EXHIBIT 10.2
PARTICIPATION AGREEMENT
This Participation Agreement (the "Agreement") is entered into and made
effective this 8th day of February, 2006, by and between Ridgewood Energy
Corporation ("Ridgewood") and Newfield Exploration Company ("Newfield"),
hereinafer each may be sometimes referred to as "Party" or collectively as
"Parties".
WITNESSETH:
WHEREAS, El Paso Production GOM, Inc. ("El Paso") and Newfield entered into
a Participation Agreement ("PA") dated January 17, 2003, a copy of which is
attached hereto as Exhibit "B," and provides for, among other things, Newfield's
purchase from El Paso of an undivided fifty percent (50%) Record Title interest
in OCS-G 19799, covering Xxxxxx Island Block 364, LESS AND EXCEPT the E/2 of the
E/2 from the TB-8 Sand through 500' below the TB-11 Sand as defined therein,
(the "Lease"), resulting in each Party owning an undivided fifty percent (50%)
Record Title interest in the Lease; and
WHEREAS, El Paso and Newfield drilled and sidetracked the OCS-G 19799 No. 1
Well (now renamed the A-1 Well), logged the well and later completed the well in
the CS-1 Sand. Newfield anticipates recompleting the A-1 Well into the CM-5 Sand
at some later date; and
WHEREAS, the sands listed below are referenced herein based on their
correlations in the OCS-G 19799 Xx. 0 XX 0 XX Xxxxxx Xxx XXX (XXX, XXX, XXX,
XXX) Log ("Log") as follows:
CS-3 Sand - 13,212' MD (12,598' TVD) to 13,328' MD (12,710' TVD)
CS-1 Sand - 12,219' MD (11,653' TVD) to 12,274' MD (11,706' TVD)
CM-5 Sand - 11,473' MD (10,944' TVD) to 11,698' MD (11,157' TVD); and
WHEREAS, In support of the A-1 Well and El Paso's 100% owned xxxxx that
produce from the El Paso retained XX Xxxxx, El Paso and Newfield installed the
six slot EI 364 "A" Platform and process oil, gas and water from the A-1 Well at
the El Paso owned and operated EI 372 "A" Platform under a Production Handling
Agreement dated September 29, 2004 ("PHA");
WHEREAS, El Paso, as Operator, has submitted to Newfield, as non-operator,
El Paso's AFE No. 000000 ("AFE"), attached hereto as Exhibit "A", to drill the
"A-4 Well" as a directional well from the EI 364 "A" Platform to test the CS-3
Sand objective (primary) as seen in the Log and the CM-3 sand objective
(secondary);
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WHEREAS, Newfield desires to not share in the cost, risk and expense of the
proposed A-4 Well and Ridgewood desires to participate in and bear Newfield's
50% working interest share of the A-4 Well;
WHEREAS, if the A-4 Well is successful, Newfield will work with El Paso and
Ridgewood to provide processing for the A-4 Well through an amendment to the PHA
or through a similar PHA solely for the benefit of the A-4 Well, or its
Substitute Well, and
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the Parties agree as follows:
I. PROPOSED WELL
1. A-4 Well. Newfield will elect to participate under the AFE, and in turn,
Ridgewood will assume Newfield's 50% working interest and Newfield cost,
risk and expense along with all liabilities, benefits and obligations and
will participate in the drilling of the A-4 Well pursuant to the Offshore
Operating Agreement attached hereto as Exhibit "C" ("JOA") and the AFE.
2. Substitute Well. If, during the drilling of the A-4 Well, El Paso, as
operator, encounters mechanical difficulties, heaving shale, rock salt,
excessive saltwater flow, practicably impenetrable formations or other
conditions in the hole that would cause a reasonably prudent operator under
the same or similar circumstances to discontinue drilling and to either
mechanically bypass or plug and abandon such well, Ridgewood will have the
right, but not the obligation, to participate in actual drilling operations
on another well, or a bypass operation of the current well (hereinafer
referred to as a "Substitute Well"), to a bottom hole location and
objective coincident and pursuant to the JOA if such operation is commenced
during the same rig mobilization and is timely and properly commenced in
accordance with the JOA.
II. RETAINED OVERRIDING ROYALTY
1. ORRI. Newfield will retain a proportionately reduced 5% overriding royalty
interest (being 2.5%) before payout which will automatically escalate to a
proportionately reduced 15% overriding royalty interest after payout (being
7.5%). The overriding royalty retained herein will be paid in like manner
and time as the lessors royalty.
2. "Payout" as defined herein will be that moment in time when Ridgewood has
recovered from the proceeds from the sale of oil and/or gas from the A-4
Well, or its Substitute Well, 100% of the costs incurred in drilling,
testing, completing, equipping and operating the A-4 Well. The cost of any
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platform or facility modifications, all equipment, fixtures and personality
associated therewith and any flow line or pipeline connected thereto shall
also be included in determining Payout.
III. EARNING. Upon reaching the CS-3 Sand Objective Depth as described in the
AFE and JOA and upon Ridgewood's election to complete the A-4 Well, or its
Substitute Well, Ridgewood will earn and receive from Newfield an assignment and
xxxx of sale of Newfield's 50% interest in the A-4 Well and a 25% record title
interest in the Lease.
IV. RETAINED ZONES & INTEREST
1 Newfield believes that the A-4 Well will encounter the CS-1 Sand and CM-5
Sand found in the A-1 Well with potential take points in such sands located
less than 1000' from the A-1 Well; therefore, Newfield will retain the
stratigraphic equivalent of both the CS-1 Sand and the CM-5 Sand in the
area described immediately hereinbelow. Newfield reserves the CS-1 Sand and
the CM-5 Sand in the Lease limited to the area within a circle around the
A-1 Well with the circle radius of 2,000 feet, being measured from the
midpoint of the respective sand in the A-1 Well to the midpoint of the
equivalent sand in the proposed well.
2. Should El Paso or Ridgewood propose to recomplete the A-4 Well, or its
Substitute Well, or any future well to the CS-1 Sand or CM-5 Sand and such
Sand falls within the reserved area as described in the paragraph above,
then Newfield will be afforded the right to participate for Ridgewood's 50%
or 25% working interest or cost bearing share of the well by paying the
cost to recomplete the well to the retained sand. Ridgewood would then be
afforded the election under the JOA to participate for its respective
interest for the subsequent recompletion to the non-retained sand and / or
plugging and abandonment of the well.
3. Newfield retains a 25% record title interest in the Lease.
4. Newfield retains its current working interest in the El 364 Platform "A"
Platform subject to Section V. below.
V. LIABILITIES. Ridgewood will assume the plugging and abandonment liability
for the A-4 Well. Ridgewood will not earn an interest in, nor be responsible or
liable for, any existing xxxxx, platforms, facilities, pipelines and other
personal property located on or associated with the Lease by virtue of its
participation in the A-4 Well, but will assume a proportionate share of such
liability in the platform, facility, pipelines and other personal property
located on the Lease, with the exception of existing wellbores, should it
participate in subsequent xxxxx. This liability will be based on Ridgewood's
working interest share of any future xxxxx (specifically excluding the A-4 Well)
divided by the number of slots on the El 364 "A" Platform (i.e. 1 well @ 25% WI
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divided by 6 slots yields a 4.167% P&A liability). Ridgewood will not be
responsible for the payment of a slot fee to Newfield for the A-4 Well.
VI. ACCOUNTING and LEASE OPERATING EXPENSE
1. Once Newfield elects to participate in the A-4 Well under the AFE and JOA,
Newfield will forward the joint interest xxxxxxxx and "cash calls", if any,
to Ridgewood for its prompt payment to Newfield. Newfield will then pay El
Paso in accordance with the JOA. Once Ridgewood earns or the A-4 Well is
plugged and abandoned as a dry hole this accounting method will cease. In
the case of Ridgewood earning an interest herein, the Parties will work
with El Paso to have Ridgewood become a party to the JOA with its earned
interest such that it will be recognized as a non-operated working interest
owner thereunder.
2. Ridgewood will be responsible for its share of the allocated lease
operating expense relative to the A-4 Well for the well and platform and
facility operations necessary to support such well until it is plugged and
abandoned.
VII. WELL INFORMATION. Newfield will be afforded all well information,
inclusive of logs, cores, production reports, and any other data that may be
prepared or taken in conjunction with the A-4 Well, or its Substitute Well.
Newfield's well requirement sheet is attached hereto as Exhibit "E".
VIII. TIMING. El Paso plans to spud the A-4 Well using the Gorilla IV rig upon
receipt of said rig, which is estimated to be in second quarter of 2006. Should
El Paso not commence operations. pursuant to the AFE and as a result the AFE
expires, then this Participation Agreement will be null and void.
IX. NOTICES. All notices, statements and communications required or permitted
to be given or made hereunder shall be sent to the parties listed below by
United States Mail, postage prepaid, or facsimile as follows:
Ridgewood Energy Corporation
00000 Xxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Representative: Mr. W. Xxxx Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Newfield Exploration Company
000 Xxxxx Xxx Xxxxxxx Xxxx., Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
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Representative: Vice President, Land
Phone: (000) 000-0000
Fax: (000) 000-0000
X. EXHIBITS. All Exhibits referred to herein as being attached hereto are
hereby incorporated by reference and made a part hereof as if fully set out
herein. In the event any of the provisions of any Exhibit conflicts with this
Agreement, then the provisions of this Agreement itself shall control. However,
the inclusion herein of provisions relating to any particular subject matter
shall not be deemed an attempt to deal with such subject matter to the exclusion
of provisions in the JOA or other Exhibits relating to such matter unless the
context clearly otherwise requires.
Exhibit "A" El Paso's AFE No. 110655
Exhibit "B" PA
Exhibit "C" JOA
Exhibit "D" PHA
Exhibit "E" Newfield Well Requirement Sheet
XI. CONSENT TO TRANSFER INTEREST
1. Ridgewood may not assign its interest under this Participation Agreement
without the express written consent of Newfield, which may be withheld for
any reason. Once Ridgewood earns hereunder and becomes a recognized party
to the JOA, then the terms, covenants, conditions and provisions of this
Agreement will be binding upon and inure to the benefit of the respective
successors and assigns of the Ridgewood, and said terms, covenants,
conditions and provisions will be deemed to be covenants burdening and
running with the Lease.
2. With the execution of this Agreement, Newfield will seek the approval from
El Paso to the terms and conditions contained herein, including the
potential assignment from Newfield to Ridgewood of a 50% interest in the
A-4 Well and a 25% record title interest in the Lease.
XII. MISCELLANEOUS.
1. The parties agree that, with respect to the subject matter hereof, this
Agreement together with all Exhibits shall constitute the full and complete
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understanding and agreement of the Parties, and there are no other
understandings, obligations, relationships or agreements, written or oral.
2. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS EXCLUDING ANY CHOICE OF LAW
RULES THAT WOULD CAUSE THE LAW OF ANOTHER JURISDICTION TO APPLY. ANY LEGAL
PROCEEDING ARISING OUT OF OR IN RELATION TO THIS AGREEMENT SHALL BE BROUGHT
EXCLUSIVELY IN THE APPROPRIATE COURT (STATE OR FEDERAL) IN XXXXXX COUNTY,
TEXAS. THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF SAID COURT.
3. Each of the Parties shall, from time to time, and at all times, do all such
other and further acts and deliver and execute such other and further
instruments and documents as may be reasonably required in order to fully
perform and carry out the terms and provisions of this Agreement.
XIII. COUNTERPART EXECUTION. This Agreement may be executed in any number of
counterparts, no one of which needs to be executed by all Parties. If this
Agreement is executed in counterparts, all counterparts taken together shall
have the same effect as if all parties had signed the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective for
all purposes as of the day and year first above written.
Newfield Exploration Company Ridgewood Energy Corporation
By: /s/ Xxxx Xxxxx By: /s/ Xxxxx Xxxxxxx
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Xxxx Xxxxx
Title: General Manager - GOM Title: Land Manager
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Date: February 9, 2006 Date: February 10, 2006
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