This form provides that when Operator, in good faith, believes or determines that the actual costs for any Drilling, Reworking, Sidetracking, Deepening, or Plugging Back operation conducted under this Agreement will exceed a designated of the costs estimated for the operation on the approved AFE, the Operator will give prompt notice by telephone to the other Parties participating in the operation, as well as delivering a supplemental AFE estimating the costs necessary to complete the operation. Each Party receiving the supplemental AFE shall have forty-eight from receipt of the notice to elect to approve Operators recommendation or propose an alternative operation.
Guam Cost Overruns for Non-Operator's Non-Consent Option, also known as cost overruns in non-consent operations in Guam, refer to the additional expenses incurred by a non-operator when the operator of an oil or gas lease decides to proceed with drilling or other operations without obtaining consent from the non-operator. In the context of oil and gas exploration and production, a non-operator refers to a party that holds a working interest in a lease or well but does not actively participate in decision-making or operational control. The non-operator is typically not responsible for funding operations, but they still retain the right to receive a share of proceeds once production begins. However, if the operator decides to move forward with operations without obtaining consent from the non-operator, it triggers the non-operator's non-consent option, which allows them to retain their working interest while being exempted from shouldering any of the associated costs. This non-consent option is available under certain circumstances, such as when the non-operator is unable or unwilling to fund the operation. When the non-operator exercises their non-consent option, cost overruns can occur. These refer to the additional costs that arise beyond the initial budget or estimate. These overruns can be attributed to various factors, including unexpected geological complications, delays, equipment failure, changes in market conditions, or unforeseen environmental regulations. There can be different types of Guam Cost Overruns for Non-Operator's Non-Consent Option. These may include: 1. Development Cost Overruns: These occur when the costs associated with the development of a lease or well exceed the initially estimated budget. It can happen due to unforeseen difficulties encountered during drilling, such as encountering unexpected rock formations or encountering deeper reservoirs. 2. Operation Cost Overruns: Once a well or lease is in production, operational costs can also exceed the initial estimates. Factors such as equipment failure, changes in market prices, increased maintenance requirements, or regulatory compliance can contribute to these overruns. 3. Abandonment Cost Overruns: In some cases, if a non-operator decides to abandon their interest in a well or lease due to cost concerns or other factors, there could be additional expenses associated with plugging and abandoning the well or reclaiming the lease area. These costs can also exceed the initial budget and fall under the category of cost overruns. It is essential for non-operators to carefully evaluate the potential risks and costs associated with exercising their non-consent option and be aware of the potential for cost overruns. Understanding the specific circumstances and potential risks involved is crucial in determining whether to exercise the non-consent option or to negotiate an agreement with the operator to minimize any potential cost overruns.
