1
EXHIBIT 10.36
PROPOSED TRADE STRUCTURE
RIMCO/TIGRE PROJECT
XXXXXXXXXX PARISH, LOUISIANA
Following are the terms, provisions and concepts which Xxxxxxx Oil &
Gas, L.P. ("BOG"), Tigre Energy Corporation ("Tigre") and Resource Investors
Management Company ("RIMCO") are in general agreement to with respect to their
exploration efforts in the RIMCO/Tigre Project:
1) The parties' initial ownership interests in the RIMCO/Tigre Project
(being ownership interests in all leasehold and other property of every kind
located within the lands described on Attachment 1 hereto) shall be as follows:
Party Ownership Interest
------- ------------------
Tigre 37.5%
RIMCO 37.5%
BOG 25.0%.
In order to cause BOG to have a 25% ownership interest in all of the existing
properties located within the RIMCO/Tigre Project, RIMCO and Tigre shall each
assign BOG an equal part (12.5% each) of the 25% ownership interest in all of
the existing properties. BOG's 25% ownership interest shall be subject to the
3% overriding royalty interest (ORRI) created in favor of Huerfano Corporation
("Huerfano"), proportionately reduced to BOG's 25% ownership interest. In
addition, BOG's 25% ownership interest shall be assigned subject to the 20%
back-in after payout ("APO") created pursuant to the terms of that certain
agreement dated September 13, 1994, by and between RIMCO and Tigre (the
"Original RIMCO/Tigre Agreement"), proportionately reduced to the 25% ownership
interest being assigned to BOG under this Section 1. However, RIMCO and Tigre
shall also assign BOG its 25% share of the same 20% back-in APO. This means
that the net effect is that BOG shall own the same amount of back-in APO that
its 25% ownership interest is subject to. It is BOG's intent that its 25%
ownership interest be merged with its 25% share of the back-in APO such that
BOG ends up with a 25% ownership interest not subject to the back-in after
payout. Similarly, BOG's 25% ownership interest in all existing and
subsequently acquired third-party interests within the RIMCO/Tigre Project
shall be subject to the 2% ORRI reserved by RIMCO and Tigre in the Original
RIMCO/Tigre Agreement, proportionately reduced to the 25% ownership interest
assigned to BOG in accordance with this Section 1. However, RIMCO and Tigre
shall also assign BOG its proportionate 25% share of the same 2% ORRI reserved
by RIMCO and Tigre. This means that the net effect is that BOG shall own the
same amount of the 2% ORRI that its 25% ownership interest is subject to. It
is BOG's intent that its 25% ownership interest be merged with its 25% share of
the 2% ORRI such that BOG ends up with a 25% ownership interest not subject to
any part of the 2% ORRI.
2) BOG, Tigre and RIMCO agree to acquire a license to a cumulative total
of 55 square miles of Fairfield Industries Incorporated ("Fairfield") 3-D
seismic data (the "Fairfield Data") and Geco-Prakla ("Geco") 3-D seismic data
(the "Geco Data") covering the lands located within the RIMCO/Tigre Project
(the 55 square miles of Geco Data and Fairfield Data to be licensed being
sometimes collectively referred to herein as the "Project Data"). BOG shall
pay all of the costs incurred to license the first 30 square miles of the
Project Data and, in the event that BOG causes any Project Data to be further
processed
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Proposed Trade Structure
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or re-processed, BOG shall also incur all of the costs incurred to process or
re-process the first 30 square miles of such Project Data that is processed or
re-processed. BOG, Tigre and RIMCO shall each pay their ownership interest
share (as set forth in the table contained in Section 1 above) of all of the
costs that are incurred to license the remaining 25 square miles (for a total
of 55 square miles) of the Project Data. Likewise, in the event that more than
30 square miles of Project Data is further processed or re-processed, the
parties shall pay their ownership interest share of the costs incurred to
further process or re-process such additional Project Data up to an additional
25 square miles at a maximum charge of $1,500 per square mile as a
processing/re-processing charge. BOG shall also provide Tigre and RIMCO with
interpretations of the Project Data without charge to Tigre or RIMCO, except as
provided below with respect to the right to recoup interpretational charges as
part of payout in the event that BOG exercises the option in Section 3 or 4
below, and except as provided in Section 5 below in the event that BOG does not
exercise the Section 3 or 4 option but Tigre or RIMCO assign part of their
interests to a third party for consideration.
3) Within 90 days of BOG's receipt of the Fairfield Data that is licensed
in accordance with the terms of Section 2 above, but in no event later than
July 1, 1997 (the end of such period being referred to as the "A Lands Election
Date"), BOG has the exclusive option to acquire all of Tigre's remaining 37.5%
ownership interest and 12.5% out of RIMCO's remaining 37.5% ownership interest
in that part of the RIMCO/Tigre Project which is outlined on the plat which is
attached hereto as Attachment 2 (the lands described on Attachment 2 being
referred to herein as the "A Lands" and the additional ownership interests in
the A Lands to be acquired by BOG from Tigre and RIMCO being referred to herein
as the "Additional A Lands Ownership Interest"), by committing to the
following:
* On or before the A Lands Election Date, BOG shall
notify Tigre and RIMCO, in writing, whether BOG is
electing to acquire the Additional A Lands Ownership
Interest. The Additional A Lands Ownership Interest
shall only be subject to (i) a proportionately
reduced share of the 3% ORRI due to Huerfano (being
reduced in proportion to the Additional A Lands
Ownership Interest being acquired -- i.e. 37.5% +
12.5% = 50%), (ii) a proportionately reduced share of
the 2% ORRI due to RIMCO and Tigre, and (iii) a
proportionately reduced share of the 20% back-in APO
ownership interest due to RIMCO and Tigre. By way of
example, if BOG elects to acquire the full Additional
A Lands Ownership Interest (i.e. 37.5% from Tigre and
12.5% from RIMCO), the Additional A Lands Ownership
Interest acquired by BOG would be subject to its
proportionate share of the 3% Huerfano ORRI and the
2% ORRI reserved to RIMCO and Tigre and the parties'
total respective ownership interests in the A Lands
within the RIMCO/Tigre Project would be as follows:
Ownership Interest BPO
----------------------
BOG 75%
RIMCO 25%
Ownership Interest APO
----------------------
BOG 65%
RIMCO 27.5%
Tigre 7.5%.
* In the event that BOG elects to acquire the
Additional A Lands Ownership Interest from Tigre and
RIMCO as set forth in this Section 3, a proportionate
part (being in proportion to the 37.5% additional
interest acquired from Tigre
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Proposed Trade Structure
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and the 12.5% additional interest acquired from
RIMCO) of BOG's interest in all subsequently acquired
leases and mineral interests covering the A Lands
shall be subject to the same proportionately reduced
(i) 3% ORRI due to Huerfano, (ii) 2% ORRI due to
RIMCO and Tigre, and (iii) 20% back-in ownership
interest APO due to RIMCO and Tigre.
* In the event that BOG elects to acquire the
Additional A Lands Ownership Interest from Tigre and
RIMCO, BOG shall reimburse each of Tigre and RIMCO
for a proportionate (being a percentage equal to the
amount of the additional ownership interest that is
to be acquired by BOG from such party) part of the
previously incurred land and geological costs ("sunk
costs") allocated to the A Lands (the sunk costs
allocated to the A Lands being set forth on
Attachment 4). In addition, in the event that BOG
elects to acquire the Additional A Lands Ownership
Interest as aforesaid, with respect to all prospect
costs, including but not limited to leasing, delay
rentals, drilling and completion operations
(including the initial test well operations) in which
BOG elects to participate (recognizing that BOG has
the obligation to participate in at least one initial
test well within the RIMCO/Tigre Project as set forth
below) within the A Lands, BOG shall pay for all of
the costs allocable to the Additional A Lands
Ownership Interest acquired from RIMCO and Tigre and
related to such operations until such time as payout
is reached ("BPO") with respect to all of the costs
incurred by BOG within the A Lands other than the
licensing and processing costs incurred by BOG with
respect to 30 square miles of the Project Data as
described in Section 2 above.
* In the event that BOG elects to acquire the
Additional A Lands Ownership Interest from Tigre and
RIMCO, BOG shall cause the drilling of an initial
test well to be commenced within the A Lands prior to
the expiration of nine months from the A Lands
Election Date; provided, however, that in the event
that BOG also elects to acquire additional ownership
interests in the B Lands as set forth in Section 4
below, BOG shall only be required to drill one
initial test well within either the A Lands or the B
Lands within such nine month period, but in the event
that BOG does not elect to cause the drilling of an
initial test well to be commenced within the other
portion of the RIMCO/Tigre Project (being either the
A Lands or the B Lands on which BOG did not drill the
first initial test well) within one year from the B
Lands Election Date, BOG shall assign back to RIMCO
and Tigre the additional ownership interests (being
either the Additional A Lands Ownership Interest or
the Additional B Lands Ownership Interest) that were
to be earned under this Section 3 or Section 4 below,
as applicable, in all of the interests located within
such undrilled portion.
* The payout determination for the 20% back-in APO
shall be based upon all of the expenditures (other
than the licensing and processing costs incurred by
BOG with respect to 30 square miles of the 3-D data
as described in Section 2 above) BOG has incurred
(including, without limitation, the reimbursements
paid to RIMCO and Tigre for their sunk costs
allocated to the A Lands and an
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interpretational charge of $1,750 per square mile of
seismic data licensed within the A Lands) within the
A Lands up to that point in time versus the oil
and/or gas sales revenues received by BOG from the A
Lands up to that specific point in time. Once a
point in time is reached when oil and/or gas sales
revenues received by BOG from the A Lands have
exceeded BOG's expenditures, payout shall be deemed
to have occurred and all future costs incurred within
the A Lands shall be borne and paid for on a heads-up
basis in accordance with the parties' respective
ownership interests after the back-in.
4) Within 90 days of BOG's receipt of the fully merged and processed Geco
Data (being merged and processed with the Fairfield Data) that is licensed in
accordance with the terms of Section 2 above, but in no event later than July
1, 1997 (the end of such period being referred to as the "B Lands Election
Date"), BOG has the exclusive option to acquire all of Tigre's remaining 37.5%
ownership interest and 12.5% out of RIMCO's remaining 37.5% ownership interest
in that part of the RIMCO/Tigre Project which is outlined on the plat which is
attached hereto as Attachment 3 (the lands described on Attachment 3 being
referred to herein as the "B Lands" and the additional ownership interests in
the B Lands to be acquired by BOG from Tigre and RIMCO being referred to herein
as the "Additional B Lands Ownership Interest"), by committing to the
following:
* On or before the B Lands Election Date, BOG shall
notify Tigre and RIMCO, in writing, whether BOG is
electing to acquire the Additional B Lands Ownership
Interest. The Additional B Lands Ownership Interest
shall only be subject to (i) a proportionately
reduced share of the 3% ORRI due to Huerfano (being
reduced in proportion to the Additional B Lands
Ownership Interest being acquired -- i.e. 37.5% +
12.5% = 50%), (ii) a proportionately reduced share of
the 2% ORRI due to RIMCO and Tigre, and (iii) a
proportionately reduced share of the 20% back-in APO
ownership interest due to RIMCO and Tigre. By way of
example, if BOG elects to acquire the full Additional
B Lands Ownership Interest (i.e. 37.5% from Tigre and
12.5% from RIMCO), the Additional B Lands Ownership
Interest acquired by BOG would be subject to its
proportionate share of the 3% Huerfano ORRI and the
2% ORRI reserved to RIMCO and Tigre and the parties'
total respective ownership interests in the B Lands
within the RIMCO/Tigre Project would be as follows:
Ownership Interest BPO
----------------------
BOG 75%
RIMCO 25%
Ownership Interest APO
----------------------
BOG 65%
RIMCO 27.5%
Tigre 7.5%.
* In the event that BOG elects to acquire the
Additional B Lands Ownership Interest from Tigre and
RIMCO as set forth in this Section 4, a proportionate
part (being in proportion to the 37.5% additional
interest acquired from Tigre and the 12.5% additional
interest acquired from RIMCO) of BOG's interest in
all subsequently acquired leases and mineral
interests covering the B Lands shall be subject to
the same proportionately reduced (i) 3% ORRI due to
Huerfano, (ii) 2% ORRI due to RIMCO and Tigre, and
(iii) 20% back-in ownership interest APO due to RIMCO
and Tigre.
* In the event that BOG elects to acquire the
Additional B Lands Ownership Interest from Tigre and
RIMCO, BOG shall reimburse each of Tigre and RIMCO
for a proportionate
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(being a percentage equal to the amount of additional
ownership interest that is to be acquired by BOG from
such party) part of the sunk costs allocated to the B
Lands (the sunk costs allocated to the B Lands being
set forth on Attachment 4). In addition, in the
event that BOG elects to acquire the Additional B
Lands Ownership Interest as aforesaid, with respect
to all prospect costs, including but not limited to
leasing, delay rentals, drilling and completion
operations (including the initial test well
operations) in which BOG elects to participate
(recognizing that BOG has the obligation to
participate in at least one initial test well within
the RIMCO/Tigre Project as set forth below) within
the B Lands, BOG shall pay for all of the costs
allocable to the Additional B Lands Ownership
Interest acquired from RIMCO and Tigre and related to
such operations BPO with respect to all of the costs
incurred by BOG within the B Lands other than the
licensing and processing costs incurred by BOG with
respect to 30 square miles of the Project Data as
described in Section 2 above.
* In the event that BOG elects to acquire the
Additional B Lands Ownership Interest from Tigre and
RIMCO, BOG shall cause the drilling of an initial
test well to be commenced within the B Lands prior to
the expiration of nine months from the B Lands
Election Date; provided, however, that in the event
that BOG also elects to acquire the Additional A
Lands Ownership Interest as set forth in Section 3
above, BOG shall only be required to drill one
initial test well within either the A Lands or the B
Lands within such nine month period, but in the event
that BOG does not elect to cause the drilling of an
initial test well to be commenced within the other
portion of the RIMCO/Tigre Project (being either the
A Lands or the B Lands on which BOG did not drill the
first initial test well) within one year from the B
Lands Election Date, BOG shall assign back to RIMCO
and Tigre the additional ownership interests (being
either the Additional A Lands Ownership Interest or
the Additional B Lands Ownership Interest) that were
to be earned under this Section 4 or Section 3 above,
as applicable, in all of the interests located within
such undrilled portion.
* The payout determination for the 20% back-in APO
shall be based upon all of the expenditures (other
than the licensing and processing costs incurred by
BOG with respect to 30 square miles of the 3-D data
as described in Section 2 above) BOG has incurred
(including, without limitation, the reimbursements
paid to RIMCO and Tigre for their sunk costs
allocated to the B Lands and an
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interpretational charge of $1,750 per square mile of
seismic data licensed within the B Lands) within the
B Lands up to that point in time versus the oil
and/or gas sales revenues received by BOG from the B
Lands up to that specific point in time. Once a
point in time is reached when oil and/or gas sales
revenues received by BOG from the B Lands have
exceeded BOG's expenditures, payout shall be deemed
to have occurred and all future costs incurred within
the B Lands shall be borne and paid for on a heads-up
basis in accordance with the parties' respective
ownership interests after the back-in.
5) The parties will establish an AMI covering the entire RIMCO/Tigre
Project (being the lands which are described and outlined on Attachment 1).
The parties shall each have the right to participate with their ownership
interest share (as it exists at the time of the acquisition of the acquired
interest) of any interests acquired within the AMI by paying their ownership
interest share of the costs incurred to acquire such interests. In the event
that a party elects not to acquire its ownership interest share of an acquired
interest, such party shall own no interest in the acquired interest. However,
with respect to all additional interests (being any land or mineral interests
that are acquired by BOG and which were not already held, owned or controlled
by Tigre or RIMCO prior to the date of this letter agreement and being
hereinafter referred to as "Newly Acquired Interests") acquired by BOG prior to
the Election Date, BOG shall also initially pay for all of Tigre's remaining
37.5% ownership interest share and 12.5% out of RIMCO's ownership interest
share of the costs incurred to obtain such Newly Acquired Interests. However,
in the event that BOG does not elect to acquire the additional ownership
interests from Tigre and RIMCO in the A Lands or the B Lands as set forth in
Sections 3 and 4 above, and Tigre or RIMCO subsequently assign or convey any of
their interests within the RIMCO/Tigre Project for any consideration whatsoever
(regardless of form or character), all of such consideration shall be paid to
BOG but only until such time as BOG has recouped such party's (being the
assigning party -- either RIMCO or Tigre) original ownership interest share of
the costs incurred to obtain Newly Acquired Interests within the portion(s)
(being the A Lands and/or B Lands) not selected by BOG together with an
interpretation charge of $1,750 per square mile of the Project Data which
covers lands in the portion of the RIMCO/Tigre Project not selected by BOG. If
any party hereto desires to release, surrender, abandon, or let expire any
prospect leases, the releasing party ("Releasing Participant") shall give all
of the other parties seventy-five (75) days advance written notice thereof and
the remaining parties shall have the right, at their option, to the Releasing
Participant's interest in such leases at no cost to the remaining parties.
Should such written notice not be given as provided above, then the Releasing
Participant shall be obligated to keep the lease in force by paying its
ownership interest share of the rental payments or other costs necessary to
keep the lease in effect.
6) BOG, RIMCO and Tigre have reviewed and approved the terms of the
License Agreements with Geco and Fairfield.
7) A separate JOA shall govern each individual geological prospect area
that is identified within the separate portions (A Lands or B Lands) of the
RIMCO/Tigre Project. This proposal is subject to BOG, RIMCO and Tigre reaching
agreement as to the terms of a mutually acceptable form JOA. However, the JOA
shall provide that if BOG is not obligated to carry such party for their share
of drilling costs under
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Section 3 or 4 above, and such party elects not to participate in the drilling
of the initial test well within the prospect area, such party shall relinquish
and assign all of its present and future interests in the applicable prospect
area to the parties participating in the initial test well. With respect to
subsequent xxxxx drilled within a prospect area, the JOA shall provide that if
a party elects not to participate in the drilling of the well, such party shall
relinquish and assign all of its interests in the in the proration unit
established for such well to the parties participating in the initial test well
until such time as a 600% payout is reached with respect to all of the costs
and expenses incurred to drill, complete, equip and operate the well.
8) BOG or its designee shall be named as the initial drilling operations
operator under each JOA.
The parties are in agreement with proceeding with good faith efforts
toward the negotiation and execution of a formal agreement containing the above
general concepts and additional detail as evidenced by their signature below.
TIGRE ENERGY CORPORATION
By: /s/ XXXXXXX X. XXXXXXXX
----------------------------------------
(name printed) XXXXXXX X. XXXXXXXX
-----------------------------
Its: President
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RESOURCE INVESTORS MANAGEMENT COMPANY
By:/s/ X. XXX XXXXXX
----------------------------------------
(name printed) X. XXX XXXXXX
-----------------------------
Its: Vice President
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XXXXXXX OIL & GAS, L.P.
By: /s/ XXX X. XXXXXXX
----------------------------------------
Xxx X. Xxxxxxx
President / CEO
