall be deemed reasonable if, in Lessor's sole judgment, the numbers of assignees are excessive, an
assignee's technical competence or financial ability could be inadequate or Lessee refuses to accept responsibility for the
performance of any of its successors in interest. Any attempted assignment by Lessee of the rights arising under this
Lease without such consent shall be void and of no effect. No change in the ownership of the land by Lessor, or any
interest therein, shall be binding on Lessee or any purchaser of production hereunder, until Lessee shall be furnished with
a certified copy of all recorded instruments, all court proceed ings, and all other necessary evidence of any transfer, or sale,
of said rights. Lessee shall continue to be responsible to Lessor for all unpaid sums due Lessor, as well as all obligations
under Sections 4. ROYALTIES AND STATEMENTS, 15. INDEMNITY and 16. PROTECTION AND
RESTORA nON OF LEASED PREMISES. In addition, the assignment of this Lease, in whole or in part, shall not be
valid as to Lessor until Lessor shall have been furnished a true and correct certified copy of such assignment filed of
public record in the applicable county or counties in which the Leased Premises are located. No change or division in
ownership of the land, shut-in payments, or royalties, however accomplished, shall operate to enlarge the obligations or
diminish the rights of Lessee,
12. FORCE MAJEURE. Except as otherwise specifically provided herein, when drilling, reworking, completion,
production or other operations are prevented or delayed by any applicable laws, rules, regulations or orders, or by
inability to obtain necessary permits, equipment, services, material, water, electricity, fuel, access or easements, or by
fire, flood, adverse weather conditions, war, sabotage, rebellion, insurrection, riot, strike or labor disputes, or by failure
of purchasers or carriers to take or transport such production, or by any other cause not reasonably within Lessee's
control, which by exercise of due diligence Lessee is unable to avoid, this Lease shall not terminate because of such
prevention or delay, and at Lessee's option, the period of such prevention or delay shall be added to the term hereofbut
in no event can more than two (2) additional years be added. In any event, when the cause or matter so preventing or
delaying such operations is removed or ceases to exist, Lessee shall, within 90 days thereafter, resume such operations,
Lessee shall not be liable for breach of any express or implied covenants of this Lease when drilling, reworking,
completion, production or other operations are so prevented, delayed or interrupted. Lessee shall immediately notifY
Lessor in writing, setting forth the full circumstances, when drilling, reworking, completion, production or other
operations are so prevented or delayed. Lessee shall provide Lessor with written notice of the date upon which any force
majeure ceases to be operative. The requirements to notifY Lessor of the commencement and termination of any
particular period offorce majeure and the receipt by Lessor of such reports shall not be deemed an admission by Lessor
that force majeure is actually operative and shall not preclude Lessor from contending that force majeure is not operative.
Failure of Lessee to timely give Lessor any notice of the commencement of a force majeure shall not prevent force
majeure trom being operative if it is in fact and law operative.
Page 4 of 12
Land Grant Paid-Up Oil, Gas & Mineral Lease (Non-CBM)
Rev. 01/16/06
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0010570
13. PROPORTION A TE REDUCTION. If Lessor owns an interest in the Leased Premises less than the entire fee
simple estate, or if this Lease covers less than Lessor's entire interest in the Leased Premises, then the Shut-in Well
Payments, Compensatory Royalty Payments and royalties to be paid Lessor shall be reduced proportionately,
14, NO WARRANTY, The rights granted under this Lease are granted WITHOUT WARRANTY OF ANY KIND,
EITHER EXPRESS OR IMPLIED, and without covenants of title, including, without limitation, covenants to give
possession or for quiet enjoyment.
15. INDEMNITY.
(a) Definitions -
(i) "Claim" or "Claims" means, unless specifically provided otherwise, all claims (including, but
not limited to, those for damage to property, bodily injury, personal injury, ilIness, disease, maintenance, cure,
loss of parental or spousal consortium, wrongful death, loss of support, death, and wrongful termination of
employment), damages (including damages to property that result from pollution as well as the damages that
result from the control, removal, restoration and cleanup ofpollutíon or contamination), liabilities (including,
but not limited to, plugging liability), losses, demands, liens, encumbrances, fines, penalties, causes of action of
any kind (including actions for indirect and consequential damages, but excluding those for punitive and
exemplary damages), obligations, costs, judgments, interest and awards (including payment of reasonable
attorneys' fees and costs of litigation) or amounts, of any kind or character, whether under judicial proceedings,
administrative proceedings or otherwise, or conditions in the Leased Premises or attributable to any person or
persons, Lessor, any member of Lessor Indemnitees, Lessee or any member of Lessee Group, breach of
representation or warranty (expressed or implied), under any theory of tort, contract, breach of contract
(including any Claims which arise by reason of indemnification or assumption of liability contained in other
contracts entered into by Lessor Indemnitees) arising out of, or incident to or in connection with this Lease or
any operation, activity, facility or occupancy of the Leased Premises or lands pooled therewith including, but
not limited to, the following: (A) any activity conducted in connection with this Lease, whether or not
expressly or impliedly authorized or required by this Lease; (B) plugging and abandonment of producing wells,
non-producing wells, existing wellbores, or previously plugged wellbores; (C) management, use, and disposal of
produced water and wastes or substances associated with lease activity; (D) the generation, management,
processing, handling, transportation, storage, treatment, recycling, marketing, use, disposal, release, or
threatened release, of oil, natural gas, natural gas liquids, all other petroleum substances, any waste, or any
"Hazardous Substance" or "Pollutant or Contaminant" as those terms or terms substantially similar are defined
in applicable laws, including but not limited to the Comprehensive Environmental Response Compensation and
Liability Act (CERCLA), as the same now exists or may be hereafter amended; (E) any failure by Lessee to
comply with an express or implied obligation created by this Lease; and (F) violation of any law or regulation.
(ii) "Lessee Group" means Lessee, its affiliate companies,joint owners, partners, contractors and
subcontractors and each oftheir respective officers, directors, agents, representatives, consultants, employees
and insurers.
(iii) "Lessor Indemnitees" means Lessor, its affiliate companies, joint owners, partners, contractors
and subcontractors, and each of their respective officers, directors, agents, representatives, consultants,
employees and insurers.
(iv) The term "REGARDLESS OF FAULT" means WITHOUT REGARD TO THE CAUSE
OR CAUSES OF ANY CLAIM, INCLUDING, WITHOUT LIMITATION, EVEN THOUGH A CLAIM
IS CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT,
CONCURRENT, COMPARATIVE; CONTRIBUTORY, ACTIVE, PASSIVE, GROSS, OR
OTHERWISE), WILLFUL MISCONDUCT, STRICT LIABILITY, OR OTHER FAULT, OF ANY
MEMBER, OF LESSOR INDEMNITEES, ANY MEMBER OF LESSEE GROUP, INVITEES OR
THIRD PARTIES, AND WHETHER OR NOT CAUSED BY A PRE-EXISTING CONDITION,
WHETHER PATENT OR LATENT, OF THE PREMISES OF LESSOR INDEMNITEES, LESSEE
GROUP, INVITEES ANDIOR THIRD PARTIES,
(b) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE OTHER PROVISIONS OF
THIS LEASE, LESSEE AGREES TO BE RESPONSIBLE FOR AND ASSUME ALL LlABfLlTY FOR AND
HEREBY AGREES TO DEFEND, RELEASE, INDEMNIFY AND HOLD HARMLESS LESSOR INDEMNITEES
AGAINST ANY AND ALL CLAIMS ARISING IN CONNECTION WITH: (I) BODILY INJURY AND/OR DEATH
OF ANY MEMBER OF LESSEE GROUP AND THEIR INVITEES; AND (II) DAMAGE TO PROPERTY OF ANY
MEMBER OF LESSEE GROUP AND THEIR INVITEES REGARDLESS OF FAULT. LESSEE'
ACKNOWLEDGES THAT THIS STATEMENT IS CONSPICUOUS. Furthermore, and in addition to the indemnity
obligations outlined above in this Section 15, Lessee agrees to be responsible for and assume all liability for and hereby
agrees to defend, release, indemnify, and hold harmless Lessor Indemnitees from and against any and all Claims of any
person or entity directly or indirectly arising out of or related to Lessee Group's negligent acts or omissions. The
indemnity obligations set forth in this Section shall include any medical, compensation, or other benefits paid by Lessor
Page 5 of 12
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or any member of Lessor Indemnitees and shall apply even ¡fthe employee is determined to be the borrowed or statutory
employee of Lessor or any other member of Lessor Indemnitees.
(c) In support of the indemnity obligations contained above, Lessee agrees to provide coverage and
amounts of liability insurance, which in no event shall be less than the minimum set out in Section 24 herein. It is agreed
that with respect to any statutory limitations now or hereafter in effect and affecting the validity or enforceability ofthis
indemnification provision, such statutory limitations are made a part of this indemnification provision with respect to
work perfonned and operations conducted in the state in which such statute applies, and shall operate to amend this
indemnification provision to the minimum extent necessary to bring this provisions into confonnity with the requirements
of such statute, and as so modified, this provision shall continue in full force and effect.
(d) In the event Lessee fails to furnish a defense and indemnity as provided for herein or in the event
Lessee breaches an obligation in this Lease, Lessor shall be entitled to receive from the Lessee, in addition to its
attorneys' fees, costs, expenses and any amounts paid in judgment or settlement, all costs, expenses, and attorneys' fees
incurred in the enforcement of this Lease, including specifically, but not limited to, Claims for contractual indemnity and
insurance coverage.
(e) Lessee's obligations created by this Section 15 shall continue and remain in effect and are enforceable
by Lessor even after this Lease tenninates or otherwise ceases to burden the Leased Premises.
16. PROTECTION AND RESTORATION OF LEASED PREMISES. Without limiting the generality of Section 15.
INDEMNITY hereof, Lessee shall pay either the tenant or the surface owner (whichever is appropriate) for any and all
damages to land, structures, roads, fences, gates, cattle guards, trees, growing crops, irrigation or any other facilities or
improvements, equipment, wildlife, game, fish and livestock caused by construction, operations, or maintenance of
facilities, shall bury all pipelines below plow depth where they cross cultivated land, shall construct gates where
necessary for crossing fenced lands and keep the gates in repair and closed, Lessee shall not penn it any lien or other
encumbrance to be filed or to remain against the Leased Premises as a result of operations hereunder. Regardless of
whether Lessor has consented to an assignment, fannout or other arrangement whereby Lessee consents to drilling or
other operations on the Leased Premises by a third party, Lessee shall be responsible for any and all claims, demands,
actions and causes ofaction or liens arising out of such operations, whether arising in law, at equity or administratively.
THE PROVISIONS OF THIS SECTION 16 SHALL SURVIVE ANY TERMINA nON OF THIS LEASE.
Lessee shall repair and clean all ditches, roads, bridges, fences, pipelines and other structures, facilities and
improvements on the Leased Premises which may be used, worn or damaged by any operation hereunder, shall remove
all debris resulting from any such operation, and shall otherwise restore the Leased Premises to its original condition
insofar as reasonably practicable, No well shall be drilled within 200 feet of any building, railroad tracks or structure
without Lessor's written consent. Lessee shall maintain in good condition all fences, bridges and roads on the Leased
Premises which are used or constructed by Lessee in its operations, and all such roads shall be and remain private, not
open to the public and will be conspicuously posted as such by Lessee.
17. REMOV AL OF IMPROVEMENTS. Within six (6) months after any tennination, as to all or any portion of the
Leased Premises, Lessee shall remove from that portion of the Leased Premises any and all property, facilities and
material belonging to or placed thereon by Lessee and shall restore the Leased Premises to its original condition insofar
as reasonably practicable, in default of which within the time above specified, but subject to the other obligations of
Lessee hereunder and in addition to any other remedy Lessor may enjoy, Lessor may remove, destroy or retain any such
property, at Lessor's will, and Lessee shall reimburse Lessor for the cost of any such removal or destruction as well as the
cost of restoring the Leased Premises.
18. RIGHT TO CURE: TERMINATION, In the event of Lessee's breach ofthis Lease other than Lessee's failure to
pay sums when due hereunder or a breach of obligations set forth in Sections 6. CONTINUOUS OPERATIONS, 7,
OFFSET OBLlGA TION, and 21. RELEASE, _Lessor shall notify Lessee of such breach, and Lessee shall have thirty
(30) days from the receipt thereof to comply with this Lease, If Lessee fails to remedy any material breach within the
period above provided, in addition to any other remedy available to Lessor, Lessor may, at its option, promptly following
such period tenninate this Lease and be relieved from any obligation hereunder. Such right oftennination is exercisable
by filing with Lessee and of record a notice of termination,
If the parties are unable to agree upon whether or not a breach is material, then such dispute shall be resolved by
binding arbitration conducted by the Houston, Texas, office of the American Arbitration Association ("AAA") in
accordance with the AAA's Commercial Arbitration Rules (the "Rules") effective at the time of the dispute. The
Expedited Procedures of the AAA 's Rules shall apply to any such dispute and the arbitration shall be heard and decided
by a single arbitrator to be appointed by the AAA. The jurisdiction of the arbitrator will be limited to detennining
whether or not a breach is material. The arbitrator shall make a reasoned award in writing. The award shall be final and
binding on each Party and for all purposes, Judgment upon a final award may be entered in any court havingjurisdiction.
This arbitration provision shall survive the tennination of this Lease. Should the parties ever be prevented by applicable
law from utilizing arbitration to resolve disputes hereunder, then the choice of law and forum provisions ofthis Section
18 shall nevertheless remain in full force and effect.
Irrespective of whether Lessor elects to tenninate this Lease or exercise any other right or remedy under this
Lease or at law, Lessor shall be entitled to other available remedies, including specific perfonnance to require Lessee to
(a) abandon any well and/or restore the surface of the Leased Premises to its condition existing prior to entry thereon by
Page 6 of 12
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Lessee, (b) furnish any reports required hereunder or information required hereunder from operations on the Leased
Premises or land pooled therewith, and/or ( C) make any payment due hereunder.·
19. NOTICES. Except as otherwise expressly provided in this Lease, all notices, data, info.:mation, requests,
payments and other communications required or permitted hereunder shall be in writing and shall be deemed to have
been fully given, made and received only when personally delivered, delivered by Federal Express or other nationally
recognized courier service, or upon confirmation of transmission ofa facsimile, provided that any attachments referenced
in the notice are also sent via facsimile at the same time, or three business days after having been deposited in the United
States mail, certified mail, postage prepaid, return receipt requested and be addressed as set forth below:
If to Lessee:
Kerr-McGee Oil & Gas Onshore LP
1999 Broadway
Suite 3700
Denver, Colorado 80202
Attention: Mr. Dick Frazey
If to Lessor:
Anadarko Land Corp.
P. O. Box 1330
Houston, Texas 77251-1330
Attn: Manager/Land Administrator
Either party may send notices, data, information, requests and other communications hereunder to the intended recipient
at the address set forth above using any other means (including personal delivery, expedited courier, messenger service,
telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by the intended recipient. Either party may
change its address by giving notice of such change of address in conformity with the provisions of this Section 19 for the
giving of notice,
20. GOVERNMENTAL COMPLIANCE. Lessee shall at all times comply with all laws, rules and regulations of all
governmental departments and agencies with jurisdiction over Lessee's operations hereunder and shall satisfY any and all
governmental permitting requirements to conduct Lessee's operations hereunder. Lèssee shall promptly plug and
abandon all wells in accordance with the rules and regulations of any governmental agency havingjurisdiction and, to the
extent not inconsistent therewith, Lessee shall promptly remove all abandoned pipelines and other debris, shall promptly
draw and remove the portion of all casing and pipe from abandoned wells or other operations above the surface down to a
depth of at least ten (10) feet below ground level.
21. RELEASE. In the event oftermination or forfeiture of this Lease for any causè, in whole or in part, Lessee shall
execute and record a proper instrument of release within 30 days of Lessor's request therefor, releasing from the terms
hereof all those portions ofthe Leased Premises as to which the Lease may have terminated or been forfeited; and Lessee
shall promptly furnish Lessor an executed or certified recorded copy thereof. In recognition of the business necessity of
such release being recorded in a timely fashion, Lessee, by acceptance ofthis Lease, agrees to pay as partial liquidated
damages to Lessor, the sum of One Hundred Dollars ($100.00) for each day that Lessee fails to record such release in a
timely manner, together with interest on the cumulative amount at the highest rate allowed by law from the date due until
paid plus all costs of collection, including attorneys' fees and all such sums shall be payable out of Lessee's share of
production hereunder. In addition, Lessor shall thereafter be entitled to record a notice oftermination of this Lease and
be relieved from any obligation hereunder.
22. LESSOR'S ELECTION OF REMEDIES; WAIVER, The mention of any express obligation of Lessee herein
shall never be construed as affecting any implied obligation, which Lessee may otherwise owe Lessor hereunder, but shall
be considered as being in addition thereto. Similarly, the mention of any right or remedy of Lessor herein shall not
preclude Lessor from exercising any other right or remedy to which Lessor might otherwise be entitled, including,
without limitation, specific performance to require Lessee to (a) abandon any well andlor restore the surface of the
Leased Premises to its condition existing prior to entry thereon by Lessee, (b) furnish any reports required hereunder or
information required hereunder from operations on the Leased Premises or lands pooled therewith, and/or (c) make any
payment due hereunder, but each shall be cumulative of every other right or remedy given hereunder or now or hereafter
existing at law or in equity by statute or otherwise, and may be enforced concurrently therewith or from time to time, No
failure of Lessor to enforce any provision of this Lease shall operate as a waiver of Lessor's right to thereafter enforce
such provision or any other provision.
23. DATA AND ACCESS. Lessor shall be given fifteen (15) days notice prior to commencement of all drilling
operations pursuant to this Lease. Lessor, or Lessor's representative (as appointed by Lessor), shall have the right, at
Lessor's risk, to have access to the derrick floor and to observe all operations on all wells drilled on the Leased Premises
or lands pooled therewith. Lessee shall promptly furnish to Lessor free of cost, a copy of all applications and reports
made to any governmental agency or authority, and all orders, rules and permits issued by any such agency or authority
pertaining to the Leased Premises, title opinions and curative material, daily drilling reports, well logs; core records and
analysis production analyses, formation test results, well completion reports, well workover reports, gas-oil ratio reports,
well history and performance reports, production reports, sales records and other data taken from wells located on the
Leased Premises, Lessee agrees, to furnish to Lessor true and complete copies of all contracts or agreements as amended,
for sale, processing or other disposition of any product produced from the Leased Premises and such technical
Page 7 of 12
Land Grant Paid-Up Oil, Gas & Mineral Lease (Non-CBM)
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..:Jf".-...I..¿'L...
0005~)3
information as Lessee may acquire with respect to sands and formations encountered. Lessee shall notify Lessor in the
event that any geophysical or geochemical exploration or examination of the Leased Premises is either obtained by,
becomes available to or is acquired by Lessee with respect to the Leased Premises. Notification shall be made prior to
acquisition of the data, To the extent Lessee has the legal right to do so, Lessee shall furnish copies (digital and hard) of
all such data to Lessor at LesseeUs cost and expense, Data to be furnished by Lessee to Lessor shall include all data
gathered over the Leased Premises plus one mile in any direction from the Leased Premises. Data shall include, but not
be limited to, raw and processed data to be determined on a project specific basis by Lessor. Lessor's representative shall
have the right to be present when wells are tested and/or tanks are gauged and shall have the right to examine all run
tickets and to have full information as to production and runs, including copies of all run tickets upon request, and such
other information as may be appropriate to the settlement of accounts between Lessor and Lessee, or to determine the
respective rights and obligations of said parties, or to enable Lessor to comply with applicable laws, rules or regulations
of governmental authorities, All land surveys affecting the Leased Premises shall be conducted either by an employee of
Lessee or by a Registered Land Surveyor and Lessee shall deliver promptly to Lessor a copy of the map and field notes of
each such survey. Lessor hereby agrees to treat all seismic data provided hereunder in a confidential manner and will not
reproduce or distribute such data to any third party; provided, however, Lessor may show the data to its affiliates,
working interest partners, Lessees, potential Lessees, potential participants in an exploration program, agents, or
successors in interest, and or all of whom will be required by Lessor not to disclose such data to any third party.
24. INSURANCE. Lessee shall carry the following insurance in the indicated amounts:
(a) Workmen's Compensation Insurance, in compliance with the Workmen's Compensation Jaws ofthe state in
which operations hereunder are conducted,
(b) Employer's Liability Insurance with limits of not less than $1,000,000 per person, covering all employees
engaged in the performance of work in the state having jurisdiction over each employee.
(c) General Liability Insurance, including contractual liability, with a combined single limit per occurrence of
not less than $1,000,000 for bodily injury and property damage.
(d) Automobile Insurance, including hired and non-owned vehicles, with a combined single limit per
occurrence of not less than $1,000,000 for bodily injury and property damage.
(e) Liability Umbrella (excess of underlying insurance coverage mentioned above) with a combined limit per
occurrence coverage of not less than $25,000,000,
(f) Well Control Insurance including underground blowout, seepage and pollution, with a minimum limit of
$25,000,000,
(g) To the extent of the liabilities assumed by Lessee herein, all of the above insurance shall be endorsed to
provide that:
(i) Lessee's insurers waive their right of subrogation (equitable or by assignment, express or
implied, loan receipt or otherwise) against Lessor Indemnities,
(ii) Lessee's insurers name Lessor Indemnities as additional insured's (except for Worker's
Compensation and Property Insurance).
(iii) Such insurance coverage is primary over any insurance coverage maintained by Lessor
Indemnitees,
At the inception of this Lease, annually thereafter, and whenever requested, Lessee shall furnish insurance certificates to
evidence the insurance required herein Lessee's insurance shall be carried with insurance companies satisfactory to
Lessor and shall contain endorsements stating that insurer will give thirty (30) days' written notice to Lessor of non-
renewal, cancellation, substantial amendment or alteration of such coverage. All deductible amounts, premiums,
fTanchise amounts or other charges due with respect to Lessee's required insurance herein shall be the sole obligation of
Lessee. Maintaining the prescribed insurance shall not relieve Lessee of any other obligation under this Lease.
Lessee shall require each independent contractor and subcontractor to carry and maintain insurance at its own expense in
amounts deemed necessary to cover the risks inherent to the work or services to be performed by the contractor or
subcontractor. Every such insurance policy shall contain a waiver on the part of the insurance carrier of all rights, by
subrogation or otherwise, against Lessor Indemnitees, Ùssor Indemnitees shall also be named as additional insured in
each such policy. Such insurance shall be primary over any insurance maintained by Lessor Indemnitees.
25. BONDS/LETTERS OF CREDIT Lessor may, at any time, require Lessee to provide a bond(s) to ensure timely
and proper performance of Lessee's obligations hereunder and/or at law for abandonment ofwell(s) and restoration of the
Leased Premises and/or to provide Lessor letter(s) of credit (which shall allow reduction as work is performed) to ensure
payment of contractors performing drilling or other operations hereunder. Such bond and/or letter of credit shaI1 be fTom
a suretylbank acceptable to Lessor and in a form acceptable to Lessor, ¡fnot provided within 10 days foI1owing written
request therefor, Lessee, by acceptance of this Lease, agrees to pay as partial liquidated damages to Lessor, the sum of
One Hundred Dollars ($100.00) for each day that Lessee fails to provide such bond or letter of credit, together with
interest on the cumulative amount at the highest rate allowed by law from the date due until paid plus all costs of
collection, including attorneys' fees and all such sums shall be payable out of Lessee's share of production hereunder.
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26. PROCEEDS OF PRODUCTION. Lessor reserves the right, but not the obligation, to collect trom the purchaser
thereof the proceeds of production attributable to Lessor's interest in the Leased Premises trom any sale of production
theretrom. Each purchaser shall be entitled to rely upon the written direction of Lessor concerning the payment of such
proceeds.
0,0'(\'-""'/1
'U' 'U......J ,"''1
27. REPAIR WATER WELLS/RESERVOIRS. All operations on the Leased Premises shall be conducted so as not
to damage any surface or groundwater water supply. However, in the event Lessee's operations shall result in damage or
destruction of any water supply, Lessee promptly shall repair, restore, remediate, or replace any well, tank, surface pond
or other water facility or any water supply so damaged or destroyed as a result of Lessee's operations, Lessee shall
provide to Lessor and/or surface tenant emergency water and water facilities for use in either's operations until such
damage or destruction is repaired, restored, remediated, and replaced. The words "damage" and "destroy" shall also be
construed to include contamination. Contamination is defined to mean the addition of substances to any water supply
used for human or animal consumption, or for agricultural purposes to a degree which renders the potable water supply
unfit by drinking water standards for consumption by humans or animals, or the non-potable water unfit for agricultural
purposes either during Lessee's operations or after such operations have ceased. Without limitation of the general
requirements stated above, Lessee agrees, with reference to each well drilled on the Leased Premises, either to (a) set and
circulate cement around sufficient surface casing to penetrate and adequately protect all tresh water sands; or (b) set and
circulate cement around surface casing in a manner and to a depth acceptable to the state agency and, in the event a
second string of casing (either intermediate or production casing) is set in such well, circulate cement around such second
string of casing with cement circulated either to the surface or into the surface casing previously set in such well; or (c)
utilize such other technique as may be acceptable to the state agency and in conformance with accepted practices in the
industry to assure the protection ofthe tresh water sands by placing cement in the annulus, between the fresh water sands
and the casing. All remediation and restoration and remediation of any water supply by Lessee will be by techniques
acceptable to Lessor and to the state agency with jurisdiction over the water supply, and to a regulatory standard required
by the state agency allowing for non-degradation of the water supply,
28, WELL TAKEOVER. Without the prior written consent of Lessor, Lessee shall not abandon any well or (except
when a replacement is made) remove trom the wellbore any well casing, tubing, piping, fittings, tanks, pipe lines or other
material and equipment which are necessary for the recovery and handling of production capable of being recovered trom
said well upon the Leased Premises, Lessor shall have the option to purchase any or all of such material and equipment,
except that owned by third parties, upon the Leased Premises which are still necessary for the production and handling of
hydrocarbons capable of being produced trom such well and which are not required by Lessee for operations elsewhere
on the Leased Premises. If Lessor takes over the well, Lessor shall promptly reimburse Lessee for the reasonable salvage
value of all material and equipment in the well or used or acquired in connection with the well which Lessor elects to
retain for its operations and which would have been recoverable, less the estimated costs of salvaging and of plugging
and abandoning the well, and Lessee shall promptly deliver a bill of sale to Lessor for such material and equipment. If
Lessor takes over the well, then Lessee shall be deemed to have relinquished and transferred back to Lessor, tree of any
burdens created by Lessee, all of the right, title and interest of Lessee in the wellbore, such material and equipment and
the production theretrom, If the well taken over by Lessor is the only well serving to perpetuate this Lease, Lessee shall
release this Lease to Lessor.
29. LAND GRANT PROVISIONS. Unless the requirement is waived in writing by Lessor at its discretion, no entry
shall be made for drilling operations and no facility shall be installed upon any of the Leased Premises in which Lessor
owns the mineral rights only, until a written agreement with the surface owner has been secured by Lessor in a fonn
satisfactory to Lessor, Lessee shall request Lessor to obtain such agreement or to waive the requirement therefor at least
thirty (30) days prior to the date Lessee intends to commence such operations, Any payments to surface owners pursuant
to such agreement will not increase the burdens created under this Lease,
30. ENTIRE AGREEMENT. This Lease contains the entire understanding among the parties hereto with respect to
the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or
conditions, expressed or implied, oral or written, except as herein contained. The express tenns hereof control and
supersede any course ofperfonnance or usage of the trade inconsistent with any of the tenns hereof. This Lease may not
be modified or amended other than by an agreement in writing that is signed by the parties hereto.
31. HEADINGS. The headings in this Lease are for convenience only and they fonn no part ofthis Lease and shall
not affect its interpretation.
32, SEVERABILITY. Any provision of this Lease which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or un enforceability, without invalidating the remaining
provisions hereof, which provisions shall be enforced to the maximum extent pennitted by law and construed in a fashion
to effectuate best the provisions hereof, and any such prohibition or unenforceability shall not invalidate or render
unenforceable such provision in any other jurisdiction, '
33. SUCCESSORS AND ASSIGNS, Subject to Section J I. ASSIGNMENT. All the provisions of this Lease shall
inure to the benefit of and be binding upon the parties hereto, their successors and assigns.
34. ADDITIONAL PROVISIONS. Sections 35 through 37, inclusive, listed on Exhibit "A", attached hereto and
hereby made a part hereof, are incorporated into this Lease by reference.
Page 9 of 12
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Rev. 01/16/06
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J '.1.- ,)
0005t-;,s
IN WITNESS WHEREOF, this Lease is executed on the date of the respective acknowledgments hereinbelow,
but shall be effective !Tom the date first hereinabove written,
STATE OF TEXAS )
)
COUNTY OF MONTGOMERY )
LESSOR:
CORPORA nON
~f 'êt~
(èÞ&~l
LESSEE:
KERR-MCGEE OIL & GAS ONSHORE LP
By: (þ¡ w¡
Its: Attorney-in-Fact
The fOr~Oing instrument was acknowledged before me this g day of November, 2006, by
Jf.im/_1j L·I lI/JlIIY1'1.b , attorney-in-fact of Anadarko Land Corp, a Nebraska corporation, on behalf of the
corporation.
SEAL
........................................,
rt~ A. SEIFERT É
Notary Public
. · STATE OF TEXAS
'1. ..........MJ~.o~':'.;..E;'f.; ~;~~~:2:2J
STATE OF COLORADO
COUNTY OF DENVER
Signature
A·j(~kt-
Name (Print)
My c011,lmission eXPires~ -1- ;)0 ~ 0 ,
/fftdf Ltlnd in L}>u" nl,s.{-
Title of Officer
)
)
)
The foregoing instrument was acknowledged before me this 29th day of November
David R, Dix , Attorney-in-Fact of Kerr"McGee Oil & Gas
Delaware limited partnership, on behalf of the limited partnership.
Witness my hand and official seal.
My Commission Expires 07l131200a
AEPC Lease Fonn
(04-01-04)
, 2006, by
Onshore LP, a
~AI.~
Signature
Marsha M. Emerson
Name (Print)
My commission expires
Sr. Lease Analyst
Title of Officer
Land Grant Paid-Up Oil, Gas & Mineral Lease (Non-CBM)
Rev. 01/16/06
Page 10 of 12
Oò2e,-:-oc-
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EXHIBIT "A"
Attached to and made a part of that certain Oil and Gas Lease dated November 1,2006, by and between
Anadarko Land Corp, as Lessor and Kerr-McGee Oil & Gas Onshore LP, as Lessee,
0005~:'G
ADDITIONAL SECTIONS
35, RIGHT TO PURCHASE PRODUCTION
Oil Production: Lessor and Lessee agree that Lessor shall have the right, at any time and from time to time, upon
not less than 30 days' advance written notice to Lessee, to purchase all or any part of the oil (which term as herein used
shall include crude oil, distillate, condensate, and other liquid hydrocarbons) produced and saved ITom or attributable to
the Leased Premises, on Lessor's standard division order tenns, The price payable for the oil contained in a delivery
pursuant hereto shall not be less than a bona fide third party offer at the time of delivery for oil of like grade and gravity
produced in the same field in which the well is located. In the event oil is found on the Leased Premises or on lands
pooled therewith, Lessee shall immediately notify Anadarko Energy Services in writing at Anadarko Energy Services,
Attn: Crude Oil Marketing, P. O. Box 1330, Houston, Texas 7725 1-1330,
Gas Production: Subject to any gas sales or purchase contracts affecting the Leased Premises on the date of this
Lease, Lessor and Lessee further expressly agree that in the event gas (including nitrogen and carbon dioxide) is
produced ITom or attributable to the Leased Premises, Lessor shall have a right of first refusal to purchase any or all of
such gas which is produced ITom or attributable to the Leased Premises, Under such right of first refusal, Lessee shall
notify Lessor in writing of any bona fide offer for the purchase of its gas which it is willing to accept, furnishing the tenns
thereof, and Lessor shall have the right within 30 days of the receipt of such notice and infonnation to elect to purchase
the gas on the same tenns and conditions as those contained in the bona fide offer. In the event Lessor elects not to
exercise its right to purchase under its right of first refusal, then Lessee may, within 60 days thereafter, enter into a
contract to sell the gas to such purchaser in accordance with said bona fide offer. If, however, Lessee does not timely
enter into such contract with such purchaser (or if, for any reason, a sale of gas pursuant to such contract is discontinued)
then this right of first refusal to purchase gas shall be reinstated subject to the terms and conditions set forth herein. For
purposes hereof, an offer shall not be considered as a bona fide offer when the offer is made by an affiliated company of
Lessee.
In the event that after a reasonable time (not exceeding 30 days) following the completion ofa well capable of
producing gas there is no bona fide offer to purchase the gas which is to be produced ITom or attributable to the Leased
Premises, then Lessee shall notifY Lessor in writing of that fact, and Lessor shall have the right, but not the obligation, to
purchase such gas at the Market Price. As used herein the tenn "Market Price" shall mean the arithmetic average of the
prices reported in the first issue of the month of delivery for the price references included in the Market Price Index
applicable to a point of delivery, to be designated by Lessor, less the transportation, compression, gathering and other
costs, if applicable, to deliver gas ITom such point of delivery to the main line transmission point or points where such
Market Price Index is established. As used herein, the term "Market Price Index" for a particular point of delivery shall
mean the published price references, to be designated by Lessor, which reflect the price paid for gas sold under spot
contracts between unaffiliated third parties into one or more mainline transmission systems which represent a market for
the gas purchased by Lessor at such point of delivery, Any dispute under this Lease arising out of or relating to which
published price references are consistent with the parties' intent that the Market Price Index will reflect the prices paid for
gas sold under spot contracts between unaffiliated third parties into mainline transmission systems which represent a
market for the gas purchased by Lessor at the point of delivery shall be resolved by binding arbitration conducted by the
Houston, Texas, office of the AAA in accordance with the provisions set forth in Section 18 of this Lease, The
jurisdiction of the arbitrator will be limited to determining which published price references are consistent with the
parties' intent that the Market Price Index will reflect the prices paid for gas sold under spot contracts between
unaffiliated third parties into mainline transmission systems which represent a market for the gas purchased by Lessor at
the point of delivery. If Lessor does not make an offer to purchase the gas, or does not elect to purchase the gas at the
Market Price, then Lessor's right of first refusal shall be reinstated with respect to any bona fide offer subsequently
received by Lessee, In the event gas is found on the Leased Premises or on lands pooled therewith, Lessee shall
immediately notify Anadarko Energy Services in writing at Anadarko Energy Services, Attn: Natural Gas Marketing,
p, O. Box 1330, Houston, Texas 77251-1330. Lessor hereby reserves the right to nominate an affiliate, or other third
party, to act on its behalfreJative to Lessor's right to purchase production hereunder,
36. HORIZONTAL WELLS
Should a horizontal well, as such term is defined under laws or regulations of the state in which the Leased
Premises are located or the federal government, if applicable, be drilled hereunder, the provisions of Sections 9.
LESSEE'S RETENTION OF INTERESTS and 10. POOLING shall be modified as follows, First, in Section 9, ifno
unit or spacing rule exists, the drillsite spacing unit shall be no less than the maximum acreage necessary for Lessee to
produce the well without curtailment for acreage deficiency. Second, in Section 10, Lessee shall be pennitted to fonn
pooled units of a size up to the maximum acreage necessary for Lessee to produce the well without curtailment for
acreage deficiency.
37. MINIMUM ROYALTY
Subsequent to completion of a producing well on the Leased Premises or on lands pooled therewith, should the
royalties paid to Lessor during the first and any subsequent one (I) year period ending on any annual anniversary date of
the completion of said well fail to equal one dollars ($1.00) times the net mineral acres covered by this Lease at the
Page 11 of 12
Land Grant Paid-Up Oil, Gas & Mineral Lease (Non-CBM)
Rev, 01/16/06
092'5606
OO:H}5~J7
beginning of the respective annual period (which product shall be called the "minimum royalty"), Lessee shall pay to
Lessor, within sixty (60) days following the end of said annual anniversary date, the difference between the minimum
royalty and the royalties paid to Lessor during said anniversary period. The minimum royalty payments are subject to
proportionate reduction pursuant to Section 13.
Page 12 of 12
Land Grant Paid-Up Oil, Gas & Mineral Lease (Non-CBM)
Rev, 01/16/06