|
 |
Corporate JV Decisions
Joint ventures can also:
- add new oil rights
- add new partners
- merge with other joint ventures
- calve some of its oil rights into a new joint venture
Such decisions shall be known as "corporate JV decisions."
Financial Accountability
A JV leader must be
in the black to enact a corporate JV agreement. The financial situation of the other JV partners is
irrelevant. They can vote "yes" or "no" to any
corporate proposal―even if they are in the red.
Any independent financiers involved with the corporate proposal
must also be in the black.
Quorum
The quorum for a corporate JV decision shall be specified in the JV
agreement. It shall be at least five percentage points higher than the
quorum for a drilling decision.
Majority Decision
The majority to pass a corporate proposal shall be at least five
percentage points more than the majority
needed for the drilling decision. The JV agreement
shall specify this majority.
 |
Think Carefully . .
.
. . . when negotiating your corporate quorum and majority
decision. It is quite possible for a majority to "put the screws" to the minority if the
corporate quorum and majority are not high enough.
|
Process
If a corporate decision is desired:
- The JV leader shall fill out the JV agreement to reconstitute
itself. The "old" JV shall be represented as one partner in the "new
JV." Other JVs and financiers in the corporate proposal shall
be also be named as partners in the new JV.
- The leader shall submit the agreement to the administrator, who
then submits it to all parties. Parties must respond within
three OF days.
- The JV is reformed if the each JV agree per its
corporate decision process and each independent financier agrees.
- Upon such agreement, the administrator shall prorate the old JV
partners' voting shares, drilling percentage, and revenue percentage
accordingly into the new JV.
- If rounding of the above numbers is required, the administrator has the
final decision to round numbers as he sees fit.
Adding to the Joint Venture
A JV can add new oil rights owned by JV partners or other
financiers.
If the agreement is successful, the "new" JV shall retain the same
name.
|
|
The Math of Adding
to a JV
Let's assume Fred, Harry, and Susan are partners in
JV A as constituted below. Fred is the leader
- Fred: 15 votes, 20% of drilling, 45% of revenue.
- Harry: 12 votes, 40% of drilling, 30% of revenue.
- Susan: 10 votes, 40% of drilling, 25% of revenue.
Fred agrees with Sam to add a couple of Sam's rights
to JV A. The "old" JV A will take 100 shares in the "new"
JV A. It will pay 70% of the costs and receive 60% of
the revenue.
Sam will take 20 shares in the new JV A. He will pay
30% of the drilling and receive 40% of the revenue.
When everything is agreed and prorated, the new JV A is
constituted as follows:
- Fred: 41 votes, 14% of drilling,
27% of revenue.
- Harry: 32 votes, 28% of drilling,
18% of revenue.
- Susan: 27 votes, 28% of drilling,
15% of revenue.
- Sam: 20 votes, 30% of drilling,
40% of revenue.
|
Merging Joint Ventures
Two JVs can merge their entire holdings into one JV.
If the agreement is successful, the "new" JV shall be named after
the dominant JV, as determined by the administrator.
Calving the Joint Venture
A joint venture may have been formed for a specific reason, but
development of oilfields has gone another way. Several oil rights are
still undrilled and still may have potential. These oil
rights could be developed better with other nearby oil rights owned by another joint venture
or other financiers. These potential partners have no interest in the
other rights the JV owns.
The JV can calve off some of its oil rights to be part of that new
joint venture. The oil rights that are not calved remain with the old
JV.
|
|
Complex Deals 2
Reforming old JV holdings into a better JV is good
strategy. But it will take a good negotiator to bring
these kinds of deals together.
|
|
|
Inventor's Comment
on Joint Ventures
I believe joint ventures are going to be best tool
to explore for and develop oilfields in a financially sound way. The
financiers who can master forming and reforming joint
ventures will do well.
Joint ventures will require a lot more upfront
negotiation than wells outside of joint ventures. But
once the negotiation is complete, JV partners need only
to do quick financial analysis on any proposal from the
JV leader, then vote "yes" or "no." In essence, there
is less negotiation after a JV is formed.
I think a mature OilFinancier seminar will see most
oil rights being put into joint venture blocks. And
these blocks will reform as new fields are discovered
and delineated.
But it's up to the financiers in each seminar to
figure out how intense they want to pursue their
negotiation
strategies.
|
|
 |
