Hi, my name is Curt, I am a small independent mom & pop Operator. I have a few stripper wells with production less than 20 BOPD. Since I do everything myself operating costs are low. Taxes, maintenance, utilities permits/fees, etc. average about $14/BBL. After hiring Geologists and Reservoir Engineers, Redrilling/Sidetracking 2 idle wells on Lease "A" and 3 idle wells on Lease "B" look promising. I have the capital to do one well on my own, and if it is unsuccessful it won't wipe me out. I have found a retired Oil Company CEO who is interested in investing in all 5 wells. We have had meetings and looked at the leases, geology, etc. and are ready to discuss terms. We have already agreed that he will have NO interest in existing production, only on the idle wells we work on. We are going to start with the 2 wells on Lease "A" first. Without going into any agreement details I have one question: If we go in 50/50 on the project, at what point after the "Payback Period" should the agreement terminate? That is, after the investor has made his money back and made a reasonable ( fair amount ) profit, should the agreement end and I get back to 100% of my Working Interest and Net Revenue? Of course I would want a smaller amount and he would want a larger amount of profit. I was thinking 2-3 times his investment or some period of time or a combination of both. I am not to versed on this type of agreement, and don't want to enter into a perpetuity type deal on these first 2 wells. The other 3 well on Lease "B" will be a different type of agreement, something like a modified Farm-In type, but that is another topic. Thanks, Curt.
Take a clean piece of paper and write down all the provisions you both have agreed to, thus far.
On another blank sheet, write down your ONE question, which looks to me to have several thought processes going (ifs, shoulds, after thoughts, etc.). Then proceed to write down all your answers.
Also, you will need to know what your CEO partner-to-be thinks is a reasonable (fair amount) of profit? You and him may disagree. You need to know this to help set the agreement's termination date.
Also, if you have a start date and a termination date, there will be no perpetuity.
You two need to further negotiate. Detail out everything in the agreement, and don't assume nothing.
Pat, thank you for your response.