Have a small working interest in a well and I just received my first JIB. I had paid my share upfront, so much of the costs were covered by my cash call. My interest was so small, that they decided doing a JOA with me was not worth the time, effort, and cost, so we proceeded without a JOA. Some of the items on the JIB they sent were mentioned on the AFE I signed, and some were not. Without a JOA in force, am I legally required to pay for expenses not mentioned in the AFE? They are all under leasehold cost designations for legal and land professional services.
Secondly, the AFE showed and estimate of roughly 25k for land damages, and the statement says a total of 5k was incurred, and they are billing me 4 dollars for that expense. Is the assumption that they went over the estimated cost for land damages?
Thanks!
If you have a working interest in a well, you not only have to pay your share of the drilling and completion costs, but also your share of the monthly operating costs, repairs and maintenance. Yes, in general you are responsible for all costs, regardless of whether they were on the AFE. You will also pay your share of the abandonment costs when that comes around.
I don’t understand the second part of your question. You say the AFE had an estimated $25k for surface damages, but they only incurred $5k. How is that overspending the AFE?
I’m saying that the cash call that I paid was for the entire amount on the AFE (my percentage), and the AFE accounted for 25k in surface damages, but the first JIB had a line item for surface damages for 5k. I can only think of 2 scenarios for this, one being they made a mistake and didn’t realize the surface damages were on the AFE and covered by the initial cash call, or they went over their estimated amount on surface damages. I can clear it up by calling the accounting department, but didn’t want to do that on a holiday week, so figured I would ask in here.
In regards to the costs I was referring to, I was aware about covering operating costs and maintenance, eventual shut in costs etc, but wasn’t sure about my share of their legal service costs because I didn’t sign any kind of operating agreement stating that I was. It doesn’t add up to much at all, so this is just more of a curiosity thing