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This indenture of lease
and through its Board of Land
STATE -- WYOMING L.t:d:)t:1t' UI-UUI/--
OIL AND-~4:.EASE Parcel# 185
Fund Code: CS 0004Q~
entered into by and between the State of Wyoming, ac~~grby
Commissioners as LESSOR, and the following as LESSEE:
and EHect1ve Januar
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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E2SW Section: 4 Township: 21 North Range: 118 West of the 6th P.M.
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County: Lincoln
Acres: 80.00
$80.00
($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 works,
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., SpVEREIGN 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 ~.~.SSEE to become
effective on the 2nd day of, February, 2007'·Â.D. .
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LESSOR, STATE
and, through its
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Address: ¿2-d
City: .¡{!//é~ Sta~~: Ú/7 Zip: ,foL?7/?_,
Phone: /,-P¿J7-",fÞ¿r.. '-.7? /..s-.? :' ','
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Before any road, building, drilling pa<;lconstruction, building construction or othet earth ",oving 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 & Investments or his
designated representative as soon as practicable after their discovery.
RECEIVED 3/8/2007 at 9:23 AM
RECEIVING# 927432 ·:O·~:ae
BOOK: 650 PAGE: 497
JEANNE WAGNER
LINCOLN COUNTY CLERK, KEMl'l'u",.'",-n wy
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03Z?43"-;¡ 000498
Section 1. 'tHE LESSEE AGREES: 'Iott1
'!'r.tUábrþ ~j'lM;rìish a bond WIth an approved corporate surety cOl1"9any authorized to transact
b'¡,s,7;ë~s In the Slale of Wyoming, or such other surety as may be acceplable 10 the lessor, in the
penal sum as required by the current rules of the Stale Board of Land Convnssioners,
conditioned upon Ihe payment of all renlals and royalties accruing to the lessor under the terms
hereof, aná upon Ihe full cOf1l)liance of all other lerms and condilions of this lease and the rules
and regulations relating thereto. and also conditioned on Ihe paymenl of all damag( ~ to Ihe
surface and Improvemenls Ihereon where the lease covers lands the surface or which ~ liS been
sold or otherwose leased. Such bond or bonds furnished prior to the development of 1i1e lands
contained in this lease may be increased in such reasonable amounts as the lessor may decide
upon corrmencement of drilling opera lions and after the discovery of 011 or gas.
(b)PAYMENTS. To make all payments accruing hereunder to the Office of Stale Lands and
Investments, 122 Wesl 25th Slreet. Cheyenne, Wyoming 82002-0600.
(c)RENT ALS. Prior 10 the discovery of oil or gas in paying quanlities to pay the lessor in
advance. beginning with the effective date hereof, an annual renlal of $1.00 per acre or fraction
thereof.
After .r... diocovery of oil or gas in paying quanlities to pay the lessor in advance beginning wilh
the fir ,¡ day of Ihe lease year succeeding the lease year In which actual discovery was made, an
annu. ' renlal of $2.üiJ per acre or fraction Ihereor, unless changed by agreement. Such rental so
paid for anyone year shall be credited on the royalty for that year.
Annual rentals on all leases shall be payable in advance for the firsl year and each year
thereafler. No notice of rental due shall be senl to the lessee. If the rental is nol 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 legally obligated 10 pay either the rental or the penalty, but if the rental and
penalty are not paid within thirty (30) days after the nolice of default has been received, the lease
willtermnate aulornaticaliy by operation of law. Termination of the lease shall nol relieve Ihe
lessee of any obligation Incurred under Ihe lease other than the obligation to pay rental or
penalty. The lessee shall not be enlitled to a credit on royalty due for any penalty paid for late
payments of rental on an opera ling lease.
(d)ROYAL TIES. The royalties to be paid by lessee are:
(i) On oil, one-sixth of that produced, saved, and sold from said land. the same to be delivered
at the wells or to the credit of lessor into the pipe line to which the wells may be conner;ted.
(Ii) On gas, including casinghead gas or other hydrocarbon substances, produced fr,'m said
land saved and sold or used off the premises or In the manufacture of gasoline or other pruducts
therefrom. the market value at the well of one-sixth of the gas so sold or used, provided that on
gas sold al the wells, the royalty shall be one-sixth of the amount realized from such sale.
(Iii) On all other hydrocarbons of value and gaseous substances and elements produced or
extracled, including propane. bulane, sulphur, nilrogen, carbon dioxide, and helium, at such
royalty as shall be rrulually determined 10 be fair and reasonable.
(iv) For royalty purposes on gas and natural gasoline the value shall be as approved by the
lessor. and in the determination of the value of natural gasoline Ihe fair cost of extraction shall be
considered as a deductible item; provided, however, thai the allowance for Ihe cost of extraction
may exceed Iwo-thords or Ihe amounl or value only on approval of the lessor and in no event shall
the pnce for gas. or natural gasoline, be less than Ihat received by Ihe United Stale of America for
its royalties from the same field.
(v) Natural gas and oil actually used for operallng purposes upon the land and, except as to the
ultimate sale thereof, gas or liquid hydrocarbons returned 10 the sand for stimulaling 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 corpora lion as the lessor may designate, all royally oil, gas, or olher kindred hydrocarbons,
free of charge on Ihe premises where produced, or. at the opllon of the lessor, and In lieu of said
royalties in kind, Ihe lessee agrees to pay the lessor the field market price or value of al; royalty
oil, gas, or other kindred hydrocarbons produced and saved.
When the lessor elects 10 lake its royalty oil, gas. or other hydrocarbons in kind such as oil, gas,
or other kindred hydrocarbons shall be good merchantable oil, gas, or other kindred
hydrocarbons. The lessee shall if necessary furnish storage for royalty 011 free of charge '(lr thirty
(30) days atler the end of Ihe calendar month in which Ihe 011 is produced, upon the leased
premises, or al the such place as the lessor and the lessee may mutually agree upon, provided,
that the lessee shall nol be held liable for loss or destruction of royalty oil so slored from causes
beyond his control.
The free storalJe of oil, as herein provided, shall apply only as long as Ihe said oil is the property
of tho !"550r.
(f) M::ASUREMENïS OF PRODUCTION. To gauge, measure and correcl for temperature all
produclion from said lands In conformance with the rules and regula lions adopled by the Board of
Land Convnssioners and report said production to the lessor in accordance therewith.
To keep books, records, and reports pertaining to Ihe production from the land herein leased as
well as those pertaining to the producllon from offset wells operated by the lessee, his operator.
or sub·lessee on other lands, which shall be opened at all limes for the Inspection of any duly
authorized agent of the lessor.
To furnish the lessor with original pipe line reports showing the day, monlh, year, amount,
gravilies, and temperatures of all oil run and with monthly reports showing the monlh, year,
amount, and price of all gas and natural gas gasoline and other products produced and sold from
the land herein leased. and the amounl of gas relurned to the sand.
(g) MONTHLY PAYMENTS AND STATEMENTS. Unless the lime of payment is olherwise
exlended by the Office of Slate Lands and Inveslments to make paymenl on or before the
twentieth (20Ih) day of the calendar month succeeding Ihe month of producllon and removal and
sale of oil and gas from said land, and to furnish sworn monthly statements therewith showing In
detaillhe quanlity and quality of the production (per well if required where practical) from .he land
hereby leased, and the quanlily and quality of the production (per well where practical) from offset
wells upon cornenng or conllguous land operated by Ihe lessee, his operator or sub-lessee and
such olher informalion as may be called for In Ihe form or report prescribed by lessor.
(h) WELLS TO BE DRILLED. To drill and operate effectively all wells necessary 10 reaoonably
offsel wells upon and produclion from adjoining lands.
To drill such additional wells at such times or places as are necessary and essenliallo the
proper development and corrrnercial production of the oil and gas contenl of said land.
(I)LOG OF WELLS AND REPORTS. To keep a log, In the form approved by Ihe lessor. of each
well drilled by the lessee on Ihe lands herein leased, showing the strata and character of Ihe
formalions. water sands and mneral deposits penetrated by Ihe drill, amount of casing. size and
where sel, and such other Inforrnalion as the lessor may require which log or copy Ihereof shall
be furnished to the lessor.
To file progress reports, in the form prescribed by the lessor, al the end of each thirty (30) day
period while each well Is being d,lIIed.
To file annually, or al such times as Ihe lessor may require, maps showing the development of
Ihe slructure and the localion of all wells, pipe lines and olher works used in conneclion with the
operations of Ihe lessee upon said land.
To make such olher reports pertaining to Ihe production and operalions by Ihe lesse.. on said
land, and report such olher information as may be possessed by the lessee on the wells,
production or operations of others on lands on the same geologic structure that may be of
importance in effecling proper development and operation of Ihe lands herein leased, as may be
called for by the lessor. All logs, maps, and reports shall be submitted In duplicate and Ihe Office
of Slate Lands and Investments may waive such reports as condlllons may warrant.
U)PRODUCTlON. To operale Ihe wells upon the land herein leased In a competent and efficlenl
manner in an endeavor 10 recover all the oil and gas economically possible from said land and 10
prevenl the under drainage cf Ihe oil and gas thereunder by wells operated by the lessee or
others "" cornering or conliguous lands to those leased herein. All plans or methods for the
purp~se 01 slln'lllating or Increasing production on lands herein leased other than those in
common use shall firsl be presented to the lessor for approval before being put Inlo actual
operalion.
No production agreements limiting, restricting, prorating, or otherwise affecllng Ihe
natural production 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
the consent In writing of the lessor firsl had an obtained.
(k)SUSPENSION OF OPERATIONS. Should any well drilled upon lands covered by this lease
obtain produclion of oil, gas, or other hydrocarbons in paying quanlltles and if Ihe lessee is
unable to establish a satisfaclory market for the oil, gas or hydrocarbons produced from said well,
the lessee may apply for and Ihe lessor may granl permission for the suspension of production
opera lions until such limes as a satisfactory market for the product from said well can be
developed. During the lime any such suspension of opera lions is In effect, the lessee shall
conlinue to pay the annual rental of $2.00 per acre or fracllon thereof provided by (c) above, and
this lease shall remain in effect as though 011 or gas was being produced from said lands.
(I)DILlGENCE-PREVENTlON OF WASTE. To exercise reasonable diligence In drilling,
producing, and operating of wells on the land covered hereby, unless consent to ,,"spend
operations lemporarily is granled by the lessor; to carry on all operalions hereunder In a gC>Jd and
workmanlike manner in accordance with approved methods and practice, having due regard for
the prevention of waste of oil and gas, or the entrance of waler to the oil or gas bearing sands or
strata to the destruction or Injury of such deposits, Ihe preservalion and conservallo!1 of Ihe
property for fulure productive operations and to Ihe health and safely of workmen and erroployees:
10 plug securely In an approved manner any well before abandoning It, and not to abandon any
well without permissIon of Ihe lessor. not to drill any well within two hundred (200) feel OJf any of
the Ouler boundaries of the land covered hereby, unless to _ 1St drainage by wells
drilled on lands adjoining less than 200 feet from the property lines thereol: to conduct all
operations subject to the inspection of the lessor; 10 carry out at the lessee's expense all
reasonable orders and requirements of the lessor relallve to the prevenlion of waste and
preservation of Ihe property and the health and safely of workmen including the replenling and
reseeding of drilling sites and other areas dlslurbed by drilling operations and on failure of Ihe
lessee so to do Ihe lessor shall have the righi, together wilh olher recourse herein provided, 10
enter on the property to repair damage or prevent waste at Ihe lessee's expense; to abide by and
conform 10 valid applicable rêoulalion£ Øte£cribêo 10 reimbur£o tho ownor 01 tho surlacè. If olher
than Ihe lessor, or lessee of grazing rights thereof for actual damages Ihereto and Injury to
Il1"9rovements Ihereon, provided, that the lessee shall not be held responsible for acts of
providence or aclions beyond his conlrol.
(m)TAXES AND WAGES·FREEDOM OF PURCHASE. To pay, when due all taxes lawfully
assessed and levied under Ihe laws of the State of Wyoming upon improvements, oil and gas
produced from the land hereunder. or olher righls, property or assets of the lessee, 10 accord all
workmen and employees complele 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 10 assign this lease or any
Interest therein, nor sublet any portion of the leased premises, except with Ihe consent In writing
of the lessor first had and obtained.
All overriding royallles to be valid, rrust have the approval of the Board or by the Office of State
Lands and Inveslments when aulhority to do so has been delegated by the Board and will be
recorded with Ihe lease. The Board reserves the right of disapproval of such overriding royallies
when in ils opinion lhey become excessive and hence are delrimenlal to the proper development
of the leased lands.
(o)DELlVER PREMISES IN CASE OF FORFEITURE. To deliver up Ihe leased premises, with all
permanent improvements thereon, in good order and condition in case of forfeiture of this lease.
but this shall not be construed to
prevent the removal, alteration or renewal of equipmenl and improvemenls In the ordinary
course of operations.
Section 2. THE LESSOR EXPRESSLY RESERVES:
(a) The right 10 lease sell, or otherwise dispose of Ihe surface of Ihe land embraced wilhln this
lease under existing laws or laws hereafter enacled, and In accordance with the rules of Ihe
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 righllo lease, sell, or otherwise dispose of other mineral or subsurface resources not
covered by Ihe lease, in accordance with the applicable laws and the rules of Ihe Board of Land
Convnssioners.
(c)From the operalion of this lease, the surface lands herelofore granled for righls-of-way and
easements and reserves the right to grant such other rights-of-way and easemenls as provided by
the slatutes of the State of Wyoming, as long as such rights-of-way and easements do not conflict
wilh the operalions for oil and gas on the land herein leased.
(d)The right to refuse to convntthe leased lands to a unll plan of development if the Board finds
such aclion would Impair Ihe lessor's reserved right 10 take ils royalty gas In kind and to purchase
all olher gas allocated 10 Ihe leased lands a provided In Seclion 3(e)below.
(e)The right to alter or modify the quantity and rate of produclion 10 the end Ihat waste may be
eliminated or that produclion may conform to the lessee's fair share of atlowable produclion under
any system of State or National curtailment and proralion authorized by law.
(f)ln addition to ils right 10 lake ils royalty gas in kind, the lessor reserves the righl and option 10
purchase all olher gas produced for sale or use off the leased lands. This oplion shall be
exercised only if the Board finds thai the lessee has received and Is willing 10 accept a bona fide
offer from a purchaser who Intends 10 sell or transport the gas Inlo inlerslate corrmerce and that
one or more Inlrastate purchasers (I.e., purchasers who will use, consume, or sell the gas for use
or consurrptlon enlirely within the State of Wyoming) are willing and able to purchase lhe gas
upon terms reasonably corrparable 10 and at leasl as favorable 10 the lessee as those offered by
the interstate purchaser. The Board shall waive this option and permit an inlerstate sale if it finds
that no Intrastate purchaser Is willing and able to purchase the gas upon lerms which are
reasonably comparable to and alleast as favorable to the lessee. As a condilion to such waiver.
a salisfactory agreement may be enlered Into by which Ihe production of Its royalty gas may be
deferred unlllll can be produced and sold for consurrptlon and use entirely within the State of
Wyoming.
Seclion 3. APPRAISAL OF IMPROVEMENTS. The lessee shall have Ihe righl sublecllo the
provisions of Title 36, as 10 Stale and Slate School Lands, and Tille 11, as to State Loan and
Investments Board Lands, W.S. 1977, to remove any irrprovemenls owned by lessee within a
reasonable lime after the termination of this lease. Lessee agrees Ihat any such Irrprovements
not removed wilhln a reasonable lime after termin<\lion of this lease shall be disposed of pursuant
to the above slatules.
Seclion 4. FORFEITURE CLAUSE. The Board shall have the power and aulhority 10 cancel
leases procured by fraud, deceil. or misrepresenlalions, or for the use of the lands for unlawful or
Illegal purposes, or for the vloialion of the covenants of Ihe lease. upon proper proof thereof, In
the event Ihatthe lessee shall default In the performance or observance of any of the terms.
covenants, and stlpulalions hereof, or of the general regulalions promulgated by the Board of
Land Commissioners and In force on the date hereof, the lessor shall serve notice of such failure
or default eilher by personal service or by certified or registered mail upon the lessee, and If such
failure or default continues for a period of thirty (30) days aller the service of such nolice, then
and In that evenl Ihe lessor may, at lis option, declare a forfeilure and cancel this lease,
whereupon all righls and privileges, obtained by the lessee hereunder shalllerminate and cease
and the lessor may re-enter and take possession of said premises or any part thereof. These
provisions shall not be construed to prevent Ihe exercise by lessor any legal or equilable remedy
which the lessor might otherwise have. A waiver of any particular cause or forfellure shall not
prevent Ihe cancellalion and forfeilure of this lease by any other cause of forfeiture. or for the
same cause occurring al any other time.
Seclion 5. RELINQUISHMENT AND SURRENDER. This lease may be relinquished and
surrendered to lessor as 10 all or any legal subdivision of said lands as follows:
(a) If no opera lions have been conducted 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 surrender, duly signed and acknowledged and staling therein that no operalions
have been conducted on the land. The relinquishment so filed shall become effective on the date
and hour of receipt thereof In the office of the Director or al some laler dale, if such be so
specified by the lessee Ihereln. If the said relinquishmenl falls to state thai no operalions have
been conducted, the effective date of rellnqulshmenl shall be the date the relinquishment is
approved by Ihe Board.
(b) If opera lions have been conducled under the lease on land proposed to be relinquished,the
lessee shall give sixty (60) days nolice and shall file with the Director a wrillen relinquishment or
surrender duly acknowledged and stating therein that operations have been conducted on Ihe
land. The rellnqulshmenl shall not become effective until the land and the wells thereon shall
have been placed in condillon acceptable 10 lessor and shall have been approved by Ihe Slate Oil
and Gas Supervisor.
All rentals becoming due prior 10 a surrender or relinquishment becoming effeclive, shall be
payable by lessee unless payment thereof shall be waived by lessor. A relinqulshmenl having
become effective there shall be no recourse by lessee and the lease as 10 the relinquished lands
may not be reinslated.
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STATE OF WYOMING ~ ss Ù~ä::~,f'43Z
COUNTY OF CAMPBELL )
000499
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 instrwnent, 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 k\.~l~¡~~~a~
Notary Public
My commission expires: 8/ ¿~ I ð~