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RECEIVED 4/26/2007 at 10:12 AM
RECEIVING # 928773
BOOK: 655 PAGE: 796
JEANNE WAGNER
LINCOLN COUNTY CLERK, KEMMERER, WY
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LEASE NO, 07 -00193
PARCEL NO, OTC
FUND Common School
Form Approved by the Board
and Effective January 6, 1991
STATE OF
OIL AND GAS
WYOMING
LEASE FORM
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
Fitzsimmons, LLC
, as lessee.
WITNESSETH:
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 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:
320,00 Acres
Tract 46 (formerly W2 Sec, 36) Resurvey Township 23 North, Range 120 West 6ili P,M,
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County
Lincoln
Total Acres
320.00
Advance Rental $
320.00
($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, buildings, plants,
waterways, roads, communication lines, pipe lines, reservoirs, tanks, pumping stations, or other
facilities necessary to the proper conduct of operations thereunder.
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, 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 April , 20~ A.D,
LESSOR, STATE OF WYOMING,
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City: 6- /ç/é' ðe State: ¿Jy
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OIL AND 81- ---SE TERMS
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Section 1. THE LESSEE AGREES:
(a) BOND. To furnish a bond with an approved corporate surety company authorized to
transact business in the State of Wyoming. or such other surety as may be acceptable to the
lessor, In the penal sum as required by the current rules of the State Board of Land
Commissioners. conditioned upon the payment of all rentals and royalties accruing to the
lessor under the terms hereof. and upon the full compliance of all other terms and conditions
of this lease and the rules and regulations relating thereto, and also conditioned on the
payment of all damages to the surface and improvements thereon where the lease covers
lands the surface ofwhlch has been sold or otherwise leased. Such bond or bonds furnished
prior to the development of the lands contained In this lease may be Increased in such
reasonable amounts as the lessor may decide upon commencement of drilling operations and
after the discovery of 011 or gas.
(b)PAYMENTS. To make all payments accruing hereunder to the Office of State Lands and
Investments. 122 West 25th Street, Cheyenne. Wyoming 82002-0600.
(c)RENTALS. Prior to the discovery of 011 or gas In paying quantities to pay the lessor in
advance. beginning with the effective date hereof, an annual rental of $1.00 per acre or
fraction thereof.
After the discovery of oil 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 $2.00 per acre or fraction thereof. 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 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. notice of default will be senllo the lessee. and a penalty of
$0.50 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
penalty are not paid within thirty (30) days after the notice of default has been received. the
lease will terminate automatically by operation of law. Termination of the lease shall not
relieve the lessee of any obligation Incurred under the lease other than the obligation to pay
rental or penalty. The lessee shall not be entitled to a credit on royalty due for any penalty
paid for late payments of rental on an operating lease.
(d)ROYAL TIES. The royalties to be paid by lessee are:
(I) On oil, one-elghth 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
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-eighth of the gas so sold or used.
provided that on gas sold at the wells, the royalty shall be one-eighth of the amount realized
from such sale.
(iil) 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 rrotually 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 determination of the value of natural gasoline the fair cost of extraclion 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 event shall the price for gas, or natural gasoline, be less than that received by the United
States of America for its royalties from the same field.
(v) In cases where natural gas is produced and the natural gas gasoline extracted therefrom
only one royalty shall be paid. except In the event the residue or dry gas shall be marketed it
shall then constitute a separate commodity and a royally shall be paid thereon as above
provided.
(vi) Natural gas and oil actually used for operating purposes upon the land and, except as to
the ultimate sale thereof, gas or liquid hydrocarbons returned to the sand for stimulating the
production of 011 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 the lessor may designate. all royalty oil, gas, or other kindred
hydrocarbons, free of charge on the premises where produced; or. at the option of the lessor,
and In lieu of said royalties in kind, the lessee agrees to pay the lessor the field market price
or value of all royalty 011. gas. or other kindred hydrocarbons produced and saved.
When the lessor elects to take Its royalty 011. 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 oil free of charge for
thirty (30) days after the end of the calendar month In which the oil 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 shall not be held liable for loss or destruction of royalty oil so stored
from causes beyond his control.
The free storage of 011. as herein provided, shall appiy only as long as the said 011 is the
property of the lessor.
(!) 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 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 other lands, which shall be open at all times for the inspection by
any duly authorized agent of the lessor.
To furnish the lessor with original pipe line reports showing the day, month, year, amount.
gravities. and temperatures of all 011 run and with monthly reports showing the month. year,
amount. and price of all gas and nalural-gas gasoline and other products produced and sold
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 before 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 Ihe quantity and quality of the production (per well if required where
practical) from the land hereby leased. and the quantity and quality of the producllon (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 called for in Ihe form of
report prescribed by lessor.
(h) WELLS TO BE DRILLED. To drill and operate effectively all wells necessary to
reasonably offset wells upon and production from adjoining lands,
To drill such additional wells al such times or places as are necessary and essential to the
proper development 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 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 mineral deposits penetrated by the drill. amount of casing,
size and where set, and such other Information as tile 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 period while each well Is being drilled.
To file annually, or at such times as the lessor may require. maps showing the development
of the structure and the location of all wells, pipe lines and other works used In conneclion
with the operations of the lessee upon said land.
To make such other reports pertaining to the produclion and operations by the lessee on said
land, and report such other 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 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 warrant.
OjPRODUCTION. 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 prevent the undue drainage of the 011 and gas thereunder by wells operated by the
lessee or others on cornering or contiguous lands to those leased herein. All plans or
methods for the purpose of stlrrolating or Increasing production on lands herein leased other
than Ihose in common use s"all first be presented to the lessor for approval before being put
Into actual operation,
No production agreements limiting. restricting. prorating. or otherwise affecting 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 writing of the lessor first had and obtained.
(k)SUSPENSION OF OPERATIONS. Should any well drilled upon lands covered by this
lease obtain production of 011. gas, or other "ydrocarbons in paying quantities and if the
lessee Is unable to establish a satisfactory markel for the oil. gas or hydrocarbons produced
from said well. the lessee may apply for and the lessor may grant permission for the
suspension of production operations until such time as a satisfactory market for the product
from said well can be developed. During the time any such suspension of operations Is In
effect. the lessee shall continue to pay the annual rental of $2.00 per acre or fraction thereof
provided by (c) above. and this lease shall remain in effect as though oil or gas was being
produced from said lands.
000797
(I)OILlGENCE-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 granted by the lessor; to carry on all operations hereunder In a good 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 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 approved manner any well before abandoning it. and not to abandon any
well without permission of the lessor. not to drill any well within two hundred (200) feet of any of
the outer boundaries of the land covered hereby. unless to protect against drainage by wells
drilled 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 lessor relative to the prevention of waste and
preservation of the property and the health and safely of workmen including the replanting and
reseeding of drilling sites and other areas disturbed by drilling operations and on failure of the
lessee so to do the lessor shall have the rig"t, 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 prescribed to reimburse 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 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 the laws of the State Of Wyoming upon Improvements. 011 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 lessorfirst
had and obtained.
All oveniding royalties to be valid, must have the approval of the Board or by the Office of State lands and
Inveslmams 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 ovenidlng royalties when in its opinion they become excessive and hence are
detrimental to the proper development of the leased 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 construed to
prevent the removal. alteration or renewal of equipmenland 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 enacted, and In accordance with the rules of the Board of land Commissioners 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 minerai or subsurface resources not covered by the iease,ln
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 staIuIes of the State ofWyooing.
as long as such rights-of,way and easements do not conflict with the operations for oil and gas on the land herein
ieased.
(d)The right to refuse to commit the leased lands to a un~ plan of development W the Board finds such action would
Impair the lesso(s reserved right to take its royalty gas in kind and to purchase al other gas allocated to the leased
lands as provided in Section 2(Qbelow.
(e)The right to alter or modify the quantity and rate of production to the end that waste may be eliminated or that
production may confoon to the lessee's fair share of allowable production under any system of Stale or Nationa
curtailment and proration authorized by law.
(Qln addition to its right to take lis royalty gas in kind. the lessor reserves the right and option to purchase all othergas
produced for sale or use 011 the leased lands. This option shall be exercised only If the Board finds that the lessee has
received and Is willing to accepl a bona fide offer from a purchaser who Intends to sell or lransport the gas into
interstate commerce and that one or more intrastate purchasers O.e.. purchasers who will use, consume, orsell 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 ollered by the interstate purchaser. The
Board shall waive this option and permit an Interstate sae if ~ 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 be produced and sold for consumption and use entirely within the State of Wyoming.
Section 3. APPRAISAL OF IMPROVEMENTS. The lessee shall have the right subject to the provisions of1ltle 36, as
to State and State School lands, and Titie 11, as to State loan and Investment Board lands, W.S. 1977, 10 remove any
improvements owned 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 lease shall be älSpOSed of pursuanllD
the above statutes.
Section 4. FORFEITURE CLAUSE. The Board shall have the power and authority ID cancel leases procured byhud,
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 the event that the lessee shall default In the performance or
observance of any of the terms, covenants, and stipulations hereof, or of the general 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 personal service or by certified or registered mail upon the lessee, and iI such failure ordefaultcontinues 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 lease, whereupon ali rights and privileges, obtained by the lessee hereunder shail 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 exercise by lessor any legal or equitable remedy which the Iessormightotherwise
have. A waiver of any particular cause or forfeiture shall not prevent the cancellation and forfeiture of this lease by any
other cause of forfeiture, or for the same cause occuning at any other time.
Section 5. RELINQUISHMENT AND SURRENDER. This lease may be relinquished and sUlTendered to lessor as to
all or any legai subdivision of said lands as follows:
(a) II no operations have been conducted under the lease on the land to be relinquished, the lessee shail file with the
State land Board and State loan and Inveslmant Board, a written relinquishment or surrender. duly signed and
acknowledged and stating therein that no operations 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 atsome later date. W such
be so specified by the lessee therein. If the said relinquishment falls to state that no operations have been conducted,
the ellective date of relinquishment shall be the date the relinquishment is approved by the Board.
(b) If operations have been conducted 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 relinquishment or surrender duly acknowledged and stating
therein that operations have been conducted on the land. The relinquishment shall not become effective until the land
and the wells thereon shall have been placed in condition acceptable 10 lessor and shaff have been approved by the
State Oil and Gas Supervisor.
All rentals becoming due prior to a surrender or relinquishment becoming ellective, shall be payable by lessee unless
payment thereof shall be waived by lessor. A relinquishment having become ellective there shall be no recourse by
lessee and the lease as to the relinquished lands may not be reinstated.
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000?98
vestments
STATE OF WYOMING
}
UNIFORM ACKNOWLEDGEMENT
ss,
COUNTY OF CAMPBELL
}
BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared John L, Kennedy, Manager of Fitzsimmons,
LLC, to me known to be the person who executed this within and foregoing instrument, and acknowledged to me that he executed the
same.
Given under my hand and official seal, this the 11th day of April, 2007,
Name Public: e / Lù.^-~tL.~-]S-P~
Address: Jqy:.¡ f)a IL(/'v r l~ ,6ì I~Y 827/8
My Commission Expires: 5/ 2. (p I 04
I J
STATE OF WYOMING
}
UNIFORM ACKNOWLEDGEMENT
ss,
COt.¡NTYOF lß.,r-tlW\l·U
}
BEFORE ME, the undersigned authority, a Notary Public, on this day personally appeared Lynne Boomgaarden, Director of State Lands
and Investments, to me known to be the person who executed this within and foregoing instrument, and acknowledged to me that she
executed the same,
1: ~
Given under my hand and official seal, this the I q day of ~ rt....L
,2007.
.. Notary Public
>~ State of
Wyoming
Namepublic~ttll\V\J.. L. Wb~
Address: lÔ>a. Lù, ~ ~ )L . 3tµ ~ð1~
My Commission Expires: 5 - It..--Dt; ~2
My Commission Expires May 12, 2009