1
JOINT OPERATING AGREEMENT
CHIMICHAGUA ASSOCIATION CONTRACT
LOW XXXXXXXXX VALLEY, COLOMBIA
THIS JOINT OPERATING AGREEMENT (hereinafter referred to as this "JOA"
dated effective as of the 5th day of March, 1997 (hereinafter referred to as the
"Effective Date"), is among Xxxxxxx Oil and Gas, Inc. a corporation existing
under the laws of Texas, United States of America (hereinafter referred to as
"ROG") and Geopozos S.A. a corporation existing under the laws of Colombia
(hereinafter referred to as "GEOPOZOS"). The above parties are hereinafter
collectively referred to as the "Parties" and individually referred to as a
"Party."
RECITALS
WHEREAS, on January 20, 1989, Esso Colombiana Ltd. and Empresa Colombiana de
Petrolaos (hereinafter referred to as "ECOPETROL") entered into an Exploration
and Exploitation Contract for the Chimichagua Sector (hereinafter referred to as
the "Ecopetrol Contract") protocolized by means of public deed 2892 of December
22 of 1988 of Notary 26th of the Circuit of Bogota, and duly registered before
the Ministry of Mines and Energy.
WHEREAS, Esso Colombiana Ltd. prior authorization granted by Ecopetrol assigned
to Maxus its entire interest in the mentioned Ecopetrol Contract by means of a
contract that was protocolized by Public Deed No. 782 of March 26, 1992 of
Notary 26th of the Circuit of Bogota, and duly registered before the Ministry of
Mines and Energy.
WHEREAS, Maxus prior authorization granted by Ecopetrol assigned to Geopozos its
entire interest in the mentioned Ecopetrol Contract by means of a contract that
was protocolized by Public Deed No. of 1996 of Notary of the
Circuit of Bogota, and duly registered before the Ministry of Mines and Energy.
WHEREAS, Geopozos has assigned totally all of its interest in the Ecopetrol
Contract to ROG, by means of a Purchase and Sale Agreement (hereinafter referred
as PSA) between them dated February 25, 1997.
WHEREAS the parties pursuant to the terms and provisions of Section 1.5 of the
PSA are entering into this JOA, therefore this JOA is subject to the terms and
conditions of such PSA, and
WHEREAS the Parties desire by this JOA to provide as between themselves the
basis under which the exploration, development, production and operation works
of oil and gas reserves underlying the area subject to the Ecopetrol Contract
will conduct in accordance with the terms and provisions of the Ecopetrol
Contract, the PSA and the applicable Colombian regulations.
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NOW THEREFORE, in consideration of the premises and of the mutual agreements
contained herein and other goods and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Unless otherwise expressly provided in this JOA, terms used herein
shall have the same meaning as when used in the Ecopetrol Contract.
1.2 Where the context requires, the singular shall include the plural and
the plural shall include the singular.
1.3 Definitions:
Additional Mayor facilities as used herein shall mean any capital facilities
and equipment for use in the operation on the Ecopetrol Contract other than the
facilities and equipment included in a Development Program and other than such
reasonable handing and transportation, storage facilities from the well head to
delivery facilities, if necessary, as may be required to enable Operator to
deliver Available Oil and Available Gas to the Parties as required herein and
which require an expenditure of over Two Hundred Fifty Thousand Dollars
(US $250,000).
Additional Obligatory Works as used herein shall mean any additional exploration
or development work or additional exploratory or development investment provided
by the terms of the Ecopetrol Contract or any applicable law or regulation and
which work or investment, if not performed, will require that the Ecopetrol
Contract be surrendered, in whole or in part.
Affiliate as used herein shall mean:
a) A company or corporation which is a direct or indirect subsidiary of
the party.
b) An individual or company or corporation of which the Party is a
direct or indirect subsidiary; or
c) A company or corporation which is a direct or indirect subsidiary of
an individual or a company or a corporation of which the Party is a direct or
indirect subsidiary.
For purposes of this definition, a company or corporation is a
"subsidiary" of an individual or of another company or corporation if the
latter owns directly more than fifty percent (50%) of all the shares of the
former carrying voting rights by which its management is controlled.
JOA as used herein shall mean this instrument, and any extensions, renewals,
substitutions or amendments thereof.
Appraisal Well means a well which is not an Exploratory Well or a Development
Well and is drilled with the objective of further defining a potentially
commercial discovery indicated by an exploratory well.
Authorization for Expenditure as used herein the term "AFR" shall mean an
authorization for expenditure which sets forth in an itemized fashion the
anticipated costs of a proposed operation.
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Available Petroleum as used herein shall mean the total volumes of Petroleum
produced less:
(i) the amount corresponding to Royalty;
(ii) The amount, if any, owned by Ecopetrol;
(iii) the amount unavoidable lost in the course of Joint Operations;
and,
(iv) the amount used in the conduct of Joint Operations.
Barrel means a quantity or unit of oil of forty-two (42) gallons of the United
States of America liquid measure, with appropriate adjustments for bottom
sediment and water (BS & W), corrected to a temperature of 60 degrees Fahrenheit
and pressure of 14.73 pounds per square inch absolute.
Budget as used herein means the estimated revenues and expenditure necessary to
carry out a Program.
Calendar Day or Day means a twenty-four (24) hour period according to the
Gregorian calendar.
Calendar Month or Month means a calendar month according to the Gregorian
calendar.
Calendar year or Year means a calendar year according to the Gregorian calendar
consisting of a period of twelve (12) calendar months commencing on January 1
and ending on the following December 31.
Casing Point means that point at which a well has been drilled, deepened or
sidetracked to its objective depth, or such greater or lesser depth as the
Parties participating in the cost of such operation mutually agree upon, and
all budgeted or agreed upon test have been run.
Commercial Field as used herein shall have the meaning given to it in the
Ecopetrol Contract.
Completed as a Producer in a relation to a Well shall mean completion of any
Well that has Commercial Production or that the Participating Parties in that
well have determined (based on data including, but not limited to, well log
data, core analysis data, drill stem test data, wire line formation test data,
or any combination of such data) capable of Commercial Production.
Contract Area as used herein shall mean that portion described on Clause 3 of
the Ecopetrol Contract.
Default Interest Rate as used herein shall mean in the case of colombian pesos
the maximum default interest rate allowed by law fixed by the Superintendency
of Banking, or in the case of Dollars the prime rate fixed by the Chase
Manhattan of New York, plus five percent (5%).
Determination, Determine, or Determined shall mean an action taken by the
Operating Committee pursuant to a vote of the Representatives in accordance
with Article 3 of this JOA.
Development Program shall mean the drilling, completing and equipping for
production of one or more xxxxx and the transportation and storage facilities
necessary to deliver to the Parties or to purchaser the production of Petroleum
obtained therefrom. Said xxxxx, equipment and facilities are hereinafter
referred to as "Production Facilities."
Development Well as used herein shall have the meaning given to it in the
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Ecopetrol Contract.
Discovery means a finding of hydrocarbon-bearing reservoir(s) by a single well
capable of producing Petroleum in such quantities that by itself, or when
combined of Petroleum that a Determination by the Operating Committee estimates
may be produced from subsequent xxxxx in the same interpreted closure or a
structural geological trap or geological stratigraphic trap, will provide the
Parties a reasonable profit on the investments required to exploit such
discovery, taking into consideration the fair market value of the Petroleum and
all applicable costs including royalty and income tax associate with producing
and transporting such petroleum to the point of delivery to the purchaser.
Dollars means United States of America currency or the equivalent thereof in
any other currency.
Executive Committee shall mean the Committee provided for by the Ecopetrol
Contract.
Exploitation Operations as used herein shall mean the operations conducted in
the development of a Commercial Field under the supervision of the Executive
Committee, including but not limited to, any geological or geophysical
operation, or any drilling, reworking, deepening or plugging back operation
conducted with respect to any well.
Exploration Operations as used herein shall mean the operations conducted in
relation to the search and discovery of Petroleum within the Ecopetrol Contract
Area, to be run by a decision of the Operating Committee at any time, including
geological and geophysical seismic program and drilling, testing, completing,
reworking, deepening or plugging back of any well(s) obligatory or not under
the Ecopetrol Contract.
Exploration Well shall mean either:
a) a well drilled in the Ecopetrol Contract Area at a location
lying inside the untested interpreted closure of any geologic structure or
stratigraphic trap on which a well has been drilled in which Petroleum of
potentially commercial significance has been found to be present as determined
by the Operating Committee, or
b) a well drilled in the Ecopetrol Contract Area at a location
lying outside the interpreted closure of any geological structure or
stratigraphic trap on which a well has been drilled in which Petroleum of
potentially commercial significance has been found to be present as Determined
by the Operating Committee on which a Discovery has occurred; or
c) a well drilled or deepened in the Ecopetrol Contract Area at a
location lying inside the interpreted closure of any geological structure or
stratigraphic trap as determined by the Operating Committee on which a
Discovery has occurred and which well is drilled or deepened to a different
stratigraphic level from that in which such hydrocarbons were found to be
present within that interpreted closure and which is not completed in the
horizon in which such hydrocarbons were found to be present; or
d) as Determined by the Operating Committee, a well drilled in the
Ecopetrol Contract Area to confirm and/or define a potentially commercial
Discovery indicated by a), b) and/or c) herein above.
Field Terminal means the place in the Ecopetrol Contract area at which:
a) Oil is delivered for measurement, including storage and
processing installations that might be required; and/or
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b) Natural Gas is delivered for measurement after normal field
operations.
Government means the Government of the Republic of Colombia.
Joint Account means the set of operations maintained by the Operator in
accordance with the provisions of this Agreement and of the accounting
procedure attached to the Ecopetrol Contract as Exhibit "B", in which the
Operator shall record all charges, expenditures and credits made by it in
carrying out the Joint Operations hereunder which are chargeable or creditable
to the Parties as provided herein.
Joint Operations as used herein shall have the meaning given to it in the
Ecopetrol Contract.
Market Value shall mean;
a) For Natural Gas, the weighted average realized field price of
sales to non-Affiliated third parties during each calendar year.
b) For Oil and Natural Gas liquids, the weighted average price
F.O.B point of loading received from non-Affiliated, third party customers
generally and regularly purchasing the Oil in significant volumes on
arms-length competitive terms. If the Government or its duly authorized agency
officially established a price for Oil, the price shall be the market value for
Oil in transactions in which the Government or its duly authorized agency
requires such price to be utilized. In the absence of third-party purchases in
significant volumes, the Market Value will be determined by references to the
arms-length market prices for freely traded Oils form Colombia of comparable
gravity and quality adjusted for differences in transportation costa and terms
of sale.
MCF shall mean 1000 cubic feet of natural Gas, 1 cubic foot of which shall be
the quantity of Natural Gas necessary to fill 1 cubic foot of space at a
temperature of 60' Fahrenheit and a pressure of 14.73 pounds per square inch
absolute.
Measuring Point means the point where the Petroleum production form the
Contract Area is measured for purposes of distribution to the Parties and for
distribution to Ecopetrol.
Minimum Work commitment means any mandatory exploration work required by the
terms of the Ecopetrol Contract or by a reasonable and justificable Exploration
Operation decision take by the Operating committee at any time in accordance
with article 3 of this Agreement, decision that shall be mandatory to all
Parties.
Natural Gas as used herein shall have the meaning given to it in the Ecopetrol
Contract, which is in the gaseous state a temperature of 60' Fahrenheit and a
pressure of 14.73 pounds per square inch absolute.
Non-Consent means an election by a Party not to participate in a particular
operation.
Non-consent well means a well drilled as a Non-Consent operation.
Non-Obligation Well means all xxxxx other than minimum obligation work xxxxx
drilled in the Ecopetrol Contract Area under the terms of this JOA.
Non-Operator means a Party other than the acting Operator.
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participate pursuant to this JOA.
Sole Risk Program Description means a proposal for sole risk work which shall
be included, in reasonably sufficient detail, the Program, scope of work and an
estimate of the costs of such Program.
Working Interest means the respective percentages of each Party in the
operating rights and rights to production under the Ecopetrol Contract which
obligates each Party to contribute to the chargeable expenses of the Joint
Account under the terms of the Ecopetrol Contract, the Farmout Agreement and
this JOA.
ARTICLE 2
PARTICIPATING INTEREST
2.1 All rights and obligations in the Ecopetrol Contract other than the
rights and obligations of Ecopetrol and all information, equipment, materials
and facilities purchased and acquired for the Joint Account shall be owned by
the Parties in undivided interest in the percentages set out in Section 2.2
below, and the rights and obligations of the Parties, as among themselves, in
respect of the Ecopetrol Contract, and any Petroleum produced thereunder shall
be governed by and be subject to the provisions of this JOA.
2.2 The Parties costs, ownership and benefits resulting from this Agreement
shall be proportionate to the Participating Working Interest of each Party,
subject to Articles 8 and 14 herein, in and the Ecopetrol Contract in relation
to all operations other than the Exploitation Operations are as follows:
ROG 100%
---
Total 100%
2.3 The percentages set forth in Article 2.2 above are the current
Participating Interest of the Parties. If from time to time the Participating
Interest of any Party increases or decreases, the proportion of costs and
expenses to be paid by that Party as well as its proportionate share of the
benefits shall be increased or decreased correspondingly in accordance with the
provisions of this JOA.
2.4 The participating working interest of Ecopetrol and the Parties,
subject to Articles 8 and 14 herein, in and the Ecopetrol Contract for the
conduct of Exploitation Operations in the development of a Commercial Field are
as follows:
ECOPETROL 50%
ROG 50%
---
Total 100%
2.5 Any assignment of a Participating Interest or part thereof by a Party
hereunder shall be conditioned upon the assignee accepting all the terms and
conditions of this JOA.
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ARTICLE 3
OPERATING COMMITTEE
3.1 There shall be created an Operating Committee to establish the goals
and objectives of the Joint Operations hereunder to be conducted under the
Ecopetrol Contract. The Operating Committee shall appoint an Operator to
manage, pursuant to contractual obligations, all operations of the Joint
Venture. The Operating Committee shall supervise that the Operator is
satisfying said goals and objectives in an orderly and professional manner. In
no way this provision shall be interpreted as reduce the contractual and legal
responsibilities of Operator before the Parties under the Ecopetrol Contract,
the Farm-out Agreement, this JOA and the applicable Columbian regulations.
3.2 Upon execution of this JOA, each Party shall designate one (1)
Representative, who shall be authorized to act for such Party, and an Alternate
Representative to act for it in its absence. Such designation shall be made by
each Party by notice in writing to the other Parties. In any matter arising
under this JOA, a Representative, or, in his absence, the Alternate
Representative, shall have full power and authority to represent and bind such
Party, and all decisions made by him or is alternate shall be deemed to be the
decisions of the Party which appointed him. Each Party at any time, may change
its Representative or Alternate Representative by giving like notice to the
other Parties, and the Operator. In addition to its Representative or
Alternate, each Party may have such advisors present at any meeting as it may
desire.
3.3 The Representatives of the Parties shall appoint by unanimous decision
the Chairman of the Operating Committee. The Operator shall act as Secretary
of the Operating Committee. The Operating Committee shall establish such
subcommittees including technical, accountant, and financial as the Operating
Committee shall deem appropriate. The functions of such subcommittees shall
be specified by the Operating Committee.
3.4 For all ordinary meetings of the Operating Committee, the Operator
shall prepare and furnish to the Parties, at least fifteen (15) Days in advance
of the date of any such meeting, a copy of the agenda and such supplementary
information as may be appropriate, together with notice of the date, time and
place of any such meeting. Any Party may add additional items to the said
agenda by written notice to all other Parties, the Chairman and the Operator,
to be received by them no later than eight (8) Days prior to a meeting. At all
meetings of the Operating Committee decisions shall be made only on such
matters as may be on the agenda, but at any of such meetings the agenda may be
amended to include other matters as to which the Representatives of all the
Parties unanimously agree.
3.5 For all decisions to be made without holding a meeting in any matter
arising under this JOA may be submitted to the Operating Committee for
consideration and to a vote, provided that such matter is submitted by notice
in writing to all Parties, upon the request of the Operator when a prompt vote
is necessary for operational reasons, such as when drilling equipment is on
location or is on route and charges are being incurred. In such event, each
Representative shall vote within forty-eight (48) hours of its receipt of such
notice, by giving written notice sent by fax of such vote to the Chairman, with
copies to all other Parties and the Operator, and any decision so reached shall
be binding in accordance with the provisions of this JOA on all the Parties
hereto. Failure by any Party to respond to any such notice as provided in the
manner above prescribed shall be deemed a negative vote. Operator shall
immediately report to the Parties by notice in writing the results of such vote
after receipt of the votes of all Parties and shall submit it promptly to each
Party as for a next meeting of the Operating Committee, and shall keep a
written record thereof open to inspection by the Parties at all reasonable
times.
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3.6 Any matter relating to Joint Operations hereunder may be submitted to the
Operating Committee for consideration and vote by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation in a meeting in such
a manner shall constitute presence in person at the meeting. The Chairman
shall submit it promptly to each Party as for a next meeting of the Operating
Committee, and shall keep a written record for each such decision.
3.7 In case of emergency, the Chairman may give each Representative not less
than 72 hours notice (or such lesser notice as may be unanimously agreed by each
Representative) by telephone, to be confirmed in writing by Fax, of a meeting
stating in such notice, including the general nature of the matter or matters
to be considered at such emergency meeting.
3.8 All meetings will be held at the offices of the Operator in Santafe de
Bogota, Colombia, unless otherwise agreed to by the Parties. Any Party shall
have the right to request Operator to call additional meetings at any time but
no more often than once each calendar quarter, by giving twenty (20) Days
advance notice to all Parties and to Operator, including information on the
matters which the requesting Party wishes to discuss. Minutes of each meeting
shall be prepared, approved, signed by the Representatives of the Parties and
the Operator within each meeting and kept by the Operator and furnished to
each Party within fifteen (15) Days after such meeting. Unless all parties are
notified of objections thereto within such fifteen (15) Days after the date of
their receipt of the minutes of such meeting, the record of the meeting shall
be deemed to have been agreed to by the Parties. However, no Party, or
Participating Party if less than all Parties participate in the meeting, shall
modify its vote cast and recorded at the Operating Committee meeting to which
the Minutes relate.
3.9 All matters within the jurisdiction of the Operating Committee properly
brought before it as provided in this JOA shall be Determined by the
affirmative vote of two (2) or more Parties (Parties which are Affiliates of
each other are considered one (1) Party for this purpose) owning Participating
Interests aggregating fifty-one percent (51%)or more of the total Participating
Interests of all Parties and such a Determination shall be binding upon all
Parties unless specific provisions of this JOA require that a Determination be
made otherwise, in which event the specific provisions shall prevail. Each
Party through its Representative or substitute by the Alternate Representative
shall be entitled to a vote equal to its Participating Interest at the time the
vote is taken in each meeting.
3.10 Without limiting the generality of the foreign, meetings of the Operating
Committee shall be called as follows:
a) The Operating Committee shall meet at least quarterly during March,
June, September, and December of each calendar year during the term of this
Agreement for the purpose of discussing and agreeing in relation with the
Exploration activities done by the Operator, and any other matters proposed by
any of the Parties or by the Operator, including the approval of the annual
Program and Budget to be submitted to Ecopetrol pursuant to Clause 7 of the
Ecopetrol Contract and referred to in Article 7 herein below or any other
matter. The Operating Committee shall also use the quarterly meetings to
consider the Exploitation Operations and the matters that will be discussed at
the regularly scheduled quarterly meetings of the Executive Committee during
January, April, July, and October, referred to in Clause 18.2 of the Ecopetrol
Contract.
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b) The Operating Committee shall meet to consider any additional
work required by Ecopetrol before the acceptance of a Commercial Field pursuant
to Clause 9.3 of the Ecopetrol Contract, within one month after Operator
receives notice of such additional work from Ecopetrol.
c) At the request of any Party, the Operating Committee shall meet
to consider whether to renounce the Ecopetrol Contract pursuant to Chapter VI
of such contract. Any decision to renounce the Ecopetrol Contract must be by
unanimous vote of the Representatives of the Parties.
d) The Operating Committee shall meet to consider the matters that
will be discussed at any special meeting of the Executive Committee as referred
to in Clause 18.3 of the Ecopetrol Contract.
e) Within six (6) weeks after the first Commercial Field has been
accepted by Ecopetrol, the Operating Committee shall hold a special meeting to
consider the first work Program and Budget to be submitted to the Executive
Committee as referred to in Clause 11.1 of the Ecopetrol Contract and Article 7
of this Agreement.
f) The Operating Committee shall meet on or before September 15 of
each year if Ecopetrol has advised Operators of recommended changes in the
annual program of activities and budget in order to discuss and, if
appropriate, approve said recommended change.
g) The Operating Committee shall meet each year following approval
of the work Program and Budget for the following year if necessary in order for
the Parties to vote on operations which were materially changed by the
Executive Committee.
h) The Operating Committee shall meet to approve by majority vote
any portion of the Ecopetrol Contract Area to be returned to Ecopetrol pursuant
to Clause 8 of the Ecopetrol Contract.
3.11 All important matters concerning Joint Operations, including but not
limited to the following, shall be submitted to the Operating Committee for
Determination unless otherwise agreed unanimously by the Parties in a
particular case:
a) To approve by a majority vote after the minimum Work Commitment
as established in Clause 5 of the Ecopetrol Contract has been performed new
Exploration Operations in the Ecopetrol Contract Area as Additional Obligatory
Work for all the Parties, including but not limited to shooting of a new
seismic and related works, drilling of a new Exploratory or Development Well.
b) To approve by a majority vote the Exploration Programs and
Operation to be conducted by Contractors and/or sub-contractor under
responsibility and control of the Operator during any Exploration Phase,
including budgets and revisions and amendments thereto; seismic programs and
related works, environmental license and other permits, social works in the
area of operations, security, location, drilling, additional testings,
completion, plugging back, deepening, sidetracking relating to the Obligation
Xxxxx or any well, including any additional work required by Ecopetrol before
the acceptance of the Commercial Field, according to Clause 9.3 of the
Ecopetrol Contract.
c) To decide by a majority vote a drilling of any appraisal well
for obtaining financing from any individual or financing institution or whether
to develop a Commercial Field without Ecopetrol's participation, according to
Clause 9.5 of the Ecopetrol Contract. For purposes of this Agreement
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the decision to drill the appraisal well shall be considered an Obligation Work
for all the Parties, unless otherwise other decision will be taken by the
majority vote of the Operating Committee.
d) To approve by a majority vote the Exploitation Operations to be
included in work Programs and Budgets (or revisions or additions thereto
proposed to Ecopetrol.
f) To approve by a majority vote the area in each reservoir
considered capable of producing commercial quantities of petroleum for
submission to Ecopetrol for acceptance of a Commercial Field pursuant to Clause
9.1 of the Ecopetrol Contract.
g) To approve by majority vote any revision or addition to an
approve work Program and Budget proposed by Ecopetrol pursuant to Clause 11.1
of the Ecopetrol Contract.
h) To approve by a majority vote to review and discuss the Maximum
Efficiency Rate for each Commercial Field to be submitted by the Operator to
the Executive Committee every six (6) months, in accordance with Clause 12.1 of
the Ecopetrol Contract.
i) To approve by a majority vote to review and discuss spacing
methods development drilling to be presented by the Operator to the Executive
Committee each year in accordance with Clause 12.2 of the Ecopetrol Contract.
j) To approve by a majority vote to review and discuss programs
prepared by Operator every three (3) months showing participation in production
and distribution for the next six (6) months, in accordance with Clause 12.3 of
the Ecopetrol Contract.
k) To approve by majority vote to consider the use of any Natural
Gas part of any financing programs, including but not limited to such programs
and Exploitation Operations propose to the Executive Committee, pursuant to
Clause 15 of the Ecopetrol Contract.
l) To approve by a majority vote any unitization program to be
presents to the Executive Committee and negotiated with Outside parties in
accordance with Clause 15 and 16 of the Ecopetrol Contract.
m) To approve by a majority vote the vote position to be taken by
the Operator's representative in meetings of the Executive Committee.
n) To approve by a majority vote exploration, development and
production operations for the exclusive account of the Parties under Clause 21
of the Ecopetrol Contract in the event that such operations are not approved by
the Executive Committee.
o) To approve by a majority vote the abandonment of any well.
p) Subject to Article 13.4 hereof, to approve by a majority vote
any question concerning the relinquishment of all or part of the Contract Area;
and
r) To approve by a majority vote the Determination to appraise a
Discover for financial purposes.
3.12 If more than one operation is proposed in connection with a well, then
unless the Operating Committee (or Participating Parties in a Sole Risk
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operation) unanimously agrees on the sequence of such operations, such
proposals shall be considered and disposed of in the following order of
priority:
a) Proposals to do additional testing, coring or logging;
b) Proposals to attempt a completion in the deepest objective zone;
c) Proposals to plug back and attempt completions in shallower
zones, in ascending order;
d) Proposals to sidetrack any well to reach any zone not below the
deep original authorized objective;
e) Proposals to deepening any well, in descending order;
f) Proposals to plug and abandon any well.
3.13 All proposals for action shall be Determined by the Representatives
voting in accordance with the procedures set forth above; except, that the
following proposals, to be binding upon all the Parties, shall be adopted only
if approved by the unanimous vote of the Operating Committee.
a) Completing or conducting additional testing, coring or logging
in connection with a well drilled as a Joint Operation;
b) An expenditure in excess of Five Hundred Thousand Dollars (US
$500.00 for construction or acquisition of Additional Major Facilities;
c) Unitization of the Ecopetrol contract Area, subject to
compliance with applicable laws, regulations and the terms of the Ecopetrol
Contract;
d) Amendment of the terms of the Ecopetrol Contract;
e) Amendment of the Farmout Agreement;
f) Amendment of this JOA;
g) The Determination to recommend to Ecopetrol the designation of
a Commercial Field.
h) Non-compulsory relinquishment of all or part of the Ecopetrol
contract Area.
i) The Determination to terminate the Ecopetrol Contract pursuant
its Clause 24.03 thereof. If any Party wishes to abandon all or a portion of
his interest in the Ecopetrol Contract, such Party may do so only in accordance
with the provisions set forth in Article 10 of the JOA.
ARTICLE 4
APPOINTMENT, POWERS AND DUTIES OF OPERATOR
4.1 Geopozos is hereby appointed Operator.
4.2 In accordance with the terms of the Ecopetrol contract and subject to the
provisions of Article 3 of this JOA relating to the Operating Committee, the
Operator shall have the exclusive right and obligation to direct, manage,
conduct and have charge of all Joint Operations in a workmanlike manner, and in
accordance with good oil field practice as would a prudent and professional
capable Operator under the same or similar
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circumstances shall act. The Joint Operations will included explorations,
exploitation, appraisal, development, production, storage and transportation
operations under the Ecopetrol Contract and this JOA. All Joint Operations
shall be conducted in compliance with the terms and provisions of this
Agreement, the Ecopetrol Contract, the Regulations and applicable Colombian
laws, and in accordance with the agreed Programs and Budgets and Determinations
of the Operating Committee. Operator shall comply with and require all of its
employees, agents, contractors and sub-contractors to comply with the Ecopetrol
Contract and with all applicable laws, rules, regulations, orders or
requirements of any competent governmental body jurisdiction over the Ecopetrol
Contract Area.
4.3 The Operator shall take all reasonable steps necessary to maintain the
Ecopetrol Contract and the Ecopetrol Contract Area in good standing. Without
reducing the responsibility assuming by the Operator, the Parties shall take
all reasonable steps to assist the Operator as requested by Operator from time
to time.
4.4 The Operator will represent the Parties on the Executive Committee
provided for in Clause 21 of the Ecopetrol Contract and will abide by
Determinations of the Operating Committee provided for in Article 3 of this
Agreement, and will on behalf of Sole Risk Operation under Article 14 of this
Agreement as required by the Ecopetrol Contract.
4.5 Operator under its own responsibility and liability shall select
employees and determine their number, hours of labor, and compensation. Such
employees shall be employees of the Operator. Operator may also cause employees
of any of its Affiliates to perform its obligations under this Agreement. For
the purposes of this JOA hereto, any such employees shall be considered only
employees of Operator.
4.6 If it so desires, Operator under his own responsibility may hire
outside contractors to perform directly or under sub-contracts, all or any
portion of its functions as Operator under this JOA. Outside contractors shall
be hired on competitive professional basis, quality of the work, rates and
other valuable considerations, including acceptance of terms and conditions
established by Operator that will warranty that the Joint Operations will
conducted in accordance with the decisions of the Operating Committee. Operator
shall have all Joint Operations, including seismic, drilling, reworking,
recompleting, deepening, sidetracking, plugging back, storage and transportation
operations conducted by qualified and responsible independent contractors under
competitive contracts.
4.7 Operator shall initially prepare all work Programs and Budgets and other
data to be discussed at meetings of the Operating Committee listed in Article 3
of this JOA. Operator shall pay all costs and expenses incurred by Operator for
the Joint Account promptly and when due and payable.
4.8 Operator in conducting the works under Joint Operations may, however,
employ its own equipment and tools in the conduct of such operations pursuant
to written agreement with the Participating Parties.
4.9 Operator shall carry out each program of operations within the limits
of the work Program and Budget therefore, and shall not undertake any
operations not included in any work Program and Budget or make any expenditures
during a budget period in excess of the budgeted amounts approved by the
Operating Committee therefore except as follows:
a) If necessary to carry out a project, Operator is authorized to
make expenditures in excess of the approved work Program and Budget adopted for
such project up to but no exceeding ten (10) percent of such Budget,
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provided that such excess expenditures shall be reported promptly to the
Participating Parties by the Operator.
b) Operator is also authorized to make expenditures for operations
under the Ecopetrol Contract not included in a work Program or Budget, limited
to US$ or its equivalent in colombian pesos per project or per quarter
during the Exploration Phase and US$ or its equivalent in colombian pesos
per project or per quarter during the Exploitation Phase.
c) In the case of emergency, Operator may make such immediate
expenditures as it deems necessary for the protection of like or property, and
such emergency expenditures shall be reported promptly to the Participating
Parties by Operator. Emergencies shall include but shall not be limited to
explosions, fires, floods and other unexpected contingencies.
4.10 The Operator shall give the Parties access to all relevant technical
and financial information relating to Joint Operations. The Operator shall,
without limiting the generality of the foregoing, provide under prior signature
of a confidential contract by a Party, currently as produced or compiled, the
following data and reports pertaining to the Joint Operations and each well
being drilled:
a) Copies of all geological and geophysical data, reports and maps
prepared by the Operator or its contractors, except magnetic tapes which shall
be storage by the Operator or its designates and made available for inspection
and/or copying at the sole expense of the Party requesting it;
b) Daily drilling progress reports and completion progress;
c) Complete reports of all core analyses.
d) Copies of any logs and surveys made in the well as run and upon
completion of the well a composite of all electrical type logs and mud logs or
any other information requested upon written request acquired as a result of
the Joint Operations;
e) Upon written request received by Operator prior to the
commencement of drilling, samples of cuttings and cores marked as to depth to
be packaged and shipped at the expense of the requesting Party.
f) Copies of any well tests, including drill stem tests, core
analysis reports, bottom-hole pressure surveys, gas and condensate analysis, or
any other pertinent information.
g) Reports of production, crude oil runs, and stocks.
h) Reports on status of xxxxx including xxxxx not producing and
not abandoned.
i) Copy of the plugging report in the event any well is completed
as a dry hole or is otherwise abandoned;
j) Copies of the final geological reports and the drilling reports
on all xxxxx.
k) Field and well performance data, including production reports,
reservoir studies and reserve estimates;
l) Copies of all reports furnished by the Operator to the
Colombian government and/or Ecopetrol relating to Joint Operations.
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n) Monthly Progress and Operations Reports, including the
following: 1) capital budget status; 2) statement of account by monetary
origin; and 3) inventory management;
The information listed in (a) shall be furnished by Operator on a daily basis
and the information listed in rest sub-sections shall be furnished by Operator
to the Party that request it within seven(7) days.
Any additional information as the Parties or any of them may reasonably
request, shall be furnished provided that the requesting Party shall pay the
costs of preparation thereof and that the preparation thereof will not unduly
burden the Operator's administrative and technical personnel. The Operator
shall make available at reasonable times during regular business hours other
relevant technical data and financial data for use and copying by the Party at
their sole expense.
4.11 The Party shall have the right of access to the Ecopetrol Contract Area
at their own cost, risk and expense at all reasonable times to inspect Joint
Operations. The Parties shall have the right of access at all times during
critical well operations, including the drilling or coring of potential pay
zones, logging and testing, for the purpose of observing such critical well
operations. As observers, the Parties shall be permitted to examine and make
copies of any and all data and interpretations thereof, including but not
limited to cores, samples, logs and surveys concerning operations conducted
hereunder.
4.12 The Operator shall keep the property used in Joint Operations free from
all liens, charges and encumbrances which result from joint operations,
provided that this responsibility of Operator shall not be applicable to liens,
charges and encumbrances on a Party's Participating Interest occasioned by such
Party's action or inaction.
4.13 The Operator shall prepare and keep full and complete records of
accounts in accordance with Exhibit "B" of the Ecopetrol Contract and of
technical operations hereunder in accordance with Colombian laws and applicable
Regulations, and shall prepare and furnish on time to the Operating Committee
(and furnish or cause to be furnished on time to Ecopetrol or any agency of the
Colombian Government) such reports, statements, data and information as may be
required from time to time by the Operating Committee or any such agency
concerning the Ecopetrol contract or the Joint Operations.
4.14 The Operator, its officers, directors and employees shall not be liable
to the Parties Non-Operators for injury or damage resulting from any act done
or omitted in good faith performance of its duties under this Agreement, and
that will not involve misconduct; nor shall Operator, its officers, directors
and employees be liable to the Parties for consequential damages, except in
case that the Operator will be liable for gross negligence or willful
misconduct, and for all legal purposes any of such officers, directors, and
employees shall be considered only with labor relation with the Operator.
4.15 The Operator shall have a preferred lien on and security interest in
the Participating Interest of each party respectively in Petroleum produced and
saved under this Agreement or the Ecopetrol Contract, in the proceeds from the
sale of such Petroleum and in the material and equipment acquired for the Joint
Account, to secure for operator the payment of any sum due the Operator under
this Agreement from each Party, respectively, which may become in default for
non-payment thereof.
4.16 Any legal action or suit, to the extent not covered by insurance
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charged to the Joint Account, arising out of Joint Operations shall be
compromised, settled or defended by the Operator at the expense of the Joint
Account for the benefit of the Parties; provided, however, that the Operator
shall not pay more than Fifty Thousand Dollars (US$50,000) or its equivalent in
Colombian pesos thereof, in the settlement or defense, excluding fees and
expenses of outside counsel, of any legal action or suit without first
obtaining the approval of the Operating Committee. The Operator shall promptly
notify the Parties of the filing of any such legal action or suit, when it
first occur. Operator shall not incur more than Fifty Thousand Dollars
(US$50,000) or its equivalent in Columbian Pesos in costs for legal services in
connection with any single suit, proceeding or matter without first obtaining
the approval of the Operating Committee. No settlement or compromise shall be
agreed to by Operator unless such settlement or compromise results in final
disposition of the legal action or suit. Any Party shall be entitled to
individually represent its interest in any legal action or suit at its own
expense and risk.
4.17 Where the Operator is required to secure or furnish materials, supplies,
equipment or labor for drilling, constructing, installing or maintaining
facilities or equipment, and Operator has made timely and proper attempt to
obtain same, and is unable to secure or furnish same upon reasonable terms and
conditions, including costs, Operator shall be excused from such requirement
and Parties shall be immediately and fully advised.
4.18 The Operator shall:
a) call for the tender of bids for any single contract which in
its opinion will require expenditures of more than Dollars (US$
) or its equivalent in Colombian pesos or such limit as the Operating
Committee may Determine. Where bids are required, each Party and/or its
Affiliates shall have the right to submit a bid. Services provided by a Party
or an Affiliate under a contract shall be considered to be from an outside
source for purposes of the Accounting Procedure. Operator shall not, without
the Determination of the Operating Committee, enter into any contract which
will, in Operator's opinion, require expenditures in excess of:
1) $ for Exploration
2) $ 300,000 for Development
3) $ 500,000 for Production
b) The Operator shall require that any bid shall be include any
direct indirect tax or taxes to be withheld on income, or other taxes from
payments made by the Operator for the Joint Account. The bid shall separately
indicate: (1) the amount of any such taxes which are included in respect of
any work to be performed, and (2) any such taxes which are included on account
of any wages, salaries, or other benefits paid to any of the contractor's
personnel.
c) Represent the Parties before Ecopetrol, the Colombian
government or other authorities with respect to all matters arising under the
Ecopetrol Contract (except matters related to taxes based on income, net worth
or profits) and all Joint Operations, provided, however, that Operator shall,
when time allows, first consult with the other Parties with respect to any
matters materially affecting the Parties. Each Party may be separately
represented in meetings with Ecopetrol, the Colombian government or other
authorities on such matters, provided that Operator shall be spokesman.
d) The Operator is obligated to insert in all contracts with
contractors and/or sub-Contractors a arbitration provision clause, by means of
which any differences or disputes arising in connection with such contracts
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during its life period, or subsequent to its termination shall be submitted to
Arbitration in accordance with the text refers in Clause 25 of this JOA.
4.19 The Operator is authorized to:
a) make necessary expenditures to carry out the Program(s) within
the approved Budget plus a maximum of five percent (5%) in excess of the annual
approved Budget or ten percent (10%) of any like items in such Budget; provided
that such excess expenditures shall be reported promptly to the Parties by
Operator, and provided further that the aggregate of such excess expenditures
shall not exceed Dollars (US$ ) or its equivalent in
Colombian pesos;
b) during any Calendar Year, make expenditures for Joint
Operations not included in any Program or adopted Budget, not exceeding a total
of Dollars (US$ ) or its equivalent in Colombian pesos, provided
that such expenditures shall not be for purposes previously rejected by the
Operating Committee. When expenditures have been made under this authority, the
total amount authorized hereunder shall be correspondingly reduced, and such
expenditure shall be promptly reported to the Operating Committee. If the
expanded amount is approved by the Operating Committee, the amount authorized
hereunder shall be increased back to Dollars (US$ ) or equivalent
in Colombian pesos. It being the intention of the Parties that the Operator
shall have a fixed amount established by the Operating Committee which it can
expend without obtaining prior approval; and
c) in an emergency make such immediate expenditures as it deems
necessary for the protection of life or property. Such emergency expenditures
shall be reported promptly to the Parties. Emergencies shall include but shall
not be limited to explosions, fires, floods and other unexpected contingencies.
4.20 Operator shall submit to the parties an Authority for Expenditure (AFE)
for any capital expenditure in excess of One Hundred Thousand Dollars
(US$100,000) or its equivalent in Colombian pesos. The amount stated in any
particular AFE shall not exceed the approved Budget for such expenditures. Each
such AFE shall be itemized in a manner which readily allows each Party to
correlate the expenditures covered thereby to the relevant work Program and
Budget item, upon request of any party may reasonably request.
ARTICLE 5
RESIGNATION AND REMOVAL OF OPERATOR
5.1 Geopozos shall be the Operator until such time ROG or its assignee has
been approved by Ecopetrol to assume operatorship, scheduled not to exceed 12
months. Operator may resign at any time by giving notice to the Parties. Such
resignation shall not become effective until four (4) months after said notice,
unless prior to said period a successor Operator has assumed the duties of the
Operator and Ecopetrol has waived the six (6) months requirement in Clause 10.4
of the Ecopetrol Contract. The successor Operator may not assume such duties
until it has been qualified to do business in Colombia, and until Ecopetrol has
approved the appointment of the successor Operator.
5.2 The removal of resignation of an Operator who remains a Party shall in
no way prejudice its right and obligations as a Party and it shall retain
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and hold its right to vote as a Party in the selection of a successor Operator.
If Operator give notice of its withdrawal from this Agreement and the Ecopetrol
Contract, then such notice shall also be deemed its notice of resignation as
Operator, unless the Parties unanimously agree otherwise. In the absence of
such unanimous agreement the outgoing Operator shall not hold or retain the
right to vote in the selection of a successor Operator.
5.3 Operator may be removed by the unanimous vote of the Non-Operator(s)
(excluding any Affiliate of Operator) after thirty (30) days prior notice of
that effect if:
a) it becomes bankrupt, insolvent, goes into dissolution or
liquidation, commits or suffers any act of bankruptcy or insolvency;
b) it is in material breach of its duties or obligations hereunder
and does not commence to rectify the breach within thirty (30) days of
notification by all Non-Operators (other than any Affiliate of Operator) of the
alleged default; or
c) it was an Affiliate of any Party and has ceased to be such.
5.4 Within thirty (30) days after the giving of notice to Operator of its
prospective removal or within one hundred and twenty (120) days after the date
upon which notice is received from Operator of its intention to resign, as the
case may be, the Non-Operator(s) shall notify the Operator as to whether or not
one of the Non-Operators or an Affiliate of a Non-Operator wishes to take over
as Operator. If more than one (1) Non-Operator or Affiliate thereof wishes to
become Operator, the Operator shall, subject to the provisions of Article 5.2
hereof, be selected by an affirmative majority vote of two (2) or more Parties
that are not Affiliates owning Participating Interests, provided that the
outgoing Operator shall not vote to succeed itself as Operator. If none of the
Non-Operators or their Affiliates wish to take over as Operator, the Parties
shall by unanimous vote select a third party to act as Operator or shall
establish such other procedures as will carry out the purposes of this JOA. Any
third party so selected as Operator shall enter into a written instrument with
all Parties that will establish the corresponding remuneration and other terms
and conditions that may be established by the Operating Committee, and thereby
assume the duties of Operator under this JOA.
5.5 The physical change of Operator shall take place in a way that the
continuity of operatorship is ensured so that from the effective date of its
resignation or removal, one (1) of the Non-Operators or their Affiliates or a
third party, as the case may be, shall become temporal Operator and shall be in
charge of Joint Operations. The outgoing Operator's reasonable and appropriate
demobilization costs shall be charged to the Joint Account. On the effective
date of its resignation or removal at discretion of the Operating Committee,
the outgoing Operator shall surrender possession and deliver to the succeeding
Operator, or if none, to the Non-Operators, the following:
a) Such jointly-owned facilities, equipment, materials, inventory,
cas Available Petroleum and other assets as are relevant to the duties of
Operator not previously delivered to the Parties or their respective nominees,
and shall make an inventory and accounting to the said Parties for any such
items not so delivered.
b) All books of accounts, documents, agreements and other papers
relating to Joint Operations; and
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c) All data and information obtained by the Operator on behalf of
the Parties in the course of Joint Operations.
d) Replace the former Operator with the new Operator as signatory
of any bank or financing institution account or in any title or document.
5.6 As soon as practicable after the effective date of such change of
Operator, the Parties shall audit or procure the audit of the Joint Account.
All costs and expenses incurred in connection with such audit shall be for the
Joint Account. The results of such audit shall be reported to the Operating
Committee as soon as practicable. Upon delivery of all the information referred
in point 5.5 a) to d) above, and acceptance of such audit by the Operating
Committee, the outgoing Operator shall be released and discharged from all
obligations, rights and liabilities as Operator, but without prejudice to any
legal rights and liabilities accrued prior to the date of the acceptance by the
Operating Committee of such audit.
ARTICLE 6
OPERATIONS
6.1 Operator shall conduct the Exploration Seismic Operations pursuant to
the approved Exploration Seismic Operations and Budget for the benefit and at
the expenses of all Parties.
6.2 Operator shall conduct operations for the drilling of the obligations
Xxxxx pursuant to the AFT for the particular Obligation Well for the benefit
and at the expenses of all the Parties.
6.3 Operator shall conduct operations for Exploration Operations pursuant
to the approved Exploration Program and Budget (or any revision or addition
thereto) for the benefit and at the expenses of all the Parties.
6.4 Operator shall conduct Exploitation Operations, pursuant to the
approved Exploitation Program and Budget (or any revision or addition thereto)
for the benefit and at the expense of the Participating Parties, and Ecopetrol,
if it decides to participate. Operator shall conduct Exploitation Operations
without the approval of the Executive Committee in accordance with the
provisions of Clause 21 of the Ecopetrol Contract and the provisions of this
JOA for the benefit and at the expenses of all the Participating Parties.
ARTICLE 7
WORK PROPOSAL PROGRAMS AND BUDGETS
7.1 As soon as practical by after the effective date of this JOA or before
October 1 of each year, the Operator shall submit to the Operating Committee
for the meeting to be held in September, and itemized Program and Budget of
proposed capital and operating costs and expenses for Joint Operations for the
next succeeding Calendar Year. The Operator will take into account the
recommendations of the Non-Operator (a) in the preparation of the Budget and
Program which will be submitted to the Operating Committee for Determination.
Operator must take into consideration for preparation of the Annual Budget the
possibility of contribute with cash for invest in the Joint Operations to be
held under the proposed Budget with the sale of the natural gas currently
discovered in the Astrea-No.1 Well and Arjona-No.1 Well located in the
Ecopetrol Contract Area. The final Budget and Program will be approved within
thirty (30) days following its submittal to the Operating Committee.
Such Program and Budget shall include facilities to provide the total capacity
for Petroleum if any, produced in accordance with Article 11
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below. Within thirty (30) days following the receipt of the Budgets and
Programs, the Parties will inform the Operator in writing concerning any
changes they wish to propose. The Operator will take into account the
recommendations and changes of the Parties in the preparation of the Budgets
and Programs which will be submitted for the final approval of the Operating
Committee.
7.2 Approval of the Budget shall constitute authority for the Operator to
arrange Joint Operations and make expenditure commitments in accordance with
the approved Program and commence expenditures on January 1 of the budget year.
7.3 The Operator and any Non-Operator may also from time to time submit to
the Operating Committee revisions of the Program and Budget covering additions,
and adjustments which it considers to be in the best interest of Joint
Operations.
7.4 Subject to Article 4 hereof, Operator shall not be obligated or
entitled to perform any work or incur in any expenditure or indebtedness
hereunder for the Joint Account until the Operating Committee shall have
approved a Budget which shall authorize the expenditures necessary to complete
the Program for the Calendar Year in question.
7.5 The following procedures shall apply with respect to proposals for
Exploration Operations:
a) On or before May 1 of each year, Operator shall submit to each
Non-Operator a recommended initial work Program and Budget relating to
Exploration Operations to be conducted during that Contract Year. Such work
program and budget shall include all anticipated Exploration Operations,
including but not limited to Non-Development Xxxxx, Development Xxxxx,
Development Facilities and geophysical operations and shall include a detailed
itemization of each proposed operation and the estimated costs thereof.
b) On or before June 1 of each year each Non-Operator shall submit
to Operator and all Non-Operators proposed amendments and adjustments to the
initial annual work Program and Budget as proposed by Operator.
c) At the quarterly meeting of the Operating Committee to be held
during June of each year, the representatives of the Parties, shall review and
discuss the initial annual work Program and Budget for Exploration Operations
as submitted by the Operator and all amendments and adjustments thereto
proposed by Non-Operators. At such meeting the Representatives of the Parties
shall vote on all recommendations and proposals and shall formulate a final
work Program and Budget for the Exploration Operations. Those Exploration
Operations receiving a majority vote interest of the Operating Committee as
provided in Article 3.10.(a) of this Agreement shall be included in the final
work Program and Budget for Exploration Operations for that Contract year
(hereinafter the "Exploration Program and Budget"). Each Party whose
Representative votes to approve an operation for inclusion in the Exploration
Program and Budget shall be a Participating Party in said operation, and each
party whose representative votes to disapprove an operation or fails to vote on
such operations shall be a Non-Participating Party in said operation. The
participating parties shall be obligated to pay their proportionated shares of
the costs of the operation.
d) A party hereto may from time to time propose revisions to the
Exploration Program and Budget (hereinafter "Revised Exploration Operations')
in accordance with the following procedures:
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(1) In proposing such Revised Exploration Operations related to a
Non-Consent Operation, to each Participating Party a detailed itemization of
each Revised Exploration Operations and the anticipated costs thereof.
(2) Not later than 15 days from receipt of a Party's proposed Re
Exploration Operation, each Party (or Participating Party in the case of a
Non-Consent Operation) shall submit to the Party making the proposal its
proposed amendments and adjustments to the proposed Revised Exploration
Operation.
(3) At the next quarterly meeting of the Operating Committee, or at
special meeting of the Operating Committee call by the Chairman, if Operators
deems necessary due to the nature of the Revised Exploration Operations, the
Representative of each Party (or Participating Party in the case of a
Non-Consent Operations) shall vote to approve or disapprove each Revised
Exploration Operations. Any proposed Revised Exploration Operation receiving a
majority vote of the Representatives of the Parties (or the Participating
Parties in the case of a Non-Consent Operation) shall be conducted by the
Operator pursuant to Article 6.3 above. Each party whose Representative votes to
approve a Revised Exploration Operation shall be deemed a Participating Party in
the Revised Exploration Operation, and each Party whose Representative votes to
disapprove a Revised Exploration Operation or fails to vote shall be a
Non-Participating Party in the Revised Exploration Operation. The Participating
Parties shall be obligated to pay their proportionate shares of the costs of a
Revised Exploration Operation.
(4) Not less than ninety (90) days before commencing an Exploration
Operation (or Revised Exploration Operation), Operator shall notify all
Participating Parties specifying the work to be performed, the location,
proposed depth, objective formation, estimated costs and other information
relating to the operation, which AFE shall be in accordance with the approved
Exploration Program and Budget (or Revised Exploration Operation) and the terms
of this JOA, and shall be for information purposes only. The Participating
Parties shall be obligated to pay their proportionate shares of the AFE and any
additional costs authorized under Article 4.20 of this JOA.
7.6 The following procedures shall apply with respect to proposals for
Exploitation Operations:
a) On or before May 1 of each year, (except upon the first
acceptance of the Commercial Field, within two weeks after such acceptance),
Operator shall submit to each Non-Operator a recommended initial work program
and Budget for the next following Calendar Year. If there are at least six and
one-half month remaining in the Calendar Year, after the first acceptance of a
Commercial Field, the initial work program and budget shall cover the remainder
of such Calendar Year. The initial work Program and Budget shall include all
anticipated operations concerning the development of the Commercial Field,
including but not limited to Non-Development Xxxxx, Development Xxxxx,
Development Facilities and other operations. Said initial work Program and
Budget shall include a detailed itemization of each proposed operation and the
estimated costs thereof.
b) On or before June 1 of each year (except upon the first
acceptance of Commercial Field, within one month after such acceptance), each
Non-Operator shall submit to Operator and all other Non-Operators its proposed
amendments and adjustments to the initial work Program and Budget proposed by
Operator. Each operation in the initial work Program and Budget recommended by
Operator and each operation submitted by a Non-Operator as
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an amendment, modification, addition or adjustment thereto shall be submitted
to the Operating Committee for discussion and a vote at its June meeting (or
six weeks after the first acceptance of a Commercial Field).
c) At the quarterly meeting of the Operating Committee to be held
during June of each year (or six weeks after the first acceptance of a
Commercial Field), the Representatives of the Parties, shall review and discuss
all proposals submitted, and shall vote on each operations submitted to the
Operating Committee, and shall formulate the Work Program and Budget (the
"initial Exploitation Program and Budget") to be submitted to Ecopetrol on
August 15th of each year (or two months after the first acceptance of a
Commercial Field). Each operation receiving a majority vote shall be included
in the initial Exploitation Program and Budget. Except as hereinafter provided
each Party whose Representatives votes to approve an operation for inclusion in
the Initial Exploitation Program and Budget shall be a Participating Party in
said operation; and each Party whose Representative votes to disapprove an
operation or fails to vote shall be a Non-Participating party in said operation.
d) Operator shall present the Initial Exploitation Program and
Budget to Ecopetrol no later than August 15th of each year (or two month after
the first acceptance of a Commercial Field) in accordance with the terms of
Clause 11.1 of the Ecopetrol Contract. Operator shall inform all Parties of the
changes recommended by Ecopetrol in the Initial Exploitation Program and Budget
and shall freely consult with all Parties regarding those changes and take into
consideration all recommendations and suggestions of all Parties regarding the
preparation of the final detailed work Program and Budget (hereinafter the
"Final Exploitation Program and Budget") to be submitted to the Executive
Committee for final approval. Taking into consideration the recommendations of
Ecopetrol and Non-Operators, Operator shall submit the Final Exploitation
Program and Budget to the Executive Committee in accordance with Clause 11.1 of
the Ecopetrol Contract.
e) Those operations included in the Final Exploitation Program and
Budget approved by the Executive Committee without material change shall be
conducted by Operator in accordance with Article 6.4 of this JOA (Operation for
Exploitation Operations) at the expense and for the benefit of the
Participating Parties and Ecopetrol in accordance with the terms of the
Ecopetrol Contract.
f) Those operations included in the Final Exploitation Program and
Budget which were approved by the Executive Committee with material change
shall be considered at a special meeting of the Operating Committee, and the
Representative of each Party shall vote on each such operation. Such vote shall
supercede the initial vote provided for in Article 7.5 (c) above. Each Party
whose Representative votes to approve an operation shall be a Participating
Party in said operation, and each Party whose Representative votes to
disapprove an operation or fails to vote shall be a Non-Participating Party in
said operation. Only those operations receiving a majority vote shall be
conducted by the Operator, and they shall be conducted for the benefit of the
Participating Parties and Ecopetrol in accordance with the terms of the
Ecopetrol Contract.
g) Those operations included in the Final Exploitation Program and
Budget which are not approved by the Executive Committee, shall be considered
at a meeting of the Operating Committee and the Representative of each Party
shall vote regarding whether or not to proceed to conduct each such operation
for the exclusive account of the Parties pursuant to the terms of Clause 21 of
the Ecopetrol Contract. The vote provided for in this Article 7.5 (g) shall
supercede the vote provided for in Article 7.5 (c) above. Each Party whose
Representative votes to proceed with an operation shall be
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Ecopetrol in accordance with the terms hereof and the terms of the Ecopetrol
Contract.
(5) If any of the Revised Exploitation Operations approved by the
Executive Committee differ materially from those approved by majority vote of
the Operating Committee (or Participating Parties in the case of Non-Consent
Operations) those Revised Exploitation Operations so altered shall again be
submitted to the Parties (or Participating Parties in the case of Non-Consent
Operations) for approval in the same manner as provided in Section 7.5 (f)
above. If a Revised Exploitation Operation is not approved by the Executive
Committee and if Operator is authorized to act with respect to such Revised
Exploitation Operation pursuant to the terms of Clause 21 of the Ecopetrol
Contract and this Agreement, then at a meeting of the Operating Committee, the
Representative of each Party (or Participating Parties in the case of
Non-Consent Operation) shall vote regarding whether or not to proceed to
conduct such Revised Exploitation Operations for the exclusive account of the
Parties pursuant to the terms of Clause 21 of the Ecopetrol Contract. Each
Party whose Representative votes to proceed with such a Revised Exploitation
Operation shall be a Participating Party in the operation; and each Party whose
Representative votes not to proceed with a Revised Exploitation Operation or
fails to vote shall be a Non-Participating Party in the Revised Exploitation
Operation. Operator shall conduct those Revised Exploitation Operations which
receive the majority vote of the Operating Committee (or Participating Parties
in the case of Non-Consent Operations) at the expense and for the benefit of
the Participating Parties. Subject to the terms of Clause 21 of the Ecopetrol
Contract each Participating Party shall pay the portion of the costs and
expenses attributable to Ecopetrol's Working Interest in such operation and
except as hereinafter set forth shall receive the portion of the Petroleum
attributable to Ecopetrol's Working Interest in the operation (after deduction
of the royalty of Ecopetrol) in the ratio that each Participating Party's
Interest bears to the total interest of all Participating Parties. In the event
Revised Exploitation Operations not approved by the Executive Committee are
conducted for the exclusive account of the Parties pursuant to Clause 21 of the
Ecopetrol Contract and this Agreement, the benefits of the provisions of Clause
21 of the Ecopectrol Contract regarding the recoupment of the costs and expenses
of such operations with a premium, shall accrue solely to the Participating
Parties in the subject operations pro rata in the proportion that the
Participating Parties of each such Party in the subject operation bears to the
total Participating Interest of all Participating Parties in such operation.
(6) Not less than ninety (90) days before commencing an Exploitation
Operation (or Revised Exploitation Operation), Operator shall notify all
Participating Parties specifying the work to be performed, the location,
proposed depth, objective formation, estimated costs and other information
relating to the operation, which AFE shall be in accordance with the approved
Exploitation Program and Budget (or Revised Exploitation Operation) and the
terms of this Agreement, and shall be for information purposes only. The
Participating Parties shall be obligated to pay their proportionate shares of
all costs for the approved operations including those costs authorized under
Article 4.20 of this Agreement.
ARTICLE 8
COSTS, EXPENSES AND ADVANCES
9.1 Except as herein otherwise specifically provided, all costs, expenses and
benefits, accruing or resulting from Joint Operations, shall be borne and paid
by and accrued to the Parties in proportion to their respective Participating
Interests. All charges, credits and accounting for such expenditures among the
Parties and between the Parties and Ecopetrol and
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the rendering of accounts by Operator in respect thereof shall be in accordance
with Exhibit "B" of the Ecopetrol Contract.
8.2 Except as otherwise provided concerning advance payments, Operator
initially shall pay all costs and expenses, including required advances to
third parties; and discharge all Joint Account costs and expenses and shall
charge the Parties with their respective Participating Interest shares of such
costs and expenses.
8.3 Funds received by Operator under this JOA shall be segregated or
maintained by it as a separate fund. Funds received as estimated advances shall
be maintained by Operator in an interest-bearing account or otherwise invested
in a manner to earn interest which will not interfere with Operator's
obligation to pay all costs and expenses when due. Interest earned shall be
credited to each Party advancing such funds, pro rate, in accordance with the
Party's Participating Interest in the operation for which the advance was made.
8.4 The Operator at its election shall have the right to request and receive
from each Party payment in advance in Colombian pesos unless the Party elects
to fund in other currency of each Party's respective share of the estimated
amount of expenditures for Joint Operations for the succeeding quarterly period
payable to the Operator on the due date established by the Operator based on
the currency established by the Operating Committee. Such estimates shall be
based on the latest information available to the Operator at the time the
request to the Party for advance is made. Such request for advance shall be
furnished to the Parties at least forty-five (45) days prior to the first day
of any quarterly period in which such advances are due. The quarterly cash
calls shall be paid by each Party not earlier than the first Day of the
quarterly period to which the cash call applies. Payment shall be considered
made when good funds have been received at the bank account place designated by
the Operating Committee. Proper adjustment each quarterly cash call shall be
made between advances and expenditures in the currency so advanced as part of
the calculation of the cash call for the next succeeding quarterly period, to
the end that each Party shall bear and pay its proportionate share of actual
expenditures. Payment of any cash calls pursuant to this Article, shall not
prejudice the right of any Party to protest or question the correctness thereof
within the time limits specified in the Exhibit "B" of the Ecopetrol Contract.
8.5 The Operator shall pay all fees, rentals and imposts and shall charge the
Joint Account any such fees, rentals and imposts so paid; provided, however
each Party shall pay to the Colombian government all taxes computed by
reference to profits, income, networth, distributions or capital, required
by the applicable Regulations to be paid on account of Joint Operations or
by the terms and provisions of the Ecopetrol Contract.
8.6 Each Party shall timely pay or deliver, or cause to be paid or delivered,
to the appropriate governmental authority, all taxes computed by reference to
income, profits, net worth, distributions, or capital properly payable by such
Party, and such Party shall hold the other Parties free from any liability
therefor.
8.7 Operator shall, in accordance with Clauses 13 and 14 of the Ecopetrol
Contract, deliver to Ecopetrol the portion of the production from the Ecopetrol
Contract Area representing Ecopetrol's royalty. If the Operator is requested by
Ecopetrol to pay royalty as provided for in Clause 14.6 or the Ecopetrol
Contract, then the Operator shall make such payment, and each Party shall
furnish Operator with all information necessary for it to do so, and shall
advance to Operator such funds as are necessary to pay timely
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to Ecopetrol the royalty in respect of the share of production taken from the
Ecopetrol Contract Area and disposed of by such Party.
8.8 If the existence of a Commercial Field in the Ecopetrol Contract Area is
recognized by the Parties and Ecopetrol and Joint Operations with Ecopetrol are
commenced under the Ecopetrol Contract, the provisions of this JOA shall, as
among each of the Parties, be applicable and controlling with respect to those
operations; provided, however, that in the event of conflict between the
provisions of this Agreement and those of the Ecopetrol Contract, the latter
shall prevail as among Ecopetrol, and each of the Parties.
8.9 In each contract signed by Operator with the Contractors and/or
sub-contractors it will be an express provision, by means of which such persons
agree and accept the Parties harmless from and against any and all claims,
demands, actions, causes of action, judgements, including attorney's fees and
legal costs, arising out of or resulting from death, injury, kidnaping, to
persons or damage to property during or in connection with the services to be
xxxxx to the Joint Operations.
8.10 It is recognized that at the time major expenditures will be required
under development activities the Parties will review the equity of the
arrangements for cash advances, xxxxxxxx and like matters affected thereby.
Operator shall take into consideration for such review the possibility of
obtaining additional earnings with the sale of the natural gas currently
discovered in the Astrea-No. 1 Well and Arjona-No. 1 Well located in the
Ecopetrol Contract Area.
8.10 The rules of the Accounting Procedure marked as Exhibit "B" of the
Ecopetrol Contract shall govern all the provisions for accounting, billing
payments and allocation of all direct and indirect costs, expenses and overhead
charges and containing the principles to be adopted by the Operator and the
Parties for all accounting and fiscal purposes.
ARTICLE 9
DEFAULTS AND REMEDIES
9.1 In addition to any other security rights and remedies provided for by
law or equity with respect to services rendered or materials and equipment
furnished under this Agreement, each Party grants to Operator a first lien and
security interest upon its interest in this Agreement and the Ecopetrol
Contract, including any Petroleum production, credited thereto, in order to
secure payment of its share of expense together with interest thereon at the
rate for the currency in which the payment was supposed to be made set forth in
Exhibit "B" of the Ecopetrol Contract or the maximum rate allowed by law,
whichever is less, plus attorney's fees, court costs and other related
collection costs. If any Party does not pay its share of expense when due,
Operator shall have the right, without prejudice to other rights or remedies,
to collect from the Petroleum purchaser the proceeds from the sale of such
Party's share of production until the amount owed by such Party plus interest
at the rate herein provided has been paid. Each purchaser shall be entitled to
rely on Operator's statement concerning the amount owed and interest payable
thereon. Operator grants to the parties a similar lien and security interest to
secure payment of Party's supported share of expenses, and to secure the
obligation of Operator to properly disburse funds received from the Parties.
9.2 If such Party or Parties fails to pay any cash call made due in full
within the grace period of forty-five (45) Days from the date of receipt of
notice its proportionate share or to timely pay in full its proportionate share
of any quarterly expenditure made in accordance with this JOA and/or
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Exhibit "B" of the Ecopetrol Contract, it shall be in default ("Defaulting
Party or "Defaulting Parties" if more than one (1)). The Operator shall give
notice of such failure to such Party and amount thereof to all Parties. Each
Party not in default shall, within ten (10) Days of receipt of such notice, pay
to Operator the default amount in the proportion that its Participating
Interest bears to the total Participating Interest of all Non-Defaulting
Parties. Failure of a Non-Defaulting Parties to pay when due its share of such
default amount shall likewise and with the same effect be considered a default
and said Party will become a Defaulting Party hereunder.
9.3 The amount or amounts so advanced by each Non-Defaulting Party in
respect of each Defaulting Party shall bear interest at the Default Interest
Rate from the date so advanced until said amount together with such interest to
the date of payment has been paid in full by the Defaulting Party. Any sums
paid back by Defaulting Parties and allocated by the Operator within the next
five (5) Days to the Non-Defaulting Parties in the same proportion as the sums
were advanced, and will be applied first to interest due and the balance, if
any, to the default amount.
9.4 Notwithstanding any other provision of this Agreement, the Defaulting
Party shall not be entitled to attend Operating Committee meetings or to vote
on any matter coming before the Operating Committee during the period that such
default continues. The Non-Defaulting Parties alone shall have the right, at
any time subsequent to such default and for so long as such default continues,
to decide unanimously the course and extent of all future Joint Operations and
expenditures therefor, so long as such default remains in effect, including
without limiting the generality of the foregoing, expenditures incurred in the
quarterly period with respect to which the default first occurred and any
subsequent quarterly period, and the right to approve a surrender of all or
part of the Ecopetrol Contract Area or termination of the Ecopetrol Contract.
The Defaulting Party shall be bound by such decisions and any subsequent
Determinations, and during such period of time a Defaulting Party shall not
have the right to cast any vote on the Operating Committee. Subject to
Operators prior preferred lien, if any, pursuant to Article 9.1 each
Non-Defaulting Party shall have a preferred lien on all secure the payment of
all advanced funds due it from each Defaulting Party. Such preferred lien shall
also apply against all Petroleum otherwise attributable to each Defaulting
Party's Participating Interest and the proceeds thereof and shall remain in
effect until each Non-Defaulting Party recovers the full amount plus interest
of the sums so advanced by it.
9.5 Operator may, without limiting Operator's rights at law:
a) Withhold from such Defaulting Party any further information and
privileges with respect to Joint Operations; and
b) Treat the default as an immediate and automatic assignment to the
Operator of the proceeds of the sale of the Defaulting Party's share of the
Petroleum produced, such proceeds to be set-off against the sums in default:
and from and after Operator making such election, Operator may require the
purchaser of the Defaulting Party's share of the Petroleum to make payment
therefore to Operator while the default continues. Any such action by Operator
shall not operate to release such Defaulting Party from liability for payment
of any monies and shall be in addition to and not in lieu of the other
provisions of this Article 9 and any other legal, equitable or contractual
remedy which the Operator may have for the collection of such monies.
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9.6 In order to secure Operator for the non-payment of any sum due the
Operator under this Agreement from each Party, the Operator shall have a
preferred lien on and security interest in the Participating Interest of each
Party, in Petroleum produced and saved under this JOA or the Ecopetrol
Contract, in the proceeds form the sale of such Petroleum and in the material
and equipment acquired for the Joint Account.
9.7 Subject to Operator's lien, each Non-Defaulting Party shall have a
similar lien, mutatis mutandis, on all interests of the Defaulting Party under
the Ecopetrol Contract and this JOA to secure the payment of any and all
amounts advanced, plus interest thereon. Furthermore, any overriding royalty,
production payment, net proceeds interest, carried interest, or any other
interest carved-out of the Working Interest of a Party in the Ecopetrol
Contract shall be subject to the rights of the Parties to this Agreement, and
any Party whose Working Interest is so encumbered shall be responsible
therefor. If a Party does not pay its share of expense under this Article are
insufficient for that purpose, the security rights provided for therein may be
applied against the carved-out mentioned interests with which such Working
Interests is burdened. In such event, the rights of the owner of such
carved-out interest shall be subordinated to the security rights granted.
9.8 In addition and supplemental to any other remedy which may be available
to the Operator and Non-Defaulting Party, if any Party hereto shall be in
default in payment of advances or costs incurred hereunder, including any
Minimum Work Commitment, and if the Defaulting Party shall fail to remedy such
default within sixty (60) Days (or five (5) Days if a drilling rig is on an
Exploratory Well location) after receipt of written notice thereof by
Operator, Defaulting Party, at the sole option of the Non-Defaulting Party(ies),
effective as of the date of such default, if, Petroleum share it is not enough
to pay all the debts after deducting the royalties mentioned in Clause 13 of
the Ecopetrol Contract, the Defaulting Party shall in favor of the
Non-Defaulting Party or Parties be penalized promptly and immediately thereafter
with a penalty of Two Hundred percent (200%) in each case of all amounts due.
In case of any doubt in the calculation and application of this penalty, Clause
21.2 of the Ecopetrol Contract shall be apply.
9.9 No partial or total assignment of any interest that belongs to the
Defaulting Party shall relieve the Defaulting Party of its obligation to pay
the full amount of the sums in default, together with interest and the penalty
thereon provided in Article 9.8 above. Further, the Defaulting Party shall
continue to be liable for its accrued obligations under this JOA and the
Ecopetrol Contract until relieved of such obligations by all Non-Defaulting
Parties and for interest as provided above until the Defaulting Party has paid
the full amount of the sums in default together with such interest to the date
of payment for all loss, claims liability or damage incurred by the
Non-Defaulting Parties as a consequence of such default.
9.10 Since the remedies contained under this Article are not exclusive and
are without prejudice to any remedies or actions at law or equity that are or
may be available to the Non-Defaulting Parties for the enforcement of their
rights and collection of all sums due and owing from a Defaulting Party. The
failure to exercise any right or remedy at any time shall not constitute a
waiver of such right or remedy or stop the future exercise of such right or
remedy with respect to any default or subsequent defaults in the performance by
any Party of its obligations hereunder, including but not limited to the
obligations to advance funds.
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ARTICLE 10
WITHDRAWALS
10.1 No party shall withdraw from this Agreement until any Minimum Work
Commitment for the corresponding exploration year has been satisfied.
Thereafter, any Party may withdraw from this Agreement and the Ecopetrol
Contract upon at least sixty (60) Days notice in writing to the other Parties
of its intention to withdraw; When a Party ("Withdrawing Party") shall
thereafter cease to be entitled to vote on any matter submitted to the
Operating Committee affecting or applying to Joint Operations to be conducted
after the expiration of said sixty (60) Days.
10.2 The other Parties shall each have thirty (30) Days from the receipt of
the notice from the Withdrawing Party to elect, by giving notice to the
Parties, whether to take a transfer of the Withdrawing Party's interest or to
join in the withdrawal; a failure to respond within thirty (30) Days shall be
deemed an election not to withdraw. If all Parties elect to join in the
withdrawal, all Parties shall surrender their Participating Interests at the
earliest possible date and each Party shall be liable for its Participating
Interest share of all costs of surrendering the Ecopetrol Contract and related
operations. If one or more Parties elect not to join in the withdrawal, then
the Withdrawing Party, together with those Parties electing to join in the
withdrawal ("Withdrawing Parties"), shall at their sole cost, risk and expense,
borne in proportion to their respective Participating Interests, transfer their
Participating Interests in the Ecopetrol Contract and in this Agreement and in
the jointly-owned information, materials, equipment and inventory to the
Parties electing to continue ("Remaining Parties"). Such transfer shall be
effective upon the expiration of sixty (60) Days from the date that the first
notice of withdrawal from the original Withdrawing Party was received by the
last of the Parties to receive such notice and shall be free and clear of all
liens, claims and encumbrances. The Parties joining in the withdrawal, on and
after the date that their notice to withdraw, was received by the first of the
other Parties to receive notice, shall cease to be entitled to vote on any
matter submitted to the Operating Committee affecting or applying to Joint
Operations to be conducted after the effective date of such transfer. The
Remaining Parties shall take the interest transferred in proportion to their
respective Participating Interests unless they unanimously agree otherwise.
10.3 The Withdrawing Parties, at their sole cost, shall take such actions and
execute such documents as are necessary or desirable to obtain required consent
from the Ecopetrol or the Colombian government or both, and otherwise to give
effect to the transfer. Until such consents are obtained, the Withdrawing
Parties shall hold their Participating Interests in trust for the benefit of
the Remaining Parties.
10.5 Any withdrawing Party shall continue to be bound by the provisions of
Articles 18 and 20.3 hereof as if it were a Remaining Party.
ARTICLE 11
INSURANCE
11.1 In accordance with Clause 33 of the Ecopetrol Contract, Operator shall
carry for the Joint Account and shall require contractors and/or
sub-contractors to carry all insurance required to comply with the Regulations
applicable to the Ecopetrol Contract Area and any other obtainable insurance as
may be approved by the Operating Committee. In cases compatible with the
applicable Regulations, such insurance shall waive all right of recourse
against the Parties. Each policy of insurance obtained pursuant to this Article
11.1 shall, if Parties request, include
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as named insureds any mortgages other holders of a security interest in this
Agreement and Ecopetrol Contract.
11.2 At all times while operations are conducted hereunder, Operator shall
carry insurance of the types and in the amounts as follows:
a) Workers Compensation Insurance in full compliance with all
laws, orders or rules of the Colombian government body.
b) Employees Liability Insurance in the limits of US $100,000 per
accident covering injury or death to any employee which may be outside the
scope of the Workers' Compensation under section (a) above.
c) Comprehensive General Liability Insurance with limits of
a minimum of US $750.000 for Bodily Injury and Property Damage per occurrence
including Blowout and Cratering. Completed Operations and Broad Form
Contractual Liability as respects any contract into which the Operator may
enter under the terms of this Agreement.
d) Comprehensive Auto Liability insurance covering owned,
non-owned and hired automotive equipment with limits of a minimum of US $750,000
for Bodily Injury and Property Damage per occurrence.
e) Operators Extra Expense Coverage (Control of Well Insurance)
with a minimum of US $1,000,000 covering its proportionate share of expenses
involved in controlling a blowout, the expense of redrilling and certain
related costs.
f) Performance Bond, to guarantee overall compliance with the
obligations and Advances imposse to Operator and/or Contractors and/or
subcontractors, equal to the percentages and amounts to be established in each
case by the Operating Committee, without the later means reduction of any
responsibility on behalf of the Operator.
Coverage under 11.2 (c), (d), (e) and (f) may be carried for Non-Operators by
Operator.
11.3 Operator shall require all contractor and/or subcontractors to obtain,
maintain and keep in force during the time in which they are engaged in the
performance of operations or services hereunder such insurances as in the best
judgement of Operator are deemed necessary taking into account the nature of
the operation or services being performed hereunder and the risks associated
therewith.
11.4 All policies of insurance obtained hereunder by either Operator shall,
to the extent obtainable, (i) name as insureds the Parties with its percentages
of interest and (ii) contain provisions or endorsements waiving the insurer's
rights of subrogation against such named insures.
11.5 All deductibles contained in the policies of insurance obtained
hereunder shall be assumed and borne by the Parties in proportion to their
respective Participating Interests.
11.6 Operator shall, upon request, obtain and send copies to Parties prior
to the commencement of operations hereunder certificates of insurance covering
the respective insurances set forth above.
11.7 When Joint Operations are conducted by all of the Parties under the
terms of this Agreement, the cost of any insurance required hereunder with
respect to such Joint Operations, as well as losses, liabilities and
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expenses incurred as the result of such Joint Operations, shall be the burden
of all Parties. When Non-Consent Operations are conducted under the terms of
this Agreement, the cost of insurance requirements hereunder with respect to
such Joint Operations, as well as losses, liabilities and expenses incurred as
the result of such operations, shall be the burden of the Participating Parties
therein.
11.8 Except as provided in this Article 11, no other insurance will be
provided by the Operator for the benefit of the Parties except by approval of
the Operating Committee or as may be required by law or contractual agreements
entered into by Operator pursuant to Joint Operations under this Agreement.
11.9 It is understood and agreed that any Party may carry any other
insurance for its own account at its sole cost and expense for its own
Directors, officers, agents and employees, provided that such insurance
shall waive all right of recourse against the other Parties.
ARTICLE 12
DISPOSITION OF PETROLEUM PRODUCED
12.1 Each Party shall have the right to take in kind or separately dispose
of its share of Available Petroleum produced and saved from the Ecopetrol
Contract. After Oil and/or Gas have been discovered in commercial quantities
and jointly-owned facilities are available for storage and/or transportation
thereof, the Operating Committee shall determine an appropriate lifting
procedure in the event any Party wishes to separately dispose of its share of
Available Petroleum. Expenses incurred by the Operator to accommodate a Party's
separate disposition of Available Petroleum which are not common to all parties
shall be charged to and borne by such Party.
12.2 Any available Petroleum to which a Party is entitled from Sole Risk
Operation under Article 14 of this Agreement shall be delivered to such Party
in addition to any Available Petroleum which it receives under this Article 12.
Any extra cost of producing, transporting or storing such Petroleum shall be
borne solely by the Party entitled to receive it. Subject to Determination of
the Operation Committee, such Party may use jointly owned facilities if and to
the extent such use will not significantly interfere with Joint Operations.
12.3 At any time, and from time to time, when any Party shall fail to take
in kind or separately dispose of its proportionate share of Available
Petroleum, Operator shall have the right (revocable at will be the Party owning
same), but not the obligation, to sell such Petroleum to others at the same
price which Operator receives for its own share of Available Petroleum, or to
purchase same at the field price paid by a third party in an arms length
transaction, for the account of such non-taking Party, Any purchase or sale by
Operator of any other Party's share of Available Petroleum shall be only for
reasonable periods of time as are consistent with the minimum needs of the
industry under the circumstances, but in no event for a period in excess of
one (1) year.
ARTICLE 13
EFFECTIVE DATE AND TERMINATION
13.1 This JOA shall be effective as of March 5th, 1997.
13.2 This JOA shall be and remain in effect for so long as the Ecopetrol
Contract is not terminated by the Parties hereto or until this Agreement is
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otherwise terminated pursuant to the terms hereof, and until all materials,
equipment, and personal property used in connection with operations hereunder
have been removed and/or disposed of and final settlement has been made between
the Parties in accordance with the terms of this JOA, the Ecopetrol Contract,
the Farmout Agreement and the Regulations.
13.3 Notwithstanding the termination of this JOA, Operator shall have the
obligation to take whatever action is necessary if reasonable, in order to
obtain and retain possession of assets in which the Parties have an interest
pursuant to Clause 22.10 of the Ecopetrol Contract, and possession of funds
which had been deposited in Colombia and aboard for anticipated Joint
Operations.
13.4 Notwithstanding the termination of this Agreement, all Parties (or
Participating Parties in the case of Non-consent Operations) shall be obligated
to pay their proportionate shares of cost incurred by Operator pursuant to
Section 13.2 above, and for the reconditioning of land, plugging of xxxxx and
any other such activity required by Ecopetrol or any other colombian authority
on the termination of the Ecopetrol Contract.
13.5 Any termination of this Agreement shall be without prejudice to any
accrued rights and remedies of the Parties; and the provisions of this
Agreement with respect to confidential information and the settlement of
disputes shall continue to have effect notwithstanding such termination.
ARTICLE 14
OPERATIONS BY LESS THAN ALL PARTIES
14.1 The Parties irrevocably agree to undertake the Minimum Work Commitment
required by the terms of the Ecopetrol Contract or by the Operating Committee
in accordance with this Agreement After satisfying the Minimum Work Commitment,
any proposal by Operator or a Party to drill an Exploratory or Development
Well shall be submitted to the Operating Committee for consideration in the
manner provided in Article 3 hereof. Should such a proposal fail to receive the
required vote of the Operating Committee then, within thirty (30) Days after
the Operating Committee votes on such proposal, any Party or Parties desiring
to conduct such operations shall give notice in writing to all the Parties of
their desire to do so, specifying the Sole Risk Program Description, and each
other Party shall, within thirty (30) Days after receipt of notice, give notice
to all Parties, stating whether or not it desires to join in such operations.
Each Party so giving notice that it desires to participate in such operation
shall be a "Participating Party" for such purpose. If all Parties are
Participating Parties, then such operation shall be conducted for the Joint
Account of the Parties under this Agreement and at such time as may be
mutually agreed upon. If any Party receiving said notice of desire to conduct
such operations shall notify the other Parties that it does not desire to join
in such operation, or shall fail to give notice to the other Parties in the
manner and within the period above provided, then such well or other
operation, if drilled or conducted, shall be at the sole cost, risk and
expense of the Participating Parties, in the proportion that their respective
Participating Interests, bear to the sum of their Participating Interests.
14.2 Participating Parties shall arrange for the drilling by the Operator of
any Sole Risk Well within ninety (90) Days after the end of the aforesaid
notice period of thirty (30) Days, or within such longer period as may be
required to enable Operator to move in and rig up drilling equipment. Upon
receipt of written request of Participating Parties, to be given to Operator at
the and of the aforesaid notice period of thirty (30)
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Days, Operator shall drill such well at the sole cost, risk and expense of
Participating Parties; provided that such drilling will not interfere with
Operator's due execution of a Program therefore adopted by the Operating
Committee, in which event, Operator shall select an alternative time for
drilling of said well subject to approval of Participating Parties and/or the
Operating Committee, as may be required. Notwithstanding anything to the
contrary in Article 14.1 herein, Operator shall have the option, if it is not a
Participating Party therein, to elect not to act as Operator for said Sole Risk
Well and the Participating Parties shall elect one of themselves to act as
Operator of the Sole Risk Well by a majority vote of their Participating
Interests. Notwithstanding any other provision of such Article 14.1, it is
agreed that no Party or Parties shall be entitled to drill a Sole Risk
Exploratory Well until all Additional Obligatory Work shall have been completed.
14.3 If a Sole Risk Exploratory Well is drilled in accordance with the terms
hereof, Operator, if directed by Participating Parties, shall conduct
appropriate tests of reasonable duration and shall furnish only the
Participating Parties with a copy of all test data together with copies of all
logs, analyses and other information obtained in connection with the drilling
of such well. If said Sole Risk Exploratory Well results in a Discovery of
Petroleum, the Participating Parties shall be entitled to receive One Hundred
percent (100%) of the Petroleum produced from the Sole Risk Exploratory Well and
Fifty percent (50%) of the Petroleum attributable to the Non-Participating
Parties produced from subsequent Joint Account xxxxx in the Commercial Field
associated with the Discovery until Participating Parties have received from
the proceeds of sale thereof an amount equal to One Thousand percent (1000%) of
the cost of drilling, completing and operating such well.
14.4 If a Sole Risk Development Well is completed as a well producing or
capable of producing Petroleum, the Participating Parties shall be entitled to
receive one hundred percent (100%) of the Petroleum produced from said well
until Participating Parties have received from the proceeds of sale of such
Petroleum an amount equal to six hundred percent (600%) of the drilling costs
of such well, plus four hundred percent (400%) of the cost for surface
facilities, transportation and infrastructure required to produce the Petroleum
found in such well, plus one hundred percent (100%) of the cost of operating
such facility during the reimbursement and premium period provided for herein.
Thereafter, such well shall become a jointly-owned well, as any well drilled
for the Joint Account hereunder.
14.5 Prior to the abandonment of any Sole Risk well, each Party shall be
given notice in writing of the intention to abandon such well. Each Party shall
have a period of forty-eight (48) hours thereafter (or such additional time as
any Party may reasonably request provided, that all costs attributable to such
requested additional time shall be charged to the Party making such request) in
which to elect to take over and deepen, plug back or rework and attempt to
complete such well. If no Party elects to take over such well it shall be
plugged and abandoned at the sole cost and risk of the Participating Parties.
If any Parties elect to take over such well, all costs, expenses and other
liabilities incurred in connection with such well from the date of such
takeover shall be shared by such Parties in the proportions that their
respective Participating Interests bear to the sums of their Participating
Interests. All interests of any other Parties in such well shall be transferred
and assigned to the Parties electing to take over such well without
consideration or warranty. The Parties electing to take over such well shall
promptly pay to transferors the latter's share of the salvage value of the
material and equipment appurtenant to the well determined in accordance with
the Accounting Procedure established as Exhibit "B" of the Ecopetrol Contract.
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in accordance with Article 3.9 hereof, the acquisition or construction of such
Additional Major Facilities shall be undertaken by Operator for the Joint
Account. Provided, however, that any Party who voted against such proposal
shall not be required to participate therein if such Party advises Operator
within fifteen (15) Days after the adoption of such proposal of its intention
not to participate. In such case, the Parties participating in the acquisition
or construction of such Additional Major Facilities shall jointly bear the cost
thereof and shall own such Additional Major Facilities in the proportion that
the Participating Interest of each bears to the sums of their Participating
Interests. The Parties not participating in the acquisition or construction of
such Additional Major Facilities shall have no interest therein or right to the
use thereof except on such terms and conditions as the Parties participating
therein may specify.
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14.6 If any proposal for completing, deepening, plugging back, sidetracking,
re-completing, or reworking a well drilled hereunder fails to receive the
affirmative vote of the Parties in the Operating Committee for such proposals
to proceed as set forth in Article 3 then, within thirty (30) Days after the
vote on such proposal, any Party or Parties desiring to perform such work shall
give notice in writing to all the Parties of their desire to perform such work,
specifying the proposed work and estimated cost thereof, and each Party shall
within thirty (30) Days after receipt thereof, give notice to all Parties
stating whether or not it desires to join in such work. Each Party giving
notice as provided above that it desires to participate in such work shall be a
"Participating Party" for such purpose. If Parties holding Participating
Interests sufficient to approve such work in accordance with Article 3 elect to
join in such work then such work shall be done for the Joint Account this
Agreement; otherwise, the work shall be done at the sole cost, risk and expense
of the Participating Parties, in the proportions that their respective
Participating Interests bear to the sum of their Participating Interests. Where
a drilling rig is on location, the period for the giving of notice with respect
to a completion, deepening, plugging back, sidetracking, recompleting or
reworking operation shall be reduced to seventy-two (72) hours in each case.
14.7 If such operation results in the production of Petroleum from a well
which is:
a) An Exploratory Well, then with respect to the Petroleum
produced therefrom, the provisions of Article 14.2 shall apply, mutatis
mutandis, to the operation (including the penalty provided therein) to the
extent that such operation and production relates to the well as an Exploratory
Well;
b) Development Well, then with respect to the Petroleum produced
therefrom the provisions of Article 14.3 shall apply, mutatis mutandis, to the
operation and the recovery of costs (including the penalty provided therein)
to the extent that such operation and production relates to the well as a
Development Well.
14.8 Any proposal by Operator or other Party, for acquisition or
construction of Additional Major Facilities shall be submitted to the Operating
Committee in accordance with Article 3 hereof. Such proposal shall include, in
reasonably sufficient detail, the specifications for the facilities, equipment
and transportation to be acquired or constructed and the estimated cost
thereof. If the Operating Committee initially fails to adopt such proposal the
Operating Committee shall meet again (not less than twenty (20) Days nor more
than forty (40) Days thereafter) to reconsider and vote on such proposal. If,
upon reconsideration, such proposal is adopted in accordance with Article 3.9
hereof, the acquisition or construction of such Additional Major Facilities
shall be undertaken by Operator for the Joint Account. Provided, however, that
any Party who voted against such proposal shall not be required to participate
therein if such Party advises Operator within fifteen (15) Days after the
adoption of such proposal of its intention not to participate. In such case,
the Parties participating in the acquisition or construction of such Additional
Major Facilities shall jointly bear the cost thereof and shall own such
Additional Major Facilities in the proportion that the Participating Interest
of each bears to the sums of their Participating Interests. The Parties not
participating in the acquisition or construction of such Additional Major
Facilities shall have no interest therein or right to the use thereof except on
such terms and conditions as the Parties participating therein may specify.
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14.9 If additional testing, logging or coring ("Testing") is conducted as a
Sole Risk Operation, all data acquired therefrom by the Participating Parties
shall be their exclusive property and the Non-Participating Parties shall have
no right or interest in such data or right to have such data disclosed to them.
In the event a completion, plugging back, sidetracking or deepening operation
is thereafter proposed to be conducted in the same well, any Non-Participating
Party to the Sole Risk Testing Operation electing to participate in such
proposed operation, shall pay three hundred percent (300%) of the cost of the
Sole Risk Testing Operation to the Participating Parties and shall be entitled
to receive copies of, or access to, the data acquired as a result of such
Testing.
14.10 If a seismic operation is conducted as a Sole Risk Operation, all data
acquired therefrom by the Participating Party shall be its exclusive and
confidential property and the Non-Participating Party shall have no right or
interest in such data or right to have such data disclosed to it. Whenever by
Determination a location is to be drilled as an Exploratory Well, the
Non-Participating Party to the Sole Risk Seismic Operation shall purchase the
entire length of all Sole Risk Seismic Operation lines which have any portion
within a six kilometer radius circle drawn from such well location, by paying
Three Hundred percent (300%) of the cost of the Sole Risk Seismic Operation to
the Participating Party. In no event shall a Single Sole Risk Seismic Operation
Line pursuant to this Article 14.11 exceed twelve (12) kilometers.
Notwithstanding Articles 5.2 and 14.1 the Participating Parties shall have the
right to designate the Operator for the Sole Risk Seismic Operation.
14.11 With respect to any operation under this Article 14, Operator, within
sixty (60) days after the completion of such operation, shall furnish each of
the Parties with an inventory of the equipment and materials acquired in
connection with such operation and an itemized statement of the cost incurred
in such operation; or, at its option, Operator may submit in lieu thereafter
while Participating Parties are being reimbursed or receiving the applicable
premium as above provided, Operator shall furnish to the Parties an itemized
statement of all costs and liabilities incurred in the operation of well,
together with a statement of the quantity of Petroleum produced from it and the
amount of proceeds realized from the sale or other disposition of Available
Petroleum produced therefrom during the preceding Month. As used in this
Article 14 "Proceeds of Sale" of Available Petroleum means market value
determined by arm's length sales to third parties not related with the seller,
or if these are no such sales, such value as may be agreed on by the Parties
for the purposes hereof.
14.12 If any Party shall not agree to participate in any Additional
Obligatory Work within at least sixty (60) Days prior to the date upon which
the Parties are required to commence such Additional Obligatory Work, such
Party not desiring to conduct such work or make such investment shall in favor
of the Non-Defaulting Party or Parties be penalized promptly and immediately
thereafter with a penalty of Two Hundred percent (200%) in each case of all
amounts due. In case of any doubt in the calculation and application of this
penalty, Clause 21.2 of the Ecopetrol Contract shall be apply.
14.13 In case of recoupment of costs and relinquishment of rights, and
interests as to a development facility, the following provisions shall govern
with respect to any Non-Consent Operation in conducting the construction of a
Development Facility.
a) Whenever any Non-Consent Operation is conducted for the
construction Development Facility the Participating Parties, in the proportion
that each Participating Party's Interest bears to the total of the Participating
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Operating Committee shall means the Committee established pursuant to this JOA.
Operator means the Party, the Affiliate of a Party, or a third party appointed
to conduct Joint Operations in accordance with this JOA.
Party or Parties means the parties to this JOA, and shall at all times where
the context so admits include their respective successors and assignees.
Participating Interest means the respective percentage interest of each of the
Parties as provided in this Agreement which participates in a Joint Operation
by paying its portion of the cost and expenses of such Joint Operation.
Participating Party means a Party joining in an operation in accordance with
the terms of this JOA, paying its portion of the cost and expenses of the
operation and being entitled to its proportionate part of the benefits of the
operation.
Percentage Interest means a Party's percentage of participation in the
undivided rights and obligations of the Parties under this JOA.
Petroleum means the natural mixture in normal conditions of hydrocarbons in
liquid or gaseous state, as well as those substances accompanying or derived
from them, except helium and rare gases, in its liquid state at a temperature
of 60 degrees Fahrenheit and a pressure of 14.73 pounds per square inch
absolute. For purposes of this Agreement, the term Petroleum shall be read to
encompass Natural Gas liquids.
Program means a work program for carrying out Joint Operations as Determined by
the Operating Committee pursuant to this Agreement.
Quarter means the consecutive three (3) month period beginning on the first day
of January, April, July and October of any calendar year.
Regulations means the applicable laws, rules, statutes, regulations, orders,
and decrees of duly constituted governmental authorities of the Republic of
Colombia in force from time to time.
Reservoir means a porous and permeable stratum capable of producing Petroleum
and which must be considered because of the character of the substance it holds
(such as similitude of physical properties, density, GOR, viscosity a pressure
relationship) a unit in regard to its natural exploitation. According to
Commercial Reservoir shall mean a Reservoir which is capable of Commercial
Production.
Representative means the persons designated and appointed by each Party in
accordance with this Agreement for the purpose of making Determinations.
Semester means a six (6) month period beginning on January 1 or July 1 of a
Calendar Year.
Sole Risk Development means Development Well which is to be drilled by less
than all of the Parties.
Sole Risk Exploration Well means an Exploration Well which is drilled by less
than all of the Parties.
Sole Risk Operation means an operation in which less than all Parties
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Parties' interest, shall have the sole right to take all Petroleum production
allocable or attributable to the Parties and produced by means of or
transported or processed by such Development Facility, determined as the outlet
of the subject Development Facility, to the extent such Petroleum is allocable
or attributable to the Parties shall equal (after deduction of all production
taxes, operating expenses of the Development facility allocable to the Parties,
the royalty of Ecopetrol, and all overriding royalties, and other burdens
payable out of or measured by production) 500% of the costs (excluding the
aforesaid taxes, operating expenses, royalties, overriding royalties and other
burdens, but including costs incurred by the Participating Party in the
acquisition, the sign, building, moving installation and security of such
Development Facility) incurred by the Participating Parties in such Non-Consent
Operations (such time is hereinafter referred to as "Payout"), and such receipt
of Petroleum production is hereinafter referred to as "Recoupment of Costs with
Premium").
b) Upon the commencement of a Non-consent Operations for a
Development Facility which shall means execution of the construction contract,
each Non-Participating Party shall be deemed to have relinquished all of such
Non-participating Party's operating rights and working interest in such
facility until the payout referred to in Article 14.2 (a) above shall have been
accomplished. When such Payout shall have been accomplished the relinquished
interest shall revert to each Non-Participating Party and each Non-Participating
Party shall bear that percentage of costs thereafter incurred with respect to
the reverted interest and be entitled to the percentage of Petroleum produced,
processed or transported thereby that is equal to its regular Participating
Interest.
c) Operator shall, within One Hundred and Twenty (120) Days after
completion of a Non-Consent Development Facility, furnish all other Parties
with a statement of expenses incurred in connection with such facility or with
a copy of the monthly billing furnished to the Participating Parties. Parties
shall kept cost information confidential.
14.14 As between the Parties, all materials and equipment in or appurtenant
used in Separate Account Operations to a Non-Consent Operation shall be owned
by the Participating Parties until Recoupment of Costs with Premium as provided
in this Article 14. In care of an operation for the running and setting of
production string of casing and attempted completion of a well, or in case of a
deepening or plugging back operating, any material or equipment that is in or
appurtenant to the well at the time of the commencement of the operation and
which is necessary for the conduct of such operation may be used by
Participating Parties so long as necessary, but the Ownership thereof shall not
change. In the case of reversion to a Non-Participating Party of its
relinquished interest, such Non-Participating Party shall become the owner of
the same interest in the material and equipment acquired for the operation
conducted for only the Participating Parties which such Non-participating
Party would have owned had such operation been conducted for the account of all
Parties. Subject to the interest of Ecopetrol under the Ecopetrol Contract, any
amount realized from the sale or disposition of equipment acquired in connection
with any operation under this Article 14 which would otherwise be owned by a
Nonparticipant Party had it participated therein shall be credited to the
total unreturned costs of such operation and the Operating Expenses that are
chargeable against the relinquished interest of such Non-Participating Party as
above provided, and the balance, if any, shall be paid to such
Non-Participating Party as above provided, and the balance, if any, shall be
paid to such Non-Participating Party.
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14.15 Notwithstanding any other provision of this Article 14, Non-Consent
Operations shall neither interfere with operations being conducted by all
Parties nor be conducted if there is an unreasonable amount of risk of loss or
damage to such Parties' property.
14.16 Non-Consent Operations shall not be conducted in a well already having
multiple completions, each of which are not owned by the same parties in the
same proportions, unless the well is incapable of producing from any of its
completions or unless all Participating Parties in the well consent to such
operations.
14.17 As to any matter pertaining to Sole Risk Operations which are presented
to the Executive Committee under the Ecopetrol Contract for a vote, the
Participating Party shall have the right to vote the Non-Participating Party's
Participating Interest, and the Non-Participating Party, upon the writing
request of the Participating Party, shall promptly furnish the Participating
Party, with all documentation which may be necessary to demonstrate this right
to the other Representatives on the Executive Committee.
14.18 In the conduct of Non-Consent Operations, the Participating Parties
shall keep the lands and premises covered by the Ecopetrol Contract free and
clear of liens or encumbrances.
14.19 All overriding royalties, production payments or other burdens or
charges and all mortgages, liens or other encumbrances which any Party may grant
or otherwise create or permit to be created out of or with respect to its
interests in or its share or Petroleum production from its interest in/and to
the Ecopetrol Contract (hereinafter "Individually Created Lease Burdens or
Encumbrances") are hereby made subject to this Agreement and subordinate to all
rights of the other Parties hereunder, including rights of such other Parties
as Participating Parties in a Non-Consent Operation under this Article 14 to
receive a conveyance of interests or Recoupment of Costs with Premium. In the
event that any Party shall grant, create or permit any such Individually
Created Lease Burdens or Encumbrances, such Party hereby undertakes and agrees
to indemnify and hold the other Parties harmless from the effect thereof.
ARTICLE 15
RELATIONSHIP OF THE PARTIES
15.1 With the exception of severability and jointly liabilities of the
Parties referred in Clause 27.2 of the Ecopetrol Contract, the rights, duties,
obligations and liabilities of the Parties shall be several and not joint or
collective, it being the express purpose and intention of the Parties that
their respective interests in this Agreement and in the Ecopetrol Contract
shall be as tenants in common, and nothing herein contained shall ever be
construed as creating a new juridical person or entity, an association,
partnership or trust, or as imposing upon the Parties any joint or collective
duty, obligation or liability.
15.2 This JOA is not intended to create, and shall not be construed to
create, a relationship of partnership or an association for profit between or
among the Parties hereto. Notwithstanding any provision herein that the rights
and liabilities hereunder are several and not joint or collective, or that this
Agreement and operations hereunder shall not constitute a partnership. If, for
U.S. federal income tax purposes, this Agreement and the operations hereunder
are regarded as a partnership, each U.S. Party hereby affected elects to be
excluded from the application of all of the provisions of Subchapter "K",
Chapter 1, Subtitle "A", of the Internal
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Revenue Code of 1986, as amended, as permitted and authorized by Section 761 of
the Code and the regulations promulgated thereunder. Operator is authorized and
directed to execute on behalf of each Party hereby affected such evidence of
this election as may be required by the Secretary of the Treasury of the United
States or the Federal Internal Revenue Service, including specifically, but not
by way of limitation, all of the returns, statements, and the data required by
United States Treasury Regulations Section 1.761. Should there be any
requirement that each Party hereby affected give further evidence of this
election, each such Party shall execute such documents and furnish such other
evidence as may be required by the Federal Internal Revenue Service or as may be
necessary to evidence this election. No such Party shall give any notice or take
any other action inconsistent with the election made hereby. If any future
Income Tax Laws of the United States contain provisions similar to those in
Subchapter "K". Chapter 1 Subtitle "A" of the Code is permitted, each Party
hereby affected shall make such election as may be permitted or required by such
laws. In making the foregoing election, each such Party states that the income
derived by such Party from operations hereunder can be adequately determined
without computation of partnership taxable income.
ARTICLE 16
ASSIGNMENT
16.1 No Party shall transfer all or any part of its interests in the
Ecopetrol Contract or any part of its interests in and to the right to
production from the Ecopetrol Contract Area, including but not limited to
any overriding royalty interests, production payment or interest of a similar
nature, except in accordance with this Article 16 and upon obtaining when it
will be required the consent of Ecopetrol in accordance with Clause 27 of the
Ecopetrol Contract, and provided that:
a) A Party shall only assign its undivided Participating Interest,
or a part thereof, in and to the Ecopetrol Contract and the entire Ecopetrol
Contract Area; and
b) Except with respect to an assignment to an Affiliate, no
assignment shall be made which has the effect of leaving the assignor or the
assignee with less than a five percent (5%) Participating Interest; and
c) With respect to an assignment of less than a five percent (5%)
Participating Interest to an Affiliate, such assignment shall contain the
express condition that the Participating Interest assigned shall be transferred
back to the Party in the event that said Affiliate ceases to be an Affiliate of
that Party.
16.2 If any Party hereto desires to transfer all or any part of its
interests in the Ecopetrol Contract, the Party desiring to transfer
(hereinafter referred to as the "Transferring Party") shall promptly give
written notice to all other Parties (the "Notified Parties") with full
information concerning the interest to be transferred, the price to be
receive and the form of payment for the proposed transfer. The Notified
Parties shall then have an optional prior right, exercisable by notice in
writing for a period of thirty (30) days after receive of the notice from the
Transferring Party to acquire for such a stated price in such form of payment
the interest which the Transferring Party propose to transfer. If two or more
Notified Parties exercise this optional prior right, they shall share the
interest to be transferred by the Transferring Party in the proportions that
their respective interests bear to the aggregate interest of all such Parties.
If all Notified Parties decline to exercise the aforesaid option (and failure
to respond in writing within the said thirty
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(30) Day period shall be so construed), the Transferring Party may proceed with
the transfer for the price and mode of payment set forth in the notice to the
Notify Parties, subject to the consent of Ecopetrol, provided that such
transfer must be completed (other than the receipt of government approvals)
within four (4) month from the end of such thirty (30) day period of the
Transferring Party shall be obligated to repeat the procedure established in
this Article. The provision of this article shall not apply when a Party
desires to transfer all or any part of its interests in the Ecopetrol contract
in the following cases:
a) A transfer by a Party to an Affiliate of that Party.
b) A mortgage or a pledge by a Party to a financial institution of
individual.
c) A merger, reorganization or consolidation provided the primary
purpose of such merger, reorganization or consolidation is not the transfer of
the rights and interest in the Ecopetrol Contract.
16.3 Every assignment of a Party's Participating Interest, or part thereof,
shall be made expressly subject to this Agreement and the Ecopetrol Contract.
Each transferee taking any such interest shall, either by the terms of the
instrument or transfer or by separate agreement in writing with the Parties,
assume and agree to be bound by all of the assignor's obligations, liabilities
and duties under this Agreement and the Ecopetrol Contract with respect to the
interest assigned, including but not limited to the payment of money. In the
event of a default by any such assignee or transferee of such a Party, any
other Party hereto may proceed with any remedies directly against such Party
without exhausting its remedies or taking any action whatsoever against any
such assignee or transferee. A transfer of a participating Interest or part
thereof, shall not be effective unless made by an instrument in writing duly
executed by the parties thereto in accordance with the Ecopetrol Contract, this
Agreement and the Regulations.
16.5 No assignment of this JOA and the Ecopetrol Contract shall be made
except subject to and in accordance with such consents and approvals as are
required by this Agreement, the Ecopetrol Contract and the Regulations;
provided that as to assignment of Participating Interests between the Parties
which are required by this JOA, including assignments contemplated by Articles
9 and 10 of this JOA, the prospective assignee shall, from the time the
assignment is to be effective according to this JOA and until the
aforementioned consents and approvals are obtained, assume all costs, expenses,
and obligations attributable to the Participating Interest to be assigned and
shall during such period be entitled to all of the rights and benefits
attributable to the Participating Interest to be assigned.
16.6 This JOA shall be binding upon, and shall insure to the benefit of, the
Parties and, except as otherwise prohibited, their respective heirs, devisees,
legal representatives, successors and assigns, and shall constitute a covenant
running with the interests covered hereby. Nothing contained in this Agreement
express or implied, is intended to confer upon any other person or entity any
benefits, rights or remedies. Each Party hereby obligates itself to incorporate
in any assignment of any interest in the Ecopetrol Contract and express
provision that such assignment is subject to this JOA and each such Party
further agrees to obtain such assignee's consent to be bound by the provisions
of this JOA.
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ARTICLE 17
RELINQUISHMENT
17.1 When it becomes necessary under the Ecopetrol Contract or the
Regulations to relinquish any part of the Ecopetrol Contract Area, Operator
shall, at least forty five (45) Days prior to the date on which any notice is
required to be given to Ecopetrol, give notice in writing to the Operating
Committee setting forth in detail all requirements of such relinquishment. Such
notice shall include descriptions of the specific area or areas proposed to be
relinquished, together with descriptions and boundaries of the area or areas to
be retained.
17.2 The Operating Committee shall determine the area or areas to be
relinquished.
17.3 Any non-compulsory relinquishment of all or any part of the Ecopetrol
Contract Area may only be affected with the unanimous consent of the Parties.
ARTICLE XVIII
LIABILITY
18.1 Each Party shall assume its own liability for any losses and expenses
on account of personal injury, kidnaping or death to its employees, agents or
representatives, except those arising out of willful misconduct or gross
negligence of the permanent, supervisory, salaried employees of the Operator.
Each Party, in proportion to its Working Interest, or in the case of a Joint
Operation in which fewer that all the Parties participate in proportion to such
Party's Participating Interest in such Joint Operation, shall be liable for any
losses and expenses that exceed the amount collectible under the insurance
carried by the Operator for the Joint Account (as set forth in Article 11
above) on account of personal injury or death to any employee, agent or
representative of Operator other than that resulting from the gross negligence
or willful misconduct of the permanent, supervisory, salaried employees of the
Operator.
18.2 Liability for damages to the property of third parties or injury to or
death of third parties arising from Joint Operations under the Ecopetrol
Contract including the expenses incurred in defending claims or actions
asserting liabilities of this character, shall be borne by the Parties of their
respective insurers in the same proportions that said Parties bear the costs
and expenses of the Joint Operations out of which such liability arises, except
that when some damage is caused by the gross negligence or willful misconduct
of the permanent, supervisory, salaried employees of the Operator, such loss
shall be borne by the Operator. In the event damage is caused by a Party other
than Operator, liability for such damage shall be borne by such Party, except
when such Party is specifically authorized to act for the Parties; then any
such damage except that caused by gross negligence or willful misconduct of
such Party shall be borne by each of the Parties in proportion to their
respective Participating Interest.
18.3 It is not the intention of the Parties hereto to create a partnership,
association, trust, or other character of business entity. The duties,
obligations, and liabilities are intended and declared to be separate and
individual and not joint, and nothing contained in this Agreement or in any
agreement made pursuant hereto shall ever be construed to create a partnership,
association, trust, or other character of business entity recognizable in law.
Each Party shall be individually responsible only for its own obligations as
set out in this Agreement and shall be liable only for its own proportionate
share of costs and expenses as herein stipulated. Each Party shall indemnify
and hold harmless all other Parties against all losses, claims, demands,
liabilities and liens in excess of a Party's proportionate share of losses,
claims, etc., as herein stipulated, regardless of the cause or causes thereof
including pre-existing
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18.4 If any Party to this JOA is sued and receives a claim based on an
alleged cause of action arising out of Joint Operations on the Ecopetrol
Contract Area such Party shall give prompt written notice to the other Parties
hereto.
18.5 The defense of law suits shall be handled by a committee of attorneys
representing the Parties hereto, which Operator's attorney as chairman. Suits
may be settled only with the mutual consent of all Parties involved. No charge
shall be made for services performed by attorneys representing the Parties
hereto, but all other third person expenses incurred in the defense of suits,
together with the amount paid to discharge any final judgment, shall be
considered costs of the Joint Operation and shall be paid by all Parties in
proportion to their Working Interest in the Ecopetrol Contract or their
Participating Interest in the Joint Operations, whichever is applicable at the
time the cause of action arose. Outside counsel shall be used for the Parties
only with the written approval of all Parties. If it is agreed that an outside
counsel is to be hired, the fees and expenses shall be charged to all the
Parties in proportion to all their Working Interest in the Ecopetrol Contract
or their Participating Interest in the Joint Operation, whichever is applicable
at the time the cause of action arose.
18.6 Damage claims arising out of Joint Operations shall be handled by
Operator. The settlement of any such claims shall be within the discretion of
Operator so long as the amount paid in settlement of any such one claim does
not exceed or establish liability for a sum in excess of either US$50,000 or
its equivalent in colombian pesos, the limits of coverage of the claim in
question by insurance maintained in force by Operator for protection of the
Parties pursuant to Article II of this Agreement, which ever is greater. The
sums paid in settlement of such claims shall be charged as expenses to be paid
by all Parties in proportion to their Working Interest in the Ecopetrol
Contract or their Participating Interests in the Joint Operation, whichever is
applicable at the time the cause of action arose. In connection with all losses
which exceed US$50,000 or its equivalent in colombian pesos, the applicable
insurance coverage, Operator shall: (i) furnish the Parties copies of accident
reports; (ii) notify the Parties of the services of all information and legal
processes; (iii) inform the Parties as to the status of any claims or suits and
of any payments made in connection therewith; and (iv) furnish Non-Operators
any other available information required by them, or their insurance carrier,
for the purpose of fixing or adjustment of premiums or to support any claim.
18.7 The Participating Parties agree to hold any Non-Participating Party
harmless and to compensate, indemnify and protect it against any losses,
claims, demands, liabilities and liens of any Party hereto or any third party
for damage to or loss of any property or injury to or illness or death of any
person, which damage, loss, injury, illness or death arises out of or is
incidental to such Non-Consent Operations, and regardless of the strict
liability or the negligence be sole, joint or concurrent, active or passive.
ARTICLE 19
PUBLIC ANNOUNCEMENTS
19.1 Operator shall in accordance with good oil industry practice be
primarily responsible and have the exclusive authority to issue all press
releases and public statements with respect to Joint Operations conducted
pursuant to the Ecopetrol Contract and this JOA, and all Parties shall
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endeavor in good faith to agree promptly with Operator on the text and timing
of such releases and statements; provided only that no release or statement
shall be made until the same has been cleared with Ecopetrol. Any Party wishing
a release or statement to be issued shall notify Operator and all other Parties
of the proposed text and timing, and Operator shall promptly seek the agreement
of Ecopetrol and the Operating Committee on the content and timing of said
release. Notwithstanding any failure to obtain such approval, no Party or any
Affiliate of Party shall be prohibited from issuing or making any public
announcement or statement if it is obligated by any law, rules and regulations,
including those of any recognized stock exchange or security regulatory agency
to do so.
ARTICLE 20
CONFIDENTIAL INFORMATION
20.1 All information and data made available or obtained from Joint Operations
shall be and remain confidential among the Parties during the term of this
Agreement and for two (2) years thereafter. No Party shall disclose such
information and data, including interpretation of any nature, to any individual
or entity which is not a Party to this Agreement during such period without the
prior written consent of all Parties. A Party may disclose, without having
obtained such prior written consent, only general information and data, but
only insofar as is reasonably required, to:
a) Affiliates of a Party;
b) an agency of this government with competent jurisdiction;
c) an established Stock Exchange;
d) subject to Article 20.2, a lending institution or individual in
connection with a loan to the disclosing Party;
e) subject to Article 20.2, a contractor, consultant, attorney or
accountant employed by a Party;
f) subject to Article 20.2, an entity which is engaged with a Party in
good faith negotiations for the acquisition of all or a part of the
Participating Interest of such Party; and
g) employees of a Party for the purposes of Joint Operations, subject
to take customary precautions to ensure confidentiality.
20.2 Disclosures pursuant to 20.1 (D), (E) and (F) shall not be made unless
prior to such disclosure the disclosing Party has obtained a written
undertaking from the recipient to keep the information and data strictly
confidential and not to use or disclose the information and data except for the
express purpose for which the disclosure is to be made.
ARTICLE 21
FORCE MAJEURE OR CASUS FORTITUITUS
21.1 If as a result of Force Majeure or Casus Fortituitus, as defined in
accordance with Clause 34 of the Ecopetrol Contract, any Party is rendered
unable, wholly or in part, to carry out its obligations under this Agreement,
other than the obligation to pay other amounts due or to furnish security, then
the obligations of such Party to the extent affected by such Force Majeure or
Casus Fortituitus shall be suspended during the continuance of any inability so
caused, but for no longer period. The Party claiming Force Majeure or Casus
Fortituitus shall notify the other Parties of the Force Majeure situation
within a reasonable time after the occurrence of the facts relied on and shall
keep all Parties informed of all significant developments. Such notice shall
give reasonably full particulars of said Force Majeure or Casus Fortituitus,
and shall likewise estimate the period of time which said Party anticipates
will be required to remedy the Force Majeure or Casus Fortituitus. The affected
Party shall use all reasonable diligence to remove or overcome the Force
Majeure or Casus Fortituitus situation as quickly as possible, but shall not be
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obligated to settle any labor dispute except on terms acceptable to it and the
sole discretion of the affected Party.
ARTICLE 22
DISPOSITION OF ASSETS UPON TERMINATION OF THE
22.1 On termination of the Ecopetrol Contract whether by agreement or
otherwise, this Agreement shall be terminated, such assets as may have been
held for the Joint Account shall be applied in the first instance toward the
discharge of the debts and liabilities of the Joint Account. Any deficiency
shall be met by cash calls upon the Parties in proportion to their respective
Participating Interests immediately prior to such termination.
22.2 The remaining assets held for the Joint Account shall be distributed to
the Parties in such manner as they may agree upon or, failing such agreement,
the assets (other than cash) shall be sold and the monies thus available and
any other cash held for the Joint Account shall be distributed to the Parties
in proportion to their respective Participating Interests immediately prior to
the termination of the Ecopetrol Contract.
ARTICLE 23
BUSINESS ETHICS
23.1 The Parties agree that they and the Operator will follow a business
ethics policy which provides for (a) maintaining adequate internal controls,
(b) proper recording and reporting of all transactions, and (c) compliance with
all applicable laws. No Party and the Operator shall take any action that would
result in inadequate or inaccurate recording and reporting of Joint Operations
assets, liabilities or other transactions, or which would violate any
applicable laws. Each Party and the Operator agrees to respond promptly and in
reasonable detail to any notice from another Party, the Operator or its
auditors pertaining to the above stated undertaking, and shall furnish adequate
documentary support for its response upon request.
23.2 Each Party and the Operator shall avoid any conflict between its own
interests (including the interests of Affiliates) and the interests of the
other Parties in dealing with such contractors, sub-contractors, suppliers,
customers, and other organizations or individuals doing or seeking to do
business with the Parties (or any Affiliate) in connection with operations
under this Agreement. Competitive bidding shall be used whenever practicable in
the procurement of materials, supplies or equipment, and of contracted services.
ARTICLE 24
NOTICES
24.1 Except as otherwise specifically provided in this JOA, all notices
authorized or required to be given pursuant to any of the provisions of this
Agreement, shall be in writing, in Spanish and/or the English language and
shall be delivered in person, by registered mail, by courier service or by fax
or any electronic means of transmitting written communications, and addressed
to the recipient(s) as designated below. The originating notice given under any
provision of this JOA shall be deemed delivered only when actually received by
the Party, and when the case would be with a copy to the Operator, to whom such
notice is directed, and the time for such Party to deliver any notice in
response to such originating notice shall run from the date the originated
notice is received from the registered service air mail, courier service. The
second or any responsive notice shall likewise be deemed delivered when
received. "Received" for
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purposes of this Article 24 with respect to written notice delivered pursuant
to this agreement by non-electronic means shall mean actual delivery of the
notice to the address of the Party and acknowledging receipt be notified as
specified in accordance with this Article.
XXXXXXX OIL AND GAS, INC.
Att: Xx. Xxxx X. Xxxxxxx
President, CEO
0000 Xxxx Xxxxxxx Xxxxx 000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
GEOPOZOS, X.X.
Xxxxxxx 00 Xx. 00-00, Xxxxxxx 000
Xxxxxxx xx Xxxxxx, Xxxxxxxx
Att: Xx. Xxxx Xxxxxxx P.
Fax: (00-0) 000-0000
Phone: (00-0) 000-0000
256-6539
24.2 Any Party may, from time to time, change his address by giving written
notice thereof to the other Parties and the Operator.
24.3 A copy of any notice given under this Agreement by any Party to any
other Party or the Operator shall be given concurrently to all Parties and
Operator by the same medium of communication as was used in giving the original
notice.
ARTICLE 25
ARBITRATION
APPLICABLE LAWS
25.1 This JOA shall be interpreted in accordance with the laws and Tribunals
of the Republic of Colombia.
25.2 Differences or disputes arising between the Parties or between the
Parties and Operator in connection with the Ecopetrol Contract, the Farm-out
Agreement and this JOA, during its execution or subsequent to its termination,
or in relation with the rights and obligations of the Operator under this
Agreement and the performance of its services, shall be submitted to the
following procedure:
In case there is a disagreement or contradiction in the interpretation of the
Clauses of this JOA and regarding the provisions of Exhibit "B" of the
Ecopetrol Contract, the provisions of the former shall prevail.
a) If the dispute is of a technical or accounting nature, the Parties may
request expert opinion or examination as in procedure laid down in Book 6,
Title IV of the Colombian Commercial Code or the applicable law or regulation,
and the decision there reached shall be binding on all Parties. The Parties
agree that any award issued shall be in force any competent Court of the United
States of America or any country:
(1) every factual or technical difference arising from the
interpretation or application of this Agreement, and which cannot be settled in
an amicable manner, shall be submitted to the final decision of experts
appointed as follows: one appointed by each Party and/or the Operator and the
third one by common agreement of the main experts appointed. If the experts
cannot reach an Agreement in the appointment of the third one, he shall be
appointed upon request of any of the Parties
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and/or the Operator by the Board of Directors of Asociacion
Colombiana de Ingenieros de Petroleos "ACIPET" or by the Board of
Directors of the Asociacion Colombiana de Geofisicos y Geologos del
Petroleo "ACGGP," when the case will be with main office in Bogota.
(2) All accounting differences arising between Operator
regarding the interpretation and execution of this Agreement, the
Ecopetrol Contract or its Exhibit "B'' and which cannot be settled in
an amicable manner, will be submitted to the decision of experts, who
will be certified public accountants appointed as follows: one
appointed by each Party and/or the Operator and the third appointed
by the two main experts and in case there is no Agreement between them
and at the request of any of the Parties and/or the Operator, such
third expert will be appointed by "Junta Cerntral de Contadores Bogota'.
The decision of the experts shall have the effect of a settlement
between them, and therefore such decision will be final, unless one Party
involve in the arbitration decide in accordance with the applicable law to
appeal. The parties agree that any award issued shall be in force before
any competent Court of the United States of America or any other country.
In case of controversy between the Parties/and or the Operator on the
technical, accounting, or legal character of the controversy, it shall
be considered as legal controversy.
(b) If the dispute is on a point of law, or interpretation of this Agreement
or the application of any of its paragraphs, either Party and/or the Operator,
may request arbitration with the formalities and procedures laid down in
Book 6, Title III of the Colombian Commercial Code or any new locker
applicable laws or regulations and the place of deliberation of the Tribunal
shall be Bigota Colombia.
If the parties and/or the Operator do not agree on the nominations of
arbitrators, these will be appointed in accordance with the rules of the Centro
de Arbitraje y Concilicion Mercantilrs of the Chamber of Commerce of Bogota,
Colombia and they shall be licensed attorneys. The decision there reached shall
be binding on all parties. The parties agree that any award issued shall be in
force before any competent Court of the United States of America or any
other country.
ARTICLE 26
MISCELLANEOUS
26.1 It is understood and agreed by the parties hereto that the provisions of
the Ecopetrol Contract an its exhibits are immutable and that this JOA shall in
no way abrogate the terms and provisions thereof.
26.2 The topic headings used herein are inserted for convenience only and
shall not be construed as having any substantive significance as a meaning or
as indicating that all of the provisions of this Agreement relating to any
particular topic are to be bound in any particular Article or Paragraph.
The terms "heron," "hereof," and "hereunder" and like terms are reference
to this Agreement unless specified and applying to a particular Article.
26.3 There shall be no modification or amendment to this JOA except by written
instrument signed by all the Representatives of the Parties.
26.4 Except as expressly provided herein to the contrary, all previous
agreements and understanding, verbal or in writing, with respect to the subject
covered by this JOA are superseded by this JOA.
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[TO COME]
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