California Oil and Gas Law Blog

You have been approached with the possibility of joining forces with another industry leader in California to arrange an oil and gas transaction that has the potential to become extremely successful. One of the first things you will be required to do is to form a contractual agreement that will detail which party will be responsible for which requirements and their subsequent outcome. Preventing contract disputes is something you must proactively be aware of in order to maintain a functional agreement. 

One of the best ways to prevent contention and misunderstanding from infiltrating your ability to operate with confidence and success is to take your time negotiating your contract from the very start of communications. According to Entrepreneur, you should maintain the mindset that articulating a contract is going to take a bit of time to accomplish. Break it down into sections and focus time on each aspect of the contract. A term sheet can give you direction as to which specific clauses you want and need to include in your content. 

Whenever you have the opportunity to explore a new area, you are going to have to create a plan for how you are going to get from considering your options to finalizing a sale. In many cases, you will be one of several interested contractors who are going to need to show the seller why you are the best fit for potential exploration. At Ehrlich Pledger Law, LLP, we have helped many companies in California with the legal side of natural resource exploration. 

While pitching and making an effective sale is a compilation of many different skills, one of the most important skills that you will need to have is negotiation. This skill allows you to discuss details with the seller in a manner that will allow you to create a deal that is beneficial to both parties, without compromising too much of what you desire. According to Forbes Magazine, in order to be able to negotiate effectively, you should remember the following:

• Select a time and setting to make your pitch that is appropriate and strategic.
• While using a persuasive tone of voice, avoid involving too much emotion.
• Make sure you have your facts straight before making any false assumptions.
• Know when to be silent and listen to the other side.

You have recently discovered a promising opportunity to initiate a new oil exploration effort in California. This will require you to coordinate and implement a contractual agreement that will protect your rights, as well as the rights of the landowner and his or her property and assets. At Ehrlich Pledger Law, LLP, we have helped many people to secure beneficial contract agreements that provide protection and clarification. 

While you may be influenced by the promise of making considerable money once your contract is in place and exploration begins, it is imperative that you remember that securing a good contract is about more than negotiating significant financial agreements. According to geology.com, other important parts of the contract that you should read thoroughly, and verify that all parties understand the language of, include the following:

• Property reservations where mining is not allowed.
• Guidelines and agreements related to the protection of the owner's property, including buildings, livestock and roads.

As you are probably aware, the oil and gas industry can be a highly lucrative business to be involved in. As one of the many competitors in California, one of your biggest challenges will be to strategize and come up with creative ways to stay ahead of your competition. One of your options is to collaborate with other industry leaders to form a joint operating agreement. Understanding how this type of relationship functions is critical to pursuing an agreement that is rewarding, trustworthy and successful. 

According to Chron, a joint operating agreement is often decided when a certain project or end goal is in need of being completed. The agreement itself consists of a few important parts including the following:

• Description of operations: This portion will discuss how you and the other parties have arranged responsibilities. Notes should be included to describe how certain components will be delegated and under what parameters goals will be accomplished. Examples of what you could include are hours of operation, drilling zones and approved drilling techniques. 
• Financial interests: Under this section of the contract, you should clarify how financial interests will be protected in various circumstances such as dissolution or in scenarios where your agreement does not work out as planned. 
• Rights and responsibilities: Chances are you and the other party both have desired outcomes to the agreement. This section allows you to determine what each other's rights are and what each of your responsibilities are in order to uphold a functional agreement.