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STATE
OIL AND
WYOMING
GAS LEASE
Lease # 07 -0017c .,.
Parcel #187
Fund Code: CS
000494
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This indenture of lease entered into by and between the State of Wyoming, acting by
and ~hrough its Board of Land Commissioners as LESSOR, and the following as LESSEE:
Fitzsimmons, LLC
Section 1. PURPOSE. The LESSOR, in consideration of the rents and royalties to be
paid and the covenants and agreements to be kept and performed by the LESSEE, does hereby
grant and lease to the LESSEE, the exclusive right to drill for, mine, extract, remove, and
dispose of all the oil, gas and associated hydrocarbon substances and gaseous substances and
elements produced therewith, including sulphur, hydrogen sulfide, sulphur dioxide, nitrogen,
carbon dioxide and helium, which may be produced from the following described land, to wit:
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All Section: 36 Township: 21 North Range: 118 West of the 6th P.M.
County: Lincoln
Acres: 640.00
$640.00
($1.00 per acre or fraction thereof)
Together with the right of ingress and egress and the right to use so much of the
surface of said lands as is necessary to construct and maintain thereupon all wor.ks,
building, plants, waterways, roads, communication lines, pipe lines, reservoirs, tanks,
pumping stations, or other facilities necessary to the proper conduct of operations there
under.
Section 2. TERM OF LEASE. This lease shall become effective on the day and year set
out below and shall remain in effect for a primary term of five (5) years and for so long
thereafter as leased substances may be produced from the lands in paying quantities. This
lease may also be extended beyond its primary term in the absence of production of leased
substances as may be provided by the statutes of the State of Wyoming and the regulations of
the Board of Land Commissioners adopted pursuant thereto. Provided, however, if drilling,
completion, testing or reworking operations are being diligently conducted, either during
the primary term or during any extension thereof, this lease shall continue in full force
and effect so long as such operations are being conducted and so long thereafter as oil or
gas may be produced in paying quantities. This lease may be relinquished or terminated at
an earlier date as herein provided.
Section 3. If the LESSOR owns an interest in oil and gas in said land less than the
entire fee simple estate, then the royalties and rentals to be paid LESSOR shall be reduced
proportionately.
Section 4. LESSEE expressly represents that, if an individual, LESSEE is a citizen of
the United States, or has declared an intention to become a citizen, and is over 19 years of
age-and if a corporation, is duly qualified to transact business in Wyoming.
Section 5. This lease is issued under the authority conferred by Title 36, W.S. 1977
as to the State and School Lands, and Title 11, W.S. 1977 as to Farm Loan lands, and shall
be subject to, and operations by LESSEE hereunder shall be conducted in compliance with the
specific lease terms set out on the reverse of this lease, and with all applicable state
statutory requirements and the regulations issued thereunder, including those providing for:
the leasing of State or Farm Loan Lands for oil and gas; the conservation of oil and gas;
and the regulation of security transactions.
Section 6. HEIRS AND SUCCESSORS IN INTEREST. It is covenanted and agreed that each
obligation hereunder shall extend to and be binding upon, and every benefit thereof shall
inure to the heirs, executors, administrators, successors of, or assigns of the respective
parties hereto.
Section 7. SOVEREIGN IMMUNITY. The State of Wyoming and the lessor do not waive
sovereign immunity by entering into this lease, and specifically retain immunity and all
defenses available to them as sovereigns pursuant to Wyoming Statute 1-39-104 (a) and all
other state laws.
IN WITNESS WHEREOF, this lease has been executed by LESSOR and LESSEE to become
effective on the 2nd day of, February, 2007 A.D.
LESSOR, STATE OF WYOMING, Acting by and through its
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Before any road, building, drilling pad construction, building construction or other earth moving activities commence, plans for such activities (including maps) must be submitted for
prior approval by the Office of State Lands & Investments or his designated representative.
The collection of fossils from this land is prohibited. Any fossils found on this land must be safeguarded by the finder and given to the Office of State Lands & Inve&tments or his
designated representative as soon as practicable after their discovery.
RECEIVED 3/8/2007 at 9:22 AM
RECEIVING # 927431
BOOK: 650 PAGE: 494
JEANNE WAGNER
LINCOLN COUNTY CLERK, KEMMERER, WY
,
J927431
OIL AND G1'\\:) LE:ASE TERMS
00-0495
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.. Section 1. THE LESSEE AGREES:
(a) BOND. To furnish a bond with an approvad corporata suraty company authorizad to
transact businass in tha State of Wyoming, or such other surety as may be acceptable to the
lessor, in the penal sum as requirad by the aJrrent rules of the State Board of Land
Commissionars, conditionad upon the payment of all rentals and royalties accruing to the
lessor under the tarms heteof, and upon the full compliance of all other terms and conditions
of this lease and the rules and regulations relating thereto, and also conditionad on the
payment of all damegas to the surface and improvements thereon where tha lease covers
lands the surface of which has been sold or otherwise leased. Such bond or bonds furnished
prior to the development of tha lands containad in this laase may be increesad in such
reasonable amounts as the lassor may decide upon commencement of drilling oparations and
after the discovery of oil or gas.
(b)PAYMENTS. To maka all payments accruing hereunder to the Office of Stale Lands and
Investments, 122 West 25th Street, Cheyema, Wyoming 82002-0600.
(c)RENTALS. Prior to the discovery of oil or gas in paying quantitias to pay the lessor in
advance, beginning with the effective date hereof, an annual rental of $1.00 per aae or
fraction Ihereof.
After the discovery of oil or gas in paying quantities to pay tha lassor in advance beginning
with the first day of tha lease year succeeding the lease year in which actual discovary was
made, an annual rental of $2.00 per aae or fraction thereof, unless changad by agreamant.
Such rental so paid for any ona year shall ba craditad on the royalty for that year.
Annual rentals on allleasas shall be payabla in advance for the first year and each year
thereafter. No notice of rental due shell be sent to tha lessee. If the rental is not paid on or
before the date it becomes due, notice of default will be sent to the lessee, and a penalty of
$0.50 per acre for late payment will be assessed.
The lessee is not legalty obligatad to pay either the rantal or the penalty, but if the rental and
penalty are not paid within thirty (30) days after the notice of default has bean received, the
laase will terminate automatically by operetlon of law. Termination of the lease shall not
reliave the lessee of any obligation incurred under the lease other than the obligation to pay
rental or panalty. The lessea shall not be entitled to a credit on royalty due for any penalty
peid for lata payments of rental on an operating laase.
(d)ROYAL TIES. The royaltias to be paid by lessee are:
(i) On oil, one-eighth of thet produced, saved, and sold from said land, the same to ba
delivered at the wells or to the cradit of lessor into the pipe line to which the wells may be
connacted.
(ii) On gas, including casinghead gas or other hydrocarbon substances, produced from said
land saved and sold or used off the premises or in the manufacture of gasoline or other
products therefrom, the market value at the well of one-eighth of the gas so sold or used,
providad that on gas sold at the wells, the royalty shall be one-eighth of the amount realizad
from such sale.
(iii) On all other hydrocarbons of value and gaseous substances and elements produced or
extractad, including propane, butane, sulphur, nitrogen, carbon dioxida, and helium, at such
royalty as shall be mutually determined to be fair and reasonable.
(iv) For royalty purposes on gas and natural gasoline the value shall be as approvad by the
lessor, and in the determination of the value of naturel gasolina the fair cost of extraction shell
be considered as a daductible item; provided, however, that the allowance for the cost of
extraction may exceed two-lhirds of the amount or value only on approval of the lessor and in
no event shall the price for gas, or naturel gasoline, be lass than thet receivad by the Unitad
State of Amarica for its royalties from the same field.
(v) Naturel gas and oil actually usad for opereting purposes upon the land and, axcept as to
the ultimate sale thereof, gas or liquid hydrocarbons retumed to the sand for stimulating the
production of oil or secondary recovery purposes shall be royalty free.
(e) DISPOSITION OF ROYALTY OIL AND GAS. To deliver to the lessor, or to such
individual, firm or corporation as tha lassor may designate, all royalty oil, gas, or other kindred
hydrocarbons, free of charge on the premises whete produced, or, at the option of the lessor,
and in lieu of said royalties in kind, the lassee agrees to pay tha lessor the field market price
or value of all royalty oil, gas, or other kindred hydrocarbons produced and savad.
When the lessor elects to lake its royalty oil, gas, or othar hydrocarbons in kind such as oil,
gas, or other kindrad hydrocarbons shall be good merchantable oil, gas, or other kindrad
hydrocarbons. The lessee shall if necessary fumish storege for royalty oil free of charge for
thirty (30) days after the end of the calendar month in which the oil is produced, upon the
leasad premises, or at the such place as the lessor and the lessee may mutually agree upon,
provided, that tha lassee shall not be held liable for loss or destruction of royalty oil so storad
from causes beyond his control.
The free storage of oil, as herain provided, shall apply only as long as tha said oil is the
property of the lessor.
(f) MEASUREMENTS OF PRODUCTION. To gauge, measure and correct for temperature all
production from said lands in conformance with the rules and regulations adopted by the
Board of Land Commissioners and report said production to tha lessor in accordance
therewith.
To keep books, records, and reports pertaining to the production from the land herein leased
as welt as those pertaining to the production from offset wells operatad by the lessee, his
operator, or sub-lessee on other lands, which shall be opened at all times for the inspection of
any duly aulhorizad agent of the lessor.
To furnish tha lessor with original pipe line reports showing the day, month, yaar, amount,
gravities, and temperatures of all oil run and with monthly reports showing the month, year,
amount, and price of all gas and natural gas gasoline and other products produced and sold
from the land herein leasad, and the amount of gas returnad to the sand.
(g) MONTHLY PAYMENTS AND STATEMENTS. Unless the time of paymant is otherwise
extendad by the Office of State Lands and Investments to make payment on or before the
twentieth (20th) day of tha calendar month succeeding the month of production and removal
and sale of 011 and gas from said land, and to fumish sworn monthly statements therewith
showing in detail the quantity and quality of the production (per wall if required where
prectical) from the land heteby leased, and the quantity and quality of the production (per well
where practical) from offset wells upon cornering or contiguous land operated by the lessee,
his operator or sub-lessee and such other information as may be callad for in the form or
report presaibed by lessor.
(h) WELLS TO BE DRILLED. To drill and operate effectively all wells nacessary to
reasonably offsel walls upon and production from adjoining lands.
To drill such additional walls at such times or places as are necessary and essantialto the
proper developmant and commercial production of the 011 and gas content of said land.
(i)LOG OF WELLS AND REPORTS. To keep a log, in the form approvad by the lessor, of
each well drilled by the lessee on the lands herein leasad, showing the strata and character of
the formations, water sands and mineral deposits penetratad by the drill, amount of casing,
size and where set, and such other information as the lessor may requira which log or copy
thereof shall be furnishad to the lessor.
To file progress reports, in the form presaibed by the lessor, at the end of each thirty (30)
day period while each well is being drillad.
To file annually, or at such times as the lessor may require, maps showing the development
of the structure and the location of all walls, pipe lines and other works usad in connection
with the operations of the lessee upon said land.
To make such other reports pertaining to the production and operations by the lessee on
said land, and report such other information as may be possessad by the lessee on the wells,
production or operations of others on lands on the same geologic structure that may be of
importance in effecting proper development and operation of the lands herein leasad, as may
be callad for by the lessor. All logs, maps, and reports shall be submitted in duplicete and the
Office of Stata Lands and Investments may waive such reports as conditions may warrent.
ü)PRODUCTION. To operate the walls upon the land herein leasad in a competent and
efficient manner in an endeavor to recover all the 011 and gas economically possible from said
land and to prevent the under drainage of the oil and gas thereunder by walls operated by the
lessee or others on cornering or contiguous lands to those leasad herein. All plans or
methods for the purpose of stimulating or increasing production on lands hetein leased other
than those in common use shall first be presentad to the lessor for approval before being put
into actual operation.
No production agrosements limiting, restricting, prorating, or otherwise affecting the
naturalproduction from said land shall be entered Into by the lessee, nor shall the lessee limit,
restrict, or prorate the natural production from said land in any way or in any event, except
with tha consent in writing of the lessor first had an obtained.
(k)SUSPENSION OF OPERATIONS. Should any wall drilled upon lands coverad by this
laase obtain production of oil, gas, or othar hydrocarbons in paying quantities and if the
lessee is unable to establish a satisfactory market for the oil, gas or hydrocarbons produced
from said well, tha lessee may apply for and the lessor may grant permission for the
suspension of production operations until such times as a satisfactory market for the product
from said well can be developed. During the time any such suspension of oparations is in
affect, the lessee shall continue to pey the annual rental of $2.00 per aae or fraction thereof
provided by (c) above, and this lease shall remain in effact as though oil or gas was being
produced from said lands.
(I)DILIGENCE-PREVENTION OF WASTE. To exercise reasonable diligence in drilling,
producing, and operating of wells on the land covered hereby, unless consent to suspend
operations temporarily is grantad by the lessor, to carry on all operations hereunder in a good
and workmanlike manner in accordance with approvad methods and practice, having due
regard for the prevention of waste of 011 and gas, or the entrance of water to the oil or gas
bearing sands or strata to the destruction or injury of such deposits, the preservation and
conservation of the property for future productive operations and to the health and safety of
workmen and employees: to plug securely in an approvad manner any wall before abendoning
it, and not to abandon any well without permission of the lessor, not to drill any wall within two
hundred (200) faat of any of the outer boundaries of the land coverad hereby, unless to
protect against drainage by wells drillad on lands adjoining less than 200 feet from the
property lines thereof; to conduct all operations subject to the inspection of the lessor, to carry
out at the lessee's expense all reasonable orders and requirements of the lassor relative to
the prevantion of waste and preservation of the property and the health and safety of workmen
including the replanting and reseading of drilling sites and other areas disturbed by drilling
operations and on failure of the lessee so to do the lessor shall have the right, together with
other recourse herein provided, to enter on the property to repair damage or prevent waste at
the lessee's expense; to abide by and conform to valid applicable regulations prescribad to
reimbursa the owner of the surface, if other than the lessor, or lessee of grazing rights thereof
for actual damages thereto and injury to improvements thereon, provided, that the lessee shall
not be hald responsible for acts of providence or actions beyond his control.
(m)TAXES AND WAGES-FREEDOM OF PURCHASE. To pay, when due all taxes lawfully
assessed and levied under the laws of the State of Wyoming upon improvements, oil and gas
produced from the land hereunder, or other rights, property or assets of the lassee, to accord
all workmen and employees complete freedom of purchase, and to pay all wages due
workmen and employees in conformance with the laws of the State of Wyoming.
(n)ASSIGNMENTS OF LEASE-PRODUCTION AGREEMENTS. Not to assign this lease or
any interest therein, nor sublat any portion of the leasad premises, except with the consent in
writing of the lassor first had and obtained.
All overriding royaltias to be valid, must have the approval of the Board or by tha Office of
State Lands and Investments when authority to do so has been delegatad by the Board and
will be recordad with the lease. The Board reserves the right of disapproval of such overriding
royalties when in its opinion they become excessive and hence are detrimental to the proper
development of the laased lands.
(o)DELIVER PREMISES IN CASE OF FORFEITURE. To deliver up the leased premises,
with all permanent improvements thereon, In good order and condition in case of forfeiture of
this lease, but this shall not be construad to prevent the removal, alleration or renewal of
equipment and improvements in the ordinary course of operations.
Section 2. THE LESSOR EXPRESSLY RESERVES:
(a) The right to lease sell, or otherwise dispose of the surface of the land embraced within
this lease under existing laws or laws hereafter ena~ed, and in accordance with the rules of
tha Board of Land Commissions insofar as the surface is not necessary for the use of the
lessee in the conduct of operations hereunder.
(b)The right to laasa, sell, or otherwise dispose of other mineral or subsurface resources not
covered by the lease, in accordance with the applicable laws and the rules of the Board of
Land Commissioners.
(c)From the operation of this lease, the surface lands heretofore granted for rights-of-way
and easements and reserves the right to grant such other rights-of-way and easements as
provided by the statutes of the State of Wyoming, as long as such rights-of-way and
easements do not conflict with the operations for oil and gas on the land herein leasad.
(d)The right to refuse to commit the leasad lands to a unit plan of development if the Board
finds such action would impair the lesso(s resarvad right to take its royalty gas in kind and to
purchase all other gas allocatad to the leased lands a providad in Section 3(e)below.
(e)The right to alter or modify the quantity and rate of production to the and that waste may
be eliminated or that production may conform to the lessee's fair share of allowable production
under any system of State or National aJrtailrnent and proration authorizad by law.
(f)ln addition to its right to take its royalty gas in kind, the lessor reserves the right and option
to purchase all other gas produced for sale or use off the leased lands. This option shall be
exercisad only if the Board finds that the lessee has received and is willing to accept a bona
fide offer from a purchaser who intends to sell or transport the gas into interstate commerce
and that one or more intrastate purchasers (Le., purchasers who will use, consume, or sell the
gas for use or consumption entirely within the State, of Wyoming) are willing and able to
purchase the gas upon terms reasonably comparable to and at least as favorable to the
lessee as those offered by the interstate purchaser. The Board shell waive this option and
permit an interstate sale if it finds that no intrastate purchaser is willing and able to purchase
the gas upon terms which are reasonably comparable to and at least as.favorable to the
lessee. As a condition to such waiver, a satisfactory agreement may be entered into by which
the production of its royalty gas may be deferred until it can bè produced and sold for
consumption and use entirely within the State of Wyoming.
Saction 3. APPRAISAL OF IMPROVEMENTS. The lessee shall have the right subject to the
provisions of Title 36, as to State and State School Lands, and Title 11, as to State Loan and
Investments Board Lands, W.S. 1977, to remove any improvements ownad by lessee within a
reasonable time after the termination of this lease. Lessee agrees that any such
improvements not removed within a reasonable time after termination of this laase shall be
disposad of pursuant to the above statutes.
Saction 4. FORFEITURE CLAUSE. The Board shall have the power and authority to cancel
leases procured by fraud, deceit, or misrepresentations, or for the use of the lands for
unlawful or illegal purposes, or for the violation of the covenants of the lease, upon proper
proof theteof, in the event that the lessee shell default in the parformance or observance of
any of the terms, covenants, and stipulations heraof, or of the ganaral regulations
promulgated by the Board of Land Commissioners and in force on the date hereof, the lessor
shall serve notice of such failure or default either by parsonal service or by certified or
registerad mail upon the lessee, and if such failure or defeult continues for a period of thirty
(30) days after the service of such notice, then and in that event the lessor may, at Its option,
declare a forfeiture and cancel this leasa, whereupon all rights and privileges, obtained by the
lessee hareunder shall terminate and cease and the lessor may re-enter and take possession
of said premises or any part thereof. Thesa provisions shall not be construed to prevent the
exercise by lessor any legal or equitable remedy which the lessor might otherwise have. A
waiver of any particular cause or forfeiture shall not prevent the cancellation and forfeiture of
this lease by any other ceuse of forfeiture, or for the same cause occurring at any other time.
Saction 5. RELINQUISHMENT AND SURRENDER. This lease may be relinquishad and
surrendered to lessor as to all or any legal subdivision of said lands as follows:
(a) If no operations have been conductad under the lease on the land to be relinquished, the
lessee shall file with the State Land Board and State Loan and Investment Board, a written
relinquishment or surrendar, duly signed and acknowtedged and stating therein that no
operations have been conducted on the land. The relinquishment so filad shall become
effective on the date and hour of receipt thereof in the office of the Director or at some later
date, if such be so specifiad by the lessee therein. If the said relinquishment fails to state thet
no operations have been conducted, the affactive date of relinquishment shall be the date the
relinquishment is approved by the Board.
(b) If operations have bean conductad under the lease on land proposed to be relinquished,
the lessee shall give sixty (60) days notice and shall file with the Director a written
ralinquishment or surrender duly acknowtadgad and stating therein that operations have bean
conductad on the land. The relinquishment shall not become affective until the land and the
walls thereon shall have been placed in condition acceptable to lessor and shall have bean
approved by the State Oil and Gas Supervisor.
All rentals becoming due prior to a surrender or relinquishment becoming effective, shall be
payable by lessee unless payment thereof shall be waived by lessor. A relinquishment having
become affective there shall be no recourse by lessee and the lease as to the relinquishad
lands may not be reinstated.
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STATE OF WYOMING )
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COUNTY OF CAMPBELL )
000496
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Before me on the 2nd day of February, 2007, John L. Kennedy, Manager of
. . Fitzsimmons, LLC personally appeared in his capacity as known to me to be the
identical person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same as free and voluntary act and deed,
and as the free and voluntary act of the corporation, for the uses, purposes and
consideration therein set forth. Witness my hand and official seal:
C/~-L~¡U ~a-'^-G
Notary Public
My commission expires: S I è ~ / & '1