A joint operating agreement is something commonly used in the oil and gas industries in California. If you are interested in getting into these industries, then you have likely heard of a JOA. The Oil & Gas Financial Journal explains that this type of agreement is part of establishing a joint venture. There is no one set format for a JOA that you have to use, but there are some common items typically included in all JOAs.
Most agreements will state the parties involved, their responsibilities and roles within the joint venture, liabilities, how costs are determined and handled, allocation of the materials obtained, dispute resolution terms, instructions for how a party may leave the joint venture and how to transfer interest. You will notice that the parties to a JOA are usually identified as operators or non-operators. Operators are those who handle the daily duties whereas non-operators are more financial contributors. Interests and rights to vote on what happens within the joint venture are usually equal for both operators and non-operators.
JOAs are commonly used because they can help you find success in the difficult oil and gas industries. These industries have a high risk and require a lot of capital, especially at start up. Working with a partner or a group of people helps reduce individual risks and enables you to have a better chance of obtaining the money needed to get operations off the ground. This information is only intended to educate and should not be interpreted as legal advice.