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This indenture of lease entered into by and between the State of Wyoming, acting by
and through its Board of Land commission~~~ as'LE~SOR, and the following as LESSEE:
Fitzsimmons, LLC
OO~OS8
and 8!fective January 6, 199B
STATE
OIL AND
C.&: ..'YOMING
GAS LEASE
L..ease If V I-V' .-- .
Parcel # 598
Fund Code: CS
Fo.t'm Approved by the
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
eiements produced therewith, including sulphur, hydrogen sulfide, sulphur dioxide, nitrogen,
carbon dioxide and helium, which may be produced from the following described land, to wit:
'7
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Lots 5-8 Section: 16 Township: 23 North Range: 120 West of the 6th P.M.
NWNW Section: 10 Resurvey Township: 23 North Range: 120 West of the 6th P.M.
County: Lincoln
Acres: 191.94
$192.00
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($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, October, 2007 A.D.
Lessee Signature:
and through its
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LE:S~OR, ,",STATE OF
Address:
-------------
City: State: Zip:
Phone : _=~ .3 01 =-ttJ...~~/.s ~===
1 JOHN KENNEDY
2201 Cabin Ct.
.: Gillette, WY 82718
RECEIVED 12/26/2007 at 10:53 AM
RECEIVING # 935804
BOOK: 682 PAGE: 58
JEANNE WAGNER
LINCOLN COUNTY CLERK, KEMMERER, WY
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OIL AND GAS TEF
Section 1. THE LESSEE AGREES:
(a) BOND. To furnish a bond with an approved corporata surety company authorized to transact
business in tha Stata of Wyoming, or such othar surety as may be acceptable to the lessor, in the
penal sum as required by the current rules of the Stata 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
end regulations relating thereto, and also conditioned on the payment of all damages to the
surface and,il'Qprovernentsth!'f'eon where the lease covers lands the surface of which has been
sold or otharWIse leased. Sticþ bQnd or bonds furnished prior to the devalopment of the lands
contained in this lease niay be increased In such reasonable amounts as the lessor may decide
upon commencement of drilling operations and after the discovery of oil or gas.
(b)PAYMENTS. To make all peyments accruing hereunder to the Office of State Lends 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 lassor in
advance, beginning with tha affective data hereof, an annual rental of $1.00 per acre or fraction
thereof.
After the discovery of oil or gas In peying 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 mada, an
annual rental of $2.00 per acre orfrection thareof, unlass changed byagraement. Such rental so
peid for eny one year shall be credited on the royalty for that year.
Annual rentals on all leases shell be payable in advance for the first year and aach year
thereafter. No notice of rental due shall be sent to the lessee. If tha 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 peyment 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 automaticelly 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
peyments of rentel on an operating lease.
(d)ROYAL TIES. The royalties to be paid by lassee 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 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 manufactura of gasoline or other products
therefrom, the market value at the well of one-sixth of the gas so sold or used, provided that on
gas sold at the walls, 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
extrecled, including propene, butane, sulphur, nitrogen, carbon dioxide, 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 approved by the
lessor, and in the determination of the value of natural gasoline the fair cost ofaxtraction shell be
considered as a deductible item; provided, however, that the allowance for the cost ofaxtrection
may excead \WO-thirds of the amount or velue only on approval of tha lassor and in no avant shall
the price for gas, or natural gasoline, be less than thet received by the United Stata of America for
its royalties from the same field.
(v) Natural gas and 011 ectually used for opereting purposes upon tha land and, except as to the
ultimate sale thereof, gas or liquid hydrocarbons returnad to tha sand for stimulating tha
production of oil or secondary recovery purposes shall be royalty free.
(e) DISPOSITION OF ROYAL TV OIL AND GAS. To deliver to the lassor, or to such individual,
firm or corporation as the lessor may designate, all royalty oil, gas, or other kindred hydrocarbons,
free of charge on tha premises where produced, or, at the option of the lessor, end in lieu of said
royalties In kind, the lassee agrees to pay the lessor tha field market price or value of all royalty
oil, gas, or other kindred hydrocarbons produced and saved.
When the lessor elects to take its royalty oil, gas, or other hydrocarbons in kind such as oil, gas,
or other kindred hydrocarbons shall be good merchentable oil, gas, or other kindred
hydrocarbons. The lessee shall if necessery 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 piece as the lessor and the lessee may mutually egree 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 oil, as herein provided, shall apply only as long as the said oil Is the property
ofthe lessor.
(I) 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 es those pertaining to the production from offset wells opereted by tha lassee, his operator,
or sub-lessee on other lands, which shall be opened at all times 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, amount,
grevities, 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 leased, and the amount of gas returned to the sand.
(g) MONTHLY PAYMENTS AND STATEMENTS, Unless the time of payment is otharwise
extended by the Office of State Lands and Investments to make peymant on or before the
twentieth (20th) day of the calendar month succeeding the month of production and removal and
sala of 011 and gas from said land, and to furnish sworn monthly statements tharawith showing in
datail the quantity and quality of tha production (per well if rsquired whera practical) from the land
hereby laased, and the quantity and quality of tha production (per well where prectical) from offsat
wells upon cornering or contiguous land operated by the lessaa, his operator or sub-lessee end
such other information as may be called for in tha form or report prescribad by lessor.
(h) WELLS TO BE DRILLED. To drill and operata effactivaly all wells nacessary to raasonably
offset walls upon and production from edjoining lands.
To drill such additional walls at such times or places as are necessary and essantial to tha
proper davelopment and commercial production of tha oil and gas content of seid 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 tha strata and charactar of tha
formations, water sands and minerel deposits penetrated by the drill, amount of casing, size and
where set, and such other information 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
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 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 possessed by the lessee on tha wells,
production or operations of others on lands on tha same geologic structure that may be of
importance in effecting proper davelopment 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.
mPRODUCTION. To operata the wells upon the land herein leased in a competent and afficienl
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 lassee or
others on cornering or contlgtlOUs lands to those leased herein. All plans or methods for the
purpose of stimulating 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
operetion.
No production egreements 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
the consent in writing of tha lessor first had an obtained.
(k)SUSPENSION OF OPERATIONS. Should any well drilled upon lands covered by this leasa
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 said well,
the lessee may apply for and the lessor may grant pennission for the suspension of production
operations until such times as a satisfactory markat for the product from said wall 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 affect as though oil or gas was being produced from said lands.
(I)DILlGENCE-PREVENTION OF WASTE. To exercJse reasonable diligence in drilling,
producing, and operating of wells on the land covered hereby, unless consent to suspend
operations temporarily is granted by the lassor; to carry on all operations hereunder in a good and
workmanlike manner In accordance with approved methods and practice, having dua rega,d 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 tha
property for Mure productiva operations and to the health and safety ofworkmen and employees;
to plug securely in an approved manner any wall 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 outar boundaries of the land covered hereby, unless I .,. ,inst 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
reasoneble orders and requirements of tha lassor relative to the prevention of waste and
preservation of the property and the health and safety 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 right, together with other recourse herein provided, to
enter on tha property to rapair damage or prevent waste at the lessee's expense; to abide by and
conform to valid applicable regulations prescribed to raimburse the owner of the surface, if other
than the lessor, or lessee of grazing rights thereof for actual damages thereto and injury to
improvements theraon, 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, oil and gas
produced from the land hereunder, or other rights, property or assets of Ihe lessee, to accord all
workmen and employees complete fraedom of purchase, and to pey all wagas 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 Office of State
Lands and Investments when authority to do so has been delegated by the Board and will be
recorded with the laase. The Board resarves tha right of disapproval of such overriding royalties
when in its opinion thay become excessive and hance are detrimental to the proper development
of the leased lands.
(o)DELlVER 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 squlpment and improvemants in the ordinary
course of operations.
Section 2. THE LESSOR EXPRESSLY RESERVES:
(a) The right to lease sell, or otharwise dispose of the surface of the land embraced within this
lease under existing laws or laws hereafter enacted, and in accordance with the rulas of the
Board of Land Commissions insofar as the surface is not necessary for the use of the lessae in
the conduct of operations hereunder.
(b)The right to leasa, sell, or otharwise 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-<:>f-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 oparations for oil and gas on the land herein leased.
(d)The right to rafuse to commit the leased lands to a unit plan of development if the Board finds
such action would impair the lesso~s reserved right to take Its royalty gas in kind and to purchase
all other gas allocated to tha leased lands a provided in Section 3(e)below.
(e)The right to alter or modify the quantity and rata of production to the end that waste may be
eliminated or that production may conform to the lassee's fair shara of allowable production under
any system of State or National curtailment and proration authorized by law.
(1)1n addition to its right to taka its royalty gas in kind, the lessor reserves the right and option to
purchase all other gas produced for sale or use off the laased 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 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 purchasa 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 comparable to and at least as favorabla to the lessee. As a condition to such waiver,
a satisfactory agreement may be entered into by which the production of its royally 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 hava the right subject to the
provisions of Title 36, as to Stata and State School Lands, and Title ii, as to State Loan and
Investments Board Lands, W.S. 1977, to remove any improvements owned by lessee within a
reasonable time after tha terminetion of this laase. Lessee agrees that any such improvements
not removad within a raasonable tima after termination of this lease shall be disposed of pursuant
to the above statutes.
Section 4. FORFEITURE CLAUSE. The Board shall have the power and authority to cancel
laases procured by fraud, deceit, or misrepresentations, or for the usa 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 hareof, or of the general regulations promulgated by the Board of
Land Commissioners and in force on the date hareof, 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 continues for a period of thirty (30) days after the service of such notice, then
and In that evant tha lessor may, at its option, declare a forfeiture and cancel this lease,
whereupon all rights and privileges, obtained by the lessee hereundar 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 exercise by lessor any legal or equitable remedy
which the lassor might otherwise 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 occurring at any other time.
Section 5. RELINQUISHMENT AND SURRENDER. This lease may be relinquished and
surrendered to 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
lassee shall file with the State Land Board and State Loan and Investment Board, a written
relinquishment or surrender, duly signed and acknowtedged and stating \herein thet no operations
have been conducted on the land. 'Tha relinquishment so filed shell become affac\ive on the data
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 fails to state that no operations have
been conducted, tha effective date of relinquishment shall be the date the relinquishmant is
approved by the Board.
(b) If operations have been conducted unde, tha lease on land proposed to be relinquished, the
lessee shall give sixty (60) days notice and shell file with the Dirac\or a written relinquishment or
surrender duly acknowledged and stating therein that operations have been conducted on the
land. Tha relinquishment shall not become effac\ive until the land and the wells thereon shall
hava been placed in condition accaptable to lessor and shall hava been approved by the Stale Oil
and Gas Supervisor.
All rentals becoming due prior to a surrendar or relinquishment becoming effective, shall be
payable by lessee unless payment thereof shall be waived by lessor. A relinquishment having
become effective there shall be no recoursa by lessee and the lease as to the relinquished lands
may not be rainstatad.
000059,
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