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EXHIBIT 10.5
Producers 88 (3/99)
TX-Gen
Paid-up, Pooling
OIL,
GAS AND MINERAL LEASE
This
Lease Agreement is entered into this 17th day of July, 2006, (the
"Effective Date") between Henry J. Janssen. Jr., as "Lessor,"
whether one or more, whose address is 484 FM 81, Runge, Texas
78151, and Penasco Petroleum, Inc., as
"Lessee", whose address
is 9801 Anderson Mill Rd., Suite 230, Austin, Texas
78750.
In
consideration of the sum of Ten Dollars ($10.00) and other valuable
consideration, the receipt of which is acknowledged, and of the
royalties and agreements of Lessee contained in this Lease, Lessor
grants, leases, and lets exclusively to Lessee, its successors and
assigns, all of the land described in this Lease, together with any
reversionary rights of Lessor, for the purpose of exploring by
geological, geophysical, and all other methods, and of drilling,
producing and operating wells or mines for the recovery of oil, gas
and other hydrocarbons, and all other minerals or substances,
whether similar or dissimilar, that may be produced from any well
or mine on the leased premises, including primary, secondary,
tertiary, cycling, pressure maintenance methods of recovery, and
all other methods, whether now known or unknown, with all related
incidental rights, and to establish and utilize facilities for
surface and subsurface disposal of salt water, and to construct,
maintain and remove roadways, tanks, pipelines, electric power and
telephone lines, power stations, machinery and structures thereon,
to produce, store, transport, treat and remove all substances
described above, and their products, together with the right of
ingress and egress to and from the land subject to this Lease and
across any other land now or later owned by Lessor. The land that
is covered by and subject to this Lease is situated in Karnes
County, Texas, and is described as follows and referred to in this
Lease as the "land" or the "lands":
138 acres, more or less, described in the Oil
and Gas Lease dated October 18, 1972, executed by Ema L. Janssen,
et al, as Lessor, to Earl Scheig, as Lessee, recorded in Volume
417, Page 337 of the Deed Records of Karnes County, Texas, covering
138 acres out of the Charles A. Labazon Division of the Victor
Blanco Four League Grant, A-3, Karnes County, Texas.
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON,
YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS
INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS:
YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE
NUMBER.
This
Lease covers all of the land described above, and in addition it
covers and there is expressly leased, let, and demised to the same
extent as if described above, all lands owned or claimed by Lessor
adjacent, contiguous to or a part of the lands specifically
described above, whether the additional lands are owned or claimed
by deed, limitation or otherwise, and whether they arc inside or
outside the stated description, whether they are held under fence
by Lessor or not, and whether the additional lands are in the named
survey or other survey or surveys. This is a Lease in gross and not
by the acre and the bonus money paid shall be effective to cover
all such lands irrespective of the number of acres they actually
contained, and the lands included within the terms of this Lease
are estimated to comprise 138 acres, whether they actually comprise
more or less.
1. Term of
Lease Without reference
to the commencement, prosecution, or cessation at any time of
drilling or other development operations, or to the discovery,
development, or cessation at any time of production of oil, gas, or
other minerals, and notwithstanding anything else contained in this
Lease to the contrary, this Lease shall be for a term of 6 months
from the date stated above (the "Primary Term") and as long
thereafter as oil, gas, or other minerals are produced from
the lands, or land with which the lands are pooled, or as
long as this Lease is continued in effect as otherwise provided by
the terms of this Lease.
2.
Royalty The royalties to be paid by Lessee are: (a) on oil, and on
other liquid hydrocarbons saved at the well, (3/16) of that
produced and saved from the land, the same to be delivered at the
wells or to the credit of Lessor in the pipeline to which the wells
may be connected, Lessor's interest in either case shall bear its
proportionate share of any expenses for treating oil to make it
marketable as crude; (b) on gas, including casinghead gas or other
gaseous substances produced from the land and sold on or off the
premises, (3/16) of the net proceeds at the well received from the
sale of gas, provided that on gas used off the premises or by
Lessee in the manufacture of gasoline or other products, the
royalty shall be the market value at the well of (N/A) of the gas
so used, and as to all gas sold by Lessee under a written contract,
the price received by'Lessee for that gas shall be conclusively
presumed to be the net proceeds at the well or the market value at the well for the gas so sold; (c) on all
other minerals mined and marketed, (N/A), either in kind or value
at the well or mine at Lessee's election; and, (d) at any time and
from time to time either at or after the expiration of the Primary
Term of this Lease, if there is a gas well or wells on the land or
lands pooled with the land subject to this Lease (and for purposes
of this clause (e) the term "gas well" shall include wells capable
of producing natural gas, condensate, distillate, or any gaseous
substance and wells classified as gas wells by any governmental
authority) and the well or wells are or have been shut-in before or
after production, it shall be deemed that the well or wells are
producing gas within the meaning of paragraph 1 and this Lease
shall not terminate. In that event, Lessee covenants and agrees to
pay, as royalty, shut-in gas royalty in the amount of Fifty Dollars
($50.00) per annum as long as the well or wells are shut-in and
this Lease is not maintained in force or effect by any other of its
provisions. The shut-in royalty shall be paid or tendered to Lessor
or to Lessor's credit in the (Direct to lessor) Bank at ( ), which
Bank or any successor Bank shall continue to be the agent for
Lessor and Lessor's successors and assigns. Should Lessee elect,
that Bank may also be used to be paid any other sums, including
royalties due under this Lease. If that Bank (or any successor
Bank) should fail liquidate, or be succeeded by another Bank, or
for any reason fail or refuse to accept shut-in royalty or any
other payment, Lessee shall not be held in default until thirty
(30) days after Lessor shall deliver to Lessee a recordable
instrument making provision for another method of payment or
tender. Any depository change is a liability of the. Lessor. Any
payment or tender of shut-in royalty made under the terms
of this Lease may be made by check or draft of Lessee mailed
or delivered to the Bank or to Lessor. In the event Lessee is
obligated to pay the shut-in royalty indicated, the first payment
of shut-in royalty shall be due and payable on or before ninety
(90) days following the date on which the well is shut-in, or if
shut-in during the Primary Term then on or before ninety (90) days
following the expiration of the Primary Term, and subsequent
payments, if required under the terms of this paragraph shall be
due and payable annually on or before the anniversary of the date
of the original payment.
1
It is specifically provided that this is a Paid-Up
Lease during the term set out above as the "Primary Term" and there
shall be no obligations or liability on the Lessee to make any
shut-in royalty payment or other payment during the Primary Term, and
without any other
payment this Lease shall remain in fu
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