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.
New York Cost Overruns for Non-Operator's Non-Consent Option, also known as NY Cost Overruns for NOC, refers to a specific provision in the oil and gas industry. It is an agreement that outlines the financial responsibilities and consequences for non-operating interest owners who choose not to participate in additional costs incurred during drilling operations. When a drilling project exceeds its initial budget, the operator may require additional capital contributions to cover the cost overruns. However, in the case of non-consenting interest owners, who have chosen not to participate in the project's development, they may face specific consequences. Under the New York Cost Overruns for Non-Operator's Non-Consent Option, non-consenting interest owners can incur financial penalties or consequences which can result in the reduction or dilution of their ownership stake in the project. This provision aims to incentivize these non-operating interest owners to contribute their share of the additional costs to avoid potential financial loss. There are several types of New York Cost Overruns for Non-Operator's Non-Consent Option, including: 1. Specified Cost Overruns: This type refers to specific cost overruns incurred during drilling operations, such as unexpected geological challenges, environmental compliance requirements, or equipment failure. Non-consenting interest owners are generally responsible for their proportionate share of the additional expenses. 2. Penalty and Dilution: If non-consenting interest owners choose not to contribute their share of the cost overruns, they may face penalties or dilution of their ownership stake. Penalties could include reduced revenue distributions or additional charges. Dilution occurs when the non-consenting interest owner's percentage ownership in the project decreases as a result of their inability to cover the additional costs. 3. Negotiated Agreements: In some cases, non-operating interest owners may negotiate alternative agreements with the operator to address cost overruns. These agreements may involve different financial arrangements or allow for the sale of the non-consenting interest owner's stake to another party. However, the terms and conditions may vary depending on the specific circumstances and parties involved. 4. Legal Enforcement: If an agreement cannot be reached between the operator and non-consenting interest owner, legal action may be pursued. This can involve litigation to determine the rights and obligations of the parties involved, potentially resulting in court-mandated financial resolutions. In summary, the New York Cost Overruns for Non-Operator's Non-Consent Option is a provision in the oil and gas industry aimed at ensuring non-consenting interest owners bear their fair share of additional costs incurred during drilling operations. It serves as a mechanism to encourage cooperation and participation while enabling operators to proceed with necessary operations without financial burdens.
