In the oil and gas industry, a shared well agreement is an agreement between parties to jointly operate a well. A third-party shared well agreement is when a third party is brought on to help manage the well. This can be beneficial for all parties involved, but it also requires careful planning and communication.

Here are three key things to consider when entering into a third-party shared well agreement:

1. Clarify roles and responsibilities.

When multiple parties are involved in operating a well, it’s essential to have a clear understanding of who is responsible for what. This includes things like maintenance, repairs, and ensuring compliance with regulations. Ideally, each party should have a designated role and responsibility that is clearly outlined in the shared well agreement.

It’s also important to establish communication channels and protocols. This can include regular meetings or check-ins, as well as procedures for addressing issues or concerns that may arise.

2. Develop a comprehensive agreement.

A well-written shared well agreement is crucial for avoiding misunderstandings and disputes down the line. The agreement should address issues like:

– The rights and obligations of each party

– How expenses will be shared

– How profits will be distributed

– Termination and renewal options

– Liability and insurance coverage

– Dispute resolution procedures

It’s important to work with legal and industry experts to ensure that the agreement is comprehensive and covers all relevant aspects of the shared well operation.

3. Consider the financial implications.

Operating a well is a significant investment, and a third-party shared well agreement can help mitigate some of the risk. However, it’s important to carefully consider the financial implications of the agreement.

For example, each party should have a clear understanding of how expenses will be shared, and what percentage of profits each party is entitled to. It’s also important to consider the costs associated with bringing a third party on board – such as hiring consultants or paying for additional insurance coverage.

Final thoughts

A third-party shared well agreement can be a smart business move for all parties involved. However, it’s important to approach the agreement with careful planning and attention to detail. By clarifying roles and responsibilities, developing a comprehensive agreement, and considering the financial implications, you can help ensure a successful and mutually beneficial shared well operation.