Dry Hole Agreement

Dry hole contribution: a payment (cash or in the area) that is only required if a test well is unsuccessful and in exchange for well test and evaluation data. U.S. Dept. Energy, Energy Information Administration`s Energy Glossar … Energy Notes There are many other special agreements that are used in oil and gas exploration and development. Whenever two or more labour owners decide to share the risk of drilling, development or operations related to oil and gas extraction, they enter into what the industry calls a Joint Venture Agreement or simply an enterprise agreement. The JOAjoint Enterprise Agreement generally provides that one of the parties operates as an operator of the parties in the common territory covered by the JOAjoint Enterprise Agreement. In addition, the operation for which the JOAjoint operating agreement was concluded (drilling a well) is defined and how costs and revenues are distributed, assessed and accounted for. In addition, it provides for the rights of each party to the production received and determines how leases are acquired, maintained, transferred and sold. Due to the diversity of ownership of oil and gas interests and/or the need to share economic risks, the oil and gas industry has entered into a number of different contractual agreements.

The most common types of contracts are farm outs-farm-ins or commercial well agreements and common enterprise agreements. The age of technology can also push companies into dry holes if they are not able to adapt and produce products and services that are always in demand. Palm, for example, specializes in the manufacture of personal digital assistants or PPAs. The introduction of smartphones, which have replaced the capabilities of PPAs, has reduced this sector until even Palm can no longer maintain its operation. Leasing agreements include situations in which two or more parties trade rights and shares in an oil and gas lease in one geographic area for rights and interest in another. Traditional and older industries may face dry situations when their customer base declines to a negligible level that a company can no longer support.

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