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Simple English definitions for legal terms
support agreement
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A quick definition of support agreement:
A support agreement is a contract between two parties in the oil-and-gas industry. One party agrees to provide money or property to the other party to promote exploratory operations. The receiving party will drill a well on leases that it holds and provide the contributing party with information from tests conducted. The contribution lessens the cost or the risk of drilling operations for the receiving party. The contributing party benefits from the purchase of geological or technological information. This agreement is also known as a contribution agreement and is different from dry-hole agreement, bottom-hole agreement, and acreage-contribution agreement.
A more thorough explanation:
A support agreement is a contract between individuals or entities in the oil and gas industry. The purpose of this agreement is to promote exploratory operations. In this agreement, one party agrees to contribute money or property to another party if the other party will drill a well on leases that it holds and provide the contributing party with information from tests conducted.
For example, if Company A holds leases for oil and gas exploration but lacks the funds to drill a well, it may enter into a support agreement with Company B. Company B agrees to provide the necessary funds for drilling the well, and in return, Company A provides Company B with information from tests conducted on the well.
Support agreements are beneficial for both parties. For the contributing party, it is a purchase of geological or technological information. For the party receiving the support, the contribution lessens the cost or the risk of drilling operations.
Other terms used for support agreement include contribution agreement, dry-hole agreement, bottom-hole agreement, and acreage-contribution agreement.