Malone Petroleum Consulting



Be careful with non-standard contracts

Don't sign that contract!

Completing a well procedure:

You only want to sign the standard joint operating agreement and the attached COPAS accounting agreement since they have been blessed by the organizations which created them for the oil and gas industry. Make sure that the language has not been carefully and strategically changed to trick you into thinking you are signing a trusted document.

If you sign any other agreements or contracts, you had better be careful. For instance, if there is piranha language in the document that in some way says:

"If you do not pay a bill in a timely manner, you lose all of your interest."

The operator who has this kind of language has it there for ONLY one reason: it is to take your money then steal back the ownership you have just purchased so that they can do it again to the next investors. This reveals the operator to be a crook with crooked and wishful intentions. As an example, the investor (an experienced oil and gas employee) paid the operator (#1) hundreds of thousands of dollars for a 50% ownership. Then the operator sends the investor a bill (#2) for hundreds of thousands of dollars more; so, the surprised investor must mortgage his house to keep from losing his investment money. After that payment, the operator sends another invoice for a bill (#3) for hundreds of thousands of dollars again which the investor cannot pay. The operator then informs the investor he was out of the deal (the operator’s original intent). The sad part is the investor does not know the operator never used the money for any of the proposed work and kept the money for luxury living expenses. Then the operator makes the offer to the next trusting investor. Not only do some operators steal from royalty owners, investors, working interest owners, they steal from each other. Most operators are forced to have audit departments to protect themselves.

We had one employee to tell us: if she does not steal for her employer, she will lose her job. I had a client who had a son in law quit his great job. He was asked why he quit; the reply was he did not want to go to jail. The bad thing is the operator usually does not go to jail; there is almost no risk since the only thing the victim can do is sue and maybe lose to the operator who is using the victim’s stolen money to pay for their own attorneys. This happens over and over. If a crook has stolen a billion dollars and is probably going to jail, the billionaire can simply have a prearranged deal to make them disappear, like having their car to crash into a wall while they are in a private plane flying to a new life.

The bottom line is even if you are in the oil and gas industry or any other industry, you better have several eyes to look at your contract before you sign it.

Apycom jQuery Menus