162 (7-85) GPC
▇▇▇-▇▇▇▇-▇▇ (Stamped)
GAS PURCHASE CONTRACT
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THIS AGREEMENT, made and entered into this 22 day of __JUNE__,19_92_,by
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and between ▇▇▇▇▇▇ PETROLEUM COMPANY, a Division of Chevron U.S.A. Inc.,
hereinafter referred to as "Buyer", and JUBILEE OIL & GAS CORPORA'I'ION,
hereinafter referred to as "Seller";
WITNESSETH:
WHEREAS, Seller owns and holds one or more valid and subsisting oil and/or
gas mining leases covering the following described lands situated and being
within the County of ▇▇▇▇, State of Texas, to-wit:
Pennzoil Hartwich Lease - Section 219, Block 34, H&TC Survey
and,
WHEREAS, Seller is operating the above-described properties and certain
▇▇▇▇▇ on said lands are productive, of what is termed casinghead gas, and/or gas
well gas, and Seller desires to sell the gas which may hereafter be produced
from ▇▇▇▇▇ located on said premises; and,
WHEREAS, Buyer desires to purchase said gas;
NOW, THEREFORE, in consideration of the mutual covenants and agreements to
be kept and performed by the parties, Seller hereby grants, bargains, sells, and
agrees to deliver to Buyer and further agrees to purchase and take from Seller,
subject to the stipulations and conditions hereinafter specified, Seller's
interest in gas now or hereafter Produced from ▇▇▇▇▇ on the lands hereinabove
described.
1. PURPOSE- The gas hereby sold is conveyed to Buyer for the purpose of
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extracting therefrom liquid hydrocarbons. Seller agrees that prior to delivery
to Buyer, the gas shall not be processed other than in a conventional mechanical
gas oil separator or separators, operating with no internal piping for heat
interchange. The term "gas' as used throughout this contract means gas issuing
from oil ▇▇▇▇▇ or gas produced from gas ▇▇▇▇▇ as classified by the Texas
Railroad Commisson.
2. DELIVERY PLACE- The delivery of gas shall he made at vapor tight flow
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ranks and/or gas traps furnished by Seller and/or at the casingheads of the
▇▇▇▇▇. Buyer may, with Seller's consent, install equipment acceptable to Seller
on Seller's storage links for the purpose of saving and utilizing vapors
therefrom, which vapors for the purpose of this contract shall he considered
gas.
3. DELIVERY DATE- The delivery and reception of said gas hereunder shall
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begin on or before sixty (60) days from the date this contract, signed by
Seller, is received by Buyer at its offices in Tulsa, Oklahoma. If Buyer fails
to accept and/or agree to pay for said gas by said date, Seller's sole remedy
shall be the right to cancel this contract any time thereafter before actual
utilization begins by serving ten (10) days' written notice on Buyer, in which
event this contract shall terminate at the end of said ten-day period unless on
or before the last day thereof Buyer either starts receiving said gas or agrees
to pay for the same as though received.
(HAND WRITTEN)C-162158
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162(7-85)/GPC
(HAND STAMPED) ▇▇▇-▇▇▇▇-▇▇
4. LEAN AND FLUSH GAS- Buyer agrees to take all the gas testing more than
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0.50 gallons of gasoline to one thousand (1,000) cubic feet of gas, provided
that during flush gas production and during periods of curtailment by the
residue gas purchaser or purchasers Buyer shall only be obligated to take gas
ratably as to quantity with all other casinghead gas connected to its gathering
line and only obligated to take gas well gas ratably with other gas well gas of
the same type connected to Buyer's plant. A flush gas condition is hereby
defined to exist whenever Buyer's gathering line or plant is of insufficient
capacity to gather or process all of the gas connected thereto. Unless Buyer
within six (6) months from the commencement of such excess production arranges
to take or pay for any part or all of such excess gas, Seller shall have the
right to dispose of any such excess gas not taken or paid for by Buyer.
4. RESIDUE GAS- The term 'residue gas' is defined as and shall be any gas
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connected to Buyer's plant gas gathering system which is sold before processing
or which is discharged in the form of gas from the gas processing facility.
Buyer shall not be obligated to return residue gas to Seller's lease for use in
the development and operation of such lease, though Buyer may do so at any time
that it so elects. Until such time as Buyer does return residue gas to Seller's
lease, Seller may use gas produced from said lease for the purpose of developing
and operating the lease, excluding the use of gas for gas lifting or for
pressure maintenance and/or cycling operations. Upon Buyer's election to return
residue gas, Buyer agrees to return to the nearest boundary line of Seller's
lease, heretofore described, sufficient residue gas for developing and operating
said lease, the amount of such gas not to exceed an amount equal to the "residue
gas remaining" as hereinafter determined, provided that in the event the
"residue gas remaining" shall be insufficient in quantity for the purpose of
developing and operating said lease, Seller hereby reserves the right to use gas
from its lease sufficient in quantity to make up the deficiency. The volume of
residue gas returned to Seller shall be computed on the same basis of
measurement as provided in Paragraph 9, MEASUREMENT; provided, however, such
volume of residue gas may, at Buyer's option, be estimated in accordance with
methods followed generally in the natural gas processing industry. Utilization
of said residue gas so delivered by Buyer shall be at Seller's risk. In the
event Seller accepts and uses residue gas furnished by Buyer in excess of the
amount of residue gas to which Seller is entitled, Seller shall pay Buyer for
such gas at the weighted average price per MCF paid by the major purchasers of
residue gas sold from Buyer's plant for the residue gas sold to such purchasers
from said plant. In the event Seller accepts and uses gas other than residue gas
in excess of the amount of residue gas to which Seller is entitled, Seller shall
pay Buyer for such excess gas at Buyer's cost at point of delivery to Seller.
Seller shall not permit wasteful use of gas returned hereunder. The term
"wasteful use" shall include, but not by way of limitation, the use of gas as a
working fluid in steam pumps or turbines and the burning of gas in open flares.
The volume of "residue gas remaining" shall be determined by (1) multiplying the
volume of said gas delivered from said lease by the applicable theoretical
percentage as shown in the following table, the result being the "theoretical
volume of residue gas remaining" from the gas delivered from said lease, (2)
dividing the "total actual volume of residue gas remaining" (determined in the
manner hereinafter provided) from all gas delivered to said plant by the total
"theoretical volume of residue gas remaining" from all gas delivered to said
plant (the latter being the sum of the theoretical volumes for all leases from
which gas is delivered to said plant determined as to each lease in accordance
with (1) above) and expressing the result in percentage, and (3) multiplying the
"theoretical volume of residue gas remaining" from Seller's said lease by said
last-mentioned percentage. The "total actual volume of residue gas remaining"
from all gas delivered to said plant as used herein shall mean that volume of
residue gas remaining, after the extraction of gasoline and additional products,
from all gas processed in Buyer's plant, less the volume of residue gas
necessary for plant operation. Said "total actual volume of residue gas
remaining" shall be measured by suitable orifice meters of standard make to be
installed and kept in repair by Buyer at the various points where the residue
gas is delivered to producers and to purchasers (if not measured by purchasers)
and to flare; provided, however, that Buyer shall not be required to measure the
deliveries of small quantities of residue gas which would not, in Buyer's
judgment, justify a meter installation and the volumes of such deliveries shall
he estimated by Buyer in accordance with methods followed generally in the
natural gas processing industry.
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162- 0159-00 (STAMPED) 162(7-85)/GPC
Notwithstanding anything in this agreement to the contrary, Buyer, at its sole
discretion, may at any time change the residue gas allocation procedure set
forth herein to a procedure which takes into account the BTU content of the gas,
thereby providing that the total BTU's in the actual Plant residue gas remaining
will he allocated between leases/▇▇▇▇▇ connected to the Plant on the basis of
the theoretical BTU's remaining from each lease/well after the extraction of the
products and the consumption of fuel. Likewise, Buyer may change the method of
product allocation set forth herein to one based on the theoretical product
content of the gas from each lease/well as determined by measurement and
chromatographic analysis of the gas from each lease/well.
Theoretical Percentage of Gas Remaining as Residue After Extraction of Gasoline
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and Plant Use Based Upon Gasoline Content in Gallons per 1,000 Cubic Feet (GPM).
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GPM % GPM % GPM % GPM % GPM % GPM % GPM %
---- ------- ---- ------ ---- ------ ---- ------ ---- ------ ----- ------ ----- -----
.00 100.00 2.00 72.90 4.00 54.30 6.00 38.30 8.00 25.10 10.00 13.70 12.00 3.50
.05 93.10 2.05 72.45 4.05 53.85 6.05 37.90 8.05 24.80 10.05 13.35 12.05 3.25
.10 92.60 2.10 72.00 4.10 53.40 6.10 37.50 8.10 24.50 10.10 13.00 12.10 3.00
.15 92.10 2.15 71.50 4.15 52.95 6.15 37.20 8.15 24.25 10.15 12.75 12.15 2.75
.20 91.50 2.20 71.00 4.20 52.50 6.20 36.90 8.20 24.00 10.20 12.50 12.20 2.50
.25 91.05 2.25 70.50 4.25 52.15 6.25 36.55 8.25 23.65 10.25 12.25 12.25 2.30
.30 90.50 2.30 70.10 4.30 51.80 6.30 36.20 8.30 23.30 10.30 12.00 12.30 2.10
.35 90.05 2.35 69.60 4.35 51.30 6.35 35.80 8.35 22.95 10.35 11.75 12.35 1.85
.40 89.60 2.40 69.10 4.40 50.80 6.40 35.40 8.40 22.60 10.40 11.50 12.40 1.60
.45 89.00 2.45 68.65 4.45 50.40 6.45 35.10 8.45 22.30 10.45 11.25 12.45 1.40
.50 88.40 2.50 68.20 4.50 50.00 6.50 34.80 8.50 22.00 10.50 11.0O 12.50 1.20
.55 87.85 2.55 67.70 4.55 49.65 6.55 34.45 8.55 21.70 10.55 10.75 12.55 .90
.60 87.30 2.60 67.20 4.60 49.30 6.60 34.10 8.60 21.40 10.60 10.50 12.60 .60
.65 86.80 2.65 66.70 4.65 48.85 6.65 33.80 8.65 21.10 10.65 10.25 12.65 .35
.70 86.30 2.70 66.20 4.70 48.40 6.70 33.50 8.70 20.80 10.70 10.00 12.70 .10
.75 85.75 2.75 65.75 4.75 47.95 6.75 33.15 8.75 20.55 10.75 9.75
.80 85.20 2.80 65.30 4.80 47.50 6.80 32.80 8.80 20.30 10.80 9.50
.85 84.70 2.85 64.90 4.85 47.15 6.85 32.50 8.85 20.05 10.85 9.25
.90 84.20 2.90 64.50 4.90 46.90 6.90 32.20 8.90 19.80 10.90 9.00
.95 83.65 2.95 63.95 4.95 46.35 6.95 31.85 8.95 19.50 10.95 8.75
1.00 83.10 3.00 61.40 5.00 45.90 7.00 31.50 9.00 19.20 11.00 8.50
1.05 82.50 3.05 62.95 5.05 45.50 7.05 31.15 9.05 18.85 11.05 8.25
1.10 81.90 3.10 62.50 5.10 45.10 7.10 30.80 9.10 18.50 11.10 8.00
1.15 81.50 3.15 62.00 5.15 44.75 7.15 30.50 9.15 18.20 11.15 7.70
1.20 80.90 3.20 61.50 5.20 44.20 7.20 30.20 9.20 17.90 11.20 7.40
1.25 80.40 3.25 61.00 5.25 43.85 7.25 29.95 9.25 17.60 11.25 7.20
1.30 79.90 3.30 60.50 5.30 43.50 7.30 29.50 9.30 17.30 11.30 7.00
1.15 79.45 3.35 00.15 5.35 43.05 7.35 29.25 9.35 17.05 11.35 6.75
1.40 79.00 3.40 59.80 5.40 42.60 7.40 29.00 9.40 16.80 11.40 6.50
1.45 78.50 3.45 59.30 5.45 42.25 7.45 28.65 9.45 16.50 11.45 6.25
1.50 78.00 3.50 58.80 5.50 41.90 7.50 28.30 9.50 16.20 11.50 6.00
1.55 77.50 3.55 58.15 5.55 41.55 7.55 28.00 9.55 16.00 11.55 5.80
1.60 77.00 3.60 57.90 5.60 41.20 7.60 27.70 9.60 15.80 11.60 5.60
1.65 76.50 3.65 57.40 5.65 40.80 7.65 27.30 9.65 15.50 11.65 5.35
1.70 76.00 3.70 56.90 5.70 40.40 7.70 26.90 9.70 15.20 11.70 5.10
1.75 75.50 3.75 56.55 5.75 40.15 7.75 26.70 9.75 14.95 11.75 4.95
1.80 75.00 3.80 56.20 5.80 39.90 7.80 26.50 9.80 14.70 11.80 4.60
1.85 74.50 3.85 55.75 5.85 39.50 7.85 26.20 9.85 14.41 11.85 4.35
1.90 74.00 3.90 55.30 5.90 39.10 7.90 25.90 9.90 14.20 11.90 4.10
1.95 73.45 3.95 54.80 5.95 38.70 7.95 25.50 9.95 13.95 11.95 3.80
3
(HAND WRITTEN) C - 162158
162 (7-85)/GPC
6. DILUTFD GAS- Should Seller's operations under this paragraph create a
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condition which in the exclusive judgment of Buyer makes the taking and
utilization of gas therefrom unprofitable to Buyer, or should such operations
tend to endanger the plant or property of Buyer or the lives of Buyer's
employees should such diluted or contaminated gas be taken, then Buyer, at its
election, may discontinue taking the gas from the particular well or ▇▇▇▇▇ while
being so operated.
7. RIGHT OF WAY - To the full extent that Seller is able to convey such
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rights, Seller hereby assigns and grants to Buyer an easement across the
premises covered hereby to lay and maintain lines and to install, maintain and
operate any equipment necessary to its operations hereunder and Buyer shall have
the right of free entry for any purpose connected therewith. All lines and
equipment placed by Buyer on said premises shall remain the property of Buyer
and may he removed by Buyer before or within a reasonable time after the
expiration of this Agreement.
8. SETTLEMENT TESTS- The gasoline content per thousand cubic feet of gas
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delivered to Buyer hereunder shall be determined by a field compression test, or
chromatographic analysis, at Buyer's option, made in accordance with the
official code of the Gas Processors Association for testing natural gas for
gasoline content. The specific gravity shall be determined by the use of a
gravitometer of the Ranarex type. The tests for gasoline content and specific
gravity shall be made by Buyer semiannually except when, in the opinion of
either party, a change in the method of operations of the lease will affect
materially the gasoline content and specific gravity of the gas, in which event
the tests shall be made at the demand of either party upon five (5) days' notice
to the other party. Buyer shall notify Seller in writing ten (10) days previous
to the semiannual tests in order that it may have a representative present to
witness said tests and/or make joint tests with its own appliances. The content
tests shall be computed to a standard pressure base of 14.65 pounds per square
inch absolute and at a standard base temperature of sixty (60) degrees
Fahrenheit.
9. MEASUREMENT- The gas delivered hereunder shall be measured by a suitable
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orifice meter, or meters, of standard make to be furnished, installed, and kept
in repair by Buyer near tile point of delivery of such gas. Buyer may, at its
option, install an electronic flow recorder to record the static and
differential pressures, flowing temperature and volume of such gas. All gas
volumes measured hereunder shall be computed to a standard pressure base of
14.65 pounds per square inch absolute at a standard base temperature of sixty
(60) degrees Fahrenheit. For purposes of measurement computations tile average
atmospheric pressure shall be assumed to be 13.2 pounds per square inch and the
average flowing temperature shall be assumed to be sixty (60) degrees
Fahrenheit. All orifice coefficient computations shall be made in accordance
with published procedures adopted as American National Standard, "Orifice
Metering of Natural Gas," published as ANSI-API 2530 (Formerly prescribed by the
API and published as API2530, including therein the American Gas Association
Report No. 3 adopted in 1975 by API and further approved by the American
National Standards Institute June 28, 1977) as amended or revised from time to
time, except that the ▇▇▇▇▇▇▇▇ Number, Expansion, and Manometer Factors shall
each be considered as unity, and only those gas volumes measured at pressures of
100 pounds per square inch gauge or greater shall be corrected for deviation
from ▇▇▇▇▇'▇ Law. Notwithstanding the foregoing, at Buyer's option the flowing
temperature of the gas may be determined by means of a recording thermometer
installed by and at the expense of Buyer. In the event Buyer elects to exercise
such option, the arithmetical average of the recorded temperatures of the gas
delivered during each month shall be deemed to be the temperature of such gas so
delivered during such month. Buyer shall test, and if necessary adjust and
repair, any meter installed by it hereunder at or about the time the tests for
gasoline content are made. Said meter, or meters, shall be open to inspection at
all times by Seller in the presence of Buyer. In case any question arises as to
the accuracy of the meter measurement, said meter, or meters, shall be tested
upon the demand of either party. The expense of such tests shall be borne by the
party demanding same if the meter is found to be correct and by Buyer if found
incorrect. A registration within 2% of correct shall be considered correct.
4
(HAND WRITTEN) C - 162158
162 (7-85)/GPC
If at any time any of the measuring or testing equipment is found to be out of
service, or registering inaccurately in any percentage, it shall be adjusted at
once to read accurately, within the limits prescribed by the manufacturer. If
such equipment is out of service, or inaccurate by an amount exceeding two
percent (2%) at a reading corresponding to the average rate of flow for the
period since the last preceding test, the previous readings of such equipment
shall be disregarded for any period definitely known or agreed upon, or if not
so known or agreed upon, for a period of sixteen (16) days or one-half (1/2) of
the elapsed time since the last test, whichever is shorter. The volume of gas
delivered during such period shall be estimated by:
(a) Using the data recorded by any check-measuring equipment if installed
and accurately registering, or if not installed or registering accurately;
(b) By correcting the error if the percentage of error is ascertainable by
calibration, test or mathematical calculation, or if neither such method is
feasible;
(e) By estimating the quantity, or quality, delivered based upon deliveries
under similar conditions during a period when the equipment was registering
accurately. No corrections shall be made for recorded
inaccuracies of two percent (2%) or less.
If requested, Buyer shall send charts or flow computer unit data printouts to
Seller for checking after which they shall be returned to Buyer.
10. PRICE
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A. Natural Gasoline Value- The gasoline content values due each connection
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shall be determined by multiplying the "Total Gasoline Value" by a fraction, the
numerator of which is the "Adjusted Gasoline Content of Each Connection" and the
denominator of which is the "Adjusted Gasoline Content of All Connections," and
then multiplying the result by whichever of the following percentages is
applicable, to-wit:
Monthly Delivered Volume (MCF Percentage
-------------------------------- ----------
Less than 9,125 55%
9,125 or more, but less than 15,200 60%
15,200 or more 65%
The "Total Gasoline Value" shall be the total value invoiced for deliveries of
natural gasoline.
The "Adjusted Gasoline Content of Each Connection" shall be determined by
multiplying the "Gasoline Content Per Thousand Cubic Feet", as determined in
accordance with Section 8 hereunder, by a fraction, the numerator of which shall
be the "Actual Net Plant Production of Natural Gasoline" and the denominator of
which shall be the "Gasoline Content of all Connections", then multiplying the
result by the applicable measured volume of gas from each connection.
The "Actual Net Plant Production of Natural Gasoline", expressed in gallons,
shall be the total net deliveries of natural gasoline adjusted for change in
inventory.
The "Adjusted Gasoline Content of All Connections" shall be the sum of the
"Adjusted Gasoline Content of Each Connection" for all connections.
The "Gasoline Content of all Connections" shall be the sun or the products
obtained by multiplying the "Gasoline Content Per Thousand Cubic Feet" of each
connection by the applicable measured volume of gas from each connection.
5
(HAND WRITTEN) C - 162158
162 (7-85)/GPC
B. Additional Products Value- The additional products value for each
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connection shall he determined by multiplying the "Total Additional Products
Value" by a fraction, the numerator of which is the "Adjusted Gasoline Content
of each Connection", as defined in Section 10-A, and the denominator of which is
the "Adjusted Gasoline Content of all Connections", also as defined in 10-A, and
then by whichever of the following percentages is applicable, to-wit:
Monthly Delivered Volume (MCF Percentage
-------------------------------- ----------
less than 9,125 55%
9,125 or more, but less than 15,200 60%
15,200 or more 65%
The "Total Additional Products Value" shall be the total value invoiced for
deliveries of additional products. The value invoiced shall include any and all
adjustments from prescribed quality specifications including but not limited to
impurities and contamination claims, if allowed by Buyer, but shall not include
any cash discounts.
Notwithstanding the foregoing, the individual liquid hydrocarbon products,
delivered by Buyer into a pipeline operated by others or delivered to remotely
located fractionation facilities owned by Buyer or remotely located storage
owned by Buyer shall he deemed to have been sold; and each of said individual
products except methane shall be priced for settlement purposes hereunder at an
amount per gallon equal to the weighted average price per gallon paid by Buyer
for all like product purchased by it under arms-length contracts from suppliers
(other than any corporation more than 50% of the capital stock of which is owned
directly or indirectly by Buyer or other entity which controls Buyer) and
delivered during such settlement period into Chevron Pipe Line Company's
(formerly Gulf Pipeline Company's) LPG Pipeline System at points west of ▇▇▇▇▇▇
County, Texas, for transportation to Buyer's MtBelvieu fractionation
facilities. Methane, if any shall be priced at the same price as heretofore
provided for ethane.
In the event such deliveries of said products to Buyer's remotely located
fractionation or storage facilities are made as a composite stream or streams,
the composition of such composite stream delivered during each accounting period
hereunder shall be deemed to be the same as that revealed by a chromatographic
analysis of a representative sample of such stream taken by Buyer during such
month. Such samples shall be analyzed at Buyer's expense.
The parties hereto acknowledge that governmental regulations, both currently and
prospectively, may limit the price Buyer may charge third parties for the
respective liquid products attributable to the gas purchased hereunder. When so
limited, Buyer may elect to pay Seller, notwithstanding the above paragraph, an
amount equal to the applicable percentage of such limited price, multiplied by
the volume of the subject product saved and sold at Buyer's Plant which is
attributable to Seller's gas purchased hereunder.
C. Residue Gas Sales Value - If the "residue gas remaining" (determined as
-------------------------
heretofore provided) from Seller's gas shall he more than sufficient for the
needs and requirements of Seller for development and operation purposes upon the
premises from which said gas is produced, Buyer shall have the right to sell any
or all of such surplus residue gas or to use such surplus residue gas in its
operations. If Buyer sells any surplus residue gas remaining from the gas
delivered hereunder, Buyer shall pay to Seller eighty percent (80%) of the "net
proceeds received from the sale of such residue gas," hereinafter defined. The
"net proceeds received from the sale of such residue gas" shall be deemed to be
the gross proceeds received from the sale of such residue gas less Buyer's costs
of treating, dehydrating, and compressing such gas to the pressure required for
delivery to the purchaser thereof (whether treated, dehydrated, or compressed
before or after processing in Buyer's plant), and less the cost of any
transportation necessary to market the residue gas. For the purposes hereof,
Buyer's said treating cost shall be deemed to be 0.5 per MCF, Buyer's said
dehydration cost shall be deemed to be 0.25 per MCF, and Buyer's said
compression cost shall be deemed to be 1.0 per MCF for each stage of
compression.
6
In the event Buyer should elect to utilize the surplus residue gas attributable
to the gas delivered hereunder, said residue gas shall he valued at the ▇▇▇▇▇
▇▇▇▇▇▇ receives for said gas from the Company, Division, or Department utilizing
such gas.
The volume of surplus residue gas available for sale from the gas delivered
hereunder shall be the remainder obtained by subtracting the volume, determined
either by estimate or measurement, that actually was delivered to Seller for
lease operation during the month for which settlement is to be made from the
volume of "residue gas remaining" determined by application of Paragraph 5
hereof. The volume of surplus residue gas sold from the gas delivered hereunder
shall be deemed to be that proportionate part of the total volume of surplus
residue gas sold from Buyer's plant which the volume of surplus residue gas
available for sale from the gas delivered to Buyer hereunder, determined as
heretofore provided, bears to the total volume of surplus residue gas available
for sale from all gas delivered to Buyer for processing in such plant.
11. SEVERANCE TAXES - Buyer hereby agrees to reimburse Seller for all state
----------------
severance taxes which are actually borne by Seller and which Buyer actually
collects from its purchaser of residue gas under the terms of Buyer's residue
sales contract or applicable law or regulation.
12. FUEL GAS & ELECTRICAL POWER- In the event, Buyer elects to utilize
-------------------------------
electrical power in the operation of compressors at the processing plant or
located in the field, such electrical power costs will be allocated to Seller's
gas by multiplying the total electrical power cost times a factor, the numerator
of which is the volume of gas delivered hereunder and the denominator of which
is the total volume of gas utilizing such electrical cost. This total lease
allocated electric cost will then be subtracted from the lease residue value
before dividing the residue income between Buyer and Seller as provided in
Section C of Article 10.
13. PAYMENT - Payment shall he mailed by Buyer not later than the last day
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of each month for all gas purchased hereunder during the preceding month, and at
the time payment is made a statement showing full details of the account shall
he transmitted to Seller accompanying Buyer's check in payment therefor.
Examination by Seller of the books of account kept by Buyer respecting said gas
account shall be permitted by Buyer at any and all reasonable hours. All
statements rendered to Seller by Buyer during any calendar year shall be
conclusively presumed to be true and correct after twenty-four (24) months
following the end of any such calendar year, unless within the said twenty-four
month period Seller takes written exception therein and makes claim on Buyer for
adjustment. Failure on the part of Seller to make claim on Buyer for adjustment
within such period shall establish the correctness thereof and preclude the
filing of exceptions thereto or making of claims for adjustment thereof.
If the lease or leases described herein are owned by two or more parties, the
Gas Purchase Statement will be sent to the operator and payment of any sums due
to Seller hereunder shall be made to the party designated as Operator of such
lease or leases and he shall make proper distribution of the sums to the parties
Seller.
14. TITLE - Title to the gas conveyed hereunder shall pass to Buyer at the
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point of delivery. Seller warrants that it has clear title to the gas being
conveyed hereunder and that it has good and merchantable title in the leasehold
from which the gas is produced. Seller also warrants and represents that it has
a good and clear right to sell all of the gas conveyed to Buyer hereunder.
Seller also agrees that upon demand by Buyer it will submit abstracts of title
covering said leasehold and such other documents as may be necessary or
desirable to satisfy the attorneys of Buyer that Seller has good and clear title
to the gas being conveyed hereunder; provided, however, that if the title of
Seller is questioned, or involved in any action, Buyer shall have the right to
withhold payment for such gas without liability for interest during the pendency
of such action or until said title is freed from such question, or until Seller
furnishes Buyer with a bond acceptable to Buyer that will save Buyer harmless
from any losses that may arise from Buyer having made payment to Seller for gas
in which Seller did not have a good and clear title.
7
162 (7-85)/GPC
15. ROYALTY - Seller agrees to account and pay to the persons entitled
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thereto all royalties, overriding royalties, bonus payments and production
payments due with respect to the gas sold or delivered hereunder. Seller further
agrees to defend, indemnify and hold Buyer harmless from all suits, actions,
debts, accounts, damages, costs (including court costs and reasonable attorneys
fees), losses and expenses arising from or out of any of said payments.
16. DRIP - Buyer shall keep reasonably clear of obstruction all its
----
pipelines through which said gas is being delivered and shall own all liquids
collecting in such lines.
17. FORCE MAJEURE- In the event of either party hereto being rendered
--------------
unable, wholly or in part, by force majeure to carry out its obligations under
this Agreement, other than to make payments due hereunder, the obligations of
the party suffering force majeure, so as they are affected by such force
majeure, shall be suspended to the extent and for the period of such force
majeure condition. Such party suffering force majeure shall give notice and full
particulars of such force majeure in writing or by telegraph to the other party
as soon as possible after the occurrence of the cause. Such cause shall as far
as possible he remedied with all reasonable dispatch. The term "force majeure"
as employed herein shall mean acts of God, strikes, lockouts or other industrial
disputes or disturbances, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
storms, floods, washouts, arrests and restraints of governments and people,
civil disturbances, explosions, breakage or accidents to machinery or lines of
pipe, the making of repairs or alterations to lines of pipe or plants, inability
to secure labor or materials, freezing of ▇▇▇▇▇ or lines of pipe, partial or
entire failure of ▇▇▇▇▇ or gas supply, necessity for compliance with any court
order, or any law, statute, ordinance, regulation or order promulgated by a
governmental authority having jurisdiction, inclement weather that necessitates
extraordinary measures and expense to construct facilities and/or maintain
operations and any other causes, whether of the kind enumerated herein or
otherwise, not within the control of the party claiming suspension and which by
the exercise of due diligence such party is unable to prevent or overcome. Such
term shall likewise include (a) in those instances where either party hereto is
required to obtain servitudes, right-of-way grants, permits or licenses to
enable such party to fulfill its obligations hereunder, the inability of such
party to acquire, or delays on the part of such party in acquiring, at
reasonable cost and after the exercise of reasonable diligence, such servitudes,
right-of-way grants, permits or licenses, and (b) in those instances where
either party hereto is required to furnish materials and supplies for the
purpose of constructing or maintaining facilities or is required to secure
permits or permissions from any governmental agency to enable such party to
fulfill its obligations hereunder, the inability of such party to acquire, or
delays on the part of such party in acquiring, at reasonable cost and after the
exercise of reasonable diligence, such materials, supplies, permits and
permissions. It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the party having the
difficulty, and that the above requirements that any force majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of opposing party when such
course is inadvisable in the discretion of the party having difficulty. Either
party may briefly interrupt its performance hereunder for the purpose of making
necessary or desirable inspections, alterations and repairs; and the party
requiring such relief shall give to the other party reasonable notice of its
intention to suspend its performance hereunder, except in cases of emergency
where such notice is impracticable or in cases where the operations of the other
party will not be affected the party requiring such relief shall endeavor to
arrange such interruptions so as to inconvenience the other party as little as
possible. Service interruptions on the part of either party which are sanctioned
by this provision are expressly included within the definition of "force
majeure" for the purposes of this contract.
In the event that during the term of this Agreement Seller claims a suspension
of its obligation to deliver gas to Buyer for thirty (30) or more days for the
reason of one or more events of force majeure, then the term of this Agreement
shall he extended for the number of days during which such force majeure
condition is claimed.
8
162 (7-85)/GPC
18. UNPROFITABLE GAS- If, in Buyer's sole judgment, the gas available at any
----------------
delivery point provided for hereunder is or becomes insufficient in volume or
liquefiable hydrocarbons content, or for any other cause is or becomes
unprofitable for the extraction of liquefiable hydrocarbons therefrom, Buyer
shall not be required to take such gas so long as such condition exists. If at
any time the volume and/or liquefiable hydrocarbons content of the gas available
to Buyer, or any other cause beyond Buyer's control, shall render the operation
of Buyer's plant or the gas gathering lines to Seller's lease unprofitable in
Buyer's sole judgment, Buyer may by thirty (30) days written notice to Seller
cancel this contract.
19. PRIORITY RIGHTS OF SELLER - Seller may, at any time, without liability
---------------------------
to Buyer clean out, deepen, or abandon any well or ▇▇▇▇▇ on the above-described
properties, or may use any efficient, modern, or improved method for the
production of oil or gas. Before any well or ▇▇▇▇▇ are taken out of service for
any reason whatsoever Seller agrees to first shut off the same from
communication with Buyer's gathering system.
20. INDEMNITY - Seller agrees to defend, indemnify and save harmless Buyer,
---------
from and against any and all loss, damage, injury, liability and claims thereof,
for injury to or death of any person (including an employee of Seller or Buyer)
or for loss or damage to property (including the property of Buyer), resulting
from Seller's performance of this Agreement, including such loss, damage,
injury, liability and claims as are attributable to the gas covered by this
Agreement, prior to the delivery of said gas to Buyer. This indemnity shall
apply regardless of whether liability without fault is imposed or sought to be
imposed on Buyer. This indemnity shall not apply to the extent that said loss,
damage, injury, liability and claims arise from personal injury, death or
property damage which is caused by or results from the sole or concurrent
negligence of Buyer, or an individual contractor directly responsible to Buyer.
Seller and Buyer specifically intend that the foregoing obligation of Seller to
defend, indemnify and save harmless shall cover and apply to, but is not limited
to, all loss, damage, injury, liability and claims as are caused by, result from
or are attributable to the sole, comparative, contributory or concurrent
negligence of Seller or any third party.
21. SCOPE - In the event the above-described property is covered by more
-----
than one lease, this contract shall be construed as a separate
contract as to each lease.
22. TAXES - Seller shall bear all taxes imposed upon Seller with respect to
-----
the gas delivered hereunder and Buyer shall bear all taxes imposed upon Buyer
with respect to such gas after delivery thereof to Buyer. If required by law or
requested by Seller, Buyer shall remit taxes to the proper authority and deduct
Seller's portion thereof from Buyer's payment to Seller.
23. LAWS AND REGULATIONS- This contract and all provisions herein shall be
----------------------
subject to and performed in accordance with all present and future, applicable
and valid orders, laws, rules or regulations of any duly constituted federal,
state or local governmental authority now or hereafter having jurisdiction over
the parties, their facilities, the gas delivered hereunder, or this Agreement.
24. TERM - This Agreement will become effective on the date hereof and will
----
remain in full force and effect for a period of five (5) years from the date of
initial delivery of gas hereunder. At the end of such period, this Agreement
will continue in effect from year-to-year thereafter, until canceled by written
notice given by either party to the other not less than one (1) month prior to
the end of the initial five (5) year term or any subsequent anniversary date.
However, in the event the oil and gas lease covering the above-described
property should terminate before the expiration of the term of this Agreement,
then this Agreement shall be canceled contemporaneously with such termination.
Upon termination, this Agreement will cease to have any force or effect, except
as to unsatisfied obligations or liabilities of either party attributable to the
period prior to 12:00 midnight on the date of termination, or arising thereafter
as a result of such termination.
9
(HAND WRITTEN) C - 162158
162 (7-85)/GPC
25. ASSIGNMENT- The provisions of this Agreement shall be binding upon and
----------
inure to the benefit of the parties hereto, their heirs, successors and assigns.
If Seller assigns or conveys all or any part of the leases or other properties
covered hereby, Seller shall provide in any instrument of assignment or
conveyance that the leases or other properties are assigned or conveyed subject
to the terms and conditions of this Agreement and that the party or parties to
whom such assignment or conveyance is made shall be bound by the terms of this
Agreement. No assignment of any of Seller's rights or obligations hereunder
shall be made without the consent of Buyer, except to any company with which
Seller is affiliated or to a trustee or trustees, individual or corporate, as
security for bonds, security or other obligations. No transfer of or succession
to the interest of Seller hereunder, wholly or partially, shall Affect or bind
Buyer until Buyer shall have been furnished with written notice and the original
instrument or a certified copy or an acceptable photocopy of the instrument or
instruments effecting such changes of ownership.
26. PRODUCTION IN CONFORMANCE WITH FLOW SCHEDULE - In order to maintain
-------------------------------------------------
maximum plant efficiency on a 24-hour operating schedule, it is desired by the
parties hereto to maintain a reasonably uniform rate of flow of gas to said
plant over each 24-hour period. It is, therefore, agreed that Seller shall, at
its option, either (1) regulate its producing schedule so that the gas shall be
supplied from Seller's lease at a reasonably uniform rate of flow; or (2) accept
and follow a producing schedule to be established by Buyer for all ▇▇▇▇▇
connected to Buyer's plant, provided that Buyer shall consider the wishes of
Seller in establishing the producing schedule for Seller's well or ▇▇▇▇▇.
Anything else contained in this agreement to the contrary notwithstanding,
Seller hereby agrees that in the event it fails to comply with the above
provisions of this paragraph, such failure shall give Buyer the right, at its
option, to refuse to accept delivery of Seller's gas during any period of such
non-compliance.
27. COUNTERPART SIGNATURES - This Agreement may be executed in any number of
----------------------
counterparts, each of which, when executed by [any] Buyer and [any] Seller,
shall be deemed to be an original, binding agreement between such Buyer and
Seller, as of the effective date hereof, regardless of any failure by one or
more parties to execute such contract.
28. CANDELLATION OF PRIOR CONTRACTS - Upon commencement of deliveries of gas
-------------------------------
hereunder, this Agreement shall supersede any prior gas contracts and any
amendments thereto effective between the parties hereto insofar as such
contracts cover the properties hereinbefore described.
IN WITNESS WHEREOF the parties have hereunto subscribed their names.
▇▇▇▇▇▇ PETROLEUM COMPANY,
A Division of Chevron U.S.A. Inc.
By (SIGNED)
---------------------------------
Attorney-in-Fact
"BUYER'
ATTEST: JUBILEE OIL & GAS CORPORA'I'ION
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (SIGNED) ▇▇▇▇▇▇ ▇. ▇▇▇▇, President(SIGNED)
----------------------- ---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, President
---------------------------------
"SELLER"
10
(HAND WRITTEN) C - 162158
