EXHIBIT 10.125
OPERATING AGREEMENT
ALLEGHENY AREA
Green Canyon 254, et al
OUTER CONTINENTAL SHELF - GULF OF MEXICO
OFFSHORE LOUISIANA
ENSERCH EXPLORATION, INC.,
READING & XXXXX DEVELOPMENT CO.,
MOBIL OIL CORPORATION, AND
MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC.
October 17, 1995
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TABLE OF CONTENTS
ARTICLE 1 CONTRACT APPLICATION . . . . . . . . . . . . . . . . . . . .
1.1 Application in General . . . . . . . . . . . . . . . . . . . . . .
1.2 Application to the Contract Area . . . . . . . . . . . . . . . . .
ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.1 Additional Testing, Coring, or Logging. . . . . . . . . . . . . . .
2.2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.3 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.4 Annual Operating Plan . . . . . . . . . . . . . . . . . . . . . . .
2.5 Appraisal Operations . . . . . . . . . . . . . . . . . . . . . . .
2.6 Appraisal Well . . . . . . . . . . . . . . . . . . . . . . . . . .
2.7 Authorization for Expenditure (AFE) . . . . . . . . . . . . . . . .
2.8 Confidential Data . . . . . . . . . . . . . . . . . . . . . . . . .
2.9 Contract Area . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.10 Cost(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.11 Deepen or Deepening . . . . . . . . . . . . . . . . . . . . . . . .
2.12 Deeper Drilling . . . . . . . . . . . . . . . . . . . . . . . . . .
2.13 Designated Prospect(s) . . . . . . . . . . . . . . . . . . . . . .
2.14 Development Operations . . . . . . . . . . . . . . . . . . . . . .
2.15 Development Phase . . . . . . . . . . . . . . . . . . . . . . . . .
2.16 Development Plan . . . . . . . . . . . . . . . . . . . . . . . . .
2.17 Development Well . . . . . . . . . . . . . . . . . . . . . . . . .
2.18 Disproportionate Spending Settlement . . . . . . . . . . . . . . .
2.19 Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.20 Exploratory Operations . . . . . . . . . . . . . . . . . . . . . .
2.21 Exploratory Well . . . . . . . . . . . . . . . . . . . . . . . . .
2.22 Fabrication AFE . . . . . . . . . . . . . . . . . . . . . . . . . .
2.23 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.24 Final Design AFEs . . . . . . . . . . . . . . . . . . . . . . . . .
2.25 General Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
2.27 Hydrocarbon(s) . . . . . . . . . . . . . . . . . . . . . . . . . .
2.28 Initial Exploratory Well . . . . . . . . . . . . . . . . . . . . .
2.29 Integrated Project Team (IPT) . . . . . . . . . . . . . . . . . . .
2.30 Joint Account . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.31 Lease(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.32 Non-Consent Operations . . . . . . . . . . . . . . . . . . . . . .
2.33 Non-Operating Party . . . . . . . . . . . . . . . . . . . . . . . .
2.34 Non-Participating Party . . . . . . . . . . . . . . . . . . . . . .
2.35 Non-Participating Party's Share . . . . . . . . . . . . . . . . . .
2.36 Objective Depth . . . . . . . . . . . . . . . . . . . . . . . . . .
2.37 Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.38 Participating Interest. . . . . . . . . . . . . . . . . . . . . . .
2.39 Participating Party . . . . . . . . . . . . . . . . . . . . . . . .
2.40 Producible Reservoir . . . . . . . . . . . . . . . . . . . . . . .
2.41 Producible Well . . . . . . . . . . . . . . . . . . . . . . . . . .
2.42 Production System . . . . . . . . . . . . . . . . . . . . . . . . .
2.42.1 Subsea Production System . . . . . . . . . . . . . . . . .
2.42.2 Initial Production System . . . . . . . . . . . . . . . .
2.42.3 Subsequent Production System . . . . . . . . . . . . . . .
2.43 Sidetrack or Sidetracking . . . . . . . . . . . . . . . . . . . . .
2.44 Subsequent Exploratory, Appraisal or Development Operation . . . .
2.45 Well Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.46 Withdrawing Party . . . . . . . . . . . . . . . . . . . . . . . . .
2.47 Working Interest . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 3 EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 4 SELECTION OF OPERATOR . . . . . . . . . . . . . . . . . . . . .
4.1 Designation of the Operator . . . . . . . . . . . . . . . . . . . .
4.2 Substitute Operator . . . . . . . . . . . . . . . . . . . . . . . .
4.3 Resignation of Operator . . . . . . . . . . . . . . . . . . . . . .
4.4 Removal of Operator . . . . . . . . . . . . . . . . . . . . . . . .
4.4.1 Removal Upon Assignment . . . . . . . . . . . . . . . . . . .
4.4.2 Removal for Cause by Vote . . . . . . . . . . . . . . . . . .
4.5 Selection of Successor Operator . . . . . . . . . . . . . . . . . .
4.6 Effective Date of Resignation or Removal . . . . . . . . . . . . .
4.7 Delivery of Property . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5 RIGHTS AND DUTIES OF OPERATOR . . . . . . . . . . . . . . . . .
5.1 Exclusive Right to Operate . . . . . . . . . . . . . . . . . . . .
5.2 Workmanlike Conduct . . . . . . . . . . . . . . . . . . . . . . . .
5.3 Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.4 Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . .
5.5 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.6 Reports to Government Agencies . . . . . . . . . . . . . . . . . .
5.7 Information to Participating Parties . . . . . . . . . . . . . . .
5.8 Completed Well Information . . . . . . . . . . . . . . . . . . . .
5.9 Information to Non-Participating Parties . . . . . . . . . . . . .
5.10 Cost Information . . . . . . . . . . . . . . . . . . . . . . . . .
5.11 Managing Production . . . . . . . . . . . . . . . . . . . . . . . .
5.11.1 Compensation . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 6 EXPENDITURES AND SECURITY RIGHTS . . . . . . . . . . . . . .
6.1 Basis of Charges to the Parties . . . . . . . . . . . . . . . . . .
6.2 Authorization for Expenditure and Supplemental AFE . . . . . . . .
6.2.1 Required Authorization . . . . . . . . . . . . . . . . . . .
6.2.2 AFE Overrun Notice . . . . . . . . . . . . . . . . . . . . .
6.2.3 Supplemental AFE for Cost Overruns for Xxxxx . . . . . . . .
6.2.4 Supplemental AFE for Cost Overruns on Integrated Project Team
AFE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2.5 Supplemental AFE for Cost Overruns on Final Design AFE . . .
6.2.6 Supplemental AFE for Cost Overruns on Fabrication AFE . . . .
6.2.7 Supplemental AFE for Cost Overruns on All Other AFEs . . . .
6.2.8 Supplemental AFE for Cost Overruns for All Supplemented AFEs
6.2.9 Further Operations During a Force Majeure . . . . . . . . . .
6.3 Security Provisions . . . . . . . . . . . . . . . . . . . . . . .
6.4 Financing Statement and Recording of this Agreement . . . . . . . .
6.5 Unpaid Charges . . . . . . . . . . . . . . . . . . . . . . . . . .
6.6 Contributions by Non-Delinquent Parties . . . . . . . . . . . . . .
6.7 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.8 Carved-out Interests . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 7 CONFIDENTIALITY OF DATA . . . . . . . . . . . . . . . . . . . .
7.1 Confidentiality Obligation . . . . . . . . . . . . . . . . . . . .
7.1.1 Exceptions to Confidentiality . . . . . . . . . . . . . . . .
7.1.2 Permitted Disclosures . . . . . . . . . . . . . . . . . . .
7.1.3 Limited Releases to Offshore Scout Association . . . . . . .
7.1.3.1 Well Location . . . . . . . . . . . . . . . . . . . .
7.1.3.2 Well Operations . . . . . . . . . . . . . . . . . . .
7.1.3.3 Well Completion Information . . . . . . . . . . . . .
7.1.4 Continuing Confidentiality Obligation . . . . . . . . . . .
7.2 Ownership of Confidential Data . . . . . . . . . . . . . . . . . .
7.2.1 Well Log and Data Trades . . . . . . . . . . . . . . . . . .
7.2.2 Ownership of Non-Consent Data . . . . . . . . . . . . . . . .
7.3 Access to the Lease and Rig . . . . . . . . . . . . . . . . . . . .
7.4 Development of Proprietary Information and/or Technology . . . . .
7.5 News Releases . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 8 VOTING, ELECTIONS, AND NOTICES . . . . . . . . . . . . . . . .
8.1 Overall Supervision of Business Affairs . . . . . . . . . . . . . .
8.1.1 General Matter Vote . . . . . . . . . . . . . . . . . . . . .
8.1.2 Elections . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2 Voting Procedures on General Matters and Elections . . . . . . . .
8.2.1 Voting Interest . . . . . . . . . . . . . . . . . . . . . . .
8.2.2 Vote Required . . . . . . . . . . . . . . . . . . . . . . . .
8.2.3 Second Opportunity for an Election . . . . . . . . . . . . .
8.3 Response Time for General Matters and Elections . . . . . . . . . .
8.3.1 Well Operation Proposal . . . . . . . . . . . . . . . . . . .
8.3.2 Production System Construction . . . . . . . . . . . . . . .
8.3.3 Other AFE Related Operations . . . . . . . . . . . . . . . .
8.3.4 Other Proposals . . . . . . . . . . . . . . . . . . . . . . .
8.3.5 Failure to Respond . . . . . . . . . . . . . . . . . . . . .
8.3.6 Suspensions of Production . . . . . . . . . . . . . . . . . .
8.3.7 Standby Charges . . . . . . . . . . . . . . . . . . . . . . .
8.4 Meetings of the Parties . . . . . . . . . . . . . . . . . . . . . .
8.5 Designation of Representatives . . . . . . . . . . . . . . . . . .
8.6 Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.7 Giving and Responding to Notices . . . . . . . . . . . . . . . . .
8.8 Content of Notice . . . . . . . . . . . . . . . . . . . . . . . . .
8.9 Agent for Mobil Entities . . . . . . . . . . . . . . . . . . . . .
8.10 Votes by Affiliates . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 9 GEOPHYSICAL OPERATIONS . . . . . . . . . . . . . . . . . . . .
9.1 Geophysical Operations . . . . . . . . . . . . . . . . . . . . . .
9.1.1 Conduct of Proprietary Geophysical Operations . . . . . . . .
9.1.2 Group-Shoot and Speculative Seismic Surveys . . . . . . . . .
ARTICLE 10 EXPLORATORY OPERATIONS . . . . . . . . . . . . . . . . . . . .
10.1 Application . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.2 Proposal of Exploratory Operations . . . . . . . . . . . . . . . .
10.2.1 Well Plan's Minimum Specifics . . . . . . . . . . . . . . .
10.2.2 Pre-Spud Technical Meeting and Revision of Well Plan . . . .
10.2.3 Timely Operation . . . . . . . . . . . . . . . . . . . . . .
10.2.4 Exploratory Operations Costs . . . . . . . . . . . . . . . .
10.2.5 AFE Overruns and Substitute Well . . . . . . . . . . . . . .
10.3 Subsequent Exploratory Operations at Objective Depth . . . . . . .
10.3.1 Response to Operator's Proposals . . . . . . . . . . . . . .
10.3.2 Counterproposals . . . . . . . . . . . . . . . . . . . . . .
10.3.3 Approval of Subsequent Exploratory Operations by All Parties
10.3.4 Approval of Subsequent Exploratory Operations by Fewer Than
All Parties . . . . . . . . . . . . . . . . . . . . . . .
10.3.5 Subsequent Exploratory Operations If Not Approved . . . . .
10.4 Deeper Drilling . . . . . . . . . . . . . . . . . . . . . . . . .
10.5 Plugging and Abandoning Costs . . . . . . . . . . . . . . . . . . .
10.6 Conclusion of Exploratory Operations . . . . . . . . . . . . . . .
10.7 Subsurface Team . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 11 APPRAISAL OPERATIONS . . . . . . . . . . . . . . . . . . . . .
11.1 Proposal of Appraisal Operations . . . . . . . . . . . . . . . . .
11.1.1 Well Plan's Minimum Specifics . . . . . . . . . . . . . . .
11.1.2 Pre-Spud Technical Meeting and Revision of Well Plan . . . .
11.1.3 Timely Operation . . . . . . . . . . . . . . . . . . . . . .
11.1.4 AFE Overruns and Substitute Well . . . . . . . . . . . . . .
11.2 Subsequent Appraisal Operations at Objective Depth . . . . . . . .
11.2.1 Response to Operator's Proposals . . . . . . . . . . . . . .
11.2.2 Counterproposals . . . . . . . . . . . . . . . . . . . . . .
11.2.3 Approval of Subsequent Appraisal Operations by All Parties .
11.2.4 Approval of Subsequent Appraisal Operations by Fewer . . . .
Than All Parties . . . . . . . . . . . . . . . . . . . . .
11.2.5 Subsequent Appraisal Operations If Not Approved . . . . . .
11.3 Election by Non-Participating Parties in Deepening or
Sidetracking Appraisal Operations . . . . . . . . . . . . . . . . .
11.4 Deeper Drilling . . . . . . . . . . . . . . . . . . . . . . . . . .
11.4.1 Limited Participation in Deeper Drilling . . . . . . . . . .
11.4.2 Multiple Completion Alternatives Above and Below the Deepest
Producible Reservoir . . . . . . . . . . . . . . . . . . .
11.4.3 Completion Attempts At or Above the Deepest Producible
Reservoir . . . . . . . . . . . . . . . . . . . . . . . .
11.5 Plugging and Abandoning Costs . . . . . . . . . . . . . . . . . . .
ARTICLE 12 DEVELOPMENT PLAN . . . . . . . . . . . . . . . . . . . . . . .
12.1 Phased Development Plans . . . . . . . . . . . . . . . . . . . . .
12.2 Proposal of Integrated Project Team . . . . . . . . . . . . . . . .
12.3 Integrated Project Team Election . . . . . . . . . . . . . . . . .
12.4 Proposal of a Development Plan . . . . . . . . . . . . . . . . . .
12.4.1 Alternative Development Plans . . . . . . . . . . . . . . .
12.5 Content of the Development Plan . . . . . . . . . . . . . . . . . .
12.6 Approval of a Development Plan . . . . . . . . . . . . . . . . . .
12.6.1 Amended Approval Requirement for Development Plans . . . . .
12.7 Final Design AFE . . . . . . . . . . . . . . . . . . . . . . . . .
12.7.1 Response to Final Design AFE . . . . . . . . . . . . . . . .
12.8 Fabrication AFE . . . . . . . . . . . . . . . . . . . . . . . . . .
12.8.1 Response to Fabrication AFE . . . . . . . . . . . . . . . .
12.9 Minor Modifications and Revisions to Development Plans . . . . . .
12.9.1 Minor Modifications to Development Plans . . . . . . . . . .
12.9.2 Revisions to Development Plans . . . . . . . . . . . . . .
12.10 Major Modifications to Development Plans . . . . . . . . . . . . .
12.11 Supplemental AFE for Cost Overruns on Fabrication AFE . . . . . . .
12.12 Termination of a Development Plan . . . . . . . . . . . . . . . . .
12.13 Timely Operations for Initial Production Systems . . . . . . . . .
12.14 Expansion, Modification, or Repair of an Initial Production System
12.15 Subsequent Development Phases . . . . . . . . . . . . . . . . . . .
12.16 Access to Existing Facilities . . . . . . . . . . . . . . . . . . .
12.17 Non-Consent Operations in Subsequent Development Phases . . . . . .
12.18 Annual Operating Plan . . . . . . . . . . . . . . . . . . . . . . .
12.18.1 Development and Submission of the Annual Operating Plan . .
12.18.2 Review of the Annual Operating Plan . . . . . . . . . . . .
12.18.3 Content of Annual Operating Plan . . . . . . . . . . . . .
12.18.3.1 Capital Budget . . . . . . . . . . . . . . . .
12.18.3.2 Expense Budget . . . . . . . . . . . . . . . .
12.18.3.3 Operator Forecasts and Informational Items . .
12.18.4 Effect of the Annual Operating Plan . . . . . . . . . . . .
ARTICLE 13 DEVELOPMENT OPERATIONS . . . . . . . . . . . . . . . . . . . .
13.1 Proposal of Development Operations . . . . . . . . . . . . . . . .
13.1.1 Operator's Counterproposal . . . . . . . . . . . . . . . . .
13.1.2 AFE Overruns and Substitute Xxxxx . . . . . . . . . . . . .
13.1.3 Timely Operations . . . . . . . . . . . . . . . . . . . . .
13.2 Subsequent Development Operations at Objective Depth . . . . . . .
13.2.1 Response to Operator's Proposal . . . . . . . . . . . . . .
13.2.2 Counterproposals . . . . . . . . . . . . . . . . . . . . . .
13.2.3 Approval of Subsequent Development Operations by All Parties
13.2.4 Approval of Subsequent Development Operations as a General
Matter by Fewer Than All Parties . . . . . . . . . . . . .
13.3 Election by Non-Participating Parties in Deepening or Sidetracking
Operations . . . . . . . . . . . . . . . . . . . . . . . . .
13.4 Deeper Drilling . . . . . . . . . . . . . . . . . . . . . . . . . .
13.4.1 Limited Participation in Deeper Drilling . . . . . . . . . .
13.4.2 Multiple Completion Alternatives Above and Below the Deepest
Producible Reservoir . . . . . . . . . . . . . . . . . . .
13.4.3 Completion Attempts At or Above the Deepest Producible
Reservoir . . . . . . . . . . . . . . . . . . . . . . . .
13.5 Plugging and Abandoning Costs . . . . . . . . . . . . . . . . . . .
ARTICLE 14 USE OF/AND ADDITIONAL FACILITIES AND GATHERING SYSTEMS . . . .
14.1 Approval of Additional Facilities . . . . . . . . . . . . . . . . .
14.2 Expansion, Modification or Repair of an Existing Production System
14.3 Use of Production System Located on a Designated Prospect . . . . .
14.4 Approval of Additional Facilities on a Designated Prospect . . . .
14.5 Contract Area Production . . . . . . . . . . . . . . . . . . . . .
ARTICLE 15 DISPOSITION OF PRODUCTION . . . . . . . . . . . . . . . . . .
15.1 Facilities to Take in Kind . . . . . . . . . . . . . . . . . . . .
15.2 Duty to Take in Kind . . . . . . . . . . . . . . . . . . . . . . .
15.3 Failure to Take in Kind . . . . . . . . . . . . . . . . . . . . . .
15.3.1 Failure to Take Oil . . . . . . . . . . . . . . . . . . . .
15.3.2 Failure to Take Gas . . . . . . . . . . . . . . . . . . . .
15.3.3 Operator's Disposition of Oil for Non-Taking Party . . . . .
15.3.4 Operator's Purchase of Oil of Non-Taking Party . . . . . . .
15.3.5 No Obligation to Market Share . . . . . . . . . . . . . . .
15.4 Expenses of Delivery in Kind . . . . . . . . . . . . . . . . . . .
ARTICLE 16 NON-CONSENT OPERATIONS . . . . . . . . . . . . . . . . . . .
16.1 Conduct of Non-Consent Operations . . . . . . . . . . . . . . . . .
16.1.1 Indemnity for Non-Consent Operations . . . . . . . . . . . .
16.1.2 Cost Information . . . . . . . . . . . . . . . . . . . . . .
16.1.3 Non-Consent Operations in Producible Well . . . . . . . . .
16.1.4 Non-Consent Operations in Producible Reservoirs . . . . . .
16.1.5 Multiple Completions . . . . . . . . . . . . . . . . . . . .
16.2 Acreage Forfeiture Provisions . . . . . . . . . . . . . . . . . . .
16.2.1 Exploratory Operations . . . . . . . . . . . . . . . . . .
16.2.2 Initial Production System . . . . . . . . . . . . . . . . .
16.2.3 Costs of Prior Operations . . . . . . . . . . . . . . . . .
16.3 Notices and Orders . . . . . . . . . . . . . . . . . . . . . . . .
16.4 Non-Consent Operations to Maintain a Designated Prospect . . . . .
16.4.1 Acreage Forfeiture in the Entire Designated Prospect . . . .
16.4.2 Acreage Forfeiture in a Portion of the Designated Prospect
16.4.3 Limitations on Acreage Forfeiture . . . . . . . . . . . . .
16.5 Percentage Recoupment for Non-Consent Operations . . . . . . . . .
16.5.1 Non-Consent Subsequent Exploratory Operations . . . . . . .
16.5.2 Non-Consent Appraisal Operations . . . . . . . . . . . . . .
16.5.3 Non-Consent Geophysical Operations, Integrated Project Team
and/or Final Design AFE . . . . . . . . . . . . . . . . .
16.5.4 Non-Consent Development Operations . . . . . . . . . . . . .
16.5.5 Non-Consent Subsequent Production System and Facilities . .
16.5.6 Additional Production Recoupment . . . . . . . . . . . . . .
16.5.7 Recoupment From Hydrocarbon Production . . . . . . . . . . .
16.6 Reversion of Interests to Non-Participating Party . . . . . . . . .
16.6.1 Dry Hole Reversion . . . . . . . . . . . . . . . . . . . . .
16.6.2 Deepening a Non-Consent Well . . . . . . . . . . . . . . . .
16.7 Operations From a Subsequent Non-Consent Production System . . . .
16.8 Allocation of Production System Costs to Non-Consent Operations . .
16.8.1 Investment Charges . . . . . . . . . . . . . . . . . . . . .
16.8.2 Operating and Maintenance Charges . . . . . . . . . . . . .
16.8.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . .
16.9 Underinvestment of Costs . . . . . . . . . . . . . . . . . . . . .
16.9.1 Settlement of Underinvestments . . . . . . . . . . . . . . .
16.9.2 Cash Settlement of Underinvestment . . . . . . . . . . . .
ARTICLE 17 WITHDRAWAL . . . . . . . . . . . . . . . . . . . . . . . . . .
17.1 Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.2 Limitations on Withdrawal . . . . . . . . . . . . . . . . . . . . .
17.2.1 During an Emergency . . . . . . . . . . . . . . . . . . . .
17.2.2 Current Operations and Voting . . . . . . . . . . . . . . .
17.2.3 Prior Expenses . . . . . . . . . . . . . . . . . . . . . . .
17.2.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 18 ABANDONMENT AND SALVAGE . . . . . . . . . . . . . . . . . . .
18.1 Abandonment of Xxxxx . . . . . . . . . . . . . . . . . . . . . . .
18.2 Facilities and Platform Salvage and Removal Costs: . . . . . . . .
18.3 Approval Not Required . . . . . . . . . . . . . . . . . . . . . . .
18.4 Abandonment Operations Required by Governmental Authority . . . . .
ARTICLE 19 RENTALS, ROYALTIES AND MINIMUM ROYALTIES . . . . . . . . . . .
19.1 Overriding Royalties and Burdens on Production . . . . . . . . . .
19.1.1 Subsequent Creation of Overriding Royalty . . . . . . . . .
19.1.2 Subordination of Overriding Royalties . . . . . . . . . . .
19.2 Payment of Rentals and Royalties . . . . . . . . . . . . . . . . .
19.2.1 Non-Participation in Payments . . . . . . . . . . . . . . .
19.2.2 Royalty Payments . . . . . . . . . . . . . . . . . . . . . .
19.2.3 Federal Environmental Tax . . . . . . . . . . . . . . . . .
ARTICLE 20 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20.1 Internal Revenue Provision: . . . . . . . . . . . . . . . . . . . .
20.2 Other Taxes and Assessments . . . . . . . . . . . . . . . . . . . .
20.2.1 Property Taxes . . . . . . . . . . . . . . . . . . . . . . .
20.2.2 Production and Severance Taxes . . . . . . . . . . . . . . .
ARTICLE 21 INSURANCE AND BONDS . . . . . . . . . . . . . . . . . . . . .
21.1 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21.2 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 22 LIABILITY, CLAIMS, LAWSUITS AND ALTERNATE DISPUTE RESOLUTION .
22.1 Individual Obligations . . . . . . . . . . . . . . . . . . . . . .
22.2 Notice of Claim or Lawsuit . . . . . . . . . . . . . . . . . . . .
22.3 Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22.4 Defense of Claims and Lawsuits . . . . . . . . . . . . . . . . . .
22.5 Liability for Damages . . . . . . . . . . . . . . . . . . . . . . .
22.6 Indemnification for Non-Consent Operations . . . . . . . . . . . .
22.7 Damage to Reservoir, Loss of Reserves and Profits . . . . . . . . .
22.8 Non-Essential Personnel . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 23 FARM-INS AND CONTRIBUTIONS . . . . . . . . . . . . . . . . . .
23.1 Contributions From Third Parties . . . . . . . . . . . . . . . . .
23.1.1 Cash Contributions . . . . . . . . . . . . . . . . . . . .
23.1.2 Acreage Contributions . . . . . . . . . . . . . . . . . . .
23.1.3 Data Contributions . . . . . . . . . . . . . . . . . . . .
23.2 Restricted Bidding . . . . . . . . . . . . . . . . . . . . . . . .
23.3 Area of Mutual Interst . . . . . . . . . . . . . . . . . . . . . .
23.3.1 Notification Required . . . . . . . . . . . . . . . . . . .
23.3.2 Right of Participation . . . . . . . . . . . . . . . . . . .
23.3.3 Election Period If Operations Are Not Required . . . . . . .
23.3.4 Election Period If Operations Are Required . . . . . . . . .
23.3.5 Assignments . . . . . . . . . . . . . . . . . . . . . . . .
23.3.6 Operating Agreement . . . . . . . . . . . . . . . . . . . .
23.3.7 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.3.8 Conflicting Agreements . . . . . . . . . . . . . . . . . . .
23.3.9 Bidding Agreement . . . . . . . . . . . . . . . . . . . . .
ARTICLE 24SUCCESSORS, ASSIGNS, AND SALE OF INTEREST . . . . . . . . . . . .
24.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . .
24.2 Effective Date of Transfer . . . . . . . . . . . . . . . . . . . .
24.3 Transferee Bound . . . . . . . . . . . . . . . . . . . . . . . . .
24.4 Assignments and Transfers of Working Interests . . . . . . . . . .
24.4.1 Exceptions to Prior Written Notice . . . . . . . . . . . . .
24.4.2 Effective Date of Assignments . . . . . . . . . . . . . . .
24.4.3 Minimum Transfer of Interest . . . . . . . . . . . . . . .
24.4.4 Form of Assignments . . . . . . . . . . . . . . . . . . . .
24.4.5 Limited Warranty. . . . . . . . . . . . . . . . . . . . . .
24.5 Preferential Right to Purchase . . . . . . . . . . . . . . . . . .
24.5.1 Notice of Proposed Transaction . . . . . . . . . . . . . . .
24.5.2 Exercise of Preferential Right to Purchase . . . . . . . . .
24.5.3 Transactions Not Affected by the Preferential Right to
Purchase . . . . . . . . . . . . . . . . . . . . . . . . .
24.5.4 Completion of the Transaction . . . . . . . . . . . . . . .
24.5.5 Special Circumstances Preferential Rights toPurchase . . . .
ARTICLE 25 FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . .
25.1 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 26 ADMINISTRATIVE PROVISIONS . . . . . . . . . . . . . . . . . .
26.1 Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . .
26.2 Time Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26.3 Waiver of Right to Partition . . . . . . . . . . . . . . . . . . .
26.4 Compliance With Laws and Regulations . . . . . . . . . . . . . . .
26.4.1 Applicable Law . . . . . . . . . . . . . . . . . . . . . . .
26.4.2 Severance of Invalid Provisions . . . . . . . . . . . . . .
26.4.3 Fair and Equal Employment . . . . . . . . . . . . . . . . .
26.5 Construction and Interpretation of This Agreement . . . . . . . . .
26.5.1 Headings for Convenience . . . . . . . . . . . . . . . . . .
26.5.2 Gender and Number . . . . . . . . . . . . . . . . . . . . .
26.5.3 Independent Representation . . . . . . . . . . . . . . . . .
26.6 Integrated Agreement . . . . . . . . . . . . . . . . . . . . . . .
26.7 Execution of Documents . . . . . . . . . . . . . . . . . . . . . .
26.7.1 Binding Effect . . . . . . . . . . . . . . . . . . . . . . .
26.7.2 Corporate Authority . . . . . . . . . . . . . . . . . . . .
26.7.3 Further Assurances . . . . . . . . . . . . . . . . . . . . .
26.7.4 Multiple Counterparts . . . . . . . . . . . . . . . . . . .
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OPERATING AGREEMENT
ALLEGHENY AREA
OUTER CONTINENTAL SHELF GULF OF MEXICO
OFFSHORE LOUISIANA
THIS AGREEMENT is made effective as of the 1st day of May, 1995, by
and between ENSERCH EXPLORATION, INC., READING & XXXXX DEVELOPMENT CO.,
MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST
INC., the signers hereof, herein referred to collectively as "Parties" and
individually as "Party."
WHEREAS, the Parties are co-owners of one or more of the OCS oil and
gas Leases, identified in Exhibit "A-2" (Description of Leases) and desire
to provide for the sharing of Costs, risks and benefits in the
exploration, development, appraisal, and operation of these Leases lying
within the Contract Area for the production of Hydrocarbons.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises exchanged and contained within this Agreement, the Parties agree
to explore, appraise, develop and operate the Leases in the Contract Area
according to the following provisions:
ARTICLE 1
CONTRACT APPLICATION
1.1 Application in General: This Agreement applies to the exploration,
appraisal, development and operation of the Leases in the Contract
Area for the production of Hydrocarbons therefrom.
1.2 Application to the Contract Area: This Agreement and all of its
Exhibits shall apply to the entire Contract Area and shall be deemed
a separate agreement as to each of the Designated Prospects as
defined in Article 2 below. If an MMS approved unit is formed
comprising any of the Leases herein, each of the Parties shall use
its best efforts to enter into a unit operating agreement containing
the same terms and provisions as this Agreement. Regardless of
which Leases are contained in any approved unit, if at all possible,
the new unit operating agreement shall continue to be deemed a
separate agreement as to each Designated Prospect. All of the
rights and obligations in and under the Lease(s) comprising each of
the Designated Prospects, and all property and the right to produce
Hydrocarbons from each of the Designated Prospects shall be owned by
the Parties in accordance with and subject to the terms and
provisions of this Agreement.
ARTICLE 2
DEFINITIONS
As used in this Agreement (or in the Exhibits attached hereto), the
initially capitalized terms listed below shall have the following
meanings:
2.1 Additional Testing, Coring, or Logging: shall mean any testing
(excluding production testing), coring or logging which is in
addition to that approved by virtue of any previously approved AFE.
2.2 Affiliate: shall mean any corporation, limited liability company or
partnership (including a limited partnership) or other entity owned
or controlled by a Party to this Agreement. The term "Affiliate" of
a Party includes any parent corporation, partnership or other entity
that directly or indirectly owns or controls fifty percent (50%) or
more of the outstanding stock (or other interests) having the right
to vote for directors of a Party to this Agreement, and also
includes any other corporation, partnership or other entity in which
the parent corporation of a Party directly or indirectly owns or
controls fifty (50%) of the voting stock (or other interests) in the
other corporation, partnership or other entity.
- Ownership or control by a Party is deemed to exist if a Party to
this Agreement directly or indirectly owns or controls fifty
percent (50%) or more of the outstanding stock of the corporation
having the right to vote for directors of the corporation or
fifty percent (50%) or more of the interests in the partnership
or other entity.
- The stock (or interests in a partnership or other entity) owned
or controlled by a Party shall include all stock (or other
interests) directly or indirectly owned or controlled by any
other corporation, partnership or other entity owned or
controlled by a Party to this Agreement.
2.3 Agreement: shall mean this ALLEGHENY AREA Operating Agreement,
together with its attached Exhibits set out in Article 3.1 hereof.
2.4 Annual Operating Plan: shall mean the operational plan and estimate
of Costs for operations in the next ensuing calendar year as
described in Article 12.18 (Annual Operating Plan). This is not the
Unit Operating Plan as required in Article IX of the Green Canyon
254 Unit Agreement.
2.5 Appraisal Operations: shall mean all operations conducted within a
Designated Prospect subsequent to Exploratory Operations and
proposed pursuant to Article 11.0 (Appraisal Operations). The terms
Appraisal Operations and Appraisal Well are interchangeable
throughout this Agreement unless the context requires otherwise.
2.6 Appraisal Well: shall mean any well proposed and drilled as an
Appraisal Operation.
2.7 Authorization for Expenditure (AFE): shall mean any written
proposal in sufficient detail as required in Article 8.8 (Content of
Notice) made by a Party for the purpose of describing an operation
being proposed and estimating the Costs to be incurred. The AFE,
when executed by a Party, evidences that Party's Election to
participate in the proposed operation and grants the Operator the
authority to commit or expend funds, pursuant to this Agreement, for
the account of the Participating Parties. Any AFE which proposes
more than one operation shall be considered a separate AFE as to
each operation only for those operations for which Parties are
permitted separate Elections under the terms of this Agreement.
2.8 Confidential Data: shall mean all proprietary geophysical,
geological, geochemical, drilling or engineering data owned or
developed by the Parties relating to operations conducted within the
Contract Area including data owned or developed by any Party prior
to the effective date of this Agreement. The term shall also
include (but may not be limited to):
- certain commercial, contractual or financial information;
- analyses, compilations, maps, models, interpretations or other
documents that reflect or incorporate Confidential Data;
- both originals and copies of geological and geophysical data, and
well logs; and
- all other subsurface, seismic and related data acquired or
derived from operations conducted pursuant to this Agreement.
The provisions of this Agreement with respect to Confidential Data
shall not be applicable to "Confidential Information" as that term
is defined in Exhibit "G" (Integrated Project Team and Technology
Sharing).
2.9 Contract Area: shall mean the OCS Leases described in Exhibit "A-2"
(Description of Leases) which are graphically depicted in Exhibit
"A-1" (Contract Area and Designated Prospect Outlines) as to all
depths.
2.10 Cost(s): shall mean the monetary amount of all expenses incurred by
the Operator and the Participating Parties for (or on account of)
any and all operations conducted pursuant to this Agreement. The
terms expenses , expenditures , and Costs may be used
interchangeably in this Agreement.
2.11 Deepen or Deepening: shall mean any operation to drill an existing
well (including sidetracking a well) deeper than the stratigraphic
equivalent of the deepest formation previously authorized to be
encountered in such well.
2.12 Deeper Drilling: shall mean the drilling of a well below the
deepest Producible Reservoir penetrated by a Producible Well within
the same Designated Prospect.
2.13 Designated Prospect(s): shall mean those Leases or portions
thereof, grouped as the prospect areas described in Exhibit "A-1"
(Contract Area and Designated Prospect Outlines) attached hereto.
The Parties intend that the boundaries of the Designated Prospects
shall each cover as large an area as is practical using sound
geological and geophysical principles. The Designated Prospect areas
shall be periodically reviewed by the Parties, and, based upon
drilling results and/or other information obtained, may be amended
by the unanimous agreement of the Parties during such review.
2.14 Development Operations: shall mean all operations conducted
pursuant to a Development Plan.
2.15 Development Phase: shall mean Development Operations associated
with the installation of a Production System within the Designated
Prospect.
2.16 Development Plan: shall mean the plan for installing a Production
System and developing and producing Hydrocarbons from the Designated
Prospect as described in Article 12 (Development Plan). This is not
the Development Plan as required by the MMS under 30 CFR 250.34
Section (a) nor the DOCD required under 30 CFR 250.34 Section
(d)(1).
2.17 Development Well: shall mean any well proposed within a Designated
Prospect subsequent to the approval of a Development Plan for such
Designated Prospect.
2.18 Disproportionate Spending Settlement: shall mean the financial
settlement of all or a portion of the percentage recoupment by a
Non-Participating Party paying a disproportionate amount of Costs in
the next ensuing operation in which the Non-Participating Party
makes an Election to participate.
2.19 Election: shall mean either: (i) a written decision by a Party
either to participate or to become a Non-Participating Party in a
proposed operation (including the AFE associated with the operation)
or (ii) a failure of a Party to respond within the time limits set
out in Article 8 (Voting, Elections, and Notices) or elsewhere as
provided herein. An Election to participate is evidenced by a
Party's execution of the AFE. An Election not to participate
(become a Non-Participating Party) is evidenced either by a Party's
written response against a proposal or such Party's failure to
timely execute the AFE within the time limits set out in Article 8,
or elsewhere herein, as applicable.
2.20 Exploratory Operations: shall mean all operations (including any
subsequent Exploratory Operation) conducted by one or more Parties
in the drilling, testing and completing of the first well (including
a substitute well for such well) in a Designated Prospect. With
respect to the Green Canyon 254 Designated Prospect, the Enserch
Exploration, Inc. Green Canyon 254 OCS-G 7049 #5 Well shall be
deemed an Exploratory Operation.
2.21 Exploratory Well: shall mean any well proposed and drilled as an
Exploratory Operation by one or more of the Parties hereunder. The
terms Exploratory Operations and Exploratory Well are
interchangeable in this Agreement unless the context requires
otherwise.
2.22 Fabrication AFE: shall mean the individual AFEs as described in
Article 12.8 (Fabrication AFE) collectively submitted pursuant to an
approved Development Plan for the procurement, fabrication,
construction and installation of a Production System.
2.23 Facilities: shall mean all production processing and handling
equipment beyond the wellhead connections installed for the benefit
of a Designated Prospect(s) to handle or service Hydrocarbon
production from such Designated Prospect(s). Facilities also
include (but are not limited to) the flowlines and gathering lines
that transport the Hydrocarbons from the wellhead to the processing
and treating equipment but exclude pipelines used to move
Hydrocarbons to shore.
2.24 Final Design AFEs: shall mean the individual detailed design AFEs,
collectively submitted pursuant to an approved Development Plan
pursuant to Article 12.5 (Content of the Development Plan).
2.25 General Matters: shall mean any matter decided by a vote of the
Parties in accordance with Article 8.2 (Voting Procedures on General
Matters and Elections). A proposal as a General Matter may or may
not include an AFE. If the nature of the proposal requires that an
AFE be submitted with the proposal, an affirmative vote for such
proposal shall be evidenced by a Party s execution of the AFE for
the proposal.
2.26 Geophysical Operations: shall mean all operations associated with
the acquisition of geophysical data over any part of the Contract
Area pursuant to Article 9 (Geophysical Operations).
2.27 Hydrocarbon(s): shall mean the oil and gas and associated liquid
and gaseous by-products which may be produced from a wellbore
located on a Designated Prospect.
2.28 Initial Exploratory Well: Deleted.
2.29 Integrated Project Team (IPT): shall mean the group of management,
supervisory, technical, and support personnel from the Parties
assigned to assist the Operator with preparing a Development Plan
for each Designated Prospect and for the planning, design,
engineering, and installation of a Production System for each
Designated Prospect as further provided for in Exhibit "G"
(Integrated Project Team and Technology Sharing). The IPT shall be
formed pursuant to Article 12 (Development Plan).
2.30 Joint Account: shall mean the account maintained by the Operator
showing the charges paid and credits received in the conduct of the
operations hereunder and which are to be shared by the Parties as
provided in this Agreement.
2.31 Lease(s): shall mean each of the OCS federal oil and gas Leases (or
portion thereof) identified on Exhibits "A-1" (Contract Area and
Designated Prospect Outlines) and "A-2" (Description of Leases)
attached hereto.
2.32 Non-Consent Operations: shall mean Exploratory Operations,
Appraisal Operations, Development Operations or other operations or
matters for which an AFE is approved and, for which one or more
Parties, having the contractual right to do so, makes an Election or
is deemed to have made an Election not to participate in the
proposed operation or matter and where the Participating Parties
proceed to conduct the operation at their sole Cost, risk, and
benefit pursuant to provisions of Article 16 (Non-Consent
Operations).
2.33 Non-Operating Party: shall mean for each Designated Prospect any
Party to this Agreement other than the Operator (or a substitute
Operator).
2.34 Non-Participating Party: shall mean any Party to this Agreement
who, having the contractual right to do so, makes an Election or is
deemed to have made an Election not to participate in the proposed
operation and who is subject to the provisions of Article 16 (Non-
Consent Operations).
2.35 Non-Participating Party's Share: shall mean the share of Working
Interest, Costs and rights to produce Hydrocarbons that a Non-
Participating Party would have assumed or received if all Parties
had made an Election to participate in the proposed operation.
2.36 Objective Depth: shall mean, for any well, the shallower of the
total footage to be drilled (as measured in true vertical depth) or
the penetration by the drill bit of a depth sufficient to test to
the stratigraphic equivalent of the base of the deepest target
formation or interval. Said depth, formation or interval (together
with a bottomhole location) shall be set forth in the proposed Well
Plan and AFE.
2.37 Operator: shall mean the Party identified in Exhibit A-3"
(Operator Designations) designated to conduct all operations in a
particular Designated Prospect pursuant to the terms of this
Agreement. The term shall also refer to any successor or substitute
Operator selected pursuant to Article 4.2 (Designation of Operator
for Development Operations), Article 4.3 (Substitute Operator) or
Article 4.6 (Selection of Successor Operator).
2.38 Participating Interest: shall mean a Participating Party's
interest of participation in the Costs, risks and benefits
(including rights to Hydrocarbons) of an operation conducted
pursuant to this Agreement; that is, the proportion that the Party's
Working Interest bears to the total Working Interest of all the
Participating Parties in any operation (unless a different Cost
sharing basis has been agreed upon by the Participating Parties in
such operation).
2.39 Participating Party: shall mean a Party who makes an Election to
participate in sharing the Costs, risks and benefits (including
rights to Hydrocarbons) of an operation conducted pursuant to this
Agreement. If the Parties have agreed upon a different Cost sharing
arrangement, those Parties shall be considered Participating Parties
for all purposes of this Agreement.
2.40 Producible Reservoir: shall mean a Hydrocarbon accumulation into
which a Producible Well has been drilled and which is separated from
and not in oil or gas communication with any other accumulation and
identified as a Hydrocarbon bearing accumulation expected to be
developed under any Development Plan or any other accumulation from
which Hydrocarbons are ultimately produced.
2.41 Producible Well: shall mean a well producing Hydrocarbons or, if
not producing, a well that shall meet, according to either the MMS
or the Participating Parties, the well producibility criteria set
forth in Title 30 CFR 250.11 (effective May 31, 1988) or any
succeeding order issued by an appropriate governmental authority.
2.42 Production System: shall mean an offshore structure (whether fixed,
compliant, subsea, or floating) and all associated components
thereof including drilling components thereon, the associated
Facilities as defined in Article 2.23, and risers which are used for
the production of Hydrocarbons from the Designated Prospect. This
term shall also include the following defined terms:
2.42.1 Subsea Production System: shall mean an offshore subsea
structure (i.e., where multiple xxxxx or a single well
could be utilized) or template and the components thereof
(including flow lines and control systems) which are
attached to the seafloor for use in obtaining Hydrocarbon
production from a well not drilled from a Production System
and routed to the Production System;
2.42.2 Initial Production System: shall mean the Production System
for the Designated Prospect included in the first approved
Development Plan;
2.42.3 Subsequent Production System: shall mean any new or
expanded Production System proposed after the installation
of the Initial Production System for the Designated
Prospect.
2.43 Sidetrack or Sidetracking: shall mean any operation to
directionally control and/or intentionally deviate a well so as to
change the bottomhole location to another bottomhole location not
deeper than the stratigraphic equivalent of the original Objective
Depth, unless such intentional deviation is done to straighten the
hole, drill around junk or to overcome other mechanical
difficulties.
2.44 Subsequent Exploratory, Appraisal or Development Operation: shall
mean any operation conducted subsequent to its respective
Exploratory, Appraisal, or Development Well having reached its
Objective Depth, but prior to the plugging and abandonment of such
Exploratory, Appraisal or Development Well.
2.45 Well Plan: shall mean a plan for any proposed Exploratory,
Appraisal or Development Well which contains at least the
information defined in Article 10.2.1 (Well Plan's Minimum
Specifics).
2.46 Withdrawing Party: shall mean a Party that withdraws from this
Agreement under the conditions defined in Article 17.1 (Withdrawal),
or is deemed to have withdrawn under Article 16.2 (Acreage
Forfeiture Provisions).
2.47 Working Interest: shall mean the interests of the Parties as
reflected on Exhibit A (Working Interests of the Parties and
Representatives) as such interest may be adjusted from time to time
pursuant to the terms and provisions of this Agreement.
ARTICLE 3
EXHIBITS
3.1 Exhibits: All references in this Agreement to "Exhibits" without
further qualification shall mean the Exhibits listed below and
attached to this Agreement. Each of the Exhibits listed below are
made a part of this Agreement and shall be deemed incorporated into
the body of this Agreement by this reference, as completely as if
the full text of each Exhibit were contained within the text of this
Agreement. If the provisions of any of the Exhibits conflict with
any provisions of this Agreement, the provisions of this Agreement
shall prevail with exception of Exhibits "C , D , and G" , where
the conflicting provisions of Exhibits C , D , and G will
prevail.
Exhibit "A" Working Interests of the Parties and
Representatives
Exhibit "A-1" Contract Area and Designated Prospect Outlines
Exhibit "A-2" Description of Leases
Exhibit "A-3" Operator Designations
Exhibit "A-4" Area of Mutual Interest Outline
Exhibit "B" Offshore Insurance Provisions
Exhibit "C" Accounting Procedure
Exhibit "D" Gas Balancing Agreement
Exhibit "E" Equal Employment Opportunity Provision and
Certification of Nonsegregated Facilities
Exhibit "F" News Release Guidelines
Exhibit "G" Integrated Project Team and Technology Sharing
Exhibit "H" Production Handling
Exhibit "J" Security Instruments
Exhibit "K" Joint Bidding Agreement
ARTICLE 4
SELECTION OF OPERATOR
4.1 Designation of the Operator: The Party designated on Exhibit "A-3"
(Operator Designations) will be the Operator of the associated
Designated Prospect and shall conduct all operations within such
Designated Prospect for the Joint Account of the Parties. This
designation of operatorship is subject to approval by the Minerals
Management Service (MMS) and the Parties agree to promptly execute
and file such documents as may be required to gain approval of this
designation of operatorship.
4.2 Substitute Operator: If the Operator becomes a Non-Participating
Party in a Non-Consent Operation, any Participating Party may be
selected by the Participating Parties as a General Matter and
designated as the substitute Operator for the Designated Prospect,
with the same authority, rights, obligations and duties as the
Operator, except when:
(a) the drilling and other contracts for equipment and Facilities
to be utilized on the Non-Consent Operation are not
assignable; or
(b) the operation is conducted from a Production System being
operated by the Operator.
If no substitute Operator is designated by the Participating
Parties, then the Operator, at its option, shall conduct such Non-
Consent Operations at the sole risk, Costs and expense of the
Participating Parties. If the Operator conducts Non-Consent
Operations on behalf of the Participating Parties (when the Operator
is a Non-Participating Party), the Operator shall furnish the
Participating Parties an estimate of the Costs of the Non-Consent
Operation. The Operator shall not be required to proceed with such
Non-Consent Operations unless and until the Costs thereof have been
advanced to it by the Participating Parties, to the end that the
Operator need not expend any of its own funds for such Non-Consent
Operation. If a Non-Consent Operation conducted by a substitute
Operator is completed or results in a producing well, said well
shall be turned over to the Operator for future operations within
thirty (30) days of completion of such operations.
4.3 Resignation of Operator: The Operator may resign at any time by
giving written notice to the Parties; provided, however, the
Operator shall not resign during a Force Majeure situation described
in Article 25.1 (Force Majeure). If the Operator no longer owns an
interest in the Designated Prospect, the Operator shall be deemed
to have resigned without any action by the Non-Operating Parties
other than the selection of a successor Operator.
4.4 Removal of Operator: The Operator may be removed either as a result
of an assignment of all or a portion of the Operator's Working
Interest in such Designated Prospect or for good cause under the
following circumstances.
4.4.1 Removal Upon Assignment: If the Operator assigns a ten
percent (10%) or greater Working Interest in a Designated
Prospect (excluding any interest assigned to an Affiliate)
which reduces the Operator's Working Interest in the
Designated Prospect to less than the Working Interest of
another Non-Operating Party (and in Mobil s case, the combined
Mobil ownership), whether accomplished by single or multiple
assignments, then the Operator may be removed by vote of the
Parties as a General Matter. Provided however, the Operator
shall not be removed solely on the basis of a reduced Working
Interest when the reduced Working Interest is equal to or
larger than the next largest Working Interest of a Party (and
in Mobil s case, the combined Mobil ownership) in the
Designated Prospect.
4.4.2 Removal for Cause by Vote: The Operator shall resign upon the
unanimous vote of the Non-Operating Parties in the event this
is a two or three-party Agreement or the majority vote of the
Non-Operating Parties if the Agreement applies to four (4) or
more Parties, if:
(a) the Operator commits an event of default as hereafter
defined and fails to commence to cure such default
within thirty (30) days after receiving notice of such
default. An event of default is defined as a material
breach of this Agreement and includes, but is not
limited to failure to pay timely contract invoices as
they become due, failure to keep the property free of
liens (except as provided herein), or a failure to pay
properly in accordance with Exhibit C .
(b) the Operator commits an act of gross negligence or
willful misconduct; or,
(c) the Operator is unable to meet the standards of
operation contained in Articles 5.2 (Workmanlike
Conduct), 5.3 (Drilling), and 5.6 (Reports to
Government Agencies).
4.5 Selection of Successor Operator: Upon resignation or removal of the
Operator, a successor Operator shall be selected by the Parties as a
General Matter. If the resigned or removed Operator fails to vote
or votes only to succeed itself, then the successor Operator shall
be selected as a General Matter after excluding the vote of the
resigned or removed Operator. In the event there are only two
Parties to this Agreement, the Non-Operating Party shall become the
Operator.
4.6 Effective Date of Resignation or Removal: The resignation or
removal of the Operator shall become effective at 7:00 a.m. on the
first day of the month following a period of ninety (90) days after
said notice, unless a longer period of time is required to obtain
approval by the Minerals Management Service. Prior to the successor
Operator's assumption of the Operator's duties, the previous
Operator (the "outgoing Operator") shall continue to exercise its
authorities and meet its duties as Operator. Upon selection of a
successor Operator, the outgoing Operator shall be bound by the
terms of this Agreement as a Non-Operating Party. The resignation
or removal of the outgoing Operator shall not prejudice any rights,
obligations or liabilities which accrued during the period when the
outgoing Operator acted as the Operator. If the outgoing Operator
resigns or is removed, it shall be entitled to charge the Joint
Account for the reasonable Costs incurred in connection with the
change of operatorship.
4.7 Delivery of Property: On the effective date of resignation or
removal of the Operator, the outgoing Operator shall deliver to the
successor Operator possession of everything relating to operations
hereunder and co-owned by the Parties, including all funds relating
to the Joint Account, all co-owned equipment, materials and
appurtenances used in conducting operations and all books, records
and inventories relating to operations hereunder (other than those
books, records and inventories maintained by the outgoing Operator
as the owner of a Working Interest). Upon such delivery, the
outgoing Operator shall be discharged from all future rights and
obligations as the Operator. The outgoing Operator shall further
use its reasonable efforts to transfer to the successor Operator,
effective as of the effective date of such resignation or removal,
its rights as the Operator under all contracts exclusively relating
to operations hereunder and the successor Operator shall assume all
obligations of the Operator thereunder. As soon as practicable
after the effective date of such resignation or removal, the Parties
shall audit the Joint Account and conduct an inventory of all co-
owned property, and such inventory shall be used in the return of
and the accounting for the co-owned property by the outgoing
Operator. All Costs incurred in connection with such audit and
inventory shall be charged to the Joint Account.
ARTICLE 5
RIGHTS AND DUTIES OF OPERATOR
5.1 Exclusive Right to Operate: Except as otherwise provided, the
Operator shall have the exclusive right and duty to conduct (or
cause to be conducted) all operations pursuant to this Agreement.
With the exception of any team formed pursuant to this Agreement,
the number of employees or contractors used by the Operator in
conducting operations hereunder, their selection, and the hours of
labor and the compensation for services performed shall be
determined by the Operator, and all such employees or contractors
shall be the employees or contractors, respectively, of the
Operator. The Operator shall contract for and employ any drilling
rigs, tools, machinery, equipment, materials, supplies, vessels,
services, consultants, and personnel reasonably necessary for the
Operator to conduct the operations provided for in this Agreement.
Except with the unanimous consent of all Parties, Operator shall not
contract out to a third party the operation of the Production System
or any platform provided, however, such operations by any of the
Mobil Entities, as Operator, may be performed by Mobil Exploration &
Producing U.S. Inc., as agent for the Mobil Entitles or any Mobil
affiliate.
5.2 Workmanlike Conduct: The Operator shall conduct all operations in a
proper and workmanlike manner in accordance with methods and
practices customarily used in sound oil and gas field practice and
with that degree of diligence reasonably and ordinarily exercised by
an experienced prudent operator engaged in a similar activity under
the same or similar circumstances. The Operator shall not be liable
to the Parties for losses sustained or liabilities incurred as a
result of its actions as the Operator, except such as may result
from its gross negligence or willful misconduct. Unless otherwise
provided, Operator shall consult with the Parties and keep them all
informed of all important matters.
5.3 Drilling: The Operator may have all drilling operations conducted
by qualified and responsible independent contractors who are not
affiliated with the Operator and are employed under competitive
contracts. A competitive contract is a contract containing current
terms, rates and provisions that do not exceed those generally
prevailing on the OCS in the Gulf of Mexico for operations involving
drilling rigs of an equivalent type, operating in similar
environments, and equipped to the Operator's standard conditions
which are capable of drilling the proposed well(s) within the time
schedule for the operations to be conducted. The Operator may
employ its equipment, personnel, drilling rig, workover rig or
snubbing unit in the conduct of such operations in accordance with
Exhibit "C" (Accounting Procedure) or pursuant to a written agree-
ment among the Participating Parties. If the Operator's equipment,
personnel, drilling rig, workover rig or snubbing unit are employed
in conducting operations under this Agreement, the terms, rates and
provisions for use shall be consistent with then current competitive
contracts prevailing in the OCS in the deepwater Gulf of Mexico.
The Participating Parties may acquire by purchase or lease, a
drilling rig as part of the Production System and in this instance
the Costs to the Joint Account shall be as stated in Exhibit C .
5.4 Liens and Encumbrances: The Operator shall use reasonable efforts
to keep the Leases, Production Systems, Facilities and other
equipment and any Hydrocarbons free from all liens and encumbrances,
except those provided for in Article 6.3 (Security Provisions) which
might arise by reason of the operations conducted under this
Agreement.
5.5 Records: The Operator shall keep accurate books, accounts and
records of operations hereunder in compliance with the Accounting
Procedure in Exhibit "C" (Accounting Procedure). Unless otherwise
provided for in this Agreement, all records of the Joint Account
shall be available to a Non-Operating Party at all reasonable times
during the Operator's normal office hours pursuant to the provisions
contained in Exhibit "C".
5.6 Reports to Government Agencies: The Operator shall make timely to
all governmental authorities reports that it has a duty to make as
Operator and shall furnish copies of such reports to the
Participating Parties. The Operator shall give timely written
notice to the Parties of litigation and/or administrative
proceedings of which it has notice affecting any Designated Prospect
or operations hereunder.
5.7 Information to Participating Parties: The Operator shall, in a
timely manner, furnish each Participating Party the following
information pertaining to each well being drilled (provided such
information was obtained or received by Operator):
(a) copy of the application for permit to drill and all amendments
thereto;
(b) daily drilling and workover reports; daily mud checks, mud
logs, lithological, and Hydrocarbon information; daily casing
and cement tallies and cumulative Costs incurred on the
operation;
(c) complete report of all core analysis;
(d) copies of any logs or surveys as run (including a complete
"library tape" of the digitally recorded data);
(e) copies of well test results, bottomhole pressure surveys, gas
and condensate analyses or similar information;
(f) copies of reports made to and notices or orders received from
regulatory agencies;
(g) 48 hours advance notice of logging, coring or testing
operations (or, if conditions do not permit such advance
notice, as much advance notice as is reasonably possible);
(h) upon written request, and if sufficient quantities are
available, samples of cutting and sidewall cores marked as to
depth, to be packaged and shipped at expense of the requesting
Party;
(i) copies of the drilling prognosis;
(j) if conventional cores are taken, the requesting Party shall be
allowed access to inspect and evaluate said cores; and
(k) samples of gas, condensate and oil, if sufficient quantities
are available.
Upon written request, the Operator shall use its reasonable efforts
to furnish to a requesting Participating Party any additional
available information (including a complete slabbed section of all
recovered cores, if requested and available), acquired by the
Operator for the Participating Parties, not otherwise furnished
under this Article (not including any derivative information
independently developed at Operator's sole Cost and expense). The
Costs of gathering and furnishing such additional available
information shall be charged to the requesting Participating Party.
5.8 Completed Well Information: Operator shall, in a timely manner,
furnish to each Participating Party the following information
pertaining to each completed well:
(a) monthly report of production and injection;
(b) copies of reports made to regulatory agencies;
(c) report on status of xxxxx not producing and not abandoned;
(d) Hydrocarbon status report;
(e) bottomhole pressure data;
(f) composite of all logs run (e.g., TDT, Carbon-Oxygen, Spinner
Surveys, Casing Collar, etc.); and,
(g) reports of inventory.
5.9 Information to Non-Participating Parties: The Operator shall
furnish to each Non-Participating Party copies of all non-
confidential reports made to regulatory agencies. A Non-
Participating Party shall be entitled to receive the information
specified in Article 5.7 and 5.8 only after fulfilling the
requirements specified in Article 16 (Non-Consent Operations). A
Party which has permanently relinquished all of its Working Interest
in either the Contract Area or a specific Designated Prospect, shall
not be entitled to receive any information specified in Article 5.7
and 5.8 above with respect to such relinquished interest.
5.10 Cost Information: Within one hundred twenty (120) days after
completion of a Non-Consent Operation, the Operator shall furnish
all Parties an itemized statement of the Cost of such operations and
an inventory of the equipment pertaining thereto or, at its option,
the Operator in lieu of an itemized statement of such Costs may
submit a detailed statement of monthly xxxxxxxx. For the purposes
of calculating recoupment of Costs pursuant to Article 16 (Non-
Consent Operations), the Operator shall furnish to all Parties a
quarterly statement showing operating expenses and the proceeds from
the sale of Hydrocarbon production from the xxxxx from which
recoupment is being made.
5.11 Managing Production: All Parties shall comply with the XXXXX
Operator/Producer Roles and Responsibilities Guidelines (October
1993) ( OPRR Guidelines ) and shall cooperate and use due diligence
to avoid gas imbalances resulting in Pipeline Penalties under the
provisions of the transportation tariffs of any transporting
pipelines. Notwithstanding anything in this Article 5 to the
contrary, the Parties shall use the OPRR Guidelines to determine the
allocation of penalties among the Parties. The Operator shall be
solely responsible and liable for and shall protect, defend,
indemnify and hold all other Parties harmless from and against any
Pipeline Penalties allocated to the Operator in accordance with this
Article 5.11. Each of the other Parties shall be solely responsible
and liable for and shall protect, defend, indemnify and hold the
Operator harmless from and against Pipeline Penalties allocated to
such Party in accordance with this Article 5.11.
5.11.1 Compensation: The Parties hereto recognize that Operator
may be performing penalty avoidance services for Non-
Operators, implementing procedures to avoid penalties
and will be subject to additional risk of incurring
penalties. Operator may be performing these services
and incurring this additional risk without compensation.
The Parties agree that in the event Operator and one or
more Non-Operators enter into a subsequent Operating
Agreement(s) within the Area of Mutual Interest as
identified on Exhibit A-4 hereof and such Agreement
provides that its operator will be separately
compensated for performing these services and incurring
such risk, then Operator shall have the right to have
this Agreement amended ( Amendment ) to provide for an
identical fee which shall be effective retroactive to
the effective date of such Non-Operator s participation
under this Agreement on the date of such Amendment. The
Amendment shall be applicable only to such Non-
Operator s share of production hereunder. Operator
shall notify the affected Non-Operator(s) of its
election and shall forward a copy of the Amendment to
such Party. The Amendment shall be effective without
further action of the Parties to this Agreement. Non-
Operator(s) shall pay Operator the fee provided in the
Amendment for past production within sixty (60) days of
receipt of such Amendment and Operator shall continue to
receive such fee in accordance with the Amendment. This
Agreement may be further amended as set forth above in
the event other Non-Operators, acting as operator, are
parties to operating agreements with Operator and
separately receive payment for performing such services
and incurring such risks. In any event, the Operator
(or any Non-Operator, acting as Operator) shall keep the
other Parties apprised of any and all penalty avoidance
services being performed.
ARTICLE 6
EXPENDITURES AND SECURITY RIGHTS
6.1 Basis of Charges to the Parties: Except as otherwise provided, the
Operator shall pay all Costs of operations hereunder and each
Participating Party shall reimburse the Operator, in proportion to
its Participating Interest, for the Costs of each such operation.
The Operator shall have the right to require each Participating
Party to advance its respective share of estimated expenditures, as
provided in Exhibit "C" (Accounting Procedure). Funds received by
the Operator under this Agreement may be commingled with Operator's
own funds. All charges, credits and accounting for expenditures
shall be made pursuant to Exhibit "C".
6.2 Authorization for Expenditure and Supplemental Authorization For
Expenditure: The Operator shall not make any single expenditure or
undertake any project or operation costing Two Hundred Fifty
Thousand Dollars ($250,000) or more, unless an Authorization for
Expenditure (AFE) has either: (1) been included in a proposal for
an operation and approved by the Participating Parties through their
Election to participate in the operation, or (2) received the
approval of the Parties as a General Matter. For any single
expenditure or project costing in excess of Fifty Thousand Dollars
($50,000), but less than Two Hundred Fifty Thousand Dollars
($250,000), the Operator need not submit an AFE, but shall furnish
written information describing the expenditure to each of the
Participating Parties. In the event of an emergency and
notwithstanding the foregoing, the Operator shall be empowered to
immediately make such expenditures for the Joint Account of the
Participating Parties as, in its opinion as a reasonable and prudent
Operator, are required to deal with the emergency. The Operator
shall report to the Participating Parties, as promptly as possible,
the nature of the emergency and action taken.
6.2.1 Required Authorization: Prior to making any expenditure for
the Joint Account of less than Two Hundred Fifty Thousand
Dollars ($250,000) that requires the utilization of a drilling
or workover rig, the Operator shall obtain the approval of the
Parties as a General Matter.
6.2.2 AFE Overrun Notice: Operator shall provide an AFE overrun
notice to all Participating Parties whenever it appears (based
upon Operator's reasonable estimate) that the actual total
Costs associated with any separate AFE will exceed the
original AFE by more than ten percent (10%).
6.2.3 Supplemental AFE for Cost Overruns for Xxxxx: If during the
drilling of Exploratory Xxxxx, Subsequent Exploratory
Operations, Appraisal Xxxxx, subsequent Appraisal Operations,
Development Xxxxx, or subsequent Development Operations, it
appears (based upon Operator's reasonable estimate) that the
actual Costs will exceed the latest approved AFE for the well
by twenty-five percent (25%) or two million dollars
($2,000,000), whichever is less, Operator shall submit a
supplemental AFE to the Participating Parties to make an
Election as to their further participation in the well AFE.
Any Participating Party which becomes a Non-Participating
Party as to such further operation under this Article 6.2.3
shall be subject to the provisions of Article 16 (Non-Consent
Operations).
6.2.4 Supplemental AFE for Cost Overruns on Integrated Project Team
AFE: If it appears (based upon Operator's reasonable
estimate) that the actual Integrated Project Team Costs will
exceed the latest approved AFE by twenty-five percent (25%) or
two million dollars ($2,000,000), whichever is less, Operator
shall submit a supplemental AFE to the Participating Parties
to make an Election as to their further participation in the
Integrated Project Team AFE. Any Participating Party which
becomes a Non-Participating Party as to such further operation
under this Article 6.2.4 shall be subject to the provisions of
Article 16.5.3 (Non-Consent Geophysical Operations, Integrated
Project Team and/or Final Design AFE) only for the amount of
such supplement.
6.2.5 Supplemental AFE for Cost Overruns on Final Design AFE: If it
appears (based upon Operator's reasonable estimate) that the
actual design Costs will exceed the latest approved Final
Design AFE by twenty-five percent (25%) or five million
dollars ($5,000,000), whichever is less, Operator shall submit
a supplemental AFE to the Participating Parties to make an
Election as to their further participation in the Final Design
AFE. Any Participating Party which becomes a Non-
Participating Party as to such further operation under this
Article 6.2.5 shall be subject to the provisions of Article
16.5.3 (Non-Consent Geophysical Operations, Integrated Project
Team and/or Final Design AFE) only for the amount of such
supplement.
6.2.6 Supplemental AFE for Cost Overruns on Fabrication AFE: If it
appears (based upon Operator's reasonable estimate) that the
actual Costs associated with any separate AFE submitted under
the Fabrication AFE will exceed the latest approved
Fabrication AFE by twenty-five percent (25%) or ten million
dollars ($10,000,000), whichever is less, Operator shall
submit a supplemental AFE to the Participating Parties to make
an Election as to their further participation in the
Fabrication AFE. Any Participating Party which becomes a Non-
Participating Party as to such further operation under this
Article 6.2.6 shall be subject to the provisions of Article
16.2 (Acreage Forfeiture Provisions).
6.2.7 Supplemental AFE for Cost Overruns on All Other AFEs: If it
appears (based upon Operator's reasonable estimate) that the
actual Costs will exceed the latest approved AFE for the
operation by twenty-five percent (25%) or two million dollars
($2,000,000), whichever is less, Operator shall submit a
supplemental AFE to the Participating Parties to make an
Election as to their further participation in the operation.
Any Participating Party which becomes a Non-Participating
Party as to such further operation under this Article 6.2.7
shall be subject, if applicable, to the provisions of Article
16 (Non-Consent Operations) only for the amount of such
supplement.
6.2.8 Supplemental AFE for Cost Overruns for All Supplemented AFEs:
If it appears (based upon Operator s reasonable estimate) that
the actual Costs associated with any already supplemented AFE
will exceed the revised total (original plus all
supplementals) AFE by twenty-five percent (25%) or two million
dollars ($2,000,000), whichever is less, Operator shall submit
another supplemental AFE to the Participating Party(s) to make
an Election as to their future participation in such project.
Any Participating Party which becomes a Non-Participating
Party as to such further operation under such project shall be
subject to the appropriate Non-Consent provisions of the
supplemental AFE provision applicable thereto as set forth
hereinabove.
6.2.9 Further Operations During a Force Majeure: No Party shall be
allowed to make an Election not to participate in a further
operations under Articles 6.2.3 (Supplemental AFE for Cost
Overruns for Xxxxx), 6.2.4 (Supplemental AFE for Cost Overruns
on Integrated Project Team AFE), 6.2.5 (Supplemental AFE for
Cost Overruns on Final Design AFE), 6.2.6 (Supplemental AFE
for Cost Overruns on Fabrication AFE), 6.2.7 (Supplemental AFE
for Cost Overruns on All Other AFEs) or 6.2.8 (Supplemental
AFE for Cost Overruns for All Supplemented AFES) during a
Force Majeure or other emergency as described in Article 25.1
(Force Majeure), but may make its Election not to participate
after termination of such emergency.
6.3 Security Provisions: Notwithstanding anything to the contrary
contained in this Agreement, it is understood and agreed that: (a)
each Non-Operator hereby mortgages, pledges, and hypothecates to
Operator and each other Non-Operator and grants Operator and each
other Non-Operator a security interest in, and Operator hereby
mortgages, pledges, and hypothecates to each Non-Operator and grants
each Non-Operator a security interest in, all right, title, and
interest of each such Non-Operator and Operator, as applicable, now
or hereafter acquired in and to: (i) the oil and gas leases located
within each and every Designated Prospect in the Contract Area
( the Designated Prospect Leases ); (ii) all surface or subsurface
machinery, equipment, fixtures, inventory, facilities, and other
property of whatever kind, character or nature, now or hereafter
located on the Designated Prospect Leases or held for use in
connection with the Designated Prospect Leases or in connection with
the operation hereof, or the treating, handling, storing,
transportation, processing, marketing or sales of Hydrocarbons,
including without limitation, all oil xxxxx, gas xxxxx, water xxxxx,
injection xxxxx, casing, tubing, tubular goods, rods, pumping units,
engines, Christmas trees, platforms, derricks, separators,
compressors, flow lines, tanks, gas systems (for gathering, treating
or compression) pipe lines, chemicals, solutions, water systems,
power plants, transformers, starters and controllers, tools,
telegraph, telephone, loading racks, loading docks, and shipping
facilities, but not the Production System, (collectively, the
Equipment ); (iii) Hydrocarbons which are produced from the
Designated Prospect Leases, all products processed or obtained
therefrom, and all inventory thereof upon extraction from the
wellhead; (iv) all contract rights and other general intangibles
related to the Designated Prospect Leases, the operation thereof or
the treating, handling, storing, transportation, processing,
marketing or sales of Hydrocarbons, or under which the proceeds of
Hydrocarbons arise or are evidenced or governed; (v) all accounts
resulting from the sale of Hydrocarbons at the wellhead and all
other accounts, contract rights, operating rights, general
intangibles, chattel paper, documents, and instruments arising from
or by virtue of any transaction related to the Designated Prospect
Leases, the Equipment, or the Hydrocarbons: (vi) all proceeds of the
foregoing or payments in lieu of Hydrocarbons, whether such proceeds
or payments are goods, money, documents, instruments, chattel paper,
securities, accounts, general intangibles, fixtures or other assets
(all of the aforesaid properties, rights and interest of Operator,
herein called the Operator s Property , and all the aforesaid
properties, rights and interests of each Non-Operator with respect
to each Non-Operator, herein called such Non-Operator s Property ).
The liens and security interests granted by each Party in favor of
the other Party secures the payment and performance of all present
and future obligations, liabilities, and indebtedness of each party
under this Agreement together with interest thereon at the rate
provided in the Accounting Procedure (attached hereto as Exhibit
C ), now or hereafter arising, up to the Limit (as hereinafter
defined) for each Party as hereinafter set forth (as to each party,
the Secured Obligations). Any party (not an original signatory to
this Agreement or the Leases) whether by assignment, merger,
mortgage, operation of law or otherwise, shall be deemed to have
taken such interest subject to the liens and security interests
granted by this Article 6.3 as to all Secured Obligations
attributable to such interest being acquired, whether or not such
Secured Obligations arose before or after such interest is acquired.
Each Party hereunder shall be entitled to exercise all of the rights
and remedies of a mortgagee of immovable or real property and/or of
a secured party under applicable Louisiana law, including but not
limited to Chapter 9 of the Louisiana Commercial Laws. R.S. 10:9-
101, et seq. If Operator seeks to enforce the liens and security
interests granted to it hereunder against any Non-Operator, Operator
shall have the right to appoint a keeper of such Non-Operator s
Property, or any part thereof, pursuant to the terms and provisions
of La. R.S. 9:5131 et seq. and 9:5136 et seq. If a Non-Operator
seeks to enforce the liens and security interests granted to it
hereunder against Operator or another Non-Operator, such Non-
Operator shall have the right to appoint a keeper of the Operator s
Property, or any part thereof, or of the Non-Operator s Property, or
any part thereof, as applicable, pursuant to the terms and
provisions of La. R.S. 9:5131 et seq. and 9:5136 et seq. The
maximum amount of the Secured Obligations of each Party to be
secured hereunder that may be outstanding at any time (the Limit )
is fixed at ten million dollars ($10,000,000) with reference to each
Non-Operator, and ten million dollars ($10,000,000) with reference
to Operator.
6.4 Financing Statement and Recording of this Agreement: To perfect the
security interests grated here under, the Parties hereto agree to
execute simultaneously herewith and cause to be filed in the
appropriate filing offices, this Agreement and a financing statement
on form UCC-1, as in the form attached hereto as Exhibit J
(Security Instruments). The Parties shall have a continuing
obligation to execute additional financing statements to continue
such perfection and to accurately reflect the current properties
covered by this Agreement. The Parties hereto further agree to
execute and thereafter register, file or record or cause to be
registered, filed or recorded in any appropriate governmental
office, this Agreement and any document or instrument supplemental
to or confirmatory of this Agreement, which may be necessary or
desirable for the continued validity, perfection or priority of the
rights of the Parties under this Agreement.
6.5 Unpaid Charges: In the event of the failure of any Party to pay its
share of the Costs when due as provided in this Agreement, Operator
(or the Non-Operator with the largest Working Interest in the
Designated Prospect to which such failure applies if Operator is in
default of the payment of costs hereunder), at any time and from
time to time, shall be entitled to collect and receive the proceeds
from the sale of all or any part of such Party s share of the
Hydrocarbons from the Leases, including the proceeds from previously
executed sales contracts made by or for such delinquent Party. All
sums so collected shall be applied against the delinquent or unpaid
expenses due from such Party, the balance of such proceeds, if any,
to be paid to the Party or other person entitled thereto. Operator
may likewise take any other credit due any such delinquent Party and
apply the same against sums due from such Party under this
Agreement. Except to the extent they conflict with the options
granted to a non-defaulting Party in Article 6.7 (Default), the
rights granted to Operator in this Article shall not be construed as
exclusive remedies but shall be in addition to all rights,
privileges and remedies afforded Operator by other provisions of
this Agreement and by law or equity. Service of a true copy of this
Agreement upon any purchaser of all or any part of a delinquent
Party s share of the Hydrocarbons from the Leases shall constitute
written authorization on the part of such delinquent Party for such
purchaser to pay the proceeds from such sale to the Operator (or the
Non-Operator with the largest Working Interest in the Designated
Prospect to which such failure applies if the Operator is in default
on the payment of costs hereunder) during such delinquency, and such
purchaser shall be considered as having been notified of such
authorization prior to the time of such service. The books and
records kept by Operator with respect to operations hereunder shall
constitute conclusive proof for purposes of this Article of the
existence or nonexistence of any such delinquency insofar as the
right of Operator (or the Non-Operator) to collect the proceeds from
the sale of all or any part of the Hydrocarbons is concerned,
subject, however, to all rights of inspection, verification, and
audit provided for in this Agreement. The exercise of the rights
granted in this Article shall not in anyway affect the obligation of
any delinquent Party to make royalty payments. If the Operator
fails to pay its share of the Costs, the Non-Operator shall be
afforded the same remedy and rights as provided to the Operator in
this Article 6.
6.6 Contributions by Non-Delinquent Parties: If any Party neglects or
fails to pay its share of Costs incurred hereunder within ninety
(90) days after rendition of billing therefor by Operator, the other
Parties (including Operator) shall advance to Operator their
respective proportionate part of the Costs and expenses of such
defaulting Party. Parties so advancing the unpaid Costs and
expenses of any such defaulting Party shall bear the cost of
collecting any payments in proportionate part and shall be
reimbursed by the Operator in like fashion upon receipt by the
Operator of any past due amounts owing by any such defaulting Party.
Any interest collected by Operator in such connection shall likewise
be applied to such reimbursement. Any Party so advancing a
defaulting Party s Costs and expenses shall be subrogated to the
lien and rights appurtenant thereto herein given Operator or any
other Party.
6.7 Default: If any Party (including the Operator) fails to pay, as
provided above and in Exhibit C , its share of any Cost which it is
obligated to make under any provision of this Agreement, and if such
default continues for a period of thirty (30) days following
delivery by Operator (or by any Non-Operator in case of a default by
Operator) of notice of such default to such Party, then at any time
after the expiration of such 30-day notice period the Operator (or
any Non-Operator if the Operator is the Party in default) shall be
entitled to the remedies in (a) and (b) or (a) and (c)below:
(a) Operator (or any Non-Operator if Operator is the Party in
default) may suspend by written notice any or all of the
rights of the defaulting Party granted by this Agreement,
without prejudice to the right of the non-defaulting Party to
continue to enforce the obligations of the defaulting Party
under this Agreement. The rights of a defaulting Party that
may be suspended hereunder at the election of the non-
defaulting Parties shall include, without limitation, the
right to elect to participate in any further operation
regarding the well or subject operation proposed under this
Agreement to which the default relates; and
(b) Operator (or any Non-Operator if Operator is the Party in
default) may xxx to collect the amounts in default and
attorney fees together with all damages suffered by the non-
defaulting Parties as a result of the default, plus interest
accruing on the amounts recovered from the date of default
until the date of collection at the rate specified in Exhibit
"C" hereto and to enforce the liens and security interests
granted under Article 6.3; or
(c) Operator (or any Non-Operator if the Operator is the Party in
default) may deliver a written Notice of Non-Participation
Election to the defaulting Party at any time after the default
occurs with the following effect:
(i) If the billing is for the drilling of a new well or the
plugging back, reworking or deepening (including
sidetracking) of a dry hole or a well not then producing
in paying quantities, or for the completion or
recompletion of any well, the defaulting Party will be
conclusively deemed to have elected not to participate
in the subject operation subsequent to the time of
default and to be a Non-Participating Party with respect
thereto under the Article which is applicable to the
operation, notwithstanding any Election to participate
theretofore made.
(ii) Until the delivery of such Notice of Nonparticipation
Election to the defaulting Party, such Party shall have
the right to cure its default by paying the unpaid
billing plus interest at the rate set forth in Exhibit
C hereto. Any interest relinquished pursuant to this
Article shall be owned by the non-defaulting Parties in
proportion to their interests, and the non-defaulting
Parties shall be liable to contribute their shares of
the defaulted amount.
Notwithstanding the other provisions of this paragraph, if a Party
fails to pay part or all of its share of Costs hereunder because of
a legitimate disagreement as to the appropriateness of part or all
of the billing in question, and if such Party makes such
disagreement and the grounds therefor known to the Operator in
writing prior to the due date of such billing and timely tenders
payment of all undisputed amounts, then such Party shall not be
subject to sub-paragraph (a) or (c) of Section 6.7.
6.8 Carved-out Interests: Except for those which are set forth in
Exhibit A-2 (Description of Leases) hereof, agreements creating
any overriding royalty, production payment, net proceeds interest,
carried interest or any other interest carved out of a Working
Interest in a Lease(s) shall specifically make such interests
inferior to the rights of the Parties to this Agreement. If any
Party whose Participating Interest is so encumbered does not pay its
share of expenses, and the proceeds from the sale of its Hydrocarbon
production under Article 6.3 (Security Provisions) are insufficient
for that purpose, the security rights provided for herein may be
applied against the carved-out interests with which such Working
Interest is burdened. In such event, the rights of the owner of
such carved-out interest shall be subordinated to the security
rights granted by Article 6.3. Additionally, in the event a Party
elects not to participate in any operation hereunder and becomes a
Non-Participating Party pursuant hereto, then and in that event, the
Participating Parties shall acquire the interest of such Non-
Participating Party with respect to such Election, free and clear of
any and all obligations created under or pursuant to any carved-out
interest as described above.
ARTICLE 7
CONFIDENTIALITY OF DATA
7.1 Confidentiality Obligation: The Parties agree that all Confidential
Data acquired or obtained by any Party shall be kept confidential
during the term of this Agreement and for an additional period of
two (2) years after the termination of this Agreement. Each Party
agrees to maintain the secrecy of the Confidential Data using at
least the standard of care it normally uses in protecting its own
confidential information and trade secrets. The Confidential Data
shall be made available to each Participating Party for its
exclusive use. During the confidentiality period, the Confidential
Data shall not be disclosed to any third party (unless disclosed
under an "exception to confidentiality" or as a "permitted
disclosure", as set out in Article 7.1.1 or 7.1.2, respectively).
7.1.1 Exceptions to Confidentiality: The confidentiality obligation
shall not apply to the extent that particular items of
Confidential Data:
(a) are now or later become part of the public domain
(other than as a result of a wrongful act or
omission by the Party disclosing the Confidential
Data); or
(b) are now or later become available to a Party on a
non-confidential basis from a source, other than a
Party hereto, that is legally permitted to
disclose the item of Confidential Data; or
(c) were known to a Party on a non-confidential basis
prior to the disclosure of the Confidential Data
to it under the terms of this Agreement or to
which such Party was otherwise entitled at the
time of disclosure; or
(d) is independently developed by employees or
contractors of a Party whose employees or
contractors have not had access to Confidential
Data.
7.1.2 Permitted Disclosures: The Operator may disclose items of
Confidential Data to such third parties as may be necessary in
connection with the operation of a Designated Prospect,
provided such third parties are bound by written agreement to
keep secret the Confidential Data for a period of time not
less than is set forth in Article 7.1 of this Agreement (or a
lesser period if agreed by all Parties). The Operator shall
promptly inform the other Parties hereto of the names of such
third parties and list the items of Confidential Data
disclosed. Notwithstanding anything herein to the contrary
and subject to the restrictions that: (i) the Confidential
Data shall not be removed from the custody and premises of the
Party making such disclosure, excepting disclosure made
pursuant to items (1) and (5) below; and (ii) that such third
party be bound by written agreement not to use or disclose the
Confidential Data except for the express purpose for which
such disclosure is to be made, any Party may disclose, in
whole or in part, the Confidential Data:
(1) to any Affiliate of such Party provided such
Affiliate shall be bound by the confidentiality
provision contained herein; or
(2) to any bona fide financially responsible,
prospective assignee of any portion of such
Party's Working Interest (including but not
limited to an entity with whom a Party or its
Affiliates is conducting bona fide negotiations
directed toward a merger, consolidation or a sale
of a Party's or an Affiliate's shares or
substantially all of its assets in the OCS Gulf of
Mexico), provided that the disclosing Party shall
give all other Parties to this Agreement not less
than fifteen (15) days advance written notice
specifying the extent to which that Party intends
to disclose the Confidential Data to the
prospective assignee and the name of such
prospective assignee; or
(3) to any potential contractors or professional
consultants engaged by or on behalf of such Party
and acting in that capacity where such disclosure
is essential to such contractor's or consultant's
work; or
(4) to any bank or other financial institution to the
extent appropriate to a Party arranging financing
for its obligations under this Agreement; or,
(5) to the extent required by the terms of any Lease,
or by law, order, decree, regulation or rule
(including without limitation, those of any
regulatory agency, securities commission, stock
exchange, judicial or administrative proceeding).
If a Party is legally compelled to disclose any
Confidential Data such Party shall promptly
provide all other Parties to this Agreement
written notice of such proceedings so that the
non-disclosing Parties may seek a protective order
or other remedy. A disclosing Party shall furnish
only such Confidential Data as is legally required
and will use its reasonable efforts to obtain
confidential treatment for any Confidential Data
disclosed; or,
(6) to an entity desiring to transport and/or purchase
Hydrocarbons produced hereunder for the purpose of
making Hydrocarbon reserve estimates and other
technical evaluations.
7.1.3 Limited Releases to Offshore Scout Association: The Operator
may disclose the following well information at weekly Offshore
Oil Scout meetings:
7.1.3.1 Well Location:
(a) proposed surface location;
(b) surveyed surface location with X & Y;
(c) proposed bottom hole location;
(d) KB and water depth;
(e) OCS number and well number; and
(f) actual bottom hole location (must be
reported within two weeks of reaching
total depth of the well).
7.1.3.2 Well Operations:
(a) rig move in date;
(b) spud date;
(c) weekly drilling depth, MW;
(d) casing depths, cement, EMWs;
(e) mud weight, sidewall cores, cores,
RFTs (only that they were taken);
(f) logs (only the depths and type run);
(g) date total depth is reached; and
(h) date rig is released.
7.1.3.3 Well Completion Information:
(a) any Media Release or public filing of
well completion information will be
furnished at weekly Scout meetings.
7.1.4 Continuing Confidentiality Obligation: Any Party who ceases
to own a Working Interest in the Contract Area shall
nonetheless remain bound by the confidentiality and use
obligations of this Agreement as to any Confidential Data
obtained through this Agreement.
7.2 Ownership of Confidential Data: Except as otherwise provided for in
this Article, all Confidential Data produced as a result of an
operation hereunder shall be the property of all Participating
Parties in that operation. Any Non-Participating Party shall have
no rights in or access to Confidential Data produced or derived from
a Non-Consent Operation unless and until the provisions of Article
16 (Non-Consent Operations) are satisfied.
7.2.1 Well Log and Data Trades: Any Participating Party may propose
the exchange or trade of any co-owned Confidential Data for
other similar data and information owned by a third party.
The approval of such exchange or trade shall require the
unanimous approval of the Participating Parties who own such
data. Upon approval of such trade by all Participating
Parties, the Operator shall consummate such exchange or trade
with the third party. The Operator shall promptly provide all
Participating Parties copies of the third-party data obtained
along with copies of any agreement relating to such exchange.
7.2.2 Ownership of Non-Consent Data: When the Non-Participating
Party becomes a Participating Party in the operation, as
provided herein, such non-consent Confidential Data and
information previously withheld from such Non-Participating
Party shall thereafter become co-owned by such Party.
7.3 Access to the Lease and Rig: Each Participating Party's authorized
representatives including those related to financing arrangements of
the Production System shall have access to any drilling rig,
Production System or Facility serving a Designated Prospect to
observe and inspect operations and xxxxx in which it participates
(and the records and other data pertaining thereto). Access by the
Participating Party to any drilling rig, Production System or
Facility serving a Designated Prospect shall be arranged through the
Operator twenty-four (24) hours in advance (or, if conditions do not
permit, as much advance notice as is reasonably possible). Each
Party's access will be at its sole Cost, risk and expense and at
reasonable times and provided such access does not unreasonably
interfere with the operations being conducted.
7.4 Development of Proprietary Information and/or Technology: The
ownership, use, treatment and disclosure of any proprietary
information and/or technology specific to drilling technology,
production technology, production structure and Facilities and their
transportation and installation, pipelines, flowlines and offshore
oil and gas transportation which are charged to the Joint Account
shall be handled in accordance with Exhibit "G" (Integrated Project
Team and Technology Sharing).
7.5 News Releases: Except to the extent required by the terms of any
Lease, or by law, order, decree, regulation or rule (including
without limitation, those of any regulatory agency, securities
commission, stock exchange, judicial or administrative proceeding),
the Parties shall use reasonable efforts to unanimously agree upon
the timing and content of releases to the news media concerning
operations covered by this Agreement. However, in the event the
Parties cannot unanimously agree upon either the timing and/or
content of the news release within five (5) days of such proposed
news release, then such timing and/or content shall require approval
as a General Matter. Failing General Matter approval of a news
release, such news release may be prepared in accordance with
Exhibit "F" (News Release Guidelines).
ARTICLE 8
VOTING, ELECTIONS, AND NOTICES
8.1 Overall Supervision of Business Affairs: The activities of the
Parties under this Agreement that are not within the scope of the
Operator s authority to unilaterally decide under Article 5.0
(Rights and Duties of Operator) or Article 6.2 (Authorization for
Expenditure) shall be divided into the following broad classes:
8.1.1 General Matter Vote: General Matters for which a vote for
approval is required prior to action, but no accompanying
Election regarding participation is required, or;
8.1.2 Elections: Proposed operations for which an Election regarding
participation is required for such operation. (An example of
such an operation is an Election for a Fabrication AFE
proposed pursuant to a previously approved Development Plan
under Article 12.8 (Fabrication AFE) without the requirement
for approval as a General Matter.)
The Parties shall decide and take action upon all General Matters
and Elections in accordance with the provisions of this Article 8.
8.2 Voting Procedures on General Matters and Elections: Unless
otherwise provided, any General Matter or Election shall require
the approval of the Parties and shall be decided by a vote of the
Parties as follows:
8.2.1 Voting Interest: Each Party shall have a voting interest
equal to its Working Interest in a Designated Prospect or,
with respect to a Non-Consent Operation, its Participating
Interest in such operation, as applicable.
8.2.2 Vote Required: The Parties shall attempt to reach unanimous
agreement regarding proposals requiring approval of the
Parties. However, in the event that the Parties cannot
unanimously agree, (except as otherwise provided in this
Agreement), a General Matter shall be decided by an
affirmative vote of: one (1) or more of the Parties having a
combined voting interest of fifty percent (50%) or more.
For General Matters where an AFE is not required with a
proposal, a Party shall evidence its vote for approval in
writing. A Party failing to vote, or respond timely to a
General Matter, shall be deemed to have voted against the
proposal.
8.2.3 Second Opportunity for an Election: Upon approval of a
proposal which requires an Election, any Party who either: (i)
elected not to approve the proposal; or (ii) failed to elect
shall have forty eight (48) hours (exclusive of Saturdays,
Sundays and federal holidays) from receipt of notice from the
Operator that a proposal has been approved, to respond with a
second Election as to its participation in the proposal.
Failure to respond in a timely manner shall be deemed an
Election not to participate. When a drilling rig is on
location and standby charges are accumulating, the time
permitted for such a response shall not exceed forty-eight
(48) hours (inclusive of Saturday, Sunday or legal holidays)
or longer period if such requesting Party agrees to bear one
hundred percent (100%) of all standby charges for said
extended period.
8.3 Response Time for General Matters and Elections: After receipt of
notice pursuant this Article 8, the Parties shall either: (i) submit
their vote in response to a General Matter proposal as described
under Article 8.1.1, or (ii) make an Election if the proposal does
not require a vote as a General Matter as described under Article
8.1.2. The Operator shall give prompt notice of the results of such
voting or Elections to each Party. Unless specified otherwise
herein, the response times required for each type of proposal shall
be as follows:
8.3.1 Well Operation Proposal: When any proposed well operation
does not require construction of a Production System, each
Party shall respond with its Election within thirty (30) days
after receipt of the proposal. When a drilling rig is on
location and standby charges are accumulating, an Election in
response to the proposal shall be made within forty-eight (48)
hours after receipt of the proposal (exclusive of Saturdays,
Sundays and federal holidays or longer period if such
requesting Party agrees to bear one hundred percent (100%) of
all standby charges for said extended period); provided that
the forty-eight (48) hour provision of this Article 8.3.1
shall not apply to a new well (other than a substitute well)
proposed under Articles 10.2 (Proposal of Exploratory
Operations), 11.1 (Proposal of Appraisal Operations) or 13.1
(Proposal of Development Operations).
8.3.2 Production System Construction: Elections involving the
construction and installation of a Production System shall
require a response within one hundred eighty (180) days after
receipt of the Fabrication AFE.
8.3.3 Other AFE Related Operations: Except as otherwise provided
for in Articles 8.3.1 and 8.3.2, the response time to a
proposed operation will depend upon the AFE gross expenditure
amount. Response times will be as follows:
(a) AFE of $250,000 or more but less than
$10,000,000 response will be made within thirty
(30) days after receipt of said proposal.
(b) AFE of $10,000,000 or more but less than
$50,000,000 response will be made within sixty
(60) days after receipt of said proposal.
(c) AFE of $50,000,000 or more response will be made
within one hundred eighty (180) days after receipt
of said proposal.
8.3.4 Other Proposals: For all other proposals requiring notice,
each Party shall respond with an Election within thirty (30)
days after receipt of the proposal.
8.3.5 Failure to Respond: Failure of any Party to respond to a
proposal within the required period shall be an Election not
to participate in the proposed operation.
8.3.6 Suspensions of Production: Anything in this Article 8.3
notwithstanding, if the MMS grants a Suspension of Production
(an "SOP") or a Suspension of Operations (an "SOO") for all or
any part of the Designated Prospect, shorter time limits set
forth as requirements of the SOP/SOO shall supersede the
longer time periods for a Party's Election as provided for
under this Agreement.
8.3.7 Standby Charges: Unless otherwise agreed between the Parties,
the Participating Parties in a prior operation shall be
responsible for standby charges accrued until all Parties
having a right to do so, have made an election to either
participate or not participate in a subsequent proposed
operation. All standby charges accruing after the final
Election regarding the subsequent operation has been made
shall be the responsibility of the Participating Parties in
the subsequent operation.
8.4 Meetings of the Parties: In addition to the annual meeting required
by Article 12.18 (Annual Operating Plan), meetings of the Parties
shall be called by the Operator upon its own motion or at the
request of any Party. Except in the case of emergency, or except
when agreed by unanimous consent, no meeting shall be called on less
than ten (10) days (exclusive of Saturdays, Sundays and federal
holidays) advance notice, and such notice shall include an agenda of
the meeting. The representative of the Operator shall be chairman
of each meeting and shall take minutes of each meeting. Only
matters set out in the agenda for the meeting shall be considered at
the meeting unless unanimously agreed to by all the Parties to this
Agreement. A Party may add items to the agenda by providing at
least five (5) days advance written notice to all Parties of such
additional items.
8.5 Designation of Representatives: The names and addresses of the
representatives who are authorized to represent and bind each Party
with respect to voting on General Matters or Elections hereunder,
are set forth in Article II of Exhibit "A" (Working Interests of
the Parties and Representatives) attached hereto. The designated
representatives may be changed by written notice to the other
Parties in accordance with Article 8.7 (Giving and Responding to
Notices).
8.6 Elections: An Election to participate in an Exploratory Operation,
an Appraisal Operation or a Development Operation shall include an
Election to participate in all necessary expenditures for drilling,
testing, logging and plugging/abandonment to the Objective Depth as
set out in the Well Plan. An Election to participate in a
Development Well shall also include an Election to participate in
all necessary expenditures through the installation of the wellhead
if set forth in the Well Plan.
8.7 Giving and Responding to Notices: All notices and responses
(including notices/proposals of General Matters, Elections) shall be
made in writing and delivered to the designated representative in
person or by facsimile transmission (followed by a phone call
confirming receipt), U.S. mail, overnight express or courier. When
a drilling rig is on location and standby charges are accumulating,
all notices and responses shall be given by telephone and
immediately confirmed in writing. Any notices and responses shall
be effective only when received by the Party to whom such notice,
proposal or response is directed except as otherwise provided in
this Article 8.7. Any notice or response transmitted by facsimile
shall be deemed given and received only after the receiving Party
has confirmed receipt of such facsimile. Any notice or response
transmitted by overnight express or courier shall be deemed given
and received twenty-four (24) hours (exclusive of Saturdays, Sundays
and federal holidays) after such notice or response is deposited or
transmitted. Any notice or response by U.S. mail (other than
overnight express) shall be deemed given and received five days
(exclusive of Saturdays, Sundays and federal holidays) after the
notice or response is deposited in the mail.
8.8 Content of Notice: Any notice which requires a response within a
time period shall indicate which of the response times specified in
Article 8.3 (Response Time for General Matters and Elections) is
required. If a notice proposes a well operation, the notice shall
include the following information:
(a) the type of well operation being proposed, i.e., Exploratory,
Appraisal or Development Operation(s);
(b) any Well Plan applicable to for the proposed operation; and
(c) an AFE showing the estimated Costs of the operation, including
all necessary expenditures associated with the drilling,
testing and completing or abandoning the well.
If the notice proposes a Production System, Subsea Production
System, Subsequent Production System or Facilities, the notice shall
include the following information:
(a) the type of system or Facilities being proposed; and
(b) description of same, including location, estimated Costs of
operation, including design, engineering, fabrication,
transportation and installation.
8.9 Agent for Mobil Entities:
(a) For all purposes of this Agreement, except for any Designation
of Operator recognized by the MMS, Mobil Oil Corporation and
Mobil Oil Exploration & Producing Southeast Inc., collectively
herein the Mobil Entities , agree that Mobil Exploration &
Producing U.S. Inc. shall be the true and lawful agent of the
Mobil Entities hereunder with respect to all of the rights,
powers and duties of the individual Mobil Entities, including,
without limitation, the giving and receiving of notices and
taking any action on behalf of the individual Mobil Entities.
Mobil Exploration & Producing U.S. Inc. accepts and
acknowledges this relationship and agrees to perform same
hereunder.
(b) Enserch Exploration, Inc. and Reading & Xxxxx Development Co.
shall be entitled to and agrees to treat any notice given or
action taken by Mobil Exploration & Producing U.S. Inc., as a
notice from or an action by the Mobil Entities.
8.10 Votes by Affiliates: For purposes of this Article 8 it is understood
and agreed that the interest of the Mobil Entities, as well as any
of its or their Affiliates which subsequently become a Party to this
Agreement, shall be aggregated and combined, for all purposes
hereof, including but not limited to notice, voting, Election and
approval purposes, as if the Mobil Entities constituted a single
Party to this Agreement. Similarly, each of Enserch Exploration,
Inc. and its Affiliates or Reading & Xxxxx Development Co. and its
Affiliates shall be aggregated and combined, for all purposes
hereof, including but not limited to notice , voting, Election and
approval purposes, should any of their respective Affiliates
subsequently become a Party to this Agreement. Such aggregation
and combination shall not extend to any assignee or transferee to a
non-Affiliate permitted under the terms of Article 24 (Successors,
Assigns and Sale of Interest).
ARTICLE 9
GEOPHYSICAL OPERATIONS
9.1 Geophysical Operations: Any Party may propose to acquire or process
geophysical surveys (other than shallow hazard surveys, velocity
surveys or other similar well bore geophysical operations) to
evaluate all or any portion (s) of the Contract Area at any time
during the term of this Agreement. These geophysical surveys may
consist of either conducting proprietary surveys, purchasing
speculative surveys from vendors, or participating in group
shoot surveys. Geophysical Operations are not to be considered
Exploratory, Appraisal, or Development Operations and may be
conducted simultaneously with Exploratory, Appraisal, or Development
Operations.
9.1.1 Conduct of Proprietary Geophysical Operations: The Operator
shall conduct all proprietary geophysical surveys (or
processing) for the account of the Participating Parties based
upon their Participating Interest share of the Costs of the
surveys. The Operator shall provide the Participating Parties
with copies of all field data and support documentation as
appropriate for any and all seismic data collected from the
geophysical survey. The Operator shall obtain all licenses
and/or permits from all governmental agencies necessary to
support the surveys. The ownership of any proprietary
geophysical data derived from a proprietary survey shall be
limited to the field tapes, i.e., raw data and initial
processing (not including re-processed or interpreted data)
and owned on the basis of the Parties Participating Interests
in the survey. If the geophysical data is acquired by a
geophysical contractor instead of through the Operator, then
wherever in this Article the word Operator appears,
Contractor shall be substituted therefor. If a Party elects
not to participate in a proprietary geophysical survey, then a
Participating Party shall elect to either : (i) proceed with
the Geophysical Operation with the interest of the Non-
Participating Party shared by the Participating Parties on the
basis of their respective Working Interests, unless otherwise
agreed, or (ii) change its Election to become a Non-
Participating Party. A Non-Participating Party shall not be
entitled to any geophysical data obtained from the proprietary
geophysical survey unless the Non-Participating Party agrees
to become an underinvested Party per terms of Article 16.5.3
(Geophysical Operations, Integrated Project Team and/or Final
Design AFE).
9.1.2 Group-Shoot and Speculative Seismic Surveys: The Parties
shall make a good faith effort to coordinate the acquisition
of any new group-shoot or speculative seismic surveys covering
one or more of the Leases within the Contract Area. This
shall enable all Parties who desire to acquire such data to
take advantage of group rates available from most seismic
contractors and will allow each Party a license to use such
data. For such seismic data purchases covering the Leases,
the acquiring Parties shall mutually agree upon the Cost
shares of the total licensing fee (rather than on their
Working Interest shares).
ARTICLE 10
EXPLORATORY OPERATIONS
10.1 Application: Exploratory Operations shall mean all operations
(including any subsequent Exploratory Operation) conducted by one or
more of the Parties hereunder in the drilling, testing and
completing of the first well (including a substitute well for such
well) in a Designated Prospect as described in this Article 10
(Exploratory Operations). The Costs, risks and obligations of
Exploratory Operations conducted in accordance with this Agreement
shall be borne by the Parties as provided in Article 10.2.4
(Exploratory Operations Costs) below.
10.2 Proposal of Exploratory Operations: Any Party may propose to
conduct an Exploratory Operation within a Designated Prospect by
giving notice of the proposal (along with the associated AFE and
Well Plan) to all other Parties. If all the Parties elect to
participate in drilling the proposed Exploratory Well, Operator
shall commence the proposed well in accordance with this Article 10
and drill same at their Cost and risk. No Exploratory Well shall be
drilled by any Party hereto on any Designated Prospect without the
approval of one or more Parties having a combined voting interest of
fifty percent (50%) or more except, however: (a) subsequent to the
beginning of the last two (2) years of the primary term of any Lease
within such Designated Prospect having a primary term of five (5)
years (regardless of whether the lease has a primary term which will
extend to eight (8) years) or (b) subsequent to the beginning of the
last three (3) years of any Lease within such Designated Prospect
having a primary term of ten (10) years upon which there is no well
agreed to be drilled by at least a fifty percent (50%) voting
interest, any one or more of the Parties hereto may drill an
Exploratory Well upon such Lease upon its Election. If fewer than
all the Parties elect to participate in and agree to bear one
hundred percent (100%) of the Cost and risk of drilling the proposed
well or conducting a proposed operation, Operator shall drill such
well or conduct such operation, provided that a Participating Party
may, subject to Article 4.2, take over the operation as substitute
Operator in the event Operator does not elect to participate. The
Operator (or substitute operator) shall then commence the
Exploratory Operation at the sole Cost and risk of the Participating
Parties. Except as provided in Article 16.2 (Acreage Forfeiture
Provisions) and Article 16.4 (Non-Consent Operations to Maintain a
Designated Prospect), Costs of a Non-Consent Exploratory Operation
will be recouped in accordance with Article 16 (Non-Consent
Operations).
10.2.1 Well Plan's Minimum Specifics: The Well Plan for any
Exploratory Well and any proposed Subsequent Exploratory
Operation will include at least the following
information:
(a) the surface and target bottomhole locations;
(b) the expected spud date and the anticipated time
necessary to conclude drilling, evaluation,
completion and/or abandonment operations;
(c) the true vertical depth to be drilled, along with
the specified Objective Depth (and other target
zones to be penetrated);
(d) the proposed drilling plan, including the casing
program and any anticipated Sidetracking
operations;
(e) details of any coring, logging or other evaluation
operations to be conducted; and
(f) information concerning the drilling rig to be
used, including day rates, water depth rating and
other limitations relevant to the drilling
operations to be conducted.
10.2.2 Pre-Spud Technical Meeting and Revision of Well Plan:
Subsequent to the approval of the Exploratory Operation,
but prior to commencing such Exploratory Operations
(other than a substitute operation), the Participating
Parties shall meet for a Pre-Spud Technical Meeting .
The purpose of the meeting is to review the Well Plan
describing the specific operations planned for the
Exploratory Well. Any proposed revision to the
operations specified in the original Well Plan and AFE
shall require mutual agreement of the Participating
Parties. Any such revision to the Well Plan shall be
evidenced by the signature to an amended AFE for the
proposed Exploratory Operation. In the absence of
agreement upon a revised Well Plan, the original Well
Plan and AFE shall stand as approved. Any revisions to
the original Well Plan or AFE by the Participating
Parties shall not give any Non-Participating Party an
additional opportunity to make an Election unless the
Objective Depth is changed or the target bottomhole
location is changed by more than three hundred (300)
feet, in which case the Exploratory Operation shall be
proposed anew to all Parties having the right to elect
thereon.
10.2.3 Timely Operation: A proposed Exploratory Operation
shall be commenced within one hundred eighty (180) days
from the date upon which it is approved except as a
result of Force Majeure as set forth in Article 25.1.
If operations have not commenced in a timely manner, the
approved Exploratory Operation shall be deemed
withdrawn, with the effect as if the Exploratory
Operation had never been approved. If an approved Ex-
ploratory Operation is deemed withdrawn due to lack of
timely commencement of operations, any Costs incurred
during said one hundred eighty (180) day period which
are attributable to the proposed operation shall still
be chargeable to the Participating Parties. An
Exploratory Operation shall be deemed to have commenced
on the date the rig arrives on location or, if the rig
is already on location, the date when actual drilling
operations for the proposed Exploratory Operation are
begun.
10.2.4 Exploratory Operations Costs: The Costs, risks and
obligations associated with drilling, testing, logging
and abandoning (whether permanent or temporary) an
Exploratory Well, any substitute well and any subsequent
Exploratory Operations shall be borne by the Par-
ticipating Parties in proportion to their Participating
Interest in such Exploratory Operation.
10.2.5 AFE Overruns and Substitute Well: The Operator shall
timely commence an Exploratory Operation and continue
the operation with due diligence to the Objective Depth
subject to (i) a supplemental AFE s being required
pursuant to Article 6.2 (Authorization for Expenditure
and Supplemental Authorization For Expenditure) or (ii)
the Operator encountering mechanical difficulties,
uncontrolled influx of subsurface water, abnormal
pressures, pressured or heaving shale, salt, granite or
other practicably impenetrable substances or other
similar conditions prevailing in the hole that render
further drilling impracticable. If the Exploratory Well
is abandoned due to the conditions described under
10.2.5 (ii), then the Operator or any Participating
Party may propose a substitute well (with the associated
AFE and Well Plan), and each Participating Party in the
abandoned Exploratory Well shall make an Election
whether to participate in the proposed substitute well.
The Operator (or substitute Operator) shall commence the
substitute well at the sole Cost and risk of the Parties
making an Election to participate. Any Party who makes
an Election not to participate in either (i) or (ii)
above shall be subject to the provisions of Article 16.2
(Acreage Forfeiture Provisions) or Article 16.5.1 (Non-
Consent Subsequent Exploratory Operations), whichever is
applicable.
10.3 Subsequent Exploratory Operations at Objective Depth: After (i) the
Exploratory Well (or its substitute) has been drilled to its
Objective Depth, (ii) all operations in the controlling AFE and Well
Plan have been completed or terminated (except plug and abandon) and
(iii) all logs and test results have been distributed to the
Participating Parties, the Operator, shall promptly notify the
Participating Parties of the Operator's proposal for one of the
following operations:
(a) conduct Additional Testing, Coring or Logging of the
formations encountered prior to setting production casing;
(b) Sidetrack the well bore to core the formations encountered;
(c) Deepen the well to a new Objective Depth (however, if a casing
string is required to Deepen the well, then option "d" shall
precede Deepening the well);
(d) Sidetrack the well to another bottomhole location not deeper
than the stratigraphic equivalent of the original Objective
Depth;
(e) conduct production testing;
(f) conduct on the well other operations not listed herein;
(g) complete the well at Objective Depth in the objective zone or
formation;
(h) plug back the well and attempt a completion in a shallower
zone or formation;
(i) temporarily abandon the well; or
(j) permanently plug and abandon the well.
10.3.1 Response to Operator's Proposals: Within forty-eight
(48) hours (exclusive of Saturdays, Sundays and federal
holidays) after receipt of Operator's proposal to
conduct Subsequent Exploratory Operations, or longer
period if such requesting Party agrees to bear one
hundred percent (100%) of all standby charges for said
extended period, each Participating Party shall respond
to the Operator's proposal by making its Election to
participate in Operator's proposal or by making a
counterproposal. Failure of a Participating Party to
respond to a proposal (except a proposal to plug and
abandon) shall be deemed an Election not to participate
in the Operator's proposal and to become a Non-
Participating Party from that point.
10.3.2 Counterproposals: If a Participating Party makes a
counterproposal for Subsequent Exploratory Operations,
the other Participating Parties shall have an additional
twenty-four (24) hours to respond to all
counterproposals. If conflicting proposals for
Subsequent Exploratory Operations are made, preference
for voting shall be given first to operation (a) above,
next to operation (b) above, and so forth. If different
depths or locations are proposed for Subsequent
Exploratory Operations, preference shall be given to the
shallowest depth (or the bottomhole location nearest the
existing well bore) and then to other depths or
bottomhole locations in descending (or more distant)
order. After a decision to conduct a Subsequent
Exploratory Operation is made and the Subsequent
Exploratory Operation is commenced, the remaining
proposals for other types of subsequent Exploratory
Operations shall be deemed withdrawn. At the completion
of the Subsequent Exploratory Operation, the Operator
shall again submit proposal(s) for Subsequent
Exploratory Operations to the Participating Parties,
through the procedure provided herein, until such time
as the well is plugged and abandoned.
10.3.3 Approval of Subsequent Exploratory Operations by All
Parties: If the proposed Subsequent Exploratory
Operation is approved by all then-Participating Parties,
the Operator (or substitute Operator) shall commence the
Subsequent Exploratory Operation at the Cost(s) and risk
of the Participating Parties.
10.3.4 Approval of Subsequent Exploratory Operations by Fewer
Than All Parties: If a proposal for Subsequent
Exploratory Operations (except a proposal to plug and
abandon), is approved by at least a fifty percent (50%)
interest but by fewer than all then-Participating
Parties, then the Operator (or substitute Operator)
shall conduct the operation at the sole Cost and risk of
the Participating Parties. Any Non-Participating Party
in a Subsequent Exploratory Operation shall be subject
to Article 16.5.1(Non-Consent Subsequent Exploratory
Operations). A Non-Participating Party in a Subsequent
Exploratory Operation shall be relieved of the Costs,
risks and obligations of the Subsequent Exploratory
Operation, except as to its share of the Costs of
plugging and abandoning the Exploratory Well in its
then-current condition. No operation shall be performed
on the well unless deemed by the Operator to be safe and
the well bore is in a condition to perform the proposed
operation.
10.3.5 Subsequent Exploratory Operations If Not Approved: If
no proposed Subsequent Exploratory Operation (except a
proposal to plug and abandon) receives approval by the
Participating Parties having a voting interest of at
least fifty percent (50%), then prior to an Exploratory
Xxxxx being plugged and abandoned, Operator (or
substitute Operator) shall conduct at the sole Cost and
risk of the Participating Parties, the proposed
Subsequent Exploratory Operation receiving the largest
percentage of Participating interest approval, and in
the event of conflicting Elections between two (2) or
more Subsequent Exploratory Operations, by Parties
having equal interests, then preference shall be given
first to operation (a) then (b) and so on, as set forth
in Article 10.3 (Subsequent Exploratory Operations at
Objective Depth). Any Non-Participating Party in such
subsequent Exploratory Operation shall be subject to
Article 16 (Non-Consent Operations). Such Non-
Participating Party shall be relieved of the Costs, risk
and obligation of the Subsequent Exploratory Operation,
except as to its share of the Costs of plugging and
abandoning the Exploratory Well in its then-current
condition. No operation shall be performed on the well
unless deemed by the Operator to be safe and the well
bore is in a condition to perform the operation.
10.4 Deeper Drilling: A proposal to drill an Exploratory Well to an
Objective Depth below the deepest Producible Reservoir penetrated by
a Producible Well or to reenter and Deepen an existing Exploratory
Well to an Objective Depth below the deepest Producible Reservoir
penetrated by a Producible Well shall require unanimous approval of
the Parties.
10.5 Plugging and Abandoning Costs: Upon the conclusion of all operations
set forth in an Exploratory Operation s Well Plan and all Subsequent
Exploratory Operations on such well, or if the Operator encounters
mechanical difficulties or impenetrable conditions, which make
further drilling impracticable, then the Operator may propose to
plug and abandon the well. Upon approval of the well abandonment by
the Participating Parties having a voting interest of at least fifty
percent (50%) or, failing approval, the Operator deems the well bore
not to be safe or in a condition to perform operations, the Operator
shall commence the plugging and abandonment of the well. The
Participating Parties in the original operation shall pay all Costs
of plugging and abandoning the Exploratory Well (except any
increased plugging and abandoning Costs associated solely with a
Subsequent Exploratory Operation conducted as a Non-Consent
Operation). The Participating Parties in any Non-Consent Operation
shall be responsible for the increased plugging and abandoning Costs
attributable to the Non-Consent Operation.
10.6 Conclusion of Exploratory Operations: Exploratory Operations shall
cease in any Designated Prospect after the abandonment of the
Exploratory Well, whether permanent or temporary, and the release of
the rig from the Exploratory Well (including any substitute well).
10.7 Subsurface Team: Within sixty (60) days after rig release of the
Exploratory Well, the Parties shall form a subsurface team. Each
Party shall be entitled to have at least one (1) representative on
the subsurface team. Each Party shall be responsible for designating
its representative(s) for the subsurface team. A Party's
representatives for the subsurface team may be changed at any time.
The salaries, burdens, benefits, other compensation and expenses of
each subsurface team member shall be the responsibility of the Party
employing or providing the subsurface team member. The Operator
shall serve as the coordinator for the subsurface team. Members of
the subsurface team will work independently at office locations
provided by the Party designating such member. The responsibilities
of the subsurface team shall include but not be limited to the
following items:
- making recommendations for Appraisal Operations,
- evaluating potential Producible Reservoirs within a Designated
Prospect, and;
- advising the Integrated Project Team regarding subsurface
matters so the Integrated Project Team can more effectively
assist the Operator in the preparation of the Development Plan
pursuant to Article 12 (Development Plan).
The subsurface team will meet as it deems necessary to carry out the
above activities. Once the subsurface team is formed, it will
remain in existence until the expiration or dissolution of the
Designated Prospect.
ARTICLE 11
APPRAISAL OPERATIONS
11.1 Proposal of Appraisal Operations: After completion of Exploratory
Operations any Party may propose to conduct an Appraisal Operation
within a Designated Prospect by giving notice of the proposal (along
with the associated AFE and Well Plan) to all other Parties. If all
the Parties agree to participate in drilling the proposed Appraisal
Well, Operator shall commence the proposed well in accordance with
this Article 11 and drill same at their Cost and risk. No Appraisal
Well shall be drilled by any Party hereto on any Designated Prospect
without the approval of one or more Parties having a combined voting
interest of fifty percent (50%) or more except, however: (a)
subsequent to the beginning of the last two (2) years of the primary
term of any Lease within such Designated Prospect having a primary
term of five (5) years (regardless of whether the Lease has a
primary term which extends to eight (8) years); (b) the last three
(3) years of the primary term of any Lease within such Designated
Prospect having a primary term which has been extended to eight (8)
years; or (c) subsequent to the beginning of the last three (3)
years of any Lease within such Designated Prospect having a primary
term of ten (10) years upon which there is no well being reworked,
drilled, or agreed to be drilled by at least a fifty percent (50%)
voting interest, any one or more of the Parties hereto may drill an
Appraisal Well upon such Lease upon its Election. If fewer than all
the Parties elect to participate in and agree to bear 100% of the
Cost and risk of drilling the proposed well or conducting a proposed
operation, Operator shall drill such well or conduct such operation,
provided that a Participating Party may, subject to Article 4.2,
take over the operation as substitute Operator in the event Operator
does not elect to participate. Costs of a Non-Consent Appraisal
Operation will be recouped in accordance with Article 16 (Non-
Consent Operations). The formation of an Integrated Project Team
may occur concurrently with Appraisal Operations.
11.1.1 Well Plan's Minimum Specifics: The Well Plan for the
Appraisal Operation shall include at least the
information set forth under Article 10.2.1 (Well Plan's
Minimum Specifics).
11.1.2 Pre-Spud Technical Meeting and Revision of Well Plan:
The Pre-spud Technical Meeting and Revision of the Well
Plan shall be in accordance with Article 10.2.2 (Pre-
Spud Technical Meeting and Revision of Well Plan). The
Well Plan for an Appraisal Operation shall be deemed
automatically revised with each Sidetracking, Deepening,
or additional Operations approved by the Participating
Parties.
11.1.3 Timely Operation: A proposed Appraisal Operation shall
be commenced within one hundred eighty (180) days from
the date upon which it is approved. Except as a result
of Force Majeure (Article 25.1), if operations have not
commenced in a timely manner, the approved Appraisal
Operation shall be deemed withdrawn, with the effect as
if the Appraisal Operation had never been approved. If
an approved Appraisal Operation is deemed withdrawn due
to lack of timely commencement of operations, any Costs
incurred during said one hundred eighty (180) day period
which are attributable to the proposed operation shall
still be chargeable to the Participating Parties. An
Appraisal Operation for the drilling of an Appraisal
Well shall be deemed to have commenced on the date the
rig arrives on location or, if the rig is already on
location, the date when actual drilling operations are
begun.
11.1.4 AFE Overruns and Substitute Well: The Operator shall
timely commence an Appraisal Operation and continue the
operation with due diligence to the Objective Depth,
subject to (i) a supplemental AFE being required
pursuant to Article 6.2 or (ii) the Operator
encountering mechanical difficulties, uncontrolled
influx of subsurface water, abnormal pressures,
pressured or heaving shale, salt, granite or other
practicably impenetrable substances or other similar
conditions prevail in the hole that render further
drilling impracticable. If the Appraisal Well is
abandoned due to the conditions described under Section
11.1.4 (ii), then the Operator or any Participating
Party may propose a substitute well (with the associated
AFE and Well Plan), and each Participating Party in the
abandoned Appraisal Well will make an Election whether
to participate in the proposed substitute well. The
Operator (or substitute Operator) shall commence the
substitute well at the sole Cost and risk of the Parties
making an Election to participate. Costs of a Non-
Consent substitute well will be recouped in accordance
with Article 16 (Non-Consent Operations).
11.2 Subsequent Appraisal Operations at Objective Depth: After (i) the
Appraisal Operation has been drilled to its Objective Depth, (ii)
all operations in the controlling AFE and Well Plan have been
completed or terminated (except plug and abandon) and (iii) all logs
and test results have been distributed to the Participating Parties,
the Operator shall promptly notify the Participating Parties (and
Non-Participating Party(ies) in the case of a proposal under Section
11.2 (c) and (d), if applicable) of the Operator's proposal for one
of the following operations:
(a) conduct Additional Testing, Coring or Logging of the
formations encountered prior to setting production casing;
(b) Sidetrack the well bore to core the formations encountered;
(c) Sidetrack the well to another bottomhole location not deeper
than the stratigraphic equivalent of the original Objective
Depth;
(d) Deepen the well to a new Objective Depth;
(e) conduct production testing;
(f) complete the well at the Objective Depth in the objective zone
or formation;
(g) plug back the well and attempt a completion in a shallower
zone or formation;
(h) conduct on the well other operations not listed herein;
(i) temporarily abandoning the well; or
(j) permanently plug and abandon the well.
11.2.1 Response to Operator's Proposals: Within forty-eight
(48) hours (exclusive of Saturdays, Sundays and federal
holidays) after receipt of Operator's proposal to
conduct subsequent Appraisal Operations, or longer
period if such requesting Party agrees to bear one
hundred percent (100% ) of all standby charges for said
extended period, the Participating Parties shall
respond to the Operator's proposal by making its
Election to Operator's proposal or making a
counterproposal. Failure of a Participating Party to
respond to a proposal (except a proposal to plug and
abandon) shall be deemed an Election not to participate
in the Operator's proposal and to become a Non-
Participating Party from that point.
11.2.2 Counterproposals: If a Participating Party makes a
counterproposal for a subsequent Appraisal Operation,
the other Participating Parties shall have an additional
twenty-four (24) hours to respond to all
counterproposals. If conflicting proposals for
subsequent Appraisal Operations are made, preference for
voting shall be given first to operation (a) above, next
to operation (b) above, and so forth. If different
depths or locations are proposed for subsequent
Appraisal Operations, preference for voting shall be
given to the shallowest depth (or the location nearest
the existing well bore) and then other depths or
locations in descending (or more distant) order. After
a decision to conduct a subsequent Appraisal Operation
is made and the subsequent Appraisal Operation is
commenced, the remaining proposals for other types of
subsequent Appraisal Operations shall be deemed
withdrawn. At the completion of the subsequent
Appraisal Operation, the Operator shall again submit
proposal(s) for subsequent Appraisal Operations to the
Participating Parties, through the procedure provided
herein, until such time as the well is plugged and
abandoned.
11.2.3 Approval of Subsequent Appraisal Operations by All
Parties: If the proposed subsequent Appraisal Operation
is approved by all then Participating Parties, the
Operator (or substitute Operator) shall commence the
subsequent Appraisal Operation at the Cost(s) and risk
of the Participating Parties.
11.2.4 Approval of Subsequent Appraisal Operations by Fewer
Than All Parties: If a proposal for Subsequent
Appraisal Operations (except a proposal to plug and
abandon), is approved by the Election of at least
fifty percent (50%) interest of the then Participating
Parties' interest, but by fewer than all then
Participating Parties, then the Operator (or substitute
Operator) shall conduct the operation at the sole Cost
and risk of the Participating Parties. Any Non-
Participating Party in a Subsequent Appraisal Operation
shall be subject to Article 16 (Non-Consent Operations).
A Non-Participating Party in a Subsequent Appraisal
Operation shall be relieved of the Costs, risks and
obligations of the Subsequent Appraisal Operation,
except as to its share of the Costs of plugging and
abandoning the Appraisal Well in its then-current
condition. No operation shall be performed on the well
unless deemed by the Operator to be safe and the well
bore is in a condition to perform the proposed
operation.
11.2.5 Subsequent Appraisal Operations If Not Approved: If no
proposed Subsequent Appraisal Operation (except a
proposal to plug and abandon) receives sufficient
election to be approved by at least fifty percent (50%)
interest of the then participating Parties, then prior
to an Appraisal Well being plugged and abandoned,
Operator (or substitute Operator) shall conduct at the
sole Cost and risk of the Participating Parties, the
Subsequent Appraisal Operation receiving the largest
percentage of Participating interest approval, and in
the event of equal elections between two (2) or more of
such proposed Appraisal Operations, then preference
shall be given first to operation (a) then (b) and so
on, as set forth in Article 11.2 (Subsequent Appraisal
Operations at Objective Depth). Any Non-Participating
Party in such Subsequent Appraisal Operation shall be
subject to Article 16 (Non-Consent Operations). Such
Non-Participating Party shall be relieved of the Costs,
risk and obligation of the subsequent Appraisal
Operation, except as to its share of the Costs of
plugging and abandoning the Appraisal Well in its then-
current condition. No operation shall be performed on
the well unless deemed by the Operator to be safe and
the well bore is in a condition to perform the
operation.
11.3 Election by Non-Participating Parties in Deepening or Sidetracking
Appraisal Operations: If an Appraisal Well is drilled to its
initial Objective Depth and does not appear to result in a well that
will qualify as a Producible Well, and if any Participating Party
proposes to either (i) Deepen said Appraisal Well, or (ii) Sidetrack
said Appraisal Well, then, as provided in Article 11.2 (c) or (d),
the Operator shall notify each original Non-Participating Party of
the proposal. Each original Non-Participating Party may respond
with an Election regarding such a proposal to Deepen or Sidetrack by
notifying the Operator of its Election within forty-eight (48) hours
(exclusive of Saturdays, Sundays and federal holidays) after
receiving the Operator's notice, or longer period if such requesting
Party agrees to bear one hundred percent (100%) of all standby
charges for said extended period. Any original Non-Participating
Party making an Election to participate in the Deepening or
Sidetracking of an Appraisal Well shall be deemed to be
underinvested in an amount equal to its share of the Cost incurred
in such Non-Consent Well (including but not limited to drilling,
testing, logging or coring) prior to such Deepening or Sidetracking.
The Parties that participated in drilling to the initial Objective
Depth will be deemed overinvested in that amount, and all Costs for
operations under this Agreement that would otherwise be allocated
proportionately to such overinvested Parties shall be allocated to
the underinvested Parties until all overinvestments are eliminated.
Any original Non-Participating Party making an Election to
participate in the Deepening or Sidetracking of an Appraisal Well
shall remain a Non-Participating Party in the Appraisal Well to the
initial Objective Depth until the Costs recoverable under Article 16
(Non-Consent Operations), less any payments through a
Disproportionate Spending Settlement and/or Article 16.9
(Underinvestment of Costs), have been recouped by the original
Participating Parties.
11.4 Deeper Drilling: A proposal to drill an Appraisal Well to an
Objective Depth below the deepest Producible Reservoir penetrated by
a Producible Well shall require approval of the Parties having at
least a fifty percent (.50%) voting interest and shall be further
subject to the following provisions.
11.4.1 Limited Participation in Deeper Drilling: If a proposal
is approved pursuant to Article 11.4 above, any Party
may either; (a) make an Election to participate in the
proposed Deeper Drilling operation; (b) make an Election
not to participate in the proposed Deeper Drilling
operation; or (c) make an Election to limit its
participation to drilling to the base of the deepest
Producible Reservoir to be penetrated by the Deeper
Drilling operation.
A Party making an Election to limit its participation in
a Deeper Drilling Appraisal Well to the base of the
deepest Producible Reservoir shall bear its
Participating interest share of the Cost and risk of
drilling (including abandonment) to the base of the
deepest Producible Reservoir. If a Party makes an
Election not to participate in the proposed Deeper
Drilling, the proposed Deeper Drilling operations shall
be conducted pursuant to Article 16 (Non-Consent
Operations).
11.4.2 Multiple Completion Alternatives Above and Below the
Deepest Producible Reservoir: If a Non-Participating
Party in a Deeper Drilling operation below the deepest
Producible Reservoir considers the well to be capable of
producing at or above the deepest Producible Reservoir,
and has indicated a desire to complete the well at or
above the deepest Producible Reservoir, any further
Deeper Drilling operations shall be conducted subject
to the following provisions:
(a) Multiple Completions: If all the Participating Parties
in the well agree that a multiple well completion(s) are
possible and practicable involving (i) a completion at
or above the deepest Producible Reservoir and (ii) a
completion below the deepest Producible Reservoir, the
Participating Parties in the Deeper Drilling operation
shall bear 100% of the Costs of drilling to an Objective
Depth below the deepest Producible Reservoir that are in
excess of the original Costs to drill and complete the
well in the deepest Producible Reservoir.
(b) Single Completions: If all the Participating Parties in
the well do not agree that multiple well completions are
possible or practicable, the Non-Participating Party in
the Deeper Drilling operation shall be deemed
overinvested in the original well in an amount equal to
the Non-Participating Party's Share of the original
Costs of drilling the well to the deepest Producible
Reservoir. The Participating Parties in the Deeper
Drilling operation shall assume their proportionate
share of the Non-Participating Party's Share of the
Costs of other operations conducted under this Agreement
until all overinvestments are eliminated.
(c) Overinvestments for Single Completions: The
Participating Parties as to the depths below the deepest
Producible Reservoir shall be deemed overinvested in an
amount equal to the Non-Participating Party's Share of
the well's Cost down to the deepest Producible Reservoir
at the first occurrence of the following events:
(i) the well is not a Producible Well in the deeper
depths and the well is plugged back to a shallower
zone; or,
(ii) the well is completed as a Producible Well in the
deeper depths, but Hydrocarbon production from the
deeper zone is later depleted prior to Non-Consent
Recoupment (attributable to Deeper Drilling
operation) and the well is plugged back to a
shallower zone; or,
(iii) the well is completed as a Producible Well in the
deeper depths and the Participating Parties have
recovered the applicable Non-Consent Recoupment
(attributable to the Deeper Drilling operation)
from Hydrocarbon production from the deeper zone.
The overinvestment shall be depreciated at the rate of
one-half percent (.50%) per month from the date the Deeper
Drilling operation commences to the earlier of the date
of (i), (ii) and (iii) above, but such depreciation
shall not reduce the overinvestment below forty percent
(40.0%) of the original overinvestment. The Non-
Participating Parties in the Deeper Drilling operation
shall assume their proportionate share of the
Participating Party's Share of the Costs of other
operations conducted under this Agreement until all
overinvestments are eliminated.
11.4.3 Completion Attempts At or Above the Deepest Producible
Reservoir: If a well drilled below the deepest
Producible Reservoir is not completed for production in
the deeper depths, then the Participating Parties in
said well down to the deepest Producible Reservoir shall
have a right to utilize the well for completion in a
Producible Reservoir. The Participating Parties in
drilling below the deepest Producible Reservoir in said
well shall bear the Costs (including plugging back
Costs) necessary to place the well in proper condition
for completion in a Producible Reservoir. If a well
drilled below the deepest Producible Reservoir is
damaged to the extent that it is rendered incapable of
being completed and produced at or above the deepest
Producible Reservoir in that well, the Participating
Parties in the Deeper Drilling operation shall be
obligated, at their sole Cost and risk, to restore the
well to its condition prior to the Deeper Drilling
operations below the deepest Producible Reservoir. The
Participating Parties in the Deeper Drilling Operation
shall be obligated to pay for the entire Cost of
redrilling the well if the damage cannot be repaired.
Both the Participating Parties in the original drilling
operation and the Participating Parties in the Deeper
Drilling operation shall be Participating Parties in the
completion attempt in the shallower formation.
11.5 Plugging and Abandoning Costs: Upon the conclusion of all operations
set forth in an Appraisal Operations Well Plan and all Subsequent
Appraisal Operations on such well, or if the Operator encounters
mechanical difficulties or impenetrable conditions, which make
further drilling impracticable, then the Operator may propose to
plug and abandon the well. Upon approval of the well abandonment by
the Participating Parties having a voting interest of at least fifty
percent (50%) or failing approval, the Operator deems the well bore
not to be safe or in a condition to perform further operations, the
Operator shall commence the plugging and abandonment of the well.
The Participating Parties in the original operation shall pay all
Costs of plugging and abandoning the Appraisal Well (except any
increased plugging and abandoning Costs associated solely with a
Subsequent Appraisal Operation conducted as a Non-Consent
Operation). The Participating Parties in any Non-Consent Operation
shall be responsible for the increased plugging and abandoning Costs
attributable to the Non-Consent Operation.
ARTICLE 12
DEVELOPMENT PLAN
12.1 Phased Development Plans: The results of Exploratory and/or
Appraisal Operations may justify the development of one or more
Producible Reservoirs within a Designated Prospect. The Operator
shall prepare for the approval of the Parties a Development Plan in
order to pursue such development of a Designated Prospect. In order
to provide for the orderly preparation of the Development Plan,
unless otherwise mutually agreed by all the Parties, the Parties
shall form an Integrated Project Team subject to Article 12.2
(Proposal of Integrated Project Team) whose duties are more
specifically set forth in Exhibit "G" (Integrated Project Team and
Technology Sharing) and which shall be charged with assisting the
Operator in the preparation of a Development Plan and in design,
engineering, fabrication, transportation and installation of the
Initial Production System and Facilities. In view of the Costs and
scope of Development Operations for a Designated Prospect, the
Parties may agree to divide Development Operations into an initial
Development Phase and one or more subsequent Development Phases.
Each Development Phase shall be centered upon the installation of a
new or expanded Production System for a Designated Prospect. A
separate Development Plan shall be prepared for each Development
Phase, and each Development Plan shall be developed, approved and
implemented pursuant to this Article 12.
12.2 Proposal of Integrated Project Team: The Operator shall have the
exclusive right to submit a proposal for the formation of the
Integrated Project Team during the first six (6) month period
following rig release for an Exploratory Well on any of the
Designated Prospects. However, if an Appraisal Operation is
approved by the Parties prior to the proposal for the formation of
the Integrated Project Team, the Operator's exclusive proposal
period shall be extended until six (6) months after rig release of
the last approved Appraisal Operation on any of the Designated
Prospects. If Operator fails to propose the formation of the
Integrated Project Team during its exclusive proposal period(s),
then, after expiration of the Operator's exclusive proposal
period(s), any Party may propose the formation of the Integrated
Project Team.
12.3 Integrated Project Team Election: A proposal for the formation of
the Integrated Project Team shall not require the approval of the
Parties as a General Matter. Each Party shall have an Election as
to its participation in the AFE for the Integrated Project Team,
pursuant to Article 8.3.3 (Other AFE Related Operations). The
formation and administration of the Integrated Project Team shall be
handled in accordance with Exhibit "G" (Integrated Project Team and
Technology Sharing) with the Costs of the Integrated Project Team
being charged in accordance with Exhibit "C" (Accounting Procedure).
A Party which makes an Election not to participate in the Integrated
Project Team shall become a Non-Participating Party as to the costs
of the Integrated Project Team and shall be subject to the
provisions of Article 16.5.3 (Non-Consent Geophysical Operations,
Integrated Project Team and/or Final Design AFE). A Non-
Participating Party shall not have access to the data or studies
prepared by the Integrated Project Team until satisfaction of the
requirements of Article 16.5.3.
12.4 Proposal of a Development Plan: The Operator shall have the
exclusive right for a period of twelve (12) months from the
formation of the Integrated Project Team to submit a Development
Plan for the review and approval of the Parties, such proposed
Development Plan to be based upon the work and recommendations of
the Integrated Project Team. If Operator has begun preparation of a
Development Plan during the first six (6) months of the twelve (12)
month period, but the Development Plan will not be completed and
submitted by the end of the Operator's exclusive period, the
Operator may request an extension of the exclusive period to allow
completion of the work in progress. Any request for extension shall
include a report of the progress to date and specify a date for
submission of the Development Plan not more than three (3) months
from the expiration of the exclusive submission period. The Parties
may grant an extension by a General Matter vote. If the Parties
mutually agree not to form an Integrated Project Team, then the
Operator shall have the exclusive right to propose a Development
Plan for a period of twelve (12) months following completion of the
Exploratory Operations or Appraisal Operations, whichever is later.
12.4.1 Alternative Development Plans: If a Development Plan is
not timely submitted by the Operator or the Development
Plan submitted by the Operator is not approved pursuant
to Article 12.6 (Approval of a Development Plan) or
12.6.1 (Amended Approval Requirement for Development
Plans) below, then any Party shall have the option to
submit a Development Plan. Development Plans proposed
after expiration of the Operator's exclusive period
shall be considered for approval by the Parties in the
order in which the Development Plans are submitted.
12.5 Content of the Development Plan: Any Development Plan proposed
under this Agreement shall contain sufficient detail to allow the
Parties to adequately evaluate the scope, timing, Costs and capacity
of the proposed Development Plan and Production System. All
Development Plans submitted shall include at least the following
information:
(a) Initial Production System: Description of the Initial
Production System including:
(i) the type of Production System proposed (i.e., tension
leg well jacket, floating production system, etc.),
including the Production System's location,
configuration (i.e., number of well slots or subsea
tiebacks) and production capacity;
(ii) a description of the Facilities, including the gathering
and pipeline system necessary to transport the
Hydrocarbons from the well heads to shore;
(iii) a project execution plan which includes a time schedule
for designing, contracting, fabricating, constructing,
transporting, installing, commissioning, and start-up;
(iv) the estimated date of initial Hydrocarbon production and
the estimated daily rate of Hydrocarbon production
thereafter; and,
(v) the estimated Costs of the Production System not in the
form of an AFE;
(b) Producible Reservoirs: A description of the Hydrocarbon
bearing geological formations expected to be developed under
the Development Plan along with the general area and depth of
sands or reservoirs to be developed by the Production System,
and wellstream characteristics for use in designing the
Production System;
(c) Recoverable Reserves: An estimated range of recoverable
reserves for the proposed Development Plan;
(d) Predrilling Operations: A reasonable description of
predrilling operations, if any, planned in support of later
development, including an estimate of the timing, Cost and
location of each predrilling operation;
(e) Development Xxxxx: A reasonable description of drilling and
completion plans for all Development Xxxxx, including an
estimate of the timing, Cost and location of each well.
(f) Other Data: Provided such information is available, any other
information reasonably necessary to perform an evaluation of
the technical and economic feasibility of the Initial
Production System provided for in the Development Plan.
12.6 Approval of a Development Plan: The Operator shall have ninety (90)
days to obtain unanimous approval of the Parties for any Development
Plan proposal submitted by the Operator during its exclusive period.
If either (i) the Operator fails to gain the unanimous approval of
the Parties or (ii) the Operator fails to submit a Development Plan,
the Parties shall have a period of ninety (90) days commencing with
either the expiration of the Operator's exclusive period or the
failure to obtain approval in which either the Operator's
Development Plan or an alternate Development Plan may be unanimously
approved by the Parties.
12.6.1 Amended Approval Requirement for Development Plans: If
a Development Plan is not unanimously approved upon
conclusion of the ninety (90) day period provided in
Article 12.6 above, then the unanimous agreement
requirement, provided for under Article 12.6 shall be
amended to provide:
(i) during this amended approval process,
consideration for approval by the Parties shall be
given first and simultaneously to any previously
proposed Development Plan;
(ii) for a twelve (12) month period following
expiration of the two (2) separate ninety (90) day
plus ninety (90) day periods, approval of a
Development Plan shall be by the Parties as a
General Matter. No new alternative Development
Plan shall be submitted during the last six (6)
months of this twelve (12) month period; and
(iii) if a Development Plan is not approved, as a
General Matter, during the twelve (12) month
period, then the Development Plan shall be
approved according to the following:
(a) If there is only one Development Plan submitted and
such Development Plan receives an affirmative vote
of at least forty percent (40%) of the voting
interest, such Development Plan shall be deemed
approved by the Parties;
(b) If there are two (2) or more Development Plans
submitted and two (2) receive an affirmative vote
of at least forty percent (40%) of the voting
interest, then the Development Plan receiving the
largest affirmative vote shall be deemed approved by
the Parties.
(c) If there are two (2) or more Development Plans
submitted and one Development Plan receives an
affirmative vote of at least forty percent (40%) of
the voting interest, and the other Development
Plan(s) receives an affirmative vote of less than
forty percent (40%) of the voting interest, then the
Development Plan receiving the affirmative vote of
at least forty percent (40%) of the voting interest
shall be deemed approved by the Parties;
(d) If two (2) competing Development Plans each receive
an affirmative vote of forty percent (40%) voting
interest, the Parties will use reasonable efforts to
diligently pursue a compromise Development Plan,
failing which then the Development Plan submitted
first shall be deemed approved by the Parties.
12.7 Final Design AFE: No later than six (6) months from the date the
Development Plan is approved as provided in Article 12.6 above,
Operator shall submit to all Parties the Final Design AFE for the
Initial Production System for their Election. Such Final Design AFE
shall include a Cost estimate for design which shall include both
the Cost of Operator and Non-Operator staff time (including
Affiliate employees) and the Cost of contract labor and services for
the design and testing necessary to adequately define the system for
the bidding of fabrication. The Final Design AFE may also include
the Cost of long-delivery equipment items which must be purchased
before the start of fabrication and construction. Operator may
provide other additional documents as necessary to allow the Parties
to adequately evaluate the Final Design AFE.
12.7.1 Response to Final Design AFE: Each Party shall respond as
to its Election in the Final Design AFE proposal within the
time frame as described in Article 8 (Voting, Notices, and
Elections). If all the Parties make an Election to
participate in the Final Design AFE, then the Operator
shall proceed with the Final Design AFE for the Joint
Account of the Parties. If a Party makes an Election not to
participate in the Final Design AFE, then each of the
Participating Parties shall elect to either: (i) proceed
with the Final Design AFE with the interest of the Non-
Participating Party shared by the Participating Parties on
the basis of their respective Working Interests, unless
otherwise agreed in writing, or (ii) change its Election to
become a Non-Participating Party. All risk, Cost, and
expense shall be borne in proportion to the respective
interests of the Participating Parties. Any Non-
Participating Party shall be subject to the Non-Consent
provisions as set forth in Article 16.5.3 (Non-Consent
Geophysical Operations, Integrated Project Team/and/or
Final Design AFE).
12.8 Fabrication AFE: No later than six (6) months from the date of the
last Election for the Final Design AFE as provided in Article 12.7
above, unless such additional time is necessary due to circumstances
beyond Operator's control, Operator shall submit a Fabrication AFE
for the Initial Production System to all Parties for their Election.
The Fabrication AFE shall consist of separate AFEs for each major
component in the construction, fabrication and installation of the
Initial Production System identified in the approved Development
Plan and Final Design AFE. If the Operator does not timely submit
the Fabrication AFE, any Party may submit a Fabrication AFE for the
Development Plan. The Fabrication AFE shall consist of a separate
AFE for: (i) the structural components of the Initial Production
System, (ii) the equipment and Facilities to be located on the
Designated Prospect (or located off the Designated Prospect but
serving the Designated Prospect), and (iii) any pipelines or other
Facilities for handling Hydrocarbon production. The Election
regarding the Fabrication AFE shall be a single Election and not an
Election as to the individual AFEs comprising the Fabrication AFE.
12.8.1 Response to Fabrication AFE: The Parties shall make their
Election as to the Fabrication AFE within the time period
as described in Article 8.3.2 (Production System
Construction). Development Xxxxx shall be subject to
separate AFEs and shall not be included within the
Fabrication AFE. If all the Parties make an Election to
participate in the Fabrication AFE, then the Operator shall
proceed to design, fabricate, construct, transport and
install the Initial Production System for the Joint Account
of the Parties. By making an Election to participate in the
Fabrication AFE, each Participating Party commits to pay
its Participating Interest share of the Costs, risks and
liabilities of the Initial Production System as set out in
the Fabrication AFE. Each Non-Operator Participating Party
shall have the option to attend regularly scheduled
meetings between the Operator and any contractors
constructing the Initial Production System or Facilities
specified in the Fabrication AFE as well as visits to the
construction sites. Any Non-Participating Party shall be
subject to Article 16.2 (Acreage Forfeiture Provisions) and
the Participating Parties shall elect to either: (i)
proceed with the Fabrication AFE with the interest of the
Non-Participating Party shared by the Participating Parties
on the basis of their respective Working Interests, unless
otherwise agreed, or (ii) change its Election to become a
Non-Participating Party. The Working Interest of the Non-
Participating Party shall be shared by the Participating
Parties in accordance with Article 16.2.2 (Initial
Production System).
12.9 Minor Modifications and Revisions to Development Plans: In
implementing the Development Plan, the Operator may make minor
modifications and revisions to the Development Plan subject to the
following:
12.9.1 Minor Modifications to Development Plans: The Operator
may, without the approval of the Participating Parties,
make minor modifications to a Development Plan if such
minor modifications are both necessary and reasonable to
accomplish the Development Plan. For purposes of this
paragraph, a minor modification shall mean a modification
which does not cause the estimated Cost of any separate AFE
submitted under the Fabrication AFE to increase by more
than twenty-five percent (25%) or Two Million Dollars
($2,000,000), whichever is less, and does not change the
type of Production System, the number of Development Xxxxx,
the capacity of the Facilities or the Hydrocarbon
transmission system of the Development Plan. Such minor
modifications also shall not materially change the risk or
timing of the Development Plan nor any prior Elections of
the Parties.
12.9.2 Revisions to Development Plans : A Development Plan may be
revised as needed to accommodate new data, interpretations
or other changes not covered by Article 12.9.1 (Minor
Modifications to Development Plans) or by Article 12.10
(Major Modifications to Development Plans). Any such
revision pursuant to this Article 12.9.2 shall require
approval as a General Matter. The Operator shall provide a
copy of the revised Development Plan to all Parties, except
in the case when the Development Plan is automatically
revised as a result of a Development Operation not included
in the then current Development Plan being approved as a
General Matter as provided in Article 13.1 (Proposal of
Development Operations).
12.10 Major Modifications to Development Plans: The Operator shall
promptly notify the Participating Parties whenever a major
modification to a Development Plan is anticipated and shall furnish
to the Participating Parties the Operator's proposal to modify the
Development Plan (and associated AFE's) along with the basis for the
proposal and estimated Costs. Approval of major modifications shall
require the unanimous affirmative vote of all Participating Parties
in accordance with Article 12.6. A major modification shall be
deemed to have occurred when:
(i) the type of the Production System is materially changed or
the capacity is changed by ten percent (10%) or more; or
(ii) the number of well slots of the Production System is changed
by at least twenty-five percent (25%); or
(iii) the type of Hydrocarbon transmission system is changed (e.g.,
pipeline vs. barge, etc.).
If the major modification is approved by all the Participating
Parties, then the Operator shall immediately advise any Party who
made an Election not to participate in the Fabrication AFE for the
original approved Development Plan and provide the modified
Development Plan to such Non-Participating Party. Any Non-
Participating Party shall have the right for a period of forty-five
(45) days, after receipt of the modified Development Plan from the
Operator, in which to make an Election to participate in the
modified Development Plan. Any Non-Participating Party s Election
to participate in the modified Development Plan shall be subject to
a Disproportionate Spending Settlement in an amount equal to one
hundred percent (100%) of such Non-Participating Party's share of
the actual Costs incurred for the Development Plan. The Non-
Participating Party who makes an Election to participate in the
modified Development Plan shall be an underinvested Party until such
underinvestment is eliminated. The Participating Parties shall
deliver to the Non-Participating Party who makes an Election to
participate in the modified Development Plan an assignment of one
hundred percent (100%) of such Non-Participating Party's former
Working Interest in the Designated Prospect, the xxxxx therein and
production therefrom within thirty (30) days after full payment is
received. If the major modification is approved, the Development
Plan (and any associated AFE's) shall be deemed modified and the
Operator shall carry out the modified Development Plan. In the
event a major modification is not approved by all Participating
Parties, the Operator shall continue to implement the approved
Development Plan.
12.11 Supplemental AFE for Cost Overruns on Fabrication AFE: Shall be as
provided for in Article 6.2.6 (Supplemental AFE for Cost Overruns on
Fabrication AFE).
12.12 Termination of a Development Plan: Any proposed termination of an
approved Development Plan may only be accomplished by unanimous
consent of the Participating Parties.
12.13 Timely Operations for Initial Production Systems: The Operator shall
commence, or cause to be commenced, the construction of the Initial
Production System in any Designated Prospect(s) within one (1) year
from the last Party's Election for the Fabrication AFE. Such
construction shall be deemed timely commenced on the date the major
fabrication contract for the Production System is awarded. If such
construction has not commenced in a timely manner, then the approved
Fabrication AFE shall be deemed withdrawn with the effect as if the
Fabrication AFE had never been submitted. The above
notwithstanding, if the MMS grants a "Suspension of Production" or a
"Suspension of Operations" (an "SOP/SOO") for an approved
Development Plan, any shorter time limits set forth as requirements
of the SOP/SOO shall supersede the corresponding longer time limit
set forth in this Agreement or the Development Plan.
12.14 Expansion, Modification, or Repair of an Initial Production System:
Subsequent to the installation of the Initial Production System
described and approved in the first Development Plan for a
Designated Prospect, any Party may propose the expansion,
modification or repair of any existing Production System in which it
has participated by written notice to the other Participating
Parties in such Production System. Such proposal shall be presented
in accordance with Articles 12.18 (Annual Operating Plan) and 8.3
(Response Time for General Matters and Elections) for approval as a
General Matter. If approved as a General Matter, it will be
binding on all Participating Parties in the Initial Production
System and Operator shall proceed with such project for the benefit
of the Joint Account and all Cost, risk and expense of such
operation shall be borne in proportion to the respective
Participating Parties' Working Interest in such Initial Production
System unless otherwise agreed. This Article 12.14 shall not
constitute a limit on a Party's right to install its own Facilities
under Article 15 (Disposition of Production). The provisions of
this Article 12.14 shall not apply to subsequent Development
Phase(s).
12.15 Subsequent Development Phases: At any time after the last Party's
Election under the Fabrication AFE for the Initial Development
System, any Participating Party may propose an additional
Development Phase(s) and the installation of a subsequent or
expanded Production System(s). Upon proposal of a Subsequent
Development Phase, the Operator shall propose the formation of an
Integrated Project Team to prepare a Development Plan for the
Subsequent Development Phase. The preparation and approval of the
Development Plan for a Subsequent Development Phase shall follow the
same procedures specified in this Article 12 for the preparation and
approval of the initial Development Plan.
12.16 Access to Existing Facilities: Development Operations in subsequent
Development Phases shall have reasonable access (on a space
available basis) to gathering, processing and transportation
Facilities installed for previous Development Phases.
12.17 Non-Consent Operations in Subsequent Development Phases: If fewer
than all Parties make an Election to participate in a Subsequent
Development Phase, the Operator (or substitute Operator) shall
conduct Development Operations in the Subsequent Development Phase
for the account of the Participating Parties and at their sole Cost
and risk. The Participating Parties shall conduct the Subsequent
Development Operations in the Subsequent Development Phase with the
benefit of the non-consent provisions specified in Article 16 (Non-
Consent Operations). A Non-Participating Party in a Subsequent
Development Phase shall not be entitled to any information or data
from any Development Operation associated with such Development
Phase, unless the Non-Participating Party makes an Election to
participate in such operations of the Subsequent Development
pursuant to Article 16.7 (Operations From a Subsequent Non-Consent
Production System). Any Non-Participating Party in a Subsequent
Development Phase may retain its Working Interest in the Designated
Prospect corresponding to a Development Phase in which it
participated. However, such a Non-Participating Party shall not
unreasonably interfere with Development Operations in the Subsequent
Development Phase (and shall not make any claim for drainage upon
the Participating Parties in the Subsequent Development Phase, so
long as the Subsequent Development Phase is conducted according to
prudent operating practices). In all events, the sequence and
conduct of Development Operations in a Subsequent Development Phase
shall be controlled by the Participating Parties in the Subsequent
Development Phase Operation. Hydrocarbon production volumes between
Phases shall be measured on the basis of well tests and operating
expenses between Phases allocated upon the basis of Hydrocarbon
production volume throughput.
12.18 Annual Operating Plan: Beginning in the year in which a Development
Plan is approved for a Designated Prospect, and each subsequent year
thereafter, the Operator shall develop an Annual Operating Plan.
The Annual Operating Plan process will be used (i) as a reporting
mechanism by which the Operator will inform the Non-Operating
Parties of results of the previous year's activities, (ii) to review
ongoing operations and (iii) to forecast activities, anticipated
Hydrocarbon production volumes, operating expenses and capital
expenditures for the remainder of the current year and the next
succeeding calendar year.
12.18.1 Development and Submission of the Annual Operating Plan:
Prior to May 1 of each year, the Operator will conduct a
meeting with the Non-Operating Parties to review the
results of the previous year. The Operator will also
provide the Non-Operating Parties with its anticipated
activities for the current and following year and solicit
input regarding these activities from the Non-Operating
Parties. After this meeting, the Operator will prepare and
submit its proposed draft for the Annual Operating Plan
prior to June 1 of each year.
12.18.2 Review of the Annual Operating Plan: The Non-Operating
Parties will provide suggested changes, additions or
deletions to the Annual Operating Plan to the Operator and
all other Parties prior to July 15 of each year. The
Operator will then make any changes it deems necessary and
submit the Annual Operating Plan no later than October 1 of
each year.
12.18.3 Content of Annual Operating Plan: The Annual Operating
Plan will include an estimated capital budget, expense
budget and Operator's anticipated forecast as follows:
12.18.3.1. Capital Budget: The Annual Operating Plan shall
contain an estimated capital budget that includes the
following:
(a) a list of proposed xxxxx to be drilled including
their anticipated order, drilling time, depths,
locations, objective sands, type of well
(Development, Appraisal, etc.), purpose of well
(production, injection, etc.) and estimated Costs;
(b) capital workovers, which shall be defined as any
workover operation conducted to recomplete a well to
a new zone or install artificial lift, listed by
well, with their estimated Cost;
(c) other capital projects requiring a gross expenditure
greater than three million dollars ($3,000,000).
The term "capital project" shall include addition of
new equipment, expansion or upgrades of existing
equipment; and
(d) an estimated total amount (in aggregate) for capital
projects.
12.18.3.2 Expense Budget: The Annual Operating Plan shall
contain an estimated expense budget that includes the
following:
(a) expense workovers, which shall be defined as any
anticipated workover operation which is not a
capital workover (such as repair work or reworks
within the same zone), listed by well, with their
estimated Cost;
(b) all expense projects requiring a gross expenditure
greater than three million dollars ($3,000,000).
The term "expense project" shall include repair,
replacement, inspection and maintenance of existing
equipment;
(c) an estimated total amount (in aggregate) for expense
projects; and
(d) estimated Operations and Maintenance (O&M)
expenditures for the year may be shown in the
aggregate. O&M expenses shall include the ongoing,
everyday expenditures necessary to operate the
field.
12.18.3.3 Operator Forecasts and Informational Items: The Annual
Operating Plan shall contain the Operator's reasonable
forecasts and projections (but are recognized as
forecasts and projections only) including the following
information:
(a) production forecasts;
(b) injection forecasts;
(c) fuel and flare gas forecasts;
(d) scheduled or planned downtime exceeding three (3)
days;
(e) data collection programs; and
(f) other areas deemed of significance by the Operator.
12.18.4 Effect of the Annual Operating Plan: The Annual Operating
Plan shall be primarily for informational and planning
purposes and shall not obligate any Party to any
expenditures or constitute an Election to participate in or
a proposal of any specific operation. However, the Annual
Operating Plan is recognized as the Operator's effort to
forecast and plan for activities during the year while
providing for input from the Non-Operators. Pursuant to
the terms and conditions of this Agreement, any Party may
make proposals for operations which were not included in
the Annual Operating Plan. Approval of any such operation,
under the terms provided in Article 8 (Voting, Elections,
and Notices), shall be deemed a modification to the Annual
Operating Plan.
ARTICLE 13
DEVELOPMENT OPERATIONS
13.1 Proposal of Development Operations: It is the intent of the Parties
to proceed with development of the Contract Area in accordance with
the approved Development Plan. Any Party may propose to conduct
specific Development Operations which were included in the
Development Plan by giving notice of the proposal and the associated
Well Plan, which shall include at least the information set out in
Article 10.2.1 (Well Plan's Minimum Specifics), and AFE to all other
Parties. Each Development Operation included in an approved
Development Plan shall not require approval as a General Matter.
The Operator (or substitute Operator) shall commence the Development
Operation at the sole Cost and risk of the Parties making an
Election to participate. Costs of a non-consent Development
Operation will be recouped in accordance with Article 16 (Non-
Consent Operations). Any Participating Party may propose to
conduct specific Development Operations which were not included in
the Development Plan. However, such a proposal shall also specify
that it is not for an operation included in the Development Plan. A
proposal for a Development Operation not included in the Development
Plan shall require approval as a General Matter and, if approved,
such Development Operation not included in the Development Plan
shall automatically revise the Development Plan. However, the
provisions of this Article 13 (Development Operations) shall not
apply to the proposal for the Initial Production System in the
Designated Prospect. The Initial Production System shall be
proposed as a part of the Development Plan in accordance with
Article 12 (Development Plan) of this Agreement.
13.1.1 Operator's Counterproposal: If a Non-Operating Party makes
a proposal that was not included in the approved
Development Plan and such proposal is approved as a General
Matter with the Operator being the non-approving Party, the
Operator shall have the option to:
(a) make an Election to participate in the operation
proposed by the Non-Operating Party;
(b) become a Non-Participating Party pursuant to the
provisions of Article 16 (Non-Consent Operations); or,
(c) make a counterproposal within the applicable response
time that attempts to satisfy the same or similar
objectives (in terms of timing and development of the
Designated Prospect) as would the Non-Operating Party's
proposal.
The Operator's counterproposal, if approved as a General
Matter, shall have the effect of voiding the Non-Operating
Party's proposal. A Party making an Election not to
participate in the Operator's counterproposal shall become
a Non-Participating Party in the Operator's counterproposal
shall become a Non-Participating Party in the operation
subject to Article 16 (Non-Coinsent Operations). If the
Operator's counterproposal is not approved, Operator shall
make its Election and commence the originally proposed
operation in a timely manner.
13.1.2 AFE Overruns and Substitute Xxxxx: The Operator shall
timely commence a Development Operation and continue the
drilling of such well with due diligence to its Objective
Depth or until (i) a supplemental AFE is required pursuant
to Article 6.2 (Authorization for Expenditure and
Supplemental Authorization for Expenditure)) or (ii) the
Operator encounters mechanical difficulties, uncontrolled
influx of subsurface water, abnormal pressures, pressured
or heaving shale, salt, granite or other practicably
impenetrable substances or other similar conditions prevail
in the hole that render further drilling impracticable. If
the Development Well is abandoned due to the conditions
described under Section 13.1.2 (ii), then the Operator or
any Participating Party may propose a substitute well (with
the associated AFE and Well Plan), and each Participating
Party in the abandoned Development Well shall make an
Election whether to participate in the proposed substitute
well. The Operator (or substitute Operator) shall commence
the substitute well at the sole Cost and risk of the
Parties making an Election to participate. Costs of a Non-
Consent substitute Development Well will be recouped in
accordance with Article 16 (Non-Consent Operations).
13.1.3 Timely Operations: A proposed Development Operation except
as provided in Article 12.13 (not requiring the
installation of a Production System) shall be commenced
within one hundred eighty (180) days from the date upon
which the last applicable Election to participate was made.
Except as a result of Force Majeure (Article 25.1), if
operations have not been timely commenced within one
hundred eighty (180) days from the last Election date, the
proposal and Elections shall be deemed withdrawn, with the
effect as if the proposal and Elections had never been
made. If a proposal is deemed withdrawn due to lack of
timely commencement of operations, any Costs incurred
during said one hundred eighty (180) day period which are
attributable to the proposed operation shall still be
chargeable to the Participating Parties. A Development
Operation for the drilling of a Development Well shall be
deemed to have commenced on the date the rig arrives on
location or, if the rig is already on location, the date
when actual drilling operations are begun.
13.2 Subsequent Development Operations at Objective Depth: After a
Development Well (or its substitute) has been drilled to its
Objective Depth as set forth in the Well Plan (and all logs and
evaluations have been distributed to the Participating Parties), the
Operator shall promptly notify the Participating Parties of the
Operator's proposal for one of the following operations:
(a) conduct Additional Testing, Coring or Logging of the
formations encountered prior to setting production casing;
(b) complete the well at the Objective Depth in the objective zone
or formation;
(c) Sidetrack the well to another bottomhole location not deeper
than the stratigraphic equivalent of the original Objective
Depth;
(d) plug back the well and attempt a completion in a shallower
zone or formation;
(e) Deepen the well to a new Objective Depth;
(f) conduct other operations on the well not listed;
(g) temporarily abandon the well; or
(h) permanently plug and abandon the well.
13.2.1 Response to Operator's Proposal: Within forty-eight (48)
hours (exclusive of Saturdays, Sundays and federal
holidays) after receipt of Operator's proposal to conduct
Subsequent Development Operations, or longer period if such
requesting Party agrees to bear one hundred percent (100%)
of all standby charges for said extended period, each
Participating Party shall respond to the Operator's
proposal by making its Election to participate in
Operator's proposal or by making a counterproposal.
Failure of a Participating Party to respond to a proposal
(except a proposal to plug and abandon) shall be deemed an
Election not to participate in the Operator's proposal and
to become a Non-Participating Party from that point.
13.2.2 Counterproposals: If a Participating Party makes a
counterproposal for Subsequent Development Operations, the
other Participating Parties shall have an additional
twenty-four (24) hours to respond thereto. If conflicting
proposals for Subsequent Development Operations are made,
preference for voting shall be given first to operation (a)
above, next to operation (b) above, and so forth. If
different depths or locations are proposed for Subsequent
Development Operations, preference shall be given to the
shallowest depth (or the location nearest the existing well
bore) and then other depths or locations in descending (or
more distant) order. After a decision to conduct a
Subsequent Development Operation is made and the Subsequent
Development Operation is commenced, the remaining proposals
for other types of Subsequent Development Operations shall
be deemed withdrawn. At the completion of the Subsequent
Development Operation, the Operator shall again submit
proposal(s) for Subsequent Development Operations to the
Participating Parties, through the procedure provided
herein, until such time as the well is plugged and
abandoned.
13.2.3 Approval of Subsequent Development Operations by All
Parties: If the proposed Subsequent Development Operation
is approved by all Parties, the Operator (or substitute
Operator) shall commence the Subsequent Development
Operation at the Cost(s) and risk of the Participating
Parties.
13.2.4 Approval of Subsequent Development Operations as a General
Matter by Fewer Than All Parties: If a proposal for
Subsequent Development Operations (except a proposal to
plug and abandon), is approved as a General Matter by fewer
than all Parties, then the Operator shall conduct the
operation at the sole Cost and risk of the Participating
Parties. Any Non-Participating Party in a Subsequent
Development Operation shall be subject to Article 16 (Non-
Consent Operations). A Non-Participating Party in a
Subsequent Development Operation shall be relieved of the
Costs, risks and obligations of the Subsequent Development
Operation, except as to its share of the Costs of plugging
and abandoning the Development Well in its then-current
condition. No operation shall be performed on the well
unless deemed by the Operator to be safe and the well bore
is in a condition to perform the proposed operation.
13.3 Election by Non-Participating Parties in Deepening or Sidetracking
Operations: If a Development Well is drilled to its initial
Objective Depth and does not appear to result in a well that will
qualify as a Producible Well, and if any Participating Party
proposes to either (i) Deepen said Development Well or (ii)
Sidetrack said Development Well, then as provided in Article 13.2
(c) or (e), the Operator shall notify each original Non-
Participating Party of the proposal. Each original Non-
Participating Party may respond with an Election regarding such a
proposal to Deepen or Sidetrack by notifying the Operator of its
Election within forty-eight (48) hours (exclusive of Saturdays,
Sundays and federal holidays) after receiving the Operator's notice,
or longer period if such requesting Party agrees to bear one hundred
percent (100%) of all standby rig charges for said extended period.
Any original Non-Participating Party making an Election to
participate in such Deepening or Sidetracking of a Development Well
shall be deemed to be underinvested in an amount equal to its share
of the Cost incurred in such Non-Consent Well (including but not
limited to drilling, testing, logging or coring) prior to the
Deepening or Sidetracking. The Parties that participated in
drilling to the initial Objective Depth will be deemed overinvested
in that amount, and all Costs for operations under this Agreement
that would otherwise be allocated to such overinvested Parties shall
be allocated to the underinvested Parties until all overinvestments
are eliminated. Any original Non-Participating Party making an
Election to participate in the Deepening or Sidetracking of a
Development Well shall remain a Non-Participating Party in the
Development Well to the Initial Objective Depth until the Costs
recoverable under Article 16 (Non-Consent Operations), less any
payments through a Disproportionate Spending Settlement and/or
Article 16.9 (Underinvestment of Costs), have been recouped by the
original Participating Parties.
13.4 Deeper Drilling: A proposal to drill a Development Well to an
Objective Depth below the deepest Producible Reservoir penetrated by
a Producible Well or to reenter and Deepen an existing Development
Well to an Objective Depth below the deepest Producible Reservoir
penetrated by a Producible Well shall require approval as a General
Matter and shall be further subject to the following provisions.
13.4.1 Limited Participation in Deeper Drilling: If a proposal is
approved pursuant to Article 13.4, any Party may either;
(a) make an Election to participate in the proposed Deeper
Drilling operation; (b) make an Election not to participate
in the proposed Deeper Drilling operation; or (c) make an
Election to limit its participation to drilling to the base
of the deepest Producible Reservoir to be penetrated by the
Deeper Drilling operation.
A Party making an Election to limit its participation in
a deeper Development Well to the base of the deepest
Producible Reservoir shall bear its Participating Interest
share of the Cost and risk of drilling (including
abandonment) to the base of the deepest Producible
Reservoir. If a Party makes an Election not to participate
in the proposed Deeper Drilling, the proposed Deeper
Drilling operations shall be conducted pursuant to Article
16 (Non-Consent Operations).
13.4.2 Multiple Completion Alternatives Above and Below the
Deepest Producible Reservoir: If a Non-Participating Party
in a Deeper Drilling operation below the deepest Producible
Reservoir considers the well to be capable of producing at
or above the deepest Producible Reservoir, and has indicated
a desire to complete the well at or above the deepest
Producible Reservoir, any further Deeper Drilling operations
shall be conducted subject to the following provisions:
(a) Multiple Completion: If all the Participating Parties
in the well agree that a multiple well completion(s) is
possible and practicable involving (i) a completion at
or above the deepest Producible Reservoir and (ii) a
completion below the deepest Producible Reservoir, the
Participating Parties in the Deeper Drilling operation
shall bear 100% of the Costs of drilling to an Objective
Depth below the deepest Producible Reservoir that are in
excess of the original Costs to drill and complete the
well in the deepest Producible Reservoir.
(b) Single Completions: If all the Participating Parties do
not agree that multiple well completions are possible or
practicable, the Non-Participating Party in the Deeper
Drilling operation shall be deemed overinvested in the
original well in an amount equal to the Non-
Participating Party's Share of the original Costs of
drilling the well to the deepest Producible Reservoir.
The Participating Parties in the Deeper Drilling
operation shall assume their proportionate share of the
Non-Participating Party's Share of the Costs of other
operations conducted under this Agreement until all
overinvestments are eliminated.
(c) Overinvestments for Single Completions: The
Participating Parties as to the depths below the deepest
Producible Reservoir shall be deemed overinvested in an
amount equal to the Non-Participating Party s Share of
the well s Cost down to the deepest Producible Reservoir
at the first of the following events:
(i) the well is not a Producible Well in the deeper
depths and the well is plugged back to a shallower
zone; or,
(ii) the well is completed as a Producible Well in the
deeper depths, but Hydrocarbon production from the
deeper zone is later depleted prior to Non-Consent
Recoupment (attributable to Deeper Drilling
operation) and the well is plugged back to a
shallower zone; or,
(iii) the well is completed as a Producible Well in the
deeper depths and the Participating Parties have
recovered the applicable Non-Consent Recoupment
(attributable to the Deeper Drilling operation) from
Hydrocarbon production from the deeper zone.
The overinvestment shall be depreciated at the rate of one-
half percent (.50%) per month from the date the Deeper
Drilling operation commences to the earlier of the date of
(i), (ii) and (iii) above, but such depreciation shall
not reduce the overinvestment below forty percent (40.0%)
of the original overinvestment. The Non-Participating
Parties in the Deeper Drilling operation shall assume their
proportionate share of the Participating Party's Share of
the Costs of other operations conducted under this
Agreement until all overinvestments are eliminated.
13.4.3 Completion Attempts At or Above the Deepest Producible
Reservoir: If a well drilled below the deepest Producible
Reservoir is not completed for production in the deeper
depths, then the Participating Parties in said well down to
the deepest Producible Reservoir shall have a right to
utilize the well for completion in a Producible Reservoir.
The Participating Parties in drilling below the deepest
Producible Reservoir in said well shall bear the Costs
(including plugging back Costs) necessary to place the well
in proper condition for completion in a Producible
Reservoir. If a well drilled below the deepest Producible
Reservoir is damaged to the extent that it is rendered
incapable of being completed and produced at or above the
deepest Producible Reservoir in that well, the
Participating Parties in the Deeper Drilling operation
shall be obligated, at their sole Cost and risk, to restore
the well to its condition prior to the Deeper Drilling
operations below the deepest Producible Reservoir. The
Participating Parties in the Deeper Drilling Operation
shall be obligated to pay for the entire Cost of redrilling
the well if the damage cannot be repaired. Both the
Participating Parties in the original drilling operation
and the Participating Parties in the Deeper Drilling
operation shall be Participating Parties in the completion
attempt in the shallower formation.
13.5 Plugging and Abandoning Costs: At the conclusion of all operations
set forth in a Development Well s Well Plan and all Subsequent
Development Operations on such well or if the Operator encounters
mechanical difficulties or impenetrable conditions, which make
further drilling impracticable, then the Operator may propose to
plug and abandon the well. Upon approval of the well abandonment as
a General Matter by the Participating Parties, the Operator shall
commence the plugging and abandonment of the well. The
Participating Parties in the original operations shall pay all Costs
of plugging and abandoning the Development Well (except any
increased plugging and abandoning Costs associated solely with a
Subsequent Development Operation conducted as a Non-Consent
Operation). The Participating Parties in any Non-Consent Operation
shall be responsible for the increased plugging and abandoning Costs
attributable to the Non-Consent Operation.
ARTICLE 14
USE OF/AND ADDITIONAL FACILITIES AND GATHERING SYSTEMS
14.1 Approval of Additional Facilities: Any Party may propose the
installation of additional Facilities by notice to the other Parties
together with information adequate to describe the proposed
Facilities and their estimated Costs. Except as provided in Article
15.1 (Facilities to Take In Kind), the installation of additional
Facilities shall require approval as a General Matter. Upon
approval as a General Matter, the Operator shall proceed to install
the Facilities as approved, provided, in the judgment of the
Operator, it does not interfere with continuing operations on the
Contract Area. The installation of any additional Facilities shall
be at the sole Cost and risk of the Participating Parties. Any Non-
Participating Party shall be subject to Article 16.5.5 (Non-Consent
Subsequent Production System and Facilities). This Article shall
only apply to Facilities which were not included in the approved
Development Plan.
14.2 Expansion, Modification or Repair of an Existing Production System:
Deleted. Refer to Article 12.14.
14.3 Use of Production System Located on a Designated Prospect: The
Participating Parties hereto with respect to a particular Production
System shall have priority use of the co-owned capacity for use in
operating and developing a Designated Prospect pursuant to an
approved Development Plan. Use of the Production System
attributable to a particular Designated Prospect for handling
production coming from outside such Designated Prospect may be
granted only if Production System Capacity as defined in Exhibit H
attached hereto is available beyond the requirements of an approved
Development Plan for developing a Designated Prospect. Use of
excess capacity from a Production System shall be subject to the
following priority of usage:
a. First priority to Hydrocarbon production from Leases that are
co-owned by the Participating Parties and that are located
inside the Designated Prospect(s) for which the Production System
was installed pursuant to an approved Development Plan..
b. Second priority to Hydrocarbon production from Lease(s) that
are co-owned by all of the Participating Parties in the
Production System and that are outside the Designated
Prospect(s) for which the Production System was installed
pursuant to an approved Development Plan, but from a Designated
Prospect within the Contract Area.
c. Third priority to Hydrocarbon production from Lease(s) that are
co-owned by less than all, but at least one, of the
Participating Parties in the Production System and that are
located outside the Designated Prospect(s) for which the
Production System was installed pursuant to an approved
Development Plan, but from a Designated Prospect(s) within the
Contract Area.
d. Fourth priority to hydrocarbon production from a lease in which
less than all Parties have an ownership interest and in which the
other Party(ies) was offered an interest but declined pursuant to
the AMI provisions of Article 23.3 (Area of Mutual Interest)
hereof.
e. Fifty priority to hydrocarbon production owned by a Participating
Party coming from outside the Contract Area.
f. Sixth priority to hydrocarbon production owned by third parties.
Priority "a", b , c , d and "e" shall require no further
approval by the Participating Parties. Priority "f" shall require
unanimous approval by all the Participating Parties in such
Production System. In the event that unanimous approval cannot be
reached by the Participating Parties under priority "f" each Party
shall be entitled to use its share of excess capacity as it deems
appropriate. Exhibit H attached hereto shall apply to the use of
excess capacity by one or more of the Parties or third parties.
14.4 Approval of Additional Facilities on a Designated Prospect: This
Article shall only apply to Facilities which are to be located on a
Designated Prospect and which were not included in the approved
Development Plan. Any Party may propose the installation of
additional or expanded Facilities for a Designated Prospect beyond
those specified in the Development Plan by giving notice to the
other Participating Parties together with information adequate to
describe the proposed Facilities and their estimated Costs. Except
as provided in Article 15.1 (Facilities to Take In Kind), the
installation of additional Facilities on the Production System
beyond the scope of the Development Plan shall require the approval
of the Participating Parties as a General Matter, and the
availability of sufficient deck space and buoyancy to support the
proposed additional Facilities. Upon approval, the Operator shall
proceed to install the additional Facilities for the benefit of the
Participating Parties provided that, in the judgment of the
Operator, the additional Facilities do not interfere with continuing
operations on a Designated Prospect. The installation of any
additional Facilities shall be at the sole Cost and risk of the
Participating Parties. Any Non-Participating Party shall be subject
to Article 16.5.5 (Non-Consent Subsequent Production System and
Facilities)
14.5 Contract Area Production: Notwithstanding any other provision of
this Agreement to the contrary, production from Leases co-owned by
the Participating Parties in any Designated Prospect shall at all
times have first preference to use all of the capacity of the
Production System (in whole or in its several parts) installed for
such Designated Prospect(s), over any production from outside the
Contract Area.
ARTICLE 15
DISPOSITION OF PRODUCTION
15.1 Facilities to Take in Kind: Any Party shall have the right at its
sole risk and expense to construct Facilities for taking its share
of production in kind, provided that such Facilities at the time of
installation do not interfere with continuing operations on the
Contract Area. During the construction and operation of such
Facilities, the Party responsible for the construction or operation
shall indemnify and defend the other Parties against any claims or
liabilities which may result from such construction or operation and
such Party shall be responsible for any damages or losses sustained
by the other Parties as a result of the construction or operation of
such Facilities.
15.2 Duty to Take in Kind: Each Party has the right and duty to take in
kind or separately dispose of its share of the oil and gas produced
and saved from the Leases and Contract Area.
15.3 Failure to Take in Kind: If any Party fails to take in kind or
dispose of its share of production, the following will apply:
15.3.1 Failure to Take Oil: If any Party fails to take in kind or
dispose of its share of oil, Operator shall either (a)
purchase the oil in accordance with 15.3.4 or (b) sell the
oil to others in accordance with 15.3.3.
15.3.2 Failure to Take Gas: If any Party fails to take in kind or
dispose of its share of gas, then Exhibit "D" shall apply.
15.3.3 Operator s Disposition of Oil for Non-Taking Party: All
contracts obtained by Operator for the sales of a non-
taking Party s share of oil to a third party shall be at a
price not less than the price Operator is receiving for its
own share of production for the contract period. A non-
taking Party receiving such price acknowledges that it
represents fair market value for the product sold.
15.3.4 Operator s Purchase of Oil of Non-Taking Party: If Operator
purchases the oil of a Party failing to take in kind or
dispose of its share, Operator will pay the average of the
following postings for oil of the same kind, gravity and
quality; Xxxxxxxx Permian Corporation South Louisiana
Xxxxxx Island (Onshore), Texaco Trading & Transportation
Inc. s South Louisiana Sour (onshore), and EOTT Energy
Corp. South Louisiana Sour (Xxxxxx Island Onshore), less
transportation, separation and storage fees incurred prior
to delivery to the posting point. If for any reason any of
these three postings is unavailable, the Parties will agree
on three postings for averaging.
If Operator contracts to sell a non-taking Party s share of
oil and/or condensate, such sales shall be only for such
reasonable periods of time as are consistent with the needs of
the industry, but in no event shall any contract for the sale
of oil and/or condensate be for a period in excess of three
(3) months.
Operator shall deduct transportation and other reasonable
marketing costs associated with a purchase or sale of a non-
taking Party s oil.
15.3.5 No Obligation to Market Share: Unless required by
governmental authority or by judicial process, no Party
shall be forced to share an available market with any other
Party.
15.4 Expenses of Delivery in Kind: Any cost incurred by Operator in
making delivery of any Party s share of oil, or disposing of same,
shall be borne by such Party.
ARTICLE 16
NON-CONSENT OPERATIONS
16.1 Conduct of Non-Consent Operations: If any Party makes or is deemed
to have made an Election to become a Non-Participating Party in an
operation, the proposed operation shall be conducted as a Non-
Consent Operation. If the Participating Parties timely commence the
Non-Consent Operation, then the Non-Participating Parties shall be
subject to either the acreage forfeiture provisions of Article 16.2
(Acreage Forfeiture Provisions) or 16.4 (Non-Consent Operations to
Maintain a Designated Prospect), or the Cost recoupment provisions
of Article 16.5 (Percentage Recoupment for Non-Consent Operations),
each reflecting the increased risks and Costs assumed by the
Participating Parties. Any operation that invokes the provisions of
this Article 16 must be proposed and conducted in good faith using
cost estimates and Objective Depths which are reasonable for the
Designated Prospect considering the geological and geophysical data
available at the time of the proposal. If any proposed operation
requires approval as a General Matter, such approval shall be
obtained prior to the Participating Parties proceeding with the Non-
Consent Operation. The Operator (or substitute Operator) shall
conduct any Non-Consent Operation at the sole risk and expense of
the Participating Parties in the Non-Consent Operation. Any Non-
Consent Operations shall not unreasonably jeopardize, hinder or
interfere with operations conducted by all Parties (unless the Non-
Consent Operation will maintain all or a portion of the Designated
Prospect under Article 16.4 (Non-Consent Operations to Maintain a
Designated Prospect)).
16.1.1 INDEMNITY AND WAIVER FOR NON-CONSENT OPERATIONS: THE
INDEMNITY AND WAIVER FOR NON-CONSENT OPERATIONS SHALL BE AS
PROVIDED FOR IN ARTICLES 22.6 (INDEMNIFICATION FOR NON-
CONSENT OPERATIONS) AND 22.7 (DAMAGE TO RESERVOIR, LOSS OF
RESERVES AND PROFITS).
16.1.2 Cost Information: The Costs of any Non-Consent Operation
shall be borne by the Participating Parties in the
proportion that their Participating Interests bear to the
sum of all Participating Interests in the Non-Consent
Operation (unless otherwise agreed by the Participating
Parties). The Costs of a Non-Consent Operation shall
include the Costs of maintaining the drilling equipment on
site during the notice period for an Election or vote
pursuant to Article 8 (Voting, Elections, and Notices)
including any response times and no part of such Costs
shall be borne by the Non-Participating Parties unless
otherwise provided. Within one hundred twenty (120) days
after completion of a Non-Consent Operation, the Operator
shall furnish all the Parties an itemized statement of the
Cost of the Non-Consent Operation and an inventory of the
equipment pertaining thereto. The Operator shall furnish
to the Parties a monthly statement showing operating,
maintenance and other expenses attributable to the Non-
Consent Operations, and the revenues from the sale of
Hydrocarbon production for the preceding month from
operations subject to recoupment under this Article 16
(Non-Consent Operations). The Non-Operating Parties shall
furnish the Operator any revenue or price information for
their take in kind production. In accounting for the
revenues from Non-Consent Operations, Hydrocarbon
production need not be separately metered, but may be
determined upon the basis of monthly well tests.
16.1.3 Non-Consent Operations in Producible Well: Once a
Producible Well has been completed and placed on
production, Non-Consent Operations shall not be conducted
in that well unless approved by all the Participating
Parties in such well, unless such well is not capable of
producing from its current completion(s).
16.1.4 Non-Consent Operations in Producible Reservoirs: Unless
otherwise agreed by all Parties, Non-Consent Operations for
a Development Well shall not be conducted in any
Producible Reservoir previously penetrated by a Producible
Well drilled from or producing through the same Production
System serving the proposed Non-Consent Well and the
Producible Well unless such Producible Reservoir shall have
been designated as an Objective Depth or completion zone in
the well proposal.
16.1.5 Multiple Completions: Non-Consent Operations shall not be
conducted in any existing well having multiple completions
unless:
(a) each of the multiple completions are owned by the same
Parties in the same proportion; or,
(b) none of the previous well completions are capable of
producing; or,
(c) all Participating Parties in the well containing the
multiple completions consent to such Non-Consent
Operation(s).
For the purposes of this Article 16, each completion shall be
considered as a separate well.
16.2 Acreage Forfeiture Provisions: In view of the significantly greater
risks associated with Exploratory Operations for each of the
remaining undrilled Designated Prospects(s), and the Fabrication AFE
for the Initial Production System, the Parties agree that upon
timely commencement of such operations, the Participating Parties
shall be entitled to an assignment of the Non-Participating Party's
right, title and interest (including operating rights) in all of the
Leases comprising a Designated Prospect. Within thirty (30) days of
the timely commencement of such Non-Consent Operation, the Non-
Participating Party(s) shall execute and deliver an assignment of
its interest to the Participating Parties, with no reimbursement by
and at no cost to the Participating Parties. If an assignment is
made pursuant to this Article 16.2, such assignment shall be free
and clear of the interests contemplated in Article 19.1 (Overriding
Royalties and Burdens on Production) and Article 6.8 (Carved-Out
Interests) and then each Participating Party shall accept its
Participating Interest share of the Non-Participating Party's
assigned interest, unless otherwise agreed. Except as otherwise
provided in Article 16.4.3 (Limitations on Acreage Forfeiture) and
Article 12.10 (Major Modifications to Development Plans), the Non-
Participating Party's Election not to participate in an Exploratory
Operation, or the Fabrication AFE for the Initial Production System
or a supplemental AFE pursuant to Article 6.2.6. (Supplemental AFE
for Cost Overruns on Fabrication AFE) shall require such Non-
Participating Party to relinquish and permanently assign to the
Participating Party(s) one hundred percent (100%) of Non-
Participating Party s right, title and interest in and to all of the
Leases comprising the Designated Prospect, any xxxxx drilled thereon
and any Production System attributable thereto.
16.2.1 Exploratory Operations: If one or more Participating
Party(s) proceed with timely operations for the Exploratory
Well on a Designated Prospect as a Non-Consent Operation,
the Non-Participating Party(s) in either the Exploratory
Well or any supplemental AFE for that well, shall
relinquish and assign to the Participating Party(s) one
hundred percent (100%) of the Non-Participating Party's
right, title and interest in and to all of the Leases
comprising the Designated Prospect, and any xxxxx drilled
thereon.
16.2.2 Initial Production System: If one or more Participating
Party(s) proceed with timely operations for the Initial
Production System as authorized in the Fabrication AFE as a
Non-Consent Operation, the Non-Participating Party(s) shall
relinquish and assign to the Participating Party(s) one
hundred percent (100%) of the Non-Participating Party's
right, title and interest in and to all of the Leases
comprising the Designated Prospect, and any xxxxx drilled
thereon. If pursuant to Article 6.2.6 the Operator
submits a supplemental Fabrication AFE, a Participating
Party must submit its Election within the applicable
response time set out in Article 8.3.3 either to: (a)
approve the supplemental Fabrication AFE or (b) not consent
to the supplemental Fabrication AFE (and be subject to the
acreage forfeiture provisions of this Article 16.2 with no
reimbursement by and at no cost to the remaining
Participating Parties, as if that Party had not approved
the Fabrication AFE). If any Party fails to approve the
supplemental Fabrication AFE within the applicable response
time, such Party shall be deemed to have not consented to
the supplemental Fabrication AFE . Any such approval shall
not prejudice a Party s right to withdraw under the
provisions of Article 17.
16.2.3 Costs of Prior Operations: Any Non-Participating Party
subject to a non-consent provision shall remain liable for
its share of previously incurred Costs for operations where
it was a Participating Party and there shall be no re-
allocation of previously incurred Costs due to the Non-
Participating Party's election or assignment.
16.3 Notices and Orders: If the Operator is required by notice or order
(including SOPs and XXXx) from any government agency having
jurisdiction over the Contract Area to either drill or rework a
well, or conduct other operations to maintain all or a portion of a
Designated Prospect, the Operator shall immediately furnish each of
the Parties with a copy of such order or notice.
16.4 Non-Consent Operations to Maintain a Designated Prospect: The
following provisions are applicable if:
(a) an operation is required, pursuant to a governmental agency
order, notice, regulation, SOO or SOP requirement or Lease
obligation, to maintain all or any portion of a Designated
Prospect; or
(b) a proposal is made for an operation within the final eighteen
(18) months of the primary term of a Lease which has no
Producible Well and such Lease is not held by a unit, SOO or
SOP,
then such operation must be timely commenced and shall be conducted
pursuant to this Article 16.4. The response time for a proposal
made hereunder shall be the earlier of:
(c) the response time provided in Article 8 (Voting, Elections,
and Notices); or,
(d) one hundred eighty (180) days before the deadline under the
order, notice, regulation, SOO or SOP requirement or Lease
obligation, whichever is earlier.
If the proposal requires approval as a General Matter and such
approval is not obtained within the applicable response period, then
any Party who made an Election to participate in the Non-Consent
Operation may proceed with such operation after giving notice to the
other Parties. The other Parties will have fifteen (15) days after
receipt of the notice to make an Election.
16.4.1 Acreage Forfeiture in the Entire Designated Prospect: If
it is necessary to drill or rework a well or conduct other
operations to maintain the entire Designated Prospect, then
each Non-Participating Party in the Non-Consent Operation
shall relinquish and permanently assign to the
Participating Parties one hundred percent (100%) of the
Non-Participating Party's Working Interest in the entire
Designated Prospect within thirty (30) days after
commencement of such well or other operation.
16.4.2 Acreage Forfeiture in a Portion of the Designated Prospect:
If a well is drilled or reworked or other operations are
conducted in order to maintain a portion of the Designated
Prospect, then each Non-Participating Party in the Non-
Consent Operation shall relinquish and permanently assign
to the Participating Parties one hundred percent (100%) of
the Non-Participating Party's Working Interest in the
affected portion of the Designated Prospect within thirty
(30) days after commencement of such well or other
operation. If a Party forfeits its Working Interest
pursuant to this Article 16.4.2, then such Party shall have
no further rights under this Agreement as to the portion of
the Designated Prospect forfeited. All remaining Parties
shall amend this Agreement to provide for the change of
ownership on Exhibit A as to the forfeited portion of the
Designated Prospect and this Agreement shall apply
separately to such operational area.
16.4.3 Limitations on Acreage Forfeiture: Notwithstanding the
foregoing, if more than one well is drilled or more than
one operation is conducted, any of which would maintain the
entire Designated Prospect or the affected portion of the
Designated Prospect, an assignment shall not be required
from any Participating Party in any such well or other
operation. In addition, no Party shall be required to
relinquish or assign all or any portion of its Working
Interest in the Designated Prospect if the order, requiring
the well or other operation, is appealed and successfully
overturned.
16.5 Percentage Recoupment for Non-Consent Operations: Except as
provided in Articles 16.2 (Acreage Forfeiture Provisions) and 16.4
(Non-Consent Operations to Maintain a Designated Prospect), upon the
timely commencement of any Non-Consent Operation, each Non-
Participating Party's Working Interest in the Non-Consent Operation
along with the right to produce Hydrocarbon therefrom shall be owned
by and vested in each Participating Party in the proportion that
each Participating Party's Working Interest bears to the total
Working Interest of all Participating Parties (unless other
proportions are agreed in writing by the Participating Parties) for
as long as the Non-Consent Operation originally proposed is being
conducted or Hydrocarbon production is obtained from the Non-Consent
Operation subject to Non-Consent Articles 16.6.1 (Dry Hole
Reversion) and 16.6.2 (Deepening a Non-Consent Well). Subject to
Article 16.6 such Working Interest, and rights and title to
Hydrocarbon production shall revert to each Non-Participating Party
when all Participating Parties have recouped from the Non-
Participating Party's former Working Interest and proceeds
from production associated with that Working Interest an amount
equal to the product of such Participating Party s share of the
Costs of the Non-Consent Operation multiplied by the recoupment
percentage for each operation set out below. The Non-Participating
Party's Share of the Non-Consent Operation shall be reduced (to the
extent of the Non-Participating Party's prior Working Interest) by
any third-party cash contribution credited to the Non-Consent
Operation. Upon recoupment by the Participating Parties of the
recoupment percentage, the Working Interest forfeited by the
Non-Participating Parties in the Non-Consent Operation,, shall
revert to the former Non-Participating Party and the former
Non-Participating Party shall become a Participating Party in the
Non-Consent Operation.
16.5.1 Non-Consent Subsequent Exploratory Operations: The
recoupment amount for Non-Consent Subsequent Exploratory
Operations shall be the Non-Participating Party's share of
the Costs of the Subsequent Exploratory Operations
conducted including, but not limited to, evaluating,
Deepening, Sidetracking, completing, recompleting,
equipping, and plugging back of the Subsequent Exploratory
Operation multiplied by one thousand percent (1000%).
16.5.2 Non-Consent Appraisal Operations: The recoupment for Non-
Consent Appraisal Operations shall be the Non-Participating
Party's Share of the Costs of drilling, evaluating,
Deepening, Deeper Drilling, Sidetracking, completing,
recompleting, equipping, and plugging back and of the
Appraisal Operation multiplied by four hundred percent
(400%).
16.5.3 Non-Consent Geophysical Operations, Integrated Project Team
and/or Final Design AFE: A Party making an Election not to
participate in a Geophysical Operations, Integrated Project
Team and/or Final Design AFE will be an underinvested Party
in an amount equal to two hundred percent (200%) of the
amount such Party would have paid had it participated in
such AFE pursuant to Article 16.9 (Underinvestment of
Costs). As an underinvested Party, the Non-Participating
Party will be responsible for all Costs of subsequent
operations and/or AFE under this Agreement (in addition to
Costs associated with such Party's Working Interest) in
which the Non-Participating Party makes an Election to
participate, which would otherwise be the responsibility of
the Parties making an Election to participate in such
Geophysical Operations, Integrated Project Team and/or
Final Design AFE, until the underinvestment is eliminated.
16.5.4 Non-Consent Development Operations: The recoupment for
Non-Consent Development Operations (including workovers)
shall be the Non-Participating Party's Share of the Costs
of drilling, evaluating, Deepening, Deeper Drilling,
Sidetracking, completing, recompleting, equipping, and
plugging back the Development Operation multiplied by three
hundred percent (300%).
16.5.5 Non-Consent Subsequent Production System and Facilities:
The recoupment for any non-consent Subsequent Production
System or Facilities shall be the Non-Participating Party's
Share of the Cost of designing, fabricating and installing
the Subsequent Production System or Facilities, including
the Cost of an injection or disposal well, multiplied by
two hundred percent (200%).
16.5.6 Additional Production Recoupment: In addition to the
percentage recoupment set forth above for various Non-
Consent Operations, the Participating Parties shall be
entitled to recoup:
(a) two hundred percent (200%) of the Non-Participating
Party's Share of the Cost of Facilities necessary to
carry out the Non-Consent Operation; plus,
(b) one hundred percent (100%) of the Non-Participating
Party's Share of the Cost of using any Production System
already installed for the Designated Prospect for which
the Non-Participating Party has a Participating
Interest; plus,
(c) one hundred percent (100%) of the Non-Participating
Party's Share of the Cost of operating expenses,
maintenance Costs, royalties, and severance, gathering,
production taxes and other governmental fees based on
production.
16.5.7 Recoupment From Hydrocarbon Production: Recoupment for a
Non-Consent Operation which results in a discovery of a
Producible Reservoir or extension of an existing Producible
Reservoir shall be made from the following portions of the
Non-Participating Party's Share of Hydrocarbon production:
(a) Subsequent Exploratory Operations, Appraisal Xxxxx, or
Development Xxxxx: Recoupment shall be taken from one
hundred percent (100%) of the Non-Participating Party's
Share of all Hydrocarbon production from the Non-Consent
Operation (if the well is completed for Hydrocarbon
production), and from fifty percent (50%) of the Non-
Participating Party's Share of Hydrocarbon production
from all xxxxx subsequently drilled and completed in the
Producible Reservoir discovered by said Non-Consent
Operations or the extended portion of an existing
Producible Reservoir discovered by said Non-Consent
Operation and in which the Non-Participating Party has a
Participating Interest.
(b) Non-Consent Subsequent Production Systems and
Facilities: Recoupment shall be taken from one hundred
percent (100%) of the Non-Participating Party's share of
Hydrocarbon production from all xxxxx which are drilled
from and/or produced through the Subsequent Production
System or Facilities and/or xxxxx benefited from
injection or disposal xxxxx.
The interest shall revert to each Non-Participating Party only
after the Participating Parties have completely recouped, from
Hydrocarbon production, the amounts specified herein.
16.6 Reversion of Interests to Non-Participating Party: Subject to the
provisions of Article 16.5.7 (Recoupment from Hydrocarbon
Production), a Non-Participating Party's Working Interest which is
subject to recoupment from future Hydrocarbon production shall
revert to the Non-Participating Party upon the occurrence of the
first of the following events:
- the Non-Consent Operation results in a dry hole; or,
- hydrocarbon production ceases prior to complete recoupment by the
Participating Parties; or,
- the Participating Parties propose to Deepen below the original
Objective Depth if the original operation resulted in a dry hole;
or,
- upon complete recoupment.
16.6.1 Dry Hole Reversion: If a Non-Consent Operation, other than
a Non-Consent Operation under Articles 16.2 (Acreage
Forfeiture Provisions) and 16.4 (Operations to Maintain a
Designated Prospect), results in a dry hole and fails to
obtain Hydrocarbon production or, if Hydrocarbon production
ceases prior to complete recoupment by the Participating
Parties, then the Non-Participating Party's Working
Interest which has been relinquished shall revert to the
Non-Participating Party. However, all Non-Consent Xxxxx,
Production Systems, any Facilities and rights to produce
from a Producible Reservoir under Article 16.5.7 shall
remain vested in the Participating Parties. Any salvage
value in excess of complete recoupment shall be credited to
all Parties according to their Working Interest and without
regard to their participation status.
16.6.2 Deepening a Non-Consent Well: If a Non-Participating Party
makes an Election to participate in the Deepening
operation, then the Participating Parties shall be deemed
overinvested to the extent of the Non-Participating Party's
Share of Costs in the original Non-Consent Operation (less
any amount recouped by the Participating Parties out of
production or through a Disproportionate Spending
Settlement). If the Participating Parties have recouped
the Cost of the well at the time they desire to Deepen the
well then the Non-Participating Party will not be an
underinvested Party in the Deepening of the well. However,
in such case, the Participating Parties in the original
well shall still be permitted complete recoupment from the
other xxxxx in the Producible Reservoir, discovered or
extended by the original well as provided in Article
16.5.7(a) (Subsequent Exploratory Operations, Appraisal
Xxxxx or Development Xxxxx), until the total non-consent
amount to be recouped has been recovered from the
Producible Reservoir.
16.7 Operations From a Subsequent Non-Consent Production System: Any
Party who made an Election not to participate in a Subsequent
Production System may make an Election to participate in operations
from such Subsequent Production System. If a Non-Participating
Party makes an Election to participate in such operations, then the
Non-Participating Party may reduce the percentage recoupment amount
through a Disproportionate Spending Settlement in subsequent
Development Operations conducted from the Subsequent Production
System. Any Disproportionate Spending Settlement amounts shall be
subtracted from the recoupment entitled to the Participating Parties
in the Subsequent Production System pursuant to Article 16.5.5 (Non-
Consent Subsequent Production System and Facilities).
16.8 Allocation of Production System Costs to Non-Consent Operations: In
the event a Non-Consent Well is proposed to be drilled from or
produced through a Production System owned by all the Parties, the
rights of Participating Parties to use the Production System for the
proposed Non-Consent Well and the Costs therefore shall be based on
the following:
16.8.1 Investment Charges: If a Non-Consent Well will utilize
either a Production System and/or Subsea Production System
owned by all the Parties, the Non-Participating Parties in
such well shall be deemed to be the overinvested Parties in
such Production Systems to the extent the Participating
Parties in such well would have paid a charge for the right
to use the Production System and/or Subsea Production
System and its Facilities as follows:
(a) The Participating Parties in such well shall pay a one-
time slot usage fee covering its use of the Production
System in an amount equal to two percent (2%) of the
Cost of the Production System, the Subsea Production
System and its Facilities to the owners of the
Production System (to be shared in proportion to the
owner's Working Interest in the Production System). For
purposes of the slot usage fee, the total Cost of the
Production System shall be reduced by .41667% per month
commencing upon the first monthly anniversary date of
when the Production System was installed and every
monthly anniversary thereafter until the total Cost of
the Production System is reduced to twenty-five percent
(25%) of the original Cost. The Cost of additions to
the Production System shall be reduced in the same
manner commencing upon the first monthly anniversary
after the addition is installed. If the Non-Consent
Well is abandoned, the right of Participating Parties to
use that Production System slot shall terminate unless
such Parties commence drilling a substitute well from
the same slot within ninety (90) days after abandonment.
The slot usage fee shall not apply to a slot which is
deemed to be "surplus." A slot may be deemed surplus by
the unanimous consent of all Parties owning an interest
in the Production System.
(b) If Hydrocarbon production from the Non-Consent Well is
handled through Facilities owned by all Parties, the
Participating Parties shall pay to the owners of the
Facilities a sum equal to that portion of the total Cost
of such Facilities which one well bears to the total
number of xxxxx which the Facilities are designed to
accommodate.
16.8.2 Operating and Maintenance Charges: The Participating
Parties in a non-consent well shall pay all Costs necessary
to connect their well to the Facilities and the Production
System. The expense of operating and maintaining the
Facilities and the Production System shall be allocated
equally per active completion among all active completions
served. Subsea Production System operating and maintenance
expenses shall be allocated equally per active subsea
completion among all active subsea well completions served
by such Subsea Production System.
16.8.3 Payments: The payment of sums pursuant to Article 16.8.1
(Investment Charges) shall not be a purchase of an
additional interest in the Production System or Facilities.
Such payments shall be included in the total amount which
the Participating Parties are entitled to recoup out of
Hydrocarbon production from the Non-Consent Well, but only
to the extent of actual Costs. Such charges shall be paid
by the Participating Parties in such well by allocating (in
addition to any other Costs allocated to them under this
Agreement) all Costs attributable to tangible, intangible
and other cost categories that would otherwise be allocated
to the Non-Participating Parties until all overinvestment
is eliminated.
16.9 Underinvestment of Costs: A Non-Participating Party shall not be
liable for settling any underinvestment of its share of the Costs of
a Non-Consent Operation unless, having the right to do so under this
Agreement, the Non-Participating Party makes a revised Election to
become a Participating Party. Unless otherwise provided in this
Agreement, a Non-Participating Party has the right to make a revised
Election to become a Participating Party under the following
Articles:
(a) Article 9.1.1 (Conduct of Propriety Geophysical Operations);
(b) Article 11.3 (Election by Non-Participating Parties in Deepening
or Sidetracking Appraisal Operations);
(c) Article 11.4 (Deeper Drilling in Appraisal Operations);
(d) Article 12.3 (Integrated Project Team Election);
(e) Article 12.7 (Final Design AFE);
(f) Article 12.10 (Major Modification to Development Plans);
(g) Article 13.3 (Election by Non-Participating Parties in Deepening
or in Development Sidetracking Operations); and
(h) Article 13.4 (Deeper Drilling in Development Operations).
16.9.1 Settlement of Underinvestments: Upon making a revised
Election, a Non-Participating Party shall settle any
underinvestment for its share of the Costs in a Non-Consent
Operation by either; (a) making a Disproportionate Spending
Settlement by bearing all Costs of all future operations
until the underinvestment is eliminated, (i.e. one hundred
percent (100%) of the Non-Participating Party's share of
the Costs of the original operation) or, (b) making an
immediate cash settlement to the original Participating
Parties in the full amount of the underinvestment. The
original Participating Parties in the Non-Consent Operation
shall select the manner of eliminating the under-
investment at their sole discretion as a General Matter.
16.9.2 Cash Settlement of Underinvestment: If there are no
further proposed or planned operations on the Designated
Prospect for which Costs would be allocated toward the
elimination of an underinvestment, the underinvested Party
shall pay any overinvested Party the remaining
underinvested amount in cash. If operations on the
Designated Prospect, for which Costs are being paid by the
underinvested Party and allocated to the underinvestment,
do not eliminate the underinvestment within two (2) years,
or any other shorter period specified in this Agreement,
from the date the underinvestment accrued, or upon final
settlement of this Agreement, whichever comes first, the
underinvested Party shall pay the overinvested Party the
remaining underinvestment in cash. Percentage recoupment
for Non-Consent Operations under Article 16.5 (Percentage
Recoupment for Non-Consent Operations) shall not be
considered an over/under investment.
ARTICLE 17
WITHDRAWAL
17.1 Withdrawal. If a Party wishes to withdraw from this Agreement in
any one or more or all Designated Prospects, it shall tender an
offer to withdraw to the non-withdrawing Parties ( Tender ). The
Tender shall include an offer to assign to the other Parties who do
not desire to withdraw, the following with respect to the Designated
Prospect(s) to which the withdrawal applies:
(a) marketable title to the Withdrawing Party's undivided
interest in the Production System fabricated for that
Designated Prospect(s) free of burdens or encumbrances,
including financing arrangements, at fair market value as
determined by an independent appraisal, as hereinafter
described; and,
(b) all of its interest in the Leases, xxxxx, Facilities, and
platforms (except for the Production System) in the affected
Designated Prospect(s) without warranty but free of any
overriding royalty (except for overriding royalty burdens
listed in Exhibit A ), or other burdens or encumbrances,
including financing arrangements, at salvage value, less the
cost of plugging and abandonment.
If the Tender is accepted, the assignees, in proportion to the
respective interests so acquired, shall pay the assignor for its
interest, the fair market value of the undivided interest in the
Production System described in (a) above as determined by the mutual
agreement of the Parties hereto, provided, that if the Parties fail
to agree, then the fair market value shall be determined by an
independent appraisal. Independent appraisal shall mean an
appraisal mutually agreed to by two nationally recognized
independent appraisers, one of which appraisers shall be chosen by
withdrawing Party and one by majority vote of Non-withdrawing
Parties , or, if such appraisers cannot agree on such appraisal, an
appraisal arrived at by a third independent appraiser chosen by the
mutual consent of such two appraisers, provided that, if either
withdrawing Party or Non-withdrawing Parties shall fail to appoint
an appraiser within (15) days after a written request to do so by
the other, or if such two appraisers cannot agree on such appraisal
and fail to appoint a third appraiser within (20) days after the
date of the appointment of the second of such appraisers, then any
Party may apply to the American Arbitration Association to make such
appointment. In the event such third independent appraiser shall be
chosen to provide such appraisal, unless the Parties agreed
otherwise, such appraisal shall be required to be made within (20)
days of such appointment. An independent appraisal of the fair
market value of the Production System shall mean an appraisal which
assumes that the sale would be an arm s-length transaction between
an informed and willing buyer, under no compulsion to buy, and an
informed and willing seller, under no compulsion to sell. The fees
and expenses of appraisers for an independent appraisal, whenever
undertaken pursuant to this Agreement, shall be borne equally by all
the Parties and each Party shall separately bear any fees, costs and
expenses of its respective attorneys and experts (other than the
appraisers referred to above) incurred in connection with such
independent appraisal.
If the Tender is accepted, the assignees, in proportion to the
respective interests so acquired, shall pay the assignor for its
interest, the salvage value of the items identified in (b) above
less its share of the estimated cost of salvaging same, plugging and
abandoning of xxxxx, and removal of all platforms and Facilities
(except for the Production System), as determined by the Parties.
If such withdrawing Party s interest in such salvage value is less
than such Party s share of the estimated costs, the withdrawing
Party shall pay the Operator, for the benefit of the Parties
succeeding to its interest, a sum equal to the deficiency. Within
sixty (60) days after the effective date of the assignment, Operator
shall render a final statement to the withdrawing Party for its
share of all expenses, including any deficiency in salvage value,
incurred as of the first day of the month following the date of
receipt of the notice. Provided all such expenses (including any
deficiency hereunder) due from the withdrawing Party have been paid
within thirty (30) days after rendering of such final statement, the
withdrawing Party shall thereafter be relieved from all further
obligations and liabilities with respect to the Designated
Prospect(s).
The Tender offer shall remain open for thirty (30) days after the
receipt by the non-withdrawing Parties of the independent appraisal.
If the Tender is not accepted in writing by the non-withdrawing
Parties within such time period, it shall be deemed to have been
rejected. If the Tender is accepted, the assignment of the
withdrawing Party s interest shall not relieve such Party from any
obligation or liability incurred prior to the first day of the month
following receipt of the assignment by assignees. The assigned
interest shall be owned by the assignees in the proportion that
their respective Participating Interests bear to the remaining
Participating Interest.
If the Tender is not accepted, the withdrawing Party shall retain
its interests in the property described in (a) and (b) above and
shall be free to sell such interests in accordance with Article 24,
except that Article 24.2 titled Preferential Right To Purchase shall
not apply to a sale, which consideration is for a price equal to
or greater than the fair market value as set out in this Article
17.1 of the Tender, and such sale is contracted for by the
withdrawing Party within 180 days after date of the non-withdrawing
Party s election not to purchase the withdrawing Party s interest.
If the withdrawing Party has not sold its interest within such time
period, it may sell subject to the Preferential Right to Purchase or
submit a new Tender to the non-withdrawing Parties in accordance
with this Article.
17.2 Limitations on Withdrawal:
17.2.1 During an Emergency: No Party shall be relieved of its
obligations hereunder during a blowout, a fire, or other
emergency, but may withdraw from this Agreement in
accordance with Article 18.1 (Abandonment of Xxxxx) after
termination of such emergency, provided such Party shall
remain liable for its share of all costs associated with
the emergency.
17.2.2 Current Operations and Voting: Any Party withdrawing prior
to completion of any operations (pursuant to an AFE) in a
Designated Prospect in which it had previously made an
Election to participate shall remain fully liable for its
share of the AFE. After giving its notification of
withdrawal, the Withdrawing Party shall not be entitled to
make an Election to participate or vote on any General
Matter in the Designated Prospect involved, other than
General Matters for which the Withdrawing Party retains a
financial responsibility.
17.2.3 Prior Expenses: The Withdrawing Party(ies) shall remain
responsible for its Participating Interest share of any
Costs of operations, rentals, royalties, taxes, damages or
other liability or expense accruing or commencing prior to
the effective date of the withdrawal. Prior to the
effective date of the withdrawal, the Operator shall render
an estimate to the Withdrawing Party(ies) for its share of
all identifiable expenses incurred or expected to be
incurred prior to the effective date of withdrawal, along
with a statement of any deficiency in salvage value. Prior
to any withdrawal, a Withdrawing Party, at its sole
expense, shall satisfy or provide security satisfactory to
the remaining Party(ies) for all obligations and
liabilities it has incurred or are attributable to it prior
to the effective date of the withdrawal. Furthermore, any
liens, charges and other encumbrances which the Withdrawing
Party(ies) placed (or caused to be placed) on its Working
Interest prior to its withdrawal shall be fully satisfied
or released prior to its withdrawal (unless the Remaining
Parties are willing to accept the Working Interest subject
to such liens). Provided all such expenses (including any
deficiency in abandonment Costs) have been paid, the notice
of withdrawal and the assignments shall be effective upon
the specified effective date.
17.2.4 Confidentiality: A Withdrawing Party shall continue to be
bound by the confidentiality provisions of Article 7
(Confidentiality of Data) after the withdrawal, but, as of
the effective date of the withdrawal, shall have no further
access to technical information relating to operations
hereunder. The Remaining Party(ies) shall have no
obligation of confidentiality hereunder to the Withdrawing
Party.
ARTICLE 18
ABANDONMENT AND SALVAGE
18.1 Abandonment of Xxxxx: Any Participating Party may propose the
abandonment of a well which has been drilled hereunder by notifying
the other Participating Parties. No well shall be abandoned without
the unanimous consent of the Participating Parties therein. Any
Party may propose the abandonment of such well by notifying the
Participating Parties in writing. The Participating Parties not
consenting to such abandonment shall pay the Parties desiring to
abandon their proportionate share of the value of the well s
salvageable material and equipment as determined pursuant to Exhibit
C (Accounting Procedure), less the current estimated costs (as
determined by the Parties) of salvaging same and of plugging and
abandoning the well.
Each Party desiring to abandon a well shall assign to the non-
abandoning Parties, in proportion to their Participating Interest,
its interest in such well and the equipment therein and its
ownership in the production from such well. Such assignment shall
be without warranty and free of any overriding royalties (except for
overriding royalty burdens listed on Exhibit "A" hereof) or any
other burdens or encumbrances. Any Party so assigning shall be
relieved from any further liability with respect to the well;
provided, however, such Party shall remain fully responsible for all
of its obligations incurred prior to the time of the assignment
provided for herein.
18.2 Facilities and Platform Salvage and Removal Costs: Except as
otherwise provided for herein regarding the disposition of the
Production System, when the Parties owning other Facilities or
another platform, agree that no further use will be made of such
Facilities or platform, they shall be disposed of by the Operator
for the Participating Parties at the highest bid or removed at the
risk and expense of such Parties. If a Party purchases Facilities
or a platform, it will be deemed the owner and assume all risks upon
acquiring ownership rights in such Facilities or platform.
18.3 Approval Not Required: The Operator may, without prior approval of
the Parties, dispose of any items of surplus or obsolete material
and equipment if the current price of new materials or equipment
similar thereto is less than One Hundred Thousand Dollars
($100,000.00).
18.4 Abandonment Operations Required by Governmental Authority: Any well
abandonment or platform/Production System removal required by a
governmental authority shall be accomplished by Operator with the
Costs, risks and net proceeds, if any, to be shared by the Parties
owning such well, platform or Production System in proportion to
their Participating Interest.
ARTICLE 19
RENTALS, ROYALTIES AND MINIMUM ROYALTIES
19.1 Overriding Royalties and Burdens on Production: If any Party has
previously created or hereafter creates any overriding royalty,
production payment, carried or reversionary working interest, net
profits interest or other type of burden on Hydrocarbon production
in addition to the lessor's royalty stipulated in the Lease(s)
except for overriding royalty interests set forth in Exhibit A
attached hereto (an "Overriding Royalty"), the Party creating the
Overriding Royalty shall assume and bear all obligations of the
Overriding Royalty regardless of that Party's participation status
notwithstanding that an assignment or relinquishment of all or a
portion of that Party's Working Interest is made to another Party
under this Agreement. The Party creating the Overriding Royalty
shall indemnify and hold all other Parties harmless from any and all
claims and demands for payment asserted by the owners of the
Overriding Royalty. Any such agreements creating these interests
shall contain provisions to effect this.
19.1.1 Subsequent Creation of Overriding Royalty: Notwithstanding
anything herein to the contrary, if subsequent to the
execution of this Agreement, any Party should create an
Overriding Royalty, such subsequently created Overriding
Royalty shall be made specifically subject to all the terms
and provisions of this Agreement and shall be subordinate
to the rights of the other Parties to this Agreement.
19.1.2 Subordination of Overriding Royalties: If the Party owning
the Working Interest from which the Overriding Royalty is
created: (a) fails to pay when due its share of Costs, or
(b) withdraws from this Agreement, then the Overriding
Royalty shall be chargeable with its pro rata portion of
all Costs (equal to its fractional interest in gross
production) and the security rights created in Article 6.3
(Security Provisions) shall be applicable against such
Overriding Royalty. The Operator shall have the right to
enforce the security rights (and all other rights granted
under this Agreement) against the owners of the Overriding
Royalty for the purpose of collecting Costs chargeable to
the Overriding Royalty.
19.2 Payment of Rentals and Royalties: The Operator shall make all
rental payments on behalf of the Parties for the Designated
Prospects which it operates. The Operator shall use reasonable care
to make proper and timely payment of all rentals, minimum royalties
or other similar payments accruing under the terms of the Leases
which are included within the applicable Designated Prospect. Upon
receipt of proper evidence of all such payments and the Operator's
invoice for its proportionate share of all such payments, each Non-
Operating Party shall reimburse the Operator for the Non-Operating
Party's Working Interest share of all such payments. In the event
Operator fails to make proper payment of any rental or minimum
royalty or similar payments accruing under the terms of the Lease(s)
through mistake or oversight where such payment is required to
continue a Lease in force, then Operator shall not be liable to the
other Parties for any resulting damages or any loss which results
from such nonpayment.
19.2.1 Non-Participation in Payments: If any Party elects not to
pay its share of any rental, minimum royalty or similar
payment, such Non-Participating Party shall notify the
other Parties of its intention not to pay its share of such
payment at least sixty (60) days prior to the date on which
such payment is due. Upon this occurrence, the Operator
shall make such payment solely for the benefit of all the
Participating Parties. The Non-Participating Party shall
assign to the Participating Parties all of its Working
Interest in the Designated Prospect or portion thereof,
maintained by such payment.
19.2.2 Royalty Payments: Each Party shall pay or cause to be paid
all royalty and other amounts payable out of Hydrocarbon
production actually taken from the Lease(s) for its
account. When necessary for calculating the recoupment of
a Non-Consent Well, any Non-Operating Party taking its
production shall advise the Operator (in writing on or
before the tenth day of the month following the month in
which the Hydrocarbon production is sold or used off the
premises) of the volumes of Hydrocarbons it took and the
prices received for such Hydrocarbon production.
19.2.3 Federal Environmental Tax: Each Party agrees to pay and
bear its proportionate share of the Federal Environmental
Tax payable on its share of Hydrocarbon production or any
other fees being required by the Oil Pollution Act of 1990
and any other statutes. However, should the oil owned by a
Party be reported to the MMS (or a successor regulatory
agency) by another Party in its reporting form, the
reporting Party shall pay the required fees on all volumes
reported and the non-reporting Party shall reimburse the
reporting Party for all fees paid on its behalf.
ARTICLE 20
TAXES
20.1 Internal Revenue Provision: Each Party elects to be excluded from
the application of all or any part of the provisions of Subchapter
K, Chapter 1, Subtitle A, Internal Revenue Code of 1986, as amended,
or similar provisions of applicable state laws.
20.2 Other Taxes and Assessments: The Operator for the Joint Account
shall file all tax returns and reports required by law and shall pay
all applicable taxes, other than income or other taxes provided in
Article 20.2.2 (Production and Severance Taxes) or assessments
levied with respect to operations conducted under this Agreement.
The Parties shall promptly furnish the Operator with copies of any
notices, assessments or tax statements received pertaining to taxes
to be paid by the Operator. The Operator shall charge each Party
its Working Interest share of all taxes and assessments paid and,
upon written request from a Non-Operating Party(ies), provide copies
of all tax returns, reports, tax statements and receipts for such
taxes. The Operator shall not allow any taxes to become delinquent,
unless such nonpayment is approved as a General Matter.
20.2.1 Property Taxes: The Operator shall render for ad valorem
property tax purposes all personal property and/or real
property covered by this Agreement as may be subject to
such taxation and shall pay such property taxes for the
benefit of each Party. The Operator shall timely and
diligently protest to a final determination any valuation
it deems unreasonable. Pending such determination, the
Operator may elect to pay under protest. Upon final
determination, the Operator shall pay the taxes and any
interest, penalty or cost accrued as a result of such
protest. The Operator shall charge each Party its Working
Interest share of such tax payments including interest,
penalties and all reasonable Costs in accordance with
Exhibit "C" (Accounting Procedure).
20.2.2 Production and Severance Taxes: Each Party shall pay, or
cause to be paid, all production, excise, severance and
other similar taxes due on any Hydrocarbon production which
it received pursuant to the terms of this Agreement. Any
Party responsible for such tax payment shall upon written
request from the Operator, provide evidence that such taxes
have been paid.
ARTICLE 21
INSURANCE AND BONDS
21.1 Insurance: The Operator shall maintain the insurance coverage
provided in Exhibit "B" (Offshore Insurance Provisions) attached
hereto and charge each Party its Working Interest share of the Cost
of such coverage.
21.2 Bonds: Operator shall obtain and maintain any and all bonds,
certificates of financial responsibility and permits required to be
carried by any applicable law, regulation or rule. Operator will
require all contractors to obtain and maintain all bonds required to
be carried by any applicable law, regulation or rule.
ARTICLE 22
LIABILITY, CLAIMS AND LAWSUITS
22.1 Individual Obligations: The obligations, duties and liabilities of
the Parties shall be several and not joint or collective; and
nothing contained herein shall ever be construed as creating a
partnership, joint venture, association or other character of
business entity recognizable in law for any purpose. Each Party
shall hold all the other Parties harmless from liens and
encumbrances on the Leases or in the Contract Area arising as a
result of its acts or omissions.
22.2 Notice of Claim or Lawsuit: If a claim is made against any Party or
if any Party is sued on account of any matter arising from
operations hereunder, or on any matter affecting the Leases or Con-
tract Area, or if any hearings are held pursuant to operations under
this Agreement, such Party shall give written notice of the lawsuit
or hearing to the other Parties as soon as reasonably practicable.
22.3 Settlements: The Operator may settle any single damage claim or
lawsuit involving operations hereunder if the expenditure does not
exceed Two Hundred and Fifty Thousand Dollars ($250,000) per
occurrence and if the payment is in complete settlement of such
claim or suit. If the amount required for settlement exceeds such
amount, the Parties shall determine the further handling of the
claim or suit pursuant to Article 22.4 (Defense of Claims and
Lawsuits) below.
22.4 Defense of Claims and Lawsuits. The defense of claims and lawsuits
arising from operations under this Agreement which are likely to
exceed Two Hundred and Fifty Thousand Dollars ($250,000.0) per
occurrence shall be handled by a committee of staff attorneys
representing the Participating Parties in the operation out of which
the claim arose, with Operator's attorney as Chairman. Suits may be
settled during litigation only with the mutual consent of all
Participating Parties. No charge shall be made for services
performed by the staff attorneys or travel expenses, but all other
expenses incurred in the defense of suits, together with the amount
paid to discharge any final judgment, shall be considered costs of
operation and shall be paid by the Parties in proportion to their
Participating Interest in the operation out of which the claim
arose. Outside counsel shall be employed only with the unanimous
approval of the affected Parties. If it is agreed that outside
counsel is to be employed, the fees and expenses shall be charged to
the affected Parties in proportion to their Participating Interest
in the operation out of which such claims arose.
22.5 Liability for Damages: To the extent allowed by law, liability for
losses, damages, Costs, expenses, claims, liabilities and lawsuits
arising from operations under this Agreement not covered by or in
excess of the insurance carried for the Joint Account shall be borne
by each Party in proportion to its Participating Interest in the
operations out of which such liability arises, except when such
liability results from the gross negligence or willful misconduct of
a Party(ies), in which case such Party(ies) shall be solely liable
for same.
22.6 INDEMNIFICATION FOR NON-CONSENT OPERATIONS: THE PARTICIPATING
PARTIES AGREE TO HOLD THE NON-PARTICIPATING PARTIES (AND THEIR
AFFILIATES, AGENTS, INSURERS, DIRECTORS, OFFICERS AND EMPLOYEES)
HARMLESS AND TO RELEASE, DEFEND, INDEMNIFY, AND PROTECT THEM
AGAINST ALL CLAIMS, DEMANDS, LIABILITIES, INCLUDING ENVIRONMENTAL
POLLUTION AND LIENS FOR PROPERTY DAMAGE OR PERSONAL INJURY,
INCLUDING SICKNESS AND DEATH, CAUSED BY OR OTHERWISE ARISING OUT OF
NON-CONSENT OPERATIONS, AND ANY LOSS AND COST INCLUDING LIENS AND
ENCUMBRANCES, SUFFERED BY ANY NON-PARTICIPATING PARTY AS AN INCIDENT
THEREOF, EXCEPT TO THE EXTENT THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY SUCH NON-PARTICIPATING PARTY CONTRIBUTES TO THAT
LOSS OR COST. SHOULD ANY INDEMNITY CONTAINED HEREIN BE DETERMINED
TO BE IN VIOLATION OF LAW OR PUBLIC POLICY, THE PARTIES AGREE THAT
SAID INDEMNITY(IES) SHALL THEN BE ENFORCEABLE ONLY TO THE MAXIMUM
EXTENT ALLOWED BY LAW.
22.7 DAMAGE TO RESERVOIR, LOSS OF RESERVES AND PROFITS: NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, NO PARTY TO THIS
AGREEMENT SHALL BE LIABLE TO ANY OTHER PARTY TO THIS AGREEMENT AND
EACH PARTY RELEASES THE OTHER PARTIES FROM CLAIMS FOR LOSS OF OR
DAMAGE TO A RESERVOIR(S), LOSS OF HYDROCARBONS, OR FOR LOSS OF
REVENUES OR PROFITS OR FOR OTHER CONSEQUENTIAL OR BUSINESS
INTERRUPTION DAMAGES ARISING OUT OF OR INCIDENTAL TO OR IN
CONNECTION WITH THIS AGREEMENT, OR ANY OPERATIONS HEREUNDER, HOWEVER
CAUSED, INCLUDING NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL FAULT
ON THE PART OF ANY PARTY TO THIS AGREEMENT.
22.8 NON-ESSENTIAL PERSONNEL: A PARTY HERETO WHO REQUESTS TRANSPORTATION
AND/OR ACCESS TO A PRODUCTION SYSTEM, VESSEL OR ANY OTHER FACILITY
UTILIZED FOR OPERATIONS AND WHO IS NOT DIRECTLY INVOLVED WITH THE
OPERATION UNDER THIS AGREEMENT, AGREES TO PROTECT AND INDEMNIFY THE
OTHER PARTIES HERETO AS TO ANY COST, LIABILITY OR JUDGMENT INCURRED
AS A RESULT OF A CLAIM, DEMAND, CAUSE OF ACTION OR SUIT BROUGHT BY
SUCH PERSON ARISING OUT OF SAID PERSON'S TRANSPORTATION AND/OR
ACCESS TO A PRODUCTION SYSTEM, VESSEL OR ANY FACILITY UTILIZED FOR
OPERATIONS. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, ANY
SUCH INDEMNIFICATION AND/OR PROTECTION PROVIDED HEREIN SHALL BE
INAPPLICABLE WHERE THE CLAIM DEMAND, CAUSE OF ACTION OR SUIT ARISES
OUT OF THE WILLFUL MISCONDUCT, INTENTIONAL ACT OR GROSS NEGLIGENCE
OF THE PARTY SO INDEMNIFIED AND/OR PROTECTED.
ARTICLE 23
FARM-INS AND CONTRIBUTIONS
23.1 Contributions From Third Parties: The Parties may seek to obtain
support from third parties for operations hereunder through
contributions of cash, acreage or data. Any Party may propose to
seek support for such operations on the Contract Area through
contributions from third parties. Each Party shall notify all other
Parties of any contribution offers received from third parties. Any
proposal or offer from third parties shall be subject to the General
Matter approval of the Parties prior to either accepting the offer
or making such a proposal. Upon General Matter approval, the
Operator, unless otherwise agreed, shall negotiate all contributions
on behalf of the Parties (with prior consultation of the Parties and
the prior agreement of the cash equivalent value for any non-cash
consideration offered or received). Upon receiving a response from
a third party to the Operator's proposal, the Operator shall notify
all of the Parties of the proposal and its terms. Within thirty
(30) days of receipt of the Operator's notice, the Party's shall
vote as a General Matter on the proposal. If a proposal is approved
as a General Matter, any Party shall have the right to decline
participation in a contribution and be relieved of any obligations
and benefits thereunder. The Participating Party(s) shall not be
required to obtain the consent of the Non-Participating Party
regarding any contribution or trade.
23.1.1 Cash Contributions : In the event a cash contribution is
accepted towards the drilling of a well, in which all
Parties are Participating Parties, said cash contribution
shall be turned over to the Operator, and the Operator
shall credit the amount of the cash contribution against
the Costs of the proposed operation in proportion to each
Party's Participating Interest. In the event the
Participating Parties accept a cash contribution toward the
drilling of a well where fewer than all Parties are
Participating Parties, the cash contribution shall be
credited among the Participating Parties in such well to
the extent that each Participating Party shall receive a
portion of the contribution equal to its Participating
Interest in the well. The cash contribution shall be
deducted from the cost of drilling and completing the well
prior to computation of the Recoupment Amount Participating
Parties shall be entitled to receive in accordance with
Article 16 (Non-Consent Operations).
23.1.2 Acreage Contributions: Any contribution of acreage toward
the drilling of a well hereunder shall be offered, without
warranty of title, to the Participating Parties in
proportion to their Participating Interests. If all of the
Parties to this Agreement participate in accepting their
share of the assignment of the acreage, the acreage shall
become a part of the Contract Area and subject to the terms
of this Agreement. Any acreage contribution in which less
than all Parties are Participating Parties shall, to the
extent possible, be subject to the terms of an Operating
Agreement substantially similar to this Agreement, and
shall apply separately to the acreage acquired by the
Participating Parties.
23.1.3 Data Contributions : Contributions of geoscience or
engineering data offered by third parties in support of
operations hereunder shall be handled pursuant to Article 7
(Confidentiality of Data), and may be accepted by the
Participating Parties so long as the confidentiality of any
data belonging to Non-Participating Parties is preserved.
No data owned by a Non-Participating Party may be included
in any data contribution without the consent of the Non-
Participating Party.
23.2 Restricted Bidding: If at any time during the term of this
Agreement, more than one of the Parties are on the list of
restricted joint bidders for OCS lease sales as issued by the
Minerals Management Service pursuant to 30 CFR 256.44, then the
Parties agree to comply with all statutes and regulations regarding
restricted joint bidders on the OCS in effect during the term of
this Agreement. In the case of multiple restricted bidders being
Parties to this Agreement, the provisions of this Agreement shall be
amended to delete those provisions which would otherwise require a
transfer of a leasehold interest prohibited by 30 CFR 256.44(c).
23.3 Area of Mutual Interest: The geographical confines of the area
described and outlined in Exhibit A-4 shall hereinafter be referred
to as the Area of Mutual Interest .
23.3.1 Notification Required: Subject to Articles 23.3.9 (Bidding
Agreement), if any Party hereto ( Acquiring Party )
acquires either an oil and gas lease (or any interest
therein) or any other mineral interest covering lands
and/or water bottoms and/or seabeds lying within the Area
of Mutual Interest, or if the Acquiring Party is offered
the opportunity to enter into any type of agreement by
which such an interest may be earned or otherwise acquired
by conducting drilling, seismic, or other operations on the
lands lying within the Area of Mutual Interest, then the
Acquiring Party shall promptly notify the other Parties of
such acquisition or such opportunity. Any interest
acquired by a Party hereto in lands outside of the Area of
Mutual Interest, however, shall not be subject to the terms
of this Article. The notification provided for in this
Article shall contain all available title information, and
copies of leases, agreements by which the interests maybe
acquired, and all other pertinent instruments. It shall
also describe in detail the cost and expense of such
acquisition and any other obligation which may be incurred
pursuant thereto.
23.3.2 Right of Participation: The Parties shall have the
opportunity to participate in any acquisition hereunder,
and in the following proportions:
Enserch Exploration, Inc. 40%
Mobil Oil Exploration & Producing Southeast Inc. 40%
Reading & Xxxxx Development Co. 20%
23.3.3 Election Period If Operations Are Not Required: If
drilling, seismic, or other operations are not required to
acquire the interest, each Party hereto shall have fifteen
(15) days from receipt of notice thereof in which to elect
to participate in such acquisition. Failure to notify the
acquiring Party of its election within fifteen (15) days
shall be deemed and election not to participate.
23.3.4 Election Period If Operations Are Required: If the
acquisition requires drilling, seismic, or other operations
on the lands lying within the Area of Mutual Interest, the
election of a Party to participate in such operations shall
be deemed an election to participate in the agreement
governing such operations, to the extent necessary to
acquire the interest. No party shall be required to make
such election more than one hundred fifty (150) days nor
less than fifteen (15) days prior to commencement of
initial operations.
23.3.5 Assignments: To receive an assignment of its proportionate
share of the interest acquired as a result of conducting
drilling, seismic, or other operations on the Area of
Mutual Interest, a Party ( Participating Party ) must have:
(1) participated in all operations necessary for the
acquisition of the interest, including, but not limited to,
completion operations and also must have paid all costs and
expenses incurred in connection therewith; (2) participated
in any previous drilling, seismic, or other operations that
were necessary or were a condition precedent to the
operations resulting in the acquisition of the interest;
and (3) participated in accordance with the terms,
provisions, covenants, and conditions of the agreements
governing the acquisition of interest. The Acquiring Party
and the Participating Party shall share in the acquisition
in the proportion that each such Party s respective working
interest, as set forth in Article 23.3.2 above bears to the
sum of the working interests of the Acquiring Party and the
Participating Parties. On receipt of an invoice from the
Acquiring Party setting forth in detail the cost and
expense of the acquisition, each Participating Party shall
promptly reimburse the Acquiring Party for its
proportionate share thereof. The Acquiring Party shall
then promptly assign to the Participating Party its
proportionate interest in the acquisition.
23.3.6 Operating Agreement: If all Parties to this Agreement elect
to participate in any acquisition, then any such acquired
interest shall thereafter be subject to this Agreement and
the Parties shall amend Exhibits A-1", A-2", and A-3" to
reflect the newly acquired leases and Designated Prospects.
Future operations conducted on the newly acquired
Designated Prospects shall be governed by this Agreement.
Such amendment shall be effective with the award of a lease
or the effective date of any such transfer; and shall be
executed by the Parties within ninety (90) days from lease
issuance or the effective date of the transfer leases. If
less than all Parties elect to participate in an
acquisition, the Acquiring Parties will execute an
agreement substantially in the form of this Agreement.
In the event that the lease acquisition involves a third party
(not a Party to this Agreement), the Parties agree to utilize
this form of Agreement as the starting point for negotiation
of a mutually acceptable form of Operating Agreement with the
third party.
23.3.7 Term: The Area of Mutual Interest shall be in effect until
December 31, 2000.
23.3.8 Conflicting Agreements: The provisions of this Article
shall prevail over any conflicting provisions, if any, in
this Agreement.
23.3.9 Bidding Agreement: Attached hereto as Exhibit "K" is that
certain Bidding Agreement dated effective September 1,
1995, by and between Mobil Oil Exploration & Producing
Southeast Inc., Enserch Exploration, Inc., and Reading &
Xxxxx Development Company (hereinafter referred to as the
Bidding Agreement ), which shall govern the acquisition of
leasehold interests within the Area of Mutual Interest and
which may be acquired at OCS Lease Sales. If there is a
conflict between the provisions of this Article 23.3 and
the Bidding Agreement, the provisions of the Bidding
Agreement shall control to the extent of such conflict. It
is the intent of the Parties that with respect to a lease
acquired as a result of a high bid for which a Party was a
Non-Participating Party under the Bidding Agreement, such
Non-Participating Party shall not be offered a second
opportunity to acquire an interest under the terms of this
Article. If a Party declines to participate in an
acquisition within the Area of Mutual Interest, it will
affect adversely that Party s priority for handling its
production from the affected area.
ARTICLE 24
SUCCESSORS, ASSIGNS, AND SALE OF INTEREST
24.1 Successors and Assigns: This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors
and assigns and shall constitute a covenant running with the Leases.
Each Party shall incorporate in any assignment of an interest in the
Leases a provision that such interest and the assignment thereof is
subject to this Agreement.
Except as otherwise provided, for the purpose of maintaining
uniformity of ownership in each Designated Prospect, no Party shall
sell, encumber, transfer or make other disposition of its interest
in a Designated Prospect and in xxxxx, Initial Production System,
Subsequent production System, Facilities, and production unless such
disposition covers either:
(a) the entire interest of the Party in a Designated Prospect and
any and all Leases, xxxxx, equipment, Initial Production
System, Subsequent Production System, Facilities and
production attributable thereto; or
(b) an equal undivided interest in a Designated Prospect and any
and all Leases, xxxxx, equipment, Initial Production System,
Subsequent Production System, Facilities and production
attributable thereto.
Notwithstanding the foregoing, upon notice to the Parties, a Party
may sell, assign, encumber or transfer its interest in the Initial
Production System or Subsequent Production System in connection with
any financing or leasing arrangement covering such Party's interest
therein. If a Party's interest in the Initial Production System or
Subsequent Production System takes the form of a right of use
pursuant to a lease, or some other contractual right, those rights
of use contained in the lease or other contractual rights shall be
transferred at the same time and in the same proportion as a
transfer of a Parties' interest in the Designated Prospect, xxxxx,
equipment, Facilities and production. Any such financing, lease
arrangement or contractual service agreement will be made
specifically subject to the terms and provisions of this Agreement
and the rights of the Parties hereunder. The Parties agree to
cooperate with each other for the purpose of allowing each Party to
obtain satisfactory financing, lease arrangements or service
agreements covering its interest in the Production System.
24.2 Effective Date of Transfer: No sale, transfer or assignment of an
interest in a Designated Prospect permitted under the provisions of
this Agreement shall be effective hereunder until a duly executed
counterpart original or a certified copy of the filed instrument or
instruments evidencing such change in ownership has been delivered
to the Operator, together with a like counterpart original of an
instrument in a form acceptable to Operator in which the assignee
adopts and ratifies this Agreement. Any such transfer or assignment
shall be made effective as of the first day of a calendar month, or
if not so made effective, the instrument or instruments shall be
considered effective for all purposes hereof as of the first day of
the calendar month next following the date of such instrument or
instruments. Upon receipt of such instrument the Operator shall
recognize the change in interest and shall notify the Parties, but
the Operator shall not be responsible for effecting any retroactive
adjustment with respect to any matter between the affected Parties
arising from any prior accounting under this Agreement by Operator.
24.3 Transferee Bound: All such authorized sales, transfers, assignments
or conveyances of an interest in a Designated Prospect and this
Agreement, whether expressly so stated or not, shall operate to
impose upon any Party acquiring such interest its share of all costs
and other obligations chargeable hereunder to such interest and
shall likewise operate to give and grant to such Party acquiring
such interest its proportionate part of all benefits accruing
hereunder.
24.4 Assignments and Transfers of Working Interests: All of the Parties
to this Agreement agree to give prior written notice to the Operator
and the other Parties of any proposed assignment, transfer or other
disposition of all or a portion of a Party's Working Interest
covered by this Agreement. Any assignment of a Working Interest
covered by this Agreement shall be made to a financially responsible
assignee and shall be further subject to this Agreement and the
following provisions:
24.4.1 Exceptions to Prior Written Notice: Notwithstanding any
provision of this Agreement to the contrary, an assigning
Party shall not be required to provide prior written notice
with respect to any of the following:
(i) A Party seeking to mortgage, pledge, hypothecate or
grant a security interest in all or a portion of its
Working Interest in the Leases, any equipment or
Facilities or each Party's right to produce Hydrocarbons
from a Designated Prospect. However, except as
otherwise provided herein, any encumbrance arising from
the financing transaction shall be expressly
subordinated to the rights of the other Parties to this
Agreement, and the assigning Party shall ensure that any
mortgage or encumbrance shall be without prejudice to
the terms of this Agreement and promptly following the
creation of such encumbrance, the Party creating the
same shall deliver to the other Parties to this
Agreement a written acknowledgment by the holder of such
encumbrance, in form and substance satisfactory to such
Parties, confirming such subordination; or,
(ii) A Party assigning all or an undivided part of its
interest to an Affiliate.
24.4.2 Effective Date of Assignments: Except as otherwise
provided in this Agreement, the effective date for any
assignment shall be at least thirty (30) days but not more
than one hundred eighty (180) days after the date of the
written notice. No assignment, other than those allowed by
Article 24.4.1 (Exceptions to Prior Written Notice), shall
be binding upon the Parties unless and until (i) the
assignor or assignee provide all remaining Parties with a
photocopy of a fully executed assignment, and an executed
MMS Form 1123, "Designation of Operator" and (ii) evidence
of tender for approval by the Mineral Management Service.
The Parties shall promptly join in such reasonable actions
as may be necessary to secure such approvals and shall
execute and deliver any and all documents reasonably
necessary to effect any such assignment. Any costs
attributable to such an assignment shall be the sole
obligation of the assignor.
24.4.3 Minimum Transfer of Interest: Unless unanimously agreed
otherwise, any transfer to a third party shall be limited
to a minimum Working Interest of ten percent (10%) in an
entire Designated Prospect. No assignment or transfer of
any interest in this Agreement or any Lease or lands
subject to this Agreement shall be made that is not an
equal and undivided interest in and to all of a Party's
interest in a Designated Prospect and any and all Leases,
xxxxx, Production Systems, Facilities and production
attributable thereto unless otherwise provided under this
Agreement. No assignment or transfer of any Working
Interest in this Agreement or any Lease or lands subject to
this Agreement shall be made that is not an undivided
Working Interest in all of a Party's Working Interest in a
Designated Prospect (unless otherwise provided under this
Agreement).
24.4.4 Form of Assignments: Any assignment of any interest in or
subject to this Agreement shall incorporate provisions that
the assignment is inferior to and made expressly subject to
this Agreement and providing for the assumption by the
assignee of the performance of all of assignor's
obligations under this Agreement. Any assignment not in
compliance with this provision shall be voidable by the
non-assigning Parties.
24.4.5 Limited Warranty: Any transfer of interest pursuant to
this Article 24 shall require that any assignment, vesting
or relinquishment of Working Interest between the Parties
under this Agreement shall be made without warranty of
title.
24.5 Preferential Right to Purchase: Subject to the provisions of this
Article, each Party shall have the right to freely transfer and
alienate its Working Interest. For the purposes of this Article
24, Working Interest as to each Designated Prospect covered by
this Agreement shall mean any right, title or interest of a Party in
and to any Lease, Production System, Facilities, Hydrocarbons,
platform, equipment or any other property, real or personal, or any
other right or interest covered by or created under this Agreement.
Any transfer of all or any portion of a Party's Working Interest,
directly or indirectly, shall be subject to the following
provisions:
24.5.1 Notice of Proposed Transaction: Should any Party (the
"Assignor") desire to dispose of all or any portion of its
Working Interest hereunder (whether offered as a single
property disposition or as part of a multi-property
disposition) and has received a bona fide offer (whether
from a Party to this Agreement or from a third party) which
the Assignor is willing to accept for the sale or other
disposition of its Working Interest in a Designated
Prospect, each of the remaining Parties to this Agreement
shall have a prior and preferential right to purchase of
such Working Interest. In such case, the Assignor shall
promptly give prior written notice of the proposed
transaction to the other Parties. The notice of the
proposed transaction shall provide full information
concerning the transaction including at least:
- the name and address of the prospective purchaser (who
must be ready, able and willing to acquire the interest),
- the purchase price or other consideration offered (which
shall include the monetary equivalent in U.S. Dollars
based upon the reasonable market value of any
consideration other than cash), and
- all other pertinent material terms of the offer.
24.5.2 Exercise of Preferential Right to Purchase For a period of
thirty (30) days from receipt of the notice, the remaining
Parties shall have the prior right and option, but not the
obligation to elect to acquire the Working Interest offered
(on the same terms and conditions, or on equivalent terms
for a non-cash transaction as stated in the notice) without
reservations or conditions. The Election to exercise the
preferential right shall be made by the exercising Party
giving the Assignor written notice of its Election to
purchase prior to the expiration of the thirty (30) day
period. If an Election to purchase preferentially is made,
the Assignor shall be required to transfer the Working
Interest to the Party at the price and on the terms
specified in the notice. The transaction shall be
concluded within a reasonable time, but no later than sixty
(60) days after receipt of the Election to purchase
preferentially (plus a reasonable time to secure all
necessary governmental approvals). If more than one Party
elects to acquire the Working Interest offered, then each
Party shall acquire a proportion of the Working Interest
offered equal to the ratio its own pre-acquisition Working
Interest bears to the total pre-acquisition Working
Interests of all acquiring Parties (unless the acquiring
Parties agree upon a different ratio). If only one Party
elects to acquire the Working Interest offered, it may
require the Assignor to transfer all of the Working
Interest offered, but may not require the transfer of less
than all Working Interest offered.
24.5.3 Transactions Not Affected by the Preferential Right to
Purchase: This preferential right to purchase shall not
exist or apply when a Party proposes to:
(a) mortgage, pledge or otherwise encumber its interest
(including assignments of proceeds from the sale of its
Hydrocarbon production executed as further security for
the debt secured by such mortgage); or
(b) dispose of its Working Interest by:
- merger, reorganization or consolidation;
- a sale or other transfer to an Affiliate.
24.5.4 Completion of the Transaction: If none of the remaining
Parties elect to exercise its preferential right to
purchase the Working Interest offered, the Assignor shall
be free to complete the proposed transaction on the terms
disclosed in the notice. However, if any proposed
transaction is not completed within one hundred twenty
(120) days from the expiration of the thirty (30) day
preferential right Election period (plus a reasonable time
to secure any necessary governmental approvals) or, if the
terms of the proposed transaction are amended in any way,
the proposed transaction shall be considered withdrawn and
the Working Interest offered shall again be subject to the
preferential right to purchase as if the originally
proposed transaction had never been proposed.
24.5.5 Special Circumstances Preferential Rights to Purchase:
Notwithstanding anything to the contrary contained in this
Article 24 or elsewhere in this Agreement, with respect to
any transfer of interest by Reading & Xxxxx Development Co.
or its successors or assigns, to Enserch Exploration, Inc.
or its successors or assigns, made pursuant to the terms
and provisions of an agreement or agreements between
Reading & Xxxxx Development Co. and Enserch Exploration,
Inc. executed either prior to or contemporaneously with
this Agreement, said interest will be either subject to
this Article 24.5 or will be promptly offered for sale by
Enserch Exploration, Inc. to the remaining Parties, and the
purchase price for any such transfer shall be determined in
the following manner. Enserch Exploration, Inc. shall
select a duly qualified appraiser, the Parties who maintain
a preferential right shall jointly select a second duly
qualified appraiser and the two (2) appraisers so selected
shall select a third duly qualified appraiser. The three
(3) appraisers shall, each independent of the other,
determine the fair market value of the interest proposed to
be transferred. The three (3) determinations shall be
averaged and the greater of the resulting average or the
amount paid, reimbursed or tendered by Enserch Exploration,
Inc. for the interest, shall be deemed for all purposes to
be the purchase price for the interest proposed to be
transferred hereunder.
ARTICLE 25
FORCE MAJEURE
25.1 Force Majeure: If as a result of Force Majeure any Party is
rendered unable, wholly or in part, to carry out its obligations
under this Agreement (except for the payment of money) then the
obligations of the Party giving such notice, so far as and to the
extent that the obligations are affected by such Force Majeure,
shall be suspended during the continuance of any inability so
caused, but for no longer period. In addition, if as a result of
Force Majeure, the condition that any Non-Consent Operation be
timely commenced cannot be met, then that condition shall be
suspended for the duration of the Force Majeure event, provided
notification of the Force Majeure event is given as hereafter
specified to the Non-Participating Parties by the Participating
Parties in the Non-Consent Operation (who would benefit from the
acreage forfeiture by or percentage recoupment of the costs against
the Non-Consenting Party pursuant to Article 16). For purposes of
this Agreement, "Force Majeure" shall be inclusive of but not
limited to the following events: flood, hurricane or other acts of
God; a fire, blowout, oil spill or other environmental catastrophe;
war, civil disturbance, labor dispute, strike, lockout, compliance
with any law, order, rule or regulation, governmental action or
delay in granting permits or permit approvals as needed; by
inability to secure materials or rig; or by any other cause, whether
similar or dissimilar, beyond the reasonable control of the said
Party. The Party claiming Force Majeure shall notify the other
Parties of the Force Majeure situation within a reasonable time (not
to exceed thirty (30) days) after the occurrence of the facts relied
on and shall keep all Parties informed of all significant
developments. The notice of Force Majeure shall give full details
of said Force Majeure, and also (if possible) estimate the period of
time which said Party will require to remedy the Force Majeure or to
resume performance of its obligations under this Agreement. The
affected Party shall use all reasonable diligence to remove or
overcome the Force Majeure situation, but shall not be obligated to
settle any labor dispute except on terms acceptable to it and all
such disputes shall be handled within the sole discretion of the
affected Party.
ARTICLE 26
ADMINISTRATIVE PROVISIONS
26.1 Term of Agreement: This Agreement shall become binding upon
execution by all Parties with an effective date as set forth in the
preamble to this Agreement. This Agreement shall remain in effect
from the effective date and for so long as any of the Leases in the
Contract Area shall remain in effect or until all assets and
operations have been turned over to a single Working Interest owner.
Termination of this Agreement shall not relieve any Party from any
Costs or liability accrued or incurred prior to the termination of
this Agreement, and the provisions of this Agreement shall continue
in force for such additional time as necessary until:
(a) all xxxxx have been plugged and abandoned;
(b) all property and equipment in the Contract Area belonging to
the Parties are disposed of by the Operator and all claims or
lawsuits have been settled or otherwise disposed of; and,
(c) a final accounting and settlement has been made under this
Agreement (including settlement of any gas imbalances pursuant
to Exhibit "D").
The Operator shall have a reasonable period of time after the
occurrence of an event of termination in which to conclude the
administration of operations and to make a distribution of assets.
During this period of time, the Operator shall continue to have and
shall exercise all powers granted and meet all duties imposed by
this Agreement until all provisions of this Agreement are fully
executed.
26.2 Time Limits: Time is of the essence in this Agreement and all time
limits shall be strictly construed and enforced. The failure or
delay of any Party in the enforcement of the rights granted under
this Agreement shall not constitute a waiver of said rights nor
shall it be considered as a basis for estoppel. Such Party may
exercise its rights under this Agreement despite any delay or
failure to enforce the rights when the right or obligation arose.
26.3 Waiver of Right to Partition: Each Party for itself, its
successors and assigns waives the right to bring an action for
partition of its interest in the Leases and lands or personal
property held subject to this Agreement, and covenants that for a
period of fifteen years from the effective date hereof and for such
longer period of time as may be authorized by subsequently enacted
law it shall not resort at any time to any action at law or in
equity to partition any or all of Leases and lands or personal
property subject to this Agreement.
26.4 Compliance With Laws and Regulations: This Agreement, and all
operations conducted by the Parties pursuant to this Agreement, are
expressly subject to and shall comply with all laws, orders, rules
and regulations of any federal, state or local governmental
authority having jurisdiction over the Contract Area. No Party
shall suffer a forfeiture or be liable in damages for failure to
comply with any of the provisions of this Agreement if such
compliance is prevented by or if such failure results from
compliance with any applicable law, order, rule or regulation.
26.4.1 Applicable Law: THE PROVISIONS OF THIS AGREEMENT AND THE
RELATIONSHIP OF THE PARTIES SHALL BE GOVERNED AND INTERPRETED
ACCORDING TO FEDERAL LAWS AND THE LAWS OF THE STATE OF
LOUISIANA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS
THAT WOULD REFER THE MATTER TO THE LAWS OF ANOTHER
JURISDICTION.
26.4.2 Severance of Invalid Provisions: In case of a conflict
between the provisions of this Agreement and the provisions
of any applicable laws or regulations, the provisions of the
laws or regulations shall govern over the provisions of this
Agreement. If, for any reason and for so long as, any clause
or provision of this Agreement is held by court of competent
jurisdiction to be illegal, or invalid, unenforceable or
unconscionable under any present or future law (or
interpretation thereof), the remainder of this Agreement
shall not be affected by such illegality or invalidity. Any
such invalid provision shall be modified to the extent
practical to conform with the intent of the Parties and
eliminate such illegality or invalidity or if such is not
possible, shall be deemed severed from this Agreement as if
this Agreement had been executed with the invalid provision
eliminated. The surviving provisions of this Agreement shall
remain in full force and effect unless the removal of the
invalid provision destroys the legitimate purposes of this
Agreement; in which event this Agreement shall be null and
void. The Parties shall negotiate in good faith for any
required modifications to this Agreement.
26.4.3 Fair and Equal Employment: Each of the Parties is an
Equal Opportunity Employer. To the extent that this Agreement
may be subject to Executive Order 11246, as amended, the equal
opportunity provisions (41 CFR 60-1) are incorporated herein
by reference. If the Non-Discrimination in the OCS provisions
of 30 CFR 270 apply to this Agreement and the operations
conducted under it, the provisions of 30 CFR 270 are also
incorporated by reference. To the extent required by
applicable laws and regulations, this Agreement also includes
and is subject to the affirmative action clauses concerning
disabled veterans and veterans of the Vietnam era (41 CFR
60-250) and the affirmative action clauses concerning
employment of the handicapped (41 CFR 60-741), which clauses
are incorporated herein by reference. In performing work
under this Agreement, the Parties agree to comply with
(and the Operator shall require each independent contractor
to comply with) the governmental requirements set forth in
Exhibit "E" attached hereto, pertaining to nonsegregated
facilities. This Agreement and the Parties are also subject
to any other applicable rules and regulation relating to
nondiscrimination that may be promulgated from time to time
by any governmental body having jurisdiction over the subject
matter of this Agreement.
26.5 Construction and Interpretation of This Agreement: The
interpretation and construction of the terms of this Agreement will
be governed by the following conventions:
26.5.1 Headings for Convenience: Except for the definition headings
contained in Article 2 (Definitions), all the table of
contents, captions, numbering sequences and paragraph headings
used in this Agreement are inserted for convenience only and
shall in no way define, limit or describe the scope or intent
of this Agreement or any part thereof; nor have any legal
effect other than to aid a reasonable interpretation of this
Agreement.
26.5.2 Gender and Number: The use of pronouns in whatever gender or
number shall be deemed to be a proper reference to the Parties
to this Agreement though the Parties may be individuals,
business entities or groups thereof. Any necessary
grammatical changes required to make the provisions of this
Agreement refer to the correct gender or number shall in all
instances be assumed as though each case was fully expressed.
26.5.3 Independent Representation: Each Party has had the benefit of
independent representation with respect to the subject matter
of this Agreement. This Agreement, though drawn by one Party,
shall be construed fairly and reasonably and not more strictly
against one Party than another.
26.6 Integrated Agreement: This Agreement and the exhibits attached
thereto, contain the final and entire Agreement of the Parties with
respect to the subject matter of this contract. This Agreement
shall not be modified or changed except by a written amendment
signed by all the Parties. This Agreement is entire as to all the
performances to be rendered under it and breach of any provision
shall constitute a breach of the entire Agreement.
26.7 Execution of Documents:
26.7.1 Binding Effect: This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors
and assigns and shall constitute a covenant running with the
land and Leases which are the subject hereof and which are
covered hereby. This Agreement does not benefit or create any
rights or benefits in any person or entity not a Party to this
Agreement.
26.7.2 Corporate Authority: If any Party is a legal entity, including
but not limited to, an association, corporation, joint venture,
limited partnership, partnership or trust, such Party
represents to the other Parties that the execution and
delivery of this Agreement and the completion of transactions
contemplated herein have been duly authorized by all necessary
corporate proceedings or have received all necessary
management approvals.
26.7.3 Further Assurances: Each Party further agrees to take any and
all actions necessary and sign any and all documents
necessary to implement the terms of this Agreement. Any
necessary documents (e.g., a Designation of Operator, etc.)
shall be prepared and executed by all Parties within thirty
(30) days from the receipt of a written request for same from
any Party.
26.7.4 Multiple Counterparts: This Agreement may be executed by
signing the original or a counterpart thereof. If this
Agreement is executed in multiple counterparts, each counter-
part shall be deemed an original and all of which when taken
together shall constitute but one and the same Agreement with
the same effect as if all Parties had signed the same
instrument. This Agreement may also be ratified by separate
instrument referring to this Agreement and adopting by
reference all the provisions of this Agreement. A ratification
shall have the same effect as an execution of the original
Agreement.
IN WITNESS WHEREOF, each Party, through its duly authorized agent or
representative, has executed this Agreement effective as of the date first
above written.
ENSERCH EXPLORATION, INC. READING & XXXXX DEVELOPMENT CO.
By:______________________________ By:______________________________
Its: Senior Vice President Its: President
Date:____________________________ Date:____________________________
Witnesses: Witnesses:
_________________________________ _________________________________
_________________________________ _________________________________
MOBIL OIL CORPORATION MOBIL OIL EXPLORATION & PRODUCING
SOUTHEAST INC.
By:______________________________ By:______________________________
Its: Attorney-in-Fact Its: Attorney-in-Fact
Date:____________________________ Date:____________________________
Attest: Attest:
_________________________________ _________________________________
Assistant Secretary Assistant Secretary
Witnesses:
_________________________________ _________________________________
_________________________________ _________________________________
MOBIL EXPLORATION & PRODUCING U.S.
INC. ACKNOWLEDGING AND ACCEPTING ITS
RIGHTS AND OBLIGATIONS PURSUANT TO
ARTICLES 5.1, 8.9 AND 8.10.
By:________________________________
Its: Attorney-in-Fact
Date:______________________________
Attest:
___________________________________
Assistant Secretary
Witnesses:
___________________________________
___________________________________
* * * * *
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on
____________________________________, 1995 by
__________________________________________________________________________
________ as ________________________ of
________________________________________________________, a _____________
corporation, on behalf of said corporation.
___________________________________________________
Notary Public, State of Texas
My Commission Expires:
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on
____________________________________, 1995 by
__________________________________________________________________________
________ as ________________________ of
________________________________________________________, a _____________
corporation, on behalf of said corporation.
___________________________________________________
Notary Public, State of Texas
My Commission Expires:
on.
___________________________________________________
Notary Public, State of ____________________
My Commission Expires:
STATE OF __________
COUNTY OF ____________
This instrument was acknowledged before me on
____________________________________, 1995 by
__________________________________________________________________________
________ as ________________________ of
________________________________________________________, a _____________
corporation, on behalf of said corporation.
___________________________________________________
Notary Public, State of ____________________
My Commission Expires:
* * * * *
ACKNOWLEDGMENTS
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
ACKNOWLEDGMENT
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
ACKNOWLEDGMENT
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
-----------------------------------------------------------------------------
EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT CERTAIN ALLEGHENY OPERATING AGREEMENT
EFFECTIVE MAY 1, 1995 BETWEEN ENSERCH EXPLORATION, INC., READING & XXXXX
DEVELOPMENT CO., MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC..
WORKING INTERESTS OF THE PARTIES AND REPRESENTATIVES
I. WORKING INTERESTS OF THE PARTIES:
XXXXX XXXXXX XXXXX 000 (XXX-X 15548)
XXXXX XXXXXX XXXXX 000 (XXX-X 15550)
XXXXX XXXXXX XXXXX 000 (XXX-X 15566)
XXXXX XXXXXX XXXXX 000 (XXX-X 15567)
XXXXX XXXXXX XXXXX 000 (XXX-X 15568)
XXXXX XXXXXX XXXXX 000 (XXX-X 15570)
XXXXX XXXXXX XXXXX 000 (XXX-X 15571)
XXXXX XXXXXX XXXXX 000 (XXX-X 15572)
GREEN CANYON BLOCK 302 (OCS-G 15573)
WORKING INTERESTS IN THE ABOVE BLOCKS ARE OWNED AS FOLLOWS:
ENSERCH EXPLORATION, INC.------------------------------------------- 40%
MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC.-------------------- 40%
READING & XXXXX DEVELOPMENT CO.------------------------------------- 20%
100%
AS TO THE FOLLOWING LISTED BLOCKS, WORKING INTERESTS ARE SET FORTH BELOW:
XXXXX XXXXXX XXXXX 000 (XXX-X 13696)
XXXXX XXXXXX XXXXX 000 (XXX-X 8000)
XXXXX XXXXXX XXXXX 000 (XXX-X 8005)
XXXXX XXXXXX XXXXX 000 (XXX-X 7049)
XXXXX XXXXXX XXXXX 000 (XXX-X 8006)
XXXXX XXXXXX XXXXX 000 (XXX-X 8876)
XXXXX XXXXXX XXXXX 000 (XXX-X 8010)
XXXXX XXXXXX XXXXX 000 (XXX-X 13171)
XXXXX XXXXXX XXXXX 000 (XXX-X 8012)
ENSERCH EXPLORATION, INC.-------------------------------------------- 40%
MOBIL OIL CORPORATION------------------------------------------------ 40%
READING & XXXXX DEVELOPMENT CO.-------------------------------------- 20%
100%
AS TO GREEN CANYON 209 (OCS-G 8504) WORKING INTERESTS ARE OWNED AS
FOLLOWS:
AMOCO PRODUCTION COMPANY------------------------------------------ 33.33%
ENSERCH EXPLORATION, INC.----------------------------------------- 26.67%
MOBIL OIL CORPORATION--------------------------------------------- 26.67%
READING & XXXXX DEVELOPMENT CO.---------------------------------- 13.33%
100.00%
II. DESIGNATED REPRESENTATIVES OF THE PARTIES:
ENSERCH EXPLORATION, INC.
0000 XXXXXXXXXX XXXXXX, XXXXX 0000
XXXXXX, XXXXX 00000
ATTN: XX. X.X. XXXXX - REGIONAL DIRECTOR
TELEPHONE: (000) 000-0000
TELECOPIER: (000) 000-0000
MOBIL EXPLORATION & PRODUCING U.S. INC.
0000 XXXXXXX XXXXXXXX
XXX XXXXXXX, XXXXXXXXX 00000
ATTN: XX. X.X. XXXXX - PROJECT MANAGER FOR JOINT VENTURE RELATIONS
TELEPHONE: (000) 000-0000
TELECOPIER: (000) 000-0000
READING & XXXXX DEVELOPMENT CO.
000 XXXXXXXXXXXX, XXXXX 000
XXXXXXX, XXXXX 00000
ATTN: XX. X.X. XXXXXXX - PRESIDENT
TELEPHONE: (000) 000-0000
TELECOPIER: (000) 000-0000
-----------------------------------------------------------------------------
EXHIBIT "A-1"
ATTACHED TO AND MADE A PART OF THAT CERTAIN ALLEGHENY OPERATING AGREEMENT
EFFECTIVE MAY 1, 1995 BETWEEN ENSERCH EXPLORATION, INC., READING & XXXXX
DEVELOPMENT CO., MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC..
CONTRACT AREA AND DESIGNATED PROSPECT OUTLINES
I. THE CONTRACT AREA SHALL BE COMPRISED OF THE FOLLOWING GREEN CANYON
LEASES: GREEN CANYON BLOCKS 120, 126, 209, 210, 213, 250, 251, 253,
254, 257, 258, 295, 297, 298, 299, 301, 302, 304, 341 AND 342.
II. DESIGNATED XXXXXXXXX
Xxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxx Xxxxxx Xxxxxx 209, 210,
253, 254, 297, 298, 299, 341 and
000
X.X. Xxxxx Xxxxx Xxxxxx Xxxxx 120
Xxxx Xxxxx Canyon Block 250, 251 and
295
Thebes Green Canyon 126
Isis Green Canyon 213, 257, 258, 301
and 302
-----------------------------------------------------------------------------
EXHIBIT "A-2"
Attached to and made a part of that certain Allegheny Operating Agreement
dated effective May 1, 1995, between Enserch Exploration Inc., Reading &
Xxxxx Development Co. and Mobil Oil Corporation.
DESCRIPTION OF LEASES
1. GREEN CANYON BLOCK 120
MMS Serial No. OCS-G-15548
Effective date of Lease: September 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 120, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
2. GREEN CANYON BLOCK 126
MMS Serial No. OCS-G-15550
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 126, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
3. GREEN CANYON BLOCK 209
MMS Serial No. OCS-G-8504
Effective date of Lease: June 1, 1986
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 209, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
4. GREEN CANYON BLOCK 210
MMS Serial No. OCS-G-13696
Effective date of Lease: July 1, 1992
Lessor: United States of America
Lessee: EP Operating Company, et al
Legal Description:
Block 210, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
5. GREEN CANYON BLOCK 213
MMS Serial No. OCS-G-8000
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 213, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
6. GREEN CANYON BLOCK 250
MMS Serial No. OCS-G-15566
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 250, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
7. GREEN CANYON BLOCK 251
MMS Serial No. OCS-G-15567
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 251, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
8. GREEN CANYON BLOCK 253
MMS Serial No. OCS-G-8005
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Amerada Xxxx, et al
Legal Description:
Block 253, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
9. GREEN CANYON BLOCK 254
MMS Serial No. OCS-G-7049
Effective date of Lease: June 1, 1984
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 254, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
10. GREEN CANYON BLOCK 257
MMS Serial No. OCS-G-15568
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 257, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
11. GREEN CANYON BLOCK 258
MMS Serial No. 8006
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 258, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
12. GREEN CANYON BLOCK 295
MMS Serial No. OCS-G-15570
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 295, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
13. GREEN CANYON BLOCK 297
MMS Serial No. OCS-G-8876
Effective date of Lease: June 1, 1987
Lessor: United States of America
Lessee: OPUBCO Resources, Inc. et al
Legal Description:
Block 297, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
14. GREEN CANYON BLOCK 298
MMS Serial No. OCS-G-8010
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 298, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
15. GREEN CANYON BLOCK 299
MMS Serial No. OCS-G-15571
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 299, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
16. GREEN CANYON BLOCK 301
MMS Serial No. OCS-G-15572
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 301, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
17. GREEN CANYON BLOCK 302
MMS Serial No. OCS-G-15573
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 302, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
18. GREEN CANYON BLOCK 341
MMS Serial No. OCS-G-13171
Effective date of Lease: May 1, 1991
Lessor: United States of America
Lessee: Exxon Company U.S.A.
Legal Description:
Block 341, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
19. GREEN CANYON BLOCK 342
MMS Serial No. 8012
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 342, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
SUBJECT TO OVERRIDING ROYALTY RESERVATIONS
Green Canyon Block 253 is subject to reservations of overriding royalty or
other burdens and encumbrances as set forth in the following instruments:
DATE: Effective March 1, 1995
ASSIGNOR: Shell Offhsore, Inc., et al
ASSIGNEE: Enserch Exploration, Inc.
ASSIGNING: All of Assignor's right, title and interest subject to a 5% of
8/8ths overriding royalty.
Green Canyon Blocks 209, 254, 297, 298 and 342 are subject to reservations
of overriding royalty as set forth in the following instruments:
DATE: Effective July 11, 1991, 7:00 a.m.
ASSIGNOR: Xxxx Petroleum Corporation
ASSIGNEE: Exxon Corporation
FILED: August 15, 1991
ASSIGNING: All of Assignor's right, title and interest subject to 1/9th of
8/8ths overriding royalty, proportionately reduced.
DATE: Effective May 31, 1993, 7:00 a.m.
ASSIGNOR: Xxxx Petroleum Corporation
ASSIGNEE: Exxon Corporation
FILED: October 26, 1993
ASSIGNING: All of Assignor's right, title and interest subject to 1/9th of
8/8ths overriding royalty, proportionately reduced
----------------------------------------------------------------------------
EXHIBIT "A-3"
ATTACHED TO AND MADE A PART OF THAT CERTAIN ALLEGHENY OPERATING AGREEMENT
EFFECTIVE MAY 1, 1995 BETWEEN ENSERCH EXPLORATION, INC., READING & XXXXX
DEVELOPMENT CO., MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC..
OPERATOR DESIGNATIONS
Prospect Blocks Operator
Allegheny Green Canyon Blocks 209, ENSERCH EXPLORATION, INC.
210, 253, 254, 297, 298,
299, 341 and 000
X.X. Xxxxx Xxxxx Xxxxxx Xxxxx 120 ENSERCH EXPLORATION, INC.
Xxxx Xxxxx Xxxxxx Xxxxx 000, XXXXXXX EXPLORATION, INC.
251 and 295
Thebes Green Canyon 126 MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC.
Isis Green Canyon 213, 257, MOBIL OIL EXPLORATION &
258, 301 and 302 PRODUCING SOUTHEAST INC.
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EXHIBIT B
Attached to and made a part of that certain Allegheny Operating Agreement
dated effective May 1, 1995, between Enserch Exploration, Inc., Reading &
Xxxxx Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc.
OFFSHORE INSURANCE PROVISIONS
I. Any and all times while operations are being conducted under this
Agreement, Operator shall carry or cause to be carried insurance for
the benefit of and at the expense of the Joint Account as follows:
1. Worker's Compensation Insurance to cover full liability under
the applicable State and Federal Worker's Compensation Laws.
Said insurance policy shall contain the following
endorsements:
a. Employee's Liability Insurance with a limit of
$1,000,000 for accidental injuries or deaths of one or
more employees as a result of one accident.
b. Coverage under U.S. Longshoremen's and Harbor Worker's
Compensation Act, including provisions of Outer
Continental Shelf Lands Act, if applicable.
c. Marine and Voluntary Compensation, including but not
limited to General Maritime Law, Xxxxx Act,
Transportation, Wages, Maintenance and Cure, subject to
a limit of $50,000,000.
2. Such insurance shall be carried for the benefit of the Parties
hereto and its cost shall be charged to the Joint Account. If
under the laws of the jurisdiction in which operations are
conducted, Operator is authorized to be a self-insurer as to
the foregoing, Operator may elect to be a self-insurer under
such laws and, in such event, Operator shall charge to the
Joint Account, in lieu of any premiums for such insurance, a
premium equivalent in an amount determined by applying manual
insurance rates to the payroll.
II. It is specifically understood that Operator shall have no obligation
to carry any other insurance for the benefit of the Joint Account
unless mutually agreed in writing by all Parties. Any Party may
individually, at its own expense, acquire additional insurance as it
desires; however, any such additional insurance shall contain waiver
or subrogation rights in favor of the remaining Parties hereto.
III. Operator shall make a good faith effort to require third-party
contractors performing work on the Joint Property to carry such
insurance and in such amount as Operator shall deem necessary. It
is recognized in the industry that there are certain contractors and
service companies whose services are necessary to carry out
operations contemplated by the Parties, who, as a matter of policy
or legal interpretation refuse contractually to indemnify and/or
carry any insurance indemnifying lease owners. As to those
entities, Operator may waive any requirement of contractual
indemnity or insurance whatsoever.
IV. If Non-Consent Operations are conducted under the terms of this
Agreement, the cost of insurance requirements hereunder in regard to
such operations, as well as all losses, liabilities, and expenses
incurred as a result of such operations, shall be the burden of the
Parties participating therein.
V. With respect to insurance carried by Operator for the benefit of the
Joint Account hereunder, Operator shall cause the Non-Operators,
their respective parents, subsidiaries, Affiliates, insurers and
underwriters to be named as additional insureds thereunder and also
cause a waiver of subrogation to be granted by the insurance company
or underwriter in favor of the Non-Operators, their respective
parents, subsidiaries, Affiliates, insurers and underwriters with
respect to such insurance coverage.
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ADDENDUM TO EXHIBIT "C"
XXXXX ACCOUNTING PROCEDURES
ADDITIONS:
1) Salaries of First Level Supervisors employed for the benefit of the
Joint Property in the conduct of Joint Operations. First Level
Supervisors are individuals at the lowest level of the organization
who have supervision over the day to day operations of the Joint
Property. Designation of an individual as a First Level Supervisor
shall not be based on title or location but rather on the functions
performed. The inclusion of a First Level Supervisor as a direct
charge to the Joint Account reflects the cost of the immediate
supervisor responsible for the daily supervision of the Operator's
field employees and contract labor, which are directly employed on
the Joint Property in the conduct of Joint Operations.
2) In such event, Operator shall charge to the Joint Account,
in lieu of any premiums for such insurance, a premium equivalent
in an amount determined by applying manual insurance rates to
the payroll.
3) Costs incurred for the benefit of the Joint Property and
applicable to the Joint Operations which arise from compliance
with governmental or regulatory requirements or to protect the
Joint Property from potential environmental liability. Such
costs may include surveys of an ecological or archaeological
nature. Also, such costs may include expenditures to provide or
have available pollution containment and removal equipment, plus
the actual cost of control and clean up of hazardous spills as
required by applicable laws and regulations.
4) No costs incurred beyond the Shore Base Facility shall be
charged as direct charge unless such charges are specifically
covered by items 1 through 14 above. This exclusion does not
cover items covered by the Integrated Project Team Accounting
described in Addendum, Item No. 5.
Expenditures or services provided by Non-Operator(s) which are
of direct benefit the Joint Account and requested by the
Operator will be billed by the Non-Operator(s) to the Operator
on a 100% basis. Operator will xxxx back Non-Operator(s) for
their proportional share of these costs.
5) INTEGRATED PROJECT TEAM ACCOUNTING
a. Services Rendered by Employees of Participants
All salaries, wages, payroll burden and Personal Expenses
of management, supervisory, technical and other personnel
who are assigned to the Integrated Project Team (as
defined in Exhibit "G") ("IPT') and engaged in project
management, design, construction and installation shall be
charged direct regardless of location ("Qualified Costs").
A pro rata share of salaries, wages, payroll burden and
Personal Expenses of part-time technical personnel
assigned to the IPT may be charged direct as Qualified
Costs if the individual's time devoted to the project
totals at least one full day during a given month.
Qualified Costs incurred by Non-Operators will be billed
to the Operator on or before the 20th day of the month
following the month in which the costs were incurred. The
billing for such Qualified Costs shall include time
sheets, copies of expense reports and sufficient detail to
support the charge. Operator will remit payment to the
Non-Operators for these costs and charge the total amount
to the Joint Account.
A pro rata share of salaries will be charged to the Joint
Account as Qualified Costs based on actual days worked
only when such time totals at least one day or more per
month devoted to the project. Payroll burden and Personal
Expenses associated with this labor will be charged to the
Joint Account consistent with the provisions of Exhibit
"C", Section II, Paragraph 2, Direct Charges - Labor and
Paragraph 3, Direct Charges - Employee Benefits.
The defined term "Personal Expenses" shall include
reasonable travel, accommodation, per diem, meals, and
other reimbursable costs incurred by personnel whose
salaries are chargeable to the Joint Account. Personal
Expenses shall be subject to the approval of the Project
Manager. Relocation costs shall not be chargeable to the
Joint Account.
Each participant shall maintain auditable records to
support any charges made by it to the Joint Account and
shall be subject to the audit requirement provided in
Section I, Paragraph 5 of this Exhibit "C" as to such
charges. Auditable records shall include time sheets and
expense account reports for personnel charged to the Joint
Account, basis for calculation of payroll burden and
copies of third-party invoices.
b. Other Services Provided by Operator's or Non-Operators'
Employees or Affiliates
Support staff employed by the Operator or Non-Operator, or
Affiliate controlled by the Operator or Non-Operator, may
provide technical services for the benefit of the IPT.
Without limiting the foregoing, examples of such technical
services include computer assisted drafting and computer
services, prior to incurring such costs, the Project
Manager shall recommend the expenditure to the Owners'
Committee ("Recommendation"). The Recommendation shall be
in writing and shall include a description of the service
to be provided, the time period during which the service
will be rendered and the estimated cost. The
Recommendation shall include a comparison of the estimated
cost of the expenditure with the estimated cost of similar
services provided by third party vendors. If an all
inclusive standard rate is to be charged, such rate shall
not be greater than the rate customarily charged
internally by the provider of the service to its
Affiliates. Approval of the Recommendation shall require
the unanimous consent of the Owners Committee. If
unanimous consent is obtained, the costs covered by the
Recommendation shall be directly charged to the Joint
Account. If unanimous consent is not obtained, the
Project Manager shall withdraw the Recommendation and
acquire the service from third party vendors.
Affiliates shall maintain auditable records to support all
charges made by it to the Joint Account and as to such
charges shall be subject to the same audit requirements
provided for Operator's charges in Section I, Paragraph 5
of this Exhibit "C".
c. Third-Party Costs
All third party expenditures incurred by the Operator for
the direct benefit of the project regardless of location
will be direct charged to the Joint Account. Third party
expenditures shall include, but not be limited to:
- Contractors, consultants and service companies
- Fabrication, construction and installation
activities and associated cost
- Specialized equipment, materials, testing or other
services (including software and specialized
computer applications)
- Research and development, prototype studies, design
and development work
- Conceptual work/studies
- On-site construction representatives and inspectors
and associated cost
- Drilling design and development
d. Overhead Application
The Major Construction rates provided in Exhibit "C,"
Section III, 2. shall cover the cost of Operator's
personnel above the Project Manager level and Operator's
other administrative functions and associated costs
indirectly serving the project including, but not limited
to, the cost for accounting, services personnel, treasury,
administrative, senior management and other support
services provided by the Operator. Such rates shall be
applied to the total cost (gross) of the applicable fixed
asset which is the subject of the Major Construction and
which is charged to the Joint Account. Total cost shall
include the Qualified Costs of the IPT, insofar as such
costs are associated with such fixed asset.
If the Project Manager elects to locate the IPT at the
office of a Non Operating Party, the Project Manager and
Non-Operator shall agree upon a rental rate to charge for
providing a work location for the IPT. One hundred
percent (100%) of the rent will be invoiced by the Non-
Operator to the Operator. The Operator shall not be
entitled to charge overhead on Non-Operator's office
rental charges to the Joint Account.
6) The pricing of material transfers to and/or from the Joint
Property will be determined by utilizing the Computerized
Equipment Pricing System (CEPS), historical price multiplier,
pricing on application or fair market value. The pricing method
selected by the Operator will be applied consistently to all
material transfer transactions.
A "Direct Purchase" occurs when the Operator contracts with a
third party for the acquisition of materials for a specific well
site or location. Direct Purchases shall charged to the Joint
Account at the price paid by the Operator after deduction of all
discounts received. Material provided by the Operator under
"vendor stocking programs, where the initial use is for a joint
property and title of the material does not pass from the vendor
until usage, is considered a Direct Purchase. If material is
found to be defective or is returned to the vendor for any other
reason, the Joint Account shall be credited when adjustments
have been received by the Operator from the manufacturer,
distributor or agent.
"Tubular substitution" is defined where higher-than-specification
grade or size tubulars are charged to the Joint Account from
Operator's inventory. The Operator is entitled to charge the
Joint Account at an equivalent price of the well design specifi-
cation tubulars.
7) 1.Directed Inventories
With an interval of not less than 5 years, physical inventories
shall be performed by the Operator upon written notification of
a majority in working interest of the Non-Operators.
8) Prior to the Operator entering into new contracts with Third
Parties to acquire helicopter, ship transport or other ongoing
support services ("Services"), and prior to the Operator
contracting with Third Parties for Shore Base Facilities ("Shore
Base Facilities"), Operator or Non-Operator may propose sharing
their existing support Services or Shore Base Facilities
("Sharing Proposal"). The Sharing Proposal shall be made to the
Owners' Committee and shall include a description of the
Services or Shore Base Facilities to be provided, the duration
of the sharing arrangement and the estimated actual cost to
provide such Services or Shore Base Facilities. It is the
intention of this section that Sharing Proposals be based on a
reasonable estimate of the actual cost to provide the Service or
Shore Base Facilities for use by the Joint Account and that such
proposal not be based on the rate that a Third Party might
charge for comparable Services or Shore Base Facilities.
Approval of the proposal shall require the unanimous consent of
the Owners' Committee.
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EXHIBIT "D"
GAS BALANCING AGREEMENT ("AGREEMENT')
ATTACHED TO AND MADE PART OF THAT CERTAIN
OPERATING AGREEMENT DATED EFFECTIVE MAY 1, 1995, BETWEEN
ENSERCH EXPLORATION, INC., READING & XXXXX DEVELOPMENT CO.,
MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC.
("OPERATING AGREEMENT")
1. DEFINITIONS
The following definitions shall apply to this Agreement:
1.01 "Arm's Length Agreement" shall mean any gas sales agreement
with a unaffiliated purchaser or any gas sales agreement with
an affiliated purchase where the sales price represents the
current value as published in an industry publication such as
Inside F.E.R.C. or such other future publication as maybe
applicable.
1.02 "Index Price" shall mean the average of spot sales prices for
gas during any specific month as published Inside F.E.R.C.
first of the month publication for the applicable downstream
pipeline(s) to which the gathering pipelines deliver.
1.03 "Balancing Area" shall mean all of the acreage and depths
subject to the Operating Agreement.
1.04 "Full Share of Current Production" shall mean the Percentage
Interest of each Party in the Gas actually produced from the
Balancing Area during each month.
1.05 "Gas" shall mean all hydrocarbons produced or producible from
the Balancing Area, whether from a well classified as an oil
well or gas well by the regulatory agency having jurisdiction
in such matters, which are or may be made available for sale
or separate disposition by the Parties, excluding oil,
condensate and other liquids recovered by field equipment
operated for the joint account. "Gas" does not include gas
used in joint operations, such as for fuel, recycling or
reinjection, or which is vented or lost prior to its sale or
delivery from the Balancing Area.
1.06 "Makeup Gas" shall mean any Gas taken by an Underproduced
Party from the Balancing Area in excess of its Full Share of
Current Production, whether pursuant to Section 3.3 or Section
4.1 hereof.
1.07 "Mcf" shall mean one thousand cubic feet. A cubic foot of Gas
shall mean the volume of gas contained in one cubic foot of
space at sixty degrees Fahrenheit, 14.73 pounds per square
inch absolute (PSIA) and having a specific gravity of 1.00.
1.08 "MMBtu" shall mean one million British Thermal Units. A
British Thermal Unit shall mean the quantity of heat required
to raise one pound avoirdupois of pure water from 58.5 degrees
Fahrenheit to 59.5 degrees Fahrenheit at a constant pressure
of 14.73 pounds per square inch absolute.
1.09 "Operator" shall mean the individual or entity designated
under the terms of the Operating Agreement or, in the event
this Agreement is not employed in connection with an operating
agreement, the individual or entity designated as the operator
of the well(s) located in the Balancing Area.
1.10 "Overproduced Party" shall mean any Party having taken a
greater quantity of Gas from the Balancing Area than the
Percentage Interest of such Party in the cumulative quantity
of all Gas produced from the Balancing Area.
1.11 "Overproduction" shall mean the cumulative quantity of Gas
taken by a Party in excess of its Percentage Interest in the
cumulative quantity of Gas produced from the Balancing Area.
1.12 "Party" shall mean those individuals or entities subject to
this Agreement, and their respective heirs, successors,
transferees and assigns.
1.13 "Percentage Interest" shall mean the percentage or decimal
interest of each Party in the Gas produced from the Balancing
Area pursuant to the Operating Agreement covering the
Balancing Area.
1.14 "Royalty" shall mean payments on production of Gas from the
Balancing Area to all owners of royalties, overriding
royalties, production payments or similar interests.
1.15 "Underproduced Party" shall mean any Party having taken a
lesser quantity of Gas from the Balancing Area than the
Percentage Interest of such Party in the cumulative quantity
of all Gas produced from the Balancing Area.
1.16 "Underproduction" shall mean the deficiency between the
cumulative quantity of Gas taken by a Party and its Percentage
Interest in the cumulative quantity of all Gas produced from
the Balancing Area.
1.17 "Winter Period" shall mean the months November and December in
one calendar year and the months of January and February in
the succeeding calendar year.
2. BALANCING AREA
2.1 If this Agreement covers more than one Balancing Area, it
shall be applied as if each Balancing Area were covered by
separate but identical agreements. All balancing hereunder
shall be on the basis of Gas taken from the Balancing Area
measured in MMBtus.
2.2 In the event that all or part of the Gas deliverable from a
Balancing Area is or becomes subject to one or more maximum
lawful prices, any Gas not subject to price controls shall
be considered as produced from a single Balancing Area and
Gas subject to each maximum lawful price category shall be
considered produced from a separate Balancing Area.
3. RIGHT OF PARTIES TO TAKE GAS
3.1 Each Party desiring to take Gas will notify the Operator of
the volume nominated, the name of the transporting pipeline
and the pipeline contract number (if available) and meter
station relating to such delivery, sufficiently in advance
for the Operator, acting with reasonable diligence, to meet
all nomination and other requirements. Operator is
authorized to deliver the volumes so nominated and confirmed
(if confirmation is required) to the transporting pipeline
in accordance with the terms of this Agreement.
3.2 Each Party shall make a reasonable good faith effort to take
its Full Share of Current Production each month to the
extent that such production is required to maintain leases
in effect, to protect the producing capacity of a well or
reservoir, to preserve correlative rights, or to maintain
oil production.
3.3 When a Party fails for any reason to take its Full Share of
Current Production (as such Share may be reduced by the
right of the other Parties to make up for Underproduction as
provided herein), the other Parties shall be entitled to
take any Gas which such Party fails to take. To the extent
practicable, such Gas shall be made available initially to
each Underproduced Party in the proportion that its
Percentage Interest in the Balancing Area bears to the total
Percentage Interest of all Underproduced Parties desiring to
take such Gas. If all such Gas is not taken by the
Underproduced Parties, the portion not taken shall then be
made available to the other Parties in the proportion that
their respective Percentage Interest in the Balancing Area
bears to the total Percentage Interest of such Parties.
3.4 All Gas taken by a Party in accordance with the provisions
of this Agreement, regardless of whether such Party is
underproduced or overproduced, shall be regarded as Gas
taken for its own account with title thereto being in such
taking Party.
3.5 Notwithstanding the provisions of Section 3.3 hereof, no
Overproduced Party shall be entitled in any month to take
any Gas in excess of three hundred percent (300%) of its
Percentage Interest of the Balancing Area's then-current
Maximum Monthly Availability; provided, however, that this
limitation shall not apply to the extent that it would
preclude production that is required to maintain leases in
effect, to protect the producing capacity of a well or
reservoir, to preserve correlative rights, or to maintain
oil production. "Maximum Monthly Availability" shall mean
the maximum average monthly rate of production at which Gas
can be delivered from the Balancing Area, as determined by
the Operator, considering the maximum efficient well rate
for each well within the Balancing Area, the maximum
allowable(s) set by the appropriate regulatory agency, mode
of operation, production facility capabilities and pipeline
pressures.
3.6 In the event that a Party fails to make arrangements to take
its Full Share of Current Production required to be produced
to maintain leases in effect, to protect the producing
capacity of a well or reservoir, to preserve correlative
rights, or to maintain oil production, the Operator may sell
any part of such Party's full share of Current Production
that such Party fails to take for the account of such Party
and render to such Party, on a current basis, the full
proceeds of the sale less any reasonable marketing,
compression, treating, gathering or transportation costs
incurred directly in connection with the sale of such Full
Share of Current Production. In making the sale
contemplated herein, the Operator shall be obligated only to
obtain such price and conditions for the sale as are
reasonable under the circumstances and shall not be
obligated to share any of its markets. Any such sale by
Operator under the terms hereof shall be only for such
reasonable periods of time as are consistent with the
minimum needs of the industry under the particular
circumstances, but in no event for a period in excess of one
year. Notwithstanding the provisions of Article 3.4 hereof,
Gas sold by Operator for a Party under the provisions hereof
shall be deemed to be Gas taken for the account of such
Party.
4. IN-KIND BALANCING
4.1 Effective the first day of any calendar month following at
least thirty (30) days' prior written notice to the
Operator, any Underproduced Party may begin taking, in
addition to its Full Share of Current Production and any
Makeup Gas taken pursuant to Section 3.3 of this Agreement,
a share of current production determined by multiplying
fifty percent (50%) of the Full Shares of Current Production
of all Overproduced Parties by a fraction, the numerator of
which is the Percentage Interest of such Underproduced Party
and the denominator of which is the total of the Percentage
Interests of all Underproduced Parties desiring to take
Makeup Gas. In no event will an Overproduced Party be
required to provide more than fifty percent (50%) of its
Full Share of Current Production for Makeup gas. The
Operator will promptly notify all Overproduced Parties of
the election of an Underproduced Party to begin taking
Makeup Gas. However, it is further provided that an
Underproduced Party shall not be entitled to take or sell
Make-up Gas during the Winter Period unless such
Underproduced Party shall have taken or sold during the
preceding eight months (unless excused by Force Majeure
events on the gathering pipeline from the Balancing Area) a
total amount of Gas that was not less than its full share of
the Gas produced during such period.
4.2 Notwithstanding the provisions of Section 4.1, no
Overproduced Party will be required to provide more than
twenty-five percent (25%) of its Full Share of Current
Production for Makeup Gas during the Winter Period.
4.3 Notwithstanding any other provision of this Agreement, at
such time and for so long as Operator, or (insofar as
concerns production by the Operator) any Underproduced
Party, determines in good faith that an Overproduced Party
has produced all of its share of the ultimately recoverable
reserves in the Balancing Area, such Overproduced Party may
be required to make available for Makeup Gas, upon the
demand of the Operator or any Underproduced Party, up to one
hundred percent (100%) of such Overproduced Party's Full
Share of Current Production.
5. STATEMENT OF GAS BALANCES
5.1 The Operator will maintain appropriate accounting on a
monthly and cumulative basis of the volumes of Gas that each
Party is entitled to receive and the volumes of Gas actually
taken or sold for each Party's account. Within forty-five
(45) days after the month of production, the Operator will
furnish a statement for such month showing (1) each Party's
Full Share of Current Production, (2) the total volume of
Gas actually taken or sold for each Party's account, (3) the
difference between the volume taken by each and that Party's
Full Share of Current Production, (4) the Overproduction or
Underproduction of each Party, and (5) other data as
recommended by the provisions of the Council of Petroleum
Accountants Societies Bulletin No. 24, as amended or
supplemented hereafter. Each Party taking Gas will promptly
provide to the Operator any data required by the Operator
for preparation of the statements required hereunder.
5.2 If any Party fails to provide the data required herein for
four (4) consecutive production months, the Operator, or
where the Operator has failed to provide data, another
Party, may give formal written notice of a demand for such
data. If the non-reporting Party fails or refuses to
provide such data within thirty (30) days of its receipt
of the demand, then the notifying Party shall have the
right to audit the production and Gas sales and
transportation volumes of the non-reporting Party. Such
audit shall be conducted only after reasonable notice and
during normal business hours in the office of the Party
whose records are being audited. All costs associated
with such audit will be charged to the account of the
Party failing to provide the required data.
6. PAYMENTS ON PRODUCTION
6.1 Each Party taking Gas shall pay or cause to be paid all
production and severance taxes due on all volumes of Gas
actually taken by such Party.
6.2 Each Party shall pay or cause to be paid Royalty due with
respect to Royalty owners to whom it is accountable based on
the volume of Gas actually taken for its account.
6.3 In the event that any governmental authority requires that
Royalty payments be made on any other basis than that
provided for in this Section 6, each Party agrees to make
such Royalty payments accordingly, commencing on the
effective date required by such governmental authority, and
the method provided for herein shall be thereby superseded.
7. CASH SETTLEMENTS
7.1 Upon the earlier of the plugging and abandonment of the
last producing interval in the Balancing Area, the
termination of the Operating Agreement or any pooling or
unit agreement covering the Balancing Area, or at any time
no Gas is taken from the Balancing Area for a period of
twelve (12) consecutive months, any Party may give written
notice calling for cash settlement of the Gas production
imbalances among the Parties. Such notice shall be given
to all Parties in the Balancing Area.
7.2 Within sixty (60) days after the notice calling for cash
settlement under Section 7.1, the Operator will distribute
to each Party a Final Gas Settlement Statement detailing
the quantity of Overproduction owed by each Overproduced
Party to each Underproduced Party and identifying the
month to which such Overproduction is attributed, pursuant
to the methodology set out in Section 7.4.
7.3 Within sixty (60) days after receipt of the Final Gas
Settlement Statement, each Overproduced Party will pay to
each Underproduced Party entitled to settlement the
appropriate cash settlement, accompanied by appropriate
accounting detail. At the time of payment, the
Overproduced Party will notify the Operator of the Gas
imbalance settled by the Overproduced Party's payment.
7.4 The amount of the cash settlement for Overproduction will
be based on the Index Price (without regard to proceeds
attributable to liquid hydrocarbons which may have been
extracted from the Overproduction) less appropriate
deductions listed in section 7.5 under an Arm's Length
Agreement for the Gas taken from time to time by the
Overproduced Party in excess of the Overproduced Party's
Full Share of Current Production. Any Makeup Gas taken by
the Underproduced Party prior to monetary settlement
hereunder will be applied to offset Overproduction
chronologically in the order of accrual.
7.5 The values used for calculating the cash settlement under
Section 7.4, triggered by the notice of 7.1, will be based
on the Index Price after deducting any production or
severance taxes paid and any Royalty actually paid by the
Overproduced Party to an Underproduced Party's Royalty
owner(s), to the extent said payment amounted to a
discharge of said Underproduced Party's Royalty
obligation, as well as any reasonable marketing,
compression, treating, gathering or transportation costs
incurred directly in connection with the sale of the
Overproduction.
7.6 To the extent the Overproduced Party did not sell all
Overproduction under an Arm's Length Agreement, or in the
event that no sales under Arm's Length Agreements were
made during any such month, the cash settlement for such
month will be based on the Index Price (without regard to
proceeds attributable to liquid hydrocarbons which have
been extracted from the Overproduction). In either event,
the amount of cash settlement will be based on the Index
Price after deducting any production or severance taxes
paid and any Royalty actually paid by the Overproduced
Party to an Underproduced Party's Royalty owner(s), to the
extent said payment amounted to a discharge of an
Underproduced Party's Royalty obligation and any
reasonable marketing, compression, treating, gathering or
transportation costs connected with the sale of the
Overproduction.
7.7 Interest compounded at the rate specified in Exhibit "C"
of the Operating Agreement to which this Gas Balancing
Agreement is attached or the maximum lawful rate of
interest applicable to the Balancing Area, whichever is
less, will accrue for all amounts due under Section 7.1,
beginning the first day following the date payment is due
pursuant to Section 7.3. Such interest shall be borne by
the Operator or any Overproduced Party in the proportion
that their respective delays beyond the deadlines set out
in Sections 7.2 and 7.3 contributed to the accrual of the
interest.
7.8 In lieu of the cash settlement required by Section 7.3, an
Overproduced Party may deliver to the Underproduced Party
an offer to settle its Overproduction in-kind and at such
rates, quantities, time and sources as may be agreed upon
by the Underproduced Party. If the Parties are unable to
agree upon the manner in which such in-kind settlement gas
will be furnished within sixty (60) days after the
Overproduced Party's offer to settle in-kind, which period
may be extended by agreement of said Parties, the
Overproduced Party shall make a cash settlement as
provided in Section 7.3. The making of an in-kind
settlement offer under this Section will not delay the
accrual of interest on the cash settlement should the
Parties fail to reach agreement on an in-kind settlement.
7.9 At any time during the term of this Agreement, any
Overproduced Party may, in its sole discretion, make cash
settlement(s) with the Underproduced Parties covering all
or part of its outstanding Gas imbalance, provided that
such settlements must be made with all Underproduced
Parties proportionately based on the relative imbalance of
the Under-produced Parties, and provided further that such
settlement may not be made more often than once every
twenty-four (24) months. Such settlements will be
calculated in the same manner provided above for final
cash settlements. The Overproduced Party will provide
Operator a detailed accounting of any such cash settlement
within thirty (30) days after the settlement is made.
8. TESTING
8.1 NOT APPLICABLE
9. OPERATING COSTS
Nothing in this Agreement shall change or affect any Party's
obligation to pay its proportionate share of all costs and
liabilities incurred in operations on or in connection with the
Balancing Area, as its share thereof is set forth in the
Operating Agreement, irrespective of whether any Party is at any
time selling and using Gas or whether such sales or use are in
proportion to its Percentage Interest in the Balancing Area.
10. LIQUIDS
The Parties shall share proportionately in and own all liquid
hydrocarbons recovered with Gas by field equipment operated for
the joint account in accordance with their Percentage Interests
in the Balancing Area.
11. AUDIT RIGHTS
Notwithstanding any provision in this Agreement or any other
agreement between the Parties hereto, and further
notwithstanding any termination or cancellation of this
Agreement, for a period of two (2) years from the end of the
calendar year in which any information to be furnished under
Section 5 or 7 hereof is supplied, any Party shall have the
right to audit the records of any other Party regarding
quantity, including but not limited to information regarding
Btu-content. Any Underproduced Party shall have the right for a
period of two (2) years from the end of the calendar year in
which any cash settlement is received pursuant to Section 7 to
audit the records of any Overproduced Party as to all matters
concerning values, including but not limited to information
regarding prices and disposition of Gas from the Balancing Area.
Any such audit shall be conducted at the expense of the Party or
Parties desiring such audit, and shall be conducted, after
reasonable notice, during normal business hours in the office of
the Party whose records are being audited. Each Party hereto
agrees to maintain records as to the volumes and prices of Gas
sold each month and the volumes of Gas used in its own
operations, along with the Royalty paid on any such Gas used by
a Party in its own operations. The audit rights provided for in
this Section 11 shall be in addition to those provided for in
Section 5.2 of this Agreement.
12. MISCELLANEOUS
12.1 As between the Parties, in the event of any conflict
between the provisions of this Agreement and the
provisions of any gas sales contract, or in the even of
any conflict between the provisions of this Agreement and
the provision of the Operating Agreement, the provisions
of this Agreement shall govern.
12.2 Each Party agrees to defend, indemnify and hold harmless
all other Parties from and against any and all liability
for any claims, which may be asserted by any third party
which now or hereafter stands in a contractual
relationship with such indemnifying Party and which arise
out of the operation of this Agreement or any activities
of such indemnifying Party under the provisions of this
Agreement, and does further agree to save the other
Parties harmless from all judgments or damages sustained
and costs incurred in connection therewith.
12.3 Except as otherwise provided in this Agreement, Operator
is authorized to administer the provisions of this
Agreement, but shall have no liability to the other
Parties for losses sustained or liability incurred which
arise out of or in connection with the performance of
Operator's duties hereunder, except such as may result
from Operator's gross negligence or willful misconduct.
Operator shall not be liable to any Underproduced Party
for the failure of any Overproduced Party (other than
Operator) to pay any amounts owed pursuant to the terms
hereof.
12.4 This Agreement shall remain in full force and effect for
as long as the Operating Agreement shall remain in force
and effect as to the Balancing Area, and thereafter until
the Gas accounts between the Parties are settled in full,
and shall inure to the benefit of and be binding upon the
Parties hereto, and their respective heirs, successors,
legal representatives and assigns, if any. The Parties
hereto agree to give notice of the existence of this
Agreement to any successor in interest of any such Party
and to provide that any such successor shall be bound by
this Agreement, and shall further make any transfer of any
interest subject to the Operating Agreement, or any part
thereof, also subject to the terms of this Agreement.
12.5 Unless the context clearly indicates otherwise, words used
in the singular include the plural, the plural includes
the singular, and the neuter gender includes the masculine
and the feminine.
12.6 This Agreement shall bind the Parties in accordance with
the provision hereof, nothing herein shall be construed or
interpreted as creating any right in any person or entity
not a signatory hereto, or as being a stipulation in favor
of any such person or entity.
12.7 If contemporaneously with this Agreement becoming
effective, or thereafter any Party requests that any other
Party execute an appropriate memorandum or notice of this
Agreement in order to give third parties notice of record
of same and submits same for execution in recordable form,
such memorandum or notice shall be duly executed by the
Party to which such request is made and delivered promptly
thereafter to the Party making the request. Upon receipt,
the Party making the request shall cause the memorandum or
notice to be duly recorded in the appropriate real
property or other records affecting the Balancing Area.
12.8 In the event Internal Revenue Service regulations require
a uniform method of computing taxable income by all
Parties, each Party agrees to compute and report income to
the Internal Revenue Service based on the quantity of Gas
taken for its account in accordance with such regulations,
insofar as same relate to sales method tax computations.
12.9 In the event pipeline penalties are assessed to any
Party(s) under this Agreement they will be settled under
the provisions as set forth in the Operating Agreement.
13. ASSIGNMENT AND RIGHTS UPON ASSIGNMENT
13.1 Subject to the provisions of Sections 13.2 and 13.3
hereof, and notwithstanding anything in this Agreement or
in the Operating Agreement to the contrary, if any Party
assigns (including any sale, exchange or other transfer)
any of its working interest in the Balancing Area when
such Party is an Underproduced or Overproduced Party, the
assignment or other act of transfer shall, insofar as the
Parties hereto are concerned, include all interest of the
assigning or transferring Party in the Gas, all rights to
receive or obligations to provide or take Makeup Gas and
all rights to receive or obligations to make any monetary
payment which may ultimately be due hereunder, as
applicable. Operator and each of the other Parties hereto
shall thereafter treat the assignment accordingly, and the
assigning or transferring Party shall look solely to its
assignee or other transferee for any interest in the Gas
or monetary payment that such Party may have or to which
it may be entitled and shall cause its assignee or other
transferee to assume its obligation hereunder.
13.2 Notwithstanding anything in this Agreement (including but
not limited to the provisions of Section 13.1 hereof) or
in the Operating Agreement to the contrary, and subject to
the provisions of Section 13.3 hereof, in the event an
Overproduced Party intends to sell, assign, exchange or
otherwise transfer any of its interest in a Balancing
Area, such Overproduced Party shall notify in writing the
other working interest owners who are Parties hereto in
such Balancing Area of such fact at least sixty (60) days
prior to closing the transaction. Thereafter, any
Underproduced Party may demand from such Overproduced
Party in writing, within thirty (30) days after receipt of
the Overproduced Party's notice, a cash settlement of its
Underproduction from the Balancing Area. The Operator
shall be notified of any such demand by an Underproduced
Party and of any cash settlement pursuant to this Section
13, and the Overproduction and Underproduction of each
Party shall be adjusted accordingly. Any cash settlement
pursuant to this Section 13 shall be paid by the
Overproduced Party on or before the earlier to occur (i)
of sixty (60) days after receipt of the Underproduced
Party's demand or (ii) at the closing of the transaction
in which the Overproduced Party sells, assigns, exchanges
or otherwise transfers its interest in a Balancing Area on
the same basis as otherwise set forth in Sections 7.3
through 7.6 hereof, and shall bear interest at the rate
set forth in Section 7.7 hereof, beginning sixty (60) days
after the Overproduced Party's sale, assignment, exchange
or transfer of its interest in the Balancing Area for any
amounts not paid. Provided, however, if any Underproduced
Party does not so demand such cash settlement of its
Underproduction from the Balancing Area, such
Underproduced Party shall look exclusively to the assignee
or other successor in interest of the Overproduced Party
giving notice hereunder for the satisfaction of such
Underproduced Party's Underproduction in accordance with
the provision of Section 13.1 hereof.
13.3 The provisions of this Section 13 shall not be applicable
in the event any Party mortgages its interest or disposes
of its interest by merger, reorganization, consolidation
or sale of substantially all of its assets to a subsidiary
or parent company, or to any company in which any parent
or subsidiary of such Party owns a majority of the stock
of such company.
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EXHIBIT "E"
Attached to and made a part of that certain Allegheny Operating Agreement
dated effective May 1, 1995, between Enserch Exploration, Inc., Reading &
Xxxxx Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc..
EQUAL EMPLOYMENT OPPORTUNITY PROVISION
During the performance of this contract, the Operator agrees as
follows:
1. The Operator will not discriminate against any employee or
applicant for employment because of race, color, religion, sex or national
origin. The Operator will take affirmative action to ensure that
applicants are employed and that employees are treated during employment,
without regard to their race, color, religion, sex or national origin.
Such action shall include, but not be limited to the following:
Employment, upgrading, demotion, or transfer, recruitment or recruitment
advertising; layoff or termination; rates of pay or other forms of
compensation; and selection for training, including apprenticeship. The
Operator agrees to post in conspicuous places, available to employees and
applicants for employment notices to be provided for the contracting
officer setting forth the provisions of this non-discrimination clause.
2. The Operator will, in all solicitations or advertisements for
employees placed by or on behalf of the Operator, state that all qualified
applicants will receive consideration for employment without regard to
race, color, religion, sex or national origin.
3. The Operator will send to each labor union or representative of
workers with which it has a collective bargaining agreement or other
contract or understanding, a notice to be provided by the agency
contracting officer, advising the labor union or workers' representative
of the Operator's commitments under Section 202 of Executive Order 11246
of September 24, 1965, and shall post copies of the notice in conspicuous
places available to employees and applicants for employment.
4. The Operator will comply with all provisions of Executive Order
11246 of September 24, 1965, and of the rules, regulations, and relevant
orders of the Secretary of Labor.
5. The Operator will furnish all information and reports required
by Executive Order 11246 of September 24, 1965, and by the rules,
regulations, and orders of the Secretary of Labor, or pursuant thereto,
and will permit access to its books, records, and accounts by the
contracting agency and the Secretary of Labor for purposes of
investigation to ascertain compliance with such rules, regulations, and
orders.
6. In the event of Operator's non-compliance with the non-
discrimination clauses of this contract or with any of such rules,
regulations, or orders, this contract may be canceled, terminated or
suspended in whole or in part and the Operator may be declared ineligible
for further Government contracts in accordance with procedures authorized
in Executive Order 11246 of September 24, 1965, and such other sanctions
may be imposed and remedies invoked as provided in Executive Order 11246
of September 24, 1965, or by rules, regulations, or order of the Secretary
of Labor, or as otherwise provided by law.
7. The Operator will include the provisions of paragraphs (1)
through (7) in every subcontract or purchase order unless exempted by
rules, regulations, or orders of the Secretary of Labor issued pursuant to
Section 204 of Executive Order 11246 of September 24, 1965, so that such
provisions will be binding upon each subcontractor or vendor. The
Operator will take such action with respect to any subcontract or purchase
order as the contracting agency may direct as a means of enforcing such
provisions including sanctions for non-compliance: Provided, however,
that in the event the Operator becomes involved in, or is threatened with,
litigation with a subcontractor or vendor as a result of such direction by
the contracting agency, the Operator may request the United States to
enter into such litigation to protect the interests of the United States.
Operator acknowledges that it may be required to file Standard Form
100 (EEO-1) promulgated jointly by the Office of Federal Contract
Compliance, the Equal Employment Opportunity Commission and Plans for
Progress with the appropriate agency within thirty (30) days of the date
of contract award if such report has not been filed for the current year
and otherwise comply with or file such other compliance reports as may be
required under Executive Order 11246, as amended and Rules and Regulations
adopted thereunder.
Operator further acknowledges that it may be required to develop a
written affirmative action compliance program as required by the Rules and
Regulations approved by the Secretary of Labor under authority of
Executive Order 11246 and supply Non-Operators with a copy of such program
if they so request.
CERTIFICATION OF NON-SEGREGATED FACILITIES
Operator assures Non-Operators that it does not and will not
maintain or provide for its employees any segregated facilities at any of
its establishments, and that it does not and will not permit its employees
to perform their services at any location, under its control, where
segregated facilities are maintained. For this purpose, it is understood
that the phrase "segregated facilities" includes facilities which are in
fact segregated on a basis of race, color, religion, or national origin,
because of habit, local custom or otherwise. It is further understood and
agreed that maintaining or providing segregated facilities for its
employees or permitting its employees to perform their services at any
location under its control where segregated facilities are maintained is a
violation of the equal opportunity clause required by Executive Order
11246 of September 24, 1965.
Operator further understands and agrees that a breach of the
assurance herein contained subjects it to the provisions of the Order at
41 CFR Chapter 60 of the Secretary of Labor dated May 21, 1968, and the
provisions of the equal opportunity clause enumerated contracts between
the United States of America and Non-Operators.
Whoever knowingly and willfully makes any false, fictitious or
fraudulent representation may be liable to criminal prosecution under 18
U.S.C. 1001.
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EXHIBIT "F"
Attached to and made a part of that certain Unit Operating Agreement dated
effective May 1, 1995, between Enserch Exploration, Inc., Reading & Xxxxx
Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc.
NEWS RELEASE GUIDELINES
The Parties hereby establish the following guidelines regarding the
issuing of a release to the news media concerning operations on any area
affected by the Agreement to which this Exhibit is attached.
Subject to Article 7.5 (News Releases) of the Agreement, no
release to the news media shall be made until all testing
(excluding flow testing) in a well is completed. Upon receipt
of all such final test results which indicates a commercial
discovery, Operator will prepare a release using the following
News Release Content Guidelines:
1. Name of Well
2. Location of Well by Area, Block and Adjacent State
3. Bonus Price and Sale Date
4. Tested lnterval(s), if appropriate
5. Test(s) results, if appropriate
6. Participants and Percentages
7. Acreage Controlled
Proposed releases will be wired to the Non-Operating Parties
within 72 hours (exclusive of Saturdays, Sundays, and holidays)
before being issued to the news media. Any Non-Operating Party
desiring its name to be excluded from the releases will so
advise Operator during this 72-hour period. Any Participating
Party may prepare its own release ("Preparing Party"), using the
Content Guidelines, following receipt of Operator's proposed
release. The Preparing Party shall send the other Parties a
copy of the proposed release by facsimile transmission. Any
Party may have its name excluded from the proposed release by
notifying the Preparing Party within seventy-two (72) hours
following its receipt of the proposed release. A Non-Operating
Party's news release shall not be issued in advance of the
Operators release.
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EXHIBIT "G"
Attached to and made a part of that certain Operating Agreement effective
May 1, 1995, by and between Enserch Exploration, Inc., Reading & Xxxxx
Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc.
INTEGRATED PROJECT TEAM
The Parties agree to the formation of an Integrated Project Team
which will assist the Operator in the continued operation, development and
exploitation drilling of Producible Reservoirs in accordance with this
Exhibit and the Agreement. In accordance with the foregoing, the Parties
desire to establish an understanding, relating to (i) the Costs and
expenses of the Integrated Project Team to be charged to the Parties and
the method in which such Costs shall be shared, (ii) the overall
operation, administration and management of the Integrated Project Team,
and (iii) the exchange, development and use of technology collected or
developed by or through this Integrated Project Team.
ARTICLE 1
DEFINITIONS
1.1 "Confidential Information" shall mean all information developed
hereunder or received from or on behalf of the other Parties hereunder,
and shall include information developed by the Integrated Project Team or
information the Cost of which is charged to the Joint Account, background
technology exchanged by the Parties, business and technical information
relating to the development of the Designated Prospect. The provisions of
this Exhibit shall not be applicable to "Confidential Data," as that term
is defined in the Agreement.
1.2 "Integrated Project Team." The designated employees of the
Parties or their respective Affiliates for the purpose of assisting the
Operator in the operation of the Designated Prospect.
1.3 "Operating Agreement." That certain Operating Agreement by and
between the Parties effective May 1, 1995, covering the Designated
Prospect.
1.4 "Project Managers." The representatives designated by the
Owners' Committee who will direct, supervise and oversee the work of the
Technical Units.
1.5 "Owners' Committee." A committee comprised of no more than two
(2) manager level representatives from each Party.
1.6 "Technical Units." A group of technical expert personnel
approved by the Owners' Committee to develop recommendations and plans.
1.7 Other terms. Except as defined in this Exhibit, other terms used
herein shall have the same meaning as defined in the Operating Agreement.
ARTICLE 2
OWNERS' COMMITTEE AND INTEGRATED PROJECT TEAM
2.1 Owners' Committee. The Owners' Committee shall; 1) except as
otherwise provided in Article 2.2 herein, vote on the formation of groups
of technical personnel ("Technical Units") within the Integrated Project
Team; 2) vote on the appointment of a Project Manager to each of the
Technical Units; 3) vote on the appointment of personnel to each of the
Technical Units; 4) vote on the recommendations and plans developed by the
Technical Units for the ongoing operation, development, evaluation,
drilling and exploitation of the Designated Prospect; and 5) direct,
coordinate and manage the work of the Technical Units through the Project
Managers as follows:
2.1.1. Duties and Functions. Within thirty (30) days of
execution of this Agreement each Party shall appoint its representative(s)
to the Owners' Committee. Among other duties set forth in this Exhibit,
the Owners Committee shall issue a document setting out the limits of
authority and other administrative matters (including, but not limited to
communications, accounting and reporting between the IPT members, and
purchasing and contracting responsibilities and approvals) in the
execution of the engineering, procurement, fabrication, construction and
installation of the Production System.
2.1.2. Meetings. The Owners' Committee shall meet on an as
needed basis, but not less than once per year. The Operator shall provide
notice of meetings not less than 10 days prior to such meeting. Other
Owners' Committee meetings may be called by any Party on five business (5)
days prior written notice to the other Parties. Notices of Owners'
Committee meetings shall specify the time and place of the meeting and
include an agenda for discussion at the meeting.
2.1.3 Voting. The Owners' Committee shall vote on matters
placed before it by the Parties, by a Project Manager or by a Technical
Unit. Each Party shall be entitled to vote its Working Interest. A vote
of one or more Parties representing greater than fifty percent (50%) of
the Voting Interest as defined in Article 8.2.1 of the Operating Agreement
shall be required for approval.
2.1.4 Owners' Committee Approval. Any and all plans and
recommendations approved by a Technical Unit of the Integrated Project
Team but not approved by a Party to the Owners' Committee will require a
presentation by the Party(s) that failed to approve the Technical
Committee's recommendation to the Party(s) that approved the Technical
Committee's recommendation. The presentation shall include the technical
and economic justification for not approving the plan or recommendation.
Each representative of the Owners' Committee may assign his
duties on a temporary basis to a designated alternate. Any
Party may change its representative by notifying the other
Parties in writing of the name of the alternate representative.
2.2 Composition of the Integrated Project Team. The Integrated
Project Team shall be composed of one or more Technical Units. Any Party
may request formation of a Technical Unit to coordinate the design,
construction and operation of production Facilities, to conduct geologic
and geophysical evaluation of the Designated Prospect, to recommend plans
for conducting additional drilling, or to perform such other work as
determined necessary by the Owners' Committee (collectively referred to
herein as "Study Plan"). The request shall contain specific instructions
regarding the areas to be studied and reported upon by such Technical
Unit. If the request for formation of a Technical Unit involves a project
or operation which is reasonably anticipated to cost less than
$10,000,000, the Owners' Committee may, in its discretion, create such
Technical Unit in accordance with the Study Plan request. If the request
for formation of a Technical Unit involves a project or operation which is
reasonably anticipated to cost more than $10,000,000, the Owners'
Committee shall create such Technical Unit in accordance with the Study
Plan request. The Owners' Committee shall direct that the Technical Unit
complete the Study Plan within a specified time period, as it may, in its
discretion, determine to be reasonable under the circumstances.
Technical Units may be eliminated by the Owners' Committee if
their services are no longer needed. The representatives on the Owners'
Committee shall nominate and vote on the individual to be the Project
Manager of each Technical Unit. An individual may be the Project Manager
of one or more Technical Units and a Project Manager may also have team
member responsibilities. The Parties shall nominate personnel to be
included as team members of each Technical Unit. The individuals
nominated for participation by the Parties must have experience
commensurate with the position to which they are being nominated, who
could be expected to meaningfully participate and contribute to the work
of the Technical Unit. Each Party shall have the right to have percentage
representation on the Integrated Project Team up to its respective Working
Interest share of the total number of engineering and technical personnel
to be assigned to the Integrated Project Team; this however, does not
preclude a Party from having more or less than its respective Working
Interest representation on the Integrated Project Team consistent with the
needs of the Integrated Project Team.
The Integrated Project Team may utilize employees of the
Parties, Affiliates, outside consultants and contractors to carry out the
work of the Integrated Project Team.
2.3 Status of Integrated Project Team Participants. Each non-
consultant member of the Integrated Project Team shall remain an employee
of its respective company and each company shall remain responsible for
their employees' salaries and benefits as well as maintaining workers'
compensation insurance on their employees. Accordingly, each Party will
continue to administer the compensation, benefits, allowances and staff
planning of its employees on the Integrated Project Team. However,
employees who participate on a Technical Unit will receive team
assignments and general supervision from the Project Manager in connection
with their day-to-day work and their Costs and shall be regulated pursuant
to Article 2.7 (Integrated Project Team Costs and Payment) below. An
individual selected to the Integrated Project Team shall, insofar as
possible, and consistent with the needs of the individual's employer,
serve on the Integrated Project Team for the duration of the Integrated
Project Team. A Project Manager may request that the Owners' Committee
replace a non-performing member of the Integrated Project Team.
2.4 Project Manager. Each Technical Unit shall operate under the
direction of a Project Manager, who shall be selected by the Owners'
Committee. The Project Manager shall be responsible for the overall
management and supervision of specific work tasks for the Technical Unit.
The Project Manager shall determine at whose offices the Technical Unit's
work is to be undertaken. Such assignments shall consider use of Non-
Operator facilities and inconveniences to the Participating Parties. The
Project Manager shall recommend the appointment of individual team members
to the Technical Unit from the nominations provided by Parties. The
Project Manager shall also be responsible for selecting outside
contractors to perform certain contract services, acquiring supplies as
needed by the Technical Unit and for instituting rules and procedures for
maintaining Confidential Information. The Project Manager shall also be
responsible for making presentations on the work of the Technical Unit to
the Owners' Committee.
2.5.1 Scope of Integrated Project Team Work. The objectives for
forming the Integrated Project Team is to pool the talents of the Parties
in assisting the Operator in the preparation of the Development Plan and
in the design, fabrication, installation and commissioning of the initial
Production System and in the planning of additional evaluation and
exploitation of the existing and potential Producible Reservoirs. The
Technical Units shall be responsible for generating plans, for approval by
the Owners' Committee, which will be used by the Parties in planning and
budgeting for ongoing operations including the exploitation drilling
program for the Designated Prospect. If a subsequent Producible Reservoir
is discovered, the Integrated Project Team will assist the Operator in
preparing plans for the evaluation, exploitation and development of such
reservoir.
The Integrated Project Team shall remain in place for the term
of the Operating Agreement. The composition and functions of the
Integrated Project Team may be changed by the Owners' Committee and
Technical Units may be created or eliminated during the term of the
Operating Agreement to correspond with changes in operations.
2.5.2 Owners Committee Approval. The Development Plan shall be submitted
to the Owners' Committee for approval. Upon approval, the Development
Plan shall be submitted to the Parties for planning, budgeting and
Election purposes as the plan of the Integrated Project Team for the
development of the affected reservoir.
2.6 Place of Integrated Project Team Meetings. The time and place
of the meetings of the Technical Units and the location for conducting
Technical Unit activities shall be determined by the Project Managers.
2.7 Integrated Project Team Costs and Payment. The Costs and
expenses for the Integrated Project Team and the Technical Units shall be
charged to the Joint Account pursuant to the Exhibit "C" (Accounting
Procedures) Addendum 5 of the Operating Agreement. Each Participating
Party shall be responsible for its proportionate share of the Integrated
Project Team expenses, regardless of its level of participation on the
Integrated Project Team.
ARTICLE 3
SECURITY PROVISIONS
3.1 Security Policy. All employees of the Parties or their
Affiliates which become associated with the Integrated Project Team shall
fully comply with the security policy of the Operator and all procedures
then in effect made available by the Project Managers for use by the
Integrated Project Team. A copy of the applicable confidentiality
requirements and any revisions thereto shall be made available to all such
employees by the Project Managers for their use during the project. The
Project Managers may, subject to approval of the Parties, also institute
reasonable additional provisions as may be appropriate under the
circumstances. Operator shall take reasonable steps to minimize the
exposure of Non-Operator's Integrated Project Team members to Operator's
proprietary and Confidential Information not related to the project. Any
incidental disclosure of a business or technical nature, whether or not
related to the Designated Prospect to which the Integrated Project Team
members are exposed by virtue of working in the facilities provided to the
Integrated Project Team shall be subject to security policy of the
Operator. This Article is not intended to restrict the access of
Integrated Project Team members to relevant and pertinent information
needed to accomplish their team's assignments.
ARTICLE 4
CONFIDENTIALITY
4.1 Obligation of Confidentiality and Restrictions on Use. Each
Party agrees to maintain confidentiality and not to disclose to any third
party or use the Confidential Information, except as expressly provided
hereunder, for a confidentiality period commencing on the date of
execution of the Operating Agreement and extending through the later of
(a) two (2) years following the termination of the Integrated Project Team
work pursuant to Article 8.3 (Termination) of this Exhibit or (b) seven
(7) years following the date of execution of the Operating Agreement.
After expiration of the confidentiality period the receiving Party's
obligations of confidentiality and restrictions on use shall cease. Each
Party agrees to treat the disclosure of the Confidential Information in
the same manner as it treats its own Confidential Information.
The Parties shall declare and list background technology and information
which will be utilized by the Integrated Project Team prior to establish-
ment of such Integrated Project Team. Such declared and listed back-
ground technology and information shall be subject to this Article 4
(Confidentiality).
4.2 Exceptions
(a) The provisions of Article 4.1 (Obligation of
Confidentiality and Restrictions or Use) above shall not apply to
Confidential Information which:
(1) was in the public knowledge or literature at the time of
development or receipt hereunder, or
(2) subsequent to the formation of the Integrated Project
Team, was not marked or identified as being confidential
at the time of disclosure, or
(3) was already in the receiving Party's possession (or its
Affiliate) without obligation of confidentiality, at the
time of development or receipt by the receiving Party.
(b) Provisions of Article 4.1 (Obligation of Confidentiality
and Restrictions or Use) above shall cease to apply to information which:
(1) becomes part of the public knowledge subsequent to its
development or receipt hereunder and without fault of the
receiving Party, or
(2) is disclosed to the receiving Party without obligation of
confidentiality by a third party having legal right to do
so, or
(3) is independently developed by or for the receiving Party.
4.3 Supporting Agreements. Upon request of a Project Manager, each
Party shall require those participating in the Integrated Project Team to
execute a confidentiality agreement having obligations of confidentiality
and restrictions on use of the Confidential Information at least as
restrictive as those set forth in this Exhibit and shall furnish a copy
thereof to the other Parties.
ARTICLE 5
LICENSE TO USE CONFIDENTIAL INFORMATION
5.1 Right to Release Joint Account Work Product. Each Party will be
entitled to review the full reports of all technical studies, detail
reports, general conclusions, numerical results and design drawings from
all engineering services that are charged to the Joint Account pursuant to
an AFE in which it is a Participating Party, whether those engineering
services are performed by a Party participating in the Integrated Project
Team, an Affiliate or by a third party. A Party may copy such material at
its sole cost.
5.2 Right to Confidential Information. Subject to the obligations
of confidentiality of Article 4 (Confidentiality) of this Exhibit and
subject to the patent rights of the Parties, each Party may use all
Confidential Information received or developed hereunder which is (1)
background technology exchanged by the Parties or (2) developed by the
Integrated Project Team under this Agreement or the Cost of which is
charged to the Joint Account, without otherwise accounting to the other
Party, including use by or for a joint venture or production sharing
arrangement in which a Party has ownership interest.
5.3 Right to Disclose. Subject to the foregoing, each of the
Parties may disclose Confidential Information during the period of
confidentiality set forth in Article 4.1 (Obligation of Confidentiality
and Restrictions or Use) of this Exhibit upon the following conditions:
(a) Each Party may extend all its rights under this Exhibit to
its Affiliates who agree to obligations of confidentiality
and restrictions on use at least as restrictive as those
set forth in this Exhibit.
(b) Each Party and its Affiliates may disclose the
Confidential Information of Article 5.2 (Right to
Confidential Information) to consultants and contractors
who agree to hold such Confidential Information in
confidence and to use it only for the benefit of a Party
or its Affiliates.
(c) Each Party and its Affiliates may disclose Confidential
Information of Article 5.2 above to governmental agencies
and insurance companies or as otherwise required by law or
regulation as such Parties or Affiliates deem necessary,
either in confidence or not in confidence if the Party or
its Affiliates has made a reasonable but unsuccessful
attempt to obtain a confidentiality agreement.
(d) Upon prior written consent of the non-disclosing Parties,
a Party and its Affiliates may disclose the Confidential
Information of Article 5.2 above to other members of joint
ventures or production sharing arrangements in which the
Party or Affiliate has an ownership interest provided the
other members agree to hold the Confidential Information
in confidence and to use it only for the benefit of that
joint venture or production sharing arrangement.
(e) Any Party may disclose Confidential Information under
Article 5.2 above which is specifically related to the
Designated Prospect to any potential purchaser of all or
any portion of such Party's interest therein, provided,
the potential purchaser agrees to hold the Confidential
Information in confidence and to use it only for the
purposes of determining its interest in acquiring an
interest in the Designated Prospect.
(f) Each Party may use such Confidential Information under
Article 5.2 as reasonably necessary or appropriate to file
patent applications pursuant to Article 6 (Patents and
Integrated Project Inventions). Prompt notice will be
provided to the other Parties of any such filing.
5.4 Rights Under Copyright and Following Expiration of
Confidentiality. Following the expiration of the period of
confidentiality set forth in Article 4.1 (Obligation of Confidentiality
and Restrictions or Use), each Party may freely use and disclose the
Confidential Information identified in Article 5.2 (Right to Confidential
Information) without accounting to any other Party, subject only to
whatever patent rights may apply to the technology and, where applicable,
to the obligations of Articles 5.5.1 and 5.5.2 below. Subject to the
obligations of confidentiality set forth herein, each Party has the right
to copy, display, publish, distribute and prepare derivative works of all
documents, drawings or other writings or materials created or conveyed
under this Exhibit, including the rights to license, sell or otherwise
transfer such rights.
5.5 Notice of Third-Party Limitations
5.5.1 Notwithstanding the provisions of Articles 5.2 (Right to
Confidential Information), 5.3 (Right to Disclose) and 5.4 (Rights Under
Copyright and Following Expiration of Confidentiality), the Parties
acknowledge that various background materials may have been received from
third parties under preexisting restrictions, e.g., that the Party may
disclose the third-party source information to a partner in a joint
venture only under obligations of confidentiality and under restriction to
use the information only in connection with the joint venture. Each Party
agrees to identify, in writing, any such restrictions in effect and secure
the receiving Party's acknowledgment prior to transmittal of such third-
party source information. The receiving Party's acknowledgment
constitutes its acceptance of such obligations and restrictions.
5.5.2 The Project Manager and each Party soliciting work from
third-party contractors and consultants (or from Affiliates) shall use its
best efforts to secure contract terms with such third party which contain
applicable confidentiality terms and which support rights to the Parties
consistent with this Agreement.
5.6 Software. A Party may be authorized to use various computer
software and programs which are identified as proprietary to one of the
other Parties during the duration of the Integrated Project Team, however,
such computer software and programs shall not be considered joint property
and its use may be limited under license to a single Party. Use of such
proprietary software and programs is not a grant of license of any rights
outside of this Agreement and the Parties retain all rights to such
property. Computer software and programs which are not proprietary to one
of the Parties, but which was developed jointly by the Integrated Project
Team, shall be considered co-owned property.
ARTICLE 6
PATENTS AND INTEGRATED PROJECT INVENTIONS
6.1 Patent Assignment With Right to License and Sublicense. Patents
on inventions which are (1) conceived solely by outside contractors or
consultants, or conceived jointly among the Parties (each including its
respective Affiliates) while working on the Integrated Project Team and
(2) from work which has been funded by the Joint Account, will be assigned
to the Operator. The Party holding such assignments hereby agrees to
grant each other Party an irrevocable, nonexclusive, worldwide, royalty-
free license to practice under all such patents, including the right to
grant sublicenses under such patents to any third party or Affiliate on
such other terms and conditions that such Party deems appropriate, without
accounting to any other Party.
6.2 Patent Assignment and License With Limited Right to Sublicense.
Patents on inventions not covered in Article 6.1 (Patent Assignment With
Right to License and Sublicense), which are conceived or first reduced to
practice (actual or constructive), by a Party or its Affiliate, either
alone or jointly with any outside contractors or consultants, and as a
direct result of work which has been funded by the Joint Account will be
owned by that Party. The Party owning any such patent agrees to grant
each other Party an irrevocable, nonexclusive, worldwide, royalty-free
license under all such patents to make, have made, use and have used such
invention for such other Party's own business, including any joint venture
or production-sharing arrangement in which such other Party has an
ownership interest. Further, each such other Party has the right to
extend these rights to its Affiliates.
6.3 No Other Commitment to License or Disclose. Except as expressly
set forth above, nothing in this Exhibit will be deemed to require any
Party or Affiliate to grant any licenses under any patents to anyone. The
scope and content of any background technology disclosed under this
Agreement will be determined in the sole discretion of the disclosing
Party.
ARTICLE 7
DISCLAIMER OF WARRANTY AND INDEMNITIES
7.1 Disclaimer of Warranties. ALL INFORMATION RECEIVED BY THE
PARTIES HEREUNDER SHALL BE PROVIDED ON AN "AS IS" BASIS WITHOUT ANY
WARRANTIES EITHER EXPRESS OR IMPLIED, AS TO THE ACCURACY, VALIDITY OR
UTILITY OF SUCH INFORMATION OR THAT IT CAN BE USED WITHOUT INFRINGING ANY
THIRD-PARTY PATENT, COPYRIGHT OR OTHER PROPRIETARY RIGHT. WITHOUT
LIMITING THE PRECEDING, ANY IMPLIED WARRANTY OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED FROM THIS
AGREEMENT. IN NO EVENT SHALL A PARTY CONVEYING INFORMATION BE LIABLE FOR
ANY INCIDENTAL, CONSEQUENTIAL OR OTHER DAMAGES ARISING OUT OF OR RESULTING
FROM THE USE OF INFORMATION CONVEYED UNDER THIS EXHIBIT.
7.2 Indemnities. Each Party agrees to defend, hold harmless and
indemnify the other Parties from and against any loss, damage, claim,
suit, liability, judgment and expense (including attorney fees and other
costs of litigation) related to or in connection with its use (including
use by others which it authorizes), outside of the Contract Area, of any
Confidential Information under or developed pursuant to this Exhibit.
ARTICLE 8
MISCELLANEOUS
8.1 Export Controls. Each Party agrees to abide by the United
States Department of Commerce regulations concerning the export or re-
export of United States source technical data, or the direct product
thereof, to unauthorized destinations and regulations in respect of
information supplied by or on behalf of any other Party hereunder.
8.2 Independent Research. Nothing herein shall in any way restrict
or impair the right of any Party to conduct its own independent research,
development or design activities even though such activities may parallel
or overlap the activities provided for herein. Any Party conducting such
independent activities shall have no obligation arising therefrom with
respect to the use or disposition of the results thereof, including but
not limited to all information and data resulting therefrom. Such
independent work shall not delay, disrupt or hinder the activities of the
Integrated Project Team or any contractor working under the direction of
the Integrated Project Team.
8.3 Termination. The work of the Integrated Project Team will
terminate upon expiration of the Operating Agreement.
All provisions of this Exhibit related to confidentiality and
use of information, patents and indemnity shall survive completion of
Integrated Project Team activities conducted hereunder. A withdrawing
Party shall have the rights specified in this Exhibit based on
developments and "changes prior to the effective date of Withdrawal and
shall continue to have all obligations with respect thereto as set forth
in this Exhibit relating to confidentiality, restrictions on use, patents,
indemnity and, as applicable, duties to license the other Parties.
8.4 Assignability. A new party not a Party to this Agreement who
acquires an interest in a Designated Prospect may join as a Party to the
Integrated Project Team upon the approval of the Parties as a General
Matter pursuant to Article 8 of the Operating Agreement. Approval shall
be based upon such factors as the depth of its generally relevant
technical expertise, offshore operating experience, the level of skill of
its potential Integrated Project Team members, the percentage of Working
Interest acquired in the Designated Prospect, the compatibility of
specific areas of technical expertise with the needs of the Integrated
Project Team and the financial support provided by the Party to the
development of the Designated Prospect pursuant to the Operating
Agreement. Approval to participate on the Integrated Project Team shall
not be unreasonably withheld. Project Managers shall recommend the
assignment of new members to the Technical Units in accordance with
Article 2 (Owners' Committee and Integrated Project Team) herein.
A new Party joining the Integrated Project Team must agree, in
writing, to undertake all obligations set forth for a Party thereunder.
Such new Party will have all rights, duties and obligations under Article
5 (License to Use Confidential Information) of this Exhibit for use of all
Confidential Information exchanged or developed prior to the date it joins
the Integrated Project Team and during its participation thereunder.
However, patent rights received by such new Party hereunder pursuant to
Article 6 (Patents and Integrated Project Inventions) of this Exhibit
shall be in accordance with the terms of this Agreement limited to patents
based on developments after the date such Party joins the Integrated
Project Team.
The licenses received by a Party under Articles 5 and 6 of this
Exhibit may be assigned by that Party only to an Affiliate of the Party,
to the successor of all or substantially all of the business of the Party
relating to offshore hydrocarbon developments, or as otherwise expressly
provided in this Agreement. However, a Party may transfer license rights
limited to a specific, fabricated embodiment which was made and used under
such license and the license will continue in effect as to that specific,
fabricated embodiment transferred.
In the event that a Party assigns its entire interest in the
Leases, the assigning Party shall have all the rights specified in this
Exhibit including patent rights and license rights thereunder, based on
developments and exchanges prior to the effective date of such assignment
and shall continue to have all obligations and duties with respect thereto
as set forth in this Exhibit relating to the confidentiality, restrictions
on use, patents, indemnity and as applicable, duties to license the other
Parties.
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EXHIBIT "H"
Attached to and made a part of that certain Operating Agreement dated
effective May 1, 1995, between Enserch Exploration, Inc., Reading & Xxxxx
Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc.
PRODUCTION HANDLING
1. Application.
If a Production System Component (as defined herein) has unused
capacity or uncommitted capacity, this exhibit shall control the
allocation of such excess capacity.
2. Definitions.
For purposes of this exhibit, the following definitions shall apply:
(a) "Barrel of Oil Equivalent" - The combined volume of oil and gas
expressed in barrels, converting each 5.626 thousand cubic feet of
gas to a barrel of oil.
(b) "Excess Capacity" - The ability of the Production System or any of
its components to process or transport production in excess of the
production committed to the Production System or any of its
components, all as determined in Article 3 hereof.
(c) "Party or Parties" - The owner or owners of Working Interests who
either own, lease or have service contract rights to the
Production System.
(d) "Production System." - Shall be as defined in the Operating
Agreement.
(e) "Production System Capacity." The anticipated maximum production
handling capacity of the entire Production System at the time of
the application of Article 14.
(f) "Production System Component Capacity." The anticipated maximum
production handling capacity of each component of the Production
System.
(g) "Non-Unit Production" - Hydrocarbon production not contemplated by
any approved Development Plan.
(h) "Unit Production" - Hydrocarbon production contemplated by the
current approved Development Plan for such Production System
component.
3. Determination of Excess Capacity and Priority of Its Use.
The ability to process or transport Non-Unit Production will be
determined by establishing the Excess Capacity available through each
Production System Component. The amount of Excess Capacity will be
calculated by deducting the total of (i) the estimated peak future
production volumes from the Designated Prospect(s) for which the
Production System was built or modified pursuant to an approved
Development Plan and (ii) the volume of Non-Unit Production contractually
committed to be processed or transported by the affected Production System
Component from the actual operating capacity of such Production System
Component. The final determination of the amount of Excess Capacity for
each Production System Component to be made available shall require the
mutual agreement of the Parties.
Excess Capacity from a Production System Component shall be subject to
the following priority usage:
a. First priority to Hydrocarbon production from Leases that are co-
owned by the Participating Parties and that are located inside
the Designated Prospect(s) for which the Production System was
installed pursuant to an approved Development Plan.
b. Second priority to Hydrocarbon production from Leases that are co-
owned by all of the Participating Parties in the Production System
and that are located outside the Designated Prospect(s) for which
the Production System was installed pursuant to an approved
Development Plan, but from a Designated Prospect(s) within the
Contract Area.
c. Third priority to Hydrocarbon production from Lease(s) that are
co-owned by less than all but at least one of the Participating
Parties in the Production System and that are located outside the
Designated Prospect(s) for which the Production System was
installed pursuant to an approved Development Plan, but from a
Designated Prospect(s) within the Contract Area.
d. Fourth priority to Hydrocarbon production from a lease in which
less than all Parties have an ownership interest and in which the
other Party(ies) was offered an interest but declined pursuant to
the AMI provisions of Article 23.3 (Area of Mutual Interest)
hereof.
e. Fifth priority to hydrocarbon production owned by a Participating
Party coming from outside the Contract Area.
f. Sixth priority to hydrocarbon production owned by third parties.
4. Non-Unit Production Handling Charges.
Monthly production handling fees ("Fee") will be charged on a dollar
per Barrel Oil Equivalent basis for production volumes utilizing any
Production System Component. Metering systems will be installed for
Non-Unit Production and shall conform to the requirements of the
Operator. The Fee to use Excess Capacity assigned to the sixth
priority in Section 3 f. above shall be negotiated between the Parties
and the third party producer at the time of the contracting for the
use of the affected component by such third party. Such Fee shall
reflect the cost and the fair market value of the services to be
provided. For each Production System Component, the Fee to use Excess
Capacity assigned to the priorities identified in Sections 3 a, b, c,
d & e above shall be the sum of the capital investment, interest,
depreciation expense and actual operating and maintenance expenses
calculated as follows:
A.Charges for Access
Non-Unit Production shall be charged an access fee ("Access Fee")
equivalent to the depreciation and interest for the capital
investment in the Production System Components utilized. The
Access Fee shall be equal to (a) the gross investment in the
Production System Component (adjusted for subsequent capital
expenditures) depreciated over twenty (20) years, on a straight
line basis and (b) the interest charged on the gross investment in
such Production System Component, less the accumulated
depreciation provided under (a) above, computed at the rate of ten
percent (10%). The cumulative sum of the annual depreciation (a)
and interest (b) charges divided by eighty-five percent (85%) of
the total Production System capacity, divided by twenty (20),
establishes the Access Fee to be charged for processing or
transporting the Non-Unit Production through the Production System
Component. The Access Fee depreciation and interest components
shall be increased to include capital expenditures incurred by the
Owners of the Production System in excess of $5,000,000.
B.Charges for Operating and Maintenance Expense
Non-Unit Production will be charged for its proportionate share of
the operating and maintenance expenses (including all marketing and
third party transportation fees) attributable to the Production
System Component utilized on a monthly basis. The actual volume of
Non-Unit Production throughput for that component will be divided
by the total of unit and non-unit throughput to determine the
portion of the total operating and maintenance expenses
attributable to Non-Unit Production. The result will be multiplied
times the monthly operating and maintenance expenses attributable
to the affected Unit Production System Component and included in
the Access Fee. The Access Fee will also include a fifteen percent
overhead charge on the operating and maintenance expenses
attributable to the affected Production System Component.
5. Capital Improvements.
Capital improvements required to accommodate Non-Unit Production
will be borne by the Party contracting to use the Production System
Component (hereafter the "Non-Unit Producer") to handle its Non-
Unit Production. Approval of engineering and design a actual
installation of the equipment will be the responsibility of the
Parties with costs borne by the Non-Unit Producer. Additional
capital investment requirements in Non-Unit Production handling
equipment and facilities to comply with safety, regulatory or
operation concerns shall be borne exclusively by the Non-Unit
Producer. Major capital investment required on the Unit Production
System in excess of five hundred thousand dollars which benefit
both the owners or lessees of the Production System and the Non-
Unit Parties will be allocated to all Parties on percentage basis
based upon the capacity allocated pursuant to the Production
Handling Agreement. The allocation of such cost will be made in
proportion to their respective rights to utilize the total capacity
of the affected Production System Component after the capital
investment is made. As between the parties to this Agreement, all
accounting, billing and overhead requirements for Non-Unit
Production will conform to the terms of Exhibit "C". The agreement
to process or transport Non-Unit Production will include a
provision where upon termination, the Parties will have the option
of removing the capital improvement made at the sole cost and risk
of the Non-Unit Producer or, the Parties may acquire the capital
improvements on an as is, where is, basis at no cost by assuming
abandonment and salvage responsibility.
6. Other Requirements for Non-Unit Production Handling Agreements.
a. Any such agreement will require unanimous approval by all
Parties.
b. All Parties will, in proportion to their ownership or leased
interest in affected Production System Component, share the
benefits and the risk and liability associated with an such
agreement.
c. No Party may separately enter into an agreement with any third
party involving the use of said Party's percentage ownership or
leasehold interest of the Production System.
d. Any such agreement will be a Service Agreement only and will not
involve any sale, lease or transfer of interest to a party who
is not a Party to this Agreement.
e. The payment of production downtime compensation associated with
accommodating Non-Unit Production with an e. priority in Section
3. above will be negotiated at the time of the execution of the
Non-Unit Production Handling Agreement.
Production downtime compensation associated with accommodating Non-
Unit production with a priority of c, d, or e in Section 3. above will be
equal to the fixed operating costs of the Production System Component
utilized for the downtime period plus the estimated loss in the present
value of revenue less expenses associated with production delayed during
the downtime period. No downtime compensation will be required for a
cumulative total of ten (10) days of lost revenue associated with the
initial tie-in of such production. Downtime compensation for third-party
production (Section 3 f. priority) will be negotiated.
f. Every Non-Unit Production Handling Agreement will terminate
before, or contemporaneously with, the end of the economic and
useful life of the applicable Production System, unless
otherwise agreed by the owners of such Production System.
g. Each Non-Unit Production Handling Agreement will identify the
ownership of the Production System Component and include a
description of the financing and leasing relationships
associated with the design, installation an construction of the
Production System Component.
h. Each Non-Unit Production Handling Agreement shall contain
quality specifications to insure that no decrease in value of
Unit production will occur as a result of commingling Unit and
Non-Unit Production.
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EXHIBIT "K"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
ALLEGHENY OPERATING AGREEMENT EFFECTIVE MAY 1, 1995 BETWEEN ENSERCH
EXPLORATION, INC., READING & XXXXX DEVELOPMENT CO., MOBIL OIL CORPORATION
AND MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC.
JOINT BIDDING AGREEMENT
Agreement is made and entered into as of the 1st day of September, 1995,
by and between MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC. ("Mobil"),
ENSERCH EXPLORATION, INC. ("Enserch") and READING & XXXXX DEVELOPMENT CO.
("Reading & Xxxxx"), each of such parties being hereinafter called a
"Party" and all of such parties together being hereinafter called the
"Parties."
W I T N E S S E T H:
WHEREAS, the United States Department of the Interior (the "DOI")
has heretofore announced tentative plans for OCS Lease Sales covering
certain areas of the Outer Continental Shelf in the Central Gulf of Mexico
to be made available for oil and gas leasing in the years 1996, 1997,
1998, 1999 and the year 2000 ; and
WHEREAS, the oil and gas exploration and development of these
areas involves unusually large technological and financial risks because
of (i) variable geologic conditions and the inexact nature of
technological measurements and interpretations involved in predicting the
occurrence of oil and gas, and hence the high probability of drilling dry
holes, in such areas and (ii) the expected high costs of acquiring leases
and of exploring for, discovering and developing oil and gas in these
areas; and
WHEREAS, in recognition of the magnitude of these risks and of
the concomitant need for increased domestic oil and gas supplies to serve
the national interest, the Parties deem it necessary to join together
herein to share such risks and thus minimize their own individual costs
and investments in the block(s) or tract(s) covered hereby in order to
maximize monies available for discovery and development of needed oil and
gas reserves from other blocks or tracts and areas.
NOW, THEREFORE, in consideration of the premises, and of the
mutual covenants and obligations of the Parties herein set forth, it is
agreed as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement:
1.1 "Subject Block" is a block, tract or bidding unit, as
described or referred to in Section 2.1 hereof, to which
the further provisions of this Agreement apply.
1.2 "Subject Sale," with respect to a Subject Block, is any
public offering of that block for oil and/or gas leasing
purposes during the term of this Agreement (whether or not
actually held on the date specified in the DOI notice of
sale).
1.3 "Joint Bid Hereunder" is a bid on a Subject Block
submitted or proposed for submission hereunder by at least
two Parties at a Subject Sale."
1.4 "Technical Information" is any geological, geophysical,
engineering, well or other similar information, materials
or data or interpretations thereof relevant to a Subject
Block.
1.5 "Affiliate" of a Party is any company which owns or
controls, is owned or controlled by, or is under common
ownership or control with, such Party. Control means the
ownership, directly or indirectly, of more than fifty
percent (50%) of the outstanding voting securities of a
corporation.
ARTICLE 2
SCOPE OF AGREEMENT
2.1 This Agreement shall apply only to the blocks and areas
described in the AMI attached to Operating Agreement as Exhibit "A-4"
attached hereto which are available for bid at a Subject Sale, hereinafter
referred to as "Contract Area", excepting any blocks which the Parties
may hereafter elect, pursuant to the provisions of Article 6.2.1 hereof,
to be excluded from this Agreement, provided that any blocks not now
subject to this Agreement may be added by unanimous agreement of the
Parties to amend said Exhibit "A-4".
ARTICLE 3
RIGHT OF PARTICIPATION
3.1 The Parties shall have the opportunity to participate in
any Joint Bid Hereunder, and in the ownership of any oil and/or gas lease
issued pursuant to such bid by reason of a Subject Sale, in the following
proportions:
Mobil 40.000%
Enserch 40.000%
Reading & Xxxxx 20.000%
or in such other proportions as the Parties may hereafter agree upon; in
such case the Parties shall sign a memorandum recording the agreement
reached in the form of Exhibit "B".
3.2 If more than two parties are, or become, Parties to this
Agreement, and if one or more Parties thereafter withdraw from further
participation with respect to a Subject Block, as required or permitted
hereunder: (i) the remaining Parties, proceeding independently of such
non-participating Party(ies) but in full compliance with the requirements
and procedures applicable to considering, agreeing to and submitting a
Joint Bid Hereunder, may continue consideration of matters relating to
that Subject Block which are within the scope of this Agreement, and (ii)
the above stated interest of each such remaining Party shall be changed to
accord with the ratio that such interest bears to the total of the above
stated interests of all such remaining Parties (or as may otherwise be
mutually agreed upon by such remaining Parties).
ARTICLE 4
TECHNICAL MEETINGS
4.1 At the request of any Party a technical meeting may be
called prior to the dates set for bid meetings, at a time and place mutual
convenient, in order to systematically review data and to share
interpretations of such data so that a thorough review of the prospects
can be completed by the time bids are to be determined.
ARTICLE 5
BIDDING COMMITTEE
5.1 The meetings of the Parties provided in this Agreement
shall be conducted by and through a "Bidding Committee." The Bidding
Committee shall be formed and shall act in accordance with the provisions
hereinafter set forth.
5.2 Prior to the first meeting of the Parties, each Party
shall designate, by written notice to each other Party, its representative
to the Bidding Committee. A designated representative may appoint an
alternate to act in his place and stead at any particular meeting(s).
5.3 Each Party's representative and/or alternate and a maximum
of four assistants may be present at all meetings of the Bidding
Committee, but only a designated representative or (in his absence) his
appointed alternate may bind the Party he represents on any matter
requiring a decision, action or agreement of that Party hereunder. The
representative of Mobil shall be chairman of the Bidding Committee and he
(or his alternate) shall preside at each such meeting.
ARTICLE 6
MEETINGS AND DETERMINATION OF BIDS
6.1 In addition to holding the meeting required by Section 6.3
hereof, the Parties shall, at the request of any Party, with at least
forty-eight (48) hours advance notice, meet at such other time(s) as may
be appropriate to consider matters within the scope of this Agreement.
Each meeting hereunder shall be conducted in accordance with the
requirements and procedures set forth in this Agreement.
6.2 At the first and any subsequent meeting of Parties, each
Party shall inform each other Party of any Subject Block on which it is
then no longer interested in participating in a Joint Bid Hereunder.
6.2.1 If such information is disclosed and the Parties
determine that such Subject Block has no further
interest for joint bidding purposes hereunder prior
to suggestion of any amount for a Joint Bid
Hereunder, then (i) this Agreement shall
automatically terminate as to such Subject Block
(subject only to the provisions of Section 6.2.2)
and, if any confidential information relevant to
such block has been disclosed, subject to the
provisions of Article 7 hereof, and (ii) a
memorandum to that effect shall be signed by the
Parties. Otherwise, such block shall remain subject
to all further provisions hereof.
6.2.2 By mutual agreement of the Parties, a block as to
which this Agreement has terminated under Section
6.2.1 hereof may again be made subject to this
Agreement (in which event it shall again be
considered as a Subject Block and be subject to all
the provisions hereof). Appropriate memoranda
recording the actions taken shall thereupon be
signed by the Parties.
6.3 At a meeting to commence not later than 12 p.m. (C.D.T.)
on the 7th day immediately preceding the date announced for a Subject
Sale, each Party shall disclose to each other Party the highest bid in
which it is then willing to participate on each Subject Block. Following
such disclosure, each Party shall inform each other Party whether it
elects to participate in a Joint Bid Hereunder on each such Subject Block
at the highest amount suggested by any Party (the "Highest Suggested Bid
Amount"). In the event any Party ( "Non-Participating Party") elects not
to participate in any such bid, the other Party or Parties ("Participating
Party") may bid solely or jointly with others for a lease on such Subject
Block; and if the Participating Party or Parties (solely or with others)
bid no less than the Highest Suggested Bid Amount, and are awarded the
lease, the Non-Participating Party shall, with respect to such Subject
Block, have no further rights under this Agreement.
6.4 Whenever Parties have agreed to join in any Joint Bid
Hereunder, in accordance with the requirements and procedures set forth
herein, the Parties shall sign a memorandum recording the agreement
reached in the form of Exhibit "C". Whenever any Party cannot or does not
participate in any Joint Bid Hereunder at the highest amount theretofore
suggested, the Party shall: (I) sign a memorandum in the form of Exhibit
"D" setting forth such determination, the date, the name of each Non-
Participating Party and the amount at which that Party cannot or does not
agree to participate and (ii) such Non-Participating Party shall not be
entitled to participate in further discussions or meetings relating
thereto.
6.5 A record of all suggested Joint Bids Hereunder shall be
made; and no Party shall participate in any Joint Bid Hereunder on a
Subject Block that is less than the highest Joint Bid Hereunder suggested
by any Party for that block.
ARTICLE 7
DISCLOSURE AND CONFIDENTIAL OF INFORMATION
7.1 A Party that believes the disclosure of information
(including, but not limited to, Technical Information) it possesses would
be beneficial in arriving at a Joint Bid Hereunder may, subject to the
further provisions of this Article 7, disclose such information to each
other Party.
7.2 No information shall be disclosed, nor any discussion
held, relating to future hydrocarbon supply, demand or price.
7.3 A Party disclosing information, including, but not limited
to, Technical Information, (the "Disclosing Party") thereby represents it
has the right to make such disclosure to each other Party to whom such
information is disclosed (the "Examining Party").
7.4 Whenever Technical Information is disclosed, the Parties
shall sign a memorandum identifying such information and each Subject
Block to which it relates and setting forth (i) the date of the
disclosure, (ii) the name of each Disclosing Party and the name of each
Examining Party and (iii) whether such information is to be subject to the
confidentiality provisions of Section 7.5 hereof.
7.5 All Technical Information shall be held confidential by
each Examining Party and shall not be divulged by such Examining Party to
any other person or entity, except an Affiliate, for a period of two (2)
years from the date such confidential information is disclosed, unless the
Parties mutually agree to a lesser period of time or unless the Disclosing
Party indicates at the time of disclosure that the information is not to
be subject to this requirement of confidentiality. The foregoing
confidentiality provision shall not apply to any Examining Party to the
extent that the particular disclosed information (i) is now or hereafter
becomes part of the public domain other than as a result of a wrongful act
or omission by such Examining Party, or (ii) is already owned by or in the
possession of the Examining Party, or (iii) is hereafter disclosed to the
Examining Party by a third party without binder of confidentiality.
7.6 All other disclosed information relating to bids shall be
held confidential by the Parties and shall not be divulged to any other
person or entity except an Affiliate until after the opening of bids.
7.7 If any Examining Party discloses to an Affiliate any
information it is obligated to hold confidential hereunder, the Examining
Party shall ensure that such Affiliate shall likewise be fully bound by
the confidentiality provisions hereof.
ARTICLE 8
NON-RESTRICTION OF BIDDING
8.1 Nothing herein shall ever be construed as denying or
restricting the right of a Party to bid on any Subject Block (or any other
block); and the Parties hereby expressly confirm the right of any Party
(acting either solely or with others) to bid on any such block (including
any Subject Block on which a Joint Bid hereunder is proposed or submitted
hereunder) if, as and when it may desire. In order reasonably to protect
all Parties against the inequitable use of information obtained pursuant
to this Agreement, however, it is agreed that:
8.1.1 If a Party (an "Acquiring Party"), either solely or
jointly, should bid at a Subject Sale for, and thereby
acquire a leasehold interest in, any Subject Block for
which an unaccepted bid was made by one or more Parties at
the same sale pursuant to this Agreement and such
unaccepted bid was for an amount no less than the Highest
Suggested Bid Amount, then such Acquiring Party shall,
within thirty (30) days after such acquisition, give
written notice thereof (together with the details of such
acquisition) to each other Party that participated in such
unaccepted bid (an "Unsuccessful Bidding Party"). Each
Unsuccessful Bidding Party shall have thirty (30) days
after receipt of said notice in which to give the
Acquiring Party written notice of its election (if it so
elects) to purchase from the Acquiring Party the
hereinafter stated part of the Acquiring Party's interest
by reimbursing the Acquiring Party for said part of the
Acquiring Party's lease-acquisition costs and by assuming
said part of the Acquiring Party's leasehold obligations.
That part of the Acquiring Party's costs for which such
Unsuccessful Bidding Party is to reimburse the Acquiring
Party, that part of the Acquiring Party's leasehold
obligations which such Unsuccessful Bidding Party is to
assume and that part of the Acquiring Party's interest
which such Unsuccessful Bidding Party shall be entitled to
purchase is as follows:
(i) If the Acquiring Party participated in submitting
the above-described unaccepted bid: that part of the
Acquiring Party's interest which is equal to the
Unsuccessful Bidding Party's share of said
unaccepted bid.
(ii) If the Acquiring Party did not participate in
submitting said unaccepted bid: that part of the
Acquiring Party's interest which is equal to the
ratio that the Unsuccessful Bidding Party's Section
3.1 interest bears to the total of those Section 3.1
interests that are represented in both the accepted
and unaccepted bids.
8.1.2 If a Party, either solely or jointly, should acquire a
leasehold interest in any Subject Block as the result of a
bid at a Subject Sale for an amount less than the Highest
Suggested Bid Amount, such Acquiring Party shall, within
thirty (30) days after such acquisition, give written
notice thereof (together with the details of such
acquisition) to each other Party. Each such other Party
shall have the option for a period of thirty (30) days
after receipt of such notice in which to give such
Acquiring Party written notice of its election (if it so
elects) to purchase from such Acquiring Party the
hereinafter-stated part of such Acquiring Party's interest
by reimbursing the Acquiring Party for said part of the
Acquiring Party's leasehold acquisition costs and by
assuming said part of the Acquiring Party's leasehold
obligations. That part of the Acquiring Party's costs for
which each such other Party is to reimburse the Acquiring
Party, and that part of the Acquiring Party's leasehold
obligations which each such other Party is to assume, and
that part of the Acquiring Party's interest which each
such other Party shall be entitled to purchase, shall be
equal to the percentage interest for such other Party as
provided in Section 3.1 hereinabove.
8.2 The right of purchase from an Acquiring Party, as stated
in Sections 8.1.1 and 8.1.2 hereof, shall apply whether the original
leasehold interest was acquired by a Party to this Agreement or by an
Affiliate of such Party.
ARTICLE 9
RESPONSIBILITY FOR BIDS
9.1 Mobil shall prepare and file the bids for the blocks or
blocks in which all the Parties elect to participate in Joint Bids
Hereunder at the Subject Sale. Each Party participating in a Joint Bid
Hereunder shall be responsible for satisfying itself as to the correctness
of such bid and shall take whatever steps it deems desirable to ensure
that such bid is timely and properly prepared and submitted. Each Joint
Bid Hereunder shall disclose the identity of all Parties joining in such
bid, and comply with any other requirements promulgated by the MMS. Mobil
will advance all funds required to cover that part of the bonus(es) which
must be submitted with the bid(s) in which Mobil elects to participate.
As soon as Mobil determines when the Minerals Management Service will
deposit the bid check(s), Mobil will notify the other Participating
Parties by telephone of the date that the Party must wire its
proportionate share of immediately available funds to CitiBank N.A. -
American Bankers Association Routing Number 000000000 - (New York, NY) for
credit to Mobil Oil Corporation's account number 4064-0942. One day prior
to the date upon which the balance of the bonus and the first year rental
is due for an accepted Joint Bid Hereunder, Mobil shall pay the total then
due to the Minerals Management Service, and on the same date the other
Participating Parties agree to wire their proportionate share of
immediately available funds pursuant to the above wiring instructions.
9.2 In the event that a surety bond is required for any Joint
Bid Hereunder in which Mobil elects to participate, Mobil shall prepare
and file such surety bond, and shall maintain same until such time as the
Minerals Management Service deems the bond no longer necessary. Each
Party that participates in a Joint Bid Hereunder, for which Mobil prepares
and files a surety bond, shall be billed for its proportionate share of
any and all costs realized or incurred by Mobil in securing and
maintaining such bond.
ARTICLE 10
SELECTION OF OPERATOR AND OPERATING AGREEMENT
10.1 If the Parties submit a Joint Bid Hereunder, the Parties
agree that the Operator for any jointly acquired lease(s) under this
Agreement shall be either Mobil or Enserch (if a Party owns an interest in
such lease). Operatorship shall be determined within thirty (30) days
following issuance of all leases and shall be selected on a Designated
Prospect basis with each individual selection covering all blocks which
comprise said Designated Prospect.
10.2 The Party which generated the prospect for which the
lease(s) was acquired shall have the option to be designated Operator. If
a prospect acquired by two or more of the Parties was generated by two or
more Parties independently of one another, then the Party with the largest
interest in the prospect (with 33.33334% and 33.33333% considered as
equal) shall have the option to be designated Operator thereof.
10.3 In the event that: (i) a prospect was generated by two or
more Parties, (ii) no Party has a larger interest in the prospect such
that two or more of the Parties have an equal interest in the prospect and
(iii) such Parties do not reach agreement as to which Party shall be
designated Operator, the order of the right to elect to be designated
Operator of such Designated Prospect(s) shall be determined by lot between
such owners. As to those prospects which the same two Parties own in
equal proportions, each of said Parties will, from such drawing of lots,
receive an assigned selection number either 1 or 2. Prospect selections
win be made by each such Party in sequential order as follows: 1, 2, 2, 1,
1, 2, 2, 1, etc. As to those prospects which the same three Parties own
in equal proportions, each of said Parties will then, from such drawing of
lots, receive an assigned selection number either 1, 2 or 3. Prospect
selections will then be made by each such Party in sequential order as
follows: 1, 2, 3; 2, 3, 1; 3, 1, 2; 1, 2, 3; 2, 3, 1; 3, 1, 2; etc.).
ARTICLE 11
RELATIONSHIP OF THE PARTIES
11.1 It is expressly agreed that the relationship of the
Parties as created by this Agreement is not as members of any partnership,
joint venture or association; that the duties, obligations and liabilities
of the Parties are several and not joint; and that nothing contained
herein shall be construed to create or impose any partnership duty,
obligation or liability on any Party. Each Party hereby elects to be
excluded from the application of all or any part of the provisions of
Subchapter K, Chapter 1, Subtitle A, Internal Revenue Code of 1986, as
amended, or similar provisions of applicable state laws.
ARTICLE 12
APPLICABLE LAWS, RULES AND REGULATIONS
12.1 The provisions hereof shall be subject to all applicable
valid laws and all applicable valid rules, regulations and orders of any
governmental authority having jurisdiction; and in the event any provision
hereof shall be found to be contrary to, or inconsistent with, any such
law, rule, regulation or order, the latter shall prevail and this
Agreement shall be deemed modified to the extent, but only to the extent,
necessary for it to be consistent therewith, subject to the further
provisions of this Article 12.
12.2 In the event a Joint Bid Hereunder would be disqualified
under any provision of 30 CFR 256.44 or under any other applicable law,
rule, regulation or order, then no such bid shall be submitted, and this
Agreement shall thereupon terminate as to each Subject Block affected by
such disqualification (except that the obligations of the Parties under
Article 7 hereof shall remain in force and effect during the period of
time specified therein).
12.3 Each Party hereby represents that:
12.3.1 Such Party has heretofore filed with the
appropriate Minerals Management Service
("MMS") office(s) all statements, reports,
documents and other matters required by 30 CFR
256.41, DOI notice of sale and/or any other
applicable law, rule, regulation or order in
order for such Party to qualify to submit a
bid at a Subject Sale, to the extent same may
be so filed prior to the time of actually
submitting a bid; and
12.3.2 Such Party:
(a) is now and will remain during the term of this
Agreement, in full compliance with all
applicable joint bidding requirements of 30
CFR 256.41 (including, without limitation,
each Statement of Production required
thereby), of the DOI notice of sale and of any
other applicable law, rule, regulation or
order; and
(b) is not now, and will not, during the term of
this Agreement, become, a party to (i) any
pre-lease agreement described in 30 CFR
256.44 that would disqualify a Joint Bid
Hereunder at a Subject Sale or (ii) any other
agreement which would preclude such Party from
joining in and being fully bound by the
provisions of this Agreement; and
(c) can and will, in connection with any Joint Bid
Hereunder to which it is a Party, comply with
all requirements of 30 CFR 256.41 et seq.
applicable to a Subject Sale.
ARTICLE 13
ASSIGNABILITY
13.1 A Party's rights and obligations under this Agreement may
be assigned, in whole or in part, subject to the following:
13.1.1 No such assignment, other than an assignment
to an Affiliate, shall be made without the advance
written consent of each other Party; and any such
assignment not so consented to shall be void.
13.1.2 Any assignment permitted hereunder shall be made
expressly subject to the provisions of Agreement;
and the assignee(s) thereunder shall, to the extent
of such assignment, assume all of the obligations,
and be bound by all of the provisions, of this
Agreement.
ARTICLE 14
NOTICES
14.1 All notices required or permitted to be given to a Party
under this Agreement shall be given (i) by United States mail or telegram,
postage or charges prepaid, and addressed to that Party at its address as
shown opposite its name on the signature page hereof or (ii) by telephone
to that Party's representative or alternate, confirmed in writing as above
provided. Each Party shall have the right to change its address for
notice purposes at any time(s) by giving written notice thereof to each
other Party.
ARTICLE 15
TERM
15.1 Unless sooner terminated, in whole or in part, by reason
of some other provision hereof, or by mutual agreement of the Parties,
this Agreement, with respect to each Subject Block, shall terminate on
December 31, 2000; provided however;
15.1.1 The obligation of each Party with respect to
confidential Technical Information under Section 7.5
hereof shall remain in effect during the period(s) of
time specified therein; and
15.1.2 The provisions of Articles 8, 10 and of Sections
13.2 and 16.1 hereof shall remain in effect for any
additional period(s) of time as may be required in
order for such provisions to be complied with
following a Subject Sale.
15.2 Any Party may, with respect to a Subject Block, provided
that no Subject Sale has theretofore been held with respect to that
Subject Block, withdraw from further participation in this Agreement
(thereby terminating its further rights and obligations under this
Agreement) at any time during the term hereof but after six (6) months
from the date hereof, by giving written notice thereof to each other
Party; except that any Joint Bid Hereunder which has been submitted to the
MMS by the Parties may not be rescinded without the mutual consent of all
Parties participating in such joint bid; provided however:
15.2.1 The obligation of such withdrawing Party with respect
to confidential Technical Information under Sections
7.5, 7.6 and 7.7 shall remain in effect during the
period of time specified therein; and
15.2.2 If such withdrawing Party, either solely or jointly
with others, should, during the remaining term of this
Agreement, acquire an interest in such Subject Block,
then such Party shall, within thirty (30) days after
such acquisition, give written notice thereof to each
other Party. Such other Party shall have the option,
for a period of thirty (30) days after receipt of such
notice, to give such withdrawing Party written notice
of its election (if it so elects) to acquire its
prorata share (i.e., that share which is equal to its
participating interest under Section 3.1 hereof) of the
acquired interest by reimbursing such withdrawing Party
for such prorata share of the acquisition costs and by
assuming such prorata share of the withdrawing Party's
obligations relating thereto.
ARTICLE 16
SUBSEQUENT ACQUISITIONS
16.1 If a Party, including an Affiliate (an "Acquiring Party"),
either solely or jointly, should acquire (or obtain the right to acquire)
from others, within one (1) year after the Subject Sale, or December 31,
2000, whichever is the earlier, a leasehold interest in a Subject Block by
farmin, purchase or any means other than bidding at a Subject Sale and if
an unaccepted bid was previously made by one or more Parties on such
Subject Block at a Subject Sale pursuant to this Agreement, then such
Acquiring Party shall, within thirty (30) days after the acquisition of
such interest or right, give written notice thereof (together with the
details of such acquisition) to each other Party that participated in such
unaccepted bid (an "Unsuccessful Bidding Party"). An Unsuccessful Bidding
Party shall have thirty (30) days after receipt of said notice in which to
give the Acquiring Party written notice of its election (if it so elects)
to purchase from the Acquiring Party that portion of the Acquiring Party's
interest stated in Section 8.1.1 hereof by reimbursing the Acquiring Party
for said part of the Acquiring Party's acquisition costs and by assuming
the said part of the Acquiring Party's obligations.
ARTICLE 17
ENTIRE AGREEMENT
17.1 This Agreement supersedes and replaces any oral or written
communication heretofore made between the Parties relating to the subject
matter hereof, except for any prior written confidential agreements
between the Parties pertaining to data or information or blocks covered by
this Agreement. This Agreement may not be modified or changed except by
an instrument in writing signed by all Parties.
17.2 This Agreement may be executed in counterpart, any of
which shall be considered an original.
IN WITNESS WHEREOF, the Parties have executed this Agreement as
of the date first above stated.
WITNESS: MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC.
_____________________________
_____________________________ By: _____________________________
Attorney-in-Fact
WITNESS: ENSERCH EXPLORATION, INC.
_____________________________
______________________________ By: ______________________________
WITNESS: READING & XXXXX DEVELOPMENT CO.
_____________________________
______________________________ By: ______________________________
EXHIBIT "B"
Attached to and made a part of that certain Joint Bidding Agreement dated
September 1, 1995 by and between Mobil Oil Exploration & Producing Southeast
Inc., Enserch Exploration, Inc. and Reading & Xxxxx Development Co.
AMENDMENT TO BIDDING AGREEMENT
In consideration of the covenants and agreements hereinafter expressed,
and for other valuable considerations received, the undersigned parties
agree that the names and percentages shown in Article 3 (RIGHT OF
PARTICIPATION) of that certain Joint Bidding Agreement, dated September 1,
1995, by and between Mobil Oil Exploration & Producing Southeast Inc.,
Enserch Exploration, Inc. and Reading & Xxxxx Development Co., shall be
and is hereby amended insofar and only insofar as it covers the below
listed Area/Blocks(s) for OCS Sale No. ___ :
AREA BLOCK(S)
__________________________ __________________________
to read as follows:
MOBIL __________________ %
ENSERCH __________________ %
READING & XXXXX __________________ %
Except as amended hereby, all other terms and provision of the Agreement
shall remain in full force and effect as written.
Mobil Oil Exploration & Producing Southeast Inc.
By: ________________________ Executed & Effective: _____________________
Enserch Exploration, Inc.
By: ________________________ Executed & Effective: _____________________
Reading & Xxxxx Production Co.
By: ________________________ Executed & Effective: _____________________
Exhibit "C"
Attached to and made a part of that certain Joint Bidding Agreement dated
September 1, 1995 by and between Mobil Oil Exploration & Producing Southeast
Inc., Enserch Exploration, Inc. and Reading & Xxxxx Development Co.
MEMORANDUM
AGREEMENT TO PARTICIPATE IN JOINT BIDDING
Pursuant to Article 6 (MEETINGS AND DETERMINATION OF BIDS) of the that
certain Joint Bidding Agreement, dated September 1, 1995, by and between
Mobil Oil Exploration & Producing Southeast Inc., Enserch Exploration,
Inc. and Reading & Xxxxx Development Co., the Parties signing below record
agreement to enter a joint bid for OCS Sale No. ___ as follows:
AREA BLOCK HIGHEST SUGGESTED BID
___________________ __________ ____________________________________
PARTICIPATION % Mobil Oil Exploration & Producing
Southeast Inc.
________________________ By: __________________________________
Enserch Exploration, Inc.
________________________ By: __________________________________
Reading & Xxxxx Development Co.
________________________ By: __________________________________
Date Signed: ________________________
Exhibit "D"
Attached to and made a part of that certain Joint Bidding Agreement dated
September 1, 1995 by and between Mobil Oil Exploration & Producing Southeast
Inc., Enserch Exploration, Inc. and Reading & Xxxxx Development Co.
MEMORANDUM
ELECTION REGARDING
PARTICIPATION IN JOINT BIDDING
Pursuant to Article 6 (MEETINGS AND DETERMINATION OF BIDS) of the that
certain Joint Bidding Agreement, dated September 1, 1995, by and between
Mobil Oil Exploration & Producing Southeast Inc., Enserch Exploration,
Inc. and Reading & Xxxxx Development Co., the non-participating party (or
parties) has elected not to participate in the highest suggested bid shown
below for OCS Sale No. ____. The participating parties, if more than one,
agree to consider a joint bid at such highest suggested amount.
AREA BLOCK HIGHEST SUGGESTED BID
_____________________ _____________ _________________________________
PARTICIPATING PARTY:
By: _____________________________
NON-PARTICIPATING PARTY:
By: _____________________________
Date Signed: _____________________
