Oil and Gas: Exploration and Production Agreements
This practice note discusses the treatment of certain agreements typically used in connection with the exploration and production of hydrocarbons—oil and gas assets. The status of rights under such agreements, including oil and gas leases, joint operating agreements, and farmout agreements, can be affected by the operation of the Bankruptcy Code.
As a rule, even after a bankruptcy is filed, non-bankruptcy law governs the property rights of the parties to agreements typically used in connection with the exploration and production of hydrocarbons. Only once the non-bankruptcy property rights of the parties to an agreement are understood, can a court presiding over a bankruptcy case analyze the effect of the Bankruptcy Code on the agreement at bar. It is therefore crucial to be aware of how the mineral law of the applicable state characterizes your client’s rights. For example, while joint operating agreements are almost always executory contracts, an oil and gas lease may, depending on the governing non-bankruptcy law, constitute either evidence of an interest in real property that is not subject to assumption or rejection under Section 365 of the Bankruptcy Code or an unexpired lease that is subject to assumption or rejection under Section 365.
This practice note addresses oil and gas agreements as follows:
- Oil and Gas Leases
- Safe Harbor Provision for Farmout Agreements
- Joint Operating Agreements
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“Oil and Gas: Exploration and Production Agreements,” by Ira L. Herman was published on February 28, 2020 as a Lexis Practice Advisor® Practice Note. Reprinted with permission.