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.
When it comes to oil and gas ventures, the Indiana Cost Overruns for Non-Operator's Non-Consent Option is an important aspect that needs to be understood. This provision addresses the potential situation where a non-operator in an oil or gas operation decides not to contribute funds to cover cost overruns. Let's delve deeper into this topic and uncover its different types. In an oil or gas venture, multiple parties are involved, including operators who are responsible for managing and conducting operations, and non-operators who have invested capital but do not participate directly in decision-making or daily operations. When a non-operator decides not to contribute additional funds for cost overruns, it triggers a crucial provision known as the Non-Operator's Non-Consent Option. 1. Traditional Indiana Cost Overruns for Non-Operator's Non-Consent Option: Under this option, the non-operator has the choice to either participate by contributing additional capital to cover cost overruns or opt for a non-consent option. By choosing the non-consent option, the non-operator essentially waives any rights to future revenues from the project. This means they will not receive any proceeds until the operator recoups the cost overruns from future production revenue. 2. Carried Interest Indiana Cost Overruns for Non-Operator's Non-Consent Option: In some cases, the non-operator may have the opportunity to select a carried interest option instead of completely forfeiting future proceeds. This option enables the non-operator to retain a certain percentage of future revenues, usually a reduced share, until the cost overruns are covered. However, the operator typically retains a higher share to compensate for the non-operator's lack of contribution. 3. Expenditure Cap Indiana Cost Overruns for Non-Operator's Non-Consent Option: Another variation of the non-operator's non-consent option is the expenditure cap. In this scenario, the non-operator agrees to cap its liability for cost overruns to a specific amount. If the total cost exceeds this cap, the non-operator opts out of contributing further and accepts the consequences mentioned above, such as a loss of future revenue or a reduced carried interest. Understanding the Indiana Cost Overruns for Non-Operator's Non-Consent Option is crucial for both operators and non-operators involved in oil and gas ventures. Operators must ensure they include clear provisions in contracts and agreements to address non-operator participation in cost overruns, while non-operators need to carefully consider the potential financial implications and risks associated with choosing the non-consent option or alternative variations.
