Joint Operating Agreements: Election to Participate

摘要

Smith is the operator under two joint operating agreements. One of the non-operating working interest owners is Chevron U.S.A., Inc., which in May 2004 contracts to sell certain oil and gas properties, including the ones subject to the two JOAs operated by Smith to XTO. Internal Chevron memos show that pending the sale, Chevron will make all decisions relating to AFE's or other operations. In May and June of 2004, Smith gives written notice to the non-operating working interest owners of its proposal to drill four more wells. The AAPL Form JOAs provide a thirty-day election period. Chevron, without consulting XTO, notifies Smith that it elects not to participate in the drilling program. The notification is sent on June 17, 2004. By that time all of the other working interest owners had elected to participate and by June 22, 2004, they all notify Smith that they will carry their proportionate share of Chevron's carried interest. Two days later, Chevron sends Smith a letter containing four signed AFE's for the proposed well.