Articles

New Handbook a Practical Guide to Oilfield Indemnity Issues

Articles / July 9, 2019

Texas natural gas exploration and production is often a multiparty endeavor. Oilfield operators enter into form drilling contracts (i.e., IADC onshore drilling contracts) or Master Service Agreements (MSAs) with contractors under which the contractors agree to provide services and materials for the operators. Owners of mineral leases enter into farmout agreements that provide for the provision of services in exchange for a percentage ownership in the lease. Parties with mineral lease interests enter into joint exploration and development agreements.

All these agreements can include indemnity provisions that dramatically shift the risks and liabilities of the parties. Such indemnity agreements are common in the industry. In fact, four states have enacted anti-indemnity statutes to specifically address the oilfield services industry: Texas, New Mexico, Louisiana and Wyoming. Each state’s oilfield anti-indemnity statute was enacted to promote fairness and prevent owners and/or operators of oil and gas wells from shifting potential liabilities to well service contractors with minimal bargaining power.

Oilfield indemnity agreements in Texas must be specially tailored to satisfy the state’s anti-indemnity statute and to achieve the drafting parties’ risk-shifting objectives. This can be a complicated undertaking. This handbook provides an overview of numerous issues that must be considered when preparing a valid oilfield indemnity provision. It also provides advice for practitioners on how to navigate such provisions when an incident in the oilfield occurs.

This handbook also addresses assorted insurance and choice-of-law issues likely to confront parties to any such indemnity agreements.

To read the full Texas Oilfield Indemnity Handbook, please click here.

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