EX-10.1 2 dex101.htm DEVELOPMENT AGREEMENT DEVELOPMENT AGREEMENT
Exhibit 10.1
This Development Agreement (the “Development Agreement”) by and among XxxxXxxxx Energy, Inc., a Delaware corporation, with offices at 000 Xxxxxx X. Xxxx Xxxxxx, Xxxxxxxx Xxxx, XX 00000-0000 (“XxxxXxxxx Parent”), XxxxXxxxx Exploration and Production, LLC, a Delaware limited liability company and wholly owned subsidiary of XxxxXxxxx Parent with offices at 000 Xxxxxx X. Xxxx Xxxxxx, Xxxxxxxx Xxxx, XX 00000-0000 (“Assignor” and, together with XxxxXxxxx Parent, “XxxxXxxxx”) and XxxxXxxxx Mississippian Trust I, a statutory trust formed under the laws of the State of Delaware (the “Trust”), is delivered to be effective as of 12:01 a.m., Central Time, January 1, 2011 (the “Effective Time”). All capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in Article I below.
WHEREAS, Assignor and Mistmada Oil Company, Inc., an Oklahoma corporation and wholly owned subsidiary of XxxxXxxxx Parent (“XxxxXxxxx Sub”), have entered into that certain Term Overriding Royalty Interest Conveyance (PUD) to be effective as of the Effective Time (the “Term PUD Conveyance,” and together with the Perpetual PUD Conveyance, collectively the “Conveyances”), which Term PUD Conveyance has been assigned as of the Effective Time by XxxxXxxxx Sub to the Trust; and
ARTICLE I
This Article I defines certain capitalized words, terms and phrases used in this Development Agreement. Certain other capitalized words, terms and phrases used in this Development Agreement are defined elsewhere in this Development Agreement.
“Additional Interest” is defined in Section 3.01.
“Additional Lease” is defined in Section 3.01.
Development Well Amount shall be rounded to the nearest ten thousandth (i.e., four decimal places to the right of the decimal point).
“Affiliate” means, for any specified Person, another Person that controls, is controlled by, or is under common control with, the specified Person. “Control,” in the preceding sentence, refers to the possession by one Person, directly or indirectly, of the right or power to direct or cause the direction of the management and policies of another Person, whether through the ownership of voting securities, by contract or otherwise.
“AMI Area” means that area described in Exhibit A to this Development Agreement.
“Assignee Minerals” means, collectively, the “Assignee Minerals” as defined under each of the Conveyances.
“Assignor “ is defined in the introductory paragraph to this Development Agreement.
“Assignor’s Net Revenue Interest” means the interest, stated as a decimal fraction, in Subject Minerals production from a Development Well attributable to Subject Interests in that Development Well, net of Production Burdens.
“Assignor’s Net Share of Minerals” means the share of Subject Minerals from each Development Well that is attributable to Assignor’s Net Revenue Interest in that Development Well determined prior to giving effect to the Conveyances.
“Closing Time” means 12:01 a.m., Central Time, on April 12, 2011.
“Conveyances “ is defined in the recitals to this Development Agreement.
“Development Agreement” is defined in the introductory paragraph to this Development Agreement.
“Development Well” means any Mineral well located on the Subject Lands that is spud after December 31, 2010 and drilled horizontally to, and perforated for completion in, the Target Formation, on or prior to the Drilling Obligation Completion Date.
“Drilling Obligation Completion Date” means the date that the Total Drilling Target is reached; provided that the “Drilling Obligation Completion Date” shall not be deemed to have been achieved unless XxxxXxxxx Parent shall have delivered to Trustee, within a reasonable time thereafter, (a) a certificate substantially in the form of Exhibit B to this Development Agreement, executed by its Chief Executive Officer, President or any Vice President, certifying that the Total Drilling Target was achieved as of such date and identifying each Development Well and (b) such other documentation as Trustee may reasonably request to establish satisfaction of XxxxXxxxx’x drilling obligation hereunder.
“Effective Time” is defined in the introductory paragraph to this Development Agreement.
“Exchange Acreage” is defined in Section 3.02.
“Excluded Assets” means those Minerals xxxxx that are described in Exhibit B to each of the Conveyances.
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“Farmout Agreements” means any farmout agreement, participation agreement, exploration agreement, development agreement or any similar agreement.
“Gas” means natural gas and all other gaseous hydrocarbons or minerals, including helium, but specifically excluding any Gas Liquids.
“Gas Liquids” means those natural gas liquids and other similar liquid hydrocarbons, including ethane, propane, butane and natural gasoline, and mixtures thereof, that are removed from a gas stream by the liquids extraction process of any field facility or gas processing plant and delivered by the facility or plant as natural gas liquids.
“Lateral Distance Factor” means, with respect to each Development Well, the fraction (not to exceed 1.0) obtained by dividing such well’s Perforated Length by 2,500 feet. For example, if the Perforated Length of a Development Well is 2,000 feet, the computation would be: 2,000 feet / 2,500 feet = 0.8. Therefore, such Development Well would have a Lateral Distance Factor of 0.8. In no event shall the “Lateral Distance Factor” exceed 1.0. In the event that the Perforated Length of a Development Well is greater than 2,500 feet, the Lateral Distance Factor shall nevertheless be deemed to be equal to 1.0.
“Minerals “ means Oil, Gas and Gas Liquids.
“Mortgage” is defined in Section 2.05(b).
“NRI Factor” means, with respect to each Development Well, the fraction obtained by dividing Assignor’s Net Revenue Interest for such well by 56.9828%. For example, if Assignor’s Net Revenue Interest in a Development Well is 80%, the computation would be: 80% / 56.9828% = 1.4039. Therefore, such Development Well would have a NRI Factor of 1.4039.
“Oil” means crude oil, condensate and other liquid hydrocarbons recovered by field equipment or facilities, excluding Gas Liquids.
“Party,” when capitalized, refers to XxxxXxxxx Parent, Assignor or the Trust. “Parties,” when capitalized, refers to XxxxXxxxx Parent, Assignor and the Trust.
“Perforated Length” means the length (in feet) of a Development Well measured from the first perforation along the measured depth to the last perforation along the measured depth.
“Perpetual PUD Conveyance” is defined in the recitals to this Development Agreement.
“Person” means any natural person, corporation, partnership, trust, estate or other entity, organization or association.
“Production Burdens” means, with respect to any Subject Lands, Subject Interests or Subject Minerals, all royalty interests, overriding royalty interests, production payments, net profits interests and other similar interests that constitute a burden on, are measured by or are payable out of the production of Minerals or the proceeds realized from the sale or other disposition thereof.
“Reasonably Prudent Operator Standard” means the standard of conduct of a reasonably prudent oil and gas operator in the AMI Area under the same or similar
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circumstances, acting with respect to its own property and disregarding the existence of the Royalty Interests as a burden on such property.
“Royalty Interests” means, collectively, the royalty interests created under each of the Conveyances.
“XxxxXxxxx” is defined in the introductory paragraph to this Development Agreement.
“XxxxXxxxx Parent” is defined in the introductory paragraph to this Development Agreement.
“XxxxXxxxx Sub” is defined in the recitals to this Development Agreement.
“Subject Interests” means Assignor’s undivided interests in the Subject Lands as described on Exhibit A to the Conveyances, whether as lessee under leases, as an owner of the Subject Minerals (or the right to extract such Minerals) or otherwise, by virtue of which undivided interests Assignor has the right to conduct exploration, drilling, development and Mineral production operations on the Subject Lands, or to cause such operations to be conducted, or to participate in such operations by paying and bearing all or any part of the costs, risks and liabilities of such operations, to drill, test, complete, equip, operate and produce xxxxx to exploit the Minerals. The “Subject Interests” (a) may be owned by Assignor pursuant to leases, deeds, operating, pooling or unitization agreements, orders or any other instruments, agreements or documents, recorded or unrecorded, (b) include any and all extensions or renewals of leases covering the Subject Lands (or any portion thereof) obtained by Assignor, or any Affiliate thereof, within six (6) months after the expiration or termination of any such lease, and (c) are subject to the Permitted Encumbrances (as defined in each of the Conveyances). For the avoidance of doubt, the “Subject Interests” do not include: (i) Assignor’s interests in the Excluded Assets; (ii) Assignor’s rights to substances other than Minerals; (iii) Assignor’s rights to Minerals (other than Assignee Minerals) under contracts for the purchase, sale, transportation, storage, processing or other handling or disposition of Minerals; (iv) Assignor’s interests in, or rights to Minerals (other than Assignee Minerals) held in pipelines, gathering systems, storage facilities, processing facilities or other equipment or facilities; or (v) any additional or enlarged interests in the Development Xxxxx, Subject Lands or Subject Minerals acquired by Assignor after the Closing Time, except (1) to the extent any such additional or enlarged interest becomes a part of the Subject Interests by amendment to the Conveyances pursuant to Section 3.01 or Section 3.02, (2) as may result from the operation of the terms of the instruments creating the Subject Interests, or (3) as may be reflected in extensions and renewals covered by the preceding sentence.
“Subject Lands” means the lands subject to or covered by the oil and gas leases described in Exhibit A to each of the Conveyances, insofar and only insofar as they cover the Target Formation, subject to the exceptions, exclusions and reservations set forth on each such Exhibit A.
“Subject Minerals” means all Minerals in and under, and that may be produced, saved and sold from a Development Well, from and after the Effective Time, insofar and only insofar as such Minerals are produced from the Target Formation, subject to the following exclusions: Minerals that are (a) lost in the production, gathering or marketing of Minerals; (b) used (i) in conformity with ordinary and prudent operations on the Subject Lands, including drilling and
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production operations with respect to a Development Well or (ii) in connection with operations (whether on or off the Subject Lands) for processing or compressing the Subject Minerals; (c) taken by a Third Person to recover costs, or some multiple of costs, paid or incurred by that Third Person under any operating agreement, unit agreement or other agreement in connection with nonconsent operations conducted (or participated in) by that Third Person; and (d) retained by a Third Person for gathering, transportation, processing or marketing services related to the Subject Minerals in lieu of or in addition to cash payment for such services, to the extent such agreement is permitted under the Conveyances.
“Target Formation” means (i) with respect to Alfalfa County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Xxxxxx or its stratigraphic equivalent at a depth of 4,833’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 5,344’ in the XxxxXxxxx Energy Dorado SWD 1-32 located in section 32, Township 29 North, Range 9 West (API No. 35003219830000), (ii) with respect to Garfield County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Xxxxxx or its stratigraphic equivalent at a depth of 6,475’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 7,100’ in the Texas American Oil XX Xxxxxx 1 located in section 27, Township 23 North, Range 8 West (API No. 35047223450000), (iii) with respect to Grant County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Xxxxxx or its stratigraphic equivalent at a depth of 5,395’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 6,060’ in the XxxxXxxxx Energy Orion 1-22 SWD located in section 22, Township 25 North, Range 5 West (API No. 35053227710000), (iv) with respect to Major County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Xxxxxx or its stratigraphic equivalent at a depth of 6,474’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 7,094’ in the Xxxxxx Oil Xxxxx 1 located in section 24, Township 23 North, Range 9 West (API No. 35093215620000) and (v) with respect to Xxxxx County, Oklahoma, the “Target Formation” being defined as being the interval between the base of Pennsylvanian-aged Xxxxxx or its stratigraphic equivalent at a depth of 5,204’ and the Devonian-aged Woodford Shale or its stratigraphic equivalent at a depth of 5,704’ in the XxxxXxxxx Energy Koppitz SWD 1-31 located in section 31, Township 28 North, Range 13 West (API No. 35151232750000).
“Term PUD Conveyance” is defined in the recitals to this Development Agreement.
“Third Person” means a Person other than XxxxXxxxx or Trustee.
“Total Drilling Target” means that number of Development Xxxxx where the cumulative sum of all the Adjusted Development Well Amounts for such Development Xxxxx drilled or caused to be drilled by Assignor equals 123.
“Trust” is defined in the introductory paragraph to this Development Agreement.
“Trust Agreement” means the Amended and Restated Trust Agreement of the Trust, dated as of April 12, 2011 (as may be amended from time to time), among XxxxXxxxx Parent, the Trustee and Corporation Trust Company, as Delaware trustee.
“Trustee” means The Bank of New York Mellon Trust Company, N.A., a national banking association organized under the laws of the United States of America with its principal
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place of business in New York, New York, as trustee, acting not in its individual capacity but solely as trustee of the Trust.
ARTICLE II
DEVELOPMENT OF THE SUBJECT LANDS
Section 2.01 Drilling Program.
(a) Prior to the Drilling Obligation Completion Date, XxxxXxxxx shall not, and shall cause its Affiliates not to, drill and/or complete any well to the Target Formation in the AMI Area other than Development Xxxxx in furtherance of its drilling obligation in Section 2.01 above.
(b) Assignor hereby covenants and agrees to enter into a Mortgage (the “Mortgage”) by which Assignor will grant a mortgage lien in and to any of the undeveloped portions of the
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Subject Lands (including, by amendment to the Mortgage, any Additional Lease, Additional Interest or Exchange Acreage that becomes part of the Subject Lands) located in the AMI Area in order to secure the performance of XxxxXxxxx’x drilling obligation under Section 2.01 above.
(c) If XxxxXxxxx fails to achieve the Total Drilling Target by December 31, 2015, XxxxXxxxx shall be in default of its obligations under this Development Agreement and the Trust shall be entitled to pursue, in its sole discretion, any and all remedies available pursuant to Article III of the Mortgage.
(d) Notwithstanding the preceding, the maximum amount recoverable upon a failure by XxxxXxxxx to satisfy its obligations under Section 2.01 shall be $166,050,000, and such amount shall automatically be reduced by an amount that is equal to the product of $1,350,000 multiplied by the cumulative total of all Adjusted Development Well Amounts for all Development Xxxxx drilled or caused to be drilled by XxxxXxxxx under this Development Agreement. In addition, upon Assignor’s request and at Assignor’s expense, the lien and security interest evidenced by the Mortgage shall be released as to each Development Well as the same is completed (including completion as a dry hole) in accordance with this Development Agreement.
ARTICLE III
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(a) the aggregate acreage attributable to all Additional Leases, Additional Interests and Exchange Acreage will not exceed 5% of the Subject Interests as such exist as of the Closing Time;
(b) in the case of an Additional Lease only, the reserve profile of such Additional Lease is consistent with reserve profiles of other portions of the Subject Interests that would, but for the acquisition of the Additional Lease, be tapped from a Development Well having the entire length of all of its perforated laterals located within the Subject Interests;
(c) in the case of Exchange Acreage only, the reasonably projected quantity of proved undeveloped reserves attributable to the Exchange Acreage does not significantly differ from the reasonably projected quantity of proved undeveloped reserves attributable to the portion of the Subject Interests to be given in exchange therefor; and
(d) the addition of any Additional Leases, Additional interests, or Exchange Acreage, as applicable, to the Conveyance will not cause any adverse federal income tax consequence to any Unitholder of the Trust.
The Trustee is hereby authorized and directed to rely on any such certification from Assignor, and shall have no authority or responsibility to exercise any discretion in connection with any transaction authorized by this Article III.
ARTICLE IV
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the trustee therein named or the holder of the obligation secured thereby shall be entitled, to the extent such mortgage, pledge or deed of trust so provides and upon the occurrence or existence of the event or condition therein stated, if so conditioned, to exercise all of the rights, remedies, powers and privileges herein conferred upon the Trust, and to give or withhold all consents herein required or permitted to be obtained from the Trust.
Section 4.02 Governing Law. THIS DEVELOPMENT AGREEMENT SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE STATE OF OKLAHOMA WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
(a) no consideration shall be given to the captions of the articles, sections, subsections or clauses, which are inserted for convenience in locating the provisions of this Development Agreement and not as an aid in its construction;
(b) no consideration shall be given to the fact or presumption that one Party had a greater or lesser hand in drafting this Development Agreement;
(c) the word “includes” and its syntactical variants mean “includes, but is not limited to” and corresponding syntactical variant expressions;
(d) a defined term has its defined meaning throughout this Development Agreement, regardless of whether it appears before or after the place in this Development Agreement where it is defined;
(e) unless the context clearly indicates to the contrary, references to any Party shall be construed to include all permitted successors and assigns of such Party and references to Trustee shall be construed to include all successor and substitute trustees under the Trust Agreement;
(f) the plural shall be deemed to include the singular, and vice versa; and
(g) each exhibit, attachment and schedule to this Development Agreement is a part of this Development Agreement, but if there is any conflict or inconsistency between the main body of this Development Agreement and any exhibit, attachment or schedule, the provisions of the main body of this Development Agreement shall prevail.
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If to the Trust, to:
XxxxXxxxx Mississippian Trust I
x/x Xxx Xxxx xx Xxx Xxxx Xxxxxx Trust Company, N.A.
Institutional Trust Services
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
With a copy to:
Bracewell & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
If to XxxxXxxxx, to:
000 Xxxxxx X. Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
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With a copy to:
Xxxxxxxxx & Xxxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No. (000) 000 0000
[Remainder of page intentionally left blank.]
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XxxxXxxxx Energy, Inc. | ||||
By: | /s/ Xxxxx X. Xxxxxxx | |||
Name: | Xxxxx X. Xxxxxxx | |||
Title: | Executive Vice President and Chief Financial Officer |
Signature Page to Development Agreement
XxxxXxxxx Exploration and Production, LLC | ||||
By: | /s/ Xxxxx X. Xxxxxxx | |||
Name: | Xxxxx X. Xxxxxxx | |||
Title: | Executive Vice President and Chief Financial Officer |
Signature Page to Development Agreement
XxxxXxxxx Mississippian Trust I | ||||
By: | The Bank of New York Mellon Trust Company, N.A., as Trustee | |||
By: | /s/ Xxxxxxx X. Xxxxxx | |||
Name: | Xxxxxxx X. Xxxxxx | |||
Title: | Vice-President |
Signature Page to Development Agreement
STATE OF OKLAHOMA | § | |
§ | ||
COUNTY OF OKLAHOMA | § |
This instrument was acknowledged before me on April 1, 2011, by Xxxxx X. Xxxxxxx as Executive Vice President and Chief Financial Officer of XxxxXxxxx Energy, Inc., a Delaware corporation, on behalf of said corporation.
WITNESS my hand and official seal this 1st day of April, 2011.
/s/ Xxxxx X. Xxxxxxx |
NOTARY PUBLIC, |
State of Oklahoma |
Xxxxx X. Xxxxxxx |
(printed name) |
My commission expires: | ||
May 22, 2012 | ||
[SEAL] |
Acknowledgment Page to Development Agreement
STATE OF OKLAHOMA | § | |
§ | ||
COUNTY OF OKLAHOMA | § |
This instrument was acknowledged before me on April 1, 2011, by Xxxxx X. Xxxxxxx as Executive Vice President and Chief Financial Officer of XxxxXxxxx Exploration and Production, LLC, a Delaware limited liability company, on behalf of said limited liability company.
WITNESS my hand and official seal this 1st day of April, 2011.
/s/ Xxxxx X. Xxxxxxx |
NOTARY PUBLIC, |
State of Oklahoma |
Xxxxx X. Xxxxxxx |
(printed name) |
My commission expires: | ||
May 22, 2012 | ||
[SEAL] |
Acknowledgment Page to Development Agreement
STATE OF TEXAS | § | |
§ | ||
COUNTY OF XXXXXX | § |
This instrument was acknowledged before me on April 5, 2011, by Xxxxxxx X. Xxxxxx as Vice-President of The Bank of New York Mellon Trust Company, N.A., a national banking association organized under the laws of the United States of America as Trustee of XxxxXxxxx Mississippian Trust I, a Delaware statutory trust, on behalf of said national banking association and said trust.
WITNESS my hand and official seal this 5th day of April, 2011.
/s/ Xxxxx Xxxxxx |
NOTARY PUBLIC, |
State of Texas |
Xxxxx Xxxxxx |
(printed name) |
My commission expires: | ||
02-16-2014 | ||
[SEAL] |
Acknowledgment Page to Development Agreement
Exhibit A
(Description of AMI Area)
[See attached.]
Exhibit B
[Letterhead of XxxxXxxxx Energy, Inc.]
[Date]
Reference is made to that certain Development Agreement (the “Development Agreement”), by and between XxxxXxxxx Energy, Inc. (“XxxxXxxxx”), XxxxXxxxx Exploration and Production, LLC and XxxxXxxxx Mississippian Trust I, a Delaware statutory trust, delivered to be effective as of January 1, 2011. Capitalized terms used but not defined herein have the meaning given them in the Development Agreement.
XxxxXxxxx hereby certifies to the Trust that XxxxXxxxx achieved the Total Drilling Target on [insert date] and, therefore, such date shall be, for all purposes, established as the Drilling Obligation Completion Date.
The Development Xxxxx drilled to achieve the Total Drilling Target are listed in the attachment to this letter.
Please sign and return an executed copy of this letter to certify that you require no additional documentation to establish XxxxXxxxx’x satisfaction of its drilling obligation under the Development Agreement and that [insert date] shall be, for all purposes, established as the Drilling Obligation Completion Date.
XxxxXxxxx Energy, Inc. | ||
By: |
| |
Name: | ||
Title: |
Acknowledged and agreed: | ||||||||
XxxxXxxxx Mississippian Trust I | ||||||||
By: | The Bank of New York Mellon Trust Company, N.A., as Trustee | |||||||
By: |
| |||||||
Name: | ||||||||
Title: |