Production Reversion Penalties Clause Samples
The Production Reversion Penalties clause establishes financial consequences if production levels fall below agreed thresholds or revert to a lower state after having previously increased. Typically, this clause applies in industries such as oil and gas, where operators are expected to maintain or improve production rates, and penalties may be calculated based on the volume of shortfall or the duration of reduced output. Its core function is to incentivize consistent production performance and protect the interests of stakeholders who rely on stable or growing output levels.
Production Reversion Penalties. Except as to such operations conducted pursuant to Section 12.7 or for the initial EXPLORATORY WELL, or subsequent EXPLORATORY WELL referred to in Section 10.3, such interest, rights and title shall revert to each NON-PARTICIPATING PARTY when the PARTICIPATING PARTIES have recouped out of the proceeds of production from such NON-CONSENT OPERATIONS an amount equal to the sum of the following:
(a) Six hundred percent (600%) of the cost of drilling, completing, recompleting, sidetracking, deepening, deviating or plugging back each NON-CONSENT WELL and equipping it through the wellhead connections, reduced by any contribution received under Section 21.1; plus,
(b) Three hundred percent (300%) of the cost of FACILITIES necessary to carry out the operation; plus,
(c) One hundred percent (100%) of the cost of using any FACILITIES already installed determined pursuant to Section 12.6 below; plus,
(d) One hundred percent (100%) of the cost of operating expenses, royalties and severance, gathering, production and windfall profit taxes. Recoupment of costs shall be in the order listed above. Upon the recoupment of such costs, a NON-PARTICIPATING PARTY shall become a PARTICIPATING PARTY in such operations.
Production Reversion Penalties. Such rights, title and interest shall revert to each Non-Participating Party when the Participating Parties have recouped out of the Non-Participating Party's share of the proceeds of production (after deducting Non-Participating Party's share of royalty, operating expenses and all applicable taxes) from such Non-Consent Operations an amount which equals:
(a) If such operation is an Exploratory Operation under Article 11.3.1, eight hundred percent (800%) of the amount which, had it participated, would have been borne by the Non-Participating Party as its share of the cost of such Non-Consent Operation, including the cost of equipping the Non-Consent Well through the wellhead connections.
(b) If such operation is a Development Operation, five hundred percent (500%) of the amount which, had it participated, would have been borne by the Non-Participating Party as its share of the cost of such Non-Consent Operations, including the cost of equipping the Non-Consent Well through the wellhead connections.
(c) If such operation is the construction and installation of a Platform or Pipelines, three-hundred percent (300%) of the amount which, had it participated, would have been borne by the Non-Participating Party as its share of the cost of such Non-Consent Platform or Pipelines. If such operation is the construction and installation of Facilities, two hundred percent (200%) of the amount which, had it participated, would have been borne by the Non-Participating Party as its share of the cost of such Non-Consent Facilities. Upon the recoupment of such costs, each Non-Participating Party shall become a Participating Party in such operations, except as provided in Article 13.4.
Production Reversion Penalties. Except as to such operations conducted pursuant to Section 12.7 or for the initial EXPLORATORY WELL referred to in Section 10.3, such interest, rights and title shall revert to each NON-PARTICIPATING PARTY when the PARTICIPATING PARTIES have recouped out of the proceeds of production from such NON-CONSENT OPERATIONS an amount equal to the sum of the following:
(a) Six hundred percent (600%) of the cost of drilling, completing, recompleting, sidetracking, deepening, deviating or plugging back each NON-CONSENT WELL and equipping it through the wellhead connections, reduced by any contribution received under
Production Reversion Penalties. 17. 12.2.2 Non-Production Reversion . . . . . . . . . . . . . . . 18.