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.
Kentucky Farm out by Non-Consenting Party refers to a specific legal agreement within the oil and gas industry that allows a non-consenting party to farm out its interest in a Kentucky-based oil or gas lease to another party. This arrangement often arises when a party that holds a working interest in an oil or gas lease fails to contribute its share of drilling or development costs. In such cases, the non-consenting party has the option to enter into a farm out agreement with another party, transferring its interest in the lease to them. This arrangement ensures that the development of the lease can proceed without delay or hindrance by allowing an interested party to step in and assume the non-consenting party's obligations. The Kentucky Farm out by Non-Consenting Party can take various forms, depending on the specific terms agreed upon by the parties involved. Some common types include: 1. Farm out Agreement: Under this agreement, the non-consenting party transfers a portion or all of its working interest to another party without completely relinquishing its ownership. The non-consenting party retains an overriding royalty interest, which entitles them to a percentage of the production revenues generated from the lease. 2. Option Agreement: In some cases, a non-consenting party may enter into an option agreement, granting another party the right to acquire its working interest in the lease at a later date. This allows the non-consenting party to recoup its investment in the lease while ensuring that the development continues seamlessly. 3. Participation Agreement: This type of farm out agreement involves the non-consenting party allowing another party to drill and develop the lease on their behalf. The non-consenting party retains an interest in the lease but is not directly responsible for funding the operation. Instead, they receive a percentage of the production revenues in return for their ownership interest. 4. Carried Interest Agreement: In a carried interest agreement, the non-consenting party transfers its working interest to another party, completely relieving themselves of any financial obligations. The party acquiring the interest assumes all costs associated with drilling and development. In return, the non-consenting party relinquishes any claim to future profits or revenues generated from the lease. In summary, the Kentucky Farm out by Non-Consenting Party is a legal mechanism that allows parties in the oil and gas industry to resolve financing and operational issues regarding the development of Kentucky-based leases. By entering into a farm out agreement, non-consenting parties can transfer their interests to willing participants, ensuring timely and efficient exploration and production activities while safeguarding their financial position.
