Dealing With Third Parties
In the past, companies engaged in the oil and gas business often sought to rely on each other's good will because they realized that, due to the nature of the business, they had worked together earlier and would have to work together in the future. As a result, they did not worry too much about detailed contracts and, instead, relied on each other to conduct their affairs in a fair and equitable manner.
Now, however, the oil and gas industry in the United States and Canada is undergoing a transformation — major oil companies are focusing their exploration efforts overseas and dramatically reducing their ownership in producing oil and gas properties owned and operated in North America. As a result, acquisitions of oil and gas properties continue to occur at a high rate, both by large independents who seek to grow and diversify their holdings through purchases of large blocks of properties from majors and by smaller independents who seek growth potential by adding particular properties that fit well with their existing properties.1 As a result, a large number of companies are strangers to each other; therefore, the participants in the industry have altered their conduct. The “what goes around comes around” syndrome has, for the most part, become a thing of the past. In addition, as the value of reserves and the sophistication and expertise of operations increase, dispute
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