Legal Definitions - dry-hole agreement

A dry-hole agreement is a contract in the oil and gas industry where one party agrees to provide financial support to another party in exchange for geological or drilling information if the well drilled turns out to be unproductive. This agreement is also known as a support agreement.

Company A wants to drill a well on a lease it holds, but it is a risky venture and could result in a dry hole. Company B agrees to provide financial support to Company A in exchange for access to the geological or drilling information if the well turns out to be unproductive. This way, Company B can learn from the experience and use the information to improve its own drilling operations in the future.

This example illustrates how a dry-hole agreement can benefit both parties. Company A receives financial support to lessen the risk of drilling operations, while Company B gains valuable information that can be used to improve its own operations.