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.
Texas Cost Overruns for Non-Operator's Non-Consent Option refers to a specific provision in oil and gas leases that allows non-operating interest holders to opt out of participating in the payment of additional costs associated with a drilling project in Texas. This provision is often invoked when the estimated costs for drilling exceed the original budget. In the oil and gas industry, it is common for drilling projects to encounter unforeseen circumstances that result in cost overruns. These can include technical challenges, equipment failures, regulatory delays, or unexpected geological conditions. When such situations arise, the non-operating interest holders, who do not have decision-making power and are not directly involved in the day-to-day operations, may choose to exercise their non-consent option to avoid financial responsibility for the additional expenses. The Texas Cost Overruns for Non-Operator's Non-Consent Option provides protection for non-operating interest holders by allowing them to retain their ownership interest in the lease while avoiding the financial burden associated with the unexpected costs. By exercising this option, non-operators forfeit their right to share in the production revenue from the well, but they are also relieved of any obligations to cover the cost overruns. Different types of Texas Cost Overruns for Non-Operator's Non-Consent Option may include: 1. Drilling Cost Overruns: Occur when the actual drilling expenses exceed the budgeted amount. This can be due to various factors such as changes in drilling techniques, equipment malfunctions, or unexpected geological formations. 2. Completion Cost Overruns: Refer to situations where the costs associated with completing and preparing the well for production, such as casing, cementing, and stimulation operations, exceed the initial estimates. These costs are usually incurred after the drilling phase. 3. Operating Cost Overruns: Relate to ongoing expenses incurred during the operation of the well, including maintenance, repairs, and equipment upgrades. These costs can accumulate over time and may also contribute to cost overruns. 4. Regulatory Cost Overruns: Stem from unexpected costs resulting from compliance with regulatory requirements. These can include delays in receiving necessary permits or the need to implement additional safety measures, which can lead to increased expenses. It is essential for non-operating interest holders to carefully evaluate the potential risks and benefits associated with exercising the non-consent option. While it may relieve them of financial liability for cost overruns, it also means missing out on potential revenue from successful oil or gas production. Proper understanding and analysis of the specific circumstances of the drilling project are crucial in making an informed decision regarding the Texas Cost Overruns for Non-Operator's Non-Consent Option.
