Effective monitoring of the Term clause in each lease agreement ensures that Heritage’s mineral rights are developed to their full potential, in accordance with the lease, and that non-producing zones are available for re-lease.

The Term clause may differ from lease to lease, but typically has the following attributes:

Primary Term: The Primary Term is a specified period (e.g., two or three years) during which all rights leased are intact and within which the Lessee must conduct drilling or production operations on the land to hold the lease past the expiry date. Upon expiry, the Lessee must demonstrate that drilling or production operations are being conducted on the lands, or lose the lease.

Continuation: Continuation refers to the extension of a lease beyond the Primary Term if the Lessee fulfills certain conditions in the lease, for an additional term or an indefinite period. A lease is continued if the Lessee can demonstrate that drilling or production operations are being conducted on the lands and that the lease remains otherwise in good standing. It is the Lessee’s responsibility to apply for continuation at the end of the Primary Term by providing the required production information to Heritage. See this page for continuation application form.

Post-Primary Term: The period of time that commences at expiry of the Primary Term for continued leases.

Rights/Spacing Unit Reversion: If present in the lease form, rights and/or spacing unit reversion permits Heritage to repatriate non-producing mineral rights and/or spacing units, creating the opportunity for Heritage to re-lease the non-producing rights or spacing units to other parties. Types of rights reversion are specified in the lease form and may include deep rights reversion, zonal reversion or spacing unit reversion:

• Deep rights reversion allows for leased rights below the base of the deepest producing formation to be returned to Heritage;
• Zonal reversion allows for non-producing formations, including zones lying above or up hole from the zones that the Lessee has brought into production, to be severed from the lease agreement and returned to Heritage; and
• Spacing unit reversion allows for non-producing spacing units to be severed from the lease agreement and returned to Heritage.