PARTICIPATION AGREEMENT
XXXXXX ISLAND 000 XXXXXXXX
XXXXXXXX, XXXXXXXXX
This Participation Agreement ("Agreement") is made and entered into
effective as of the 1st day of July, 2005 by and between Xxxxxx Oil & Gas
Corporation ("Xxxxxx"), and Ridgewood Energy Corporation ("Ridgewood").
RECITALS
WHEREAS, Xxxxxx has identified a prospect on Xxxxxx Island block 357
and has acquired Oil & Gas Lease OCS-G 23884 dated June 1, 0000 xxxxxxxx xxxxx
000 xxxx xxx Xxxxxx Xxxxxx of America; and, WHEREAS, Xxxxxx plans to drill or
participate in the drilling of an initial test well on Xxxxxx Xxxxxx xxxxx 000,
XXX-X 00000; and,
WHEREAS, Xxxxxx has offered to Ridgewood the opportunity to participate
in the drilling of the initial test well and to acquire a 25% working interest
in block 357, OCS-G23884, less and except the NE/4 of the lease from the surface
to 11,500' subsea (hereafter "Lease"), and Ridgewood has accepted Walter's offer
all in accordance with the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreement
herein contained, the parties hereto agree as follows:
SECTION I
Initial Costs
1.01 Within ten (10) days of Ridgewood's execution of this
Agreement, Ridgewood agrees to pay Xxxxxx $141,203.00 (which
represents Ridgewood's 25% share of the Lease bonus, rental
and shallow hazard survey costs incurred by Xxxxxx).
SECTION 11
Initial Test Well
2.01 Xxxxxx plans to participate in the drilling of an initial test
well on the Lease. The initial test well will be drilled from
a surface location of approximately 5,625' FSL and 6,610' FEL
of the Lease and drilled to a depth of 15,800' TVD
(hereinafter "Initial Test Well"). As consideration for the
opportunity to earn a twenty-five percent (25%) working
interest in the Lease, Ridgewood shall bear Thirty-Three and
One-Third percent (33.33%) of the costs to drill the Initial
Test Well to casing point and through plugging and
abandonment, if the Initial Test Well is not saved for
production. This disproportionate cost sharing obligation
shall be referred to as the "Promote." The Promote will be
applicable to the dry hole costs of the Initial Test Well and
will be limited to 110% of the Initial Test Well's estimated
dry hole cost as noted in the attached AFE. The Promote will
also apply to any substitute well or sidetrack of the Initial
Test Well until Xxxxxx has received 110% of the original AFE
dry hole costs. Concurrent with Ridgewood's execution of this
Agreement, Ridgewood will be deemed to have approved the
attached AFE and well plan.
2.02 Subject only to rig availability and the ability to obtain the
required governmental permits, Xxxxxx and Ridgewood agree that
if the Initial Test Well is not spudded on or before December
1, 2005 ("Commencement Date"), and such date has not been
extended by Ridgewood, then this Agreement shall ipso facto
terminate. Within 10 days of such termination, Xxxxxx shall
reimburse Ridgewood for any payments it received in accordance
with Paragraph 1.01 of this Agreement and Ridgewood shall
submit assignments to Xxxxxx re-conveying Ridgewood's 25%
working interest in the Lease previously received from Xxxxxx,
which assignment shall be free and clear of any liens,
charges, or lease burdens, overriding royalty interest, or any
other encumbrance created by Ridgewood. For clarification
purposes only, there shall be no other penalty(ies) assessable
to either party hereto for failure of the Initial Test Well to
be spudded on or before the Commencement Date.
2.03 It is understood and agreed that Newfield Exploration Company
(`Newfield") will have a 50% working interest in the Lease and
Initial Test Well and will be the designated operator.
SECTION III
Assignment and Assumption of Rights
3.01 Within ten (10) days from receipt of Ridgewood's payment
described in 1.01 above, Xxxxxx shall assign to Ridgewood
Twenty Five percent (25%) operating rights interest in the
Lease. The interest assigned to Ridgewood in the Lease shall
be subject to the existing royalty burden and a 2.25% of
8/8ths overriding royalty interest ("ORRI") to be reserved by
Xxxxxx, all proportionately reduced to Ridgewood's assigned
interest. Xxxxxx represents to Ridgewood that total Lease
burdens created by, through and under Xxxxxx as of the
effective date of this Agreement, including lessor's royalty,
are no greater than 18.917% (of 8/8ths). The form of
Assignment is attached hereto as Exhibit "A."
SECTION IV
Operating Agreement
4.01 Contemporaneous with the execution of this Agreement, the
parties hereto agree to execute a mutually agreeable operating
agreement ("JOA"), naming Newfield operator of the Lease. Both
parties hereto acknowledge that the JOA is a three-party
agreement also requiring Newfield's signature. All operations
on the Initial Test Well and any and all subsequent operations
on the Lease shall be conducted in accordance with the terms
and provisions of the JOA. If there are any conflicts between
this Agreement and the JOA, the terms and provisions of this
Agreement shall prevail and govern.
SECTION V
Notices
5.01 All notices, requests or demands to be given under this
Agreement shall be in writing and governed and directed to the
representatives as specified below:
Ridgewood Energy Corporation Xxxxxx Oil & Gas Corporation
00000 Xxx Xxxx Xx., Xxxxx 000 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000 Xxxxxxx, XX 00000
Attn: Mr. W. Xxxx Xxxxx Attn: Mr. Xxx Xxxxxx
Phone: 000-000-0000 Phone: 000-000-0000
Fax: 000-000-0000 Fax: 000-000-0000
SECTION VI
GOVERNING LAW AND BREACH OF CONTRACT
6.01 This Agreement shall be governed by the laws of the State of
Texas except where the Maritime Laws of the United States of
America are applicable. In the event that any dispute results
in formal legal action, venue shall be appropriate in the
federal or state courts of Xxxxxx County, Texas.
6.02 In the event of a breach of this Agreement by any party
hereto, the non-breaching party shall be entitled to all
remedies available at law or equity, including but not limited
to, specific performance, monetary damages and injunctive
relief.
SECTION VII
MISCELLANEOUS
7.01 Xxxxxx shall provide Ridgewood with full and complete access
to Walter's files, records and data, so that Ridgewood may
perform its due diligence review of Walter's acquisition,
ownership and obligations associated with the Lease.
Additionally, Xxxxxx shall provide Ridgewood with access to
its technical data associated with the Lease, including
seismic, maps, well data and geological data, subject however,
to all confidentiality and data licensing restrictions.
7.02 A term, provision, covenant, representation, warranty, or
condition of this Agreement may be waived only by written
instrument executed by the party waiving compliance. The
failure or delay of any party in the enforcement or exercise
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.
7.03 This Agreement, together with all of its exhibits, is intended
by the parties to be a complete and final statement of the
agreement of the parties with respect to the subject matter
hereof, and supersedes any prior oral or written statements or
agreements between the parties hereto.
7.04 The terms and provisions hereof shall be binding upon and
inure to the benefit of Xxxxxx and Ridgewood, and their
respective heirs, legal representatives, successors and
assigns, and shall be covenants running with the Lease.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first set forth above.
WITNESSES XXXXXX OIL GAS CORPORATION
[ILLEGIBLE SIGNATURE] /s/ Xxx X. Xxxxxx
--------------------------
Xxx X. Xxxxxx
Vice President
[ILLEGIBLE SIGNATURE]
RIDGEWOOD ENERGY CORPORATION
[ILLEGIBLE SIGNATURE] /s/ W. Xxxx Xxxxx
------------------
Executive 'vice President
[ILLEGIBLE SIGNATURE]
EXHIBIT "A"
Attached to and made a part of that certain Participation Agreement
dated July 1, 2005 between Xxxxxx Oil & Gas Corporation and Ridgewood
Energy Corporation.
ASSIGNMENT OF OPERATING RIGHTS TO OIL AND GAS LEASE
OCS-G 00000
XXXXXX XXXXXX XX XXXXXXX ss.
OUTER CONTINENTAL SHELF ss.
OFFSHORE LOUISIANA ss.
For and in consideration of the sum of One Hundred Dollars ($100.00)
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Xxxxxx Oil & Gas Corporation, a Texas Corporation,
whose mailing address is 0000 Xxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000
(hereinafter called "Assignor"), does SELL, TRANSFER, ASSIGN, SET OVER AND
CONVEY unto Ridgewood Energy Corporation, a __________________ Company, whose
mailing address is 00000 Xxx Xxxx Xx., Xxxxx 000, Xxxxxxx, XX 00000,
(hereinafter called "Assignee"), a 25.0000% operating rights interest in and to
the following federal oil and gas Lease ("Lease"):
Oil and Gas Lease No. OCS-G 23884 dated June 1, 2002 from the United
States of America, as Lessor, to Xxxxxx Oil & Gas Corporation, as
Lessee, covering Xxxxxx Island Area, Block 357, OCS Leasing Map,
Louisiana Map No. 4A, containing 4999.88 acres;
LESS AND EXCEPT the Northeast Quarter (NE14) of the Lease from the
surface down to 11,500' subsea (hereinafter referred to as ("Assigned
Interest").
Subject to the matters set forth herein, this Assignment is made without
warranty of title, express, implied or statutory, even for return of any
consideration paid therefor; provided only that Assignor warrants that it has
not heretofore granted or conveyed to any other party any interest in or any
lien or encumbrance on the interest being assigned hereunder in the Lease except
as described herein.
WITH RESPECT TO ANY PERSONALTY OR CHATTELS CONVEYED HEREBY, ASSIGNOR HEREBY
NEGATES AND DISCLAIMS THE IMPLIED WARRANTY OF MERCHANTABILITY AND THE IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND ANY IMPLIED WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MODELS. ASSIGNEE AND ASSIGNOR AGREE THAT, TO
THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF
CERTAIN WARRANTIES CONTAINED IN THIS INSTRUMENT ARE "CONSPICUOUS" DISCLAIMERS.
TO HAVE AND TO HOLD the Assigned Interests hereby conveyed, together
with all and singular rights and appurtenances thereto in anyway belonging unto
Assignee, its successors and assigns.
This Assignment is made by Assignor and accepted by Assignee subject to
the following:
1) the terms, provisions and conditions of the Lease and any limitation on
or contained in the Lease; 2) That certain Participation Agreement
dated July 1, 2005 by and between Assignor and Assignee and covering
the Assigned Interest;
3) That certain Offshore Operating Agreement dated July 1, 2005 by and
between Newfield Exploration Company, as Operator, and Assignor and
Assignee, as Non-Operators, and covering the Assigned Interest;
4) Assignor reserves unto itself, and retains an overriding royalty
interest equal to 2.25% of eight-eights (8/8ths) in and to all
hydrocarbons that are produced, saved, and sold from the Lease. Said
overriding royalty shall be free of all costs of any kind whatsoever
including but not limited to costs associated with exploration,
development, production or operating, but shall bear its proportionate
share of severance and production taxes unless provided otherwise in
the Lease. Said overriding royalty shall be calculated and paid or
delivered to Assignee in the same manner as provided in the Lease
affected thereby for the calculation and payment or delivery of
royalties therein reserved to the Lessor,
a) It is understood that the overriding royalty interest reserved
hereinabove is an 8/8ths number and that Assignee shall bear its
proportionate share of such overriding royalty interest based on the
Assigned Interest herein.
4) The terms and conditions of this Assignment shall extend to and be
binding upon the successors and assigns of the parties.
IN WITNESS WHEREOF, this Assignment of Operating Rights Interest is
executed and effective this day of, 2005.
WITNESSES: ASSIGNOR:
Xxxxxx Oil & Gas Corporation
________________________
________________________
By: ________________________
Xxx X. Xxxxxx
Vice President
WITNESSES: ASSIGNEE:
Ridgewood Energy Corporation
________________________
________________________
By: ________________________
W. Xxxx Xxxxx
Executive Vice President
STATE OF TEXAS
COUNTY OF XXXXXX
On this _____ day of __________ 2005 before me appeared W. Xxxx Xxxxx,
to me personally known, who, being by me duly sworn, did say that he is the
Executive Vice President of Ridgewood Energy Corporation, and that the foregoing
instrument was signed on behalf of said company, and said W. Xxxx Xxxxx
acknowledged said instrument to be the free act and deed of said corporation.
__________________________
NOTARY PUBLIC
My Commission Expires __________________________.
STATE OF TEXAS
COUNTY OF XXXXXX
On this _____ day of __________ 2005 before me appeared before me
appeared Xxx X. Xxxxxx, to me personally known, who, being by me duly sworn, did
say that he is the Vice President of Xxxxxx Oil & Gas Corporation, and that the
foregoing instrument was signed on behalf of said partnership, and said Xxx X.
Xxxxxx acknowledged said instrument to be the free act and deed of said
corporation.
__________________________
NOTARY PUBLIC
My Commission Expires __________________________.
[NEWFIELD LOGO]
Authorization for Expenditure
[ILLEGIBLE TABLE]
Newfield
Exploration
Company
Authority
For
Expenditure
Newfield Exploration Company, Authority For
Expenditure
Well Name: El 357 WELL: #1 18-Jul-05
AFE Type: Exploration
AFE NUMBER: 8955 PRE
AFE Description: DRILL & EVALUATE DHC COMPLETE COMPLETE TOTAL
1 850 DRILLING INTANGIBLE GROSS
850 .001 LOC PERMITS 5,000 5,000
850 .002 LOC SURVEYS 25,000 25,000
850 .003 LOC PREPARATION 0 0
850 .004 LOC CLEAN UP 0 0
850 .005 LOC INSURANCE 132,000 132,000
850 .006 LOC MISC 0 0
850 .007 LOC CONTINGENCY 1,368,100 1,368,100
850 0.011 DRLO MOB DEMOB 650,000 650,000
000 .000 XXXX RIG 5,520,000 5,520,000
000 .000 XXXX FUEL 241,500 241,600
000 .000 XXXX XXXXX 9,200 9,200
000 .000 XXXX BITS 123,000 123,000
000 .000 XXXx0 XXXXX - XXXX,X.XX 19,800 19,800
850 .021 MUD CHEMICALS 835,300 835,300
850 .022 MUD COMPLETION FLUIDS 0 0
850 .023 MUD CORROSION INHIBITOR 0 0
850 .024 MUD ACID 0 0
850 .026 RENT BOPS 8,600 8,600
850 .027 RENT DRIB. STRING 92,300 92,300
850 .029 RENT MUD EQUIPMENT 24,200 24,200
850 .029 RENT CASING TOOLS 100.000 100,000
850 .030 RENT COMMUNICATIONS 32,400 32,400
850 .031 RENT ELECT LINE XXXX 0 0
000 .000 XXXX TESTING XXXX 0 0
000 .000 XXXX MISC 4,000 4,000
850 .036 CEMENT 305,000 305,000
850 .041 SERVICES MUD LOGGING 50,600 59,600
850 .042 SERVICES OPEN HOLE LOOOINO 390,000 390.000
850 .043 SERVICES CASINO HOLE LOGGING 0 0
850 .044 SERVICES DIRECTIONAL SURVEY 5,000 5,000
850 .045 SERVICES CASINO INSPECTION 20,800 20,800
850 .046 SERVICES TUBING INSPECTION 0 0
850 .047 SERVICES TUBING TESTING 0 0
850 .048 SERVICES DRILL. PIPE INSPEC 0 0
850 .049 SERVICES BHA INSPEC 5,300 5,300
850 .050 SERVICES GALLEY 27,800 27,600
850 .051 SERVICES TRASH 5,600 8.600
850 .052 SERVICES WELDING & LABOR 8,000 8,000
850 .053 SERVICES CORE ANALYSIS 0 0
850 .054 SERVICES FISHING TOOLS 0 0
850 .055 SERVICES DIRECTIONAL TOOLS 0 0
850 .056 SERVICES 80P TESTING 0 0
850 .057 SERVICES MUDLINE HANGER 6,000 6,000
850 .058 SERVICES WELLHEAD 6,000 6,000
850 .059 SERVICES CEMENTING 95,100 85,100
850 .060 SERVICES DOCKS 32,200 32,200
850 .061 SERVICES DISPATCHER 32,200 32,200
7/18/2005
Newfield Exploration Company, Authority For
Expenditure
Well Name: El 357 WELL: #1 18-Jul-05
AFE Type: Exploration
AFE NUMBER: 8955 PRE
AFE Description: DRILL & EVALUATE DHC COMPLETE COMPLETE TOTAL
850 .062 SERVICES DIVERS 0 (0)
850 .063 SERVICES LLNER HANGER 0 0
850 .064 SERVICES GRAVEL PACK 0 (0)
850 .065 SERVICES ACIDIZ1NG 0 (0)
850 .066 SERVICES MISC 48,000 48,000
850 .071 TRANS TRUCKING 69,000 69,000
850 .072 TRANS WORKBOATS 299,000 299,000
850 .073 TRANS TUGS 0 0
850 .014 TRANS CREWBOATS 138,000 138,000
850 .075 TRANS AIR 165,800 185,600
850 .076 TRANS FUEL 120,800 120,800
850 .077 TRANS MISC 0 0
850 .081 SUPR ADMIN 46,000 46,000
850 .082 SUPR CONSULTANT 119,600 119,600
850 .083 SUPR ENGINEER 7,200 7,200
SUBTOTAL $50 511,163,000 $11,193,000
1 853 DRILLINO TANGIBLE COST
853 .01 PIPE XXXXXXX 0 0
000 .00 XXXX XXXXX 187,200 187,200
853 .03 PIPE CONDUCTOR 163,500 183,500
853 .04 PIPE SURFACE 435{000 435,000
853 .05 PIPE INTERMEDIATE 584,600 684,500
853 .06 PIPE PRODUCTION 0 0
853 .07 PIPE LINER 0 0
853 .08 PIPE TIEBACK 0 0
853 .09 PIPE TUBING 0 0
853 .16 WELLHEAD 44,000 44,000
853 .25 CASING EQUIPMENT 162,500 162,500
853 .31 CETUBTNG ACC 0 0
853 .32 CE SSSV 0 0
SUBTOTAL 833 $ 1,576,700 11,576,700
T0TAL AFE# 8955 $ 12,759,700 $ 12,759,700
7/18/2005
APPROVED: [ILLEGIBLE SIGNATURE] [ILLEGIBLE INITIALS]
DATE: 7/20/05
NEWFIELD EXPLORATION COMPANY
GENERAL INFORMATION
Field Xxxxxx Island Block 357
Well Name EI 367 #1
OCS-G 23884
AFE No. 8965
Permit Depth 16,500' MD 116,500' TVD
Water Depth /Elevation (RKB to MSL) 1320' / +- l00' est.
Drilling Contractor/ Rig Name / Type Rowan/ Gorilla IV I ILC Xxxx-up
Operating Port or Facility Fourchon, Louisiana
Port Distance From Well +-120 miles
WELL LOCATION
--------------------------------------------------------------------------------
Surface Location 5,610' FSL 6,750' FEL EI 357
--------------------------------------------------------------------------------
X Y
--------------------------------------------------------------------------------
Lat Long
--------------------------------------------------------------------------------
Bottom Hole Location 5,610' FSL 6,760' FEL EI 367
--------------------------------------------------------------------------------
WELL TYPE: [X] Vertical Well [_]Directional Well
--------------------------------------------------------------------------------
KOP NA Inclination NA Azlmuth NA Build Rate NA Drop Rate N/A
--------------------------------------------------------------------------------
2nd Build NA Inclination NA Azlmuth NA Build Rate NA Drop Rate NA
--------------------------------------------------------------------------------
GEOLOGICAL OBJECTIVES AND TARGET DESCRIPTION
--------------------------------------------------------------------------------
Bul I Sand 14,480' TVD 150'Radius 5,610' FSL 6,750' FEL EI 367
--------------------------------------------------------------------------------
2 Obj 15,300' TVD 150'Radius 6,610 FSL 8 760' FEL EI 357
--------------------------------------------------------------------------------
PERMITTED CASING PROGRAM
------------------------------------------------------------------------------------------------------
Casing Point Casing Size Casing Wt Casing Grade Casing Conn. RKB MD RKB TVD
------------------------------------------------------------------------------------------------------
Drive Pipe 36" x 1.0" 374 ppf X-56 DDS 720' 720'
------------------------------------------------------------------------------------------------------
Conductor 20" 106.5 ppf J-55 BTC 1,500' 1,500'
------------------------------------------------------------------------------------------------------
Surface 13-3/8" 68 ppf HCN-80 BTC 5,000' 5,000'
------------------------------------------------------------------------------------------------------
Drilling Intermediate 9-5/8" 53.5 ppf HCP-110 LTC 8,000' 8,000'
------------------------------------------------------------------------------------------------------
Drilling Liner 7-5/8" 39 ppf HCP-110 STL 12,000' 12,000'
------------------------------------------------------------------------------------------------------
Production Liner 5" 18 ppf HCP-110 STL 16,500' 16,500'
------------------------------------------------------------------------------------------------------
NEWFIELD EXPLORATION COMPANY
PROPOSED GEOLOGICAL EVALUATION PROGRAM
-----------------------------------------------------
Conductor Hole None
-----------------------------------------------------
17-1/2" Surface Hole LWD: None
E-Log: None
-----------------------------------------------------
12-1/4" Hole LWD: GR/Res
E-LOG: None Planned
----------------------------
Mudlogging: 5,000' to Csg Pt
-----------------------------------------------------
8-1/2" Hole LWD: GR/Res
E-LOG: None Planned
----------------------------
Mudlogging: 8,000' to Csg Pt
-----------------------------------------------------
6-1/2" Hole LWD: GRI/Res
----------------------------
E-LOG: DIL/LDT/CNL/GR
Possible SWC's
-----------------------------------------------------
Mudlogging: 12,000' to TD
-----------------------------------------------------
NEWFIELD EXPLORATION COMPANY [NEWFIELD LOGO]
XXXXXX ISLAND BLOCK 357 #1
WELL SUMMARY
[ILLEGIBLE TABLE]
NEWFIELD EXPLORATIONS
EI 357 #1
[GRAPHIC CHART OMITTED]
