prairiesky fee leases kathy luther, manager lease...

PrairieSky Fee Leases

Kathy Luther, Manager Lease Compliance

CAPLA, January 27, 2015

OPEN BUSINESS for

for

The small print

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• This Presentation and any accompanying material or ensuing discussions

during or after are for informational purposes only and do not

constitute legal conclusions or legal advice from PrairieSky Royalty Ltd.

• This Presentation is based on generalizations

• The specific terms of your Lease will prevail

Agenda

• Who are We?

• History of PrairieSky’s Fee Lands

• Review of lease terms

• www.prairiesky.com Lease Compliance Information

• Lease Continuation Application

• Offsets

• Royalties and Deductions

• Lease Assignments

• Contest Time

• Questions?

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http://www.encana.com/

Who Are We?

• Created from Encana’s royalty interests in Clearwater BU

• Initial Public Offering May 27, 2014

• Included Fee Titles as well as GORR’s

• Publicly traded as PSK

• Unique Company

• A Royalty Company - Not an E&P company

• Do not intend to drill wells, explore for, or develop petroleum or natural gas

• Growth through third-party development of our properties to increase royalty revenue

• Minimal or no operating costs, capital costs, environmental liabilities or reclamation obligations

• Collaborative approach to interactions with lessees

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History of PrairieSky Fee Title Lands

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1881Canadian Pacific Railway Main Line Land Grant

History of PrairieSky Fee Title Lands continued

“Railway executive William Cornelius Van Horne swooped into Winnipeg and took CPR in his hands like a giant whip.

He cracked it once to announce his presence,

cracked it again to shake loose the sloth and corruption and

cracked it a third time simply because

the first two felt so good.

The railway didn’t know what hit it…”

Lords of The Line, 1989

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Go West, Young Man

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• 1958

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• May 2014 Encana IPO creates PrairieSky

• December 2014 Range Royalty amalgamated into PrairieSky

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PrairieSky Fee Title Ownership

• Largest Freehold Mineral

Title owner in Canada

• ~18,600 Mineral Fee Titles

• ~ 5.3 MM acres of Fee land

• ~ 17,000 active Fee Leases

• > 200 Lease forms

• ~3.6 MM acres GORR’s

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PrairieSky 2014 Fee Lease

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• Two parts

• Specific Terms

• General Terms and Conditions

• Specific Terms

• Lessor & Lessee

• Lease Date

• Leased Lands, Substances, Formations

• Type Log

• Royalty Rate

• Primary Term

• Rental rate

• Special Provisions

• Signatures

Drilling and Production Operations

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“Drilling Operations” means:

• spudding, drilling a well for production of Leased Substances to and including the commencement of Production Operations or abandonment

“Production Operations” means any of:

• production of Leased Substances;

• completion operations;

• including the installation of the production casing, tubing and wellhead equipment and all other equipment and material necessary for the permanent preparation of a well for the production of Leased Substances in Paying Quantities;

• equipping and tie-in of a well;

• re-working, fracture stimulating, acidizing or stimulating of a well; or

• injection or production of water or other substances for the purpose of producing or increasing production …

Lease Continuation - Clause 2 (b)

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Continued if:

• Production Operations diligently and continuously conducted +

• Continuation Application Form submitted +

• Rental for the upcoming year

What continues?

• those Leased Lands that are contained within the Spacing Unit of a well, and

• those Leased Formations within that well where Production Operations are being diligently and continuously conducted

Downspacing versus Holdings

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• Gas downspaced to quarter section

• Spacing is now similar to oil = A gas well must

be drilled in each quarter to continue full section

• https://www3.eub.gov.ab.ca/EUB/DDS/spacing/

wellspacing.aspx

• Example 1: Well drilled continues NW quarter

section only

• Gas Holding – 4 wells per section

• Has no affect on the spacing unit

• Changes well density only

• Example 2: Any producing lease well continues

full section spacing unit

Downspacing Holdings

PrairieSky Website – Lease Compliance

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www.prairiesky.com/land-managment/lease-compliance

http://www.prairiesky.com/land-managment/lease-compliance






Continuation Application: Production Operations

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Continued beyond primary term by one of two methods:

Production Operations

• Circa 2000 – today

• Lease forms = PSK 2014, ECA, Parkland, Sliding Scale (S/S)

• What continues = Formations with Operations

• Available on www.prairiesky.com

Producing or Capable Well • Circa 1980 - 1999

• Lease Forms = 551 and variations

• What continues = to the base of the Deepest Formation capable or producing

• Available on request

Continuation Spreadsheet available on request

Q: Are there other types of Leases ????

http://www.prairiesky.com

Production Operations - Part 1

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Groups vs. Formations

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AG

E

CR

ETA

CE

OU

S

JU

RA

SS

IC

ERCB TABLE OF FORMATIONS, ALBERTA

Example of

stratigraphic

equivalents:

Bow Island/Viking/

Paddy-Cadotte

Colony/Notikewin

Upper Mannville/

Spirit River/Falher

Glauc/Cummings/

Bluesky

Sawtooth/Shaunavon/

Rock Creek

Groups versus Formations

Groups vs. Formations

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1283m

1192m

1294m

1257m

1206m

1269m

1250m 1235m

Horizontal Wells & PAUA’s

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“If a horizontal well straddles more than one Spacing Unit without common mineral

ownership at both the lessor and lessee level, then Lessee shall….. enter into a

production allocation unit agreement…”

Scenario 1: Scenario 2:

Scenario 3:


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Production Operations: Example 2 - No current production

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Continuations for Producing/Capable Leases

• Very few leases of this type in primary term

• Producing or Capable Well • Circa 1980 - 1999

• Lease Forms = 551 and variations

• What continues = to the base of the deepest formation capable or producing

• Continuation Application Form is available on request by emailing [email protected] or contacting your PrairieSky Lease Administrator

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mailto:[email protected]



Producing/Capable - Lease Information: Part 2

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* No rental cheque required if producing

* No production requires Shut-In Well Payment

Producing/Capable – Part 3 Continuation Requested

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Offset Obligations

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PSK Fee Land Offset Well

Offset formation Producing formation http://www.fhoa.ca/

Offsets

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• Triggering wells

• 90 days of production

• drilled before or after lease date

• Lateral spacing units for older leases

• Offset Notice

• Response forms

• Well already producing from that formation

• Surrender (all non-producing formations)

• Pay Compensatory Royalties

• Separately for each offset formation

• Based on Highest Producing Offsetting Spacing Unit

• Provides additional time to drill the offset well

• Technical Review request

• Provide mapping or other evidence indicating the offset formation is not present

History of Offset (Remedy/Election) Options

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www.prairiesky.com/land-management/lease-compliance/

Options to Comply

1. Drill

1. Drill

2. Surrender

1. Drill

2. Surrender

3. Compensatory Royalty Payment

Time Line

1950

1965

1990

}

}

} Present

*Dates are approximate

http://www.prairiesky.com/land-management/lease-compliance/





Royalty Rates & Deductions

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Royalty Rates

• Majority of leases are Fixed Royalty Rates

• Sliding Scale Leases • 80% of 2009 Crown Sliding Scale Royalty Rate (no holidays)

• Minimum = 4% + Freehold Mineral Tax

• Maximum = 40%

Deductions

• Majority of leases are “No Deductions”

• For those leases that do allow deductions:

• Actual costs of facilities utilized by each well

• NOT Crown GCA

PrairieSky Lease Assignments

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• Lease Notices are addressed to Registered Lessees

• Lease Assignments versus Contractual NOA’s • Lessee registered interest not working interest or beneficial

interest • Requires PrairieSky’s execution • No Partnerships or Trustco’s • No Partial Assignments

• PrairieSky’s Assignment Agreement • Online Assignment Agreement • Recent changes to expedite Assignments

• No Longer includes the leased formations • PrairieSky may strikeout leases if

• Errors in Lease Schedules • Leases with outstanding royalty issues

• Lease Interest Clarification Agreement • Used when there is a break in chain of title • Sample agreement on our website

Contest Time

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1. What was the minimum price charged by CPR for land sold to the European settler’s?

a) $2.50/acre

b) $250/acre

c) $2.50/Ha

2. Only wells drilled after the lease date can trigger an offset obligation - True/False?

3. Which company was recently amalgamated into PrairieSky Royalty Ltd.?

a) Encana Corporation

b) Range Royalty

c) Ranger Oil & Gas Ltd.

Contest Answers

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1. What was the minimum price charged by CPR for land sold to the European settler’s?

a) $2.50/acre

b) $250/acre

c) $2.50/Ha

2. Only wells drilled after the lease date can trigger an offset obligation - True/False?

3. Which company was recently amalgamated into PrairieSky Royalty Ltd.?

a) Encana Corporation

b) Range Royalty

c) Ranger Oil & Gas Ltd.

Q & A

Questions?

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Thanks for helping us transition from Encana to PrairieSky,

&

Wishing all our lessees much success in their 2015 operations!

Thank you and…

prairiesky fee leases kathy luther, manager lease...

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