As a general rule, such farm-out agreements are concluded in an indecipherable form of correspondence agreements, which generally contain provisions concerning tendering agreements concerning border or offshore areas where the unleased interests of the public sector in oil and gas may become desirable for a group of undertakings which might wish to share and propose as a group the high supply costs. The group may have been created as a result of joint exploration and/or exploitation activities, or it may simply be a case where a financial party wishes to propose with a more competent partner or partner. These agreements can be extremely complex from a methodological point of view in determining what to offer with whom and when, as well as in the process of preparing for a competitive leasing sale. Post-sale participation formulas can also be complex. Federal and state anti-cartel laws and other laws relating to penalties for collusion further complicate proceedings. Whenever two or more owners of labour interests decide to share the risk of drilling, development or operations related to oil and gas production, they enter into a joint company agreement (JOAjoint Operating Agreement) or simply a company agreement. The JOAjoint company agreement generally provides that one of the parties acts as an operator for the parties in the common area covered by the JOA company agreement. It also defines the operation for which the JOAjoint operating agreement was concluded (drilling a well) and how costs and revenues are shared, determined and invoiced. There are a large number of other special agreements used in oil and gas exploration and exploitation. The onshore JOAs used today come from the work of the American Association of Petroleum Landmen (AAPLAmerican Association of Petroleum Landmen) to create a standard form to simplify and facilitate the negotiation of the JOas with fair results for all parties involved. The revision of the AAPLAmerican Association of Petroleum Landmen Form 610 was last completed in 1989.
Offshore JOAs in current use vary from party to party, but resemble the format of the JOAjoint onshore enterprise agreement. The American Petroleum Institute, which first established a model offshore operating agreement in December 1984, is currently trying to standardize the JOAjoint offshore operating agreement. Due to the diversity of ownership of oil and gas interests and/or the need to share economic risks, the oil and gas industry has entered into a number of different contractual agreements. . . .