1. Beau Williams owns 160 acres in Coleman County, Texas. On March 1, 2019 Beau Williams signed a five-year lease agreement with Frost Oil Company (Frost), upon signing the lease Beau received a one-time payment of $6,400. One year later, March 1, 2020, Frost had not yet drilled a well, Beau received a payment of $500. On November 30, 2020 Frost drilled a successful well and Beau started receiving payments of approximately $1,250 a month.

REQUIRED

1. What is the $500 payment called?
2. What is the $1,250 payment called?
3. Is Frost Oil Company required to make another payment on March 1, 2021?
4. Assume, Frost had not begun drilling on March 1, 2020; by what date must drilling commence to keep the lease from terminating?
5. How many years will the lease continue?