PrairieSky Fee Leases Kathy Luther, Manager Lease...
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PrairieSky Fee Leases Kathy Luther, Manager Lease Compliance CAPLA, January 27, 2015 OPEN BUSINESS for for
Transcript of PrairieSky Fee Leases Kathy Luther, Manager Lease...
PrairieSky Fee Leases
Kathy Luther, Manager Lease Compliance
CAPLA, January 27, 2015
OPEN BUSINESS for
for
The small print
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• This Presentation and any accompanying material or ensuing discussions
during or after are for informational purposes only and do not
constitute legal conclusions or legal advice from PrairieSky Royalty Ltd.
• This Presentation is based on generalizations
• The specific terms of your Lease will prevail
Agenda
• Who are We?
• History of PrairieSky’s Fee Lands
• Review of lease terms
• www.prairiesky.com Lease Compliance Information
• Lease Continuation Application
• Offsets
• Royalties and Deductions
• Lease Assignments
• Contest Time
• Questions?
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Who Are We?
• Created from Encana’s royalty interests in Clearwater BU
• Initial Public Offering May 27, 2014
• Included Fee Titles as well as GORR’s
• Publicly traded as PSK
• Unique Company
• A Royalty Company - Not an E&P company
• Do not intend to drill wells, explore for, or develop petroleum or natural gas
• Growth through third-party development of our properties to increase royalty revenue
• Minimal or no operating costs, capital costs, environmental liabilities or reclamation obligations
• Collaborative approach to interactions with lessees
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History of PrairieSky Fee Title Lands
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1881Canadian Pacific Railway Main Line Land Grant
History of PrairieSky Fee Title Lands continued
“Railway executive William Cornelius Van Horne swooped into Winnipeg and took CPR in his hands like a giant whip.
He cracked it once to announce his presence,
cracked it again to shake loose the sloth and corruption and
cracked it a third time simply because
the first two felt so good.
The railway didn’t know what hit it…”
Lords of The Line, 1989
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History of PrairieSky Fee Title Lands
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Go West, Young Man
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History of PrairieSky Fee Title Lands
History of PrairieSky Fee Title Lands
• 1958
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History of PrairieSky Fee Title Lands
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History of PrairieSky Fee Title Lands
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History of PrairieSky Fee Title Lands
• May 2014 Encana IPO creates PrairieSky
• December 2014 Range Royalty amalgamated into PrairieSky
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PrairieSky Fee Title Ownership
• Largest Freehold Mineral
Title owner in Canada
• ~18,600 Mineral Fee Titles
• ~ 5.3 MM acres of Fee land
• ~ 17,000 active Fee Leases
• > 200 Lease forms
• ~3.6 MM acres GORR’s
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PrairieSky 2014 Fee Lease
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• Two parts
• Specific Terms
• General Terms and Conditions
• Specific Terms
• Lessor & Lessee
• Lease Date
• Leased Lands, Substances, Formations
• Type Log
• Royalty Rate
• Primary Term
• Rental rate
• Special Provisions
• Signatures
Drilling and Production Operations
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“Drilling Operations” means:
• spudding, drilling a well for production of Leased Substances to and including the commencement of Production Operations or abandonment
“Production Operations” means any of:
• production of Leased Substances;
• completion operations;
• including the installation of the production casing, tubing and wellhead equipment and all other equipment and material necessary for the permanent preparation of a well for the production of Leased Substances in Paying Quantities;
• equipping and tie-in of a well;
• re-working, fracture stimulating, acidizing or stimulating of a well; or
• injection or production of water or other substances for the purpose of producing or increasing production …
Lease Continuation - Clause 2 (b)
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Continued if:
• Production Operations diligently and continuously conducted +
• Continuation Application Form submitted +
• Rental for the upcoming year
What continues?
• those Leased Lands that are contained within the Spacing Unit of a well, and
• those Leased Formations within that well where Production Operations are being diligently and continuously conducted
Downspacing versus Holdings
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• Gas downspaced to quarter section
• Spacing is now similar to oil = A gas well must
be drilled in each quarter to continue full section
• https://www3.eub.gov.ab.ca/EUB/DDS/spacing/
wellspacing.aspx
• Example 1: Well drilled continues NW quarter
section only
• Gas Holding – 4 wells per section
• Has no affect on the spacing unit
• Changes well density only
• Example 2: Any producing lease well continues
full section spacing unit
Downspacing Holdings
PrairieSky Website – Lease Compliance
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www.prairiesky.com/land-managment/lease-compliance
Continuation Application: Production Operations
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Continued beyond primary term by one of two methods:
Production Operations
• Circa 2000 – today
• Lease forms = PSK 2014, ECA, Parkland, Sliding Scale (S/S)
• What continues = Formations with Operations
• Available on www.prairiesky.com
Producing or Capable Well • Circa 1980 - 1999
• Lease Forms = 551 and variations
• What continues = to the base of the Deepest Formation capable or producing
• Available on request
Continuation Spreadsheet available on request
Q: Are there other types of Leases ????
Production Operations - Part 1
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Production Operations - Part 2
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Production Operations - Part 3
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Groups vs. Formations
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AG
E
CR
ETA
CE
OU
S
JU
RA
SS
IC
ERCB TABLE OF FORMATIONS, ALBERTA
Example of
stratigraphic
equivalents:
Bow Island/Viking/
Paddy-Cadotte
Colony/Notikewin
Upper Mannville/
Spirit River/Falher
Glauc/Cummings/
Bluesky
Sawtooth/Shaunavon/
Rock Creek
Groups versus Formations
Groups vs. Formations
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1283m
1192m
1294m
1257m
1206m
1269m
1250m 1235m
Horizontal Wells & PAUA’s
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“If a horizontal well straddles more than one Spacing Unit without common mineral
ownership at both the lessor and lessee level, then Lessee shall….. enter into a
production allocation unit agreement…”
Scenario 1: Scenario 2:
Scenario 3:
Production Operations - Part 4
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Production Operations: Example 2 - No current production
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Continuations for Producing/Capable Leases
• Very few leases of this type in primary term
• Producing or Capable Well • Circa 1980 - 1999
• Lease Forms = 551 and variations
• What continues = to the base of the deepest formation capable or producing
• Continuation Application Form is available on request by emailing [email protected] or contacting your PrairieSky Lease Administrator
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Producing/Capable - Lease Information: Part 2
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* No rental cheque required if producing
* No production requires Shut-In Well Payment
Producing/Capable – Part 3 Continuation Requested
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Offset Obligations
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PSK Fee Land Offset Well
Offset formation Producing formation http://www.fhoa.ca/
Offsets
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• Triggering wells
• 90 days of production
• drilled before or after lease date
• Lateral spacing units for older leases
• Offset Notice
• Response forms
• Well already producing from that formation
• Surrender (all non-producing formations)
• Pay Compensatory Royalties
• Separately for each offset formation
• Based on Highest Producing Offsetting Spacing Unit
• Provides additional time to drill the offset well
• Technical Review request
• Provide mapping or other evidence indicating the offset formation is not present
History of Offset (Remedy/Election) Options
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www.prairiesky.com/land-management/lease-compliance/
Options to Comply
1. Drill
1. Drill
2. Surrender
1. Drill
2. Surrender
3. Compensatory Royalty Payment
Time Line
1950
1965
1990
}
}
} Present
*Dates are approximate
Royalty Rates & Deductions
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Royalty Rates
• Majority of leases are Fixed Royalty Rates
• Sliding Scale Leases • 80% of 2009 Crown Sliding Scale Royalty Rate (no holidays)
• Minimum = 4% + Freehold Mineral Tax
• Maximum = 40%
Deductions
• Majority of leases are “No Deductions”
• For those leases that do allow deductions:
• Actual costs of facilities utilized by each well
• NOT Crown GCA
PrairieSky Lease Assignments
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• Lease Notices are addressed to Registered Lessees
• Lease Assignments versus Contractual NOA’s • Lessee registered interest not working interest or beneficial
interest • Requires PrairieSky’s execution • No Partnerships or Trustco’s • No Partial Assignments
• PrairieSky’s Assignment Agreement • Online Assignment Agreement • Recent changes to expedite Assignments
• No Longer includes the leased formations • PrairieSky may strikeout leases if
• Errors in Lease Schedules • Leases with outstanding royalty issues
• Lease Interest Clarification Agreement • Used when there is a break in chain of title • Sample agreement on our website
Contest Time
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1. What was the minimum price charged by CPR for land sold to the European settler’s?
a) $2.50/acre
b) $250/acre
c) $2.50/Ha
2. Only wells drilled after the lease date can trigger an offset obligation - True/False?
3. Which company was recently amalgamated into PrairieSky Royalty Ltd.?
a) Encana Corporation
b) Range Royalty
c) Ranger Oil & Gas Ltd.
Contest Answers
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1. What was the minimum price charged by CPR for land sold to the European settler’s?
a) $2.50/acre
b) $250/acre
c) $2.50/Ha
2. Only wells drilled after the lease date can trigger an offset obligation - True/False?
3. Which company was recently amalgamated into PrairieSky Royalty Ltd.?
a) Encana Corporation
b) Range Royalty
c) Ranger Oil & Gas Ltd.
Q & A
Questions?
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Thanks for helping us transition from Encana to PrairieSky,
&
Wishing all our lessees much success in their 2015 operations!
Thank you and…
