The Applicant’s Plans for Exploration and Development of the Proposed. Unit Area The working interest owners propose a three-year Initial XXX. The Initial XXX plans the drilling of two exploration xxxxx -- one in Block “A” leases (ADL’s 377051, 385198, and 385202) and one in Block “B” leases (ADL’s 385199 and 385201). Failure to make a written commitment to drill the Sak River #1 well in the Block “A” leases on or before May 1, 2002 will result in automatic termination of the unit. Failure to drill the first (Sak River #1) exploratory well by May 1, 2003 will result in unit termination and a charge of $15,000 to compensate the state for lost bonus bids. Failure to drill and complete the second well (Sak River #2) in the Block “B” leases by May 1, 2004 will also result in automatic unit termination. These xxxxx would be drilled in winter when the tundra and Arctic Ocean are frozen, thus minimizing wildlife disturbance. They would be drilled either directionally from a land location or from an offshore ice pad in Gwydyr Bay. Completion of these exploration activities as scheduled will satisfy the performance standards and diligence requirements that the state and the working interest owners must agree to as a condition for approval of the Agreement. The proposed Initial XXX advances exploration and evaluation of the prospect in the area sooner than would occur under any individual lease exploration effort.
