Lease Type Control Basefile County ~1 · 2019. 5. 6. · 01-10-247 140112.lb 01/12/15 34, 440 . 00 0 . 00 34,440.00 bonus amt - jan 2015 lease sale - ma-73273 in reeves county , tx

MF117202

Lease Type Control Basefile County

~1 Upland Fee 04-026379 073273 REEVES

Survey Watkins Strick iiiiiiiii

Block !!!!!!!!

Block Name

'1 Township

Section/Tract

Land Part

Acres Net: 11.480000 Gross: 11.480000

Depth Below Depth Above Depth Other Allow All

-7 Depths

Leasing: far,1./ Name JETTA ENERGY RESOURCES II, LLC

Lease Date 1/20/2015

Maps: ~ Primary Term 5 years

~ Bonus $34,440.00

GIS: Lease Royalty 0.25000000 2 Scan lab: Paid Up No -----

0

2

CONTENTS OF FILE NO. M- 7202 -----

1 BID FORM

2. OIL & GAS LEASE

-----------

------ -

-- ---

'lEl,;rJOR NO.: 95592

JETTA OPERATING COMPANY INC FORT WORTH, TX

VENDOR NAME: COMMISSIONER OF THE TEXAS GENERAL

VOUCHER VENDOR INV# INV DATE TOTAL

AMOUNT

DATE: 01/13/15 CHECK#: 727205

PRIOR PMTS &DISCOUNTS

NET AMOUNT

01-10-247 140112.LB 01/12/15 34,440.00 0.00 34,440.00 BONUS AMT - JAN 2015 LEASE SALE - MA-73273 IN REEVES COUNTY, TX

TOTAL INVOICES PAID 34,440.00

• • •••••• • •

••• • • • ••• •••• • • ••••

• • • •••••• • • ••• • • • •• •

PAY

JETTA OPERATI G COMPANY, l 777 Taylor Strut, Suitt Pl

Fon Wonh,Ttxas 76102

rROST NATIONAL BANK Corpus Chrisu, Texas 78411

01/13/15

1570656 6

727205

I'.' --~. PAY EXACTLY. '~' M~. - .!..-"

******34,440.00

TO THq_ ORDER OF

COMMISSIONER OF THE TEXAS GENERAL LAND OFFICE

VOID APTER 90 DAYS

. .. :.: I . ....... • • • ....

• • .... .. . . . .. • . ...... . .

1700 N CONGRESS AVE STEPHEN F AUSTIN STATE OFFICE BUILDING AUSTIN,TX 78701- 1495

11• ? 2 ? 20 5 11•


VENDOR NO. : 95592 DATE : 01/13/15 CHECK #: 727205 VENDOR NAME: COMMISSIONER OF THE TEXAS GENERAL


AMOUNT PRIOR PMTS

&DISCOUNTS NET

AMOUNT -------- -- ------ --- ---- -- ------------------------------ ---- ------------- ---- ---

01- 10 - 247 140112. LB 01/12/15 34 , 440 . 00 0 . 00 34,440.00 BONUS AMT - JAN 2015 LEASE SALE - MA- 73273 IN REEVES COUNTY , TX

TOTAL INVOICES PAI D 34 , 440 . 00

-

I (ft

'17ENDoi NO.: 95592


VENDOR NAME: COMMISSIONER OF THE TEXAS GENERAL


AMOUNT

DATE: 01/13/15 CHECK#: 727206


NET AMOUNT

01-10-246 150112.FEE 01/12/15 516.60 0.00 516.60 SALES FEE - JAN 2015 LEASE SALE - MA-73273 IN REEVES CO, TX

TOTAL INVOICES PAID 516.60

• • •••••• • •

•• • • • • ••• •••• • • ••••

• • • •••••• • • ••• • • • •• •

JETTA OPE RATI G ON!PA Y, I C. n7 Taylor Strut, Suite Pl

Fort Wonh.To:as 761 02

FROST NATIONAL BANK Corpus Chnsu, Texas 784 11

PAY

TO THE ORDER

• • • ••• • ......

( . . •••• • • .... ••• . . . . ..

. •••••• . .

FIVE HUNDRED SIXTEEN DOLLARS AND 60 CENTS

COMMISSIONER OF THE TEXAS GENERAL LAND OFFICE 1700 N CONGRESS AVE STEPHEN F AUSTIN STATE OFFICE BUILDING AUSTIN,TX 78701 - 1495

11• 7 2 7 20 E, 111

01/13/15


15706567 7272 06

{ PAY EXA

*********516 . 60

VOID AFTER 90 DAYS

VENDOR NO.: 95592 VENDOR NAME: COMMISSIONER OF THE TEXAS GENERAL

DATE : 01/ 1 3/ 15 CHECK # : 72 720 6


NET AMOUNT

------ --------- ---------------------- ------------------- ------------------------- ---VOUCHER VENDOR INV# INV DATE TOTAL

AMOUNT

516.6 0 0.00 51 6.60

SALES FEE - JAN 20 15 LEASE SALE - MA- 73 2 7 3 IN REEVES CO, TX

TOTAL INVOICES PAID

01-10 - 246 15 0112. FEE 01/12/15

5 16 .60

! i 1 l

APPUCANT AGREEMENT

APPUCANT IDENTIFICATION TO APPEAR ON LEASE (type/print)

AREA D ESCRIPTION

BID SUBMISSION

MGL. NO.

STATE OF TEXAS TAX I.D. #

SIGNATURE OF AGENT

State Lease Number

M-

January 20, 2 015

OIL AND GAS LEASE BID APPLICATION

I agree, If awarded a lease on the referenced tract, to comply with all terms and conditions of said lease and with all appllcable laws that so govern said

~ . ••• # •• .

lease, and as those laws may be amended. • • •

N•"'"'- ,fe.Het !:~u,1'1 f esoi<,vces ff!_ _ ll-t _ : .::: · A<'Oa:>s: ~ t !wt tii l c' 'i b lowe-v t: ·z 11 f.ut lvk 91.eef' {(.{ I ( : I Cltl'..;. r;.,+ Vv'ovth _ _s_@te: ( \ Zio: '7(910~ r : ... :.

Ul'l "l'"'C \l'1j (Includet4Code) : :·: Telephone: Co ...!.....}_"') '5 J - _ , • •

CouotvOesl: Bll.Vt 5 _ _Swvevifilea: fl-n1<J- ~tklhS (If Applicable)

~k/Tso.: scctlonCTraet: Acre$~ l\ L\-t (If Applicable)

(A) Bonus Amount !\ ~D CU 1h I viu -tJwv rhvl-ts~ Thltv ,\ Vvkclvevl £\' 'fuv~ c{p l lwr) 4 °°/t io

(type/prtnt~bove)

(B) Sales Fee Amount ($) Si l.o ~o _five- ~v.,vtilvcol OM.,vl )\ ~te-tilA ,{o((a,1.;s q ~ft oo_ (type/prtnl above)

This Sales Fee Is 1 V2% of the cash bonus as provided In Section 32.110 of the Natural Resources Code as amended.

APPLICANT NAME

f i~tt fuu.. J~sol,(NCeS 'ff[ J LL c (same as abov I

(must be an 11-dlglt number)

(slgna~wj;f [&C,WW.. ~Ut ve tt flLMAv{w-

(type/prtnt name)

BONUS AMOUNT ONLY ( A) (.Q.2. NQ.t Include sales fee) L S

7 _

ill.. 3~, 44.o oo _ 06sss

ls1oss 67

i-,1 SJ

.. . . .. . . ···· .... · • . . . . ' :

• . . . . . . . . ..

J C, l

l u,c l•orm Re, l,td I 0'99 <.unc.ttd chool I ind

ustin, m:e ~ ns

Oil "o c. ,., 1 r ""r '\() M 11 7101

\\ 11 CR! \ ', pu11W1nl 10 the Tc~as Naiural Resources CoJc Chap1crs 32, 33, SI, and Oiaplcr 52, Sut>chaptcn A·D and ll, (said Code being hereinafter referred 10 a N RC ), and subJC<I 10 all rule ind rc~ul111ons proinul111cd bv 1hc Comm1u1011er of 1he General Land OOice and or the School l Jind Board p11nuan1 1hcrc10, and 111 c,1hcr applicable s1a1u1i,s and amc,ndmcnls 10 SJ11d N R C 1hc lollo,.inp area. 10-w11

\11 0 1 Tl l f ',TR I( h. \ \ \11,.II\', <,1 1nc, . Ill I \ I C., COi ",T\, T f\\',, C 0,1 \l'\I ",(. \Pl'RO\li\l.\TI'' 1148 A( Rl'i, , .. C., 110\\', o, T i ii 01 fl(l,\L ,\I\P 0 1 ltl L\ I· ', (Ol , 1', TE\ , ..,',()\\ Q', Fil r I', 111[ 11 \ , ... C,LMltAI l ,\',I) ()111( I , /\l ', 111', 11 \ , ....

wa, after being dul) advcn,sed ollcrcd for lea on 1he 20" d•> of J1nu11') , 201 ~. 11 10 00 o'ch.c~ 1 in, b) 1h, Comrn1ss1oner of 1hc (1cner1I I 111d Ofltcc ot 1he S1a1c of Tc.a, and 1he School Land Board of 1hc S1a1c of Tcxu, lor 1hc sole and onl) purpo ;c of pro peeling and dnlhng for and productng 011 ind/or gas 1ha1 m1) be lound and produced frorn 1hc 1bo,c dcscnbed area and

\\ Ill Rl ', after all bids and rcm111ancc< .. 111ch "rrc received up 10 Yid 11me ha,c bt-cn duh con 1dcccd b\ 1hc Comm, ,oner of 1he General Land Oflicc and lht School Land Board 11 a regular mccunp 1hereot in the General Land Ofltct on lh< 101 da, of J1nu1ry, 201~. hcrcmahcr 1hl cllrcu,c da1c and 11 ,.a, f ""'d ind dclcrmmcd 1ha1 J I fT l I RG\ RI ',Ol RCI ', 111, I l C wh<»c: addms IS I ORT \\ ORl II C I l ll l 0 \\ l R, 777 1 \\ l OR ', TRI l.T , Sl I Tl. Pl. I OR I \\ OR TII, TC\\', 76102 had oflcrcd lhc high ~ ,db. 1 btd f lfl lea cf lh aru above de nbcd and 1 1hcrtlort, cn111lcd le rt~< ,i I It 1hcrw

"-0\\ , 111 £ Rf fORI I, George P Bush. Cornmm,oncr of 1hc Gcrttr1I Land Office of 1hc S111c of 1 cxu, hereinafter so ,au, ic of erred 1.:1 as ·wsor: "hose Id I A1111tn, 1.-u, b) ,,nuc of 1h au1hort1) ,1.11ed tn me and III cons1dcrn11on of 1he paymenl b) 1he hereinafter dcs1111111ed l..euec:, the sum of Thirt) -f our I houu nd I our llundrt"d f orl) .\nd 00 100 Ooll1n (SJ4,4J0.00). rcu:1p1 of .. tuch 15 hereby ackno,. lcd d ind of 1hc ro)all1es, co,enan1$, s11pul11tons ind cond11tons con1a111cd 11.l hc,tb) apced 10 be paid, otisentd a, J p,.rformed b> Leuec, d,, h.oreb) demi , gn,n1, lease and let unto the above mcnuoned bidder 1hc e<clus1ve nghl 10 prospc<:I lor prod.ice and 1uc 011 ind ur g.u from 1hc 110,esard area upon the follo,.ine 1errns and t;.>nd11to, IO·WII

I. RI Sl R\ \ no, · here ,s hcrebi c\ccptcd ind rcscr,ed 10 wsor 1hc full use of the propcn, CO\'cred hcrcb, ind all ngh1s ,.,,h rcJpecl 10 1hc surlace and wbsurflCC 1hcrcof for an) and •II p ·l' c.c p1 1h, ;c pan1ed, and 10 1hc e\lcn1 hcrcm ,ran1cd 10 ussce. 1hc nghl 10 JlllOI 1h1rd panics 1ct1m1c groph)stal and gcolo1tt<al pcrmus and 10 enter rn10 01her agrccmcnls \\1lh 1hud pan, , "hteh all""' such 1h1rd panics 10 conducl ~h>11al, gcololl'cal or 1ctsm1c 1urveV1 on, O\'Cf, under, 1hroogh and across lhc land cO\'Cred herein dunng the 1crm ol 1h11 lcuc, and 1hc ngh1s ol 1n~ and egress and use ol aa,d lands b, Lnsor and 111 m,ncnl lcssccs tor purposes ot cxplonng tor and producms the mincnls ,.hl('b arc no1 rovered, or ,.h,ch rnai nor be co,ered ,n 1hc fu1urc, under 1hc 1enns of 1his lease, but "h,ch ma, be located "11hm 1hc surface boWICbncs ot 1hc leased area All ol 1hc ngh1s mind 10 1hc lcaJCd premises retained b, Lessor and 111 c,f 1he nghls in and 10 1hc lca\Cd premises grun1cd 10 l.nsce herein shall be c,cmsed in su,;h I manner 1ha1 nenhcr shlll unduh 1n1e1tcrc "tth lhc opcnu,ons of 1hc other

2. Tl R'I S11bJcc110 tltt other provis,om hereat, 1h11 lease shall be tor a 1errn ol fh r (~I Han from 1hc eflcctove dale hereof (hcrem ailed "prtmlll'\ term") and as Ion 1hcrcaftcr as 011 or

r .Ju cd , Pl""' q .an111,cs from said area

J. l)l l ,\ \ RL '\TA Ll, II no "ell ,s commenced on 1hc land ltereby lused on or before lltt anno\'Cfllf) date of this lease, 1h1 ler~ 1hall 1crmmn1e a 10 both panics unless 1hc lnscc on or bcfo1c .aid dale hall pa) or lender,., the Comm1ss1oncr o l 1ltt General Land Olhcc ol lhc ~1a1c ot le,u II Allllln, l cxas, lhc 1 ~ ,1111 ipcc1hcJ 11. It c lt1llo"'"B Khedule mul11phcd b) 1hc number of acres 10 the prcm,-. which shall operate 111 ren1al and co,cr 1hc pn,1lege of ddcmna 1ltt com111c11<cmen1 of 1 "ell f,.r n<tht ( 12) mon1h, from Slltd diole In hl e manner and upon paymen11 or 1endc11 of arnoums set oul m 1hc lollo"''"I s<l,edule, 1hc cornmcnccmcnt of• ,.,11 rnl) be funhcr deferred for I hlc pcnod of tit< .am< nu"Tibcr ol monlhs

Anut\CfW> D;11c IxJI) Rcotli D<1 At.cc hrs1 S 5 00 Second S S 00 l1urd S '.000 00 t oonh SSOO

4 PltODl Cl 10'1 RO\ LTIC L'pon produc11on of oil and/or gas, 1he ~c •srccs 10 pa, or cause to be paid 10 1hc Comm1ss1oncr ol 1hc General Land Olhcc in Au'1m, Tc,u, lor the 11 .. artJ bcncfil of the S1a1c of TC\&> dunng 1hc lerm hcrwf

(A ) Oil Ai a ro)ah, on 011, "hich 15 defined as mcludmg all h)drocarbons produced m I hqu1d form al 1hc mou1h of lht "ell and also all condcnsa1c, d1s11llatc, and Olhcr hqu1d hydrocarbon reco,ered from 011 or gH run 1hrough I cp1ra1or or 01hcr cq111pmen1, u hcrcmaftcr prO\lded 114 pan ol 1hc gross produc11on or 1he matkcl ,11luc 1hcrcol, al 1he op11on of 1he Lcuor, such \'llue 10 br dc1crmmcd b) I) 1hc ht[lhC51 po~led pncc, plus prenuum, 11 an), ollcreJ or pa,d for 011, rnndcnutc, dis11lla1c, or 01hcr hqu1d h)drocarbons, rcspc,;11vcl), of I h~e 1ypc and gr1\II) m lhc general area where produted ind "hen run, or 2) 1hc h1ghes1 markcl pncc !hereof ollered or paid in 1hc general area "here produced and "hen run or 3) 1he gross proceeds of 1hc Slllt 1hcrcof, -..h,chcvcr 11 1hc ll•caler Lessee 1grecs 1ha1 before In) 8'" produced lrvm the land hcrcl>) lca .. d II sold, used or proccucd m I plant, 11 ,.,11 be run free of cost 10 Lessor 1hroush an adequate 011 and ps .. panuor of convcn11onlll l\'J'C or other cqutpmcnl 11 least I\ ell1c1cn1 10 1hc end 1ha1111 hqu,d h,drocarhons rero>erablc from lhc i:a b\ such mc.tns \\tll btrccmcred L1pon ,.rmcn consent of l cssor, 11~ rcqu1remcn11ha11och gu be run 1hro11~h su,;h I separator or other cqu1pmcn1 m1\ be """cd upon such 1crrns aad cond111ons u prcscnbcd b~ Lessor

(0) ',Q'\ PRO( [ S',tD G.\ As I roy•h> on an) gas (mdud1ng Oared gas), .,.h,ch is defined u 111 h)drocarboru and µscous 1ubs1anccs nOI def med u otl 1n subparlgraph (A) abov,e, prod ,c,:d Ir ,man, "ell "".atd land (e\Ctltl u provided hcrcm w11h rcspc<l 10 i;:n processed m I plant lor lhc u1rac11on nf guohne, liquid h\'drocarbon1 or other products) I 4 par1 of 1he poss produ,1,on or 1hc markcl ,aluc !hereof, a11hc op11on of lltt LCSSOf, ,uch ,aluc 10 be based on 1hc h1ghell marl.cl pncc pa,d or ollcred tor gas of comparable quahl) m 1hc general arc1 "'here produced and "hen run, or 1he gross pr...-:c: patd or ollcrcd 10 lhc producer, ... h,chcver II grnta provided 1ha11hc ma>1n n, pressure base m 1ncasunns 1hc ps under 1h1s lease conlTICI shall 110111 an) 11mc C\Cccd 14 bS pounds per square inch absolulc, and the s1and.ard base 1empcra1urc shall be'"'> (601 deg,c.. ~ahrcnhc11, conttlton 10 be made for pressure 1"ortbn110 Boyle's La", and lor spcetfic gra,m ~cc-ording 10 1cs1 made b, 1hc Balance Mcrl>Od or b) 1hc mos1 aµprovcd method of 1cs1tn~ b. .. 11,; used b) 1hc 1ndustn 111hc umc 01 1cstm1

gas attributable to gas produced from this lease, and on fifty percent (50%) or that percent accruing to Lessee, whichever is the greater, of the total plant production of liquid hydrocarbons. attributable to the gas produced from this lease; provided that if liquid hydrocarbons are recovered from gas processed in a plant in which Lessee (or its parent, subsidiary or affiliate) owns an interest, then the percentage applicable to liquid hydrocarbons shall be fifty percent (50%) or the highest percent accruing to a third party processing gas through such plant under a processing agreement negotiated at anns' Jength (or if there is no such third party. the highest percent then being specified in processing agreements or contracts in the industry), whichever is the greater. The respective royalties on residue gas and on liquid hydrocarbons shall be determined by 1) the highest markel price paid or offered for any gas (or liquid hydrocarbons) of comparable quality in the general area or 2) the gross price paid or offered for such residue gas (or the weighted average gross selling price for the respective grades of liquid hydrocarbons), whichever is the greater. In no event, however, shall the royalties payable under this paragraph be less than the royalties which would have been due had the gas not been processed.

(D) OTHER PRODUCTS: As a royalty on carbon black, sulphur or any other products produced or manufactured from gas (excepting liquid hydrocarbons) whether said gas be "casingheadt "dry" or any other gas, by fractionating, burning or any other processing, 1/4 part of gross production of such products, or 1he market value thereof, at the option of Lessor, such market value to be determined as follows:

(I) On the basis of the highest market price of each product, during the same momh in which such produc! is produced, or (2) On the basis of tlie average gross sale price of each product for the same month in which such products are produced; whichever is the greater.

(E) NO DEDUCTIONS: Lessee agrees that all royalties accruing to Lessor under this lease shall be without deduction for the cost of producing, transporting, and otherwise making the oil, gas and other products produced hereunder ready for sale or use.

(F) ROYALTY I!'J KIND: Notwithstanding anything contained herein to the contrary, Lessor may, at its option. upon not less than 60 days notice to Lessee, require at any time or from time to time that payment of all or any royalties accruing to Lessor under this lease be made in kind without deduction for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transponing and otherwise making the oil, gas and other products produced hereunder ready for sale or use. Lessor's right to take its royalty in kind shall not diminish or negate Lessor's rights or Lessee's obligations, whether express or implied, under this lease. ·

(G) PLANT FUEL AND RECYCLED GAS: No royalty shall be payable on any gas as may represent this lease's proportionate share of any fuel used 10 process gas produced hereunder in any processing plant. Notwithstanding anything contained herein to the contrary, and subjecl 10 the consent in wri!ing of the Commissioner of the General Land Office, Lessee may recycle gas for gas lift purposes on the leased premises after the liquid hydrocarbons contained in the gas have been removed, and no royalties shall be payable on the gas so recycled until such time as the same may thereafter be produced and sold or used by Lessee in such manner as to entitle Lessor to a royalty thereon under the royalty provisions of this lease.

(H) rt1INIMUM ROY ALT\': During any year after the expiration of the primary tenn of this lease, if this lease is maintained by production, the royalties paid to Lessor in no event shall be less than an amount equal to $5.00 per acre; otherwise, there shall be due and payable on or before the last day of the month succeeding the anniversary date of this lease a sum equal to $5.00 per acre less the amount of royalties paid during the preceding year.

(I) MARGINAL PRODUCTION ROYALTY: Upon Lessee's written application, tl1e School Land Board may reduce 1he royalty rate ser out in this paragraph and/or the minimum royalty set out in subparagraph 4 (I) to extend the economic life of this lease and encourage recovery of oil or gas that might otherwise remain unrecovered. Any such royalty reduction must conform to the requirements of any School Land Board administrative rules on this subject Royalty may not be reduced below the applicable statutory minimum.

5. ROYAL TY PA Yl\1ENTS AND REPORTS: All royalties not taken in kind shall be paid to the Commissioner of the General Land Office at Austin, Texas, in the following manner: Payment ofroyal!y on production of oil and gas shall be as provided in the rules set fonh in the Texas Register. Rules currently provide that royalty on oil is due and must be received in the

General Land Office on or before the 5th day of the second month succeeding the month of production, and royalty on gas is due and must be received in the General Land Office on or before the 15th day of the second month succeeding the month of production, accompanied by the affidavit of the owner, manager or other authorized agent, completed in the form and manner prescribed by the General Land Office and showing the gross amount and disposition of all oil and gas produced and the market value of the oil and gas, together with a copy of all documents, records or repons conflnning the gross production, disposition and market value including gas meter readings, pipeline receipts, gas line receipts and other checks or memoranda of amount produced and put into pipelines, tanks, or pools and gas lines or gas storage, and any other repons or records which the General Land Office may require to verify the gross production, disposition and market value. In all cases the authority of a manager or agent to act for the Lessee herein must be filed in the General Land Office. Each royalty payment shall be accompanied by a check stub, schedule, summary or other remittance advice showing by the assigned General Land Office lease number the amount of royalty being paid on each lease. If Lessee pays his royalty on or before thirty (30) days after the royalty payment was due, then Lessee owes a penalty of 5% on the royalty or $25.00, whichever is greater. A royalty payment which is over thirty {30) days late shall accrue a penalty of 10% of the royalty due or $25.00 whichever is greater. In addition to a penalty, royalties shall accrue interest al a ra!e of 12% per year; such interesl will begin accruing when the royalty is sixty (60) days overdue. Affidavits and supponing documents which are not filed when due shall incur a penalty in an amount set by the General Land Office administrative rule which is effective on the date when the affidavits or supponing documents were due. The Lessee shall bear all responsibility for paying or causing royalties to be paid as prescribed by the due date provided herein. Payment of the delinquency penalty shall in no way operate to prohibit the State's right of forfeiture as provided by law nor act to postpone the date on which royalties were originally due. The above penalty provisions shall not apply in cases oflitle dispute as 10 the State's portion of the royalty or to that ponion of the royalty in dispute as to fair market value.

6. (A) RESERVES, CONTR.\CTS AND OTHER RECORDS: Lessee shall annually furnish the Commissioner of the General Land Office with its best possible estimate of oil and gas reserves underlying this lease or allocable to this lease and shall furnish said Commissioner with copies of all contracts under which gas is sold or processed and all subsequent agreements and amendments 10 such contracts within thirty (30) days after entering into or making such contracts. agreements or amendments. Such contracts and agreements when received by the General Land Office shall be held in confidence by the General Land Office unless otherwise authorized by Lessee. All other contracts and records pertaining to the production, transportation, sale and marketing of the oil and gas produced on said premises, including the books and accounts., receipts and discharges of all wells, lanks, pools, meters, and pipelines shall at all times be subject to inspection and examination by the Commissioner of the General Land Office, the Attorney General, the Governor, or the representative of any oflhem. ·

(BJ DRILLING RECORDS: Written notice of all operations on this lease shall be submitted to the Commissioner of the General Land Office by Lessee or operator five (5) days before spud date, workover, re-entry, lemporary abandonment or plug and abandonment of any well or wells. Such written notice to the General Land Office shall include copies of Railroad Commission fonns for application to drill. Copies of well tests., completion reports and plugging reports shall be supplied to the General Land Office at the time they are filed with the Texas Railroad Commission. Lessee shall supply the General Land Office with any records, memoranda. accounts, reports, cuttings and cores, or other infonnation relative to the operation of the above-described premises, which may be requested by the General Land Office, in addition to those herein expressly provided for. Lessee shall have an electrical and/or radioactivity survey made on the bore-hole section, from the base of the surface casing to !he total depth of well, of all wells drilled on the above described premises and shall transmit a true copy of the Jog of each survey on each well to the General Land Office within fifteen (15) days after the making of said survey.

(C) PENALTIES: Lessee shall incur a penalty wheneverrepons, documents or other materials are not filed in the General Land Office when due. The penalty for late filing shall be set by the General Land Office administrative rule which is effective on the date when the materials were due in the General Land Office.

7. RETAINED ACREAGE: Notwithstanding any provision of this lease to the contrary, after a well producing or capable of producing oil or gas has been completed on the leased premises, Lessee shall exercise the diligence of a reasonably prudent operator in drilling such additional well or wells as may be reasonably necessary for tl1e proper development of the leased premises and in marketing the production thereon.

(A) VERTICAL: In the event this lease is in force and effect two (2) years after lhe expiration dale of the primary or extended term it shall then terminate as to all of the leased premises, EXCEPT (I) 40 acres surrounding each oil well capable of producing in paying quantilies and 320 acres surrounding each gas well capable of producing in paying quantities (including a shut-in oil or gas well as provided in Paragraph 11 hereof), or a well upon which Lessee is then engaged in continuous. drilling or reworking operations. or (2) the number of acres included in a producing pooled unit pursuan1 to Natural Resources Code Sections 52.151-52.153, or (3) such greater or lesser number of acres as may then be allocated for production purposes to a proration unit for each such producing well under the rules and regulations of the Railroad Commission of Texas., or any successor agency, or other governmental authority having jurisdiction. Within 90 days of a partial tennination of this lease in accordance with this subparagraph and upon paymenl of the minimum filing fee set by General Land Office rules in effect at the time of the panial lennination, Lessee shall have the right to obtain a surface lease for ingress and egress on and across the terminated ponion of the leased premises as may be reasonably necessary for the continued operation of the portions of the lease remaining in force and effect. If Lessee fails to apply for a surface lease within the 90 day period specified above, Lessee may app!y for a surface lease from tl1e Land Office, but the Land Commissioner has the discretion to grant or deny such application and to set the fee for such surface lease.

2

(B) HORIZONTAL: In the event this lease is in force and effect two (2) years after the expiration date of the primary or extended term ii shall funher termina1e as 10 all depths below 100 feet below the total depth dril!ed (hereinafter "deeper depths") in each well located on acreage retained in Paragraph 7 (A) above. unless on or before two (2) years afler the primary or extended lenn Lessee pays an amount equal lo one-ha!f(l/2) of the bonus original!y paid as consideration for this lease (as specified on page I hereof). If such amount is paid, this lease shall be in force and effect as to such deeper depths, and said tennination shall be delayed for an addmonal period of two (2) years and so long thereafter as oil or gas is produced in paying quantities from such deeper depths covered by this lease

(C) IDENTIFICATIOS A!'i'D FILl~G: The surface acreage retained hereunder as to each well shall, 11s nearly as practical, be in the form ofa square with the well located in the center thereof, or such other shape as may be 11pproved by the School Land Board. Within thiny (JO) days after panial tennination of this lease as provided herein, Lessee shall execute and record a release or releases containing a satisfactory legal description of the acreage and/or depths not retained hereunder. The recorded release, or a cenified copy of same, shall be filed in the General Land Office, accompanied by the filing fee prescribed by the General Land Office rules in effect on the date the release is filed. If Lessee fails or refuses to execute and record such release or rclease-s withm ninety (90) days after being requested 10 do so by the General Land Office, then the Comm1ss1oner at his sole discretion may des1gna1e by wntten instrument the acreage and.'or depths to be released hereunder and record such instrument at Lessee's expense in the county or counties where the lease is located and in the official records of the General Land Office and such dcs1gnaf1on shall be bindmg upon Lessee for all purposes. If at any time after the effective date of the panial tennmation provisions hereof, !he applicable field rules are changed or the well or wells located thereon are reclassified so that less acreage is thereafter allocated to said well or wells for production purposes, this lease shall thereupon tennma!e as to all acreage not thereaflcr allocated to said well or wells for produc1ion purposes.

8. OFFSET \\'ELLS: If oil and/or gas shou!d be produced in commercial quantities from a well loca1ed on land priva1ely owned or on Siale land leased at a lesser royalty, which we!J is withm one thousand (l ,000) feet of the area included herein, or which well is drammg the area covered by this lease, the Lessee shall, wnhm sixty (60) days after such 1mt1al production from ihe drain mg well or the well located within one thousand (l,000) feel from the area covered by this lease bcgm in good faith and prosecute diligen1ly the dnllmg of an offset well on the area covered by this lease, and such offset well shall be drilled to such depth as may be necessary to prevent the undue dramage of the area covered by this lease, and the Lessee, manager or driller shalt use all means necessary in a good faith cffon to make such offset well produce oil and/or gas in commercial quantities. Only upon the detenmnat1on of the Commissioner and w11h his ..,,rinen approval, may the payment of a compensa1ory royalty satisfy the obligation to drill an offset well or welts required under this Paragraph.

9. DRY HOLE/CESSATIO~ OF PRODUCTION Dl!RING PRl!\fARY TER!\f: If. during the primary Tenn hereof and prior to discovery and production of oil or gas on said land, Lessee should drill a dry hole or holes thereon, or if during the primary term hereof and after the discovery and actual production of oil or gas from the leased premises such production thereof should cease from any cause, this lease shall not 1ennmate if on or before the expiration of sixty (60) days from date of compleiion of said dry hole or cessation of production Lessee commences addl!Lonal drilling or reworkmg operauons thereon, or pays or tenders the next annual delay rental in the same manner as provided in this lease. If, dunng the last year of the primary tenn or w1thm sixty (60) days prior thereto, a dry hole be completed and abandoned. or 1he production of oil or gas should cease for any cause, Lessec:'s rights shall remam in full force and effect without further operations until the expiralion of the primary term; and if Lessee has not resumed production in paymg quantities at the expiration of the pnmary lcnn, Lessee may mamtain this lease by conducting additional drilling or reworking operations pursuant to Paragraph 10, using the expira11on of the pnmary term as the date of cessation of production under Paragraph 10. Should the first well or any subsequenl well drilled on the above described land be completed as a shut-in oil or gas well wilhin the primary term hereof, Lessee may rc:sume payment of the annual rental in the same manner as provided herein on or before the rental paying date followmg the expiration of sixty (60) days from the da!e of completion of such shut-in oil or {!SS well and upon the failure to make such payment, this lease shall ipso facto tenninate If at the expiration of the pnrnary term or any time thereafter a shut-in oil or gas we!\ is located on the leased premises payments may be made 111 accordance with the shut-in provisions hereof.

10. CESSATIO'°, DRILLl~G. ASD R[\\'ORKJSG: If, after tl1e expiration of the primary tcnn. production of oil or gas from !he leased premises, after once obtamed. should cease from any cause, this lease shall not tennmate if Lessee commences addi1ional dnl!ing or reworkmg operations 1A1thm six1y (60) days after such cessation, and this tease shall remain in full force and effect for so long as such operatmns continue in good faith and in workmanlike manner without interruptions totaling more than sixty (60) days If such drillmg or reworking operat1onS result 1n the produc1ion of oil or gas, the lease shat! remain in full force and effect for so long as oil or gas is produced from the leased premises m paymg quantities or payment of shut-in oil or gas well royalties or payment of compensatory royalties is made as provided herein or as provided by law. lfthe dn!lmg or reworking operations result in the completion of a well as a dry hole, the lease will not terminate if the Lessee commences adduional drilling or reworking operations within sixty (60) days after the completion of the well as a dry hole, and this lease shall remain in effect so long as Lessee contmues drill mg or rcworkmg operations in good faith and in a workmanlike manner without interruptions totaling more than sixty (60) days Lessee shall give wntten notice 10 the General Land Office wilhin thiny (JO) days of any cessation of production.

11. SHUT-JS ROYALTIES: For purposes of this paragraph, "weir means any well that has been assigned a well number by the state agency having jurisd1ction over the production of 011 and gas. If al any time after the exp1ra!1on of the primary term of a lease thal, until being shut in, was being maintained in force and effect, a we11 capable of producing oil or gas in paying quantities is located on the leased premises, but oil or gas is not being produced for lack of suitable produc!10n facihtics or lack of a suitable market, then Lessee may pay as a shut-in oil or gas royalty an amount equal to SJ0.00 per acre, but not less than Sl,200 a year for each well capable of producing oil orgasm paying quantities. To be effective, each initial shut-in oil or gas royalty must be paid on or before: ( 1) the expira11on of the primary term, (2) 60 days after the Lessee ceases 10 produce oil or gas from the leased premises, or (3) 60 days after Lessee completes a drilling or reworking operation in accordance with the lease provisions; whichever date is latest. If the shu1-in 0tl or gas royalty is paid, the lease shall be considered to be a producing lease and lhe payment shalt ex!end the term of the lease for a period of one year from !he end of the primary tenn, or from the first day of the month following the month m which production ceased, and, after that, if no suitable producuon facilities or suitable market for the oil or gas exists, Lessee may extend the lease for four more successive periods of one (I) year by paymg the same amount each year on or before the expiration of each shu1-in year

12. C0:\1PENSATORY ROYAL TIES: If, during the period the lease is kept in effect by payment of the shut-in oil or gas royalty, oil or gas is sold and delivered in paying quantities from a well located within one thousand (1,000) feet of the leased premises and completed in the same producing reservoir, or in any case in which drainage is occurring, the right to contmue to maintain the lease by paying the shut-in oil or gas royalty shall cease, but the lease shat[ remain effcclive for the remainder of lhe year for which the royalty has been paid. The Lessee may maintain the lease for four more successive years by Lessee paying compensatory royalty al the royalty rate provided in lhe lease of the market value of production from the well causing the drainage or which is completed m the same producmg reservoir and within one thousand (J,000) feet of the leased premises. 1l1e compensatory royalty is to be paid monthly to the Commissioner begmnmg on or before the last day of the month followmg the month in which the 01\ or gas LS produced from lhe well causing the dramage or that is completed m the same producmg reservoir and located withm one thousand (1,000) feet of the leased premises, if the compensatory royalty paid in any 12-month period is in an amount less than the annual shut-m Oil or gas royalty, Lessee shall pay an 11mount equal to the difference within th1ny (JO) days from the end of the 12-month period; and none of these pro\flsions will relieve Lessee of the obhgat1on of reasonable development nor lhe obligation to drill offsel wells as provided in N.R.C. Section 52.034; however, at the dc1ennination of the Commissioner, and with the Commissioner's y,Tiflen approval, the payment of compensatory royalties shall satisfy the obligation 10 dri!l offset wells Compensatory royalty payments which are no! timely paid will accrue penally and interest in accordance with Paragraph S of1h1s lease

13. EXTEl\"SIO~S: If, at the exp1rat1on of 1he pnmary term of this lease, production of oil or gas has not been ob1amed on the leased premises but dnllmg operations are being conducted thereon m good faith and in a good and workmanlike manner, Lessee may, on or before the expiration ofthe pnmary tenn, file m the General Land Office wntten app!ica11on 10 the Commissioner of the General Land Office for a thiny (30) day extension of this lease, accompanied by payment of Three Thousand Dollars ($3,000 00) if this lease covers six hundred forty (640) acres or less and Six Thousand Dollars (S6,000.00) if 1his lease covers more than six hundred fony (640) acres and the Commissioner shall, in writing, extend this lease for a tlllrty (JO) day period from and after the expiration of the primary tenn and so long thereafter as oil or gas is produced in paying quantities; provided funher, that Lessee may, so long as such drilling operations are being conducted make like application and payment during any thirty (30) day extended period for an additional extension of thirty (30) days and, upon receipt of such application and payment, the Commissioner shall, in wntmg, agam extend this lease so that same shall remain in force for such addiuonal thirty (30) day period and so long thereafter as oil or gas is produced in paying quanuues; pro\flded. however, that this lease shalt no! be extended for more than a total of three hundred ninety (390) days from and after lhe expiration of the primary tenn unless production in paymg quantities has been obtained

14. l"SE OF \\'ATER; Sl'RFACE: Lessee shall have the right 10 use water produced on ~id land neces..-.ary for operations hereunder and solely upon the leased premises; pro\idcd, however, Lessee shall not use potable water or water suitable for livestock or irrigation purposes for water flood operations without the prior wrinen consent of Lessor. Subject to its obligation to pay surface damages, Lessee shall have the right to use so much of the surface of 1he land that may be reasonably necessary for drilling and operating wells and transponmg and marketmg the production therefrom, such use to be conducted under conditions of least injury to lhe surface of the land. Lessee shall pay surface damages in an amount sci by the General Land Office fee schedule which is effective on the date when the activity requiring the payment of surface damages occurs

I~- POLLl'TIO~: In developmg this area, Lessee shall use the highest degree of care and all proper safeguards to prevent pollution \.\11thout hmiting the foregoing. pollution of coas1al wetlands, narural wa1erways, nvers and impounded water shall be prevcn1cd by the use of contamment facilities sufficient to prc\lcnt spillage, seepage or ground water contamma!ion In the even! of po!!ut10n, Lessee shalt use a!t means al us disposal 10 recapture all escaped hydrocarbons or other pollutant and shall be responsible for all damage 10 pl1bhc and pn\·ate propenies

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(A) UPLANDS: Lessee shall build and maintain fences around its slush, sump, and drainage pits and tank batteries so as to protect livestock against loss, damage or injury; and upon completion or abandonment of any well or wells, Lessee shall fill and level au slush pits and cellars and completely clean up the drilling site of all rubbish thereon.

(B) SCBMERGED LANDS: No discharge of solid waste or garbage shall be allowed into State waters from any drilling or support vessels, production platfonn, crew or supply boat, barge.jack-up rig or ocher equipmem located on the leased area. Solid waste shall include but shall nol be limited to containers, equipment, rubbish, plastic, glass, and any other man-made non· biodegradable items. A sib>n must be displayed in a high traffic area on all vessels and manned platfonns stating, nDischarge of any solid waste or garbage into State Waters from vessels or platfonns is strictly prohibited and may subject a State of Texas lease to forfeiture." Such statement shall be in lellering of ai least I" in size.

(C) RIVERS: To the extent necessary to prevenl pollution, the provisions found in subsections (a) and (b) of this paragraph shall also apply to rivers and riverbeds.

(D) PENAL TY: Failure to comply with the requirements of this provision may result in the maximum penalty allowed by law including forfeiture of1he lease. Lessee shall be liable for the damages caused by such failure and any costs and expenses incurred in cleaning areas affected by the discharged waste.

16. IDE1''TIFICATION J\1ARKERS: Lessee shall erect, at a distance not to exceed twenty·fivc (25) feet from each well on the premises covered by this lease, a legible sign on which shall be stated the name of 1he operator, the lease designation and the well number. Where two or more wells on the same lease or where wells on two or more leases are connected to the same tank battery, whether by individual flow line connections direct to the tank or tanks or by use of a multiple header system, each line between each well and such lank or header shall be legibly identified at all times, either by a firmly attached 1ag or plate or an identification properly painted on such line at a distance no! to exceed three (3) feet from such tank or header connection. Said signs, tags, plates or other identification markers shall be maintained in a legible condition throughout the term of this lease.

17. ASSJGNI\IE!'iTS: The lease may be transferred at any rime; provided, however, that the liability of the transferor.lo properly discharge its obligation under the lease, including properly plugging abandoned wells, removing plaiforms or pipelines, or remedia1ion of contamination at drill sites shall pass 10 the transferee upon the prior ""Titten consent of the Commissioner of the General Land Office. The Commissioner may require the transferee to demonstra!e financial responsibility and may require a bond or other security. All transfers must reference the lease by the file munbCf" and must be recorded in the county where the area is located, and the recorded transfer or a copy certified to by the County Clerk of the county where the transfer is recorded must be filed in tl1e General Land Office within ninety (90) days of the execution date, as provided by N.R.C. Section 52.026, accompanied by the filing fee prescribed by the General Land Office rules in effect on the date of receipl by the General Land Office of such transfer or cenified copy thereof. Every transferee shall succeed to all rights and be subject to all obligations, liabilities, and penalties owed to the State by the original lessee or any prior transferee of the lease, including any liabilities to the state for unpaid royalties.

18. RELEASES: Lessee may relinquish the rights granted hereunder to the State at any time by recording the relinquishment in the cow,ty where this area is situated and filing the recorded relinquishment or cenified copy of same in the General Land Office within ninety (90) days after its execution accompanied by the filing fee prescribed by the General Land Office rules in effect on the date of receipt by the General Land Office or such relinquishment or certified copy thereof. Such relinquishment will not have the effect of releasing Lessee from any liability theretofore accrued in favor of the State.

19. LIEN: In accordance with N.R.C. Section 52.136, the State shall have a first lien upon all oil and gas produced from the area covered by this lease to secure payment of all unpaid royalty and other sums of money that may become due under this lease. By acceptance of this lease. Lessee grants the State, in addition to the lien provided by N.R.C. Section 52.136 and any other applicable statutory lien, an express contractual lien on and security interest in all leased minerals in and extracted from the leased premises, all proceeds which may accrue to Lessee from the sale of such leased minerals, whether such proceeds arc held by Lessee or by a third party, and all fixtures on and improvements to the leased premises used in connection with the production or processing of such leased minerals in order 10 secure the payment of all royalties or other amounts due or 10 become due under I his lease and to secure payment of any damages or loss that Lessor may suffer by reason of Lessee's breach of any covenant or condition of 1his lease, whether express or implied. This lien and security interest may be foreclosed with or without court proceedings in the manner provided in the Title 1, Chapter 9 of the Texas Business and Commerce Code. Lessee agrees that the Commissioner may require Lessee to execute and record such instruments as may be reasonably necessary to acknowledge, attach or perfect this lien. Lessee hereby represents that !here arc no prior or superior liens arising from and relating to Lessee's activities upon the above--described propeny or from Lessee's acquisition of this lease. Should the Commissioner at any time detcnnine that this representation is not true, then tl1e Commissioner may declare this lease forfeited as provided herein.

20. FORFEITURE: If Lessee shall fail or refuse to make the payment of any sum within thirty (30) days after it becomes due, or if lessee or an authorized agent should knowingly make any false rerum or false repon concerning production or dri11ing, or if Lessee shall fail or refuse to drill any offset well or wells in good faith as required by law and the rules and regulations adopted by the Commissioner of the General Land Office, or if Lessee should fail to file repons in the manner required by law or fail to comply with rules and regulations promulgated by the General Land Office, the School Land Board, or llie Railroad Commission, or refuse the proper authority access to the records pcnaining to operations, or if Lessee or an authorized agent should knowingly fail or refuse to give correct information to the proper authority, or knowingly fail or refuse to furnish the General Land Office a correct log of any well, or if Lessee shall knowingly violate any of the material provisions of this lease, or if this lease is assigned and the assignment is not filed in the General Land Office as required by law, the rights acquired under

this lease shall be subject 10 forfeiture by the Commissioner, and he shall forfeit same when sufficiently informed of the facts which anthorize a forfeiture, and when forfeited the area shall again be subject to lease to 1he highest bidder, under the same regulations controlling the original sale of leases. However, nothing herein shaU be construed as waiving the automatic termination of this lease by operation of law or by reason of any special limitation arising hereunder. Forfeitures may be set aside and this lease and all rights thereunder reinstated before the rights of another intervene upon satisfactory evidence 10 the Commissioner of the General Land Office of future compliance with the provisions of the law and of this lease and the rules and regulations that may be adopted relative hereto.

21. RIVERBED TRACTS: ln the event this lease covers a riverbed, Lessee is hereby specifically granted the right of eminent domain and condemnation as provided for in N.R.C. Sections 52.092-52.093, as a pan of the consideration moving to Lessor for the covenants herein made by Lessee.

22. APPLICABLE LA\VS A/'l,;D DRILLING RESTRICTIONS: This lease shall be subject to all rules and regulations, and amendments thereto, promulgated by the Commissioner of the General Land Office governing drilling and producing operations on Permanent Free School Land (specifically including any rules promulgated that relate to plans of operations), payment of royalties, and auditing procedures, and shall be subject to all other valid statutes, rules, regulations, orders and ordinances that may affect operations w,der the provisions of this lease. Without limiting 1he generality of the foregoing, Lessee hereby agrees, by the acceptance of this lease, to be bow,d by and subject to all statutory and regulatory provisions relating to the General Land Office's audit billing notice and audit hearings procedures. Said provisions arc currently found at 31 Texas Administrative Code, Chapter 4, and Texas Natural Resources Code Sections 52.135 and 52.137 through 52.140. In the event this lease covers land franchised or leased or otherwise used by a navigation district or by the United States for the purpose of navigation or other purpose incident to the operation ofa port, then Lessee shall not be entitled to enter or possess such land without prior approval as provided under Section 61.117 of the Texas Water Code, but Lessee shall be entitled to develop such land for oil and gas by directional drilling; provided, however, that no surface drilling location may be nearer than 660 feet and special permission from the Commissioner of the General Land Office is necessary 10 make any surface location nearer than 2, 160 feet measured at right angles from the nearest bulkhead line or from the nearest dredged bottom edge of any channel, slip, or turning basin which has been authorized by the United States as a federal project for future construction, whichever is nearer.

23. RE!lr10VAL OF EQUIPl\1E~: Upon the termination of this lease for any cause, Lessee shall not, in any evem, be permitted to remove the casing or any part of the equipmenl from any producing, dry, or abandoned we!I or wells without the wrinen consent of the Commissioner of the General Land Office or his authorized representative; nor shall Lessee, without the written consent of said Commissioner or his authorized representative remove from the leased premises the casing or any other equipment, material, machinery, appliances or propeny owned by Lessee and used by Lessee in the development and production of oil or gas therefrom until all dry or abandoned wells have been plugged and until all slush or refuse pits have been properly filled and all broken or discarded lumber, machinery, or debris shall have been removed from the premises to the satisfaction of the said Commissioner or bis authorized representative.

24. FORCE I\IAJEURE: Should Lessee be prevented from complying with any express or implied covenant oftl1is lease, from conducting drilling operations thereon, or from producing oil and'or gas therefrom, after effort made in good faith, by reason of war, rebellion, riots, strikes, fires, acts of God or any order, rule or regula1ion ofgovcmmental authority, then while so prevented, Lessee's obligation 10 comply with such covenant shall be suspended upon proper and satisfactory proof presented to the Commissioner of the General Land Office in support of Lessee's contention and Lessee shall nor be liable for damages for failure to comply therewith (except in the event of lease operations suspended as provided in the rules and regulations adopted by the School Land Board); and this lease shall be extended while and so long as Lessee is prevented, by any such cause, from drilling, reworking operations or producing oil and/or gas from the leased premises; provided, however, tliat nothing herein shall be construed to suspend the payment of rentals during the primary or extended tenn, nor to abridge Lessee's right to a suspension w,der any applicable statute of this State.

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2~. I [A \I f ( l Rln • 1-nsec wll tal.c the highest degree of care 111d all proper safetl'Wds 10 proccc1 said premises and 10 prevent theh of 011, ps, 111d other hydrocarbons produced lrom u,d le Th, n I ~ ~,11, not hm11ed 10 the 1M111la11on of oil nc.CS!olll) equ1pmen1, seals. locl.:s. or 01hcr appropnate r,rocccme Je.1ce1 on or at all access pomt• a11he lases producuon, pthcnna ,u,d lwfll~e S) e.. .. -.here theft ot hydrocarbons cnn occur Leu« shall be hable for 1he lou of Ill) h,drocarbons rcsulung from theft and shall pa, the State of Tc,u ro,..1111:s !hereon u pro, Jed h -... all 11! or Olr. L c!-oarbons lost b) reason or thett

lb RI Dl n 10, 01 P>\, ~t[, T\: If d,umg the pnmal) term a por11on ot the land co=cd by this lease" mcludcd -.11hm 1he boundancs or a pooled un,11ha1 II s been appro,1:d b\ the S~hool l 11J B ,rd , cordion~ ~ 111• N. •· .ral Resources Code St,;nons ~ 2 151 • ~2 I H or ,f a1 811) 11mc alter 1hc c,p,nuon of the prunary term or the c,.tcndcd term th11 lase c:o-1:n a laser number of a.rt 11..n the lotal amount dcocnbcd herein, pa)n>ents that an, maJe on a per acre bcu11 hereunder shall be reduced accordmg to the number of acres pooled. rclc.ucd surrendered, or othCNtSC sc:,ued Ml that pm, menu detennmcd on a per acre tiu,s undcf the 1enns ol 1h1s lase dunng the pnmat) term shall be calculated based upon the number of acres outside the bound.Ines ol a rooled mll. o- ,r aher the e,p,1111100 of thr. pr11nal) term II~ number ol acres actual I\ rellllncd and co,ercd b) 1tus ICll\C

2" \l C ( I \',OR'> \'\O ,\',',IG!I.',· The co,enants cond11,ons and agreements con1amcd hemn wall c.tend 10 and be bmdmg upon the heirs, e,rcu1on, admm111ru1or1. suocessm or ·e hert n

18 \ I\ TIQl lTII <, COl) f : In the c,cn11ha1 an, feature of 1rd1colog1cal or lus1onal 1n1crct,1 on Pcnnnnent School r und 1.anJ II encountered durmg the ac11V1t1e1 a111honzcd b\ lhlS lcau, le 1! "1ll 1mmcd1a1el) cca,e acll\lllles and w,ll 1mmed1a1cl) 1101,f~ 1he Gen.al Land Office (ATTN Arch:icolo111.i, Asset ~na~emenl Dl\1sion, 1700 N Con!P'CU Ave, Au"'"· Te,as 7R70l) a11d the Tc,a. H111onc~I c .. mm,ss,on (PO Bo, 12276, Au,110, 1 X ~8711) M> that adequate mcuurcs ma, be undenalen 10 pro1cc1 Of rcco,er such d,sco,cncs or ltndmgJ, u appropnutc l~ssef 11 expre»h placed on nollce ot the Nauonal lli.1oncal l'rcSCf\allon Acl of 19(,o (PB-89-66, 80 S~tu1e 91 \ lo USC A 470) and the An11qm11es Code of Tc,as, Chapter I'll, Tc, Nat Code Ann (Vernon 1'193 A;. Surf) 1998) On 51a1e-c-.ned lanJ not dcdic:ated 10 the Pcnnanen1 School fund, lessee dial! nouh the Te.as H .. w,cal Ct,mm1111on before brcal.mg ground .. a prOJCCI IOCllllon An archacolog1cal SUf\.C) m1~1 be required b, the comm1»1on before conslru(t1on of 1hc proJCCt can commence Further, m the evcnt that anv sue, obJctt locauon, amlact or ocher fcatwe of archaeolog,cal sc1en11fic, cducauonal, cullwal or h1~1or1c m1erci.1 11 encountered dunni; 1hc &ell\lllCS authonzc b) this lease. lcsscc -.,II 1mmcd1atcl 10111) lessor and the Te,as Ill 10 1cal Commw1on Ml that adequate meuures ml) be un.tenalcen 10 prorcct or rec= such dtXo•=cs or f1ndmgs, a\ •r1,ropna1e

19. \ l 'I,\ I Lessor and lessee, incluJmg lesscc I suc.:nson and m1gn1, hcreb, agcc that ,enuc lor Ill) dispute armng out of a pro,u,on of lhis lcasc, -.!,ether e.prcss or 1mpl~. regarding 1n1err,1t 111 .n ol 1h1s lease, or rclaung 111 an) "I) 10 th11 lease or 10 applicable case la", swutcs. or 11dm1m11rat1vc rules, s,hall be ma court of competent Jur1sd1c11on l~tcd m Travis C'ounf\, State ol 1c.a

J O. l l i\',I Ill l"C h111uan1 10 Chapier 9 ol the 1 e, Bus ,t: Com Code.1h1s lease mUSI be filed of record m lhe office or the Coun1y Oco: m 111) county m wluch all or any pan or the !cued r , I,~ ad. and ccn,ticd cop,cs thcrcol mus1 be tiled on the General Land Olhcc The prcscnbcd lil11111 fee shall accompam the ccnified cop~ scnl lO the General Land Office

JI. r \.U. l 110"'1. Th11 011 and ps lc.uc must be signed and ackno"lcJgcd b} the Lessee be lore 11 "hied ol record 111 11~ COUI\I} records and m 1hc General Land Oflocc of the S111e of Te.u

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I 11 51 l\lO, \ \\ lll Rf or. "•tncu the &1gnat111c of the Comm,uroncr of 1he Gcncr..i Land Office of the State ofleus under the seal of the GcncraJ I.and Office

( 0\l\ll ....... 10',LR or Till (, l "IR \l l "D Off IC [ 01 1111 " '"11 01 1r,,,

l'l'RO\ 1 ll

Cont1·n1, I •a•I I)(

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5

ST \11 01 ((ORPOR\TIO'\ \ ( "''0\\11 OC\111\T)

cot ,nor widcr '!led au1hon1,, on 1h1) da) pcnonall) appeared _____________ __________ _

lno,-n hose n nc II subscnbed 10 the fo,cgomg 11atrumcn1, u ____________________ .of

____________________ and adno-.lcdgcd 10 me thal he e,ccu1cJ the 1amc

c,prcucd. m the capacuy 11a1cd and a, the act and deed of u1d coq,orauon

I or office this the_ _da,of , 20 ----

- l',0111) Pubhc m and f.:,r ______________ _

(l'\UI\ IUL \l \ ( "''0\\ Ll.0Gl\1l.'\T)

'ln d 111thor1t~. on this da) ~=11, bppcArcd _______________________ _

~ me 10 be the penons -.hose names a,c su~bed to the foregoing u~trurncnl, and acl.nm, lcdrcd to me, 1hat 1hc, c,ccu1cd the ~ he purposes and cons11Jcr111on therein c,prcssed

Gl\cn under rm hand and seal ol olrice llus the da, ol , 20_~---

No1ary J>ubhc ,n and for

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March 16, 2015

Mr Garrett Elander

XA EN RA L LAND f Fl G[O RG[ P BU ~II COMMl~ ~ION rn

Jetta Energy Resources Ill, LLC Fort Worth Club Tower, 777 Taylor Street, Suite P1 Fort Worth, Texas 76102

Dear Mr. Elander:

Thank you for participating in the General Land Office Oil and Gas Lease Sale held on January 20, 2015 I am pleased to inform you that Jetta Energy Resources Ill , LLC was the high bidder on MGL. No. 22, which has been assigned the lease number M-117202

State Lease M-117202 ,s enclosed and serves as your receipt for your bid This lease form must be fully executed by the lessee, and then recorded in the County Clerk's office of the county or counties 1n which lands covered by the lease are located After signing and recording the lease, please submit a cert ified copy of the recorded lease to the attention of the undersigned These requirements are material prov1s1ons of the lease, therefore, please return the certified copy at your earliest convenience

The lessee's other contractual and statutory responsibilities are outlined 1n the lease agreement, such as Section 6(8), which requires subm1ss1on of written notice for all drilling , production, and related act1vit1es When forms are filed with the Texas Railroad Comm1ss1on, they are required to submit copies of these forms to the General Land Office, such as Forms W-1, Appllcat,on to Drill , W-2, Oil Well Completion Report and Log; G -1, Gas Well Completion Report and Log, W-3, Plugging Record; G-5, Gas Well Classification Report, G-10, Gas Well Status Report, W-10, Oil Well Status Report , W-12, lncl1nat1on Report; Electric Logs, D1rect1onal Surveys

Please let me know 1f you have any questions or need any additional information

Robert B Hatter, Director Mineral Leasing D1v1s1on

1700 Orth (. ongrc~s A \CllUC. Ausltn. T C\!l!i 78701-1 195 PO Bo, 12873. l\uslln, 1 c,as 787 11-2873

512- 163-SOO l glo.1c,as.go\

6 File No. /VI..-// 7 Z£ 2. ;,~ -·'' -

...... • -- County ...,... ~ { -~ •.LI • l ey'

Date Filed: ~ · • -, · -

By J:~·~

• •• :.: s • •••••• • •

• ••• • • • ••••

• • •••••• • • • •••••• • •

JETTA November 3, 2015

Jetta Energy Resources Ill, LLC

Fort Worth Club Tower • 777 Taylor St. , Suite P1 • Fort Worth , TX 76102 817 . 335 .1179 • Fax 817 .3 34 .0869 • JettaOperat i ng .com

Commissioner of the General Land Office of the State of Texas 1700 N Congress Avenue Stephen F Austin State Building Austin, TX 78701-1495

Re: Year 1 Rental Payment - Section 4, Block 6 Reeves County Texas

Dear Sir,

Pursuant to the terms in your Oil, Gas and Mineral Lease dated January 20, 2015, filed in Book 1157, Page 575, enclosed is a check in the amount of $57.40 ($5.00/nma) for the First Anniversary Delay Rental.

If you have any questions please do not hesitate to call me at 817-335-1179.

Sincerely,

~ "' '---'--- --- 6' c ~ Ashley Evans Senior Land Analyst Western U.S. Division

Jetta Operating Company, Inc. Fort Worth Club Tower 777 Taylor Street, Suite Pl Fort Worth, TX 76102 817.335.1179 817.335.2285 (Fax) [email protected]

PAY

JETTA OPERATING COMPANY, INC. 777 Taylor Srreer, ,c.1i re Pl •

Fon Wonh,Texas 76102

FIFTY-SEVEN DOLLARS AND 40 CENTS

FROST NATIONAL BANK Corpus Christi , Texas 78411

~ DATE -

11/02/15

16702949 CHECK NO.

735896

O

PAY EXACTLY •

**********57.40

TO THE ORDER OF

COMMISSIONER OF THE TEXAS GENERAL LAND OFFICE

VOID AFTER 90 DAYS

1700 N CONGRESS AVE STEPHEN F AUSTIN STATE OFFICE BUILDING AUSTIN,TX 78701-1495


VENDOR NO.: 95592 DATE: 11/02/15 CHECK#: 735896 VENDOR NAME: COMMISSIONER OF THE TEXAS GENERAL

••• • • ••• • •• •••• ·,.

: ~· . • • • •

• • •••••• • • • •••••• • •


AMOUNT PRIOR PMTS

&DISCOUNTS

11-10-9 151102 11/02/15 57.40 0.00 lST ANNIVERSARY RENTAL PAYMENT - 11.48000 NET ACRES @ $5/NMA

TOTAL INVOICES PAID

t4 \\l tDl

NET AMOUNT

57.40

~ 57.40

••• ••• • • • • • • • •• •• • . . ••• • . • :~.,.? . •• •• -

. • ~ ·~ • •• •

File No. M'f \\l l:o 2 2,'*'J 'f [ Q, e V\ +c;, \

Date Filed:-...:..:...\\ ~lb.......,{ I..;.._>' __ _ By J> }leorgc P. Bush, Commissioner

15-03212 FILED FOR RECORD

Lease Form Revised I 0/99

urvcyed School Land ~ t t f ~ REEVES COUNTY TEXAS ";5:2J a e O \!J.., ex a$4, 2015 al 022800 PM

~usttn, W:exas v a L

OIL A 'D GAS LEASE '0 . M- 117202

1 1

WHEREAS, pursuant to the Texas N atural Resources Code Chapters 32, 33, 51, and Chapter 52, Subcbaptcrs A-0 and H, (said Code being hereinafter referred 10 as N.R.C.), and subject 10 all 5. rules and regulations promulgated by the Comm1ss1oner of the General Land Office and/or the School Land Board pursuant thereto, and all other applicable statutes and amendments 10 said 7 N R C. the following area., to-wn

ALL OF THE STRIC K WATKI SURVEY, REEVES COUNTY, TEXA , CO 'TAlNl G APPROXIMATELY 11.48 ACRES, A SH OW ' ON THE OFFICIAL MAP OF R EEVES COUN fY, T EXA , ·ow ON FILE 1!'1 T H E TEXAS GENERAL UNO OFFICE, AUSTrn, T EXA ,

was, after being duly advenised, offered for lease on the 20•• day of January, 2015, at 10:00 o'clock a.m., by the Commissioner of the General Land Office of the State of Texas and the School Land Board of the State of Texas, for the sole and only purpose of prospecting and drilling fo r, and producing oil and/or gas that may be found and produced from the above described area, and

WHEREAS, after all bids and remmances which were received up to said time have been duly considered by the Comm1ss1oner of the General Land Office and the School Land Board at a P regular meeting thereof in the General Land Office, on the 20'" day of January, 20 15, hereinafter the "effective dare" and II was found and determined that JETTA E 'ERGY RE OURCES G Ill, LLC whose address is FORT WORTH C LUB TOWER, 777 TAYLOR STREET, SUITE Pl , FORT WORT H, TEXAS 76102 had offered the highest and best bid for a lease ofrhe area above described and 1s, therefore, entitled to receive a lease thereon

OW, THEREFORE, I, George P Bush, Comm1ss1oner of the General Land Office of the Stare of Texas, hereinafter somerunes referred 10 as "Lessor," whose address 1s Austin, Texas, by virtue of the authonty vested in me and in cons1derat1on of the payment by the hereinafter designated Lessee, the sum of Thirty-Fou r T housand Four Hundred Forty And 00/100 Dollars (534,440.00), receipt of which ,s hereby acknowledged and of the royaltres, covenants, Stipulations and conditions contained and hereby agreed 10 be paid, observed and performed by Lessee, Q do hereby demise, grant, lease and let unto the above mentioned bidder the exclusive right 10 prospect for, produce and take oil and/or gas from the aforesaid area upon the following terms and condu,ons, 10-wu: 5

I. R ESERVATION There ,s hereby excepted and reserved to Lessor the full use of the propeny covered hereby and all rights wtlh respect to the surface and subsurface thereof for any 7 and all purposes except those granted, and to the extent herein granted 10 Lessee, the right to grant 1h1rd panics seismic, geophysical and geolog,cal permits and 10 enter into other agreements wnh rlmd panics, which allow such third parties 10 conduct geophysical, geological or seismic surveys on, over, under, through and across the land covered herein dunng the term of this lease, 5 and the nghts of ingress and egress and use of said lands by Lessor and us mineral lessees for purposes of explonng for and producing the minerals which are not covered, or which may not be covered in the future, under the terms of 1h1s lease, but which may be located within the surface boundaries of the leased area. All of the nghts in and 10 the leased premises retained by Lessor and all ofrhe nghrs m and 10 the leased premises granted 10 Lessee herein shall be exercised 111 such a manner that neither shall unduly interfere wuh the operations ofrhe other

2. T ERM. SubJccr to the other provisions hereof, this lease shall be for a term of fi ve (5) years from the effective date hereof (herein called "pnmary term") and as long thereafter as oil or gas 1s produced m paymg quan1111es from said area.

3. DELAY RENTA LS If no well is commenced on the land hereby leased on or before the anniversary date of this lease, this lease shall renninatc as 10 both panics unless the Lessee on or before said dare shall pay or tender to the Comm1ss1oocr of the General Land Office of the Stare of Texas at Ausnn, Texas, the amount specified in the following schedule muluphed by the number of acres m the premises, which shall operate as a rental and cover the privilege of defemng the commencement of a well for twelve ( 12) months from said date. In like manner and upon payments or tenders of amounts set out 10 the following schedule, the commencement of a well may be further deferred for a like penod of the same number of months.

Anmversary Date De)av Rental per Acre First S 5.00 Second S 5. 00 TI1ird S 3,000.00 Founh S 5.00

4. PRODUCTION ROYAL TI ES Upon production of oil and/or gas, the Lessee agrees to pay or cause to be paid 10 the Comm1ss1oner of the General Land Office m Austm, Texas, for the use and benefit ofrhc State of Texas, dunng the term hereof-

(A) O IL As a royalty on oil, which 1s defined as including all hydrocarbons produced ma hquid form at the mouth of the well and also all condensate, distillate, and other hqu,d hydrocarbons recovered from 011 or gas run through a separator or other equipment, as hereinafter prov,ded, 1/4 pan of the gross producnon or the market value thereof, at the option of the Lessor, such value 10 be dcrermmed by 1) the highest posted pnce, plus premium, ,f any, offered or pa,d for oil, condensate, distillate, or other hqu1d hydrocarbons, respect1vely, of a hke type and gravuy in the general area where produced and when run, or 2) the highest marker pnce thereof offered or paid in the general area where produced and when run, or 3) the gross proceeds of the sale thereof, whichever 1s the greater Lessee agrees that before any gas produced from the land hereby leased 1s sold, used or processed m a plant, 11 will be run free of cost 10 Lessor through an adequate oil and gas separator of convent1onal type or other equipment at least as efficient to the end that all hqmd hydrocarbons recoverable from the gas by such means will be recovered Upon wrmen consent of Lessor, the requirement that such gas be run through such a separator or other equipment may be waived upon such terms and conditions as prescribed by

Lessor

(B) NO -PROCE SEO GAS. As a royalty on any gas (including Oared gas), which ,s defined as all hydrocarbons and gaseous substances nor defined as 011 m subparagraph (A) above, produced from any well on said land (except as provided herein with respect 10 gas processed in a plant for the extraction of gasoline, liquid hydrocarbons or ot.hcr products) 1/4 part of the gross production or the market value thereof, at the option of the Lessor, such value 10 be based on the highest marker pnce paid or offered for gas of comparable quality rn the general area where produced and when run, or the gross price paid or offered 10 the producer, whichever is greater provided that the maximum pressure base in measuring the gas under this lease conrracr shall not at any nme exceed 14 65 pounds per square mch absolute, and the standard base temperature shall be s1x1y (60) degrees Fahrenheu, correction to be made for pressure according 10 Boyle's Law, and for specific grav,ty according 10 tCSt made by the Balance Method orb) the most approved method of resung being used by the indu at the t1mo.llW~g.._

•• ••• '\,.i:~o.,,.,. TKUt:. ex. CORRECT : . .·. ·:· .·· s-H "',. COPY OF • • • • • J... ,

•: !. • • • • :. • •: * ; ORIG! 1A L FILED TN • •• • • • • • • \,, ,;,...-."- REEVES COUNTY

~s t;o CLER.KS OFFICE

•

gas attributable to gas produced from this lease, and on fifty percent (50%) or that percent accruing to Lessee, whichever ts the greater, of the total plant producuon of hqu1d hydrocarbons, annbu1able to the gas produced from tl11s lease; proV1ded that if liquid hydrocarbons are recovered from gas processed in a plant in which Lessee (or us parent, subsuiiary or affiliate) owns an tntereSt, then the percentage applicable 10 hqutd hydrocarbons shall be fifty percent (50%) or the highest percent accruing to a llurd party processing gas through such plant under a processing agreement negonated at arms' length (or if there 1s no such tlurd pany, the highest percent then being specified in processing agreements or contTilcts m the industry), whichever is the greater TI1e respective royalties on residue gas and on liqutd hydrocarbons shall be determined by I) the highest market price paid or offered for any gas (or liquid hydrocarbons) of comparable quality m the general area or 2) the gross pnce paid or offered for such residue gas (or the weighted average gross selhng pnce for the respecuve grades ofhquid hydrocarbons), whichever is the greater In no event, however, shall the royalties payable under this paragraph be less than the royalties which would have been due had the gas no1 been processed

(D) OTH ER PRODUCTS: As a royalty on carbon black, sulphur or any other products produced or manufacrured from gas (excepting hqu1d hydrocarbons) whether said gas be "casmgbead," "dry" or any other gas, by fracuona11ng, burnmg or any other processing, ill pan of gross producuon of such produc1s, or 1he market value 1hereof, at 1he option of Lessor, such market value 10 be determined as follows:

(I) On the basis of the highest market pnce of each product, dunng the same month in which such product ,s produced, or (2) On the basis of the average gross sale price of each product for the same month m which such products are produced, whichever 1s the grca1er

(E) '0 DEDUCTIONS: Lessee agrees that all royalnes accrumg to Lessor under this lease shall be w11hou1 deduction for the cos1 ofproducmg, transponmg, and otherwise making the oil, gas and 01her products produced hereunder ready for sale or use

(F') ROYAL TY I IQ lD: Notwiths1aoding anything contained berem to 1he contrary, Lessor may, at us opuon, upon 001 less than 60 days no1ice 10 Lessee, require at any ume or from time to ume that payment of all or any royalties accruing to Lessor under tlus lease be made in kind wnhout deducnon for the cost of producing, gathering, storing, separating, rreatJOg, dehydrating, compressmg, processing. rraosporting and otherwise making the oil, gas and other products produced hereunder ready for sale or use Lessor's right to take its royalty in kind shall not diminish or negate Lessor's rights or Lessee's obhgauons, whether express or 1mphed, under this lease.

(G) PLANT FUEL A D RECYCLED GAS: No royalty shall be payable on any gas as may represen1 this lease's proportionate share of any fuel used 10 process gas produced hereunder many processmg plant. No!Wlthstandmg anythmg contamed herein 10 the contrary, and subject to the consent m wntmg of the Commissioner of the General Land Office, Lessee may recycle gas for gas hft purposes on the leased premises after the hqu,d hydrocarbons contamed m 1he gas have been removed, and no royalties shall be payable on the gas so recycled unul such time as the same ma} thereafter be produced and sold or used by Lessee m such manner as 10 entnle Lessor to a royalty thereon under the royalty proV1s1ons of this lease

(H) MI IM Ul\•1 ROY AL TY: Dunng any year after the exp1ranon of the primary term of this lease, ,f 1h1s lease is mam1amed by producnon, the royalties paid 10 Lessor m no event shall be less than an amoun1 equal 10 $5.00 per acre, otherwise, there shall be due and payable on or before the last day of the month succeeding the anmversary da1e of1his lease a sum equal 10 S5.00 per acre less the amounl of royalties paid dunng 1he preceding year.

(I) MARGI 'AL PRODUCTIO ROYA LTY: Upon Lessee's wntten application, the School Land Board may reduce 1he royalty rate se1 out ,n this paragraph and/or the mmimum royalty se1 out 10 subparagraph 4 (!) to extend the economic life of 1his lease and encourage recovery of oil or gas that might otherwise remain unrecovered Any such royalty reducnon must conform to the requirements of any School Land Board administrative rules on this subJect. Royalty may not be reduced below the applicable statutory minimum

5. ROYALTY PAYM ENTS AND REPORTS: All royalues no1 taken m kind shall be paid 10 the Commissioner of the General Land Office at Ausun, Texas, m the following manner. Payment of royalty on producnon of 011 and gas shall be as provided m 1he rules set fonh m 1he Texas Regis1er. Rules currently provide 1ha1 royalty on oil ,s due and must be received in the

General Land Office on or before the 5th day of the second mon1h succeedmg 1he month ofproducuon, and royalty on gas is due and must be received in the General Land Office on or before the

Ve: L

1 i 5 7

p G

15th day of the second month succeeding the month of production, accompanied by 1he aflidavn of the owner, manager or other authonzed agent, completed in the form and marmer prescnbed by 1he General Land Office and showing the gross amoun1 and d1spos111on of all 011 and gas produced and the marke1 value of 1he 011 and gas, together with a copy of all documen1s, records or repons confirming the gross production, d1spos11ion and market value mcludmg gas meter readings, p1pelme receipts, gas hne rece1p1s and 01her checks or memoranda of amount produced and put mto Q p1peliJ1es, 1anks, or pools and gas Imes or gas storage, and any other rcpons or records which the General Land Office may require 10 venfy the gross producuon, disposition and marke1 value In all cases the au1hon1y of a manager or agen1 10 act for the Lessee herem mus1 be filed m the General Land Office Each royalry paymenl shall be accompanied by a check srub, schedule, summary 5 or other remmance advice showing by l11e assigned General Land Office lease number the amount of royalty bemg paid on each lease If Lessee pays his royalty on or before 1lmty (30) days after J the royalty payment was due, then Lessee owes a penalty of 5% on the royalty or S25.00, whichever ,s grea1er A royalty payment which 1s over thirty (30) days la1e shall accrue a penalty of 10% of1he royally due or $25.00 whichever 1s greater In addition 10 a penalty, royallies shall accrue in1eres1 at a rale of 12% per year; such m1eres1 will begin accruing when the royalty 1s sixty (60) 6 days overdue Affidavits and supponing documents which arc not filed when due shall incur a penally ,n an amoun1 set by the General Land Office admin1s1ra11ve rule which ,s effective on the date when the affidavits or supporting documents were due. The Lessee shall bear all responsibility for paymg or causing royalnes to be paid as prescnbed by the due date provided herem. Payment of 1he delinquency penally shall in no way opera1e 10 prohibit the Stale's right of forfeiture as provided by law nor act 10 postpone the da1e on which royalties were origmally due The above penalty provts1ons shall 001 apply in cases of utle dispute as 10 the Slate's ponion of 1hc royalty or to 1ha1 ponion of the royalty m dispute as 10 fair marke1 value.

6. (A) RESERVES, CONTRA CT AND OTH ER RECORDS: Lessee shall annually furnish the Commissioner of the General Land Office with ns best possible CS1ima1e of oil and gas reserves underlying 1h1s lease or allocable 10 1h1s lease and shall furnish said Comm1ss1oner wnh copies of all contraclS under which gas is sold or processed and all subsequent agreements and amendments 10 such conrracrs within thirty (30) days after entenng into or makmg such contracts, agreements or amendmen1s Such contTilcls and agreements when received by 1hc General Land Office shall be held m confidence by the General Land Office unless 01herwisc authorized by Lessee. All other conrrac1s and records pcnaming 10 1he production, tTIIDSportauon, sale and markeung of the 011 and gas produced on said premises, mcludmg 1he books and accounts, receip1s and discharges of all wells, tanks, pools, meters, and pipelines shall at all nmes be subject to mspecuon and exammauon by the Comm1ss1oner of the General Land Office, 1he Attorney General, the Governor, or the represen1anve of any of them

(B) DRILLl!\C RECORDS: Wnnen nouce of all operauons on 1h1s lease shall be subm111ed 10 lhe Commissioner of the General Land Office by Lessee or opera1or five (5) days before spud date, workover, re-entry, temporary abandonment or plug and abandonment of any well or wells Such wnnen notice 10 the General Land Office shall mclude copies of Railroad Commission forms for applicauon 10 doll. Copies of well 1es1s, completion repons and plugging repons shall be supplied to the General Land Office at the 1ime they are filed with the Texas Railroad Comm1ss1on Lessee shall supply the General Lalld Offi ce with any records, memoranda, accounts, repons, cuttmgs and cores, or ol11er informa1ion relative 10 the operation of the above-described premises, which may be requeSted by the General Land Office, in addition 10 those hercm expressly provided for Lessee shall have an electrical and/or radioacuV!fy survey made on the bore-hole sccuon, from 1he base of 1he surface casing 10 the 101al depth of well, of all wells drilled on the above descnbcd premises and shall transrnn a true copy of the log of each swvey on each well to the General Land Office withm fifteen (15) days afterthe makmg of said swvey.

(C) PENA L TIES: Lessee shall incur a penalty whenever repons, documents or other ma1erials are not filed in 1he General Land Office when due The penalty for late filing shall be se1 by the General Land Office adrnirtis1rative rule which is effecuve on the date when the materials were due in 1he General Land Office.

7. RETA I NED ACREAGE: Notwithstanding any provision of this lease to the contTilry, after a well producing or capable of producing oil or gas has been completed on the leased preTDJses, Lessee shall exercise the diligence of a reasonably prude111 opera1or in dnlhng such additional well or wells as may be reasonably necessary for the proper developmenl of the leased premises and ID markcnng the producnon thereon.

(A) VERTICAL: In 1he event this lease ism force and effect two (2) years after the exp,rauon date of the primary or extended term II shall then 1ermmate as 10 all of the leased premises, EXCEPT (I ) 40 acres surrounding each 011 well capable of producing 111 paymg quan1111es and 320 acres surroundmg each gas well capable ofproducmg m paymg quanuues (includmg a shut-ID oil or gas well as provtded ,n Paragraph 11 hereof), or a well upon which Lessee is then engaged in conunuous dnlhng or reworkmg operauons, or (2) 1he number of acres mcluded in a producing pooled unit pursuant to Natural Resources Code Secuons 52 I 51-52 153, or (3) such grca1er or lesser number of acres as may then be allocated for producuon purposes 10 a proration unu for each such producmg well under 1he rules and regula11ons of 1he Railroad Comm1ss1on of Texas, or any successor agency, or 01her govcrnmen1al au1hon1y having Junsd1ction Withm 90 days of a pamal 1ermma11on of this lease m accordance wub 1h1s subparagraph and upon payment of the mm,mum filing fee se1 by General Land Office rules m effec1 al 1he ume of the pan,al 1ermmanon, Lessee shall have lite nght 10 obtain a surface lease for ingress and egress on and across lite 1erm111a1ed ponion of the leased premises .is may be reasonably necessary for the continued operation of the portions of the lease remaining m force and effect. If Lessee fails 10 apply for a surface lease witlun the 90 day penod specified above, Lessee may applti$1_r a surface lease from the Land Office but th;,,l..a~ mmissi~mer kas thediscre1ion to grant or deny such apphcanon and 10 set 1he fee for such surface lease 1;tl oi, ·1 KUE & CORRECT

. ! • • • :• • • • "'&'\ "", COPY OF .. :.·.·:. ~ ~ ... • •• • • •• • •• * • ORIC,I'\ ·\!. • ILED TN • •• • • • 2 &J: • ••• \ 'Y...,::, RI I \ ' , 'OL '\ TY

"t:. co' ( l t I< K' ( I I ' C

(B) HORIZONTAL In the event this lease ism force and effect two (2) years after the exp1rauon date of the pnmary or extended term II shall funher terminate as 10 all depths below 100 feet below ~1e total depth drilled (hereinafter "deeper depths") in each well located on acreage retained in Paragraph 7 (A) above, unless on or before two (2) years after the pnmary or extended term Lessee pays an amount equal to one-half(l/2) of the bonus originally paid as consideration for this lease (as specified on page 1 hereof). lfsuch amount 1s paid, this lease shall be in force and effect as to such deeper depths, and said terminanon shall be delayed for an additional period of two (2) years and so long thereafter as oil or gas is produced m paying quantlties from such deeper depths covered by this lease

(C) IDENTIFICATION AND FILING: The surface acreage retained hereunder as to each well shall, as nearly as practical, be in the form of a square with the well located in the center thereof, or such other shape as may be approved by the School Land Board. W11hin thirty (30) days after panial termination of this lease as provided herein, Lessee shall execute and record a release or releases containing a satisfactory legal description of the acreage and/or depths not retained hereunder. The recorded release, or a cenificd copy of same, shall be filed m the General Land Office, accompanied by the fihng fee prescribed by the General Land Office rules in efTcct on the date the release 1s filed If Lessee fails or refuses to execute and record such release or releases w11hin ninety (90) days after being requested to do so by the General Land Office, then the Comm1ss1oncr at his sole discretion may designate by wntten insrrumcnt the acreage and/or depths to be released hereunder and record such insrrumcnt at Lessee's expense in the county or counties where the lease 1s located and m the official records of the General Land Office and such dcs1gna11on shall be binding upon Lessee for all purposes. If at any nmc after the effective date of the partial termination prov1S1ons hereof, the applicable field rules arc changed or the well or wells located thereon arc reclassified so that less acreage 1s thereafter allocated to said well or wells for producnon purposes, this lease shall thereupon terminate as 10 all acreage not thereafter allocated 10 said well or wells for production purposes.

8. OFFSET WELL : If 011 and/or gas should be produced m commercial quan1111cs from a well located on land privately owned or on State land leased at a lesser royalty, which well is withm one thousand (1,000) feet oftbc area included hcrcm, or which well is draining the area covered by this lease, the Lessee shall, within sixty (60) days after such initial production from the draining well or the well located within one thousand (1,000) feet from the area covered by tlus lease begin in good fanh and prosecute diligently the dnlhng ofan offset well on the area covered by this lease, and such offset well shall be dnlled 10 such depth as may be necessary 10 prevent the undue drainage of the area covered by this lease, and the Lessee, manager or driller shall use all means necessary in a good faith effon to make such offset well produce oil and/or gas in commercial quantities. Only upon the detennination of the Commissioner and with his written approval, may the payment of a compensatory royalty sansfy the obligation to drill an offset well or wells required under this Paragraph.

9. DRY HOLE/CESSATIO OF PRODUCTION DVRJNG PRIMARY TERM: If, during the pnmary tenn hereof and prior to discovery and production of oil or gas on said land, Lessee should drill a dry hole or holes thereon, or if during the pnmary term hereof and after the discovery and actual producuon of oil or gas from the leased premises such production thereof should cease from any cause, this lease shall not tcnninatc if on or before the expiration of sixty (60) days from date of completion of said dry hole or cessa11on of production Lessee commences addJtional drilling or reworking operations thereon, or pays or tenders the next annual delay rental in the sainc manner as provided in tl11s lease. If, during the last year of the primary term or within sixty (60) days prior thereto, a dry hole be completed and abandoned, or the producuon of oil or gas should cease for any cause, Lessee's rightS shall remam m full force and effect without funher operations until the expiration of the pnmary term, and 1f Lessee bas not res~med production in paymg quannncs at the expiration of the pnmary term, Lessee may maintain this lease by conducting additional drilling or reworking operations pursuant to Paragraph IO, using the expiration of the pnmary tcnn as the date of cessation of production under Paragraph JO. Should the first well or any subsequent well dnlled on the above described land be completed as a shut-in oil or gas well withm the primary term hereof, Lessee may resume payment of the annual rental m the same manner as provided herem on or before the rental paymg date following the cxpiranon of sixty (60) days fTom the dare of compleuon of such shut-in oil or gas well and upon the failure to make such payment, this lease shall ipso facto terminate If at the cxp1ranon of the pnmary term or any rime thereafter a shut-m oil or gas well is located on the leased premises payments may be made m accordance wnh the shut-in prov1s1ons hereof.

10. CESSA TIO , DRJLLI. G, AND REWORK! G: If, after the expiranon of the pnmary term, production of oil or gas from the leased premises, after once obtamcd, should cease from any cause, this lease shall not term mate if Lessee commences additional drilling or reworking operations within sixty (60) days after such cessation, and this lease shall remain in full force and effect for so long as such operanons conunuc in good fa11h and m workmanlike manner without interruptions totaling more than sixty (60) days. lf such drilling or reworking operauons result in the producuon of oil or gas, the lease shall remain in full force and effect for so long as oil or gas 1s produced from the leased premises m paying quantities or payment of shut-in oil or gas well royalties or payment of compensatory royalues is made as provided herein or as provided by law If the drilling or rework mg operations result in the complcnon of a well as a dry hole, the lease will not terminate if tl1e Lessee commences additional drilling or reworkmg operations within sixty (60) days after the completion of the well as a dry hole, and this lease shall remain in effect so long as Lessee continues drillmg or reworking operations in good faith and m a workmanlike manner witl1ou1 interruptions totaling more than sixty (60) days Lessee shall give written nouce to the General Land Office withm thirty (30) days of any ccssat10n of production.

I I . SHUT-IN ROYALTIES: For purposes of this paragraph, "well" means any well that has been assigned a well number by the state agency havingjurisdicuon over the production of oil and gas. If at any ume after the expiration of the primary term of a lease that, until being shut on, was being mamtamed in force and effect, a well capable of producing oil or gas in paying quanmies is located on the leased premises, but oil or gas is not bemg produced for lack of suitable production facilities or lack of a suitable market, then Lessee may pay as a shut-in oil or gas royalty an amount equal to SI0.00 per acre, but not less than SI ,200 a year for each well capable of producing 011 or gas in paying quantmes To be effecnve, each imual shut-in 011 or gas royalty must be paid on or before (1) the cxpirauon of the pnmary tcnn, (2) 60 days after the Lessee ceases 10 produce oil or gas from the leased premises, or (3) 60 days after Lessee completes a drilling or reworking operation in accordance with the lease prov1S1ons, whichever date is latest. lf the shut-m 011 or gas royalty 1s paid, the lease shall be considered 10 be a producing lease and the payment shall extend the term of the lease for a period of one year fTom the end of the pnmary term, or from the first day of the month following the month in which production ceased, and, after that, ifno suitable production facilities or suitable market for the 0tl or gas exists, Lessee may extend the lease for four more successive periods of one ( I) year by paying the same amount each year on or before the expiration of each shut-in year.

12. COMPE SATO RY ROYA LTI ES: !f, during the penod tl1e lease is kept in effect by payment of the shut-in oil or gas royalty, 011 or gas 1s sold and delivered m paying quannties from a well located within one thousand ( 1,000) feet of the leased premises and completed in the same producing reservoir, or on any case in which drainage 1s occurring, the nght to continue to maintain the lease by paying the shut-in oil or gas royalty shall cease, but the lease shall remain effecnvc for the remainder of the year for wl11ch the royalty has been paid TI1c Lessee may maintain the lease for four more successive years by Lessee paying compensatory royalty at the royalty rate provided on the lease of the market value of production from the well causing the drainage or which is completed m the same producmg reservoir and within one thousand ( 1,000) feet of tl1e leased premises. The compensatory royalty is to be paid monthly to the Commissioner begmmng on or before the last day of the month following the month in which the 011 or gas 1s produced from the well causing the drainage or that 1s completed in the same producmg reservoir and located w11lun one thousand (1,000) feet of the leased premises, if the compensatory royalty paid in any 12-month period is in an amount less than the annual shut-in oil or gas royalty, Lessee shall pay an amount equal to the difference within thiny (30) days from the end ofrhc 12-month period; and none of these provisions will relieve Lessee of the obligation of reasonable development nor the obligation to drill offset wells as provided in N.R.C. Secnon 52.034; however, at the deterrninanon of the Comm1ss1oner, and with the Commissioner's written approval, the payment of compensatory royalties shall satisfy the obligation to drill offset wells Compensatory royalty payments which are not nmely paid will accme penalty and interest m accordance with Paragraph S of1h1s lease

13. EXT ENSIO 'S: If, at the cxp1ra11on of the pnmary term of1h1s lease, producMn ofo1l or gas has not been obtained on the leased premises but drilling operations are bcmg conducted thereon in good faith and in a good and workmanlike manner, Lessee may, on or before the expiration of the pnmary term, file m the General Land Office wntten applieanon to the Corrumssioner of the Genera.I Land Office for a thiny (30) day extension of this lease, accompanied by payment of Three Thousand Dollars ($3,000.00) if this lease covers stx hundred fony (640) acres or less and Six TI1ousand Dollars (S6,000.00) 1f this lease covers more ~tan six hundred fony (640) acres and the Cormnissioncr shall, in writing, extend tl1is lease for a thiny (30) day period from and after the expiration of the primary term and so long thereafter as oil or gas is produced in paymg quanm1cs, provided further, that Lessee may, so long as such drilling operations are being conducted make like apphcauon and payment during any th1ny (30) day extended penod for an additional extension of th1ny (30) days and, upon receipt of such application and payment, the Commissioner shall, in wnung, again extend this lease so that same shall rcmam in force for such addttional thiny (30) day period and so long thereafter as oil or gas 1s produced in pa)'lng quantities; provided, however, that tlus lease shall not be extended for more than a total of three hundred runcty (390) days from and after the expiration of the pnmary term unless production in paying quantities has been obtained

14. USE OF WATER; SURFACE: Lessee shall have the nght to use water produced on said land necessary for operations hereunder and solely upon the leased premises; provided, however, Lessee shall not use potable water or water suitable for livestock or ungauon purposes for water flood operations wnhout the pnor wrincn consent of Lessor. SubJect to 11s obligation to pay surface dainages, Lessee shall have the right to use so much of the surface of the land tl1at may be reasonably necessary for drilling and operating wells and transponing and markenng the producllon therefrom, such use to be conducted under condiuons of least inJury 10 the surface of the land. Lessee shall pay surface damages in an amount set by the General Land Office fee schedule which 1s effective on the date when the acllvity requmng the payment of surface damages occurs

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TRUJ:" & CORRP.CT IS. POLLUTIO : In developing this area, Lessee shall use the highest degree of care and all proper safeguards to prevent pollunon W1thou1. foregomg, pol'tu11on oT x0;,.s1il

wetlands, natu •atc~f. nver~~ 1n1\ti',nded w!t~ shall be prevented by the use of containment fac1l111cs sufficient to prevent spillage, seepag , "/ • contamin£J;;lll¥!ttcJovent of pollunon, Le ~ ~hall Jse all mtant at n• disposa% to recapture all escaped hydrocarbons or other pollutant and shall be responsible for all damage ' IEJRlf'E.91~ \ (, Fl LED IN • • • • •• * •

•• : :• •.• :• .• ! 3 .,.~ .::- REf\f~COL'\IY ,·~ -""~ tO" CLL ,!--.~ 01'11( 1

(A) UPLANDS: Lessee shall build and mamtam fences around its slush, sump, and drainage pus and tank batteries so as to protect livestock against loss. damage or inJwy; and upon compleuon or abandonment of any well or wells, Lessee shall fill and level all slush pus and cellars and completely clean up the drilling site of all rubbish thereon

(Bl SUBMERGED LA DS: No discharge of solid waste or garbage shall be allowed 1n10 State waters from any dnlhng or suppon vessels, producuon platfonn, crew or supply boat, barge, Jack-up ng or other equipment located on the leased area Solid waste shall include but shall not be limited 10 containers, equipment, rubbish, plastic, glass, and any other man-made nonb1odegradable uems A sign must be displayed m a high traffic area on all vessels and manned platfonns stanng, "Discharge of any sohd waste or garbage mto State Waters from vessels or platfonns is stnclly prohibited and may subJect a S1a1c of Texas lease 10 forfcuure. • Such statement shall be m lettenng of at least I" m siu.

(C) RJ VER : To the extent necessary to prevent pollution, t.he provisions found in subsecuons (a) and (b) of this paragraph sl1all also apply to nvers and nverbeds

(D) PENALTY: Failure 10 comply with the requirements of this provision may result to the maximum penalty allowed by law including forfeiture of the lease Lessee shall be liable for the damages caused by such failure and any costS and expenses incurred m cleamng areas affected by the discharged waste

16. lDENTIFICATION MARKERS: Lessee shall erect, at a distance not to exceed twenty-five (25) feet from each well on the premises covered by this lease, a legible sign on which shall be stated the name of the operator, the lease designanon and the well number. Where two or more wells on the same lease or where wells on two or more leases are coMected to the same tank banery, whether by md1v,dual flow hne connections d1rec1 to the tank or tanks or by use of a muluple header system, each hne between each well and such tank or header shall be legibly identified at all umes, cuber by a finnly attached tag or plate or an 1dent1fication properly painted on such hne at a distance 00110 exceed three (3) feet from such tank or header coMecuon Said signs, tags, plates or other 1dennfica1ion markers shall be maintained in a legible conduion throughout the 1enn of this lease

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1 17. A IC ME 'TS: The lease may be transferred at any ume, prov,ded, however, that the hab1hty of the transferor.to properly discharge us obhgarion under the lease, mcludmg properly 1

pluggmg abandoned wells, removmg platfonns or pipelines, or remediation of con1amina11on at drill sues shall pass 10 the transferee upon the pnor written consent of the Commissioner of the General Land Office. The Commissioner may require the transferee 10 demonstrate financial respons1b1l11y and may require a bond or other secunty All transfers must reference the lease by the 5 file number and must be recorded m the county where the area 1s located, and the recorded transfer or a copy cemfied 10 by the County Clerk of the county where the transfer 1s recorded must be filed m the General Land Office within mnety (90) days of the execution date, as prov,ded by N RC. Section 52.026, accompanied by the fihng fee prescribed by the General Land Office rules m 7 effect on the date of receipt by the General Land Office of such transfer or ce111fied copy thereof Every transferee shall succeed 10 all nghts and be sub1ec1 10 all ob!iganons, habihties, and penalues owed to the State by the original lessee or any pnor transferee of the lease, includmg any hab1hties 10 the state for unpaid royalues

18. RELEASES: Lessee may relinquish the rights granted hereunder 10 the State at any time by recording the relmquishment in the county where this area ,s situated and fihng the recorded rehnqu1slunen1 or cemfied copy of same m tile General Land Office withm ninety (90) days after its execution accompanied by the filing fee prescribed by the General Land Office rules in effect on the date of receipt by the General Land Office of such rehnqu1shmen1 or certified copy thereof Such rehnquislunent will not have the effect of releasmg Lessee from any liability theretofore accrued in favor of the State

19. LI EN: In accordance with N R.C. Section 52 136, the State shall have a first hen upon all 011 and gas produced from the area covered by this lease to secure payment of all unprud royalty p and other sums of money that may become due under this lease By acceptance of this lease, Lessee grants the State, m addmon 10 the hen provided by N.R.C. Section 52.1 36 and any other applicable s1aru1ory hen, an express conrractual hen on and security interest in all leased mmerals in and extracted from the leased premises, all proceeds which may accrue to Lessee from the sale G of such leased mmerals, whether such proceeds are held by Lessee or by a third party, and all fixtures on and improvements 10 the leased premises used in coMection with the production or processing of such leased minerals m order 10 secure the payment of all royalues or other amounts due or 10 become due under 1h,s lease and 10 secure payment of any damages or loss that Lessor may suffer by reason of Lessee's breach of any covenant or cond111on of this lease, whether express or implied TI11s hen and secun1y m1eres1 may be foreclosed with or without coun proceedmgs m the manner provided m the Tnle I, Chapter 9 of the Texas Busmess and Commerce Code Lessee agrees that the Commissioner may require Lessee to execute and record such instruments as may be reasonably necessary 10 acknowledge, anach or perfect tlus hen. Lessee hereby represents that there are no prior or supenor hens ansing from and relating 10 Lessee's activ,nes upon the above-described property or from Lessee's acquisition of this lease Should the Commissioner at any ume determine that 1h1s represen1auon 1s not true, then the Commissioner may declare this lease forfeued as prov,ded herem

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20. FORFEITURE: If Lessee shall fail or refuse 10 make the payment of any sum wnhin thirty (30) days after 11 becomes due, or 1f Lessee or an authorized agent should knowingly make any false return or false report concernmg production or dnlling, or 1f Lessee shall fail or refuse to drill any offset well or wells in good fruth as required by law and the rules and regulauons adopted by 7 the Corruruss1oner of the General Land Office, or 1f Lessee should fail 10 file repons m the manner required by law or fail to comply with mies and regulations promulgated by the General Land 8 Office, the School Land Board, or the Railroad Commission, or refuse the proper authority access 10 the records pertaining 10 operations, or 1f Lessee or an authonzed agent should knowingly fa,! or refuse 10 give correct information 10 the proper authority, or knowingly fail or refuse 10 furnish the General Land Office a correct log of any well, or if Lessee shall knowingly violate any of the matenal prov,s1ons oftbis lease, or tf1h1s lease 1s assigned and the assignment is not filed in the General Land Office as required by law, the nghts acquired under

tlus lease shall be subject to forfeiture by the Commissioner, and he shall forfeit same when sufficiently mfonncd of the facts which authonze a forfeuure, and when forfeued the area shall again be subject to lease to the highest bidder, under the same regulauons conirolhng the origmal sale of leases However, nothing herein shall be construed as waiving the automatic tenninanon of this lease by operation of law or by reason of any special hm11at1on arismg hereunder Forfeuures may be set aside and 1h1s lease and all nghts thereunder reinstated before the ngh1s of another intervene upon satisfactory evidence 10 the Commissioner of the General Land Office of future compliance wnh the provisions of the law and of this lease and the rules and regulauons that may be adopted relative hereto.

21. RIVERBED TRACT : In the event this lease covers a nverbed, Lessee is hereby spec16cally granted the right of emment domam and condemnanon as prov,ded for in N RC. Secuons 52 092-52.093, as a pan of the consideration moving 10 Lessor for the covenants herein made by Lessee

22. APPLICABLE LAWS AND DRILLING RE TRJCTJONS: Tius lease shall be sub1ec110 all rules and regulations, and amendments tl1ere10, promulgated by the Comm1ss1oner of the General Land Office governing drilling and producing operations on Pennanent Free School Land (specifically including any rules promulgated that relate 10 plans of operauons), payment of royalncs, and aud,tmg procedures, and shall be subject to all other valid statutes, rules, regulations, orders and ordinances that may affect operations under the provisions of this lease. Without hmumg the generality of the foregomg, Lessee hereby agrees, by the acceptance of this lease, 10 be bound by and subJect 10 all statutory and regulatory prov,s,ons relating 10 the General Land Office's audit billing notice and audit hearings procedures Said provisions are currently found at 31 Texas Administranve Code, Chapter 4, and Texas Natural Resources Code Sections 52 135 and 52 137 1tirough 52 140. In the event 1h1s lease covers land franchised or leased or otherwise used by a nav,gation disoict or by the Unued States for the purpose of nav1ga11on or other purpose incident 10 the operanon of a pon, then Lessee shall not be enmled 10 enter or possess such land wuhout pnor approval as provided under Secuon 61.117 of the Texas Water Code, but Lessee shall be enmled 10 develop such land for oil and gas by dtrect,onal drilhng, provided, however, that no surface drilling locauon may be nearer than 660 feet and special penn1ss1on from the Comm1ss1oner of the General Land Office ,s necessary to make any surface locanon nearer than 2, 160 feet measured at rigbt angles from the nearest bulkhead hne or from the nearest dredged bottom edge of any channel, shp, or rurnmg basm which has been authonzed by the United States as a federal project for futtirc construction, wluchever is nearer

23. REMOVAL OF EQUI PM E IT: Upon the 1ennma11on of this lease for any cause, Lessee shall not, in any event, be pennmed 10 remove the casing or any pan of the equipment from any producing, dry, or abandoned well or wells without the wntten consent of the Commissioner of the General Land Office or his authorized representative, nor shall Lessee, w11hou1 the written consent of srud Comm1ss1oner or his authonzed representauve remove from the leased premises the casmg or any other equipment, matenal, machmery, apphances or property owned by Lessee and used by Lessee in the development and production of 01! or gas therefrom until all dry or abandoned wells have been plugged and until all slush or refuse pits have been properly filled and all broken or discarded lumber, machmery, or debris shall have been removed from the premises 10 the satisfaction of the said Commissioner or his authorized representative

24. FORCE MAJEURE: Should Lessee be prevented from complying w11h any express or 1mphed covenant of 1h1s lease, from conducting dnlhng operanons thereon, or from producing oil and/or gas therefrom, after effon made m good faith, by reason of war, rebellion, nots, strikes, fires, acts of God or any order, rule or regulation of governmental auu1onty, u1en while so prevented, Lessee's obhgauon 10 comply with such covenant shall be suspended upon proper and satisfactory proof presented 10 u1e Commissioner of the General Land Office m support of Lessee's contention and Lessee shall not be hable for damages for failure 10 comply there"sth (except m the event of lease opcranons suspended as provided m the rules and regulanons adopted by the School Land Board), and tltis lease shall be extended w!ule and so long as Lessee is prevented, by any such cause, from drilling, reworking operanons or producing,oA p.q<J.(or~ ~\!l the leased premises, pro>jQCd. l~ •vever, u1a1 no~ herem shall be construed 10 suspend the payment ofrcntals dunng the pnmary or extended 1enn, nor I ll!l1 see's rlgnit«>la ~~l\~y

apphcablest ru1eof ~ ss1a1ee • • • • •• ~e/' COPY OF . . . . . .... /

•: :. • • • • ! . •• ; ; ORIGl'\JAL FILED IN ••• • • • 4 • • ••• .,,~ ,- Rf:E\ l S COUNTY <i, .-

i\ t o" CLERKS OFF ICE

. •. .. ,_.

25. LEASE SECURITY: Lessee shall take the higl1est degree of care and all proper safeguards 10 pro1ec1 said premises and 10 prevent theft of oil, gas, and other hydrocarbons produ~ from said lease This includes, bu! is not Jimi1ed to, the installauon of all necessary equipmen1, seals, locks, or 01her appropnate protecnve devices on or a1 all access points al 1he lease's production, gathenng and storage systems where 1heft of hydrocarbons can occur Lessee shall be hable for the Joss of any hydrocarbons resulnng from theft and shall pay 1he S1a1e of Texas royalttes thereon as provided herein on all oil, gas or other hydrocarbons Josi by reason of theft.

26. REDUCTIO ' OF PAYMENTS: If, dunng the pnmary term, a ponion oflhe land covered by tlus lease is included wi1hin the boundaries ofa pooled uni t that has been approved by 1he School Land Board in accordance witl1 Narural Resources Code Scc1ions 52.151-52.153, or tf, at any ttme after the expiration of the pnmary term or the ex1ended 1erm, 1his lease covers a lesser number of acres 1han the 101al amoun1 desenbed herein, payments tha1 arc made on a per acre basis hereunder shall be redu~ according 10 the number of acres pooled, released, surrendered, or otherw,se severed, so that payments de1errnmed on a per acre basis under 1he terms of tins lease during 1he pnmary 1em1 shall be calcula1ed based upon the number of acres ou1s1de the bowidanes of a pooled unil, or, 1f after tile expirauon of 1he pnmary 1erm, the number of acres acrually re1amcd and covered by 1h1s lease.

27. 1.JCCESSOR AND AS IG 'S: The covenants, cond111ons and agreemen1s con1amed herein shall extend 10 and be binding upon the heirs, execu1ors, adrmnis1ra1ors, successors or ass1b'llS of Lessee herein.

28. ANTIQUITIES CODE: ln 1he even! that any feature of archeological or historical mtercs1 on Permanent School Fwid Land is encountered dunng the acuvi11es authonzed by 1h1s lease, Lessee will 1mmed1a1ely cease acnvities and will 1mmed1ately notify 1he General Land Office (ATrN. Archaeologis1, Asset Management Division, 1700 N Congress Ave, Austin, Texas 78701) and the Texas H1s1orical Comm1ss1on (P.0 Box 12276, Austin, TX 78711) so 1hat adequate measures may be undenaken 10 pro1ec1 or recover such d1scovenes or findings, as appropriate. Lessee

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1s expressly placed on nouce of the National Historical Preservanon Act of 1966 (PB-89-66, 80 Statute 915, 16 US.C.A. 470) and the Annqmties Code of Texas, Chapter 191, Tex Nat. Code Ann (Vernon 1993 & Supp. 1998). On sia1e-owned land no! dedica1ed 10 the Permanent School Fwid, lessee shall notify the Texas Historical Commission before brealong ground at a proJcct 1 location. An archaeological survey might be reqmred by the commission before construcuon of the proJect can commence Further, in the event that any site, object, location, artifact or other feature of archaeological, scientific, educational, culrural or historic interest ts encountered during 1he ac11vi11es au1horize by this lease, lessee will immediately no11fy lessor and 1he Texas 1 His1orical Commission so 1hat adequate measures may be undenaken to prolcct or recover such discoveries or findings, as appropriate

5 29. VENUE: Lessor and lessee, mcludmg lessee's successors and assigns, hereby agree thal venue for any dispule arising out of a provision of this lease, whetl1er express or implied, regarding

interpretation of thts lease, or relanng many way 10 lhts lease or 10 applicable case Jaw, staruies, or admm1s1ra1ive rules, shall be in a coun of compclent Jurisdic11on located in Travis Couniy, S1ate of Texas

30. LEA E FILING: Pursuan1 to Chapter 9 of the Tex Bus & Com. Code,1h1s lease mus1 be filed of record m 1he office of1he County Clerk many coun1y in wluch all or any part of the leased premises ts located, and certified copies thereof mus1 be filed m !he General Land Office. The prescnbed filtng fee shall accompany 1he certified copies sent 10 the General Land Office.

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31. EXECUTION: Titis oil and gas lease mus! be signed and acknowledged by !he Lessee before ii is filed of record m tile COlmly records and in 1he General Land Office of the S1ate ofTexas. p

TESTIMONY WHEREOF, '"•= °" •i•"~"f "" C., •i io= of•hx O

•• ••• • • • • • • • • • •• • • • • •• • • ••• • •

... • • • • • • • • •• •• • • •••

COMMISSI NER OF THE GENERAL LA 'D OFFICE OFTIIE STATE OF TEXAS

APPROVED

Contents~ Legal 'fl\/YTV DC E,ec

5

TRUE & CORRECT COPY Of

OR!Gll\AL I !LED IN REEVES COUNTY CLERKS OFFICE

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STATE OF /e,'X/,t 5 (CORPORATION ACKNOWLEDGI\IE if)

cou ni oF %vvv:wt, f BEFORE ME, • • w,d~;.,.i ... on •. '""'' day"="'"""'"" ~~ S. NI 010 r,;

known to me to be the pe™>n whose name is subscnbed 10 the foregoing instrumenl, as ~Cv Vtc e- Pv l r / 1 ~ f of

0e/fu, o/e{,<L +,·¥} ~, ttwq f 4'1Ly ~ Pi l Utt ~ p1 &{our&{ !ffi~nd acknowledged to me !hat he executed the same

for the purposes and cons1derat1on therein expressed. 111 the capacuy stat~ d as the act and deed of said co~ration -

G,~'""'"""'""'""~'''""'d"h' J,f;, "'"' f',A,t,vc}t, ~ ·p~ Notary p bloc in and t r fuL ~Wt. . [e...xey~

(INDIVlDUAL ACKNOWLEDGMENT)

COUNTY OF __________ _

Before me, the undersigned authomy, on !his day personally appeared. ___________________ _

known to me to be the persons whose names are subscnbed to the foregoing instrument, and acknowledged to me that they executed the same for the purposes and consideration !herein expressed

Given under my hand and seal of office tl11s the ______ day of _____________ ~ 20. ____ _

Notary Pubhc in and for ____________ _

TRUE & CORRECT COPY OF

ORIGINAL FILED IN REEVES COU TY CLERKS OFFICE

Inst No. 15-03212 DIANNE 0. FLOREZ COllNTY ClERPf:

2015Apr 14 at 02:28 PM

·'

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~~s By: ER . EPUTY

•• ... • •• • • • • • • . • . • • • •• • • • . • •• • •• . • •• • ••• • ... 6

CERTIFICATE OF RECORD

THE STATE OF TEXAS, ) COUNTY OF REEVES. )

I, hereby certify that this Instrument with its certificates of

authenticity was FILED on the date and at the time stamped hereon and was duly RECORDED In the OFFICIAL PUBLIC RECORDS of Real Property of Reeves

County, Texas, as indicated.

Date Filed Lf-}'-/-/5 File# Jf-032-[ l- Vo1..lli1_PageS!J5

• • • •• • • ...

COG OPERATING LLC 600 W ILLINOIS AVE MIDLAND TX 79701

Accounts Payable BANKOFAMEJ..17 7 0 3 8 8 8

n:z___ 1110 "TX

Check No Check Date Check Amount

PAY Fifty Seven Dollars and Forty Cents

TO THE

ORDER OF

COMMISSIONER OF THE GENERAL LAND OFFICE OF THE STATE OF TEXAS 1700 N CONGRESS AVE STE 600 STEPHEN F AUSTIN BUILDING

AUSTIN TX 78701-1495

11• 0 0 3 3 7 s 2 it O 1.11•

"PLEASE OETACH AT PERFORATION ABOVE"

I 000895 I~ Payee


I COMMISSIONER OF THE GENERAL LAND ST ATE OF TEXAS M-117202 TXREl::000423/000 NORTH HARPOON 700126 SEC 4: 11.48 ACRE TRACT, BLK 6, H&GN RR COSVY LSEDATE: 01 /20/2015 OBL TYPE: RNT; DUE DATE: 01/20/2017; FREQ: ONCE REEVES TX; BOOK 1157/PAGE 575

Payee: COMMISSIONER OF THE GENERA OFFICE OF THE STATE OF TEXAS 1700 N CONGRESS AVE STE 600 •. -STEPHEN F AUSTIN BUILDING

AUSTIN, TX 78701-1495 Payee Tax I

Check Date: 11/01/2016

0033752401 11/01/2016 **************$5 7.40

1WO SIGNATURES REQUIRED FOR CHECKS OVER S200.000

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• • 'Pl.EASE DETACH AT PERFORATION ABOVE•••••• • • • •••••• •

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I 57.4'- • ••••• • I

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Check Amoun _t_ ~__,_I _ __ _

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57.40 I

•• • • • • • •• •• . • • • • • • • • • • .. ·- •••

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• • • • • • • •• File o. /Vlf' \ Ot-01::

{2...e"' k \ s- > r-a '{ c Coa 11 ty

Date Filed: _........\[ ..__/2:~\ / ........ lb _ __ _ By m\eorge P. Bush, Commissioner

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"PLEASE DETACH AT PERFORATION ABOVE"

Invoice# Oblig. Date Description Lessor Check Num..- 0033752.

mtinH1i,i TXREE000423/000

.. • • . ..

• •••• • • • •

••• • • • • •• •

• •••••• • • • •••••• • •

000895

01/20/2018 COMMISSIONER OF THE GENERAL LAND STATE OF TEXAS M- 117202 TXREE000423/000 NORTHHARPOON 7001 26

~ Payee

SEC 4: 11.48 ACRE TRACT, BLK 6, H&GN RR COSVY LSEDATE: 01/20/2015 OBL TYPE: RNT; DUE DATE: 01 /20/2018; FREQ: ONCE REEVES TX; BOOK 1157/PAGE 575 Payee: COMMISSIONER OF THE GENERA

OFFICE OF THE STATE OF TEXAS 1700 N CONGRESS AVE STE 600 STEPHEN F AUSTIN BUILDING

AUSTIN, TX 78701-1495 Payee Tax ID~

•

Check Date: 11/01 /2017

34,440.00

18703188

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Check Amount ~ 34,440.00


Accounts Payable

Check No

BANK OF AMERICA

18703188 Check Date Check Amount

l£L__ 1110 TX

0033752970 11/01/201 7 *********$34 440.00

PA y Thirty Four Thousand Four Hundred Forty Dollars and Zero ('onfc-

TO THE

ORDER OF



11• 0 0 3i 3i 7 5 2 9 7 0 11•

TWO SIGNATURES REQUIRED FOR CHECKS OVER S200.000

'PLEASE DETACH AT PERFORATION ABOVE' 'PLEASE DETACH AT PERFORATION ABOVE'

.. . . . . .. • .....

• • • .. ". . . . •••

• ' ..... • •

• •••••• • • I .

000895


STATE OF TEXAS M-117202 TXREE000423/000 NORTH HARPOON 700126 SEC 4: 11.48 ACRE TRACT, BLK 6, H&GN RR COSVY LSEDATE: 01 /20/2015 OBL TYPE: RNT; DUE DATE: 01 /20/2018; FREQ: ONCE REEVES TX; BOOK 1157/PAGE 575

.f>ayee: COMMISSIONER OF THE GENERA OFFICE OF THE STATE OF TEXAS 1700 N CONGRESS AVE STE 600

18703188

I

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STEPHEN F AUSTIN BUILDING

AUSTIN, TX 78701-1495 Payee Tax ID:~

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~ Payee Check Date: 11/01 /2017 ..i......:..... ------- ------

Check Amount ~ ---3_4_,440.~

··-. :· ... • • • • •• • • . ·:

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File No. ;Vt£ l l] 21>2-Rev\k l~ t+IA 'i'

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Date Filed : l\ { 13 [ [7 By B,.~ orge P. Bush, c:om::m~i:--ss-· - --~ 1oner


Accounts Payable BANK OF AMERICA

19703330 ~

1110 TX

Check No Check Date Check Amount

0033753487 11/06/2018 **************$5 7. 40

PAY Fifty Seven Dollars and Forty Cents

TO THE

ORDER OF



11• 0 0 3 3 7 S 3 '18 7 11•

'PLEASE DETACH AT PERFORATION ABOVE'


lWO SIGNATURES REQUIRED FOR CHECKS OVER S200,000

'PLEASE DETACH AT PERFORATION ABOVE'

Check Num~ 0033753~ mL111i·M,i Invoice # Oblig. Date Description Lessor

TXREE000423/000

• • . . . •••

• •••••• • • •

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000895

01 /20/2019 COMMISSIONER OF THE GENERAL LAND STATE Of TEXAS M-117202 TXR~E©.Ob423/000

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1 ~ Payee

NORTH HARPOON 700126 SEC 4: 11.48 ACRE TRACT. BLK 6, H&GN RR COSVY LSEDATE: 01 /20/2015 OBL TYPE: RNT; DUE DATE· 01 /20/2019: FREQ: ONCE REEVES TX; BOOK 1157/PAGE 575 Payee: COMMISSIONER OF THE GENERA

OFFICE OF THE STATE OF TEXAS 1700 N CONGRESS AVE STE 600 STEPHEN F AUSTIN BUILDING AUSTIN, TX 78701-1495

I Payee Tax ID: tllllllt'"

Check Date: 11/06/2018

57.40

1970333 (9

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1

Check Amount ~ i- 57.40

® File No. ____ _....l ..... \J....._..~ ........... 0---.d:-._..__ __

______________ County

E~ Date Filed: ___ -.....,........_~""""· .... /_!_/,__ __ _

By

George P. Bush, Commissioner~

. ... • ... ~ . • ... • • . . • ••• • . • • • . • . • • • • . . • . • • • • .. .. • • • .. . .

Lease Type Control Basefile County ~1 · 2019. 5. 6. · 01-10-247 140112.lb 01/12/15 34, 440 . 00 0 . 00 34,440.00 bonus amt - jan 2015 lease sale - ma-73273 in reeves county , tx

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