Certain representations and warranties which are unique to oil and gas properties should be considered when preparing the Deed of Trust Security Agreement, Financing Statement and Assignment of Production, including:
•That the Working Interest (WI) and Net Revenue Interest (NRI) shown in the exhibit attached to the deed of trust are correct.
•That the NRI on scheduled oil and gas wells match the NRI of wells listed in the reserve report.
•That all current bills owed by the mortgagor have been paid.
•That the mortgagor has no liability under take-or-pay contracts and that the mortgagor has no refund liability under the Natural Gas Policy Act or other law.
•That the mortgaged leases are in full force and effect and the mortgagor is not in default thereunder.
•That the mortgagor is not in default under any material contract relating to the mortgaged properties.
•That the borrower is in compliance with all laws, regulations and orders such to the Texas Natural Gas Act of 1938; the Texas Hazardous Liquid Pipeline Safety Act of 1979; the Texas Petroleum Marketing Practices Act of 1979; the Texas Federal Power Act; the Texas Natural Gas Act Pipeline Safety Act of 1968; the Texas Mineral Leasing Act of 1920.
•That the borrower possesses all licenses, permits, franchises, exemptions, approvals and government authorizations necessary to operate oil and gas properties.
CAUTION: The borrower’s activities could negatively impact air quality, underground water supplies, wildlife and fisheries. Penalties can include extensive fines, loss of license, clean-up costs and litigation liability. Laws impacted - Clean Air Act, Clean Water Act and Safe Drinking Water Act.
•That reserve reports delivered are complete and accurate based upon opinions, estimates and projections.
•That the borrower has good and defensible title to oil and gas properties and good and marketable title for facilities.
•That the borrower is not responsible for contributions to drilling operations in greater percentage than the scheduled working interest.
•That the oil and gas properties have been maintained in good working conditions consistent with industry standards.
•That the borrower owns its geological, engineering and seismic data.
•That the oil and gas properties are not overproduced such that they cannot be produced at full and regular allowable levels by state regulatory body.
•That the mortgagor has no liability as an overproduced party under any gas balancing agreement.
•That the necessary rights-of-way to produce oil and gas properties have been obtained.
•That the borrower’s oil and gas wells (well bore to bottom hole) are located in and producing from their oil and gas properties.
•That no gas imbalances, take or pay, or other arrangements exist that would cause the borrower to deliver oil and gas without receiving full payment.
•That proceeds from production are being paid on time and production payments due to the borrower is not in suspend status.
•That borrower’s marketing agreements can be canceled on short term notice.