When a potential offset well obligation is identified by PrairieSky on its lands, the following process will apply:
1. An Offset Notice will be issued to all those parties recognized at that time as legally bound and liable under the lease or governing agreement to satisfy that offset obligation. If more than one party is responsible to satisfy the offset obligations, they may appoint a single party to respond to the Offset Notice by completing and returning an Authorization Form (Word). PrairieSky Royalty will only correspond with those recognized parties and cannot accept responses or authorizations from other unrecognized parties (for further information please refer to Lease Assignments and Devolution of Title).
2. The parties receiving an Offset Notice are asked to complete and submit a standardized Offset Notice Response Form (Word), unless otherwise indicated in the Offset Notice. This document can be completed and printed online.
3. The Offset Notice Response Form allows the obligated parties to elect one of four options, to the extent permitted and in accordance with the applicable lease or governing agreement:
(i) notify us if there is a well on the PrairieSky lands producing from the offset formation which satisfies the obligation per the terms of the lease or governing agreement;
(ii) extend the time required to commence driling a well by paying a compensatory royalty based on production from the offsetting well(s) based on the terms of the lease or governing agreement;
(iii) surrender lands and/or formations per the offset clause of the lease or governing agreement; or
(iv) request a technical review of the Offset Notice with submission of technical data to support a claim that an offset is not valid.
Many of PrairieSky’s leases or agreements do not include the option to recomplete an existing well to satisfy an offset obligation. Under certain circumstances however, PrairieSky Royalty will consider a proposal to recomplete a well to satisfy an offset. Approval is at the sole discretion of PrairieSky. Recompletion proposals will be reviewed internally only by PrairieSky technical staff and will be handled in confidence.
Leases or Agreements that do not provide for payment of a Compensatory Royalty
Certain PrairieSky’s leases and agreements do not include an option to pay a compensatory royalty. Under some circumstances, however, PrairieSky may offer an option to pay a compensatory royalty to satisfy an offset. The offer of a compensatory royalty option, where it is otherwise not provided for, will only be open for acceptance if all obligated parties respond to the Offset Notice within the requested timelines.
Where the offset provision of the lease or governing agreement does not provide for surrender of non-producing formations or payment of a compensatory royalty, PrairieSky may alternatively, at is sole discretion, offer an obligated party one of the following forms of agreement to satisfy an offset obligation:
If PrairieSky offers one of these alternatives, PrairieSky will prepare and forward the applicable document, in a substantially similar form, for the obligated party's execution. The sample agreements are included here for information only, are subject to change without notice and do not create any binding obligations on PrairieSky to enter into any such form of agreement with an obligated party.