The royalties payable to the Lessor under this lease shall be well by well on a Before Pay Out ("BPO") and After Pay Out ("APO") basis. As to each and every well completed as a producer on the leased premises or on lands pooled therewith, the royalties paid to Lessor shall be one-eighth (1/8) BPO and one-fifth (1/5) APO. For the purposes of this provision "Pay Out" shall mean that point in time when Lessee, its successors and/or assigns, shall have recovered out of 87.5% of the gross production attributable to the applicable well, all of its costs of drilling, logging, testing, completing and equipping such well, plus the lease bonuses, delay rentals and similar lease payments attributable to the lands and leases comprising the well unit.