Confidentiality Agreement Forced
The Joint Operating Agreement (JOA), used by the Operator and Non-Operators to contractually control the operations related to the drilling, completing and producing oil and gas wells, has a COPAS accounting agreement attached to it which grants full audit rights to the Non-Operators. However, some operators have been unethically requiring and/or forcing auditors to sign a confidentiality agreement. This is a 1) breach of contract; 2) it is illegal not conforming to permitted by or recognized by law; and 3) it is a form blackmail to force auditors to sign an additional contract against their will in order to be allowed to exercise the previously-agreed contractual audit rights. This practice is morally and legally wrong – and the Operators fully know it. This alone, alerts and warns you as to the ethics and culture of this kind of an Operator.
The auditor does NOT have an attorney’s experience and training to be signing a document forced on them by the Operator, especially on a last minute’s notice. An additional contract logically should be timely reviewed by the Non-Operators’ legal representatives and management of all the Non-Operators.
If the Operator is an honest Operator, this forced secrecy certainly should not be needed and certainly is a strong indication the Operator indeed has something hide and they want to keep it hidden from other Non-Operators, investors and/or third parties.
Before you as a Non-Operator sign a joint operating agreement with any Operator, you need to find out if they are forcing this unethical practice on auditors and/or unsuspecting Non-Operators.
Below is an opinion from a highly experienced attorney:
Good morning, hope all is well. I’m not a fan of confidentiality agreements either.
The key for non-operators is to have legal counsel view any sort of confidentiality agreement – or any agreement – before they sign.
Once someone signs an agreement – whether it’s a lease, confidentiality agreement, whatever – there is not much we can do.