PARTICIPATION AGREEMENT
Exhibit 10.18
THIS AGREEMENT made and entered into this 10th day of September, 2008, by and between
Xxxxx Operating Company, whose address is 0000 Xxx-Xxxxxxxxx Xxxxx, Xxxxx, Xxxxxxxx 00000
(hereinafter called “XXXXX”) and NYTEX Petroleum, LLC (hereinafter called “Participant”) as to
Participant’s participation in the Lakeview Area of Mutual Interest Prospects located in Pittsburg
and Xxxxxxx Counties, Oklahoma.
RECITALS
XXXXX holds operating working interest ownership in certain oil, gas, and mineral leases and the
leasehold estates created thereby (the “Leases”), covering lands located in Pittsburg and Xxxxxxx
Counties, Oklahoma and within the Lakeview Area of Mutual Interest, hereinafter referred to as the
“Contract Area”; the Prospects and Lakeview Area of Mutual Interest all described more particularly
in Exhibit “A” attached hereto and made a part hereof for all purposes.
XXXXX is the Operator (hereinafter sometimes referred to as “Operator”) of the Contract Area
pursuant to the Joint Operating Agreement attached hereto as Exhibit “B”.
Participant desires to acquire and XXXXX desires to sell a portion of XXXXX’ working interest in
all of the Prospects and to enter into an agreement for the exploration and development of the
Contract Area, hereinafter referred to as the “Agreement”.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual covenants and promises herein
contained, the parties hereto agree as follows:
I
ACREAGE PURCHASE
ACREAGE PURCHASE
1.1 Participant shall pay XXXXX, as a prospect entry fee, the sum of $60.00 per
net leasehold acre to earn a 20.0% undivided gross Working Interest in the acreage making
up each Prospect.
1.2 All leasehold acreage shall be limited from the surface to the base of the Hartshorne
formation.
1.3 The various Leases making up each of the Prospects’ acreage are subject to royalty and
overriding royalty interests, resulting in Net Revenue Interests for each of the Prospects’ leases
as designated in Exhibit A attached hereto. Operating expenses for each well in each of the
Contract Areas in which Participant holds a working interest shall be proportionately charged to
Participant on the basis of One Hundred Percent (100%) of the Working Interest pays for One Hundred
Percent (100%) of the expenses to operate the well.
II
INITIAL TEST XXXXX
INITIAL TEST XXXXX
The Operator has drilled but not yet completed eight (8) Initial Test Xxxxx on the eight
(8) Prospects listed in Exhibit A with due diligence and in a workmanlike manner to a depth
sufficient to adequately test the geological horizon(s) projected to contain hydrocarbons.
Participation
Agreement — Page 1
III
COSTS OF INITIAL ACREAGE, DRILLING, COMPLETING AND PLACING INTO
PRODUCTION THE INITIAL TEST WELL ON EACH PROSPECT
COSTS OF INITIAL ACREAGE, DRILLING, COMPLETING AND PLACING INTO
PRODUCTION THE INITIAL TEST WELL ON EACH PROSPECT
3.1 Participant shall participate in and to the drilling and completion of the eight (8)
Initial Test Xxxxx on an actual cost basis. XXXXX shall provide Participant with an Authority for
Expenditure (“AFE”) for each of the eight (8) Initial Test Xxxxx representing both drilling and
completion cost estimates along with an invoice to Participant for Participant’s 20% working
interest in such xxxxx.
3.2 Each of the eight (8) Initial Prospect Xxxxx will occupy a quarter section, equating to
160 acres. In the event any subsequent xxxxx are drilled within the same quarter section
containing an Initial Prospect Well, Participant will have the right to participate in such
subsequent well for its 20% working interest on an actual cost basis, with no additional acreage
costs.
3.3 The Cost to Drill, Test and Complete the Initial Prospect Xxxxx are estimates. In the
event the actual costs are more or less than estimated costs, Operator shall deliver Participant an
accounting of the actual costs and provide Participant with either a 1) credit or refund if the
actual costs are lower than the estimated costs, or 2) an invoice for the additional costs as
applicable.
IV
SUBSEQUENT PROSPECTS
SUBSEQUENT PROSPECTS
4.1 Participant shall have the right to participate for its 20% working interest in any
Subsequent Prospect Xxxxx proposed to be drilled in the Contract Area. Participant shall pay a
prospect entry fee for each Subsequent Prospect on the same terms as the Initial Prospect Xxxxx as
described in Item 1.1 above. The costs for drilling and completion of Subsequent Prospect Xxxxx
will be on an actual cost basis.
4.2 XXXXX shall provide Participant written notice of a proposed Subsequent Prospect
Well along with the associated net revenue interest in the leasehold acreage and Participant’s
proportionate costs for the prospect entry fee, drilling and completion of such well. The
Participant shall have three (3) business days from receipt of such notice to provide XXXXX with
its election to participate or not participate in the proposed Subsequent Prospect Well.
V
INTEREST EARNED
INTEREST EARNED
Upon completion of the Initial Prospect Xxxxx, and each Subsequent Prospect Well, XXXXX
shall assign to PARTICIPANT, without warranty of title except by, through or under assignor, an
assignment of an undivided working interest (and the appropriate undivided net revenue interest
equaling net revenue interest applicable to the subject Prospect leases as indicated in Exhibit A
for the Initial Prospects or in the notice of Subsequent Prospect Xxxxx delivered by XXXXX
pursuant to Item 4.2 above) in the (a) Prospect Lease(s), equal to the total amount of working
interest actually acquired and paid for by PARTICIPANT from XXXXX, (b) the Prospect Well and all
oil, gas, and related hydrocarbons produced, saved, and marketed therefrom, (c) all other personal
property and equipment located on
Participation Agreement — Page 2
the Leases, and (d) all appurtenances thereto. Such assignment shall be subject to all the
terms and conditions of this Agreement and any other agreements relating to the Contract Area and
existing as of the date of this Agreement. Upon the request of Participant, XXXXX shall furnish to
Participant copies of the Leases and all title data and title opinions relating to the Leases in
the possession of XXXXX.
VI
OPERATING AGREEMENT
OPERATING AGREEMENT
All joint operations in each of the Prospects’ Contract Areas shall be conducted in
accordance with an A.A.P.L. Form 610-1989 Model Form Operating Agreement to be signed between
Participant and XXXXX, attached hereto as Exhibit B. In the event of a conflict between the terms
and conditions of the Operating Agreement and this Participation Agreement, the terms and
conditions of this Agreement shall control.
VII
NON-COMPETE
NON-COMPETE
Participant acknowledges that all leasing within the Contract Area shall occur under
the supervision of XXXXX. Participant shall not pursue the acquisition of any oil and gas leases
or mineral rights (whether or not leased), directly or indirectly, within the Contract Area for
the term of this Participation Agreement without first notifying XXXXX and obtaining written
confirmation from XXXXX that such acquisition will not conflict with any current leasing
activities. Any acquisition of oil and gas leases or mineral rights within the Contract Area by
Participant without written consent from XXXXX during the term of this Participation Agreement
shall be a material breach of this Participation Agreement.
VIII
ENTIRE AGREEMENT
ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties and no waiver,
representation, modification or agreement, oral or otherwise, shall affect the subject matter
hereof unless and until such waiver, representation or agreement is reduced in writing and
executed by an authorized representative of the parties.
IX
RELATIONSHIP OF THE PARTIES
RELATIONSHIP OF THE PARTIES
Except as otherwise provided, the liabilities of the Parties hereto shall be several
and not joint or collective, and both Parties shall be responsible only for its share of the costs
and liabilities incurred as provided hereunder. It is not the purpose or intention of this
Agreement to create any partnership, mining partnership, or association, and neither this
Agreement nor the operations hereunder shall be construed or considered as creating any such
relationship.
X
TERM
TERM
Subject to the other provisions of this Agreement, the same shall remain in force for
the life of the oil and gas leases covering the jointly owned leased premises and any extensions
or renewals thereof and new leases covering any part of a Contract Area within six months of
expiration of the lease, whether by production or otherwise.
Participation Agreement — Page 3
XI
NOTICES AND PAYMENTS
NOTICES AND PAYMENTS
All correspondence, notices and payments to XXXXX shall be delivered in person or by
first-class mail as follows:
Xxxxx Operating Company
0000 Xxx-Xxxxxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
0000 Xxx-Xxxxxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
XII
GENERAL
GENERAL
12.1 If any provision of this Agreement shall be found void, voidable or unenforceable,
the remaining provisions shall nevertheless remain in force.
12.2 This Agreement shall be deemed for all purposes to have been made and entered into in
Pittsburg County, wherein it is expressly made performable and enforceable by any court of
competent jurisdiction in accordance with the laws of the State of Oklahoma, which shall govern and
control the construction and application of the terms hereof.
12.3 Participant, to the extent that he/she is current on all payment obligations under this
Participation Agreement and has not violated any of the terms in Item VII “Non-Compete” above,
shall have and retain the right to participate in any and all future drilling operations in the
Contract Area. Absent any written agreement otherwise, such right shall be limited to
participating in the referenced future drilling operations at the same participation percentage as
acquired pursuant to the terms of this Participation Agreement.
XIII
PARTICIPANT ACKNOWLEDGEMENT
13.1 With respect to the interest acquired by Participant hereunder:
A. Participant understands that the interest described herein has not been registered
pursuant to the Securities Act of 1933, as amended, nor the securities laws of any state.
The interest has not been approved or disapproved by the Securities and Exchange Commission
nor by the securities commission of any state.
B. Participant acknowledges that there is to be no advertisement or public solicitation
to sell the interest.
C. Participant is purchasing the interest solely for its own account and not for resale
or distribution to others and understands that XXXXX and Operator have relied upon such
representation in agreeing to permit the participation in the prospect.
E. PARTICIPATION IN OIL AND GAS EXPLORATION IS HAZARDOUS BY ITS NATURE AND
INVOLVES A HIGH DEGREE OF RISK AND PARTICIPANT ACKNOWLEDGES THAT THERE IS NO ASSURANCE THAT
HE WILL MAKE A PROFIT OR EVEN RECOVER HIS INVESTMENT.
Participation Agreement — Page 4
F. Participant (i) represents that it has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of participation in the
prospects; (ii) has adequate means for providing for its current needs and personal contingencies;
(iii) has no need for liquidity in this investment; and (iv) can absorb the loss of such investment
in its entirety.
EXECUTED as of the day and year first above written.
| XXXXX Operating Company |
||||
| By: | /s/ Xxxxxxx Xxxxx | |||
| Xxxxxxx Xxxxx, President | ||||
| NYTEX Petroleum, LLC |
||||
| By: | /s/ Xxxxxxx Xxxxxx | |||
| Xxxxxxx Xxxxxx, President | ||||
Participation Agreement — Page 5
Exhibit “A”
to
Participation Agreement
to
Participation Agreement
Lakeview Contract Area
Pittsburg and Xxxxxxx Counties, Oklahoma
Pittsburg and Xxxxxxx Counties, Oklahoma
| Lease | Prospect | |||||||||
| Initial Prospect Xxxxx | Location | NRI | Acreage | |||||||
Little No. 1-2
|
Section 2-9N-17E | 79 | % | 160 | ||||||
Brin No. 2-18
|
Section 18-9N-18E | 75 | % | 160 | ||||||
Monk No. 1-10
|
Section 10-9N-17E | 79 | % | 160 | ||||||
Xxx No. 3-11
|
Section 11-9N-17E | 78.795 | % | 160 | ||||||
Xxx No. 4-11
|
Section 11-9N-17E | 78.795 | % | 160 | ||||||
Giesla No. 1-3
|
Section 3-9N-17E | 79 | % | 160 | ||||||
Xxxxx Patch No. 4-13
|
Section 13-9N-17E | 79 | % | 160 | ||||||
Lakeview No. 3-14
|
Section 14-9N-17E | 79 | % | 160 | ||||||
Contract Area:
Exhibit A to Participation Agreement — Page 1
Exhibit “B”
to
NYTEX 2008-11 Diversified Exploration Fund Participation Agreement
to
NYTEX 2008-11 Diversified Exploration Fund Participation Agreement
JOINT OPERATING AGREEMENT
Exhibit B to Participation Agreement — Page 1
