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STATE
OIL AND
WYOMING
GASWÉASE
Lease 'IT- UI-UU1 T~
Parcel # 184
Fund Code: SR 000500
This indenture of lease entered into by and between the State of Wyoming, acting by
and through 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:
1-/
.:
Lot 7:SENW Section: 4 Township: 21 North Range: 118 West of the 6th P.M.
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County: Lincoln
Acres: 78.94
$79.00
($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. 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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City: C::&$ State: ?t"Y Zip: 'y2-7/f
Phone: /-·J6;;- ¡:;'fb-' J/J,Çl
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Resource issue: Antelope crucial winter range and fossils.
Director.~; " ",' ,,.... ('\
f State Lands . ""Jî'iè'~tments
RECEIVED 3/8/2007 at 9:23 AM
RECEIVING # 927433
BOOK: 650 PAGE: 500
JEANNE WAGNER
LINCOLN COUNTY CLERK, KEMMERER, WY
"This lease is issued subject to and conditioned upon lessee's acknowledgement and agre
3) avoid human activity in antelope crucial winter range from November 15 to April 30; c,.
4) shall be subject to approval by the Director of the Office of State Lands & Investments. Director approval will be subject to consultation with Wyoming Game & Fish
Department to consider alternative practices/plan of development that will provide similar resource protection and mitigation."
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 & Investments or his
designated representative as soon as practicable after their discovery.
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Section'~~'gE!.<GREES: .
(a) BON1{·T~;ÌurnISh a bond With an approvad corporate suretycompeny authorized to transact
business In the State of Wyoming, or such olher surety as may be acceplable to the les50r, in Ihe
penal sum as reqUIred by the current rules of the State Board of Land ConYl'lissioners,
conditioned upon the payment of all rentals and royallies accruing to the lessor under the terms
hereof, ðnd upon the full corrcliance of all other terms and condilions of this lease and the rules
and regulations relating thereto. and also condllioned on the paymenl of all damages to Ihe
surface and Improvements thereon where the lease covers lands the surface of which has been
sold or olhef'NIse leased, Such bond or bonds furnished prior 10 the developmenl of the lands
contained in this lease may be increased In such reasonable amounts as the lessor may decide
upon cOnYnencement of drilling operations and after the discovery of oil or gas.
(b)PAYMENTS. To make all payments accruing hereunder to the Office of State Lands and
Investments, 122 Wesl 25th Street, Cheyenne, Wyoming 82002-0600.
(c)RENT ALS. Pnor to the discovery of oil or gas In paying quantities to pay the lessor In
advance, beginning with the effective dale hereof, an annual rental of 51.00 per acre or fraction
thereof.
Aller the discovery of 011 or gas in paying quantities to pay the lessor In advance beginning with
the first day of the lease year succeeding the lease year In which actual discovery was made, an
annual rental of 52.00 per acre or fraction thereof, unless changed by agreement. Such rental so
paid for anyone year shall be credited on the royally for that year.
Annual rentals on all leases shall be payable in advance for the first year and each year
thereafter. No notice of rental due shall be sent to the lessee. If the rental is not paid on or
before the date it becomes due, nolice of defaull will be sent to the lessee, and a penally of 50.50
per acre for late payment will be assessed.
The lessee IS not legally obligated to pay either the rental or the penalty, but If the rental and
penally are not paid within Ihirty (30) days aller the notice of defaull has been received, the lease
will terminate automallcally by operation of law. Termination of the lease shall not reU )'Ie the
lessee of any obligation incurred under the lease other than the obligation to pay rental or
penally. Tha lessee shall not be enlitied to a credit on royally due for any penally paid for late
payments of rental on an operating lease.
(d)ROYAL TIES. The royalties to be paid by lessee are:
(i) On 011. one-sIXth of that produced. saved, and sold from said land, the same to be callvered
althe wells or to the credit of lessor into the pipe line to which the wells may be connected.
(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-slxlh of the gas so sold or used, provided that on
gas sold al the wells, the royally 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
extracted, Including propane, butane, sulphur, nitrogen. carbon dioxide, and helium, at such
royally as shall be mutually determined to 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 determnation of the value of natural gasoline the fair cost of extraction shall be
considered as a deductible item: provided, however, that the allowance for the cost of extraction
may exceed two-thirds of the amount or value only'on approval of the lessor and In no e\:..nt shall
the price for gas, or natural gasoline, be less then that received by the United State of America for
its royallies from the same field.
(v) Natural gas and oil actually used for operating purposes upon the land end, except as to Ihe
ullimate sale thereof, gas or liquid hydrocarbons ratumed to the sand for stimulating the
production of oil or secondary recovery purposes shall be royalty free.
(e) DISPOSITION OF ROYAL TV OIL AND GAS. To deliver to the lessor, or to such in';,'Jidual,
firm or corporation as the lessor may designate, all royally oil. gas, or other kindred hydrocarbons,
free of charge on the premises where produced, or, althe option of the lessor. and in lieu of said
royallies in kind. the lessee agrees to pay the lessor the field market price or value of all royally
oil. gas, or othL'r kindred hydrocarbons produced and savad.
Wh,~'l the i~ssor elects to take Its royally Oil, gas, or other hydrocarbons In kind such as oil, gas,
or o,"er kindred hydrocarbons shall be good merchantable oil, gas, or other kindred
hydrocarbons, The lessee shall if necessary furnish storage for royalty oil free of charge for Ihlrty
(30) days aller the and of the calendar month In which the 011 is produced, upon the leased
premises, or at the such place as the lessor and the lessee may mutually agree upon, provided,
that the lessee shell not be held liable for loss or destruction of royally oil so stored from causes
beyond his control.
The free storage of 011, as herein provided, shall apply only as long as the said 011 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 Corm1issioners and report said production to the lessor in accordance therewith.
To keep books, records, and reports pertaining to the production from the land herein leased as
well as those pertaining to the production from offset wells operated by the lessee, his operator,
or sub-lessee on olher lands, which shell 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, month, year, .mount,
gravities, and temperatures of all oil run and with monthly reports showing the mont"" year,
amount, and price of all gas and natural gas gasoline and other products produced and 30ld from
the land herein leased, and the amount of gas returned to the sand.
(g) MONTHLY PAYMENTS AND STATEMENTS. Unless the time of payment Is otherwise
extended by the Office of State Lands and Investments to make payment on or bufore the
twentieth (20th) day of the calendar month succeeding the month of production and removal and
sale of oil and gas from said land, and to furnish sworn monthly statements therewith showing in
detail the quantity and quality of the production (per well if required where practical) from the land
hereby leased, and the quantity and quality of the production (per well where practical) from offset
wells upon cornenng or contiguous land operated by the 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 effeclively all wells necessary to reasonably
offset wells upon and production from adjoining lands.
To drill such addilional wells at such times or places as are necessary and essential to the
proper development and commerdal production of the 011 and gas content of said lanc.
(i)LOG OF WELLS AND REPORTS. To keep a log, In the form approved by the lessor, of each
well drilled by the lessee on the lands herein leased, showing the strata and character of the
formations, water sands and mmeral deposlls penetrated by the drill, amount of casing, size and
where set. and such other mformation as the lessor may require which log or copy thereof shall
be furnished to the lessor.
To file progress reports, in the form prescribed by the lessor, at the end of each thirty (30) day
penod while each well IS being drilled.
To file annually, or at such times as the lessor may require, maps showing the development of
the struclure and Ihe location of all wells, pipe lines and other works used in connection wilh the
operations of the lessee upon said land.
To make such other reports pertaining to the production and operallons by the lessee on said
land, and report such other information as may be possessed by the lessee on the wells,
prodl'cìlon 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 leased, as may be
called for by the lessor. All logs, maps, and reports shall be submitted in duplicate and the Office
of State Lands and Investments may waive such reports as conditions may warranl.
O)PRODUCTION. To operate the wells upon the land herein leased In a competent and efficient
manner in an endeavor to recover all the 011 and gas economically possible from said land and to
prevf\nt the under drainage of the oil and gas thereunder by wells operated by the lessee or
others on cornering or conliguous lands to those leased herein. All plans or methods for the
purpose of stirnJlaling or increasing production on lands herein leased other than those In
common use shall first be presented to the lessor for approval before being put Into actual
operation.
No production agreements limiting, restricling. proraling, or otherwise affecling the
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 wr,ling of the lessor first had an obtained.
(k)SUSPENSION OF OPERATIONS. Should any well drilled upon lands covered by this lease
obtain production of oil, gas. or other hydrocarbons In paying quantities and if the lessee is
unable to establish a satisfactory market for the oil, gas or hydrocarbons produced from! lid well,
the lessee may apply for and the lessor may grant permission for the suspensIon of production
operations until such times as a salisfactory market for the product from said weli 'can be
developed. During the time any such suspension of opera lions is in effect, the lessee shall
continue to pay the annual rental of 52.00 per acre or fraction thereof provided by (c) atrJVe, and
this lease shall remain in effect as though 011 or gas was being produced from said lands.
(I)DILlGENCE-PREVENTION OF WASTE. To exercise reasonable diligence In drilling,
producing, and operating of wells on the land covered hereby, unless consent to suspend
operations tel11JOrarily is granted by the lessor; to carry on all operations hereunder in a ;¡ood and
workmanlike manner in accordance wilh approved methods and practice, having due rE,gard for
the prevention of waste of 011 and gas. or the entrance of water 10 the 011 or gas bearing $ands or
strata 10 the destruclion or injury of such deposits, the presarvation and conservation of the
property for future productive operations and to the heallh and safety of workmen and employees:
to plug securely In an approved manner any well before abandoning it, and not to abandon any
well without permsslon of the lessor, not to drill any well within two hundred (200) feet of any of
the Quter boundaries of the land covered hereby, unless ¡alnst drainage by wells
drilled on lands adjoining less than 200 feet from the propenylil'1es 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 lessor relative to the prevention of waste and
preservation of the property and the heallh and safety of workmen including the replanting and
reseeding of drtlling 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 10 valid applicabla raoulalionc ørAceribêd 10 rAimburAA Ihe OWfter ollhe surlace, :r other
than the lessor, or lessee of grazJng rights thereof for actual damages thereto and injury to
improvements thereon, provided, that the lessee shall not be held 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 Ihe laws of the State of Wyoming upon improvements, oil and gas
produced from the land hereunder, or other rights. property or assets of the lessee, 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 sublet any portion of the leased premises. except with the consent in writing
of the lessor first had and obtained.
All overriding royalties to be valid, must have the approval of the Board or by the Dffice of Stale
Lands and Investments when authority to do so has been delegated by the Board and will be
recorded 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 leased lands.
(o)DELlVER PREMISES IN CASE OF FORFEITURE. To deliver up Ihe leased premises, wilh 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 equipment and improvements In the ordinary
course of operalions.
Secllon 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 enacted, and in accordance with the rules of the
Board of Land Col1Yl1issions insofar as the surface is not necessary for the use of the lessee in
the conduct of operations hereunder.
(b)The right to lease, sell, or otherwise dispose of other mineral or subsurface resources not
covered by the lease, In accordance wilh the applicable laws and the rules of the Board of Land
Commissioners.
(c)From the operation of this lease, the sL.irface lands heretofore granted for rights-of-way and
easements and reserves the right to grant suçh 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 arid gas on the land herein leased,
(d)The right to refuse to commit the leased lands to a unit plan of development If the Board finds
such action would impair the lessor's res.erved rtght to take its royally gas in kind and to purchase
all other gas altocated to the leased lan'ds a provided in Section 3(e)below.
(e)The right to aller or modify the quanlily and rate of production to the end 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 curtailment and proration authorized by law.
(f)ln addition to lis right to take its royally gas in kind, the lessor reserves the right and option 10
purchase all other gas produced for sale or use off the leased lands. This option shall be
exercised 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 Interstata conmerce and that
one or more intrastate purchasers (i.e., 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 shall 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 compareble to and et least as favorabte to the lessee. As a condition to such waiver,
a satisfactory agreement may be entered Into by which the producllon of its royalty gas may be
deferred unlll it can be produced and sold for consumption and use enlirely within the State of
Wyoming.
Section 3. APPRAISAL OF IMPROVEMENTS. The lessee shall have Ihe right subject to the
provisions of Tille 36, as to State and State School Lands. and Tille 11, as to State Loan and
Investments Board Lands, W.S. 1977, to remove any improvements owned by lessee within e
reasonable lime aller the termination of this lease. Lessee agrees that any such Improvements
not removed within a reasonable time after termination of Ihls lease shall be disposed of pursuant
to the above slatutes.
Secllon 4. FORFEITURE CLAUSE, The Board shell 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 thereof, in
Iha eventlhat the lessee shall default In the performance or observence of any of the terms,
covenants, and stlpulallons hereof, or of the general regulallons prOlnJlgated by the Board of
Land ConYl'lissioners and in force on the date hereof. the lessor shall serve notice of such failure
or default either by personal service or by certified or registered mail upon the lessee, and If such
failure or default conllnues for a period of thirty (30) days after the service of such nolice, then
and In that event the lessor may, at lis opllon, declare a forfeiture and cancal this lease,
whereupon all rights and privileges, obtained by the lessee hereunder shall terminate 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 the exerdse 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 cancellalion and forfeiture of this lease by any other cause of forfeiture, or for the
same cause occurring at any other time.
Seclion 5. RELINQUISHMENT AND SURRENDER. This lease may be relinquished and
surrendered 10 lessor as to all or any legal subdivision of said lands as follows:
(a) If no operations have been conducted under the lease on the land to be relinquished, the
lessee shall file with the State Land Board and Stale Loan and Investment Board, a written
relinquishment or surrender, duly signed and acknov,jedged and staling therein Ihat no operations
have been conducted on the land. The relinquishment so filed shall become effective on Ihe date
and hour of receipt thereof In the office of the Director or at some later date, If such be so
specified by the lessee therein. If the said relinquishment falls to slate that no operations have
been conducted, the effective date of relinquishment shall be the date Ihe relinquishment Is
approved by the Board.
(b) If operalions have been conducted under the lease on land proposed to be relinquished. Ihe
lessee shall give sixty (60) days notice and shall file with the Director a written relinquishment or
surrender duly acknowledged and staling therein that operalions have been conducted on the
land. The relinquishment shall not become effeclive until the land and the wells thereon shall
have been placed In condition acceptable to lessor and shall have been approved by Ihe Stale Oil
and Gas Supervisor.
All rentals becoming due prior to a surrender or relinquishment becoming effeclive, shall be
payable by lessee unless payment thereof shall be waived by lessor. A relinquishment having
become effeclive there shall be no recourse by lessee and the lease as to the relinquished lands
may not be reinstated.
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STATE OF WYOMING )
) ss O~Z'7433
COUNTY OF CAMPBELL )
000502
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:
t~I'lA ~ t-~~ ~ CL)~
Notary Public
My commission expires: 5-/ 2 ~ t tYC¡