This ia a provision that states that any Party receiving a notice proposing to drill a well as provided in Operating Agreement elects not to participate in the proposed operation, then in order to be entitled to the benefits of this Article, the Party or Parties electing not to participate must give notice. Drilling by the parties who choose to participate must begin within 90 days of the notice.
Wyoming Farm out by Non-Consenting Party: A Comprehensive Overview In the field of oil and gas exploration and production, a farm out agreement is a commonly used tool where one party (referred to as the "armor") grants another party (known as the "farmer") the opportunity to acquire an interest in an oil or gas lease and develop the underlying resources. However, in certain scenarios, a non-consenting party may be involved in a Wyoming farm out agreement, leading to a unique arrangement known as a Wyoming Farm out by Non-Consenting Party. A Wyoming Farm out by Non-Consenting Party occurs when an owner of an oil and gas lease, specifically in the state of Wyoming, chooses not to participate in the drilling and development operations proposed by the farmer. Despite the non-participation, the non-consenting party retains its ownership interest in the lease, as well as it's right to receive a share of the production revenues from any successful wells drilled. Now, let's delve into the different types of Wyoming Farm out by Non-Consenting Party: 1. Non-Consenting Farm out Agreement: In this type of farm out, the non-consenting party agrees to farm out a portion of its working interest to the farmer. The farmer, in turn, bears the financial burden and operational responsibilities for drilling and completing the well. The non-consenting party receives a predetermined share of the production revenues, known as a carry, until the costs expended by the farmer are recovered. Once the carry is fully satisfied, the non-consenting party reverts to its original working interest share. 2. Penalty Farm out Agreement: A penalty farm out agreement stipulates that the non-consenting party must pay a penalty, usually a percentage of its eventual production revenues, in exchange for not participating in the drilling and development operations carried out by the farmer. This penalty serves as a form of compensation to the farmer for investing the necessary capital and assuming the risks associated with drilling the well. 3. Participating Working Interest Farm out Agreement: This type of farm out allows the non-consenting party to retain a percentage of its original working interest ownership in the lease while participating in the costs associated with drilling and operating the well. The non-consenting party typically incurs an additional financial burden by paying a proportionate share of the costs, but also benefits from a proportional share of the production revenues generated by the well. 4. Weighted Average Farm out Agreement: In a weighted average farm out, the non-consenting party retains a specific percentage of its original working interest, while the farmer bears the costs and risks associated with drilling the well. The non-consenting party is entitled to a weighted average percentage of the production revenues, calculated based on the ratio of its retained working interest to its initial working interest in the lease. Wyoming Farm out by Non-Consenting Party agreements allow for efficient utilization of resources and leveraging of expertise, enabling oil and gas companies to pursue exploration and development opportunities while accommodating the preferences and financial limitations of different parties.
