An Irreverent Look at Oil & Gas Leases

1. An Irreverent Look at Oil & Gas Leases This presentation is made solely for educational purposes and contains opinions of the presenter which are provided pursuant to the First Amendment of the United States Constitution. Neither Rodney M Patterson, nor any other contributor to this presentation provides legal advice about leasing private property for gas exploration and drilling within the content of this presentation. This information is not intended to create and its receipt does not constitute a lawyer-client relationship. Viewers of this presentation should not act upon this information without seeking professional legal counsel.

2. The Law of Capture The owner of a tract of land acquires title to the oil or gas which the owner produces from wells on his land, though part of the oil or gas may have migrated from adjoining lands.

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6. Blackacre Whiteacre Non-Lessor ------------------------------------------------------------ ------------------------------------------------------------ 330 feet

7. Dateline: December 17, 2007

8. “Typical Spacing 1000 feet”

9. “Closer Spacing 500 feet”

18. Paragraph 15—Warranty of Title Lessor hereby warrants and agrees to defend title to Lessee hereunder . . . .

21. “Paid Up” Means No Delay Rental

23. Paragraph 1—The Granting Clause --What is Being Leased

24. . . . along with all hydrocarbon and non hydrocarbon substances produced in association therewith . . .

25. The term “gas” as used herein includes helium, carbon dioxide and other commercial gases, as well as hydrocarbon gases.

26. Paragraph 2—The Habendum Clause This lease, which is a “paid up” lease requiring no rentals, shall be in force for a primary term of Three (3) years from the date hereof, and for as long thereafter as oil or gas or other substances covered hereby are produced in paying quantities from the leased premises or from lands pooled therewith or this lease is otherwise maintained in effect pursuant to the provisions hereof.

27. primary term of Three (3) years

28. and for so long thereafter as oil or gas or other substances covered hereby are produced in paying quantities

29. Paragraph 3—Royalty Clause A percentage share of production, or the value derived from production, paid from a producing well. Ways to Measure Royalty: • Fair Market Value Determined by looking at the market place. • Proceeds Realized Determined by looking at what price Lessee sells for.

30. Paragraph 3—Royalty Clause When and Where Is Royalty Measured? • At the wellhead • From sale thereof

31. For Oil Paragraph 3—Royalty Clause in Sample Lease For oil and other liquid hydrocarbons separated at Lessee’s separator facilities, the royalty shall be Twenty Five Percent (25%) of such production, to be delivered at Lessee’s option at the wellhead or to Lessor’s credit at the oil Purchaser’s transportation facilities . . .

32. For Gas Paragraph 3—Royalty Clause in Sample Lease For gas . . . the royalty shall be Twenty Five Percent (25%) of the proceeds realized by Lessee from the sale thereof, less a proportionate part of . . . Taxes . . . and costs incurred by Lessee . . . . . . . . provided that Lessee shall have the continuing right to purchase such production at the prevailing wellhead market price . . . .

33. Dateline: Arlington, December 4, 2007 $15,850.00

34. Dateline: Grapevine December 17, 2007 $3,000 (Offer by Chesapeake)

35. Dateline: Arlington April 26, 2007 $26,500 (Offer by XTO)