I have a mineral rights lease on which I want to drill a gas well. An investor has offered to pay all the drilling costs involved for a 50% share of gas production profits, understanding there may be none. We have a handshake agreement now. I would like to keep a friend friendly with a contract that spells out all possible conditions. I was first told by a lawyer that a Form 610 was needed, until I found a veteran Landman who told me a Joint Venture Agreement was correct, which only needed a clause on profit sharing for the gas production. I found a form online at LawDepot.com which seems to answer my needs except for gas production profit sharing details. Is there a form for sharing gas well profits between two "venturers" and how are the profits computed?
For whatever reason, you seem to think that this business is one of filling in forms. It is not. Your options are twofold. Do it yourself and take your chances or hire someone who knows what they are doing and have them deal with the paperwork.
"Friend friendly contact" does not mean much to me. I suppose that wells were drilled with an agreement written on the back of a napkin, but good contracts, like tall fences, make for good neighbors.
By the way, a Joint Venture Agreement is what you want -- the Form 610 is added as an exhibit to the JVA - along with many other exhibits.
Best
Buddy Cotten
Buddy is the expert here; but, this one caught my eye. Relationships with friends and family are great in good times when there is no money involved. Now stick a few dollars into the equation and relationships go down hill in a hurry. Best friends or best family members can go from "best" to dire enemies overnight.
Spend a few well spent dollars and get an expert and forget the handshake!
Good Luck and hope you guys strike a bonanza.
Appreciate the advice from all concerned. I have been a Realtor for many years and used to writing up a variety of contracts, including partnership investments. Initially, contacted an attorney specializing in oil/gas issues, but he only recommended a Form 610, which I was advised by another investor as not the correct form for joint venture, although it would be useful as an exhibit. In addition, the attorney wanted 15 hours to produce a form 610, at $300 per hour, plus another $500 for paralegal, with $5,000 in advance. I was since advised to get a professional Joint Venture Agreement form for the purpose and the State of activity, then fill in the blanks to speed things up, that is to save billing hours. Did that, LawDepot.com, took two hours. I was also advised to contract with a CPA that specializes in oil/gas investments, taxes and profit sharing for the profit sharing clause. Found one. Now to find a reasonable attorney that will not pad the bill, to review the form, make any needed corrections and stick to advice and exhibits. The first one seemed like he wanted to reinvent the wheel.
Bloomberg says that west Texas intermediate is at $48.10 and natural gas is at $3.13. Why would you want to put your property into production at these prices? Wait it out. Things will turn around eventually. If you take that stuff out of the ground, you will have to sell it or store it.
Do you have a buyer? How about pipelines? How far is your property from the processing plant?
It is not as easy as some people think. The cost of a well can be into the millions of dollars. Do you have a firm commitment on financing?
Lastly, in my experience, a handshake agreement means someone is getting taken.
Think it through.
Actually, drilling costs are way down right now. Due to the lower prices for gas/oil, many rigs have been idled and drillers begging for work. Bids are getting cheaper by the week. Since the gas reservoir, which I largely control, may last 15 years or more, I figure drilling cheap now is better than waiting for prices to rise and drillers start to charge more. Plus, we are drilling into a hydrogen vent, with hydrogen in high demand for hydrogen cars; now in series production. One recently completed hydrogen well produces 98% pure hydrogen, which is now being used to power a generator that supplies electricity to a nearby community. Since the generator can be mounted next to the well, no pipeline is needed, just power lines. Hydrogen is also much safer, since any leaks vent directly upward, where it is lost in space, so no explosive vapor cloud to worry about. Fortunately, our investor, with millions, is both a friend and visionary. Now to find a reasonable oil/gas lawyer in Greeley, Colorado, to review my filled out form.
Well, I wish you luck with this enterprise. I suspect you are going to need it.
What you need is a farm-out, not a JOA or JVA. A JOA may be incorporated into a farm-out or in conjunction with it, but it is really not going to accomplish what you need. And if your partner is ok with going forward with just and executed JOA or general JVA, you have the wrong partner. And there really is no agreement out there that "spells out all possible conditions" the business is just far too complex with far too many contingencies to capture in a download and fill out contract. I'm a Denver based attorney/landman, and just sent you a friend request. Not to demean your efforts or what your are doing here, but you are way over your head here in a very capital-intensive business. I don't know what you are planning to invest in this well, but whatever it is it is just a dot compared to the amount of money a well can eat up on a bad day. Shoot me an email with your contact info, I'd be happy to go over the farmout option with you.
Ya know what I would do... RUN... you are not an oil man. This kind of thing can RUIN you financially. RUN.
Charles Odendhal said:
Appreciate the advice from all concerned. I have been a Realtor for many years and used to writing up a variety of contracts, including partnership investments. Initially, contacted an attorney specializing in oil/gas issues, but he only recommended a Form 610, which I was advised by another investor as not the correct form for joint venture, although it would be useful as an exhibit. In addition, the attorney wanted 15 hours to produce a form 610, at $300 per hour, plus another $500 for paralegal, with $5,000 in advance. I was since advised to get a professional Joint Venture Agreement form for the purpose and the State of activity, then fill in the blanks to speed things up, that is to save billing hours. Did that, LawDepot.com, took two hours. I was also advised to contract with a CPA that specializes in oil/gas investments, taxes and profit sharing for the profit sharing clause. Found one. Now to find a reasonable attorney that will not pad the bill, to review the form, make any needed corrections and stick to advice and exhibits. The first one seemed like he wanted to reinvent the wheel.