This operating agreement exhibit states the intent of the Parties that each Party shall have the right to take in kind and separately dispose of its proportionate share of gas (including casinghead gas) produced from each formation in each well located on the acreage (the "Contract Area") covered by the Operating Agreement.
Exhibit E to Operating Agreement Gas Balancing Agreement - Form 3
Category:
State:
Multi-State
Control #:
US-OG-747
Format:
Word;
Rich Text
Instant download
Description
Understanding the Gas Balancing Agreement
The Gas Balancing Agreement is a crucial component within the context of an operating agreement for gas production. This document outlines the rights and responsibilities of the Operator and Non-Operators regarding the management and distribution of gas produced from designated wells. The primary purpose of this agreement is to ensure that each party receives their fair share of gas production based on their ownership interests. Furthermore, it provides mechanisms for balancing accounts when one party is underproduced or overproduced.
Who Should Use This Agreement
This agreement is intended for parties involved in gas production agreements, specifically those designated as Operators and Non-Operators. Typically, these include companies or individuals who either manage the production of gas or have a financial stake in its extraction. Users should have a basic understanding of joint operating agreements and gas production to effectively utilize this document.
Key Components of the Agreement
The Gas Balancing Agreement includes several important components:
- Ownership of Gas Production: Details each party's rights to their proportionate share of gas production.
- Balancing of Production Accounts: Defines how underproduction and overproduction are managed among the parties.
- Risk of Loss: Specifies which party assumes responsibility in the event of production shortfalls or mechanical failures.
- Deliverability Tests: Outlines procedures for testing the deliverability of gas from wells as necessary.
How to Complete the Agreement
To complete the Gas Balancing Agreement:
- Identify the parties involved, ensuring all legal names are provided.
- Fill in the key sections with specific data related to ownership percentages, production goals, and balancing terms.
- Review all terms carefully, confirming mutual understanding and agreements on balancing provisions.
- Have all parties sign the agreement in the presence of a witness or notary as required.
Common Mistakes to Avoid
When completing the Gas Balancing Agreement, parties should avoid the following mistakes:
- Inaccurate party information—ensure all names and titles are correct.
- Neglecting to clearly define the ownership percentages and obligations.
- Overlooking the need for signatures from all parties involved.
- Failing to keep a copy of the signed agreement for future reference.
Legal Context and Use
The Gas Balancing Agreement is essential within the framework of joint operating agreements in the oil and gas industry. It serves to establish legally binding procedures for how parties will handle discrepancies in gas production. This agreement can be critical in preventing disputes related to production shares, ensuring that all parties uphold their financial and operational commitments.
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