PARTICIPATION AGREEMENT (Two Well Bores) Delilah Prospect Grayson County, Texas
(Two Well
Bores)
Delilah
Prospect
Xxxxxxx
County, Texas
This
Participation Agreement (the "Agreement"), when fully executed, will evidence
the agreement made and entered into between OKT
Resources, LLC (the "Operator") and Imperial
Oil and Gas, Inc. (the "Participant.") The
Agreement between Operator and Participant is as follows:
1.
Operator is the owner of the oil and gas leases covering the acreage (the
"Leased Acreage") described as the Contract Area in the Operating Agreement
attached to this Agreement as Exhibit "A" (the "Operating Agreement").
Participant desires to acquire an undivided seventy
(70%) percent working
interest in the well bores of the following two xxxxx. The Participant will
participate in drilling of both the X. Xxxxxx well, (first well) which will be a
legal location located in the R. W. Self Survey, A-1159 and the X. Xxxxx well,
(second well) which will be a legal location located in the Dodgin Survey,
A-377, in Xxxxxxx County, Texas, as depicted on the plat attached to this
Agreement as Exhibit "B". Both Xxxxx will test the objectives set forth in the
Delilah Prospect geological data provided to Participant by Operator. Should for
any reason one or both of the well bores be "lost" or abandoned during the
drilling due to, but not limited to mechanical, geologic or excessive deviation,
Participant shall have the right to participate in the drilling of a replacement
well within the same proration unit prescribed by the Texas Railroad Commission.
The terms for the funding of the replacement well or xxxxx would be funded under
the same promoted terms and conditions as the original xxxxx. The well bore
limitation is intended to limit Participant to interest in no more than one well
per proration unit.
2. In
order to acquire the working interest set out above, Participant
agrees:
A. To
deliver to Operator executed originals of (i) this Agreement; (ii) the
Operating
Agreement attached as Exhibit "A" and all exhibits to the Operating Agreement,
in recordable form; and, (iii) the Authority for Expenditure attached to this
Agreement as Exhibit "B" (the "Authority for Expenditure") which sets out the
estimated before casing point and after casing point tangible and intangible
costs regarding the drilling and completion of the two
Xxxxx.
B. To
remit to Operator on or before July 15th, 2010
Participant's proportionate share of the "PUD" (Proved Undeveloped) well bore
and geologic prospect fees for two xxxxx. Then Participant will, within thirty
days (30) days or less pay the estimated tangible and intangible costs through
the running and cementing of the 5 1/2 inch
production casing and well head and then balance of completion in connection
with drilling the First Well will be payable according to the timing set forth
in the Operating Agreement; and,
3.
The oil and gas leases covering the Leased Acreage are burdened by royalty and
overriding royalty interests aggregating a eighty
two (82%) percent of 8/8. The net revenue interest attributable to
Participant's working interest in the Leased Acreage will be seventy
eight (78%) percent of 8/8.
4.
It is
understood that as to the PUD and geologic fees of $100,000
per well, and
the costs
of drilling both Xxxxx (or a replacement well or xxxxx), Participant's working
interest
shall proportionally bear a twenty
(20%) percent carried
working interest burden
for each well in favor of Operator, as to all costs incurred through the tanks
for the well
(including the cost of plugging and abandonment, if a decision is made to plug
and
abandon the well). Operator's carried working interest through the tanks shall
be free and
clear of all costs of drilling, including replacement xxxxx, completion and all
equipment
through and including all costs associated with the testing, stimulation and
completion
of one zone or formation. After the completion of the first formation the
Operator
will pay its prorata share of the subsequent completion
costs.
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Participation
Agreement (Single Well)
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1
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xxx.xxxxxxxxxxxxxx.xxx
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Operator
reserves a five percent (5%)
back-in working interest effective at "payout" as defined below. The
five percent (5%)
back-in working interest in both of the wellbores shall become effective
and automatically vest in Operator at 7 a.m. on the first day of the month
following the recovery by Participant, from Participant's share of production
(after payment of Lessor royalties, all overriding royalties, including the
overriding royalty reserved to Operator, and other interests in production
burdening the Leases, and all production, severance, ad valorem, any excise, and
other pertinent taxes attributable to production), 100% of the amount paid by
Participant to Operator for all of the PUD and geological fees along with all
drilling and completion costs, and 100% of all direct costs of material and
labor (excluding any costs for overhead, office administration, insurance,
amortization or depreciation) incurred in connection with the drilling, testing,
completing, equipping, and operating of the two wellbores located on the Lands
or any lands pooled with the Lands subsequent to the Effective Date of this
Assignment ("Payout"). Payout shall be computed for the purpose of the back-in
working interest on a wellbore basis. Upon completion of any well and monthly
thereafter, as to each well, until Payout, Operator shall deliver Participant an
itemized statement of all direct costs, as described above, which are incurred
by Participant on each well. At the end of each month during which there is
production from a well, prior to its Payout, Operator shall provide Participant
a copy of all production reports related to that well, together with a statement
of all income derived from the production.
5. Operator
agrees to use its best efforts to cause operations to be commenced for the
drilling of the First Well prior to September 1st, 2010 or 30 days after receipt
of drilling and completion funds whichever is sooner. Upon the commencement of
the operations, Operator agrees to prosecute operations with due diligence and
in a workmanlike manner until the well has been drilled to an approximate depth
of 10,400 feet
subsurface or to test the base
of the Pennsylvanian formation or approximately 100 feet into the Dornick
Hills
formation.
If
Participant elects not to participate (goes non-consent) to the proposed setting
of production casing in first Well, Participant shall forfeit all of its
interest in the well bore together with its share of the PUD and geological
fees. Additionally, if Participant elects not to participate (goes non-consent)
in the drilling of or the proposed setting of production casing in the second
well then Participant shall forfeit all of its interest in the wellbore together
with its share of PUD and geological fees.
6. After
fulfilling all of its obligations under this Agreement, and on payment to
Operator of its proportionate share of all related costs, Participant will be
given an assignment of its working interest, and related net revenue interest,
in the respective well bore. The Assignment shall be in recordable form and
shall warrant title against all parties claiming by, through, or under Operator,
but not otherwise. The Assignment shall provide that the working interest
assigned to Participant is and shall remain subject to the provisions of this
Agreement and the Operating Agreement.
7. With
respect to the well bore working interest which Participant desires to acquire,
Operator and Participant agree as follows:
Participant's
percentage share of PUD
and geological fees for two xxxxx and estimated tangible and intangible
costs for the first well (including plugging and abandonment costs if the well
is a dry hole) through all of the completion cost, is $1,744,475. Participant is
purchasing seventy (70%)
percent working interest, but will pay eighty seven and one half percent
(87.5%) of the following costs:
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PUD
and Geologic Prospect fee for two xxxxx: $100,000 x 2
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$ | 200,000. | ||
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Estimated
costs through the completion of first well:
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$ | 1,799,400. | ||
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Total
Cost:
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$ | 1,999,400. | ||
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Participant's
Share @ 87.5%
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$ | 1,744,475 |
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Participation
Agreement (Single Well)
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2
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xxx.xxxxxxxxxxxxxx.xxx
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Participant
tenders to Operator the executed Agreement, the executed Operating Agreement
attached as Exhibit "A," the executed Authority for Expenditure attached as
Exhibit "B".
In case
of a conflict of terms or conditions between the Participation Agreement and the
Operating Agreement, it is hereby agreed the terms of this Participation
Agreement prevail.
Operator
and Participant cause this Agreement to be executed by their duly authorized
representatives, to be effective as of June 25, 2010.
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Operator:
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Participant:
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OKT
Resources, LLC
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Imperial
Oil and Gas Inc.
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Agree
to this the 1 day of July 2010
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Agree
to this the ________ day of ________ 2010
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/s/ Xxxxx X. Xxxxx
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/s/ Xxxxxx X. Xxxxxx
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By:
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Xxxxx
X. Xxxxx,
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By:
Xxxxxx X .Xxxxxx, C. E. O.
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| Manage | |||
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Mailing
Address:
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Mailing
Address:
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1900
E. 15th;
Building 600
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PO
Box 4675
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Edmond,
OK 73013
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Xxxx
Xxxxx, XX 00000
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Tax
Identification No:
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Tax
Identification No:
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00-0000000
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00-0000000
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Telephone
Number:
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Telephone
Number:
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000-000-0000
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000-000-0000
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Fax
Number:
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Fax
Number:
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000-000-0000
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000-000-0000
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E-Mail
Address:
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E-Mail
Address:
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xxxxxx@xxxx.xxx
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xxxxxxx@xxxxxxxxxxxxxxxxx.xxx
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xxxxx@xxxx.xxx
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xxxxxxxx@xxxxxxxxxxxxxxxx.xxx
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E-Mail
for reports:
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E-Mail
for reports:
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xxxxx@xxxx.xxx
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[Exhibit
"A": Operating Agreement]
[Exhibit
"B": Authority for
Expenditure]
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Participation
Agreement (Single Well)
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3
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xxx.xxxxxxxxxxxxxx.xxx
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