Quickstart     Cashflow File     Day     Participation     Other Financiers    Map     Oil Rights     Well Depths     Partnership     Dealmaker

  Shotgun Agreement     Running in the Red     Bankruptcy     Share Price     Corporate Position     Fast Track     Winning

  Leaving the Seminar  Hostile Areas  Subsidies  Joint Ventures  Administrator  Drilling Contractor  Rig Move Cost  Depletion

  Expiry of Rights  JV Leader  JV Drilling Decision    Posting Land    Waiving Extension Fees 

Spreading Risk Putting some of your first oil rights into a joint venture to take a small piece in many wells is good strategy in the early seminar. If you don't have any rights to put into a joint venture, offer to pay a high percentage of the drilling costs to be part of the joint venture.

 

Complicated Geology Joint Ventures are a good way to develop complicated geological situations in a financially sound way. Consider joint ventures for exploring for and stepping out from intermediate and deep fields.

Joint ventures require two or more financiers. Each financier must take at least 1% of the revenue and have at least 1% of the votes (shares).

All joint venture partners must have a positive cash balance (in the black) when forming their joint venture.

The JV partners must use the JV agreement  to form their JV. The dealmaker of the JV submits the completed agreement to the administrator. The administrator shall forward it to all partners. All partners must confirm within three OF Days.

A joint venture partner can surrender some or all of his oil rights into a joint venture. Once surrendered, the original owner has no control over those rights other than his rights as partner in the joint venture.

The JV agreement shall specify which rights are surrendered.

Decision Making

Quorum

The JV agreement must specify the quorum needed to reach a drilling decision or a corporate decision. The JV is free to set its own quorum.

If insufficient partners vote on a proposal, the proposal fails to pass. The JV leader is also fined for submitting a shotgun agreement.  

Quorum Set your quorum at about 50% of total votes. Higher quorums may sometimes be difficult to attain, which could prevent the JV from drilling wells.

Voting Block

The JV agreement must also specify how many votes each JV partner has to cast towards making decisions. The partners need not have the same number of votes.

Voting Block Set at least 20 total votes for your JV. This makes it easier to sell a part of your JV or to effect corporate decision more fairly.

It is possible to set up a JV such that one partner holds a majority of votes. Such partners enter the deal with their eyes open, thus being liable for any errant decisions made by the majority owner.

See also:

• Joint Venture Leader
• Joint Venture Drilling Decision

In the real world, joint ventures often have provision to add new oil rights to their joint venture (and often these provisions forbid JV partners from bidding as individuals against their joint venture). OilFinancier would like to provide a similar feature, but this would incur an excessive burden for the administrator to keep proper track of the details. So it won't be available until the automated version is available.

If a JV venture wants to add new oil rights to itself, it can have one of the JV partners buy the right, and then the JV and the JV partner use the corporate decision process to add the right to the JV.

Partial Sale of a JV Share Take care when selling a partial share of a joint venture. Make sure % of revenue, % of drilling costs, and votes are appropriately proportioned.  You don't want to sell the revenue yet still pay for the drilling costs. The administrator will abide by the words of the sale contract.

The other JV partners have no veto whether the sale goes through or not. The new owner must abide by the JV agreement. 

The share of the JV can be sold to a current partner in the JV―even if this sale gives the buyer a majority stake in the JV. However, this constitutes a loss of minority rights. The following section is a one-time remedy for minority owners when the JV has a majority owner.

Taking Control of a Joint Venture

When a joint venture partner acquires enough votes to enact a drilling decision without approval of the partners, he shall also be obligated to buy the share of the minority partners. The buying price shall be determined, on a per JV vote basis, by price paid by the trade deal that put the buyer in this position.

The administrator will calculate the per vote price. The administrator will then prepare a "forced" offer to the minority partners. The minority partners have five OF days to accept this offer.

If any minority partner accepts this offer, the administrator shall make the appropriate adjustments. If the offer is not accepted within five OF days, the minority partner shall remain as a minority partner still subject to all the rules of the joint venture.

There will only be one chance for minority partners to get "fair value" for a JV share before the majority partner takes control.  

If the majority partner acquires all the JV votes, the joint venture shall be dissolved. Any oil rights owned by the JV shall now belong to the majority partner.

The JV will not be allowed to make any decisions until the issue if minority partners is settled.

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