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.
The South Dakota Cost Overruns for Non-Operator's Non-Consent Option is a legal provision that occurs in the oil and gas industry. It allows non-operators of a drilling project in South Dakota to choose not to participate financially in cost overruns associated with the project. When an operator embarks on an oil or gas drilling venture, certain expenses may exceed the initial budget. These additional costs, often referred to as cost overruns, can arise due to unforeseen circumstances such as unexpected well bore conditions, challenging geology, or equipment failure. In such cases, the operator may need to secure additional funds to cover these expenses and prevent delays or complete cessation of drilling operations. The South Dakota Cost Overruns for Non-Operator's Non-Consent Option grants non-operators the right to refuse participation in the funding of these cost overruns. Non-operators are individuals or companies that have an ownership interest in the project but do not have direct control or decision-making authority. By exercising this option, non-operators can avoid shouldering the financial burdens associated with the cost overruns. There are several types of South Dakota Cost Overruns for Non-Operator's Non-Consent Option, including: 1. Non-Consent Penalty Option: This option allows non-operators to decline funding for cost overruns but incurs a penalty. The penalty can take the form of a reduction in their share of future profits or the forfeiture of their ownership interest in the project. 2. Non-Consent Well bore Option: With this option, non-operators can choose not to fund cost overruns specifically related to well bore activities. Well bore refers to the hole drilled into the earth to extract oil or gas. By opting out of funding wellbore-related cost overruns, non-operators limit their financial exposure to these specific expenses. 3. Partial Non-Consent Option: This option gives non-operators the flexibility to partially participate in covering cost overruns. They can choose to contribute a specific percentage or amount towards the additional expenses, relieving themselves of complete financial obligations. The South Dakota Cost Overruns for Non-Operator's Non-Consent Option serves as a protective mechanism for non-operators, allowing them to manage their financial risks in oil and gas drilling projects. It is important for non-operators to carefully evaluate the potential consequences and implications of exercising this option, considering the long-term impact on their ownership interest and profitability within the project.
