Primary term and extensions: how long the company has
The primary term is the set number of years the company has to start a well. If there is production when it ends, the lease usually continues "as long thereafter" as oil or gas is produced, which can mean decades.
What it does
Offers often name a primary term of a few years. Some add an option to extend for more years by paying an added bonus. An extension option is in effect a second lease on terms set today.
Watch what can keep the lease alive past the primary term: production in paying quantities, drilling under way, shut-in payments, and production from a pooled unit. Each of those has its own page here.
What we mark on a review sheet
Normal
- A primary term written in years, with a clear start date.
- A secondary term that lasts while oil or gas is produced in paying quantities.
Missing
- The amount and due date of any extension payment.
- Whether the option needs written notice to you before the term ends.
Ask about
- A long primary term paired with a low bonus.
- An extension the company can use without paying until later.
Questions to ask the company
- How long is the primary term, and when does it start?
- If there is an option to extend, what does it pay, when, and how will you notify me?
- What does the lease count as "operations" that can hold it past the primary term?
Common questions
What is the primary term of an oil and gas lease?
The set number of years the company has to begin drilling or production. If the land is producing when it ends, the lease usually continues as long as production does.
What is an option to extend a lease?
A clause letting the company add years to the primary term, usually by paying another bonus. It sets those terms now, before anyone knows what the area will be worth then.
Send it before you sign
Tell us what you got and what you want to know. We reply by email and tell you how to send the pages. A landman reads them and sends back a one-page review sheet.
Email hello@landman.review with what you got and your question, or call (307) 263-8515.