Exhibit 10.18
September 11, 2002
Xx. Xxxxx X. Xxxxx
Mid-Power Resources Corp.
0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000-X
Xxx Xxxxx, Xxxxxx 00000
Re: Lakeside Prospect
Xxxxxx Xxxxxxxxx #1 Well
Cameron Parish, Louisiana
Dear Xx. Xxxxx:
Please accept this letter as formal confirmation of certain verbal agreements
related to the Lakeside Prospect and the Xxxxxx Xxxxxxxxx #1 Well, located in
Cameron Parish, Louisiana:
1. Effective 5 PM Central Standard Time on August 31, 2002,
("Effective Time") Mid-Power Resources Corp. ("Mid-Power") was
the only Working Interest Owner in the Xxxxxx Xxxxxxxxx #1
Well ("Well") to elect to complete, test, produce, eventually
plug, and abandon said Well and restore location.
2. Xxxxxxxxx XXX, L.L.C. ("Petrogulf") owning 40.00% Working
Interst and Harvest Natural Resources ("Harvest") owning
35.00% Working Interest each individually elected to plug and
abandon the Well. Harvest has assigned all right, title and
interest to all oil and gas leases in the Lakeside Prospect to
Mid-Power and Mid-Power has accepted the same.
3. Petrogulf has sufficient funds held for the account of
Petrogulf, Harvest and Mid-Power to cover all expenses due and
payable for Lakeside Prospect and the Well prior to the
Effective Time. Xxxxxxxxx agrees to provide Mid-Power with
Xxxxxxxxx's accounting and final settlement invoices and
credits in favor of Harvest and Mid-Power as said accounting
is completed. Xxxxxxxxx has advised Mid-Power that as of the
Effective Time approximately $387,000.00 remained in
Mid-Power's account. The $387,000 is based upon actual bills
paid and JIB'd by accounting as of August 31, 2002. It does
not include any outstanding invoices. Petrogulf estimated
incremental costs of $175,000.00 to run three and a half inch
tubing for casing, cementing, and a single perforating run. It
does not include plugging and abandonment or site restoration.
Mid-Power agreed to pay 100% of
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all costs incurred beyond 5:00 PM August 31, 2002. Petrogulf
is attempting to acquire final approval from the Louisiana Oil
and Gas Commission for the tubingless completion. When
Mid-Power take over completely as Operator and furnishes its
own bond, Petrogulf shall furnish an accounting of invoices
received to date by Petrogulf.
4. Petrogulf represents to Mid-Power that full disclosure of all
known liabilities and existing conditions such as costs
incurred in acquiring of leases in the Lakeside Prospect and
the drilling of the Xxxxxx Xxxxxxxxx #1 Well and known to
Petrogulf has been given. From the Effective Time on,
Mid-Power shall be responsible for and has accepted the full
financial obligations and total liabilities for all further
operations on the well including final well completion, well,
abandonment and site restoration in accordance with all leases
and rights of way, applicable State and Federal and Local
rules and regulations. Mid-Power hereby does fully indemnify
and agrees to hold Xxxxxxxxx harmless as of the Effective
Time.
5. Mid-Power also obligates itself to attempt a completion in the
Xxxxx Xxxxx sand, thereby, earning 75.00% of Petrogulf's
40.00% working interest, being 30.00% working interest in all
Lakeside Prospect Leases, excluding the Western Lease as
defined in Paragraph 8.
6. Petrogulf shall continue as Operator of Record operating under
the reasonable and industry standard direction of Mid-Power
for a period not to exceed thirty (30) days from the effective
date, unless said period is either reduced or extended by the
written agreement by and between Petrogulf and Mid-Power. At
Petrogulf's sole option, an extension may be granted for a
period not to exceed an additional thirty (30) additional
days. Mid-Power agrees to be bound by the elections of Xxxxx
as communicated in writing to Petrogulf and send via facsimile
transmission to 000-000-0000. Petrogulf shall endeavor to
achieve Xxxxx' overall completion objectives, while
maintaining specific operational control. At the end of the
thirty (30) days, or the agreed to reduced or extended period,
Mid-Power shall immediately secure a proper and appropriate
State bond for the subject well and Petrogulf shall prepare
and forward properly styled Louisiana well transfer forms to
Mid-Power and Mid-Power agrees to complete the form and
immediately return it to Petrogulf. Petrogulf will file said
well transfer form in favor of Mid-Power or Mid-Power's
approved designee in accordance with the terms as provided for
in this paragraph.
7. Mid-Power hereby agrees to and accepts any and all other
liabilities and obligations under the controlling Operating
Agreement and AMI.
8. As consideration to Petrogulf, Mid-Power agrees to credit
Petrogulf with an undivided ten percent (10.00%) carried
Working Interest based on a 73.00% net revenue interest
through completion and tie in, or plug and abandonment of the
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well and restoration of the location, thereafter Petrogulf
shall pay its 10.00% working interest in all further
operations and expenses associated with the Well and Leases
within the Lakeside Prospect, as set forth in the Operating
Agreement. Petrogulf shall retain and Mid-Power agrees that
Petrogulf shall own an undivided non-carried 40.00% working
interest based on a 73.00% net revenue interest in the
westermost 180 acres ("Western Lease") of the Lakeside
Prospect Leases shown in Exhibit "A" (Lakeside Prospect
Leases), provided that the Western Lease in not included in
the Xxxxxx Xxxxxxxxx #1 Well final approved producing unit,
until Mid-Power ties in the well to a gas or oil sales
pipeline. At that point and upon such notice to Petrogulf,
Petrogulf shall be obligated to provide Mid-Power with 75.00%
of Petrogulf;s 40.00% working interest, being 30.00% working
interest, in and to the Western Lease as referenced above
(Petrogulf will retain a 10.00% carried working interest based
on a 73.00% net revenue interest in Western Lease in like
manner as the balance of the leases in the Lakeside Prospect).
Xxxxxxxxx's 10.00% working interest will not be carried by
Mid-Power on the drilling of any new xxxxx on any leases.
9. This Letter Agreement contains the entire agreement between
the parties and may not be amended except in writing and
executed by both parties.
10. The Intent of this Agreement is that Mid-Power has assumed the
entire obligation to attempt to test and complete the Well, or
plug and abandon and restore the location, whereby, Petrogulf
will assign all of its' interest, except 10.00% under the
Lakeside Prospect Leases excluding the Western Lease. Further,
if Mid-Power ties the Well into a pipeline, Mid-Power will
also earn the most Westerly 180 acres (Western Lease), except
for 10.00%, which will be retained by Petrogulf. After
completion of the Xxxxxx Xxxxxxxxx well, Petrogulf shall pay
its' 10.00% of all operations of said well.
11. In the event there is a conflict between the terms and
conditions of this Letter Agreement and the Operating
Agreement, the terms and conditions of the Operating Agreement
shall prevail.
If this Letter Agreement meets with your understanding, please indicate your
acceptance by signing, dating and returning a copy of this Letter Agreement to
the attention of the undersigned. For the purposes of satisfying this Letter
Agreement or notice requirements as provided for herein, facsimile transmissions
shall be considered legally binding. A fax signature is deemed the same as an
original.
Very truly yours,
Xxxxxxxxx XXX, L.L.C.
By it's Agent and the Operator of the Well
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PETROGULF CORPORATION
/s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Xxxxx X. Xxxxxxxxxx
Vice President
Agreed to and Accepted this 12th day of September, 2002,
Mid-Power Resource Corp.
/s/ Xxxxx X. Xxxxx
---------------------------
Xxxxx X. Xxxxx
President
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