CMA Lease & Contract Analysis Flashcards
6 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CMA Lease & Contract Analysis flashcards as text
Which term describes the right of a mineral owner to receive royalties from production without bearing any costs of exploration or production?
Answer: Non-participating royalty interest (NPRI)
A non-participating royalty interest entitles the owner to a fraction of gross production royalties without any right to lease or participate in production costs.
What is an 'overriding royalty interest' (ORRI) in a mineral lease?
Answer: A royalty interest carved out of the lessee's working interest that expires when the lease terminates
An ORRI is a royalty interest carved out of the lessee's working interest; it is cost-free and terminates when the underlying lease expires.
A mineral appraiser must assess a lease with a 'continuous development clause.' What does this require of the lessee?
Answer: To continuously drill new wells within specified time intervals to maintain the lease
A continuous development clause requires the lessee to drill successive wells within defined time windows, preventing the lessee from holding large acreage with minimal drilling.
What does 'commingling' refer to in the context of mineral production and leases?
Answer: Mixing production from multiple leases or wells before measurement
Commingling is the mixing of production from different leases or formations prior to measurement, which can create royalty calculation and allocation disputes.
In lease analysis, what is the significance of the 'cessation of production' clause?
Answer: It defines the grace period allowed before a lease terminates due to interrupted production
A cessation of production clause grants the lessee a defined window of time to restore production before the lease automatically terminates due to a production stoppage.
Which type of mineral agreement grants the recipient the right but not the obligation to lease or purchase mineral interests within a defined area and time?
Answer: Option agreement
An option agreement gives the holder the right—without obligation—to lease or acquire mineral interests under specified terms within a defined period.