Texas Park and Wildlife Department TPWD Lease Form

Termination of Lease as to Part of Lands

Form 1.

At the end of the primary term of this lease, each then producing well, producing oil and/or gas in paying quantities, shall hold acreage out of the leasehold estate included in units as set by the applicable spacing rules. Any land not so held by production at the end of the primary term of this lease shall revert to Lessor free and clear of the terms of this lease, with the exception that in the event Lessee is at the end of the primary term engaged in drilling or deepening a well on the land, the entire lease shall remain in force and effect so long as continuous drilling operations are being carried on upon the property, and the continuous drilling operations shall be construed to mean that no more than one hundred twenty (120) days shall elapse between the completion or abandonment of a dry hole of any oil and/or gas well and the commencement of operations for the drilling or deepening of a subsequent well. When the primary term has expired, or if there is then in process drilling or deepening operations, then when the continuous drilling operations expire, Lessee shall have thirty (30) days time in which to execute and furnish to Lessor a recordable release of any land not held under this lease.

Form 2.

On expiration of the primary term of this lease, it shall terminate as to all acreage with the exception of acres around each producing oil well then situated on the leased premises and that portion of the premises which shall have been designated as its proration unit in accordance with the applicable rules and regulations.

Form 3.

In the event only a part of the land covered by this lease is pooled or unitized under the provisions of this lease with other land or lands so as to form a consolidated pool or unit, any operations on or production from the pool or unit will maintain this lease in force only as to that part of the property which is included within the pool or unit, never to exceed 80 acres for an oil well and 640 acres for a gas well. At the end of the primary term, a portion of the land covered by this lease and not all of the land covered by this lease shall be included in any pool or unit, then this lease shall automatically terminate as to that part of the property which is located outside of any pool or unit on which there is no drilling or reworking operations or production of oil, gas or other liquid hydrocarbons.

Form 4.

On expiration of the primary term of this lease, provided that one test well has been drilled or provided that production has been established on the land or any tract in which this lands has been included and pooled in a producing unit, this lease shall be extended in full force and effect so long as the Lessee continues to drill one test well per lease year until the property has been fully developed according to the spacing rules. Should Lessee fail to carry out additional drilling as provided after the end of the primary term, then this lease shall cease and terminate as to all acreage with the exception of 40 acres around each producing oil well then situated on the leased premises and that portion of the premises which shall have theretofore been designated as its proration unit in accordance with the applicable rules and regulations. The date of the termination shall be the lease anniversary date that Lessee fails to commence operations for the drilling of any test well required to be commenced by reason of the provisions of this paragraph.

Form 5.

years beyond the end of the primary term of this lease, it will terminate as to all lands, save and except for proration spacing or production units allocated to each oil and/or gas well located on the lands or on lands pooled therewith which is then capable of producing in paying quantities.

Form 6.

Should the Lessee fail to drill at least wells during the primary term, this lease shall automatically terminate as to all acreage except the acreage designated for each well drilled, unless the Lessee is drilling at the end of the primary term. If the Lessee is drilling at that time, this lease shall not terminate as to any acreage, provided the well being drilled at that time will make a total of two wells drilled on the lease or if the well being drilled at that time is the first well and a second well is started within 90 days from the completion of the first well.

Form 7.

If, at the expiration of the primary term, a portion or portions of the land are pooled or unitized with other land so as to form a pooled unit or units, this lease may be maintained by operations or productions only as to the land included in the unit or units. Each unit shall contain the number of acres prescribed by the permanent field rules for the field in which the well or wells are located.

Form 8.

On the expiration of the primary term of this lease, this lease shall terminate as to all acreage with the exception of all wells producing from the surface to a subsurface depth of 3,000 feet to hold 40 acres each, and all wells producing from depths below 3,000 feet to hold 80 acres each.

A. If this lease is being maintained by production at the end of years after the termination of the primary term, then on that date, this lease shall automatically terminate as to all acreage except the acreage not to exceed forth (40) acres around each oil well producing in paying quantities or an oil well on which reworking operations are being conducted, an acreage not to exceed three hundred twenty (320) acres around each gas well producing in paying quantities, or a gas well on which reworking operations are being conducted. The acreage to be retained around each well (the “retained acreage”) shall be as nearly in the form of a square as is practicable and shall be accurately described by metes and bounds in a recordable release of all acreage other than the retained acreage.

B. If, at the end of years after the end of the primary term, this lease is being maintained by production as to “retained acreage” as provided above, then at such time, and from time to time thereafter, Lessor shall have the right, subject to the conditions set forth in this paragraph to request and obtain a release of this lease as to the deep horizons (as “deep horizons” are defined) under any one or more of the blocks of retained acreage. The “deep horizons” shall be horizons below a depth equal to 100 feet below the deepest well perpetuating this lease for the particular retained acreage block for which the release is requested. As a condition to such right to obtain a release of the deep horizons under any particular retained acreage block (“release acreage”), Lessor must have received, prior to requesting such release, a bona fide written proposal from a third party containing, (1) a firm offer to buy an oil and gas lease from Lessor covering the deep horizons under the release acreage; and (2) a firm commitment form such third party to commence within six (6) months from the granting of the proposed new lease, operations for the drilling of a well at a location on the release acreage to a specified depth within the deep horizons unless heaving shale, salt water flow, granite, or other impenetrable formation or condition is first incurred. Within thirty (30) days after receipt of Lessor’s request for such a release, accompanied by a copy of the offer, Lessee shall elect to either, (1) furnish a release of the acreage, or, (2) firmly commit to meet in all respect (except the payment of any proposed bonus as to lands within the release acreage) the third party proposal to buy an oil and gas lease and drill a well, and shall firmly commit to drill the well at a location of Lessee’s choosing on the release acreage to the proposed depth within six (6) months from the election, unless heaving shale, salt water flow, granite, or other impenetrable formation or condition is first met.

Form 9.

This lease shall terminate at the expiration of the primary term as to all acreage which is not included in a producing unit, unless the acreage is included in a unit on which actual drilling operations are being conducted.

Additional Notes: