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During periods of operator financial stress, some lessors want their royalty payment receivables secured. A sample of a lessor’s lien covenant is:
First Lien On Production. Lessor shall at all times have, and Lessee does hereby grant unto Lessor, a security interest in and a first lien upon Minerals produced from the Leased Premises, and upon all rigs, tanks, pipes, wellhead equipment and machinery of Lessee owned and used by Lessee in the production and handling of such Minerals, as security for the payment or delivery of the royalties provided for herein and the faithful performance of the obligations assumed by Lessee hereunder. Lessee hereby agrees to execute, to deliver unto Lessor, and to record such other documents such as forms UCC-1 necessary to perfect Lessor’s security interest and lien as herein granted.
Copyright 2011 by Edward G, Hawkins. All rights reserved.