Heritage has structured its lease terms to make it convenient and cost-effective for Lessees to produce its resources, while also protecting the interests of Heritage. This is in accordance with our philosophy of developing relationships.
Heritage’s leases typically include:
- Bonus – The bonus is a negotiable one-time fee payable to Heritage upon entering into a lease agreement.
- LOR – The Lessor Overriding Royalty is a contractually agreed percentage of the production of leased substances payable to Heritage that result from developing the lease. It may be payable to Heritage either in kind (i.e., as actual oil or natural gas volumes) or in cash, depending on Heritage’s election. The LOR rate is negotiated between the Lessor and the Lessee.
- Rent – A yearly fee paid on a per-acre or per-hectare basis.
- Tax – Freehold Mineral Tax is due on production and landholdings in all three provinces where we hold lands, and is billed annually by Heritage to the Lessee.
- Leased Formations – Leases may include all substances and formations from surface to basement, or may only include a specific formation or substance, depending on the needs of the Lessee.
- Rights Reversion – Heritage’s current lease form stipulates that at the end of the lease’s primary term, the rights to all non-producing formations and spacing units shall revert to Heritage, and Heritage shall be free to lease rights to these zones to other parties.
In addition to our primary business of leasing, Heritage also holds gross over-riding royalties (GORRs) on a number of properties owned by other parties. Heritage is actively looking for new opportunities to obtain additional GORR interests, including the possibility of investing in E&P companies by providing capital for their exploration programs in return for a “manufactured” GORR. This is a royalty on the production that results from the drilling program that was funded by our investment.