Common use of Test Well Clause in Contracts

Test Well. 4.1 On or before the expiration of the Term of this Agreement subject, however, to rig availability and obtaining requisite governmental permits, COI shall commence, or cause to be commenced, the drilling of the Test Well, at a location on the Leases mutually acceptable to the Parties, and shall prosecute same in a diligent and workmanlike manner to the Objective Depth. In the event the Test Well does not reach the Objective Depth due to encountering impenetrable substances or mechanical conditions beyond COI’s reasonable control, the Parties shall have the option, but not the obligation, to commence the drilling of a substitute well at a mutually acceptable location on the Leases. Any such substitute well drilled hereunder shall, upon its commencement, thereafter be deemed the Test Well. In the event COI does not drill the Test Well during the Term of this Agreement, COI shall assign 100% of its interest in the Stone FO Agreement to XXX within 15 days of the expiration of the Term. XXX shall then be under no further obligations to COI with regard to South Timbalier Area Block 75 and therefore free to drill or cause to be drilled REX’s prospect(s) on South Timbalier Area Block 75 4.2 With respect to the drilling of the Test Well, XXX shall be entitled to an undivided 10% of 100%, being 10%, working interest (including record title and operating rights) free and clear of all costs and expenses associated with the Test Well until Post-Casing Point (such undivided 10% interest until Post-Casing Point is referred to hereafter as the “Carried Interest”). COI, as Operator, will bear all costs and expenses attributable to such Carried Interest prior to Post-Casing Point, together with all costs and expenses pertaining to the Test Well attributable to the remaining undivided 90% working interest, subject, however, to the provisions of Section 4.3 below. 4.3 COI, as Operator, shall notify XXX once Casing Point has been reached with respect to the Test Well and within forty-eight (48) hours, inclusive of Saturdays, Sundays and federal holidays, of receipt of COI’s Casing Point notification, XXX xxx elect to either (a) increase its interest in the Leases, and the Test Well, by an additional undivided 10% of 100%, being 10%, working interest (in addition to its Carried Interest), free and clear of all costs and expenses attributable to the Test Well prior to Casing Point, or (b) retain its undivided 10% of 100% Carried Interest. If at Casing Point, COI, pursuant to the Operating Agreement, elects to temporarily abandon or to plug and abandon the Test Well and XXX elects to participate in a different operation, COI shall not be responsible for costs and expenses attributable to REX’s Carried Interest accruing thereafter to Post-Casing Point. 4.4 In the event the Test Well is drilled and plugged and abandoned as a dry hole XXX will not have had the opportunity to make an election pursuant to 4.3 above to increase its interest in the leases by an additional 10% working interest. Therefore, XXX shall have the opportunity to participate with 20% working interest on a ground floor basis, pursuant to elections made under the Operating Agreement discussed in Article V below, in any future proposals subsequent to the abandonment operations of the Test Well including but not limited to any additional drilling proposals. In the event the Test Well is successfully drilled and completed REX’s working interest in the Leases and the Test Well will be determined pursuant to its election in 4.3 above whereby XXX would own either 10% working interest or 20% working interest. 4.5 The carried Interest of XXX, REX’s working interest election at Casing Point and the XXX Employee ORRI discussed in Article 1.5, 4.2, 4.3 and 4.4 above shall be proportionately reduced to the interest farmed out by Stone, pursuant to their election under Articles 1. (a), (b), and (c) of the ST 75 Part/FO Agreement and pursuant to Article 2. of the Stone Farmout Agreement.

Test Well. 4.1 On or before the expiration of the Term of this Agreement subject, however, to rig availability and obtaining requisite governmental permits, COI shall commence, or cause to be commenced, the drilling of the Test Well, at a location on the Leases Lease mutually acceptable to the Parties, and shall prosecute same in a diligent and workmanlike manner to the Objective Depth. In the event the Test Well does not reach the Objective Depth due to encountering impenetrable substances or mechanical conditions beyond COI’s reasonable control, the Parties shall have the option, but not the obligation, to commence the drilling of a substitute well at a mutually acceptable location on the LeasesLease. Any such substitute well drilled hereunder shall, upon its commencement, thereafter be deemed the Test Well. In the event COI does not drill the Test Well during the Term of this Agreement, COI shall assign 100% of its interest in the Stone FO Agreement to XXX within 15 days of the expiration of the Term. XXX shall then be under no further obligations to COI with regard to South Timbalier Area Block 75 and therefore free to drill or cause to be drilled REX’s prospect(s) on South Timbalier Area Block 75. 4.2 With respect to the drilling of the Test Well, XXX shall be entitled to an undivided 10% of 10075%, being 107.5%, working interest (including record title and operating rights) free and clear of all costs and expenses associated with the Test Well until Post-Casing Point (such undivided 10% of 75% interest until Post-Casing Point is referred to hereafter as the “Carried Interest”). COI, as Operator, will bear all costs and expenses attributable to such Carried Interest prior to Post-Casing Point, together with all costs and expenses pertaining to the Test Well attributable to the remaining undivided 9092.5% working interest, subject, however, to the provisions of Section 4.3 below. 4.3 COI, as Operator, shall notify XXX once Casing Point has been reached with respect to the Test Well and within forty-eight (48) hours, inclusive of Saturdays, Sundays and federal holidays, of receipt of COI’s Casing Point notification, XXX xxx may elect to either (a) increase its interest in the LeasesLease, and the Test Well, by an additional undivided 1025% of 10075%, being 1018.75%, working interest (( in addition to its Carried Interest), free and clear of all costs and expenses attributable to the Test Well prior to Casing Point, or (b) retain its undivided 10% of 10075% Carried Interest. If at Casing Point, COI, pursuant to the Operating Agreement, elects to temporarily abandon or to plug and abandon the Test Well and XXX elects to participate in a different operation, COI shall not be responsible for costs and expenses attributable to REX’s XXX’x Carried Interest accruing thereafter to Post-Casing Point. 4.4 In the event the Test Well is drilled and plugged and abandoned as a dry hole XXX will not have had the opportunity to make an election pursuant to 4.3 above to increase its interest in the leases by an additional 10% working interest. Therefore, XXX shall have the opportunity to participate with 20% working interest on a ground floor basis, pursuant to elections made under the Operating Agreement discussed in Article V below, in any future proposals subsequent to the abandonment operations of the Test Well including but not limited to any additional drilling proposals. In the event the Test Well is successfully drilled and completed REX’s working interest in the Leases and the Test Well will be determined pursuant to its election in 4.3 above whereby XXX would own either 10% working interest or 20% working interest. 4.5 The carried Interest of XXX, REX’s working interest election at Casing Point and the XXX Employee ORRI discussed in Article 1.5, 4.2, 4.3 and 4.4 above shall be proportionately reduced to the interest farmed out by Stone, pursuant to their election under Articles 1. (a), (b), and (c) of the ST 75 Part/FO Agreement and pursuant to Article 2. of the Stone Farmout Agreement.

Test Well. 4.1 On or before the expiration of the Term of this Agreement subjectAugust 14, however2005 ("Commencement Date"), to rig availability and obtaining requisite governmental permits, COI shall commence, KMG will commence or cause to be commencedcommenced operations for the drilling of a test well ("Test Well") in search of oil and/or gas at a location of Xxxx-XxXxx'x choice on the Leases. The Test Well will be drilled with due diligence and in a good and workmanlike manner to a depth sufficient to test the Tex Miss formation as seen in the Induction/Density-Neutron log for the Xxxxx XxxXxxxxx No. 9 Well between the depths of 10,568 and 10,612 (TVD) located in Section 93, X-000, Xxxxxxxx Xxxxxx, Texas, or to a depth of 11,500' (TVD) beneath the surface of the earth, whichever is the lesser depth (the "Objective Depth"), unless "Impenetrable Conditions", as that term is hereinafter defined, are encountered prior to reaching the Objective Depth. The term "Impenetrable Conditions" as used in this Agreement shall mean formations, conditions (such as heaving shale) or mechanical problems that would render further drilling operations by a prudent operator uneconomical or impracticable. To the extent not in conflict with the terms of this Agreement, the Parties agree to be bound by, and all operations on the Test Well shall be governed by, the terms and provisions of the Operating Agreement attached hereto and made a part hereof as Exhibit "B" ("JOA"). Upon reaching the Objective Depth, Xxxx-XxXxx shall cause such logs and tests to be made as it deems prudent under the circumstances. During the drilling of the Test Well, at a location on the Leases mutually acceptable Participant's representatives shall be allowed access to the Partiesxxxxxxx floor of the Test Well at their sole risk and expense, provided they are and remain in compliance with Xxxx-XxXxx'x environmental, health and safety standards. Prior to running any logging device, coring, conducting any formation test(s), or conducting any other similar type test(s), Xxxx-XxXxx will first give Participant notice in sufficient time to allow its representatives to be present to witness the event. Xxxx-XxXxx will furnish Participant all data relative to the drilling well(s) in accordance with Participant's well requirement information. Any notice required hereunder to be given to Participant shall prosecute same be sent to the address, telephone, email, or fax numbers, as the case may be, set forth in a diligent and workmanlike manner Section 7 below. If Impenetrable Conditions are encountered prior to reaching the Objective Depth. In the event the Test Well does not reach the Objective Depth due to encountering impenetrable substances or mechanical conditions beyond COI’s reasonable control, the Parties Xxxx-XxXxx shall have the option, but not option of attempting to complete the obligation, to commence the drilling well as a commercial producer of a substitute well oil and/or gas at a mutually acceptable location on lesser depth if it appears that a completion attempt is warranted, or, if in Xxxx-XxXxx'x opinion a completion attempt at a lesser depth is not warranted, then, subject to the Leases. Any such substitute well drilled hereunder shall, upon its commencement, thereafter be deemed the Test Well. In the event COI does not drill the Test Well during the Term of this Agreement, COI shall assign 100% of its interest in the Stone FO Agreement to XXX within 15 days provisions of the expiration of the Term. XXX shall then be under no further obligations to COI with regard to South Timbalier Area Block 75 immediately following sentence, Xxxx-XxXxx may plug and therefore free to drill or cause to be drilled REX’s prospect(s) on South Timbalier Area Block 75 4.2 With respect to the drilling of abandon the Test Well, XXX the costs of which shall be entitled borne 65% by Xxxx-XxXxx and 35% by Participant. Participant shall have twenty-four (24) hours after notice from Xxxx-XxXxx stating that it has determined the Test Well should be plugged and abandoned in which to an undivided 10% of 100%, being 10%, working interest (including record title elect to take over the Test Well and operating rights) free become solely responsible for any and clear of all costs and expenses associated with any future operations on the Test Well until Post-Casing Point (well, including plugging and abandoning the well. Failure of Participant to respond within such undivided 10% interest until Post-Casing Point is referred period of time shall be deemed a response by Participant to hereafter as the “Carried Interest”). COI, as Operator, will bear all costs and expenses attributable to such Carried Interest prior to Post-Casing Point, together with all costs and expenses pertaining to the Test Well attributable to the remaining undivided 90% working interest, subject, however, to the provisions of Section 4.3 below. 4.3 COI, as Operator, shall notify XXX once Casing Point has been reached with respect to the Test Well and within forty-eight (48) hours, inclusive of Saturdays, Sundays and federal holidays, of receipt of COI’s Casing Point notification, XXX xxx elect to either (a) increase its interest plug and abandon the well. If Impenetrable Conditions are encountered in the Leases, and the Test Well, by an additional undivided 10% of 100%, being 10%, working interest (in addition to its Carried Interest), free and clear of all costs and expenses attributable to the Test Well prior to Casing Pointreaching the Objective Depth and: i) both Parties elect to complete the well at a depth that is less than the Objective Depth, or (b) retain its undivided 10then Participant shall have earned a 25.00% of 100% Carried Interest. If at Casing Point, COI, pursuant leasehold interest in and to the Operating Agreement, elects to temporarily abandon or to plug and abandon well bore of the Test Well Well, limited in depth to one hundred feet (100') below the deepest producing perforations in the well, and XXX subject to the reservation of the overriding royalty interest described in Section 5 below; or ii) Xxxx-XxXxx elects not to participate in the completion attempt for the well and Participant does elect to attempt to complete the well, then Participant shall have earned a different operation100% interest in and to the well bore only of the Test Well, COI subject to the depth limitation set forth immediately above and the reservation of the overriding royalty interest described in Section 5 below; or iii) Participant elects not to participate in the completion attempt for the well and Xxxx-XxXxx elects to attempt to complete the well, then Participant shall not be responsible for costs and expenses attributable to REX’s Carried Interest accruing thereafter to Post-Casing Point. 4.4 In the event the Test Well is drilled and plugged and abandoned as a dry hole XXX will not have had the opportunity to make earned an election pursuant to 4.3 above to increase its interest in the leases by an additional 10% working interest. Therefore, XXX shall have the opportunity to participate with 20% working interest on a ground floor basis, pursuant to elections made under the Operating Agreement discussed in Article V below, in any future proposals subsequent to the abandonment operations well bore of the Test Well including but not limited and, if both Parties elect to drill a substitute well as provided in Section 3 below, any additional assignment earned by Participant in the drilling proposals. In of the event substitute well shall be less and except the well bore of the Test Well is successfully drilled and completed REX’s working interest at such lesser depth. The non-consent provisions of Article VI.B.2 of the JOA shall not apply in the Leases and case of a well that is proposed to be completed at a depth that is less than the Test Well will be determined pursuant to its election in 4.3 above whereby XXX would own either 10% working Objective Depth as a result of encountering Impenetrable Conditions. Any interest or 20% working interest. 4.5 The carried Interest earned by Participant under the provisions of XXX, REX’s working interest election at Casing Point and the XXX Employee ORRI discussed in Article 1.5, 4.2, 4.3 and 4.4 above this Section l. shall be proportionately reduced assigned to it by Xxxx-XxXxx within thirty (30) days after the interest farmed out by Stone, pursuant to their election under Articles 1. (a), (b), and (c) of date on which the ST 75 Part/FO Agreement and pursuant to Article 2. of completion rig for the Stone Farmout Agreementwell has been released.

Test Well. 4.1 3.1. On or before September 30, 2005, and subject to the expiration availability of a drilling rig, tubular goods, and other equipment and services required for the drilling and completion of the Term Test Well, Argyle agrees to commence, or to cause to be commenced, the actual drilling of a well in search of oil or gas at a mutually acceptable legal location in Xxxxxxx 00, Xxxxxxxx 0 Xxxxx, Xxxxx 0 Xxxx, Xxxxxxxx County, Alabama (the "Test Well"). Argyle shall cause such drilling operations to be prosecuted with diligence and in a workmanlike manner consistent with the practices of a prudent operator until the Test Well shall have been drilled to a depth of (a) 14,850 feet TVD below the surface of the earth, or (b) a depth sufficient to test adequately and conclusively the stratigraphic equivalent of the Smackover Formation as seen in the interval between 13,684 feet and 14,016 feet in the Dragon Energy Corporation-ATIC 23-4 #1 well located in Xxxxxxx 00, Xxxxxxxx 0 Xxxxx, Xxxxx 0 Xxxx, Xxxxxxxx County, Alabama, whichever is the shallower depth (the "Objective Depth"), or to such other depth as the parties hereto may agree, as provided hereinafter. 3.2. Argyle agrees to pay and bear one hundred percent (100%) of the total cost, risk, liability, and expense incurred in connection with the drilling of the Test Well to its Objective Depth and all logging, coring, and testing of the Test Well provided or permitted under this Agreement prior to a decision concerning a completion attempt therein. For purposes of this Agreement subjectAgreement, howeverthe point in time when the Test Well has been drilled to its Objective Depth and all such logging, coring and testing of the Test Well prior to rig availability and obtaining requisite governmental permitsa decision concerning a completion attempt therein has been completed shall be referred to hereinafter as "Casing Point." 3.3. During the course of drilling the Test Well to Casing Point, COI Argyle shall commenceperform, or cause to be commencedperformed, the following services with respect to the Test Well: (a) Argyle shall cause a survey of the location of the Test Well to be made, cause such location to be staked, and secure drilling permits for the Test Well. As soon as is practicable after the execution of this Agreement, Argyle shall furnish to Dragon a survey plat showing the staked location of the Test Well. (b) Argyle shall prepare, or cause to be prepared, the Test Well location and the access thereto, and shall settle or pay surface damages, if any, occasioned by these operations. (c) Argyle shall furnish, or cause to be furnished, an appropriate drilling rig, equipment, labor, mud and chemicals, surface casing, protection casing if necessary, cement, water, and fuel; shall move the drilling rig on and off location; and shall perform such other services as may be required to drill the Test Well to its Objective Depth. (d) Argyle shall furnish such on-site geological and engineering supervision, as is necessary or appropriate. (e) Argyle shall, on a daily basis, maintain an estimate of the total expenses incurred to date for the drilling of the Test Well and shall include such information, along with the daily progress of the drilling of the Test Well, at in the daily drilling reports to Dragon provided for in Section 3.3. (g) (i). (f) During the drilling of the Test Well, Argyle shall conduct such coring and testing as would a location on the Leases mutually acceptable to the Parties, and shall prosecute same in a diligent and workmanlike manner to reasonably prudent operator. Upon reaching the Objective Depth, Argyle shall run, from the base of the surface casing of the Test Well to its Objective Depth, such electrical induction logs, neutron density logs, or other logs as may be necessary to properly test the Objective Depth for the presence of oil and/or gas in commercial quantities. Argyle Energy, Inc. Attention: Xx. Xxxxx X. Peters August 23, 2004 (g) Argyle agrees that Dragon and its representatives shall, at all times, have access at their own risk to the xxxxxxx floor of the Test Well to witness all operations thereon and to inspect the logs and other records kept with respect to the Test Well. Argyle shall provide Dragon with at least twenty-four (24) hours written notice concerning the anticipated time that any logging, coring, testing, completion, or plugging operations will take place on the Test Well to allow Dragon, or its representatives, sufficient time to be present at the well site to witness the same. Further, Argyle agrees to furnish to Dragon copies of each of the following: (i) daily drilling reports; (ii) core analyses; (iii) mud logs; (iv) electrical induction logs and surveys and neutron density logs; (v) velocity surveys; (vi) well test and completion reports; and (vii) all reports made to any state or federal agency. 3.4. When the Test Well has been drilled to its Objective Depth and the logging, coring, and testing provided in Section 3.3.(f) have been completed, Argyle or Dragon shall have the right to have additional logs, cores, or other tests made or run in the Test Well to aid in a decision whether to attempt a completion therein; provided, however, that Argyle shall have the right to veto any such proposed additional logs, cores, or other tests if Argyle, in its sole judgment, determines that such proposed logs, cores, or other tests would unduly jeopardize the Test Well or the geological formation into which it has been drilled. Any such additional logging, coring and testing shall be proposed in the manner provided in Article VI.B.1 of the Operating Agreement referred to hereinafter. If Argyle approves any such proposal for additional logging, coring and testing, Argyle shall be liable for 100% of the cost related thereto. In the event the Test Well that Argyle does not elect to conduct such additional testing and Dragon elects to conduct such testing, Dragon shall be liable for all costs incurred and all damage to the well bore during such testing. (a) In the event that Argyle is unable to reach the Objective Depth due in the Test Well, or having reached such Objective Depth, is unable to encountering impenetrable substances complete the Test Well because of subsurface conditions or formations, including without limitation heaving shale, domal formations, and excessively high pressure water sands or cavities, that would render further drilling operations by a prudent operator impracticable, or because of mechanical conditions in the Test Well beyond COI’s reasonable Argyle's control, Argyle shall plug and abandon the Parties Test Well and restore the drillsite premises thereof pursuant to the provisions of Section 3.6. (b) Thereafter, Argyle shall have the optiondetermine, but not the obligationit its sole discretion, whether to commence or to cause to be commenced, within sixty (60) days after the date that plugging operations on the Test Well are completed, the actual drilling of a substitute well for oil and/or gas (the "Substitute Test Well") at a mutually acceptable location on the Leases. Any such substitute well The Substitute Test Well shall be drilled hereunder shall, upon its commencement, thereafter be deemed under the same terms and conditions as the Test Well. In If the event COI does not drill Substitute Test Well is commenced in a timely manner and completed as a producer of oil and/or gas in commercial quantities, the Substitute Test Well shall take the place of the Test Well during the Term for purposes of this Agreement, COI and as used herein, the term "Test Well" shall assign 100% of its interest in include the Stone FO Agreement to XXX within 15 days of Substitute Test Well. Argyle Energy, Inc. Attention: Xx. Xxxxx X. Peters August 23, 2004 (a) In the expiration of event that Argyle commences the Term. XXX shall then be under no further obligations to COI with regard to South Timbalier Area Block 75 and therefore free to drill or cause to be drilled REX’s prospect(s) on South Timbalier Area Block 75 4.2 With respect to the actual drilling of the Test WellWell as provided in this Article 3, XXX shall be entitled to an undivided 10% and reaches the Objective Depth of 100%, being 10%, working interest (including record title and operating rights) free and clear of all costs and expenses associated with the Test Well until Post-Casing Point (such undivided 10% interest until Post-Casing Point is referred but both Argyle and Dragon elect not to hereafter as the “Carried Interest”). COI, as Operator, will bear all costs and expenses attributable attempt to such Carried Interest prior to Post-Casing Point, together with all costs and expenses pertaining to the Test Well attributable to the remaining undivided 90% working interest, subject, however, to the provisions of Section 4.3 below. 4.3 COI, as Operator, shall notify XXX once Casing Point has been reached with respect to the Test Well and within forty-eight (48) hours, inclusive of Saturdays, Sundays and federal holidays, of receipt of COI’s Casing Point notification, XXX xxx elect to either (a) increase its interest in the Leases, and complete the Test Well, by an additional undivided 10% of 100%, being 10%, working interest (in addition to its Carried Interest), free and clear of all costs and expenses attributable to the Test Well prior to Casing Point, or (b) retain its undivided 10% of 100% Carried Interest. If at Casing Point, COI, pursuant to the Operating Agreement, elects to temporarily abandon or to Argyle shall plug and abandon the Test Well and XXX shall restore the drillsite premises pursuant to the requirements of the Leases and applicable laws and regulations, unless operations are conducted pursuant to Section 3.7, and Argyle shall bear one hundred percent (100%) of the total costs, risks, liabilities, and expenses of such plugging, abandonment, and surface restoration operations. (b) In the event that Argyle commences the actual drilling of the Test Well as provided in this Article 3, and reaches the Objective Depth of the Test Well and both Argyle and Dragon participate in the unsuccessful attempt to complete the Test Well, Argyle and Dragon shall plug and abandon the Test Well and shall restore the drillsite premises pursuant to the requirements of the Leases and applicable laws and regulations, unless operations are conducted pursuant to Section 3.7, and the costs, risks, liabilities, and expenses of such plugging, abandonment, and surface restoration operations shall be borne by the parties in their respective after casing point working interests, (the "ACP Interest"). The ACP Interests of Argyle and Dragon are seventy-five percent (75%) and twenty five percent (25%) respectively. (c) In the event that Argyle commences the actual drilling of the Test Well as provided in this Article 3, and reaches the Objective Depth of the Test Well and either Argyle or Dragon elects not to participate in a different operationproposed completion attempt in the Test Well, COI the completion attempt will be subject to the provisions of Section 4.3, and if unsuccessful, the Consenting Party shall not be responsible for costs plug and abandon the Test Well and shall restore the drillsite premises pursuant to the requirements of the Leases and applicable laws and regulations, unless subsequent operations are conducted, and the Consenting Party shall bear (100%) of the total costs, risks, liabilities, and expenses attributable to REX’s Carried Interest accruing thereafter to Post-Casing Pointof such plugging, abandonment, and surface restoration operations. 4.4 (a) After the Test Well has been drilled to Casing Point and Argyle and Dragon have elected not to attempt to complete the Test Well as a well capable of producing oil and/or gas in commercial quantities, Argyle or Dragon may propose deepening, sidetracking, or any other operations in the Test Well prior to the plugging and abandonment thereof. Any such additional logging, coring and testing shall be proposed in the manner provided in Article VI.B. I of the Operating Agreement referred to hereinafter. (b) If Argyle and Dragon elect to participate in the operation proposed under Section 3.7.(a), the cost, risk, liability, and expense incurred in connection therewith shall be borne by the parties in their respective ACP Interest. (c) In the event that either Argyle or Dragon elects not to participate in the relevant Section 3.7.(a) operation (the "Non-Consenting Party"), and the proposing party (the "Consenting Party") thereafter elects not to proceed therewith, Argyle shall plug and abandon the Test Well is drilled and plugged and abandoned as a dry hole XXX will not have had restore the opportunity to make an election drillsite premises thereof pursuant to 4.3 above to increase its interest in the leases by an additional 10% working interest. Therefore, XXX shall have the opportunity to participate with 20% working interest on a ground floor basis, pursuant to elections made under the Operating Agreement discussed in Article V below, in any future proposals subsequent to the abandonment operations provisions of the Test Well including but not limited to any additional drilling proposalsSection 3.6. In the event that either Argyle or Dragon elects not to participate in the relevant Section 3.7.(a) operation, and such operation is pursued by the Consenting Party, the Non-Consenting Party shall surrender and relinquish to the Consenting Party, all of the right, title, and interest of the Non-,Consenting Party in and to the Test Well is successfully drilled and completed REX’s working the Leases; and the Consenting Party shall bear the full cost, risk, liability, and expense incurred in connection with the relevant operation. Such surrender of the interest of the Non-Consenting Party in the Leases shall not create an obligation on the part of the Consenting Party to reimburse the Non-Consenting Party for sums previously paid by the Non-Consenting Party under the terms of this Agreement. The Non- Consenting Party shall execute any assignments or other documents in favor of the Consenting Party necessary to divest the Non-Consenting Party of such rights and interests. Argyle Energy, Inc. Attention: Xx. Xxxxx X. Peters August 23, 2004 3.8. Subject to the provisions of Section 11.1., Argyle may, at its option, subcontract the performance of all or any part of its responsibilities and obligations hereunder; provided, however, that no such subcontract shall be regarded as an assignment of Argyle's responsibilities or obligations hereunder or as having the effect of relieving Argyle of its contractual responsibilities and obligations hereunder. 3.9. Argyle shall, during all operations conducted by it pursuant to this Agreement in connection with the exploration for, or production of, oil and/or gas on the Leases, I comply with any and all applicable laws, rules, and regulations of any governmental authority having jurisdiction over such operations, and with all of the terms, covenants, arid conditions either expressed or implied, set forth in the Leases, this Agreement, and the Test Well will be determined pursuant Operating Agreement referred to its election in 4.3 above whereby XXX would own either 10% working interest or 20% working interesthereinafter. 4.5 The carried Interest of XXX, REX’s working interest election at Casing Point and the XXX Employee ORRI discussed in Article 1.5, 4.2, 4.3 and 4.4 above shall be proportionately reduced to the interest farmed out by Stone, pursuant to their election under Articles 1. (a), (b), and (c) of the ST 75 Part/FO Agreement and pursuant to Article 2. of the Stone Farmout Agreement.