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.
Oklahoma Farm out by Non-Consenting Party refers to a legal arrangement in the oil and gas industry where a party who holds an oil and gas lease in Oklahoma and is unable or unwilling to participate in the drilling operations can elect to have their interest "farmed out" to a third party known as the "non-consenting party." This enables the non-consenting party to explore and develop the leased acreage independently, while assuming all the associated costs and risks. The Oklahoma Farm out by Non-Consenting Party generally occurs when the original leaseholder lacks the financial resources, technical capabilities, or simply chooses not to participate in the drilling activities on their leased land. Instead of losing their rights over the lease altogether, they can transfer their interest to another party willing to fund and manage the operations. The farm out agreement in Oklahoma typically entails the non-consenting party taking responsibility for all costs related to drilling, testing, and production. In exchange for their investment, they earn a proportionate share of the production revenues or a negotiated payout from the production until they recover the costs incurred (known as a 'turnkey' or 'dry hole' farm out). However, it is important to note that there are multiple types of Oklahoma Farm out by Non-Consenting Party, each with its own particularities: 1. Dry Hole Farm out: In this type of arrangement, the non-consenting party assumes all the drilling costs but is not entitled to any production revenue unless the well successfully produces hydrocarbons. If the well turns out to be dry (non-productive), the non-consenting party bears the complete financial loss. 2. Turnkey Farm out: Unlike a dry hole farm out, in a turnkey farm out, the non-consenting party is guaranteed a fixed payout or revenue share from the production, regardless of whether the well is productive. This arrangement shields the non-consenting party from financial risks associated with unproductive wells. 3. Carried Interest Farm out: In a carried interest farm out, the non-consenting party's share of drilling and production costs are entirely borne by the party or company farming into the lease. The non-consenting party does not bear any financial risks and receives a percentage of the production revenues once the well starts producing. 4. Participating Interest Farm out: A participating interest farm out allows the non-consenting party to retain a small working interest in the well or lease while allowing a third party to operate the drilling activities and assume majority responsibility for costs. In summary, an Oklahoma Farm out by Non-Consenting Party is a legal agreement allowing a leaseholder to assign their interests to a third party who takes on the role of operator and assumes financial responsibility for drilling and production operations. The different types of farm outs, such as dry hole, turnkey, carried interest, and participating interest, cater to varying risk tolerances and objectives, providing flexibility for parties involved in oil and gas exploration and development in Oklahoma.
