3-D SEISMIC PARTICIPATION AGREEMENT
THIS AGREEMENT dated as of May 30, 1996, by and between FINA OIL AND
CHEMICAL COMPANY, ("FINA") a Delaware corporation, 00000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx, Xxxxx 00000 and DENBURY MANAGEMENT, INC. ("DENBURY"), a Texas
corporation, 00000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000 (collectively,
FINA and Denbury shall be referred to as the "FINA GROUP"); and acting
individually herein SCANA PETROLEUM RESOURCES, INC. ("SPR"), a South Carolina
Corporation, 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000 ("SPR") and
FRONTIER NATURAL GAS CORPORATION ("FRONTIER"), an Oklahoma corporation, 0000
Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000; SOUTH COAST EXPLORATION
COMPANY ("SOUTH COAST"), a Texas corporation, Two Post Oak Central, 0000 Xxxx
Xxx Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000; SOCO EXPLORATION L.P. ("SOCO"),
a Texas Limited Partnership, Two Post Oak Central, 0000 Xxxx Xxx Xxxxxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxx 00000; MATAGORDA PRODUCTION COMPANY ("MATAGORDA"), a
Texas corporation, 000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 and POLARIS
EXPLORATION CORPORATION ("POLARIS"), a Texas corporation, X.X. Xxx 0000,
Xxxxxxxx, Xxxxx 00000-0000, (collectively, the "FRONTIER GROUP").
WITNESSETH:
WHEREAS, SPR and the members of the FINA GROUP and the members of the
FRONTIER GROUP each are presently engaged in the business of exploring for oil,
gas and other hydrocarbons within the state of Louisiana; and,
WHEREAS, SPR and the members of the FINA GROUP own leases, options and
other rights to explore within a certain area of Terrebonne Parish, Louisiana
and the members of the FRONTIER GROUP own leases, options and other rights to
explore within a certain area of Terrebonne Parish, Louisiana and FINA,
individually is the owner of certain lands located in a certain area of
Terrebonne Parish, Louisiana, which areas collectively are deemed by SPR, the
FINA GROUP and the FRONTIER GROUP to be prospective for finding oil, gas and
other hydrocarbons; and,
WHEREAS, certain members of the FINA GROUP own certain proprietary data or
are in possession of and have a license to use certain other data, which covers
substantially all of FINA's lands as well as lands adjacent to FINA's lands
which the FRONTIER GROUP may not have been licensed to use; and,
WHEREAS, certain members of the FRONTIER GROUP have a license to use
certain other data which the FINA GROUP may not have been licensed to use; and,
WHEREAS, SPR, the FINA GROUP and the FRONTIER GROUP recognize the benefit
of entering into an agreement which gives each access to the data presently
owned by or licensed to the other; and,
WHEREAS, the members of the FINA GROUP and the members of the FRONTIER
GROUP find it in their mutual interests to enter into an agreement for using the
data of SPR, the FINA GROUP and the FRONTIER GROUP for the purposes of exploring
for oil, gas and other hydrocarbons on the lands owned by FINA as well as the
adjacent lands which are covered by the leases, options to lease or other rights
to explore owned by either SPR, certain members of the FINA GROUP or certain
members of the FRONTIER GROUP and which are covered by data in the possession of
the members of SPR, the FINA GROUP and/or the FRONTIER GROUP.
NOW THEREFORE, for and in consideration of the premises and mutual
covenants herein contained, SPR, the members of the FINA GROUP and the members
of the FRONTIER GROUP do hereby covenant and agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following words and terms shall have the
meanings here ascribed to them:
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1.1 "Agreement" shall refer to this Agreement.
1.2 "Contract Area" shall mean the area within the red outline on Exhibit
"A" attached hereto and made a part hereof for all purposes.
1.3 "Oil and Gas" shall mean oil, gas, casing head gas, gas condensate, and
all other liquid or gaseous hydrocarbons and other marketable substances
produced therewith, unless an intent to limit the inclusiveness of this term is
specifically stated.
1.4 "Oil and Gas Interests" shall mean unleased fee and mineral interests
in tracts of lands lying within the Contract Area which are owned by or within
the control of any of the parties to this Agreement.
1.5 "Oil and Gas Lease," "Lease" and "Leasehold" shall mean the oil and gas
leases or options to acquire oil and gas leases covering tracts of land lying
within the Contract Area which are either owned by any of the parties to this
Agreement or which any party to this Agreement is entitled to or may acquire a
future interest in.
1.6 FINA Fee Lands shall mean any and all lands or Oil and Gas Interests
within the Contract Area presently owned in fee by FINA. The FINA Fee Lands are
depicted in yellow on Exhibit "A" to this Agreement.
1.7 "FINA GROUP Leases" shall mean Oil and Gas leases, options to lease,
operating rights and other Oil and Gas Interests lying within the Contract Area
which are owned or committed to SPR and/or any member of the FINA GROUP as of
the Effective Date. FINA GROUP Leases are depicted in red on Exhibit "A" to this
Agreement.
1.8 "FRONTIER GROUP Leases" shall mean Oil and Gas leases, options to
lease, operating rights and other Oil and Gas interests lying within the
Contract Area which are owned by any member of the FRONTIER GROUP as of December
31, 1996. FRONTIER GROUP Leases are depicted in green on Exhibit "A" and set
forth on Exhibit "A-1" to this Agreement. FRONTIER GROUP Leases shall also
include any leases or options to lease within the area depicted in green on
Exhibit "A" which have multiple lessors owning an individual interest in the
leased lands as evidenced by at least one lessor's execution having been
acknowledged on or before December 31, 1996. In the event the balance of the
unsigned lessors have not executed their respective leases by December 31, 1996,
said interests associated with the unsigned lessors will become subject to the
AMI provisions set forth in provision 9.1 hereof. In addition to the leases
depicted in green, FRONTIER GROUP Leases shall include those leases described on
Exhibit "A- 3" and acquired prior to May 30, 1996 attached hereto, which cover
undivided interests in tracts within the Contract Area but are not colored green
on Exhibit "A".
1.9 "Effective Date" shall mean May 30, 1996.
1.10 "Designated Member" shall mean FINA Oil and Chemical Company as to the
FINA GROUP and Polaris Exploration Corporation as to the FRONTIER GROUP.
1.11 "JOA" shall mean the operating agreement for a given Contract Area
substantially in the form as that attached hereto as Exhibit "E".
1.12 "Disputed Acreage" shall mean those lands within the Contract Area as
to which a dispute exists between FINA and the State of Louisiana with respect
to the ownership thereof. Said lands are colored green hatched on Exhibit "A"
attached hereto. For purposes of this Agreement, and as between the parties
hereto, unless and until a determination is made, it shall be assumed that the
Disputed Acreage is actually owned 80% by FINA and 20% by the State of
Louisiana. Such ownership percentages shall be adjusted with respect to any
portion of the Disputed Acreage as to which a determination or settlement is
made as between FINA and the State of Louisiana on the percentage ownership
interests of such Disputed Acreage.
1.13 "Payout" shall mean that point in time when one hundred percent (100%)
of the gross income received from the sale of oil and gas production from a
well, less Lessor's royalty, the overriding royalty interest reserved by Laurent
Oil & Gas, Inc. and Xxx X. Xxxxx, other overriding royalty interest burdens, and
production and severance taxes, is equal to the costs incurred in drilling,
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testing, completing, equipping, and operating such well.
Use of the terms "group", "FRONTIER GROUP" or "FINA GROUP" shall mean,
unless the context otherwise clearly indicates, each and every member of the
applicable group and their respective subsidiaries, parents, partnerships,
affiliates or other person or entity owned or controlled by or which owns or
controls any such member; provided, however, that such terms shall not include
and this Agreement shall not be binding on Equitable Resources, Inc. or any
subsidiary or affiliate thereof which are not signatory parties to this
Agreement. Unless the context otherwise clearly indicates, words used in the
singular include the plural, the plural includes the singular and any references
to gender includes both the masculine and the feminine. The Designated Member of
each group agrees by its execution hereof to act as an uncompensated
administrator and facilitator for its group as an accommodation only. Each
Designated Member agrees to attempt to carry out its obligations as Designated
Members hereunder with ordinary care and diligence, but each party hereto
understands and agrees that its Designated Member shall have no liability to any
such party for any delays, omissions or other errors it may commit in relating
any rights, duties or other obligations, including any individual party and/or
group elections called for herein, for which such Designated Member is
responsible for communicating to its group members, except as result from the
gross negligence or willful misconduct of such Designated Member. In no event
shall either Designated Member be liable to any member of its group in
connection with any alleged failure to carry out its obligations as Designated
Member for any special, indirect or consequential damages, including without
limitation, lost profits. A Designated Member may resign at any time. Any group
shall have the power to elect a new Designated Member at any time. Such election
shall require twenty (20) days prior written notice and shall be decided by
working interest majority. No such change in a group's Designated Member shall
be effective upon the other parties hereto until such parties have received
written notice of the change in such Designated Member, as evidenced by the
signature and approval of all of the parties in the group changing its
Designated Member.
ARTICLE 2
THE LANDS
2.1 Lands, Oil and Gas Interests and Oil and Gas Leases Committed to the
Agreement. This Agreement shall cover and affect all the lands, Oil and Gas
Interests and Oil and Gas Leases lying within the Contract Area including, but
not limited to, the FINA GROUP Leases, the FRONTIER GROUP Leases, the unleased
portion of the entirety of the FINA Fee Lands as well as those of other owners
not under oil and gas lease or contractually committed by the owner thereof to
an unrelated third party by the terms of another agreement actually in existence
on the Effective Date. Each party to this Agreement hereby commits to the terms
and conditions hereof, and agrees to lease, convey, assign or otherwise transfer
to each and every other party hereto their respective interests in the FINA
GROUP Leases, the FRONTIER GROUP Leases and the FINA Fee Lands which are owned
or controlled by any such party as of the Effective Date, to the extent located
within the Contract Area, whether or not marked or otherwise designated on
Exhibit A. During the existence of this Agreement, no party may sell, lease,
convey, assign, encumber, mortgage, pledge or contract in any manner with
respect to the FINA Group Leases, the FRONTIER GROUP Leases or the FINA Fee
Lands, in any way which would impair or prejudice the rights of any other party
in or to such interests as provided for in this Agreement. No xxxxx may be
drilled or other operations conducted in connection with the exploration for or
the production of oil or gas from the Contract Area prior to the completion of
the 3-D Survey and receipt of the fully processed data set without the prior
written consent of all parties hereto, nor after receipt of such data set except
pursuant to this Agreement. Notwithstanding the foregoing, such restrictions on
drilling and other operations shall not apply to Initially Excluded Lands as
long as they remain excluded, or to reservoirs, the entirety of which are, and
pursuant to this Agreement, will continue to be owned 100% by a party to the
exclusion of all other parties.
2.2 Lands, Oil and Gas Interests and Oil and Gas Leases Initially Excluded
from this Agreement. This Agreement does not cover lands, Oil and Gas Interests
or Oil and Gas Leases which are leased or contractually committed by the owner
thereof to an unrelated third party by the terms of another lease or other
agreement actually in existence on the Effective Date (the "Initially Excluded
Lands"). Each party represents and warrants as appropriate that all of the
leases and other agreements affecting the Initially Excluded Lands are set forth
on Exhibit "A-2", attached hereto and made a part hereof for all purposes.
Notwithstanding anything contained herein to the contrary, the Initially
Excluded Lands are limited only to those depicted in blue on the attached
Exhibit "A".
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2.3 Lands, Oil and Gas Interests and Oil and Gas Leases to be Subsequently
Committed to this Agreement. Should any of the Initially Excluded Lands either
revert to or otherwise be made available to SPR, any member of the FINA GROUP or
any member of the FRONTIER GROUP during the term of this Agreement, then those
lands shall likewise be covered and affected by this Agreement as of the
effective date of such reversion or other availability.
ARTICLE 3
TERM OF THE AGREEMENT
The term of this Agreement shall commence on May 30, 1996, and shall
continue for sixty (60) calendar months through May 30, 2001.
ARTICLE 4
CONSIDERATION
For and in consideration of the sum of ONE HUNDRED DOLLARS ($100.00) in
hand paid collectively by SPR and the FINA GROUP to the FRONTIER GROUP and other
good and valuable consideration, and of the other agreements of SPR, the FINA
GROUP and the FRONTIER GROUP herein and subject to the terms and conditions
herein set forth, SPR, the members of the FINA GROUP and the members of the
FRONTIER GROUP do hereby agree to join in the execution of this Agreement for
the purposes herein intended.
ARTICLE 5
WORKING INTEREST OF THE PARTIES
SPR, the FINA GROUP and the FRONTIER GROUP (subject to the terms and
provisions of this Agreement, and in particular Articles 7 and 9 hereof) shall
each collectively be entitled to receive, pursuant to the provisions hereof, and
own a working interest in the percentages set forth on Exhibit "B", in the FINA
Fee Lands, the FINA GROUP Leases, the FRONTIER GROUP Leases and any other lands,
leases and oil and gas interests within the Contract Area which may be obtained
pursuant to this Agreement.
ARTICLE 6
ACCESS TO EXISTING SEISMIC DATA
6.1 License to use Proprietary FINA GROUP Seismic Data. Each member of the
FRONTIER GROUP, upon execution of this Agreement, is hereby granted a license
("License"), in the form set out as Exhibit "D", attached hereto and made a part
hereof for all purposes, to use all of the FINA GROUP's proprietary seismic data
within the Contract Area according thereto.
6.2 License to use Proprietary FRONTIER GROUP Seismic Data. SPR and each
member of the FINA GROUP, upon execution of this Agreement, is hereby granted a
license ("License"), in the form set out as Exhibit D-1, attached hereto and
made a part hereof for all purposes, to use all of the FRONTIER GROUP's
proprietary seismic data within the Contract Area according thereto.
6.3 Access to Non-Proprietary FINA GROUP Seismic Data. During the term
hereof and to the extent permitted by such licenses, each member of the FRONTIER
GROUP is hereby granted access and the right to use any and all seismic data
covering lands within the Contact Area which seismic data is licensed to SPR or
any member of the FINA GROUP, to the extent such data is not also licensed or in
the possession of any member of the FRONTIER GROUP. Such access shall be granted
only on a controlled basis by SPR and the FINA GROUP, at an SPR or FINA GROUP
site agreed to by the member of the FRONTIER GROUP desiring such access, subject
to the terms and conditions of the licensing agreements in place. Those
licensing agreements are on file in FINA's or SPR's offices as applicable, and
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will remain there for the term of this Agreement, and by reference the terms
thereof are incorporated herein for all purposes.
6.4 Access to Non-Proprietary FINA Seismic Data. FINA has acquired, either
by purchase or as a condition of FINA's permit for a third party to acquire data
across FINA's Fee lands, licenses to use certain seismic data not owned by FINA.
As a participant in this Agreement during, but limited to the term hereof, SPR
and each member of the FINA GROUP and each member of the FRONTIER GROUP shall be
given access to and the right to use all of the said seismic data in FINA's
inventory within the Contract Area, but only to the extent permitted by such
licenses. This access and right to use shall be on a restricted basis,
controlled by FINA, at a FINA site agreed to by SPR, the member of the FINA
GROUP or the FRONTIER GROUP desiring such access, and shall be governed by the
terms and conditions of the various licensing agreements currently in place.
Those licensing agreements are on file in FINA's offices and by reference are
incorporated herein for all purposes.
6.5 Access to Non-Proprietary FRONTIER GROUP Seismic Data. During the term
hereof and to the extent permitted by such licenses, SPR and each member of the
FINA GROUP is hereby granted access and the right to use any and all seismic
data covering lands within the Contract Area, which seismic data is licensed to
any member of the FRONTIER GROUP, to the extent such data is not also licensed
or in the possession of SPR or any member of the FINA GROUP. Such access shall
be granted only on a controlled basis by the FRONTIER GROUP, at a FRONTIER GROUP
site agreed to by SPR or the member of the FINA GROUP desiring such access,
subject to the terms and conditions of the licensing agreements in place. Those
licensing agreements are on file in one of the FRONTIER GROUP's offices, and
will remain there for the term of this Agreement, and by reference the terms
thereof are incorporated herein for all purposes.
6.6 Access to Other Technical Data. During the term hereof, except to the
extent prevented by the terms of any agreements with the providers of, or the
co-owners of such data, SPR and each member of the FINA GROUP and of the
FRONTIER GROUP, shall also have access to and the use of any and all other
technical data owned by SPR or any member of either group which is deemed to be
useful by such party in the exploration for oil and gas, including, but not
limited to, core data, engineering data, well logs, gravity surveys, geochemical
surveys, paleontological data or any other data currently in each respective
party's files pertaining to the Contract Area. Access, for the purposes hereof
shall include the right for SPR and/or any member of either the FINA GROUP or
the FRONTIER GROUP, at their own expense, to make copies of the other's data.
SPR, nor any party of either the FINA GROUP nor the FRONTIER GROUP shall be
required, however, to show any interpretive geological, geophysical or
engineering data to the other, except that data necessary to support or required
to propose the designation of a Prospect Area within the Contract Area, as
hereinafter provided.
6.7 Confidential Technical Data. Technical data which is restricted
pursuant to the terms of an agreement of confidentiality shall not be made
available under the terms of this Article 6.
6.8 Lost Licensing Agreements. In the event license to any data cannot be
found by the party owning the data, the party owning the data shall use its best
efforts to obtain a copy of the license for the data, but in the event a
licensing agreement as to certain data cannot be located, or obtained without
repurchasing the data, the party in possession of the data may withhold
disclosure of such data, at its sole option.
ARTICLE 7
OPTION AND AGREEMENT TO LEASE
AGREEMENT TO DELIVER WORKING INTERESTS
7.1 Lease Option. At any time during the period beginning on the date a
fully processed data set covering the Contract Area and the 3-D Survey License
Area is delivered to each and every party hereto and ending with the termination
of this Agreement, the FRONTIER GROUP shall have the right and option
("Option"), but not the obligation, to obtain from FINA a lease covering all or
part of the FINA Fee Lands (excluding any Initially Excluded Lands). The Option
shall give such rights to acquire such lease(s) to the FRONTIER GROUP to the
exclusion of any person or entity not a party to this Agreement. The leasehold
interest granted pursuant to such leases(s) shall be limited to that working
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interest set forth for the FRONTIER GROUP on Exhibit "B" hereto. The Option
shall be exercised by giving written notice to FINA (with a copy to SPR) at the
address set forth herein. In this notice the FRONTIER GROUP shall identify the
acreage to be leased by legal description and tender a check in the amount of
$150 per net mineral acre selected. The lease term shall be for three (3) years
(with annual rentals of $150 per net mineral acre) and the landowner's royalty
reserved unto FINA shall be 33.33% of 8/8ths. Within thirty days after receipt
of such notice, FINA agrees to execute and deliver to the FRONTIER GROUP,
jointly, one original of an oil and gas lease covering the acreage selected
identical in form to the lease attached hereto and made a part hereof as Exhibit
"C", and containing the identical terms and conditions as set forth therein.
7.2 Agreement to Deliver Working Interest in Leases, Options to Lease and
Oil and Gas Interests. FINA shall give notice to SPR and each member of the
FRONTIER GROUP at least 72 hours prior to the time the fully processed data set
covering the Contract Area and the 3-D Survey License Area will be delivered to
SPR and the FRONTIER GROUP. Simultaneously with delivery by the FINA GROUP to
SPR and the FRONTIER GROUP of the fully processed data set covering the Contract
Area and the 3-D Survey License Area, the FRONTIER GROUP shall deliver to SPR
and the FINA GROUP, jointly, at no cost to SPR and the FINA GROUP, an assignment
duly executed and in the form attached hereto as Exhibit "G", of the FRONTIER
GROUP's interest in and to the FRONTIER GROUP Leases (hereinafter referred to as
the "Assignment"); limited however, to the interest in such FRONTIER GROUP
Leases as set forth for SPR and the FINA GROUP on Exhibit "B" hereto. The
undivided interests in the Leases to be conveyed to SPR and the FINA GROUP shall
have no burdens other than landowner royalty and the overriding royalty
interests to be granted to Laurent Oil & Gas, Inc. ("Laurent") and Xxx X. Xxxxx
("Xxxxx") pursuant to that certain letter agreement dated April 27, 1995 by and
among Frontier, Polaris, Laurent and Xxxxx as amended dated August 14,1996 (the
"Laurent Agreement") (which shall not exceed 3% on Leases with lessor's
royalties of 25% or less, or 1.5% on Leases with lessor's royalty of greater
than 25%, or 1.5% on Leases acquired by farm out or exploration agreement) to be
borne by SPR and the members of the FINA GROUP in proportion to their respective
working interests. Burdens on such Leases in excess of land owner royalty and
overrides under the Laurent Agreement shall be the sole responsibility of the
members of the FRONTIER GROUP creating said excess burden. All obligations owed
to Laurent or Xxxxx pursuant to any agreement (including specifically but
without limitation the Laurent Agreement) to permit the acquisition by either or
both of them of interests in leasehold or other interests (not including
overriding royalty interests) after completion of the 3-D Survey shall be borne
entirely by the FRONTIER GROUP, and the members thereof shall jointly and
severally indemnify and hold harmless SPR and each and every member of the FINA
GROUP from and against any reduction in interest or any other loss, cost,
expense or claim whatsoever arising in connection therewith.
7.3 Agreement to Assign Options and the Rights to Options. Included on
Exhibit A-1 attached hereto is a list of all of the options to lease held by the
FRONTIER GROUP. Exercise by the FRONTIER GROUP of any options to lease, owned by
any member of the FRONTIER GROUP within the Contract Area, shall be the sole
responsibility of the FRONTIER GROUP. Any and all leases so acquired shall be
assigned by the FRONTIER GROUP to SPR and the FINA GROUP within three business
days after receipt thereof by such member(s) of the FRONTIER GROUP, as provided
herein, and neither SPR nor the FINA GROUP shall be charged for any portion of
the costs or expense incurred in connection with the acquisition or exercise
thereof. Should any member of the FRONTIER GROUP elect to not exercise its pro
rata portion of any part of such option, the remaining members of the FRONTIER
GROUP will have the right to acquire said interest. Should the FRONTIER GROUP
collectively elect, for any reason, not to exercise all or any pro rata portion
of any part of such options as contemplated herein, then it shall deliver
written notice of its election not to exercise to SPR and each member of the
FINA GROUP as soon as possible, but in no event less than ten (10) business days
prior to the expiration of the applicable option. SPR, the FINA GROUP or any
member thereof, would have the option, but not obligation, to exercise the
remaining pro rata portion of any part of said options in accordance with their
terms at its sole cost and expense. The FRONTIER GROUP will take such action as
is necessary to permit the timely exercise of such option by SPR and any member
in the FINA GROUP desiring to exercise same. In the event any such option is
exercised by any member of the FINA GROUP, each non-participating member of the
FRONTIER GROUP shall forfeit any interest in and to any leases acquired pursuant
to such options. After delivery of the fully processed data set covering the
Contract Area and the 3-D Survey License Area to the FRONTIER GROUP and the
assignment of the leasehold interest as provided herein to SPR and the FINA
GROUP, any delay rentals approved by all parties to be paid on the leases
assigned from the FRONTIER GROUP to SPR and the FINA GROUP shall be paid 16.67%
by SPR, 33.33% by the FINA GROUP and fifty percent (50%) by the FRONTIER GROUP
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notwithstanding the Working Interest Ownership in such Lease(s) for each group
as set out in Exhibit "B". Should any party(ies) hereto elect not to pay any
delay rental obligation, then the parties consenting to pay such rentals shall
bear such costs proportionately, and receive the benefit thereof proportionately
and all non-participating parties shall forfeit any and all rights to the
leases, lands and interests affected thereby.
ARTICLE 8
SEISMIC PROGRAM
8.1 Geophysical Permit. During the term of this Agreement, SPR and the FINA
GROUP at their sole cost, risk and expense, shall have the exclusive right to
conduct seismic exploration operations within the Contract Area. At such time as
requested by FINA, the FRONTIER GROUP shall deliver at no cost to SPR and the
FINA GROUP all necessary permits pertaining to lands, Oil and Gas Leases or Oil
and Gas Interests owned or controlled by each and every member of the FRONTIER
GROUP as required by SPR and the FINA GROUP or their contractor, in the form
attached hereto as Exhibit "H", to enable SPR and the FINA GROUP to conduct said
seismic exploration operations.
8.2 3-D Survey. As primary consideration for the FRONTIER GROUP's execution
of this Agreement and in consideration for the Assignment of Leasehold interests
described in Article 7 hereof, SPR and the FINA GROUP agrees to pursue the
acquisition of a 3-D seismic survey (the "3-D Survey") covering the Contract
Area, using the parameters set forth on Exhibit "F" attached hereto and made a
part hereof, with the intent and in such manner and to such extent as to
properly image substantially all horizons down to and including the Tex "W" Sand
Series in the subsurface of the Contract Area. FINA shall be designated as the
Operator of the seismic operations and shall conduct the 3-D Survey in a good
and workmanlike manner, but neither FINA, SPR nor any member of the FINA GROUP
shall have any liability to the FRONTIER GROUP for losses sustained or
liabilities incurred except such as may result from the gross negligence or
willful misconduct of SPR or such member of the FINA GROUP. Upon completion of
the 3-D Survey and receipt of a fully processed data set of same SPR and the
FINA GROUP shall make available on the same day it is delivered to or otherwise
available to SPR and any member of the FINA GROUP, to the FRONTIER GROUP a fully
processed data set covering both the Contract Area and the adjacent area
outlined in green on Exhibit "A" and designated as the "3-D Survey License
Area." Said data set shall include full fold data over the Contract Area and the
3-D Survey License Area to the extent SPR and the FINA GROUP has full fold data
available. The associated costs of the entire 3-D Survey shall be borne solely
by SPR and the FINA GROUP. Prior to delivery of said data set as set forth
herein, the FINA GROUP shall make periodic reports, not less than monthly, to
SPR and the Designated Member of the FRONTIER GROUP of the status of said 3-D
Survey.
Said periodic reports shall include (i) weekly reports on all field
operations within the Contract Area and the 3-D Survey License Area. These
reports should include status and updates of permits, leases and options,
and maps with progress for surveying, drilling, layout and shooting, and
other any relevant information; (ii) estimates for commencement and
completion of various activities within the Contract Area and the 3-D
Survey License Area. These estimates should include surveying, drilling,
shooting, and processing and should be updated no less frequently than once
a month; (iii) daily progress and quality control reports during the
shooting phase; and (iv) processing flow chart and parameter testing with
input to parameter selection and processing in the Contract Area and 3-D
Survey License Area to be provided by the FRONTIER GROUP.
8.3 Separate Processing Option. Subject to the prior written consent of the
FINA GROUP, the FRONTIER GROUP may, at its sole option and sole cost, elect to
have that portion of the 3-D Survey covering the Contract Area and/or the 3-D
Survey License Area processed (or reprocessed or both) separately and
independently from the entire 3-D Survey by a third party recognized as a
commercial seismic processor acceptable to SPR and the FINA GROUP provided that
the separate processing can be accomplished without interference or delay to the
processing activities of SPR and the FINA GROUP. If the FRONTIER GROUP so elects
to separately process (or reprocess) such partial information, and the FRONTIER
GROUP receives said processed (or reprocessed) data set prior to the time SPR
and the FINA GROUP receives an initially processed data set, over the Contract
Area, then the FRONTIER GROUP warrants that it shall deliver or cause to be
delivered a complete and fully processed copy of the separately processed (or
reprocessed) data set to SPR and each member of the FINA GROUP, at no cost to
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SPR or the FINA GROUP, by the accepted processor on the same day the separately
processed (or reprocessed) data set is first delivered or otherwise available to
any member of the FRONTIER GROUP. At such time as SPR and the FINA GROUP receive
a processed data set over the Contract Area, the FRONTIER GROUP's obligation to
deliver copies of its processed (or reprocessed) data set over the Contract Area
to SPR and the FINA GROUP shall cease.
8 .4 Acquisition of Other Necessary Geophysical Permits. FINA, as Operator,
shall proceed with diligent efforts to acquire the necessary permits from
adjacent and surrounding land owners to legally shoot the 3-D Survey and, once
such permits are obtained, to complete said survey. In the event SPR and the
FINA GROUP cannot acquire and process the 3-D Survey within 270 days from the
Effective Date of this Agreement, then the following options shall apply:
(A) If at the end of the 270 day period a seismic crew is in the Contract
Area diligently acquiring 3-D seismic data then the time period within
which the data shall be completed and delivered shall be extended for such
time as is necessary in order for FINA to acquire and process said data,
provided that operations for such acquisition and processing shall be
continued with all due diligence and without material interruption; or
(B) If at the end of the 270 day period a crew is not in the Contract Area
acquiring 3-D seismic data and its failure to do so is not caused directly
or indirectly or arising out of or in connection with the fault, action or
inaction by any member of the FRONTIER GROUP, then this Agreement shall
terminate and SPR, the FINA GROUP and the FRONTIER GROUP shall cross-assign
any and all permits which they may have (or in the case of FINA Fee Lands
said permits shall be granted) at that time to acquire 3-D on lands owned
or controlled by such groups within the Contract Area; or
(C) If the failure to have the 3-D seismic data acquired and processed
within the 270 day period is attributable in any manner, whether directly
or indirectly or arising out of or in connection with some action or
inaction or fault of any member of the FRONTIER GROUP, then the time period
within which FINA may acquire and process the 3-D seismic data shall be
automatically extended to the length of time required to complete any
operation as the result of any delay by the FRONTIER GROUP; or
(D) If the 3-D seismic information is not acquired and processed within the
270 day period and such delays are not attributable to the fault or action
or inaction of any member of the FRONTIER GROUP, the parties may agree by
mutual consent to extend the 270 day period, and in such event, to the
extent that the extension of time requires the expenditure of additional
costs in order to maintain Leasehold interests or options or permits on the
FRONTIER GROUP leases, then SPR will bear and pay 16.67% and the FINA GROUP
will bear and pay 33.33% of all such costs, respectively.
8.5 Ownership of Acquired Data. Notwithstanding anything contained herein
to the contrary, no seismic data within the Contract Area or the 3-D Survey
License Area acquired pursuant to this Agreement shall be sold, licensed or
otherwise made available to any person or entity not a party to this Agreement
during the term of this Agreement; provided however, regardless of any provision
of this Agreement to the contrary, that the FRONTIER GROUP shall have the right
to make available to Laurent Oil & Gas, Inc. ("Laurent") such 3-D seismic data
as is called for in the Laurent Agreement under terms as set forth therein, and
in the event Laurent exercises his look-back right (as said rights are set forth
in the Laurent Agreement) as regards to the FRONTIER GROUP's interest herein,
Laurent will have pro rata rights to the 3-D data set forth in this Agreement as
if Laurent were part of the FRONTIER GROUP and a party hereto. All seismic data
and all information related thereto within the Contract Area and the 3-D Survey
License Area acquired pursuant to this Agreement and any and all proceeds, value
and/or other consideration arising therefrom, regardless of the selling party,
shall be owned jointly twenty-five percent (25%) by SPR, fifty percent (50%) by
the FINA GROUP and twenty-five percent (25%) by the FRONTIER GROUP as set forth
proportionateley on Exhibit "B-1" hereto, from the Effective Date through such
time as SPR and the FINA GROUP have recouped all costs they have incurred in
connection with obtaining such seismic data within the area required to obtain
full fold coverage of the Contract Area. After SPR and the FINA GROUP have
recouped all of such costs, said seismic data and all benefits and/or proceeds
derived therefrom, shall be jointly owned 16.67% by SPR, 33.33% by the FINA
8
GROUP and fifty percent (50%) by the FRONTIER GROUP.
8.6 Allocation of Seismic Data Sales Proceeds. Following the termination of
this Agreement all seismic data and all information related thereto within the
Contract Area acquired pursuant to this Agreement shall be and remain the joint
property of SPR, the FINA GROUP and the FRONTIER GROUP, and shall be kept
confidential and shall not be licensed, sold, published or disclosed to any
third party, without the prior written approval of a group of SPR and members of
the FINA GROUP and the FRONTIER GROUP, then holding seventy five percent 75% or
more of the total seismic data ownership as set forth on Exhibit "B-1". If after
the termination of this Agreement, the parties holding the requisite interest
agree to license all or a portion of the data, then any monies or benefit
received from the marketing of said data (after approval) shall be shared by
SPR, the FINA GROUP and the FRONTIER GROUP on the basis of their interest
therein at the time of such sale or license. Notwithstanding any provision
hereof to the contrary, SPR and the FINA GROUP shall be the owner of the data
within the 3-D Survey License Area, but the FRONTIER GROUP shall be granted a
license to use such data. Said license shall be in the form attached hereto as
Exhibit "D". All monies and other consideration due any party hereto for the
sale or other disposition of such seismic data shall be paid to the applicable
parties within ten (10) days of the selling party's receipt thereof.
8.7 Applicability After Termination. The provisions of Section 8.5 and 8.6
shall survive and remain valid and binding following termination of this
Agreement.
ARTICLE 9
LEASE ACQUISITION AND DRILLING OPERATIONS
9.1 AMI. Should any party to this Agreement obtain or have the opportunity
to obtain an interest in minerals, an oil and gas lease, an option to lease or
contractual right to explore for and/or produce oil and gas or similar
interest(s) within the Contract Area (the "Available Interests") which interests
are not FRONTIER GROUP Leases or FINA GROUP Leases then SPR and each member of
the FINA GROUP and the FRONTIER GROUP shall have the option to participate in
the acquisition of the Available Interests as to SPR's and each member's
respective share of its group's interest(s) as set forth in Exhibit "B" hereto.
In such event, the party acquiring or having the opportunity to acquire the
Available Interests shall offer in writing, as soon as possible but in any event
within ten (10) business days of acquiring such Available Interest(s), to all
other parties hereto, the option to participate in such acquisition. The cost of
any such acquisition shall be borne fifty percent (50%) by the FRONTIER GROUP,
16.67% by SPR and 33.33% by the FINA GROUP, notwithstanding the division of
working interest for each party or group as set forth on Exhibit "B". SPR and
each group shall have thirty (30) days after receipt of written notice of the
right to participate in the acquisition of the Available Interests (which notice
shall include all information relevant to such determination such as the
acquisition cost and any obligations involved), in which to elect in writing to
purchase all or part of its proportionate share of the Available Interest.
Should any party of either group elect not to participate in the acquisition of
its proportionate share of the Available Interest, then such party's share shall
be made available first to the other members of the group of which such party is
a member. To the extent that the remaining members of such group do not elect to
acquire the interest of any of its non-participating members, then the
Designated Member of such group shall give written notice to SPR and each of the
members of the other group of the availability of such interest. Such notice
shall be given at the same time as the election to participate for all or part
of the available interest is due to be delivered pursuant to this paragraph.
Should SPR elect not to participate in the acquisition of its proportionate
share of the Available Interest, then SPR shall give written notice to each of
the members of the FINA GROUP and the FRONTIER GROUP of the availability to its
interest.
9.2 Election Notice The election by SPR and/or either group to purchase any
share of the Available Interest shall be evidenced by a timely written election
which shall state specifically whether SPR or the group is taking all or only a
part (and if only a part, the percentage being taken) of its share of the
Available Interest, which election shall be submitted with payment by SPR or the
Designated Member of such group of its proportionate share of the acquisition
cost (which shall be 16.67% to SPR, 33.33% to the FINA GROUP and fifty percent
(50%) to the FRONTIER GROUP if SPR, the FINA GROUP and/or the FRONTIER GROUP
take their entire share of the Available Interest). Failure by SPR or the
Designated Member of the applicable group to timely respond or make the required
payment shall be deemed an election by SPR and all members of such group not to
participate. Any party hereto receiving notice of the availability of a share
9
of the Available Interest which has been declined by all of the members of the
other group (the "Additional Interest") shall have five (5) days after receipt
of such notice within which to elect whether or not to participate for its
pro-rata share of the Additional Interest by giving written notice of its
election to the SPR and Designated Member of each group. In the event that a
party hereto elects to acquire a portion of the Additional Interest then such
acquiring party shall pay a share of the costs attributable to that interest
equal to the costs which would have been paid had the interest been acquired by
the party to whom it was initially offered. In the event a well is being drilled
pursuant to the terms of a JOA whose contract area includes all or part of the
Available Interest, the time period for the initial election and payment shall
be five (5) working days from the receipt of the pertinent information, instead
of the twenty days previously set out above. In the event SPR and/or both groups
acquire their proportionate share of the Available Interest, said interest
immediately and automatically shall become subject to this Agreement and any
existing JOA's, as applicable, for all purposes. The Designated Members shall be
responsible for the diligent and timely communication of all information and
election notices to the members of their group, SPR and the Designated Member of
the other group.
9.3 Designation of a Prospect Area, Well Proposals and Elections For
Participation. At any time after delivery to all of the parties hereto of the
fully processed data set covering the Contract Area, any party to this
Agreement, who owns a then current working interest therein, may propose
hereunder the designation of a Prospect Area within the Contract Area, and the
drilling of a well within such Prospect Area ("Initial Test Well"). For purposes
hereof "Prospect Area" shall mean a specified geographical area under which is
thought to exist one or more subsurface or geological features which the
parties, through geological interpretation, believe to be capable of structural
or stratigraphic trapping of oil and gas in economic quantities. Any given
Prospect Area shall represent the parties' best efforts to identify and define
the surface area encompassing the entirety of all reservoirs reasonably expected
to be proven by the wellbore of the Initial Test Well. The designation of a
Prospect Area shall be evidenced in writing and may be changed thereafter based
on new information or revisions of interpretations of old information and/or by
actions of a governing body having or asserting jurisdiction. The proposing
party shall notify each party hereto in writing of its proposal and call a
meeting of the parties within ten (10) days after said notification. In the
meeting the proposing party shall present to SPR and the members of each group
all relevant data to support its proposed designation of a Prospect Area and
drilling of the Initial Test Well and will include in its presentation the depth
to be drilled, the primary objective and all other horizons likely to be tested,
detail estimated drilling and completion costs and a drilling prognosis of the
proposed Initial Test Well. The party proposing the designation of a Prospect
Area shall attempt in good faith to obtain the approval of such Prospect Area by
all of the parties to this Agreement. In the event all the parties do not agree
to the designation of the applicable reservoir limits as proposed in any given
Prospect Area, then the vote of the parties holding cumulatively 75% of the
working interest in all depth through the base of the Xxxxx Sand as set forth at
Exhibit "B" hereto as to those depths, and the vote of the parties holding
cumulatively 75% of all the working interests in all depths from the base of the
Xxxxx Sand through the base of the DuLarge Sand as set forth at Exhibit "B"
hereto as to those depths, and the vote of the parties holding cumulatively 75%
of all of the working interest in all depths below the base of the DuLarge Sand
as set forth in Exhibit "B" hereto as to those depths, as regards each of such
reservoirs reasonably expected to be proven by the wellbore of the Initial Test
Well, shall be deemed binding on all of the parties hereto as to the designation
of each such reservoir to be established within the Prospect Area. The Prospect
Area shall encompass the largest overall reservoir limits within its confines.
There shall be no more than three Initial Test Xxxxx proposed or drilling
to casing point election within the Contract Area at a time. Of the three
Initial Test Xxxxx which may be proposed or drilling simultaneously, there may
be no more than (i) two (2) proposed or drilling to a depth above the base of
the DuLarge Sand, or (ii) two (2) below the base of the DuLarge Sand such that
the parties shall have the right to propose or drill one shallow well or one
deep well, as applicable, at all times. In addition thereto, to the extent the
FRONTIER GROUP proposes to drill any xxxxx to the base of the Xxxxx Sand or
shallower, as set forth at Exhibit "B", solely on FRONTIER GROUP Leases and
solely within the areas colored in green on the attached Exhibit "A", it may
propose and drill any number of such xxxxx and such xxxxx shall not be counted
to reduce the number of xxxxx drilled pursuant to this provision. Inasmuch as
SPR or any member of the FINA GROUP proposes to drill any well on the FINA Fee
Lands from the base of the Xxxxx Sand to all deeper depths and/or on FINA GROUP
leases to all depths, it may propose and drill any number of such xxxxx and such
xxxxx shall not be counted to reduce the number of xxxxx drilled pursuant to
this provision. Any proposal made in contravention of this provision shall be
void and require no response by any party.
10
9.4 Election Options. The parties not proposing the drilling of the Initial
Test Well shall have the following options, which options must be elected within
the time notices contained in Article 12:
A. (i) elect not to participate in the Initial Test Well as to any depth ("No
Participation"),
i) elect to participate in the Initial Test Well in the manner and
to the total depth proposed ("Full Participation"),
ii) elect to limit its agreement for participation to a shallower
objective (the "Alternate Depth") than the total depth proposal
("Depth Limited Participation") or
iii) propose that the Initial Test Well be drilled to a depth below
the depth originally proposed ("Proposal to Deepen"); provided
however, that any well proposed to be drilled to a proven
underdeveloped location, which location is located solely within
the areas colored in green on Exhibit "A" attached hereto, shall
not be subject to any such proposals to deepen.
The consequences corresponding to the election of each of the options
described in Article 9.4A. above by any party(ies) or either group hereto are as
follows:
B. (i) No Participation. In the event any party elects No Participation in
the Initial Test Well in any Prospect Area and the participating
parties proceed to drill such Initial Test Well, the non-participating
party shall be deemed to have farmed out to the remaining parties its
interest in the reservoir(s) that are proven, by the Initial Test Well
or the stratigraphic equivalent thereof, and that are within the
applicable Prospect Area, on the terms set forth in Section 9.5 below.
(ii) Full Participation. If the parties elect Full Participation each party
shall participate in the Initial Test Well as proposed and shall bear
their respective share of the cost thereof. The parties shall also
enter into a mutually agreeable form of operating agreement for such
well and if no agreement can be reached the operating agreement will
be in the form of the JOA.
(iii)Depth Limited Participation. If any non-proposing party elects Depth
Limited Participation (the "Uphole Participant(s)"), it shall notify
the proposing party of such election and of the Alternate Depth to
which the Uphole Participant has elected to participate. The Uphole
Participat by making such limited election and paying its
proportionate share of drilling costs to the Alternate Depth, shall
have preserved all of its rights to receive a lease or assignment as
provided herein for all depths above 100 feet below the Alternate
Depth in the Prospect Area or the stratigraphic equivalent thereof.
The Uphole Participant will be deemed to have farmed out its interests
to all depths deeper than one hundred (100) feet below the Alternate
Depth or the stratigraphic equivalent thereof, within the Applicable
Prospect Area according to the provisions set forth in Section 9.5
below.
(iv) Proposal to Deepen. Any non-proposing party(ies) may respond to the
original proposal by proposing to drill the well to a depth below the
depth originally proposed (the "Downhole Participant(s)"), by
submitting a proposal for drilling to the deeper depth within the ten
(10) business days of its receipt of the original proposal. The
Proposal to Deepen shall be then deemed a proposal made under and
subject to the time periods and other provisions set forth in this
Article 9 and in Article 12. The Proposal to Deepen shall be
considered, and operations in furtherance thereof conducted, in
priority to the original proposal.
9.5 Farm out Terms. In the event any party shall be deemed to have farmed
out ("Farmor") to the other Parties ("Farmee") its working interest in any
reservoir(s) within the Prospect Area, the interest farmed out shall be limited
to rights which are:
1. within the Prospect Area, and
2. limited to rights from the surface to a depth 100 feet below the base
of the deepest commercially
11
productive reservoir in the Initial Test Well, and
3. limited to interests which appear productive in the wellbore of the
Initial Test Well, and
4. limited geographically to locations classified "proven" by the Initial
Test Well pursuant to generally accepted engineering standards as
accepted by the United States Securities and Exchange Commission for
publicly reporting companies.
To the extent interests are thereby farmed out the Farmor shall retain an
overriding royalty interest in such reservoir(s) equal to two percent (2%),
which retained interest shall be reduced in the same proportion as the working
interest farmed out bears to 100%. In the event the parties cannot agree as to
which interests are "proven" by the Initial Test Well, the consulting firm of
Xxxxx Xxxxx Company Petroleum Engineers of Houston, Texas shall by retained to
make such determination with the cost thereof shared by the parties. The
decision of Xxxxx Xxxxx Company Petroleum Engineers shall be accepted as
conclusive by all of the parties hereto. At Payout of the Initial Test Well, the
Farmor shall have the option to convert its retained overriding royalty interest
in such well to a working interest in the applicable reservoir(s) equal to
thirty percent (30%) of the working interest originally owned by the Farmor and
farmed out hereunder. In the event the farmor elects to convert its overriding
royalty interest in such well to a working interest at Payout, said working
interest shall be subject to a mutually agreeable form of operating agreement
and if no agreement can be reached the operating agreement shall be in the form
of the JOA. However, the Farmor shall have the option to participate for its
after Payout working interest in such farmed out reservoir(s) within such
Prospect Area in all xxxxx proposed after the Initial Test Well in said Prospect
Area is spud, regardless of whether Payout in the Initial Test Well in such
Prospect Area has been achieved and whether or not Farmor has elected to convert
its overriding royalty interest to a working interest in the Initial Test Well.
9.6 Elections on a Group Basis. If any member(s) in any group elects not to
participate, then the interest of such non-participating member shall be offered
first to the other members of its group in accordance with agreements among such
members. If the remaining member(s) of such group do not assume the interest of
the declining member in their group then the Designated Member of such group
shall send written notice to SPR and all of the members of the other group
stating that such interest is available. The proposing party or its designee,
provided that the proposing party owns a working interest at the deepest depth
proposed to be drilled to in such well, regardless of whether the well is to be
or actually is completed at such depth equal to or greater than any other party
at such deepest depth, shall automatically be designated as the Operator of the
Prospect Area for said Initial Test Well and the applicable Prospect Area for
all drilling and production operations therein. Should the proposing party not
own sufficient working interest to automatically qualify as Operator, then the
Downhole Participants in said Initial Test Well shall elect an Operator for said
well and Prospect Area. For the purposes of this provision as it pertains to
xxxxx drilled on FRONTIER GROUP Leases ONLY, the parties agree that SPR or a
member of the FINA GROUP shall always be designated as Operator of any well
drilled to or below the base of the DuLarge Sand, and that a member of the
FRONTIER GROUP shall always be designated as Operator of all xxxxx drilled to
and completed at or above the base of the DuLarge Sand, as described at Exhibit
"B" hereto, unless otherwise agreed to the contrary in writing by all the
participating parties in said well.
9.7 Payments. In the event a Party elects Depth Limited Participation the
Operator shall xxxx and the Uphole Participant shall pay pursuant to the JOA,
its share of the costs which would have been necessary to drill, and plug and
abandon the Initial Test Well to the Alternate Depth only, on a stand alone
basis ("Base Costs") for drilling the well to the Alternate Depth. If the well
is plugged and abandoned, upon completion of such activities the Operator shall
xxxx and the Uphole Participant shall pay or receive a credit as applicable
pursuant to the JOA, for its actual share of the Base Costs for plugging and
abandonment. Any costs whatsoever incurred over Base Costs, including by way of
example but without limitation, costs incurred for additional drilling, for
different or additional above ground or downhole equipment, for sidetrack or
other drilling or equipment problems or for additional time, any of which is
incurred due to drilling beyond the Alternate Depth shall be borne one hundred
percent (100%) by Downhole Participants.
For all purposed of this Article 9, the Operator shall within five (5)
business days from the filing of a completion report with the State of
Louisiana, reimburse the Uphole Participants their proportionate share of
drilling costs to the Alternate Depth in a deepened well if and when any horizon
is completed in such deepened well as a commercial producer at a level deeper
than the level at which the Uphole Participants own a working interest. Any
12
Uphole Participant shall have the right to propose a well(s) within the unit
boundary of the completed deepened well to test a shallower horizon to which its
participation had been limited (the "Accelerated Well"), but only to the extent
that the Uphole Participants participating in such Accelerated Well(s) agree to
and pay for the Downhole Participants' (participating in such Accelerated
Well(s)) proportionate share of drilling costs to the casing point election. All
Downhole Participants in the deepened well shall have the right to participate
in such Accelerated Well(s). Should the Uphole Participants participating in
such an Accelerated Well(s) actually drill and pay for the participating
Downhole Participants' share of said drilling costs, then (a) said participating
Uphole Participants shall not be required to contribute or reimburse to any
Downhole Participant any costs for the deepened well, except for costs
associated with a completion attempt(s) to which said participating Uphole
Participants consent to and which are at or above the deepest horizon in which
they own a working interest, and (b) the Downhole Participants participating in
an Accelerated Well shall not be required to contribute or reimburse to the
Uphole Participants any costs for the Accelerated Well, except for costs
associated with a completion attempt(s) to which said participating Downhole
Participants consent to in such Accelerated Well.
If a deepened well is subsequently plugged back and completed at or above
the Alternate Depth, the Operator shall xxxx, and all Uphole Participants who
have not participated in any Accelerated Well(s) within the unit boundary of the
completed deepened well shall pay, their share of the calculated Base Costs for
(i) the drilling to the Alternate Depth and (ii) (subject to the casing point
election in the Operating Agreement) completion of such deepened well at the
shallower recompleted depth. In such instance, the calculated Base Costs shall
be equal to the costs which would have been incurred had the well been drilled
and completed at the shallower recompleted depth at the time the well was
originally drilled. One hundred percent (100%) of such reimbursed Base Costs
shall be allocated and paid by the Operator of the deepened well to the Downhole
Participants in said deepened well who have not participated in any Accelerated
Well within the unit boundary of the deepened well, prorata based on the ratio
that each such Downhole Participant's working interest bears to the total
working interests of all such Downhole Participants who have not participated in
any Accelerated Well. To the extent that all Downhole Participants in the
deepened well have participated in one or more Accelerated Well(s) within the
unit boundary of the deepened well, then one hundred percent (100%) of such
reimbursed Base Costs shall be allocated proportionateley among the Downhole
Participants in the deepened well based on their working interests.
9.8 Joint Operating Agreements. Any and all operations for the drilling of
the Initial Test Well which are not specifically covered by the terms of this
Agreement, and any and all operations in a Prospect Area (or the contract area
under a specific JOA) subsequent to the drilling of the Initial Test Well shall
be performed pursuant to the terms of the applicable JOA. Each of the parties to
this Agreement who participated in any operation in a well or xxxxx within a
Prospect Area shall also be parties to the applicable JOA. Each Designated
Member shall provide a designation of interest to each other party hereto
outlining the percentage which each member in the Designated Member's respective
group shall participate in any particular ongoing or proposed operation at such
time as said operations(s) are proposed. In addition to the other provisions
which may be contained in each JOA which is entered into or made effective
pursuant to this Agreement, it shall also contain restrictions on certain
drilling activities following the drilling of a well in a Prospect Area as
follows. The JOA shall have no restriction on the number of xxxxx, reworking
operations, completion or other operations which may be proposed at any one
time.
ARTICLE 10
RELATIONSHIP OF THE PARTIES
Except as expressly stated otherwise herein, the rights, duties,
obligations and liabilities of the parties hereunder shall be several, not joint
or collective. It is not the purpose or intention of this Agreement to create
any mining partnership, commercial partnership or other partnership relation and
none shall be inferred from the agreement to file an election to be excluded
from the application of certain United States tax laws. Each party agrees to
elect to be excluded from the application of Subchapter K of Chapter 1 of
Subtitle A of the Internal Revenue Code of 1954, and all amendments thereto.
13
ARTICLE 11
ASSIGNABILITY AND CONFIDENTIALITY
11.1 Limited Assignability. The rights, benefits and obligations of this
Agreement are exclusive between SPR, the members of the FINA GROUP and the
members of the FRONTIER GROUP. SPR and the FINA GROUP reserve the right to
approve the assignment of any interest in the Agreement from any member of the
FRONTIER GROUP to any other unrelated party and the FRONTIER GROUP reserves the
same right to approve such an assignment from any member of the FINA GROUP.
Neither SPR, nor the FINA GROUP or the FRONTIER GROUP shall unreasonably deny
any request to assign an interest to an unrelated party, provided that the
unrelated third party is, in the approving group's sole opinion, at least as
financially capable as the assigning party to perform the obligations to be
assigned, or if the assignment provides that the assigning party shall remain as
guarantor of it's assignee. Notwithstanding the above, SPR and the FINA GROUP,
by execution of this Agreement, consents to any assignment from South Coast
Exploration and SOCO Exploration Limited Partnership to Harcor Energy, Inc., and
to any assignments and rights the FRONTIER GROUP may be obligated to convey
pursuant to the Laurent Agreement. It being fully understood and agreed that any
assignment from South Coast Exploration, SOCO Exploration Limited Partnership or
the FRONTIER GROUP will be made expressly subject to this 3-D SEISMIC
PARTICIPATION AGREEMENT and will not affect the rights and interest of SPR or
the FINA GROUP.
11.2 Confidentiality. SPR and each member of the FINA GROUP and the
FRONTIER GROUP agree to hold confidential all information and data arising from
or related to this Agreement and the 3-D Survey, including the terms of the
Agreement itself, and not to divulge any facts hereof to any unrelated party,
except as may be required to satisfy any local, state or federal government
regulation, or for the business purpose of selling an interest in this Agreement
to an unrelated party. This confidentiality provision shall extend to all JOA's
covering the Contract Area and/or any well(s) drilled thereon and will not
terminate until the expiration of this Agreement, or the expiration of any lease
granted or acquired within the Contract Area pursuant hereto, whichever is
later.
ARTICLE 12
NOTICE
Any notices authorized or required herein shall be given by the proposing
party to all other parties hereto and will have an initial response period of
thirty (30) days from receipt of said notice, unless specifically stated
otherwise herein. Should the proposing party not receive a timely response from
SPR or the applicable Designated Member hereto, then in such event, the
proposing party shall notify all other parties hereto that the response period
shall be extended for an additional ten (10) day period allowing SPR or either
group additional time to review or confer with its Designated Member and
respond. In the event there is no response delivered to the proposing party by a
non-proposing party or Designated Member within said ten (10) day extension
period, the proposing party will notify all other parties hereto that a final,
additional forty-eight (48) hour extension period will be granted prior to
deeming any non-responding party(ies) non-consent. It is expressly acknowledged
that this provision does not apply to notices issued pursuant to any JOA entered
into and effective pursuant hereto, in which regard the notice provision shall
be as set forth in said JOA. The aforementioned notice periods (thirty (30)
days, ten (10) days, and forty-eight (48) hours) are not applicable to the
notices and/or election periods described in Sections 1.13, 7.2, 7.3, 8.6, 9.1,
9.2, 9.3, and 9.7 contained herein.
All notices hereunder shall be deemed to be properly given, if in writing,
by facsimile transmission, if followed by postpaid registered or certified mail,
or by courier delivery, addressed to the respective party at the addresses as
set forth below, or such other addresses as they shall respectively hereafter
designate in writing, from time to time:
As to the FINA GROUP: FINA Oil and Chemical Company
P. O. Xxx 00000
Xxxxxxx, Xxxxx 00000-0000
or
00000 Xxxxxxxx Xxxxxx Xxxxxxx
Xxxxxxx Xxxxx 00000
14
(000) 000-0000
(000) 000-0000 Fax
As to the FRONTIER GROUP: Frontier Natural Gas Corporation
0000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
(000) 000-0000
(000) 000-0000 Fax
As to the
SOUTH COAST EXPLORATION COMPANY: South Coast Exploration Company
Two Post Oak Central
0000 Xxxx Xxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
(000) 000-0000
(000) 000-0000 Fax
As to the SOCO EXPLORATION L.P.: Two Post Oak Central
0000 Xxxx Xxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
(000) 000-0000
(000) 000-0000 Fax
As to the MATAGORDA PRODUCTION COMPANY:Matagorda Production Company
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
(000) 000-0000
(000) 000-0000 Fax
As to the
POLARIS EXPLORATION CORPORATION: P. O. Xxx 0000
Xxxxxxxx, Xxxxx 00000-0000
(000) 000-0000
(000) 000-0000 Fax
As to the DENBURY MANAGEMENT INC.: Denbury Management, Inc.
00000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 Fax
As to the
SCANA PETROLEUM RESOURCES, INC.: SCANA Petroleum
Resources, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Attn: President
(000) 000-0000 Phone No.
(000) 000-0000 Fax No.
ARTICLE 13
FORCE MAJEURE
15
If any party is rendered unable, wholly or in part, by force majeure to
carry out its obligations under this Agreement, other than the obligation to
make money payments, that party shall give to SPR and the Designated Member of
each group prompt written notice of the force majeure with reasonably full
particulars concerning it (who shall each, in turn, inform the members of its
group). Thereupon, the obligations of the party giving the notice, so far as
they are affected by the force majeure, shall be suspended during, but no longer
than, the continuance of the force majeure. The affected party shall use all
reasonable diligence to remove the force majeure situation as quickly as
practicable. The requirement that any force majeure shall be remedied with all
reasonable dispatch shall not require the settlement of strikes, lockouts, or
other labor difficulty by the party involved, contrary to its wishes; how all
such difficulties shall be handled shall be entirely within the discretion of
the party concerned. The term "force majeure", as here employed, shall mean an
act of God, strike, lockout, or other industrial disturbance, act of the public
enemy, war, blockade, public riot, lightening, fire, storm, flood, explosion,
governmental action, governmental delay, restraint or inaction, unavailability
of equipment, and any other cause, whether of the kind specifically enumerated
above or otherwise, which is not reasonably within the control of the party
claiming suspension.
ARTICLE 14
ENTIRETY OF AGREEMENT
This Agreement represents the entire understanding and agreement between
SPR, the FINA GROUP, and the FRONTIER GROUP regarding the matters set forth
herein and supersedes any and all prior discussions, proposals, understandings
agreements or representations, if any, by either SPR, the FINA GROUP or the
FRONTIER GROUP to another. Notwithstanding any provision of this Agreement to
the contrary, it is specifically acknowledged and understood that a Joint
Exploration and Development Agreement dated March 29, 1995, by and between FINA
and SPR ("FINA/SPR Agreement") and an Agreement dated May 30, 1996 by and among
FINA, SPR and DENBURY ("FINA/SPR/DENBURY Agreement") also exist. The parties
further acknowledge and understand that an Exploration Agreement dated February
19, 1996 between Polaris Exploration Corporation, South Coast Exploration
Company, SOCO Exploration L.P., Frontier Natural Gas Corporation and Matagorda
Production Company (the "FRONTIER GROUP Agreement") also exists. Each of such
agreements provide for rights and obligations between and among the respective
parties thereto related to operations for obtaining 3-D Seismic, the ownership
of such information, the acquisition and granting of leases or assignments of
interests in leases or minerals and the participation in drilling of xxxxx,
which agreements cover acreage within the Contract Area. This 3-D Seismic
Participation Agreement is not intended in any manner or respect to amend, alter
or add to the provisions of either the FINA/SPR Agreement or the
FINA/SPR/DENBURY Agreement and specifically as related to the rights and
responsibilities of the parties to those agreements, any conflict between the
terms of either the FINA/SPR Agreement or the FINA/SPR/DENBURY Agreement and
this Agreement shall be governed by the terms of the FINA/SPR Agreement or the
FINA/SPR/DENBURY Agreement as applicable. This 3-D Seismic Participation
Agreement is not intended to amend, alter or add to the provisions of the
FRONTIER GROUP'S Agreement, and specifically as between the parties thereto
their relationship shall be governed thereby to the extent possiblThis Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, nothing herein contained
shall be construed as permitting an assignment contrary to the foregoing terms,
conditions and provisions of this Agreement.
IN WITNESS WHEREOF, this agreement is executed on this the 20th day of
August, 1996, but effective as of May 30, 1996.
FINA AND CHEMICAL COMPANY
illegible BY: /s/ W. E. Franklin
------------- -----------------------------------------
W. E. Franklin
illegible Attorney-in-Fact
-------------
SCANA PETROLEUM RESOURCES, INC.
illegible BY: /s/ Xxx Xxxxxxxx
------------- -----------------------------------------
Xxx Xxxxxxxx
illegible President
-------------
16
DENBURY MANAGEMENT, INC.
illegible BY: /s/ Xxxxxxx Xxxx
------------- -----------------------------------------
Xxxxxxx Xxxx
illegible Vice President
-------------
FRONTIER NATURAL GAS CORPORATION
ilegible BY: /s/ Xxxxx X. Xxxxx
-------------- -----------------------------------------
Xxxxx X. Xxxxx
illegible President
--------------
SOUTH COAST EXPLORATION COMPANY
illegible BY: /s/ Xxx X. Xxxxxxx
-------------- -----------------------------------------
Xxx X. Xxxxxxx
illegible President
--------------
SOCO EXPLORATION L.P.
illegible BY: /s/ illegible
-------------- -----------------------------------------
illegible General Partner
--------------
MATAGORDA PRODUCTION COMPANY
illegible BY: /s/ Xxxxxxx Xxxxxxxx
-------------- -----------------------------------------
Xxxxxxx Xxxxxxxx
illegible President
--------------
POLARIS EXPLORATION CORPORATION
illegible BY: /s/ illegible
-------------- -----------------------------------------
illegible President
--------------
17
