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Simple English definitions for legal terms
operating agreement
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A quick definition of operating agreement:
An operating agreement is a contract between people who own a part of an oil or gas well. It explains what they agree to do when they drill, develop, operate, and keep track of the money made from the well.
A more thorough explanation:
An operating agreement is a legal contract between the owners of a working interest in an oil or gas well. This agreement outlines the parties' agreements regarding drilling, development, operations, and accounting.
For example, if a group of individuals owns a working interest in an oil well, they may create an operating agreement to establish how the well will be operated and how profits will be distributed. The agreement may include provisions for drilling new wells, maintaining existing wells, and managing the production of oil or gas.
Another example could be a partnership between two companies to develop a natural gas field. The operating agreement would outline the responsibilities of each company, the timeline for development, and how profits would be shared.
Overall, an operating agreement is a crucial document for ensuring that all parties involved in the production of oil or gas are on the same page and working towards a common goal.