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An Introduction to the AAPL Model Form Operating Agreement

Thomas P. Schroedter, Lewis G. Masburg, Jr., Oil and Gas Joint Operating Agreement (1990)

The Joint Operating Agreement may cover a single Drilling and Spacing Unit. If this is the case, the parties will be sharing in costs and production in the same manner that these items would have been shared if no “JOA” had been entered into, i.e., based upon their proportionate ownership of the leasehold estate lying with the Unit. However, in certain instances, the parties may wish to share in costs and production over a larger area. In this event, the parties will form a “Working Interest Area” by entering into a Joint Operating Agreement covering a “Contract Area” consisting of several (or many) Drilling and Spacing Units. Under this arrangement, the rights of the parties will be “contractually” pooled throughout the entire Contract Area, so that the sharing of costs and production will be assessed not upon the ownership of the particular drilling and spacing unit on which a well is drilled, but on the formula specified in the Joint Operating Agreement. Such a formula will normally, but not always, provide for a sharing based upon proportionate Contract Area leasehold ownership. Finally, the parties may agree to enter into a much more ambitious undertaking in which the “Contract Area” consists of a number of widely-scattered prospects. Despite this increased complexity, many onshore drilling operations are conducted using the same agreement form that is used for the much si