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Permalink Reply by Snake Stewart on January 11, 2009 at 15:37

If I am reading this right, the letter of intent was created because O&G's were dealing with other O&G's ?(LOL)
If only Jethro would have told Paw about Mr. Drysdale trying to cork him, Paw could have told Granny and she would have went straight to Ms. Hathaway and got that all cleared up. They could have taken care of business & been swimmin' in the "cement pond" before dinner.

The first goal of the documentation process is to ensure that the E&P Agreement accurately reflects the “business deal” between the parties. One of the most effective ways to achieve this goal is to set out all of the material trade terms in a term sheet or letter of intent and have all of the parties agree to such terms before drafting the definitive E&P Agreement. In addition to facilitating the review and approval of the trade by management, the term sheet/letter of intent can be used as a “business terms” checklist for the draftsman of the E&P Agreement.
Another advantage of using a term sheet/letter of intent is that it can eliminate the problem of the “unintended contract”. The only thing worse than having a business deal fall through because the parties cannot agree on the contract terms, is having a dispute with the other party over whether a contract exists or not. The legal analysis of contract formation is relatively straight forward (Has there been an offer? If so, has the offer been accepted?). However, the line between “preliminary negotiations” and “offer and acceptance” can often be blurred by the actions of the parties during negotiations (e.g. when one party detrimentally relies on the promises or actions of the other party). The issue is further complicated in those jurisdictions that readily impose an obligation on each party to “negotiate the contract in good faith”. By preparing a term sheet or letter of intent early in the negotiation process, the parties can expressly negate any inference that a binding contract is intended to be formed prior to the execution of a definitive E&P Agreement. The following are examples of language that could be used in a term sheet or a letter of intent to avoid the “unintended contract”.

Example 1:

This term sheet sets forth the basic terms and conditions under which Jethro Exploration Company (“Jethro”) is willing to grant Drysdale Exploration Company (“Drysdale”) the right to earn one or more assignments of Jethro’s interest in the Program Area, insofar and only insofar as such interest covers those formations located below the base of the Spiro Formation. This term sheet is being submitted for discussion purposes only and, even if accepted by Drysdale, shall not create any obligation on the part of either Jethro or Drysdale to consummate the transaction described herein. Neither Jethro nor Drysdale shall have any obligation with respect to the subject matter of this term sheet unless and until the parties execute a definitive Farmout Agreement incorporating the terms hereof.

Example 2:

Upon execution of this letter of intent, the parties agree to undertake, diligently and in good faith, to devote such time and resources as are reasonably necessary to prepare, negotiate and execute a definitive Exploration Agreement incorporating the terms hereof (the “Definitive Agreement”). If the Definitive Agreement has not been executed by the parties on or before ________, 2007, then this letter of intent shall terminate and neither party shall have any further rights or claims against, or obligations to, the other party. For the period commencing with the execution of this letter of intent and ending on __________, 2007, the parties agree that they shall not, directly or indirectly, encourage, solicit or entertain any other offers, inquiries or proposals for, or engage in any discussions with respect to, the joint exploration and development of the Program Area.

Except for the covenants contained in the immediately preceding paragraph, this letter of intent, even if accepted by Drysdale, shall not constitute a binding obligation on the part of either Drysdale or Jethro and no such obligation shall arise until the execution of the Definitive Agreement.

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Permalink Reply by sesport on January 11, 2009 at 16:33

Shucks, no need for claims, Granny has her broom & Jed has his shotgun. LOL

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Permalink Reply by sesport on January 11, 2009 at 16:34

I especially enjoyed this tidbit. Think it applies to some sections HBP here?

(d) A party’s election to participate in a Well Proposal down to a specified depth (the “Depth Limit”) usually results in such party (the “Shallow Participant”) relinquishing and assigning all of its rights in the Prospect Area below the Depth Limit.

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Permalink Reply by sesport on January 11, 2009 at 17:48

To their credit, the American Assoc. of Professional landmen is advocating, on a state-by-state basis, the passing of legislation for the certification of landmen.

http://www.landman.org/content/file/2008%20Licensing%20Task%20Force...

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Permalink Reply by HBP on January 12, 2009 at 1:56

"AAPL landmen and field landmen do not get along"

Correction: There are many, many field landmen who are proud AAPL members and fully support certification. Most of the best field professionals do not see it as a regulation, but instead see it as the job evolving in to what it should be.

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