INTERNATIONAL OIL & GAS, INC.
00000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
March 10, 2002
GoEnergy, Inc.
Xxxxx 0000,
0000 Xxxx Xxxxxxxx Xx.
Xxxxxxxxx, X.X. X0X 0X0
Re: Farmout Agreement
Hood County, Texas
Gentlemen:
This Farmout Agreement (the "Agreement") is dated effective March 10,
2002, by and between International Oil & Gas, Inc. ("Farmor") and
GoEnergy, Inc. ("Farmee"), whereby Farmee may acquire certain rights and
benefits in the drill-site and pro-rata leasehold subject hereto upon the
consideration to Farmor of $10,000.00 USD by Farmee and Farmee's compliance
with the terms and conditions hereof.
1. Farmout Acreage and Interests. Farmor is the record title owner to that
certain oil and gas leasehold interest covering certain lands in Hood County,
Texas, said leasehold interest being more particularly described in Exhibit
"A" attached hereto and made a part hereof for all purposes (the "Lease").
2. Well. On or before October 31, 2002, Farmee shall commence, or cause to
be commenced, the actual drilling of the Well ("Well") on the drill-site
location ("Location") from the legal location on the lands covered by the
Lease, and described in Exhibit "B" and shall thereafter continuously prosecute
such drilling operations in a diligent and workmanlike manner until the Well
reaches a depth of 6000 feet beneath the surface of the earth or a depth
sufficient to test the Barnet Shale formation, whichever is lesser.
Unless any unforeseen difficulties are encountered, the Well, as hereinafter
defined, drilled hereunder shall each be completed as a well capable of
producing oil and/or gas or plugged and abandoned as a dry hole within one
hundred twenty (120) days after the date actual drilling operations thereon
are commenced.
3. Substitute Well. If, during the drilling of the well provided for herein,
Farmee encounters a formation or other physical condition in the well which
renders further drilling impractical, Farmee may promptly plug and abandon the
well. Thereafter, Farmee shall, within sixty (60) days from the abandonment,
have the option, but not the obligation, to commence the actual drilling of a
substitute well at a legal location on the Lease within one hundred feet (100')
from the location of the well for which it is substituted.
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March 10, 2002
Any substitute well shall be commenced, drilled and otherwise prosecuted in
accordance with all the provisions hereof and shall be treated as if it were
the well for which it is substituted.
4. Well Assignment: In the event Farmee is successful in establishing oil
and/or gas production in paying quantities from the respective Well or
Subsequent Well, and otherwise complies with all of the provisions of this
Agreement and Farmee has otherwise complied with all of the provisions of this
Agreement, Farmor shall assign to Farmee, subject to the reservations and
exceptions set forth herein, Farmor's right, title and interest in and to the
Lease, from the surface to one hundred feet (100') below the deepest depth
drilled in the applicable Test Well but INSOFAR AND ONLY INSOFAR as the Lease
covers and effects production of oil and gas from the applicable Test Well
which is producing oil and/or gas in paying quantities. Any Wellbore Assignment
made pursuant to this Agreement shall be in a mutually acceptable form, contain
no warranty of title, and shall be made expressly subject to the terms of this
Agreement. Subject to Farmor's reserved Carried Working Interest as set forth
in Section 5.c. herein below, Farmee shall be delivered a seventy-eight percent
of eight-eighths (78% of 8/8) net revenue interest in the wellbore and the
production therefrom out of the Lease.
5. Reservations and Exceptions. Subject to the terms of this Agreement, any
Assignment earned by Farmee hereunder shall reserve and except to Farmor the
following:
a. Mutual rights of ingress and egress over the lands covered by the Lease;
b. All rights to the lands covered by the Lease in accordance with Section
8. herein below and all depths thereunder except for depths in each
wellbore from the surface to one hundred feet (100') below the deepest
depth drilled in the respective Well or Subsequent Well drilled by Farmee
hereunder;
c. Upon completion of the Well or Substitute Well as a Well producing oil
and/or gas in paying quantities, Farmor shall retain in such well the
following carried working interest through production in paying
quantities (being through first sales if a gas well and through
production into the tanks if a oil well), it being agreed and understood
that Farmee shall bear and pay for one hundred percent (100%) of the
cost of drilling, testing, completing and equipping the well under this
Agreement, to-wit:
Farmor's Reserved Carried Interest
Leasehold Net Revenue
Well Working Interest Interest
---- ---------------- --------
GoEnergy No. 1 25.00% 19.500%
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March 10, 2002
In the event the Lease does not cover a full mineral interest or Farmor
does not own all leasehold rights therein, then the carried working
interest reserved to Farmor herein shall be proportionately reduced.
6. Wellbore Assignments. It is agreed and understood that Farmee is granted
the right to earn an interest in the Lease INSOFAR AND ONLY INSOFAR as the
Lease covers depths from the surface to one hundred feet (100') below the
deepest depth drilled in each earning wellbore, and further, INSOFAR AND ONLY
INSOFAR as the Lease covers and effects production of oil and gas from the
applicable earning wellbore in accordance with this Agreement. For greater
certainty, it is expressly stated that in the event Farmee is due an assignment
from Farmor upon the successful drilling and completion of a well as a producer
of oil and/or gas in paying quantities as provided in this Agreement, Farmee is
being assigned an interest in the Lease only to the extent that the assignment
of the Lease is legally required to facilitate ownership of the production of
oil and gas from the applicable wellbore only. It is additionally provided
that in the event any Railroad Commission of Texas forms require the Farmee to
designate acreage for density, spacing, pro-ration or other purposes, Farmor
and Farmee shall mutually agree upon the designation of such acreage which
shall then be credited to Farmee for the limited purposes of Railroad
Commission of Texas filings, but Farmee shall have no other rights in the
Lease irrespective of the designation of same on the Railroad Commission of
Texas filings by Farmee. Finally, Farmor and Farmee agree that any
designation of acreage out of the Lease for the limited purposes of Railroad
Commission of Texas filings shall never exceed forty (40) acres. Irrespective
of any Wellbore Assignments made by Farmor to Farmee in accordance with the
terms of this Agreement, Farmee shall have the right to independently develop
all lands covered by the Lease, SAVE AND EXCEPT for the wellbore, and the oil
and gas production therefrom, which are earned by Farmee in accordance with
the terms of this Agreement. Notwithstanding any terms contained in this
Agreement to the contrary, in the event of a conflict between the terms
contained in this Section 6. and any other terms of the Agreement, the terms
of this Section 6. shall prevail and control.
7. Pooling. Farmee may pool or unitize all or any part of the lands covered
by the Lease with other lands or leases without the prior written consent of
Farmor.
8. Operations. Farmee shall conduct all operations hereunder at Farmee's
sole risk, cost and expense. All such operations shall be prosecuted with due
diligence, in a good and workmanlike manner and without any unreasonable delay.
When any well drilled hereunder reaches its projected total depth and has been
adequately tested, Farmee shall either complete same as a producer or plug and
abandon same in accordance with all applicable laws and regulations.
9. Assumption of Lease Obligations. Farmee shall commence and conduct all
operations contemplated by this Agreement in accordance with the provisions of
the Lease. If any well drilled hereunder is plugged and abandoned, Farmee shall
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March 10, 2002
restore the surface of the land to substantially the same condition as before
the commencement of operations thereon and to the satisfaction of the surface
owner and/or tenant.
10. Failure to Drill. Farmee shall not be liable in damages to Farmor for
failure to commence, drill, test, complete or equip Well (or any substitute
well) as herein provided, but any such failure shall result in the loss to
Farmee of all rights under this Agreement. The foregoing shall not be construed
to restrict, preclude or limit any rights Farmor may have, in law or in equity,
by virtue of Farmee's negligence or willful misconduct, or for any breach by
Farmee of any other obligation under this Agreement, including, without
limitation, the obligation to provide information to Farmor and to indemnify
Farmor as hereinafter provided.
11. Indemnity. Farmee shall, to the fullest extent permitted by applicable
law, protect, indemnify and hold Farmor harmless, free and clear of and from
all liens, claims, actions, liabilities, expenses and causes of action of every
kind, together with court costs and attorneys' fees, arising out of or in
connection with operations and activities conducted or caused by Farmee under
or pursuant to this Agreement, including all costs, expenses and obligations
of plugging and abandoning any well drilled hereunder; provided, however,
should Farmee become vested with a carried working interest as set forth in
Section 5.c. above, Farmor shall be responsible for its proportionate share
of costs associated with the plugging and abandoning of any such well.
12. Information. Farmor's authorized representatives shall at all times,
at their sole risk and expense, have full and free access to the rig floor
and to all information concerning any well drilled or reworked hereunder.
Farmee shall keep an accurate and detailed log of each well drilled or reworked
hereunder. Farmee shall also provide Farmor with a daily drilling report for
each well drilled hereunder. Farmee shall also furnish to Farmor at no cost
all information and data relating to each well hereunder including, without
limitation, well files, logs, cores, samples, tests and production reports.
All information relative to any xxxxx drilled hereunder shall be kept
confidential by Farmee and shall not be disclosed to any third parties,
other than working interest participants therein, without the prior consent
of Farmor.
13. Operating Agreement. Prior to the first sales of oil or gas production
from the first well to be successfully completed as a producer of oil or gas
hereunder, Farmor and Farmee shall enter into a mutually acceptable form of
joint operating agreement ("JOA"). In the event of a conflict between the
terms of this Agreement and the JOA, the terms of this Agreement shall prevail
and control.
14. Notices. All notices or communications provided for herein shall be
in writing and delivered to the parties' respective addresses set forth
below. The addresses of the parties for notice purposes are as follows:
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March 10, 2002
If to Farmor:
International Oil & Gas, Inc.
00000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xx. Xxxxx Xxxxxxx Xxxxxxx
Telephone: 000.000.0000
Telecopier: 972.588.3385
If to Farmee:
GoEnergy, Inc.
Xxxxx 0000,
0000 Xxxx Xxxxxxxx Xx.
Xxxxxxxxx, X.X. X0X 0X0
Attn: Mr. Strato Malamas
Telephone: 000.000.0000
Telecopier: 604.681.1118
15. Title Information. Farmor agrees to furnish to Farmee any and all title
information relating to the Lease and now in the possession of Farmor. Any
additional title work shall be conducted at Farmee's sole cost and expense,
and copies thereof will be promptly furnished to Farmor.
16. Insurance. Farmee shall maintain the insurance described on Exhibit "B"
attached hereto and incorporated herein for all purposes which covers the
drilling and completion of all xxxxx hereunder and any other operations
conducted by Farmee on the Lease. Farmee shall furnish Farmor with a
certificate of insurance evidencing same prior to commencing drilling
operations hereunder which shall expressly name Farmor as an additionally
insured party. Farmee shall make a bona fide effort to pay any shut-in royalty
payable on any well drilled by Farmee hereunder. In the absence of gross
negligence, neither party shall have any liability to the other party if the
shut-in royalties as provided above are not timely paid.
17. Well Abandonment, Takeover and Reassignment. Farmee agrees to notify
Farmor no later than thirty (30) days (or forty-eight (48) hours if a drilling
rig is on location) prior to plugging and abandoning the Respective Well or
Subsequent Well drilled on the Lease and Farmor shall have the option, but not
the obligation, to take over such well at its sole risk, cost and expense.
If Farmor elects to take over such well, Farmee shall promptly execute an
Assignment of such wellbore to Farmor (if Farmee holds record title) and
Farmee shall execute and file with the Railroad Commission of Texas Form P-4
transferring operatorship to Farmor. In the event Farmor exercises such
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March 10, 2002
option and completes said well as a producer of oil and/or gas in paying
quantities or as a water disposal or supply well, Farmee shall be deemed to
have waived any rights hereunder insofar as this Agreement pertains to such
well and any production therefrom. If Farmor elects to take over any such
well, then upon completion of operations, Farmor shall plug and abandon said
well at its sole expense and accept all liability therefor. If Farmor elects
not to take over any such well, Farmee shall plug and abandon said well at its
sole expense and accept all liability therefore; provided, however, if Farmor
has been vested with a carried working interest in accordance with Section 5.c.
Farmor shall bear and pay its proportionate share of such plugging costs.
Notwithstanding the foregoing, in the event a well which has been completed
as a producer of oil and/or gas in paying quantities should cease to produce,
Farmee shall reassign to Farmor, with special warranty of title, the wellbore
in which production ceased and the right to future production therefrom out of
the Lease, unless Farmee commences drilling or reworking operations thereon
within sixty (60) days from the date of cessation of production.
18. Relationship of Parties. This Agreement is not intended and shall not
be construed to create a mining partnership, joint venture, or any other type
of commercial partnership.
19. Time of Essence. Time is of the essence in this Agreement.
20. Applicable Law. With respect to all operations and other activities
under and concerning this Agreement, Farmee shall comply with all valid and
applicable laws, regulations, rules and ordinances of all federal, state,
local and other governmental entities having jurisdiction. This Agreement
shall be construed under and in accordance with the laws of the State of Texas.
21. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their successors and assigns. Farmee may
not assign this Agreement or any interest in the Lease earned hereunder, in
whole or in part, without prior written consent to such assignment by Farmor.
Any assignment of this Agreement or of any interest in the Lease, in whole or
in part, shall be made expressly subject to this Agreement.
22. Headings. The underlined headings used throughout this Agreement are
for administrative convenience only and shall be disregarded for purposes of
construing the Agreement.
23. Counterparts. This Agreement may be executed in counterpart and each
counterpart shall be deemed an original for all purposes and shall be binding
upon each party executing same whether or not executed by all parties.
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March 10, 2002
24. Deadline for Acceptance. If this Agreement is not signed by Farmee and
returned to Farmor on or before five (15) days from the date hereof, this
Agreement shall be voidable at the sole option of Farmor.
If the foregoing sets forth the terms of our agreement, please execute both
copies hereof in the space provided below and return one (1) copy on or before
the deadline provided in the above paragraph.
Very truly yours,
INTERNATIONAL OIL & GAS, INC.
AGREED TO AND ACCEPTED THIS
DAY OF MARCH 2002
------
INTERNATIONAL OIL & GAS, INC.
By:
-----------------------------
Xxxxxxxxx X. Xxxxxx,
Corporate Secretary, Director
GOENERGY, INC.
By:
-------------------
Strato Malamas,
President
GoEnergy Inc. - Page 8
March 10, 2002
EXHIBIT "A"
TO
FARMOUT AGREEMENT DATED MARCH 10, 2002
BY AND BETWEEN
INTERNATIONAL OIL & GAS, INC., AS FARMOR
AND GOENERGY, INC., AS FARMEE
The Lease
---------
Dated April 21, 1999, recorded Volume 1644 Page 239 Deed Report of Hood
County, from Xxxxx Xxxxxxx, as Xxxxxx, to JJB Oil & Gas Inc. and X.X.
Xxxxxx, as Leasee, insofar as the lease covers the 111.89 acres, more or
less, out of the Xxxxxxx Xxxxxx survey, more particularly describes in
said lease, save and except the 40 acre pro-ration unit surrounding the #1
Xxxxx Xxxxxxx Well, as said pro-ration unit is more particularly described
on the survey plat.
EXHIBIT "B"
TO
FARMOUT AGREEMENT DATED MARCH 10, 2002
BY AND BETWEEN
INTERNATIONAL OIL & GAS, INC., AS FARMOR
AND GOENERGY, INC., AS FARMEE
Insurance
---------
Farmee ("Operator") and any drilling contractor employed to drill a well
hereunder ("Drilling Contractor") shall carry the following insurance for
the benefit of the parties, to cover their operations hereunder:
TYPE OF INSURANCE LIMITS
----------------- ------
a. Workmen's Compensation Amount equal to full liability imposed
by laws of all non-monopolistic states
b. Employer's Liability
Bodily Injury $1,000,000 each accident
Occupational Disease $1,000,000 per person
Occupational Disease $1,000,000 policy limit
c. Comprehensive General Liability
Combines Single Limit Bodily
Injury and Property Damage $1,000,000 each occurrence
Products-Completed Operations $1,000,000 aggregate
Underground Resource
and Equipment $1,000,000 aggregate
d. Comprehensive Automobile
Liability $100,000 each person
$500,000 each occurrence
Combined Liability
Bodily Injury and Property
Damage $1,000,000 each occurrence
Excess Liability/
Umbrella Insurance $5,000,000 each occurrence
All insurance policies carried pursuant to this Agreement shall contain an
agreement by the insurance carrier issuing the policy to waive its rights of
subrogation with respect to all claims involving injury subject to the
Workmen's Compensation Law of any state and all claims involving any general
liability.
In consideration of the flat rate charg e to be made under the Accounting
Procedure by Operator for Operator's fully owned automobile equipment used for
Operator's Automobile Public Liability Insurance, no direct charge shall be
made by Operator to the joint account for premiums paid for Automobile Public
Liability Insurance.
In the event Operator or Drilling Contractor employs contractors to perform
any work hereunder, then and in such event, all such contractors shall be
required to carry the full compliance with the Workmen's Compensation Law of
the State of Texas and all rules and regulations promulgated thereunder.
All insurance carried by Operator (for the joint account) and Drilling
contractor hereunder shall include Farmor as an additional insured. Upon
request, Operator and Drilling Contractor shall furnish to Farmor a certificate
covering each policy of insurance issued pursuant to this Agreement.
