Pad Site Sharing Agreement

Industry is drilling increasingly from shared well pads in which wells and facilities are not held in common interests. This is done to mitigate the environmental footprint and to optimize operating efficiencies for construction costs and shared site-specific infrastructure. Many well pads serving different ownership wells already exist without any documentation to address the wide range of issues inherent in a pad sharing scenario.

The Pad Site Sharing Agreement ("PSSA") reflects a shared belief by PJVA and CALEP (formerly CAPL) that the only efficient and effective way to address this growing issue is to seek an industry solution to this industry problem by creating a precedent that can be used as a starting point for the vastmajority of pad sharing arrangements. Increased commonality in addressing these issues will allow for optimized business outcomes and the completion of these agreements in a much more timely and efficient manner than would otherwise be the case.

Pad sharing arrangements may at first appear to be a simple surface sharing arrangement designed to decrease the environmental footprint and to enhance operating efficiencies. The cost of the construction of the Pad Site and the installation of the shared Facility to manage production will also typically be very modest relative to the investments in the Wells. The relationship of the Owners is much more complex, though, because of the issues resulting from differences in ownership between the Pad Site (and the related common Facility) and the Wells located on the Pad Site (e.g., cross-indemnifications, a staged abandonment, Enlargements).

Given the ongoing need to manage the Pad Site and the Facility located on the Pad Site, the starting point used to create this document was the 1999 PJVA CO&O Agreement. That document was then modified, firstly, to reflect more recent work that CAPL had done to update similar concepts in the 2007 and 2015 CAPL Operating Procedures and, secondly, to address the interrelationship of the PSSA with specific Land Activities being conducted by the respective mineral rights holders under any applicable Land Agreements. The integration of the modern CAPL content also reflects the fact that the PJVA CO&O Operating Procedure was largely based on the 1990 CAPL Operating Procedure for comparable topics. Anchoring the document to these familiar and accepted industry standards is expected to facilitate industry's transition to the document.