Cash Bonus
An up-front payment or bonus which is generally computed on a per acre basis for signing the gas lease. It is considered to be the first year’s rental.
Primary Term
The number of years that a gas lease is in effect. It can be from one to ten years or more.
- Delay Rental: Annual rental payments paid to the lessor after the first year of the primary term, usually on a per acre basis.
Secondary Term
The duration of a gas lease is extended beyond the primary term if a producing well is drilled on the lease or if the lease is “pooled” with other leases to form a “unit” for a producing well. The gas lease is “held by production”, extending its duration, and expires when production ceases.
- Royalty: Your share of the production from beneath your property. This will be referred to in the lease as a fraction - usually 1/8 of the value of the oil and/or gas produced and sold.
- Shut-in Royalty: Payment in lieu of a production royalty. Paid when a well is “shut-in” (capable of production, but not producing) for maintenance or other reasons.
Termination
Occurs when the primary term expires or when economic production ceases during the secondary term.