This ia a provision that states that any Party receiving a notice proposing to drill a well as provided in Operating Agreement elects not to participate in the proposed operation, then in order to be entitled to the benefits of this Article, the Party or Parties electing not to participate must give notice. Drilling by the parties who choose to participate must begin within 90 days of the notice.
Hawaii Farm out by Non-Consenting Party is a legal term used in the oil and gas industry to describe a specific type of agreement or arrangement between parties involved in oil and gas exploration and production activities. This arrangement typically arises when a working interest owner or operator of an oil and gas lease in Hawaii proposes to drill a new well or develop an existing well in a particular area, but not all co-owners or joint interest holders agree to participate or contribute their share of the costs. In this scenario, the working interest owner who wishes to proceed with drilling, known as the "consenting party," may enter into a farm out agreement with the non-consenting parties. The farm out agreement allows the consenting party to transfer a portion of its working interest to the non-consenting parties, who will then bear a proportionate share of the drilling and development costs. The Hawaii Farm out by Non-Consenting Party can be further categorized into two key types: 1. Traditional Farm out: Under this type, the non-consenting party receives a transfer of working interest in the lease in exchange for contributing a portion of the drilling and development costs. The non-consenting party may have the option to buy back its interest in the lease after completion of the well, subject to certain terms and conditions outlined in the farm out agreement. 2. Carried Interest Agreement: This type of Hawaii Farm out by Non-Consenting Party involves the consenting party covering all the drilling and development costs on behalf of the non-consenting party, who will receive a pre-determined share of the production revenues generated by the well. In this case, the non-consenting party typically does not have an option to regain its working interest or buy back into the lease. Hawaii Farm out by Non-Consenting Party arrangements are commonly utilized to mitigate risks associated with high-cost exploration and development projects, as well as to ensure mutual benefits for all parties involved. It allows for the efficient utilization of resources and the advancement of oil and gas operations in Hawaii, contributing to the overall economic growth and energy production in the region.
