Offset compliance

Where our lease review indicates a potential offset well obligation, the following process will apply:

1. An Offset Notice will be issued to all recognized registered lessees. For leases with more than one lessee, lessees may appoint a single lessee to respond to the Offset Notice by completing and returning an Authorization Form (Word). This document can be completed and printed online. Encana will only correspond with legally recognized lessees and cannot accept responses or authorizations from other unrecognized parties (for further information please refer to Lease Assignments and Devolution of Title).
2. Lessees receiving an Offset Notice are asked to complete and submit a standardized Offset Notice Response Form (Word). This document can be completed and printed online.
3. The Offset Notice Response Form allows lessees to elect one of four options:
   • notify us that there is a well on the lease producing from the offset formation;
   • pay a compensatory royalty based on production from the offsetting well(s). Payment of a compensatory royalty will commence on the first day of the month following the date of our Offset Notice;
   • surrender all non-producing formations held under the lease; or
   • request a technical review of the Offset Notice. Lessees may submit technical data to support a claim that an offset is not valid.

Recompletions

A proposed recompletion of an existing well does not satisfy an offset obligation under the lease. However, under certain circumstances, Encana will consider a proposal to recomplete to satisfy an offset. Approval is at the sole discretion of Encana. Recompletion proposals will be handled in confidence and reviewed only by technical support staff in our Lease Compliance group.

Compensatory royalty offer

Regardless of the original lease terms, lessees will have the option to pay a compensatory royalty or surrender all non-producing formations. The offer of a compensatory royalty option where it is otherwise not provided for in the lease, will only be open for acceptance if the lessee responds to the Offset Notice within the requested timelines.

We have created a simplified Compensatory Royalty Calculator (Excel) to assist lessees in making their elections. It is intended only to provide an estimate of the compensatory royalty payable; lessees are advised to independently evaluate the data needed to use this calculator and apply whatever due diligence may be deemed necessary.

Amending agreements

Where the lease does not provide for surrender of non-producing formations or payment of a compensatory royalty, lessees may also be required to execute one of the following agreements:

• Partial Lease Continuation Agreement (Word)
• Compensatory Royalty Agreement (Word)

If one of these agreements is required, we will prepare and forward the applicable document for lessee's execution. The samples here are for review and information only and are subject to change without notice. Provision of these sample agreements for information purposes does not create any binding obligations on Encana.