JV Counterparty Distress

The slide and volatility in the oil price over the past few months has been dramatic and whilst many companies will be well positioned to weather the current climate, it has already become clear that there are some players in the industry for whom insolvency is a very real risk.

An important issue to consider is the situation where one party to a Joint Operating Agreement (JOA) enters into an insolvency process. Although all JOAs are tailored for the relevant asset, certain standard clauses are prevalent throughout the market; we consider some examples of these below by reference to the insolvency of an Operator and a Non-Operator.

Operator insolvency

Do the other parties have the ability to replace the Operator?