C.A.P.L. 2012 PETROLEUM AND NATURAL GAS LEASE AND GRANTPage 1
PETROLEUM AND NATURAL GAS
LEASE AND GRANT
THIS INDENTUREdated the day of,.
BETWEEN:
(the "Lessor")
-AND-
a having an office atthe
of , in the Province of (the "Lessee")
THE LESSOR is the registered owner, or entitled to become registered as owner, of the Leased Substances within or upon the lands legally described as follows:
as more particularly described and set forth in Certificate(s) of Title No.(in this agreement called the "Certificate of Title").
In consideration of this agreement being signed, sealed and delivered and other good and valuable consideration given to the Lessor by the Lessee, the receipt and sufficiency of which is hereby acknowledged by the Lessor, and in consideration of the covenants of the Lessee hereinafter contained, THE LESSOR HEREBY LEASES AND GRANTS the Lands and all the Leased Substances within or upon the Lands and any roadways, lanes or rights of way adjoining the Lands exclusively to the Lessee, subject to the royalties hereinafter reserved, together with the exclusive right and privilege to conduct Operations to explore for, drill for, operate, produce, win, take, remove, treat and dispose of the Leased Substances and to inject substances into and recover such substances from the Landsas is permitted by Regulations (but shall not include any right to store or dispose of substances in the Lands)for the purpose of obtaining, maintaining or increasing production of the Leased Substances from the Lands, the Pooled Lands or the Unitized Lands;
FOR THE LESSEE TO HAVE AND ENJOY the same for the term of () months (in this agreement called the "Primary Term") commencing on the Effective Date and continuingto midnight of the day ending the Primary Termand so long thereafter as continued pursuant to Clause 4.
THE LESSOR AND THE LESSEE HEREBY COVENANT AND AGREE AS FOLLOWS:
- INTERPRETATION
In this agreement, in addition to terms defined parenthetically herein,the following expressions shall have the following meanings:
(a)"Anniversary Date" means the date corresponding to the day after expiry of the Primary Term in each calendar year during which this agreement remains in force.
(b)"Commercial Production" means the output from an OffsetWell of such quantity of petroleumsubstances or any of them as, considering the cost of drilling, completing, equipping and production operations, theestimated price and quality ofsuch petroleumsubstances and the information available to the public pursuant to the Regulations at the time relating to a production test of suitable duration and nature in accordance with good oil field practice, would reasonably warrant the drilling of a like well in the vicinity thereof.
(c)"Current Market Value" means, if the Lessee sells the Leased Substances pursuant to a bona fide arm's-length sale or transaction, the value actually received by the Lessee and,in any other case, the average market price which the Lessee would have received for the sale of like substances in the area in which the Lands are located as and when the Leased Substances were produced; and in the case of natural gas, if it is greater, the price per GJ for the month in which the gas was delivered as published in the first of the month AECO Index as reported monthly by Canadian Enerdata Ltd. in the publication entitled "Canadian Gas Price Reporter" under the category "AECO 'C' & NIT One Month Spot" (after taking into consideration any applicable transportation adjustments between the inlet to the meter station of the initial common transporter accepting the natural gas and AECO).
(d)"Effective Date" means 12:01a.m. on the date of this agreement first above written.
(e)"Force Majeure" means any cause beyond the Lessee's reasonable control and, without limitation, includes an act of God, strike, lockout or other industrial disturbance, act of any public enemy, war, blockade, riot, lightning, fire, storm, flood, explosion, accidents, inability to obtain necessary materials in the open market, severe weather conditions, change in government policy and government restraints, including, without limitation, road bans and moratoriums restricting access to Zones or suspending Operations, but shall not include lack of finances.
(f)"Horizontal Well" means a well with one or more horizontal sections, or a well that is classified or approved as a horizontal well pursuant to applicable Regulations.
(g)"Lands" means all the lands, and all Zones underlying the lands, described above to the extent same are included in the Certificate of Title or in any other document of title issued in replacement thereof, except all such portions thereof as haveterminated, expired orbeen surrendered pursuant to the terms hereof.
(h)"Lease Year" means a period of one year commencing on each Anniversary Date and ending at midnight of the day immediately preceding the next Anniversary Date.
(i)"Leased Substances" means all petroleum, natural gas and all other hydrocarbons, or any of them (except coal), and all materials and substances (except valuable stone), whether liquid, solid or gaseous and whether hydrocarbons or not, produced in association with petroleum, natural gas or other hydrocarbons, or found in any water contained in any reservoir underlying the Lands, and shall include any such substances obtained from and allocated to the Lands from other lands with which the Lands have been pooled or unitized, but only to the extent that the foregoing are included in the Certificate of Title or in any other document of title issued in replacement thereof.
(j)"Notice" means any notice required or permitted in this agreement, which shall be in writing.
(k)"Offset Well" means any well drilled on any Spacing Unit laterally or diagonally adjoining the Lands, which Spacing Unit does not include lands owned by the Lessor or, if owned by the Lessor, not under lease to the Lessee, that is drilled subsequent to the Effective Date or, if drilled prior to the Effective Date, is obtainingproduction from a Zone that had not produced prior to the Effective Date.
(l)"Operations" means any of the following with respect to the Lands, the PooledLands or the UnitizedLands:
(i)drilling, testing, completing, reworking, recompleting, re-entering, deepening, plugging back or repairing a well orinjecting substances by means of a well, in search for or in an endeavour to obtain, maintain or increase production of any Leased Substances;
(ii)the production of any Leased Substances;
(iii)the recovery of any injected substance;
(iv)the extraction of water for the purpose of obtaining, maintaining or increasing production of LeasedSubstances from the Lands, Pooled Lands or Unitized Lands; or
(v)any acts for or incidental to any of the foregoing.
(m)"Pooled Lands" means all or any portion of the Lands and such other lands as have been pooled in accordance with the terms hereof or pursuant to the Regulations.
(n)"Productive Horizontal Section" means that portion of a Horizontal Well that is open to production of petroleum substances from a Zone.
(o)"Regulations" means, as may be amended, any applicable statute, regulation, license, grant, order or directive of any government, governmental agency, court or quasi-judicial body having jurisdiction in respect of the Lands.
(p)"Royalty Determination Point" means:
(i)in the case of crude oil and liquid hydrocarbons extracted from natural gas at the wellhead, at the first point of metering, measurement or allocation downstream of the wellhead, as applicable, after any treatment for the separation, removal and disposal of basic sediment and water;
(ii)in the case of natural gas and any liquid hydrocarbons processed, extracted or enriched at a gas plant, at the outlet valve of the processing plant; and
(iii)in the case of raw natural gas sold or used by the Lessee for purposes other than as allowed pursuant to Subclause3(d),the first point of metering, measurement or allocation downstream of the wellhead after any wellsite dehydration.
(q)"Spacing Unit" means the area allocated to a Vertical Well from time to time for the purpose of drilling for or producing, as the case may be, petroleum substances or any of them, as defined or prescribedby or under any Regulations; provided that the granting of a holding, downspacing or similar grant under the Regulations or suspension of any applicable Regulation with respect to the location of wells utilized in development on the Lands, any Pooled Lands or Unitized Lands shall not be considered a variance or termination of any combination of lands or allocation of production that occurred under this agreement prior to any alteration of the area or spacing allowed for wells under the Regulations including, without limitation, the provisions contained in Subclause7(d); and,in the case of a Horizontal Well, shall mean the area or areas that would otherwise be allocated to one or more Vertical Wells for the purpose of drilling for or producing, as the case may be, petroleum substances from the ProductiveHorizontal Section(s) of such Horizontal Well.
(r)"Unitized Lands" means all or any portion of the Lands and such other lands as have been unitized in a unit thatincludes any part of the Landsin accordance with the terms hereofand pursuant to any applicable Regulations.
(s)"Unit Agreement" means any agreement, as authorized hereunder and approved in accordance with any applicable Regulations, for the unitization of all or any portion of the Lands together with other lands as a single unit without regard to separate ownership and for the allocation of costs and benefits on a basis as defined in that agreement.
(t)"Vertical Well" means any well, including any well with a directionally drilled or deviated wellbore, that is not a Horizontal Well.
(u)"Zone" means any subsurface geologic stratum or common grouping of inter-related strata as determined by the governing bodies under the Regulations to be a formation containing petroleum substances distinctlyseparate and apart from any other stratum or group of strata.
- LEASE PAYMENT
(a)In addition to the other considerations given to the Lessor by the Lessee, the Lessee shall pay to the Lessor within sixty (60)days of the Effective Date (in this Clause called the "Payment Date") the sum of:
Dollars ($)
(in this Clause called the "Lease Payment").
(b)The Lessee shall not commence Operations until the Lease Payment has been made.In the event the Lease Payment has not been paid on or before the Payment Date, the provisions of Clause 13 shall not apply and this agreement shall terminate, in which event the obligations of the parties hereto shall be at an end; except, subject to Subclause 2(c), the obligation of the Lessee to pay the Lease Payment to the Lessor shall survive the termination of this agreement as liquidated damages and not as a penalty.
(c)If the Lessee determines that there are deficiencies with respect to the title of the Lessor to the Lands such that a reasonable lessee of the Lessor's interest in the Lands would not accept such title, the Lessee shall, on or before the Payment Date, give the Lessor written Notice of such deficiencies, providing reasonable particulars of same, and the Lessee shall thereupon no longer be required to pay the Lease Payment to the Lessor and this agreement shall terminate and be at an end. Failure by the Lessee to give the Lessor Notice of deficiencies as aforesaid shall be deemed to be an acknowledgement by the Lessee that the title of the Lessor to the Lands is acceptable.
- ROYALTY
(a)Subject to Subclause 3(c), the Lessor reserves a royalty share of the Leased Substances and the Lessee shall pay to the Lessor, in satisfaction of such royalty share, a royalty (in this agreement called the "Royalty") in an amount equal to the Current Market Value at the Royalty Determination Point of percent (%) of the Leased Substances sold from the Lands, or used by the Lessee for a purpose other than that described in Subclause 3(d). In computing the Current Market Value at the Royalty Determination Point, the Lessee may deduct those expenses allowed by the Crown under the Regulations related to the Royalty percentage share of Leased Substances sold, provided that such deductions shall not exceed fifty percent (50%) of the Royalty amount owing for the Leased Substances sold or so used by the Lessee in a month.
(b)The Royalty shall be payable on or before the fifteenth day of the second month following the month in which the Leased Substances were sold or used by the Lessee for a purpose other than that described in Subclause 3(d).
(c)If the Lessor’s undivided interest in the Leased Substances is less than the entire and undivided fee simple estate, the Royalty shall be paid to the Lessor only in the proportion which such interest bears to the entire and undivided fee simple estate.
(d)Notwithstanding anything to the contrary herein contained or implied, the Lessee shall be entitled to use a portion of the Leased Substances produced from the Lands as may reasonably be required by the Lessee in its Operations (inclusive of, but not limited to, the use of natural gas produced to fuel processing equipment serving only the wells on the Lands or Pooled Lands) and the Lessor shall not be entitled to any Royalty with respect to Leased Substances so used.
(e)The Lessor agrees that the Royalty shall be inclusive of any prior disposition of any other royalty or other interest in the Leased Substances evidenced on the Certificate of Title and further agrees to make all payments required by any such prior disposition out of the Royalty and to indemnify and save the Lessee harmless from its failure to do so; provided, however, that the Lessee may elect by Notice to the Lessor to make such payments on behalf of the Lessor and shall have the right to deduct any such payments made from any Guaranteed Payment, as defined in Subclause 4(b), or Royalty otherwise payable to the Lessor.
(f)The Lessee shall make available to the Lessor or its authorized representative during normal business hours at the Lessee's address for Notice or principal place of business, the Lessee's production and financial records relating to the Leased Substances produced from or allocated to the Lands.
- LEASE CONTINUATION BEYOND PRIMARY TERM
(a)Subject to the provisions of Clause 11, this agreement shall continue beyond the expiry of the Primary Term or the expiry of any Lease Year thereafter, so long as:
(i)there is a well on the Lands or Pooled Lands that has been completed for production of the Leased Substances and all the completed Zones are not abandoned and the wellbore is not being used solely for purposes other than for production of the Leased Substances, including, without limitation, pressure maintenance, pressure observation, water source or water disposal;
(ii)the Lessee has elected to pay a royalty pursuant to Subclause6(a)(iv);
(iii)at such expiry date, the Lessee has spud a well or has re-entered a well on the Lands or Pooled Lands for the purpose of obtaining, maintaining or increasing production of the Leased Substances and thereafter carries out all such Operations as are pertinent to the drilling or re-entry of that well for that purpose, in which case the provisions of this Subclause shall again apply, mutatis mutandis, ninety (90) days from cessation of such Operations for determination of the continuation of this agreement; or
(iv)the Lands are Unitized Lands.
(b)If this agreement is continued beyond the Primary Term pursuant to the provisions of Subclause 4(a), then in the last twelve month period of the Primary Term (or in the whole of the Primary Term if less than twelve months) and in every Lease Year thereafter, the total amount of the Royalty paid to the Lessor pursuant to Clause 3 shall not be less than an amount equal to Five Dollars ($5.00) per net acre or Twelve Dollars and FiftyCents ($12.50) per net hectare, whichever is the greater based on the Lessor's undivided interest in that portion of the Lands which were subject to this agreement in that time period (such amount in this agreement called the "Guaranteed Payment"). If the Royalty paid in any such time period is less than the Guaranteed Payment, then any difference shall be paid to the Lessor within thirty (30) days of the expiry of each such applicable time period.
(c)Failure to correctly calculate or make a Guaranteed Payment pursuant to this Clause shall be subject to remedy in accordance with Clause 13.
(d)Regardless of whether this agreement meets the conditions for continuation beyond the Primary Term as provided for in Subclause 4(a), this agreement shall nonetheless terminate at the end of any Lease Year ending a period of three (3) consecutive Lease Years occurring after expiry of the Primary Term where all the wells on the Lands, the Pooled Lands or the Unitized Lands have produced Leased Substances for less than an aggregate of seven hundred and twenty (720) hours during a Lease Year, from any well at any time interval all taken together, in each and every one of the three (3) consecutive Lease Years. Provided, however, if at any time during the last Lease Year of such three (3) year period the Lessee has conducted Operations to drill, re-enter, deepen, complete, rework or recomplete a well, or commence to inject substances, for the purpose of obtaining, maintaining or increasing production of any Leased Substances from the Lands, Pooled Lands or Unitized Lands, this agreement shall continue to remain in force beyond the end of that Lease Year, following which the provisions of this Clause shall again apply,mutatis mutandis.
- TAXES
(a)The Lessee agrees to pay:
(i)all taxes, rates and assessments that are assessed or levied, directly or indirectly, for Operations of the Lessee in respect of the Lands;