Could someone please explain the general mechanics of JVs.
Medina pays $5 mill for exploration to gain 80% of the tenements. Is this for perpertuity or can Monitor grab this back. Presume that is the case if Medina do not proceed to drilling.
Assume that a well is drilled, giving Medina 85%. What if this well is not commercial. Does the JV cease at that point and the 85% reverts back to Monitor?
What if the results are promising and warrants another hole being drilled. What happens then?
What if they prove up this hole and it is commercial. Seems that Medina pay all costs through to production. Thats straightforward, but how is subsequent drilling on other fields financed and presumably Medina gets 85% of any other find.
I know that the details of the HOA / JV are not known yet, and thinking through some of the possible outcomes, it is obvious that the devil is in the detail. Just interested how these sort of agreements normally are structured and how they work out.
Any info or other examples greatly appreciated.
Cheers Armour
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