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.
Oklahoma Cost Overruns for Non-Operator's Non-Consent Option: The Oklahoma Cost Overruns for Non-Operator's Non-Consent Option is a provision that allows non-operating working interest owners in oil and gas leases to avoid liability for cost overruns in drilling and development operations. This option is crucial for non-operators who want to limit their financial exposure and retain control over their investment. In a typical oil and gas lease, the non-operator is given the opportunity to participate in the drilling and development of a well. However, they also have the option to elect non-consent, which means they can choose not to participate incurring any drilling or developmental costs. By non-consenting to operations, non-operators bear no responsibility for the expenses associated with the well. In cases where non-operators decide to non-consent, a Cost Overruns provision comes into play. Cost overruns occur when the actual expenses incurred during drilling or development exceed the original projected costs. These overruns can result from unforeseen circumstances, such as encountering unexpected geological formations, essential equipment malfunctions, or uncontrollable problems with the drilling process. The Oklahoma Cost Overruns for Non-Operator's Non-Consent Option comes with different types, including: 1. Dry Hole Non-Consent: This type applies when a well drilled under the non-operator's lease is deemed non-commercial or "dry," meaning it contains insufficient quantities of oil or gas to be economically viable. In such cases, the non-operator will not be liable for any drilling or developmental costs associated with the dry well. 2. Commercial Non-Consent: This type applies when the well drilled under the non-operator's lease is discovered to be commercially viable, despite the non-operator's non-consent. The non-operator will not be responsible for any cost overruns associated with the well's development beyond their original share of the costs. 3. Limited Liability Non-Consent: Under this type, the non-operator's liability for cost overruns is limited, usually to a predetermined percentage of the original share of the costs. This provision provides some protection to the non-operator by capping their financial exposure to unexpected expenses. The Oklahoma Cost Overruns for Non-Operator's Non-Consent Option is crucial for non-operators as it shields them from the financial risks associated with drilling and developmental costs beyond their consented investments. This provision allows non-operators to remain involved in oil and gas leases while maintaining control over their financial outlays. It is essential for non-operators to carefully review and understand the specific terms of the Cost Overruns provision before electing the non-consent option to ensure their financial interests are adequately protected.
