Exhibit 10.1
PARTICIPATION AGREEMENT
High Island Area, Block 138 (S/2)
This Participation Agreement ("Agreement") is made and entered into
effective as of the 1st day of March, 2008 by and between LLOG Exploration
Offshore, Inc. ("LLOG"), and Ridgewood Energy Corporation ("Ridgewood"). LLOG
and Ridgewood are sometimes hereafter referred to collectively as "Parties" and
individually as "Party."
RECITALS
WHEREAS, LLOG has identified a prospect on the S/2 of High Island Area,
Block 138 ("Block") and has acquired Oil & Gas Lease OCS-G 31040 ("Lease") from
the United States of America which Lease is further defined on the attached
Exhibit "A"; and,
WHEREAS, LLOG plans to drill the OCS-G 31040 #1 Well ("Initial Test Well"
or "ITW") to a depth of 17,031 feet MD (15,400 feet TVD) or to a depth
sufficient to test the Marg A-2 Sand (the top of which was seen in the OCS-G
27505 #1 ST1 well at 14,976 feet), whichever is the lesser depth ("Objective
Depth"). The ITW shall be drilled at a surface location of 7,635' FSL and 6,757'
FWL of the Block, and of bottom hole location of 3,450' FSL and 6,232' FEL of
the Block; and,
WHEREAS, LLOG has offered to Ridgewood the opportunity to participate in
the drilling of the ITW, and Ridgewood has accepted LLOG's offer and has agreed
to bear fifty percent (50%) of the drilling costs ("Participating Interest") of
the ITW in order to earn a twenty-five percent (25%) record title interest in
the ITW and Lease.
NOW, THEREFORE, in consideration of the mutual covenants and agreement
herein contained, the Parties hereto agree as follows:
1. REIMBURSABLE LAND COSTS
-----------------------
Within fifteen (15) days of execution of this Agreement, Ridgewood shall
reimburse LLOG $2,219,643.75 for its 25% share of the "Sunk Land Costs". The
Sunk Land Costs for the Lease are $8,635,575 in bonus costs, $18,000 in rentals,
$25,000 for a license on the Shallow Hazard Data and $200,000 for G&G and
miscellaneous land costs.
2. ASSIGNMENT OF RECORD TITLE
--------------------------
Within fifteen (15) days from receipt of the Sunk Land Costs, LLOG shall execute
and deliver to Ridgewood an Assignment of Record Title Interest delivering to
Ridgewood a 25% of 6/6ths Record Title Interest in the Lease. The Assignment
shall be without warranty of title, either express or implied, except by,
through and under LLOG, but not otherwise. Additionally, such Assignment shall
be subject to the approval of the authorized officer of the U.S. Mineral
Management Service. The Assignment shall be prepared with an attached Exhibit
"A" thereto, with said Exhibit "A" being a mutually acceptable assignment form
which can be executed by the parties and recorded in the appropriate
County/Parish, as applicable. The Assignment shall be further subject to a 2.5%
overriding royalty interest in favor of Blue Streak Exploration which shall
deliver to Ridgewood the net revenue interest set forth on Exhibit "A"
attributable to its 25% record title interest. LLOG and Ridgewood agree to
execute any necessary documents and take all other actions reasonably necessary,
if any, to assist in the MMS approval process.
3. INITIAL TEST WELL
-----------------
Ridgewood agrees to assume their Participating Interest in the costs to drill
and evaluate the ITW to "Casing Point". The Authority for Expenditure ("AFE") to
drill the ITW is Attached hereto as Exhibit "B". Concurrent with the execution
of this Agreement, the parties agree to approve and execute the formal AFE. As
used in this Agreement, "Casing Point" shall mean that point in time when the
ITW has been drilled to Objective Depth and after all logs, cores and other
approved tests contemplated in the AFE have been conducted which are necessary
to reach the decision for further operations in the ITW, and the results thereof
have been furnished to all of the Parties, along with Operator's recommendation.
It is understood that Casing Point shall include plugging and abandonment costs
in the event the ITW is not completed for production or temporarily abandoned in
contemplation of further operations.
Ridgewood will pay its Participating Interest in the ITW until such time as the
ITW reaches Casing Point or the actual costs to drill and evaluate the ITW
reaches 110% of the AFE ("Promote Cap"), whichever occurs first. Thereafter,
Ridgewood's costs in the ITW shall be based on a twenty-five percent (25%)
working interest.
LLOG, as Operator, shall have the right to require Ridgewood to pay advances in
accordance with the terms of the XXXXX attached to the Offshore Operating
Agreement described herein.
4. SUBSTITUTE WELL
---------------
If during the drilling of the ITW, LLOG encounters impenetrable substances or
conditions, including loss of hole due to mechanical difficulties, which in the
opinion of a reasonably prudent operator under the same or similar conditions,
would render further drilling impracticable or hazardous and the condition
prevents further drilling of the ITW, LLOG may commence a "Substitute Well",
provided the drilling operations on such Substitute Well are commenced within
one hundred eighty (180) days after release of the drilling rig from the ITW.
However, with respect to such Substitute Well, the Promote Cap applicable to the
original AFE shall not be adjusted upward in the event the cumulative costs of
the ITW and the Substitute Well, as the case may be, exceed the original Promote
Cap.
5. OFFSHORE OPERATING AGREEMENT
----------------------------
The ITW shall be drilled in accordance with the February 15, 2008 Offshore
Operating Agreement ("OOA") which is sent in conjunction with, and as a
condition to this Agreement. Contemporaneously with the execution of this
Agreement, Ridgewood agrees to execute the OOA and return two (2) signature
pages to LLOG. Castex Offshore, LLC ("Castex") is also a party to the OOA and
LLOG shall furnish Ridgewood copies of Castex's signature page. 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 OOA.
2
If there are any conflicts between this Agreement and the OOA, the terms and
provisions of this Agreement shall prevail and govern.
6. INFORMATION REQUIREMENTS
------------------------
During the drilling of the ITW, LLOG shall deliver to Ridgewood the information
shown on the attached Exhibit "C".
7. TIMELY OPERATIONS
-----------------
LLOG will diligently and timely move forward in securing a rig necessary to
drill the ITW as soon as possible. LLOG is committed to having commenced
operations by April 30, 2008, subject to rig availability and obtaining the
required permits. LLOG shall not be liable to Ridgewood or suffer any penalties
for failure to spud the ITW by April 30, 2008. Notwithstanding anything herein
to the contrary, should LLOG not spud the ITW by April 30, 2008, Ridgewood shall
have the sole option to elect to terminate this Agreement and its participation
commitment hereunder ipso facto. If Ridgewood so elects to terminate this
Agreement, it shall not be liable to LLOG or suffer any penalties thereto for
such termination, and all commitments and obligations will cease upon such
notice to terminate. Upon such termination, any assignments of interest into
Ridgewood will be reassigned to LLOG and any and all Sunk Land Costs paid by
Ridgewood to LLOG will be refunded back to Ridgewood via wire transfer
simultaneously with such reassignment of interest to LLOG.
8. TERM
----
This Agreement shall terminate at such time as 1.) the ITW has reached Objective
Depth, and 2.) the Assignment provided for in Article 4 has been filed and
accepted by the Minerals Management Service. Thereafter all operations to be
conducted for the joint benefit of the Parties shall be subject to the OOA.
9. MISCELLANEOUS
-------------
This agreement shall be deemed for all purposes as prepared through the joint
efforts of the parties and shall not be construed against one party or the other
as a result of the preparation, submittal, or other event of negotiation,
drafting, or execution hereof.
The section headings used herein are for convenience only and shall not be
construed as having any substantive significance or as indicating that all of
the provisions of this Agreement relating to any particular topic are to be
found in any particular section.
In the event this Agreement or the operations, or any part thereof, contemplated
hereby are found to be inconsistent with or contrary to any laws, rules,
regulations or orders, the laws, rules, regulations or orders shall be deemed to
control and this Agreement shall be regarded as modified accordingly and as so
modified shall continue in full force and effect.
3
Any amendments, changes or modifications to the rights and obligations of the
Parties shall be in writing and shall be effective only when agreed in writing
by all Parties.
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.
10. NOTICES
-------
All notices, requests or demands to be given under this Agreement shall be in
writing and directed to the persons at the following address/contact
information:
LLOG Exploration Offshore, Inc. Ridgewood Energy Corporation
00000 Xxx Xxxx Xxxx, Xxxxx 000 00000 Xxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000 Xxxxxxx, XX 00000
Attn: Mr. K. Xxxxx Xxxxxx Attention: Mr W. Xxxx Xxxxx
Phone: (000) 000-0000 Phone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Email: xxxxxx@xxxx.xxx Email: xxxxxx@xxxxxxxxxxxxxxx.xxx
11. BINDING EFFECT
--------------
The terms and provisions hereof shall be binding upon and inure to the benefit
of LLOG 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.
LLOG EXPLORATION OFFSHOHORE, INC.
/s/ K. Xxxxx Xxxxxx
-------------------
K. Xxxxx Xxxxxx
Land Manager - GOM Shelf
RIDGEWOOD ENERGY CORPORATION
/s/ W. Xxxx Xxxxx
-----------------
W. Xxxx Xxxxx
Executive Vice President
4
EXHIBIT "A"
-----------
Attached to and made a part of that certain
Participation Agreement dated March 1, 2008
by and between LLOG Exploration Offshore, Inc.,
Ridgewood Energy Corporation
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Description of Leases:
Oil and Gas Lease bearing Serial Number OCS-G 31040, effective November 1,
2007, covering the S/2 of High Island Area Block 138, from the United
States of America, as Lessor, to LLOG Exploration Offshore, Inc., as
Lessee, containing approximately 2,880 acres, more or less.
Lease Net Revenue Interest:
80.8333% of 6/6ths (RS 6 Royalty to MMS and 2.5% overriding royalty to Blue
Streak Exploration)
5
EXHIBIT "B"
LLOG EXPLORATION OFFSHORE, Inc.
AUTHORITY FOR EXPENDITURE
FIELD OR AREA High Island 138 AFE#
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WELL NAME OCSG 31040 Well #1 PROP. TD 15400tvd.
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17031 md
STATE LA PARISH OFFSHORE ---------
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SCOPE: Drill directional hole to base of GYRO 9 sand
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Complete as a single without sand control
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SUMMARY OF ESTIMATED COST
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INTANGIBLE COST - DESCRIPTION DRILLING COMPLETION TOTAL
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Drilling Rig 48 Days @ $70,000 $/Day 3,360,000 - 3,360,000
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Turnkey Drilling - - -
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Drill Rig Completion 18 Days @ $70,000 $/Day - 1,260,000 1,260,000
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Completion Rig - Days @ 0 $/Day - - -
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Permits & Surveying 25,000 - 25,000
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Location Construction/Cleanup/Dredging - - -
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MOB/DEMOB 48 hrs @ $2,000 hr x2 Tug Tow time 192,000 60,000 252,000
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Engineering/Supervision $3,000 $/Day 144,000 54,000 198,000
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Dock Service/Dispatcher $1,500 $/Day 72,000 27,000 99,000
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Communications $500 $/Day 24,000 9,000 33,000
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Hammer Casing Crews & Tools 120,000 50,000 170,000
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Bits 110,300 - 110,300
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Directional Services 650,000 - 650,000
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Drill Pipe Rental 100,000 - 100,000
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Other Rentals $6,400 $/Day 307,200 115,200 422,400
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Cement & Cement Services 400,000 100,000 500,000
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Drilling/Completion Fluids 900,000 40,000 940,000
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Filter Unit - -
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Electric Line Services 300,000 75,000 375,000
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Slickline Services - -
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Perforating - 125,000 125,000
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Stimulation - Tools - -
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Stimulation - Pumping - -
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Nitrogen / Coil Tubing - -
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Testing - 100,000 100,000
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Fishing Services - - -
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Disposal 150,000 67,000 217,000
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Fuel, Water, Power $6,400 $/Day 307,200 115,200 422,400
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Transportation - Land $2,000 $/Day 96,000 36,000 132,000
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Transportation - Marine $28,000 $/Day 1,344,000 504,000 1,848,000
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Helicopter Service 100,000 25,000 125,000
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Other Drilling Costs (15%) 1,305,255 414,360 1,719,615
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Insurance - - -
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Overhead - - -
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========================================================================================================
SUBTOTAL - INTANGIBLE COST $10,006,955 $3,176,760 $13,183,715
========================================================================================================
-
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TANGIBLE COST (FTG) ($/FT) -
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Drive Pipe 30" 400 $300 120,000 - 120,000
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Conductor Casing 16" 1100 $90 99,000 - 99,000
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Surface Casing 13-3/8" 4500 $90 405,000 - 405,000
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Intermediate Casing 9-5/8" 14100 $60 846,000 846,000
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Drilling Liner 0 $0 - - -
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Production Casing 0 $0 - - -
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Production Liner 7" 3400 $50 - 170,000 170,000
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Tubing 3-1/2" 16800 $25 - 420,000 420,000
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Liner Hanger 150,000 150,000
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Mudline Hanger - - -
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Surface Wellhead Equipment 65,000 175,000 240,000
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Subsea Wellhead Equipment - - -
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Surface Tree - - -
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Subsea Tree - - -
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Packers & Tubing Accessories (FLT EQ & Centralizers) 25,000 250,000 275,000
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Other Costs (10%) 156,000 116,500 272,500
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========================================================================================================
SUBTOTAL - TANGIBLE COST $1,716,000 $1,281,500 $2,997,500
========================================================================================================
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Plug & Abandon 750,000
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DRY HOLE COST $12,472,955
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-
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TOTAL COST (DRILL & COMPLETE) $11,722,955 $4,458,260 $16,181,215
========================================================================================================
PREPARED BY Xxx XxXxxx DATE: 13-DEC-07
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APPROVED: ______________________ DATE: ______________________
