Keep Calm and Carry on: 'Drill or Drop' and Carry Provisions in Exploration Agreements

摘要

Drill or drop and Carry provisions are useful tools for E&P companies that wish to diversify the risks of exploration and to make investment decisions incrementally based on the latest information. Careful drafting, however, is essential to ensure that they are effective. In this case, the court had to work hard to fill in a number of gaps about the parties' intentions. It is difficult for transaction documents to cover all eventualities, but the relevant circumstances in this case were reasonably foreseeable. In frontier markets, it is not unusual for work obligations to be delayed or for the commercial solution in such circumstances to be the transfer of MWO from one period to the subsequent period. Often the "price" the host government will demand for this solution is the assumption of additional MWO by the contractor.