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.
The information in this article is intended for educational purposes only and should not be taken as legal advice.