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DRILLING CONTRACT
BETWEEN
HARKEN DE COLOMBIA, LTD.
("OPERATOR")
AND
XXXXXX DRILLING COMPANY INTERNATIONAL LTD.
("CONTRACTOR")
FOR
RIG 223
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TABLE OF CONTENTS
PART I: SCOPE OF THE CONTRACT
1. The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. The Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Contract Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2
4. Drilling Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 CONTRACTOR'S Standard of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 The Rig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 Drilling Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3A Abandonment of Well . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3B Completion of Well . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Well Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.5 Cuttings and Cores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.6 Measurements and Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.7 Safety Precautions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.8 OPERATOR Taking Complete Control Over Drilling Operations . . . . . . . . . . . . . . . . . . . . . . 6
5. Personnel Assigned to the Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. Equipment and Supplies Furnished by the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. Travel of Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8. Transport of Equipment and Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II: ADMINISTRATION OF THE CONTRACT
9. Import and Export of Drilling Rig, Ancillary Equipment,
Materials and Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10. Responsibility as to Records, Reports, Inspections, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.1 Reports and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11. Invoicing and Paying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11.1 Invoice Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11.2 Currency and Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11.3 Disputed Invoices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11.4 IVA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
12. Notices and Designation of Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART III: LIABILITIES OF THE PARTIES
13. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
14. Responsibility for Loss or Damage to CONTRACTOR Items . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
15. Responsibility for Loss or Damage to OPERATOR Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
16. Reciprocal Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
17. Responsibility for the Condition of the Hole . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
18. Risk of Damage to or Loss of Underground Mineral Deposits . . . . . . . . . . . . . . . . . . . . . . . . . 13
19. Responsibility for Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13-14
20. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21. Pollution or Contamination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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PART IV: LAW OF THE CONTRACT
22. Assignment of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
23. Exhibits as Part of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
24. Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
25. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
26. Prior Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
27. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
28. Patents and Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
29. CONTRACTOR's Obligation To Comply with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PART V: COMPENSATION TO CONTRACTOR
30. Rates of Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
30.1 Mobilization Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
30.2 Operating Day Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
30.3 Moving Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
30.4 Standby With Crews Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
30.5 Standby Without Crews Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
30.6 Mechanical Breakdown Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
30.7 Negligence Remedial Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
30.8 Force Majeure Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
30.9 Demobilization Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
30.10 Application of Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
30.11 Early Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
31. Reimbursable Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
31.1 Materials, Services and Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
31.2 Oil-Based Drilling Fluid Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
32. Daily Rate Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
33. Signatures of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBITS:
"A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
"B" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"C" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
"D" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24-29
"E" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30-32
ATTACHMENT "A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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DRILLING CONTRACT
RIG 223
PART 1: SCOPE OF THE CONTRACT
1. THE PARTIES
This agreement is entered into this 22nd day of July, 1997, by and
between HARKEN DE COLOMBIA, LTD. (HDC), a Cayman Islands corporation
("OPERATOR"), and XXXXXX DRILLING COMPANY INTERNATIONAL LTD., a Nevada
corporation ("CONTRACTOR").
2. THE WORK
CONTRACTOR shall drill all xxxxx by the rotary method (inclusive of
downhole motor operations and directional xxxxx) for OPERATOR to
depths specified by OPERATOR, but not to exceed 15,000 feet unless
with CONTRACTOR's agreement. These xxxxx shall be at locations
selected by OPERATOR within Operators Association Contract areas (the
"Block(s)") located in Colombia, South America. CONTRACTOR represents
that it possesses well-skilled employees and proper equipment as
specified herein for performance of all its work under this Contract.
CONTRACTOR has knowledge of the physical, health and climatic
conditions existing in the Blocks where the drilling operations will
be undertaken. CONTRACTOR shall perform all operations with diligence
and skill, applying sound engineering principles and good oil field
practices, CONTRACTOR shall conduct drilling, completion and testing
operations on a full twenty-four hour day, seven day week basis.
3. CONTRACT DURATION
This Contract shall become effective upon signing by the parties and
shall continue in effect for one year from and after the Commencement
Date (as defined in Section 30.2 hereof). The parties contemplate that
the operation will commence on or about November 1, 1997, however, in
the event Operator is not ready to mobilize Contractor's rig at the
termination of the Chevron contract, or by October 1, 1997 in the
event Contractor does not enter into a contract with Chevron, a rate
of US$ 4,860.00/day will be due until mobilization to Operator's first
well site. Subject to Article 3.1, OPERATOR shall have a renewable
option to extend this contract for a period or periods, each period
being not less than 6 months nor more than 12 months. OPERATOR shall
notify to CONTRACTOR in writing of its election to extend this
Contract as soon as practicable BUT NOT LATER THAN SIXTY (60) DAYS
BEFORE THE END OF THE INITIAL TERM or subsequent extension period term
of the Contract. OPERATOR may terminate this contract effective any
time after the date of spudding of the first well, subject to the
early termination provisions herein.
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3.1 Contract Extension - OPERATOR's election to extend this Contract as
provided in Article 3 above is subject to OPERATOR's and CONTRACTOR's
negotiation of mutually acceptable rates and Contract modifications
agreeable to both parties.
3.2 Early Termination
3.2.1 Either party may immediately terminate this Contract upon
written notice to the other Party, if the Rig is declared by
either Party as an actual, constructive, compromised or
arranged total loss except that compensation properly earned
up to the time of day of that loss shall be owed by OPERATOR
to CONTRACTOR.
3.2.2 Notwithstanding anything contained herein to the contrary,
OPERATOR shall, at any time, have the right to terminate this
Contract, upon thirty (30) days written notice, even though
CONTRACTOR has not defaulted hereunder, and, in such event,
CONTRACTOR shall be entitled to compensation properly earned
through the end of that thirty (30) day notice period,
including the applicable Demobilization Fee and Early
Termination Fee as defined by 30.11.
3.2.3 Notwithstanding anything herein to the contrary, CONTRACTOR
shall have the right to terminate this Contract, upon thirty
(30) days written notice stating that, in CONTRACTOR's
reasonable opinion, it is uneconomical for CONTRACTOR to
continue operations under this Contract, and certifying that
one of the following conditions applies:
3.2.3.1 OPERATOR has failed to pay CONTRACTOR
undisputed amounts and such amounts remain
unpaid following notice and a seven day grace
period.
3.2.3.2 New government edict, decree, rule,
regulation or law has been applied to
CONTRACTOR or his entitlement under this
Contract.
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4. DRILLING OPERATIONS
4.1 CONTRACTOR'S STANDARD OF PERFORMANCE - CONTRACTOR warrants
that the operation and maintenance of Contractor's Equipment
will be performed safely and in good and workmanlike manner in
accordance with accepted international oilfield practices and
in compliance with all applicable laws, rules and regulations
in effect as of the effective date of this Contract; that
CONTRACTOR's equipment shall be in good working order and its
personnel fully trained and capable of safely operating such
equipment and performing services required herein for
OPERATOR; that CONTRACTOR regularly conducts training and
safety programs; that all materials, equipment, goods,
supplies or manufactured articles furnished by CONTRACTOR in
the performance of the work or services shall be of suitable
quality and workmanship for their intended purposes, in
accordance with specifications, and shall be free from
defects; and that CONTRACTOR will not employ any employee
whose employment violates applicable labor or other laws.
CONTRACTOR further covenants, warrants and represents that all
work performed by it hereunder shall be conducted in
accordance with accepted international safety regulations (as
used in the country of Colombia), environmental laws and
regulations, precautions and procedures in effect as of the
effective date and by employing the necessary protective
equipment and devices described in the attached inventory. Any
breach of this safety covenant shall be grounds for immediate
termination of this Contract by Operator.
4.2 THE RIG - CONTRACTOR shall furnish its RIG 223 which is a
complete drilling rig as described in Exhibit "B". CONTRACTOR
shall operate the rig and ancillary equipment at ninety (90)
percent of manufacturer's rated operating specifications.
Contractor shall provide rig modifications (including
modifications to substructure) as necessary to accommodate
underbalanced drilling equipment, and one additional mud pump
independently powered and compatible with the existing
drilling rig equipment. The Drilling Tubulars (Drill Pipe,
Heavy Weight Drill Pipe, Collars, Cross-Overs, Stabilizers,
Subs, etc.) will be subject to Exhibit E, "Tubular Standards".
In special circumstances, at OPERATOR request, CONTRACTOR in
its sole discretion may operate the rig and ancillary
equipment at manufacturer's rated operating specifications.
CONTRACTOR shall maintain the rig and ancillary equipment in
good working order.
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The rig will maintain a current inspection certificate for all
major load bearing components. The inspection will be
performed by a third party inspection contractor.
OPERATOR shall notify CONTRACTOR of the location of the
initial well. CONTRACTOR shall mobilize the rig, the equipment
described herein, and its personnel to the location of the
initial well and shall make all necessary preparations for
spudding the initial well within approximately 25 days
following OPERATOR's notification of the location of the
initial well.
4.3 DRILLING PROGRAM - Before any drilling begins on any well,
OPERATOR shall deliver the drilling program to CONTRACTOR
which Contractor shall give notice to Operator of its'
receipt. Contractor shall also certify in writing to Operator
that "rigging-up" is satisfactorily completed. CONTRACTOR
shall use reasonable diligence to conduct all drilling
operations in conformance with OPERATOR's drilling program.
OPERATOR may modify the drilling program so long as any
modifications which materially increases CONTRACTOR's hazards
or costs of performance bears CONTRACTOR's approval and
provides for an appropriate rate increase as mutually agreed
by the parties. CONTRACTOR SHALL NOT BEGIN TO DISMANTLE ITS
RIG AND EQUIPMENT FOR DEMOBILIZATION UNTIL AUTHORIZED TO DO SO
BY OPERATOR IN WRITING.
4.3A ABANDONMENT OF WELL: OPERATOR at any time may elect
to have a well abandoned. Upon notice of such
election, CONTRACTOR shall promptly remove from the
hole and lay down all recoverable casing and tubing
and plug and abandon the hole in accordance with the
program provided by OPERATOR in a manner satisfactory
to OPERATOR and in compliance with all government
rules and regulations including environmental laws
and permits (obtained by OPERATOR) and CONTRACTOR
shall also promptly remove in compliance with all
government rules and regulations all its equipment,
machinery, tools, supplies and materials furnished
and all its debris and refuse from the location
resulting from its activities under this agreement.
4.3B COMPLETION OF WELL: OPERATOR may at any time elect to
have a well completed or recompleted, and in that
event, CONTRACTOR shall perform the work of
completing the well in accordance with the program
provided by OPERATOR in a manner and to the extent
desired by OPERATOR, including but not limited to the
running of liner and tubing, making permanent well
head connections and installing Christmas trees.
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4.4 WELL CONTROL - CONTRACTOR shall maintain their provided well
control equipment in good operating condition at all times,
and shall in addition make such further checks as OPERATOR
shall direct and shall use reasonable means to control and
prevent fires, blowouts and other damage, to protect the hole
and to protect OPERATOR equipment.
4.5 CUTTINGS AND CORES - When requested by OPERATOR, CONTRACTOR
shall save and identify the cuttings and cores free from
contamination and place them in separate containers furnished
by OPERATOR. Such cuttings and cores shall be made available
to a representative of OPERATOR at the site.
4.6 MEASUREMENTS AND TESTS - Routinely and in addition whenever
requested by OPERATOR, CONTRACTOR shall measure and record the
total length of all in-hole tubulars in service with a steel
tape.
4.7 SAFETY PRECAUTIONS - OPERATOR and CONTRACTOR shall take
measures to provide safe working conditions and shall comply
with safety procedures in effect as of the effective date of
this Contract regarding the maintenance and operation of
Contractors Equipment, delivered in writing by OPERATOR or
promulgated by applicable governmental agency, ministry or
authority and incorporated with this contract and without
limiting the generality of the foregoing, shall maintain
proper barriers, guard rails and other safety devices to
lessen hazards during the performance of work under this
Contract. Any safety equipment required by OPERATOR and
provided in addition to that listed in Exhibit "B" shall be
for OPERATOR account.' CONTRACTOR shall not permit smoking,
hot work or any open flames at the wellsite (except in
OPERATOR designated areas). Smoking, hot work and open flames
will be controlled via permits issued by OPERATOR and may be
canceled or reinstated by OPERATOR due to site conditions.
CONTRACTOR shall equip the rig with vapor proof lights and
shall equip the drilling engines' exhaust with a water
injection device so as to reduce the hazard of fire.
CONTRACTOR shall install on each well worked on hereunder
blowout prevention devices of the type shown in Exhibit "B"
and shall operate such devices at regular intervals.
Contractor is aware that use of underbalanced drilling
techniques are expected during the term of this contract. If
required, CONTRACTOR shall, within the capabilities of the
equipment and personnel required to be furnished by CONTRACTOR
hereunder, take precautions to prevent the well from igniting.
Notwithstanding the foregoing, should CONTRACTOR determine
that conditions exist that present an unreasonably dangerous
risk of injury or loss to persons or property, it may cease
operations until the cause of such unsafe condition has been
remedied. CONTRACTOR shall report to OPERATOR as soon as
practicable all accidents or occurrences resulting in injuries
to CONTRACTOR's employees or third parties or damage to the
property of CONTRACTOR, OPERATOR or any third parties arising
out of or in the course of the operations hereunder.
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4.8 OPERATOR TAKING COMPLETE CONTROL OVER DRILLING OPERATIONS
4.8A Should any well blow-out, ignite, or in any manner
get out of control, OPERATOR may assume complete
control and supervision of the work of bringing the
well under control or putting out the fire. Unless
and until OPERATOR so elects in writing to assume
such complete control, CONTRACTOR shall be in
complete control and supervision of the same.
4.8B Should CONTRACTOR at any time fail to conduct its
operations in compliance with applicable laws, rules
and regulations, with skill and diligence, in
conformance with accepted oilfield practice and sound
engineering principles, and in accordance with the
terms of this Contract, then OPERATOR shall notify
CONTRACTOR in writing of the specific deficiency.
After having received such notice, CONTRACTOR shall
have five days in which to fulfill its contractual
responsibilities by taking measures to rectify the
deficiency. Should CONTRACTOR fail to correct the
deficiency, OPERATOR may assume control of the rig
and ancillary equipment and continue the drilling
operations on that well until CONTRACTOR remedied any
deficiencies.
4.8C For all time during which OPERATOR is in control of
the drilling operations pursuant to Articles 4.8A or
4.8B. OPERATOR shall have full use of CONTRACTOR's
rig, equipment, machinery, facilities, material,
supplies and personnel at the location with
remuneration to CONTRACTOR at the Operating Day Rate,
Article 30.2, and all operations shall be conducted
at the sole risk of OPERATOR and CONTRACTOR's
indemnity obligations shall be suspended. CONTRACTOR
agrees to provide continuing insurance coverage for
the Contractor's Equipment, subject to insurers
approval, but OPERATOR will be solely responsible for
any damage not covered by insurance.
5. PERSONNEL ASSIGNED TO THE OPERATIONS
CONTRACTOR shall provide the personnel listed in Exhibit "C" at its
expense, Should CONTRACTOR provide additional personnel at OPERATOR
request for brief periods, remuneration shall be at cost plus ten
percent (10%). At OPERATOR's written notice, specifying the
deficiency, CONTRACTOR shall withdraw from the operations any employee
OPERATOR reasonably requests. CONTRACTOR shall pay any costs incurred
in withdrawing and replacing the unsuitable individual. CONTRACTOR
shall conduct all industrial relations matters in conformance with
applicable laws and customs.
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6. EQUIPMENT AND SUPPLIES FURNISHED BY THE PARTIES
6.1 BY OPERATOR - At its expense, OPERATOR shall furnish the
equipment, machinery, tools, supplies, materials and services
listed in Exhibit "D".
6.2 BY CONTRACTOR - At its expense, CONTRACTOR shall furnish the
equipment, machinery, drill strings, tools, supplies and
personnel as listed in Exhibits "B", "C", and "D" (subject to
the requirements of Exhibit E). The parties deem these items
to be necessary items for the full performance of CONTRACTOR
duties.
6.3 INSPECTION AND USE OF OPERATOR EQUIPMENT - Before using
OPERATOR furnished items, CONTRACTOR representative shall
visually inspect same with reasonable diligence and shall
advise OPERATOR of any apparent defect observed. All such
equipment, machinery, tools, and materials in CONTRACTOR's
possession shall remain OPERATOR's property and shall be
returned to OPERATOR at the end of operations in the same good
state of repair and operating conditions as when received,
subject to reasonable deterioration due to use. OPERATOR shall
not be entitled to any compensation for normal wear and tear
resulting from CONTRACTOR's use of such items. Liability for
damage to OPERATOR equipment is subject to Clause 15.
7. TRAVEL OF PERSONNEL
CONTRACTOR shall mobilize its personnel to the initial wellsite for
the beginning of operations at no extra cost to OPERATOR, other than
the mobilization fee. CONTRACTOR shall furnish transportation to each
wellsite for all of CONTRACTOR's personnel in connection with initial
personnel mobilization, crew changes and final personnel
demobilization. CONTRACTOR shall demobilize its personnel from each
wellsite at the end of operations at no extra cost to OPERATOR, other
than the demobilization fee.
8. TRANSPORT OF EQUIPMENT AND SUPPLIES
CONTRACTOR shall prepare its rig and equipment and supplies for
mobilization at the beginning of operations as consideration for
OPERATOR's payment of the lump sum Mobilization Fee in Exhibit A. The
same Mobilization Fee will also include in total the transportation of
CONTRACTOR's rig and equipment to OPERATOR's wellsite, rigged up ready
to spud the well to be drilled hereunder. The rig shall be ready to
commence operations when CONTRACTOR has tested all necessary equipment
and is ready to run in the hole with the initial tools. In the event
OPERATOR is not ready to commence operations once CONTRACTOR is rigged
up and ready, the Standby with Crews Rate provided in Article 30.5
shall commence and continue from day to day
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thereafter until such time as the OPERATOR has authorized the
CONTRACTOR to commence drilling operations. The Moving Rate shall apply
during all time after the rig is released from one drilling location
to move and rig up on another location. During demobilization, the
Demobilization Fee in Exhibit A will apply while CONTRACTOR'S
equipment is being moved from OPERATOR's wellsite to CONTRACTOR's
yard. CONTRACTOR shall furnish transportation for CONTRACTOR's
operating supplies and materials from point of origin to the wellsite.
OPERATOR shall furnish transportation for OPERATOR's operating
supplies and materials to each wellsite and for Contractor's rig and
equipment to the second and subsequent wellsites.
PART II: ADMINISTRATION OF THE CONTRACT
9. IMPORT AND EXPORT OF DRILLING RIG, ANCILLARY EQUIPMENT, MATERIALS AND
SUPPLIES
CONTRACTOR's drilling rig, Rig 223, has been completely imported into
Colombia and includes at least all of the equipment listed in Exhibit
"B" and CONTRACTOR shall assume all fees, duties and taxes in
connection therewith. OPERATOR shall pay all import and export
expense, including without limitation, fees, duties, taxes, port
charges, storage charges and documentary taxes for other equipment
required by OPERATOR not included in Exhibit "B". CONTRACTOR's
obligation shall be limited to arranging for the transporting,
importing and clearing of spare parts and supplies for CONTRACTOR's
equipment to support its operations under this Contract.
All costs incident to the transport, importation/exportation, and
clearing of equipment, materials and supplies, which OPERATOR requests
CONTRACTOR to provide, will be for OPERATOR account. Special
amortized equipment such as the top drive unit, drilling tubulars and
third mud pump, requested by operator, is the responsibility of
Contractor
10. RESPONSIBILITY AS TO RECORDS, REPORTS, INSPECTIONS, ETC.
10.1 REPORTS AND INSPECTIONS - CONTRACTOR shall at all times permit
OPERATOR and its authorized employees and representatives to
inspect all work performed hereunder and to witness and check
all measurements and tests made in connection with said work.
CONTRACTOR shall keep an authentic and accurate history and
log of said xxxxx, including all measurements required for
fishing operations with a record of all downhole equipment
which shall be open at all reasonable times to inspection by
OPERATOR and its authorized employees and representatives.
CONTRACTOR shall furnish each of OPERATOR's designated
representatives (pursuant to the Notice provision in Section
13) with a copy of the daily written I.A.D.C. drilling report
showing depths and work performed during the preceding
twenty-four (24) hours and any other information relative to
said well requested by OPERATOR.
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10.2 CONFIDENTIALITY - Recognizing the confidential nature of the
work, CONTRACTOR shall not, without OPERATOR's prior written
consent, allow any third person access to the well, nor give
out to any third person any information concerning the well,
or give out to third persons, nor permit any third person to
examine, any samples from the well. Upon completion of the
work on the well, the original history and log book, as well
as any copies and all other data, records and reports (except
one copy of the daily drilling report) of any nature
pertaining to CONTRACTOR's operations, shall be delivered to
OPERATOR, it being understood that neither CONTRACTOR nor any
of its employees shall retain any records or data relative to
any well which has reference to geologic information. This
ability to maintain such confidentiality shall extend beyond
any termination of this contract for an additional period of
two years beyond the remaining term of that specific Harken de
Colombia, Ltd. Association Contract.
11. INVOICING AND PAYING
11.1 INVOICE PRESENTATION - CONTRACTOR shall prepare invoices at
the end of each calendar month and after the rig is released
from each well and after each rig move. The invoices shall be
stated in U.S. Dollars. CONTRACTOR shall deliver the invoices
to OPERATOR's representative in Bogota, Colombia, with copy to
its Houston, Texas, office.
11.2 CURRENCY AND TIME OF PAYMENT - OPERATOR shall pay invoices in
U.S. Dollars, provided that CONTRACTOR may request payment of
a portion of the invoices in local currency by so specifying
at the time of invoice presentation. The exchange rate for
local currency payments shall be the Tasa Representativa del
Xxxxxxx (TRM) effective on date of invoice. OPERATOR shall pay
CONTRACTOR the approved amount of invoices within thirty (30)
days of receipt of the invoices. OPERATOR shall deliver local
currency payments to CONTRACTOR's office in Colombia. If
OPERATOR fails to pay the undisputed portion of any invoice
within thirty days of receipt, interest shall accrue from the
thirty-first day at the prime rate in effect from time to time
at Citibank, plus two percent (2%) until payment is received,
but the rate of interest shall not exceed the maximum rate
permitted by applicable law.
11.3 DISPUTED INVOICES - If OPERATOR disputes an item invoiced,
OPERATOR shall notify CONTRACTOR in writing of the item
disputed, specifying the reason and payment of the disputed
item shall be withheld until settlement of the dispute, but
PAYMENT SHALL BE MADE OF ANY UNDISPUTED PORTION. Payment of
any invoice shall not prejudice the right of OPERATOR to
question the correctness of any such invoice, provided that
within twenty-four (24) months of the date of any such invoice
OPERATOR shall make objection to any item or items thereof by
delivering CONTRACTOR written notice specifying the reasons
for its objection. Should OPERATOR within such a twenty-four
(24) month
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period so notify CONTRACTOR, adjustments shall be made between
the parties as the correctness of such item shall be
determined. Any invoice not objected to by OPERATOR within
such twenty-four month period shall be deemed final and not
subject to review. OPERATOR upon written notice to CONTRACTOR,
within the twenty-four (24) month period an invoice is
received shall have the right to audit CONTRACTOR's accounts
and records relating to operations hereunder.
11.4 IVA - For purposes of invoicing IVA tax applicable to this
construction contract, according to Article 3 of Decree 1372
of August 20, 1992, the Contractor deems his service included
to be 10% of the value of this Contract.
12. NOTICES AND DESIGNATION OF REPRESENTATIVES
All notices given by OPERATOR to CONTRACTOR shall be sent by
registered mail and telex or delivered to:
If to OPERATOR: HARKEN DE COLOMBIA, LTD.
Xxxxxxx 0, Xx.000-00 Xxxxxxx 000X
Xxxxxxx xx Xxxxxx, Xxxxxxxx
Attn: Xxxxxx Xxxxxx
Ph: 00-0-000-0000
Fax: 00-0-000-0000
with copy to: HARKEN INTERNATIONAL, LTD.
0000 Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX
Attn: Xxxxxxx X. Xxxx
Ph: 000-000-0000
Fax: 000-000-0000
If to CONTRACTOR: XXXXXX DRILLING CO. INTERNATIONAL, LTD.
Xxxxxxx 00 Xx.00-00
Xxxxxxx xx Xxxxxx, Xxxxxxxx
Attn: Xx. Xxxx Xxxxxx
Ph: 011-57-1-419-1767
Fax: 000-00-0-000-0000
with copy to: XXXXXX DRILLING COMPANY
0 Xxxx Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Ph: 000-000-0000
Fax: 000-000-0000
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PART III: LIABILITIES OF THE PARTIES
13. DEFINITIONS
As used in this contract, "OPERATOR's personnel" shall mean the
employees, agents, personnel, invitees, etc. of OPERATOR and its
contractors (excluding CONTRACTOR).
"CONTRACTOR's personnel" shall mean the employees, agents, personnel,
invitees, etc. of CONTRACTOR and its subcontractors.
14. RESPONSIBILITY FOR LOSS OR DAMAGE TO CONTRACTOR ITEMS
CONTRACTOR shall assume the entire risk of and be solely responsible
for damage to or destruction or loss (by any means including blowout
and fire) of equipment, machinery, tools, (including but not limited
to CONTRACTOR's drill pipe, drill collars, subs, choke and kill lines,
flexible hoses, hydraulic hoses supplies and materials furnished by
CONTRACTOR in connection with the operations hereunder), except for
losses or damages to equipment resulting from the following: (1) all
occurrences when OPERATOR is in control of operations per Article 4.8;
(2) loss in any transportation furnished by or for account of
OPERATOR, (3) loss of or damage to equipment in the hole and (4) the
sole or gross negligence or willful misconduct of OPERATOR's
personnel. CONTRACTOR shall be responsible for equipment losses and
damages arising under (3) above resulting from the sole or gross
negligence or willful misconduct by CONTRACTOR's personnel.
Reimbursement for equipment damaged in the hole, more than normal wear
and tear, will be at actual cost of repair or replacement cost,
including transportation to site, whichever is less. Replacement cost
shall be based on the attached schedule of downhole tools. OPERATOR
shall have the option to replace lost or damaged equipment in-kind;
provided said replacement equipment is of a quality and condition
acceptable to CONTRACTOR.
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Reimbursement for loss or damage to CONTRACTOR's equipment, (1) when
OPERATOR is in control of operations per Article 4.8; or (2) during
transportation furnished by or for the account of OPERATOR; or (3) as
a result of the sole or gross negligence of willful misconduct of
OPERATOR'S personnel, will be at replacement cost on location without
any deduction for depreciation; provided that OPERATOR's liability
hereunder shall be reduced by the proceeds of insurance, if any,
received by CONTRACTOR.
15. RESPONSIBILITY FOR LOSS OR DAMAGE TO OPERATOR ITEMS
OPERATOR shall assume liability at all times for damage to or loss or
destruction of OPERATOR furnished items regardless of how, when or
where such damage, loss or destruction occurs and CONTRACTOR shall be
under no liability to reimburse OPERATOR for such damage, loss or
destruction except in the case where such damage, loss or destruction
results from the sole or gross negligence or willful misconduct by
CONTRACTOR's personnel.
16. RECIPROCAL INDEMNITIES
(A) CONTRACTOR agrees to indemnify and hold harmless OPERATOR from
and against any and all claims, costs, liabilities, or
expenses for death of, or injury to CONTRACTOR's personnel or
loss of or damage to property of CONTRACTOR's personnel,
except such death, injury, property loss or property damage as
may result from the sole or gross negligence or willful
misconduct of OPERATOR's personnel.
(B OPERATOR agrees to indemnify and hold harmless CONTRACTOR from
and against any and all claims, costs, liabilities, or
expenses for death of, or injury to OPERATOR's personnel or
loss of or damage to property of OPERATOR's personnel, except
such death, injury, property loss or property damage as may
result from the sole or gross negligence or willful
misconduct of CONTRACTOR's personnel. Irrespective of the
insurance coverage provided by CONTRACTOR, OPERATOR's status
as an additional insured shall not be applicable except to the
extent CONTRACTOR has specifically assumed liability for such
loss or damage under this Contract.
(C) Neither party shall be liable to the other for special,
indirect or consequential damages resulting from or arising
out of this Contract, including without limitation, loss of
profit or business interruptions, however caused.
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(D) For the purposes of the indemnities OPERATOR's personnel shall
be deemed to include its other contractors and CONTRACTOR's
personnel shall be deemed to include its subcontractors.
17. RESPONSIBILITY FOR THE CONDITION OF THE HOLE
OPERATOR shall be responsible for the condition of the hole and shall
defend, indemnify and hold CONTRACTOR harmless from and against any
claims arising from damage to or loss of the hole resulting from any
of the hazards of drilling or completion operations, including the
cost of regaining control of the hole except if such loss was due to
the sole or gross negligence or willful misconduct of CONTRACTOR or
its personnel. If the hole is lost due to the sole or gross negligence
or willful misconduct of CONTRACTOR or its personnel, CONTRACTOR shall
redrill the hole or drill a new hole, to the depth at which the hole
was lost, at the negligence remedial rate, as OPERATOR's sole and
exclusive remedy. During any such period of remedial drilling, the
parties shall continue their respective responsibilities under this
Contract, including without limitation, those responsibilities
concerning furnishing of supplies and materials.
18. RISK OF DAMAGE TO OR LOSS OF UNDER-GROUND MINERAL DEPOSITS
OPERATOR assumes the entire risk of damage to or loss or destruction
of underground mineral deposits, reservoirs, or pools, and from any
loss of oil and gas resulting from operations under this Contract if
at the time of the act or omission causing such damage, loss or
destruction, the oil or gas had not been reduced to physical
possession above the surface of the earth. OPERATOR shall hold
CONTRACTOR harmless against any such damage to the mineral deposits,
reservoirs, or pools, and from any loss of oil and gas resulting from
operations under this Contract regardless of the cause of such loss or
damage, including the negligence, sole, gross or otherwise of any
party, if. at the time of the act or omission causing such damage,
loss or destruction, the oil or gas had not been reduced to physical
possession above the surface of the earth.
19. RESPONSIBILITY FOR INSURANCE
CONTRACTOR shall at all times during the term of this agreement
purchase or provide insurance coverage in amounts no less than the
amounts provided in this Article 19. The insurance companies will be
reasonably acceptable to OPERATOR and CONTRACTOR shall provide
OPERATOR certificates evidencing the coverage. CONTRACTOR agrees that
all policies required shall include an endorsement waiving the rights
of subrogation against OPERATOR for liabilities specifically assumed
by CONTRACTOR under this Contract. OPERATOR will be named an
additional insured under CONTRACTOR's General Liability and
Automobile Liability policies to the extent of the liabilities
specifically assumed by CONTRACTOR under the terms of this Contract.
Such policies shall provide for thirty (30) days notice
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in writing to OPERATOR in the event of cancellation or material change
in coverage. In the event subcontractors are used, CONTRACTOR will
require such subcontractors to maintain Worker's Compensation and
General Liability Insurance commensurate with the work being
subcontracted. Any claim against Workers Compensation or Liability
Insurance shall be defended or discharged by CONTRACTOR. The insurance
coverage's are:
Worker's Compensation Insurance sufficient to comply with the laws of
the State of Texas to cover expatriate employees. CONTRACTOR shall
further comply with the laws of Colombia related to employment and
labor including any Worker's Compensation and Worker's Insurance or
other similar requirements regarding National employees, and shall
carry Employers Liability Insurance with limits of U.S. $300,000 for
injury to or death of each person and U.S. $1,000,000 for injuries to
or death of more than one person by reason of each occurrence;
Comprehensive General Liability Insurance with limits of U.S. $300,000
for injury to or death of one person, U.S. $1,000,000 for injury to or
death of more than one person by reason of each occurrence and
property damage coverage for loss of or damage to the property of
third persons in the amount of U.S. $1,000,000 for any occurrence;
Comprehensive Automobile Liability Insurance with limits of U.S.
$250,000 per person with a limit of U.S. $1,000,000 each occurrence
and U.S. $1,000,000 property damage each occurrence;
Rig Casualty Insurance sufficient to protect CONTRACTOR against loss
or damage to the drilling equipment specified in Exhibit "B" to be
supplied by CONTRACTOR. Such Rig Casualty Insurance shall provide for
a waiver of subrogation as to OPERATOR, limited to the extent of the
specific liabilities assumed by CONTRACTOR in this Contract.
Excess Liabilities coverage in an amount of U.S. $5,000,000.
CONTRACTOR shall obtain any other coverage required by the laws of the
Colombia.
20. FORCE MAJEURE
Except for obligations for the payment of money, neither party shall
be liable for loss or damage arising out of any delay or failure of
performance caused by circumstances beyond its' control, including but
not limited to earthquake, flood, hurricane, blowout, cratering, acts
of God or public enemies, war, national emergency, invasion,
insurrection, riots, strikes, picketing, boycott, interruption of
services rendered by any public utility or interference by any
governmental agency or official (whether legal or illegal). Nor shall
any delay or failure of performance due to any of said causes be
deemed a breach of or a default in the performance of this Contract.
The party prevented from performing for any
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such cause shall promptly notify the other and shall do all things
reasonably possible to remove such cause and shall resume performance
hereunder as soon as such cause is removed. Should any act of force
majeure causing the suspension of operations hereunder continue for a
period of thirty (30) days or more, OPERATOR shall have the right to
terminate this agreement by giving CONTRACTOR five (5) days prior
notice of its intention to do so, subject to payment in accordance
with Articles 30.4 and 30.3 and 30.11.
21. POLLUTION OR CONTAMINATION
OPERATOR shall assume all liability for and defend, indemnify, hold
CONTRACTOR harmless from any loss or damage arising from pollution or
contamination except if caused by Contractor's gross negligence or
willful misconduct, including but not limited to that which may result
from (1) blowout, fire, cratering, seepage, or any other uncontrolled
flow of oil, gas or water during the conduct of operations hereunder
and (2) the use or disposition of oil emulsion, oil base or chemically
treated drilling fluids, well cuttings, and cavings, lost circulation
and fishing operations, recovery of materials and fluids, as well as
the furnishing of transportation for and disposition of such materials
when required. CONTRACTOR shall assume liability for surface spills of
pipe dope, greases, solvents, or other similar surface materials under
its control.
PART IV: LAW OF THE CONTRACT
22. ASSIGNMENT OF CONTRACT
Neither party may assign this Contract or any of its rights under this
Contract nor delegate any of its obligations other than to a wholly
owned subsidiary, affiliate corporation or joint venturer, without the
prior written consent of the other party, which shall not be
unreasonably withheld. The parties agree to respond to such notice
within fifteen (15) days.
23. EXHIBITS AS PART OF CONTRACT
Exhibits "A", "B", "C", "D" and "E" (including Attachment "A") are
attached hereto and shall be considered to be part of this agreement
to the same extent as if incorporated in the body hereof. For better
identification, such exhibits shall be initialed by both parties.
24. RELATIONSHIP OF PARTIES
The work shall be performed by CONTRACTOR as an independent contractor
and CONTRACTOR's employees shall at all times be under the direction
and control of CONTRACTOR. CONTRACTOR will receive directions from
OPERATOR as to the end results to be accomplished, and CONTRACTOR
shall be responsible for directing its employees as to the manner and
means of accomplishing the work to be performed by CONTRACTOR pursuant
to good
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and xxxxxxx'x practices. Compliance by CONTRACTOR, or its employees,
with engineering directions, safety practices, maintenance
instructions or change of orders issued by OPERATOR shall not affect
CONTRACTOR's status as an independent contractor and shall not relieve
CONTRACTOR of the obligations assumed by him under this Contract.
25. GOVERNING LAW
This agreement and interpretation hereof shall be governed by the laws
of the State of Texas, exclusive of the choice of law rules thereof,
as if therein to be wholly performed.
26. PRIOR AGREEMENTS
No prior stipulations, agreements or understanding by the parties or
any of their representatives shall be valid or enforceable unless
embodied in this Contract or covered by its provisions or added by
separate letter executed by both parties or their agents.
27. WAIVER
The waiver of or failure to require the performance of any covenant or
obligation contained in this Contract shall not be deemed to
constitute a waiver of a similar later breach.
28. PATENTS AND RIGHTS
OPERATOR shall not be liable or responsible for any damages or claims
of any kind arising out of real or alleged patent infringements,
design trademark or name or other protected rights which arise out of
or are caused by or are attributed, directly or indirectly, to any
work carried out and/or any equipment used by CONTRACTOR or its
subcontractors and CONTRACTOR shall indemnify, save and hold harmless
OPERATOR, its officers, employees, agents and servants from and
against such damages and claims. CONTRACTOR shall not be liable or
responsible for any damages or claims of any kind arising out of real
and alleged patent infringements, design trademark or name or other
protected rights which arise out of or are caused by or are attributed
to, directly or indirectly, any work carried out and/or any equipment,
except the equipment of CONTRACTOR and its subcontractors, used by
OPERATOR and OPERATOR shall indemnify, save and hold harmless
CONTRACTOR, its officers, employees, agents and servants from and
against such damages and claims.
29. CONTRACTOR'S OBLIGATION TO COMPLY WITH LAWS
CONTRACTOR agrees to comply with all permits, concessions and
clearances (and with all applicable laws and regulations in effect on
the effective date of this Contract) that govern the performance of
CONTRACTOR's obligations
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under this Contract by CONTRACTOR. CONTRACTOR shall indemnify OPERATOR
against any and all liabilities, damages, claims, fines, penalties and
expense of whatsoever nature resulting from CONTRACTOR's failure to
comply with this provision. CONTRACTOR represents that it is qualified
to do business and is established on a proper legal basis to perform
services for OPERATOR in Colombia.
PART V: COMPENSATION TO CONTRACTOR
RATES OF COMPENSATION - Except as specified to the contrary herein,
the rates specified under this Clause 30 shall not accrue until the
Commencement Date.
CONTRACTOR shall perform drilling operations and fulfill its
obligations according to this Contract. OPERATOR shall pay CONTRACTOR
as full compensation for the work performed and material, equipment
and supplies furnished as follows:
30.1 Mobilization Fee - Initial wellsite will be determined prior
to Mobilization Fee being quoted by CONTRACTOR and approved by
OPERATOR. OPERATOR shall pay CONTRACTOR in a lump sum the
amount set forth as Exhibit "A", Item 1, for CONTRACTOR
mobilizing its personnel which are located at Bogota and its
rig and ancillary equipment and materials and supplies from
last wellsite to Operator's wellsite. OPERATOR shall pay this
amount within thirty days of receiving CONTRACTOR's invoice
bearing the date of departure of the rig from last wellsite.
30.2 Operating Day Rate - This rate is set forth as Exhibit "A",
Item 2. Unless superseded by another rate, beginning on the
day CONTRACTOR is ready to spud the first well (the
"Commencement Date") and continuing all the time until the rig
is released in preparation for rigging down to move and
including but not limited to time spent reaming, coring,
fishing, drill stem testing, picking up drill pipe, tripping,
circulating and conditioning mud, running and cementing
casing, waiting on cement, logging, waiting on orders,
nippling up, running tubing, testing and completing a well or
swabbing, OPERATOR shall pay CONTRACTOR the Operating Day
Rate.
30.3 Moving Rate - This rate is set forth as Exhibit "A", Item 3.
This rate shall apply during rigging up operations, during
dismantling operations and for all time spent moving the rig
from one wellsite to another wellsite. Operator and Contractor
shall, within 24 hours or earlier of rig release from
Operator's wellsite, mutually agree to a single lump sum
mobilization fee to transport all of Contractor's rig and
equipment to Operator's next wellsite. If mutual agreement on
a lump sum fee
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cannot be reached then Contractor's equipment will be moved
using Operator furnished transportation and Contractor shall
invoice Operator for all mobilization days at the Moving Rate
specified in Exhibit "A".
30.4 Standby With Crews Rate - This rate is set forth in Exhibit
"A", Item 4. Except for the situation set forth in Article
30.6, whenever the rig is shut down at OPERATOR's request, the
rig shall be considered to be standing by with crews. The
Operating Day Rate shall be payable for the first 24 hours
after Operator's request and thereafter the Standby With Crews
Rate shall be payable until the standby with crews status
ends.
30.5 Standby Without Crews Rate - This rate is set forth as Exhibit
"A", Item 5. Whenever in OPERATOR'S sole judgment the
estimated period of OPERATOR requested rig shut down is long
enough to warrant demobilization of personnel, cessation of
camp operations or other cost reductions, OPERATOR may place
the rig on the Standby Without Crews Rate upon, five days
written notice to CONTRACTOR. OPERATOR shall reimburse
CONTRACTOR in demobilizing CONTRACTOR's personnel from point
of origin and remobilizing them in connection with a period of
Standby Without Crews status at cost plus ten percent (10%).
Further reductions in this rate can be made by reducing the
drilling staff at the request of Operator to watchmen levels
only.
30.6 Mechanical Breakdown Rate - This rate is set forth at Exhibit
"A", Item 6 and is calculated as follows: if there is a work
stoppage due to mechanical failure not primarily caused by the
negligence of CONTRACTOR's personnel, payment shall be at the
full Operating Day Rate for any such stoppage up to
twenty-four hours per occurrence. Thereafter, CONTRACTOR shall
be entitled to receive a rate equal to sixty-five percent
(65%) of the Operating Day Rate until the breakdown is
repaired.
30.7 Negligence Remedial Rate
30.7.1 This rate is set forth at Exhibit "A", Item 7 and is
calculated as follows: If there is a work stoppage as
a primary result of the negligence of CONTRACTOR's
personnel, OPERATOR shall pay the Operating Day Rate
for any such stoppage up to twenty-four hours.
Thereafter, the rate shall be eighty percent (80%) of
the Operating Day Rate until the breakdown is
repaired or for ten days whichever first occurs. If a
breakdown under this Article 30.7.1 continues for
more than ten days, CONTRACTOR shall earn zero rate
beginning with the eleventh day until the breakdown
is repaired.
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30.7.2 Time Negligence Remedial Rate shall also be payable
for all time, without limitation, spent performing
remedial operations as provided in Article 17.
30.8 Force Majeure Rate - This rate is set forth at Exhibit "A",
Item 8 and is calculated as sixty-five percent (65%) of the
Operating Day Rate. The Force Majeure Rate shall be payable
whenever a condition of force majeure exists as described in
Article 20.
30.9 Demobilization Fee - OPERATOR shall pay CONTRACTOR in a lump
sum the amount set forth as Exhibit "A", Item 10 as a
demobilization fee within thirty days of receiving
CONTRACTOR's invoice bearing the date the rig, ancillary
equipment and supplies departs OPERATOR's last wellsite. If
Contractor has received another contract for this rig, to
commence with release of this rig from Operators last well,
then the demobilization will be reduced by the following:
Well 800 kms distant: 0 discount
Well 600 kms distant: 35% discount
Well 400 kms distant: 70% discount
Well 200 kms distant: 100% discount
30.10 Application of Rates - The rates set forth in this Article 30
apply for a full 24-hour day and shall be prorated when two or
more rates apply to parts of a single 24-hour day. Only one
rate or fee shall be payable at any one time. During rigging
up, dismantling and well to well movement operations, the full
daily rate shall be payable even if operations are conducted
only during the daylight portion of the day.
30.11 Early Termination Fee - In the event this Contract is
terminated by OPERATOR prior to the one year initial term,
CONTRACTOR will receive, in addition to the compensation
provided in Section 3.2.2, the Early Termination Fee. The
number of days used in calculating the Early Termination Fee
shall be the lesser of (1) the number of days remaining in the
initial term of this Contract, or (2) 90 days. (The actual
number of days constituting this period in any situation shall
be referred to as the "Termination Period.")
In the event the OPERATOR elects early termination and the
CONTRACTOR acquires other work for the Rig during the
Termination Period, then OPERATOR shall be entitled to receive
a refund from CONTRACTOR of the daily Standby Without Crew
Rate for each day the Rig earns a dayrate under contract to a
third party.
The Early Termination Fee should not be applicable to any
subsequent period(s) to which the Contract has been extended
beyond the Initial Term of this Contract.
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31. REIMBURSABLE ITEMS
31.1 Materials, Services and Personnel-If OPERATOR requests
CONTRACTOR to provide materials, services or personnel in
addition to those specified in this Contract. OPERATOR shall
reimburse CONTRACTOR for such materials and services as are
actually furnished at CONTRACTOR cost plus ten percent (10%).
If any additional personnel are furnished by CONTRACTOR on a
short term basis, OPERATOR shall reimburse CONTRACTOR at cost
plus ten percent (10%).
31.2 Oil-Based Drilling Fluid Incentives - For each day of the
Contract term during which oil base drilling fluid is in use,
OPERATOR shall reimburse CONTRACTOR at the rate of U.S. $10.00
per person for incentive payments to those expatriate
personnel and U.S.$4.00 per person for incentive payments to
those national personnel assigned to the operation who are
actually on a rig tour on a day when oil base drilling fluid
is in use. CONTRACTOR shall invoice OPERATOR separately for
this reimbursement each month and shall support the invoice
with a schedule of incentive payments made.
32. DAILY RATE INCREASES
The rates established in the Contract are based on current costs as of
the date of this contract. If after the execution of this agreement,
CONTRACTOR shall demonstrate to the reasonable satisfaction of
OPERATOR that an increase has occurred in any component of
CONTRACTOR's costs that increases said costs in excess of 5%,
including increases in costs as a result of new laws or new
interpretations of existing laws, the daily rate shall be
appropriately adjusted in an amount equal to such cost changes. Daily
Rate increases under this Clause shall not exceed 10% of the Operating
Day Rate during any 12 month period.
33. SIGNATURES OF THE PARTIES
IN WITNESS OF THE COVENANTS AND CONDITIONS OF THE FOREGOING
THIRTY-THREE ARTICLES OF THIS CONTRACT AND THE EXHIBITS HERETO, the
parties execute two (2) copies of this Contract, one of which shall
be retained by OPERATOR and one of which shall be retained by
CONTRACTOR.
OPERATOR CONTRACTOR
HARKEN COLOMBIA, LTD. XXXXXX XXXXXXXX.XXXXXXX
INTERNATIONAL LTD.
By: /s/ XXXXXX X. XXXX By: /s/ XXXXXX X. XXXXXXX
------------------------------ --------------------------------
Title: Director Title: Vice President
--------------------------- -----------------------------
Date: July 22, 1997 Date: July 21, 1997
---------------------------- ------------------------------
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EXHIBIT A
XXXXXX DRILLING COMPANY, INC. - RIG 223
RATES OF PAYMENT
HARKEN DE COLOMBIA, LTD.
----------------------------------------------------------------------------------------------------
ITEM DESCRIPTION FEE OR RATE IN U.S. $
----------------------------------------------------------------------------------------------------
1 Mobilization Fee 350,000.00
----------------------------------------------------------------------------------------------------
2. Operating Day Rate with three mud pumps available. 13,500.00
----------------------------------------------------------------------------------------------------
3. Moving Rate 12,150.00
----------------------------------------------------------------------------------------------------
4. Standby with Crews Rate
After 24 hours 12,150.00
----------------------------------------------------------------------------------------------------
5. Standby without Crews Rate 8,775.00
----------------------------------------------------------------------------------------------------
6. Mechanical Breakdown Rate
1st 24 hrs. per occurrence 13,500.00
After 24 hrs. per occurrence 8,775.00
----------------------------------------------------------------------------------------------------
7. Negligence Remedial Rate
1st 24 hrs. 13,500.00
After 24 hrs. thru 10 days 10,800.00
After 10 days 0.00
----------------------------------------------------------------------------------------------------
8. Force Majeure Rate 8,775.00
----------------------------------------------------------------------------------------------------
9. Early Term Fee 1,000.00
----------------------------------------------------------------------------------------------------
10. Demobilization Fee 250,000.00
----------------------------------------------------------------------------------------------------
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