Working interest participation in leases has been a common format for investment in oil and gas exploration for many decades.Champ Oil Co. offers lease interest and reserves a carried working interest. Before drilling is commenced Champ circulates a Model Form Operating Agreement to all working interest owners. The Model Form Operating Agreement is promulgated by the American Association of Petroleum Landmen and has been the standard means of establishing the rights and obligations of all parties in drilling ventures for many years. The Operating Agreement provides for a turnkey price of drilling to the proposed depth. All working interest owners must approve the drilling cost by signing an Authorization for Expenditures (AFE)
Ordinarily, drilling does not proceed until all working interest owners have approved the AFE. When a well encounters a productive reservoir, a geologist supervision report and recommendation along with a separate AFE is circulated for approval of completion expenses such as casing, stimulation, treatment, or construction of feeder lines to connect to the Herbert White Gas gathering system. Many of the wells produce naturally, requiring no stimulation.
After wells go into production, Champ charges operating expenses as specified in the Operating Agreement. These costs will include pumper fees, accounting, and administrative cost relating to each well.
In addition to the potential tax deductions and cost savings enjoyed by participating as working interest owners in leases, investors have other potential advantages. By virtue of the Model Form Operating Agreement, investors have a say in Champ’s decisions as operator. Furthermore, participants are not obligated to participate in any particular well or group of wells as is typical of limited partnerships. they may pick and choose their leases and may vary the fractional interest they take in each lease. Investors are permitted to thoroughly discuss all prospects directly with Champ’s geologists, at no charge, before purchasing lease interest. Champ also welcomes and encourages all of its investors to be on location during the drilling and completion process.