EXPLORATION AGREEMENT by and between BARRY LASKER and DELTA OIL & GAS, INC. Carrera Prospect Newton County, Texas
by
and between
XXXXX
XXXXXX
and
DELTA
OIL & GAS, INC.
Carrera Prospect
Xxxxxx
County, Texas
Effective
Date: March 27, 2009
This Exploration Agreement (this
“Agreement”) is made effective as of March 27, 2009 (“Effective Date”), between
Xxxxx Xxxxxx (“Xxxxxx”), an individual whose address is Xxx Xxxxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000, XXX, and Delta Oil & Gas Inc. (“Delta”), a Colorado
corporation whose address is 000 0xx
Xxxxxx X.X., Xxxxx 0000, Xxxxxxx, Xxxxxxx X0X 0X0, Xxxxxx. Xxxxxx and
Delta are sometimes referred to collectively as “the Parties” and singularly as
“a Party”).
WHEREAS, Xxxxxx will acquire
certain oil and gas leases (“Leases”) in the Carrera Prospect, Xxxxxx County
Texas, within the area described on the map attached hereto as Exhibit A (the
“Prospect”), and perform additional tasks set forth herein; and
WHEREAS, Delta is seeking to
obtain a working interest in the Leases and operate and participate in oil and
gas exploration and production on the Prospect as set forth herein;
and
WHEREAS, the Parties want to
set forth their respective rights and responsibilities with respect to the
acquisition of the Leases, the identification of drilling locations, the
drilling and completion of up to three oil and gas xxxxx and the allocation of
costs and revenues between the Parties.
NOW, THEREFORE, in
consideration of the mutual rights and obligations provided herein, the Parties
hereby agree as follows:
|
1.
|
Delta
has paid the sum of U.S.$100,000 into an account to be held in trust for
Xxxxxx in accordance with the terms of this Agreement. Portion
of such funds shall be released to Xxxxxx upon notice from him that he has
completed negotiation for the acquisition of a Lease or
Leases. Such notice shall set forth the amount of bonus
necessary to pay the lessor, upon execution of the Lease, and the
applicable amount will be released from the account to Xxxxxx, who will
finalize arrangements to acquire the Lease(s). Included in the
sum of U.S.$100,000 is a one-time prospect generation fee in the amount of
U.S.$20,000 payable to Xxxxxx. The remaining U.S.$80,000 is
intended for purchase of the Leases and necessary surface
leases. The cost of the bonuses for the Leases and payment for
surface leases may exceed U.S.$80,000, in which event Delta shall pay
Xxxxxx within 7 days of receipt of notice from Xxxxxx setting forth the
amount of money needed to acquire additional Leases or surface
leases.
|
|
2.
|
Xxxxxx
will negotiate the acquisition of the Leases and any necessary surface
leases and is authorized to expend up to U.S.$300.00 per acre as a
signature bonus and offer royalties up to and including 25%, resulting in
a net revenue interest of not less than 75%. In the event the
price per acre or royalty for any Lease exceeds the amount stated in the
preceding sentence, Xxxxxx will give Delta 72 hours notice, inclusive of
Saturday, Sundays and holidays, in order to approve the additional bonus
amount or additional royalty burden. If Delta chooses not to
pay the additional bonus or additional royalty for any Lease, then Xxxxxx
may, at his sole option, acquire such Lease for his own
account.
|
- 2
-
|
3.
|
Upon
acquisition of the Leases, Xxxxxx shall promptly investigate the status of
the existing pipeline(s) in the area. If the tie-in costs to an
existing pipeline render development of the Prospect uneconomical, Delta,
in its sole discretion, may require Xxxxxx to reimburse Delta the amount
of money paid by Delta for Lease acquisition in the Carrera Prospect up to
that time. If Delta opts for Xxxxxx to make such repayment and
if any of the $80,000 intended for Lease acquisition still remains in the
trust account, such amount shall be released to Delta within 7 days
following notice from Delta of its intent not to
proceed. Xxxxxx shall have six months to return any portion of
the Lease acquisition costs which he has already expended on Lease
acquisition in the Carrera Prospect. Except for the obligation
of repayment to Delta, this Agreement shall terminate when Delta gives
notice to Xxxxxx of its intent not to proceed and Delta shall have no
continuing rights in the Prospect. If Delta elects not to
proceed because of the economics of pipeline tie-in, Xxxxxx may, at his
sole option, proceed with the development of the Prospect without
Delta. Xxxxxx shall be entitled to retain the $20,000
prospect generation fee regardless of whether Delta decides to proceed
with this Agreement pursuant to this Section
3.
|
|
4.
|
Delta
shall pay 100% of the costs to acquire the Leases and 100% of the costs to
drill and complete up to three xxxxx (“Target Xxxxx”) through the pipeline
connection. Drilling costs shall include geological
interpretation of data, drilling costs, site preparation costs,
infrastructure, roads, environmental impact studies, permits, remediation
work and all other costs directly or indirectly associated with
exploration, development, acquisition and finding costs relating to the
Target Xxxxx. Completion costs include all pipeline costs and tie-in costs
to the point of sale. Acquisition costs, drilling costs and completion
costs are 100% recoverable by Delta from the proceeds of production from
the well to which costs are attributable. The actual acquisition, drilling
and completion costs for the first Target Well will be recovered by Delta
from 90% of the proceeds of production from such well and the actual
acquisition, drilling and completion costs for the second and third Target
Xxxxx, if drilled, will be recovered by Delta from 80% of the proceeds of
production from the second and third well, respectively, until each of
such Target Xxxxx reaches payout of these amounts. Payout shall
be defined as the recoupment of 100% of all actual costs paid by Delta for
Lease acquisition, drilling and completion, payable out of production from
the Target Well to which the costs relate. Costs are not cumulative
to be subject to a “basket” payout from all Target
Xxxxx.
|
|
5.
|
The
pro rata working interest of each of the Parties in subsequent xxxxx to be
drilled on the Prospect after the Target Xxxxx shall be mutually agreed by
the Parties.
|
|
6.
|
All
existing third party 3D seismic data and mapping shall be provided to
Delta subject to the provisions of any agreements between Xxxxxx and third
parties, without further costs to Delta unless additional costs are
pre-approved by Delta.
|
- 3
-
|
7.
|
Xxxxxx
shall perform the initial interpretations and work-ups and shall prepare
the drilling program, including selecting total well depths and locations
for the Target Xxxxx. Xxxxxx shall charge and Delta shall pay
standard industry rates for such interpretations and work-ups and where
required shall contract with engineering consultants to prepare the
drilling program. Delta shall be invoiced and pay the amount of the
invoice for any work by such consultants. Invoices shall be
paid by Delta within 10 days following receipt of the invoice. These costs
shall be included in payout for the Target well. Such materials and
assessments will be provided to Delta without any representation
whatsoever by Xxxxxx as to their accuracy and without any suggestion
whatsoever that Delta rely on such materials and assessments in any
way.
|
|
8.
|
Delta
shall use best faith efforts to become bonded as an Operator in the State
of Texas and it shall also qualify to do business in the State of Texas,
both within 180 days following receipt of notice from Xxxxxx that
acquisition of the Leases is complete. Delta and Xxxxxx shall
negotiate in good faith and sign an Operating Agreement in a form similar
to the AAPL 610 Operating Agreement (1989) prior to commencement of
operations. Delta shall be named as the Operator under the Operating
Agreement.
|
|
9.
|
Xxxxxx
will secure leases in his name or that of a third party lease
broker. All of the interest in the Leases will be assigned to
Delta with no representations or warranties, express or implied, with
respect to the ownership of the Leasehold mineral interest except to
claims made by, through and under Xxxxxx, as assignor, but not
otherwise. Delta will provide Xxxxxx with monthly reports
on the payout status of each of the Target Xxxxx. Xxxxxx
will have a 10% carried interest in the first Target Well and a 20%
carried interest in the second and third Target Xxxxx until payout in each
of the xxxxx, as defined above. Xxxxxx’x 10% carried interest
will convert to a 50% working interest in the first Target Well upon
payout. Xxxxxx’x 20% carried interest in the second and third
Target Xxxxx shall convert to a 40% working interest upon
payout.
|
|
10.
|
Xxxxxx
may market and divest any portion of his carried interest or working
interest in the Prospect to third parties at any
time.
|
|
11
|
It
is expressly provided that there is an Area of Mutual Interest between the
Parties hereto. Such Area of Mutual Interest is more particularly
described in Exhibit A and the Area of Mutual Interest provision is more
particularly described in the Operating Agreement. The term of the Area of
Mutual Interest shall be three years commencing at the Effective
Date.
|
|
12.
|
Delta
hereby commits to the drilling of an initial test well (“Test Well”) at a
location within the Prospect selected by Xxxxxx and agreed by
Delta. Such Test Well must be commenced within one year from
the Effective Date. Delta shall drill the Test Well to a depth
sufficient to adequately test to the base of the stratigraphic equivalent
of the Nodosaria sand encountered in the GHP Xxxxxx #1 well at a depth of
7,460 feet, and thereafter shall complete the Test Well as a well capable
of producing oil and/or gas in paying quantities or plug and abandon same
as a dry hole. The second and third Target Xxxxx to be drilled on the
Prospect pursuant to this Agreement shall be at the option of Delta
following its review of results of the Test Well. If Delta
elects not to proceed with the drilling of the second and/or third Target
Xxxxx, then Delta shall release all Leasehold acreage that is not held by
production from a producing well which it has drilled pursuant to this
Agreement.
|
- 4
-
|
13.
|
The
following administrative provisions shall apply to this
Agreement:
|
|
|
a.
|
Relationship of the
Parties. This Agreement is not intended to create and
will not be construed as creating any type of partnership, joint venture,
association or other relationship where either Party will become liable
for the acts or obligations to the other Party. The liability
of the Parties hereto shall be several not joint or collective and shall
be based on the pro rata working interest of the Party. Xxxxxx
shall have no liability nor make any payment for operations on the Target
Xxxxx until payout for each respective Target
Well.
|
|
|
Each
of the Parties hereto elects, under the authority of Section 761(a) of the
Internal Revenue Code of 1986, to be excluded from the application of all
of the Provisions of Subchapter K of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended. If the income tax
laws of the states in which the property covered hereby is located
contain, or may hereafter contain, provisions similar to those contained
in the Subchapter of the Internal Revenue Code of 1986 referred to above,
under which a similar election is permitted, each of the Parties agrees
that such election shall be exercised. If applicable, Delta is
hereby authorized to execute and file on behalf of both Parties hereto
such elections with the appropriate governmental
agencies. Should there be any requirement that any Party give
further evidence of this election, each Party shall execute such documents
and furnish such other evidence as may be required by the Internal Revenue
Service or as may be necessary to evidence this
election.
|
|
|
b.
|
Entire
Agreement. This Agreement including its exhibits
represents the final and entire agreement by and between the Parties with
respect to its subject matter and, when executed, supersedes all prior
discussions and prior agreements relating to such subject
matter.
|
|
|
c.
|
Assignment. This
Agreement shall not be assigned by either Party without the prior written
consent of the other Party, which shall not be unreasonably or untimely
withheld.
|
|
|
d.
|
Dispute
Resolution.
|
|
|
(i)
|
Governing Law.
THIS AGREEMENT SHALL BE
GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, WITHOUT REGARD TO ANY CONFLICT OF LAWS RULES THAT WOULD DIRECT
APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
|
- 5
-
|
|
(ii)
|
Arbitration. Any
and all claims, demands, causes of action, disputes, controversies and
other matters in question arising out of or relating to this Agreement,
including any question regarding its breach, existence, validity or
termination, which the Parties do not resolve amicably, shall be resolved
by one arbitrator in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. The place of
arbitration shall be Houston, Texas. The resulting arbitral
award shall be final and binding, and judgment upon such award may be
entered in any court having jurisdiction. A dispute shall be
deemed to have arisen when either Party notifies the other Party in
writing to that effect. Any monetary award issued by the
arbitrator shall be payable in United States Dollars. The
arbitrator shall have no authority to award special, indirect,
consequential, exemplary or punitive damages under this
Agreement.
|
|
|
e.
|
Severability. If
any provision of this Agreement is for any reason held to be in violation
of any applicable law, governmental rule or regulation, or if the
provision is held to be unenforceable, then such provision shall be deemed
null and void. All other provisions of this Agreement shall remain in full
force and effect.
|
|
|
f.
|
Binding
Effect. This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective heirs, legal
representatives, successors and permitted
assigns.
|
|
|
g.
|
Modifications and
Amendments. This Agreement shall not be modified or amended except
by a written document executed by an authorized representative of both
Parties hereto.
|
|
|
h.
|
News Releases and
Public Announcement. Neither Party shall issue any news
release or make any public announcement relating to the subject matter of
this Agreement nor disclose the terms of this Agreement without the prior
written approval of the other Party, which approval shall not be
unreasonably or untimely withheld; provided, however, that such prior
approval shall not be required in the event that a Party is compelled to
issue a release or announcement by applicable securities laws or
requirements of any Stock Exchange, but in such event the affected Party
shall use its reasonable efforts to give the other Party at least
forty-eight (48) hours advance notice of the content of such
release.
|
|
|
i.
|
Conflicts. If a provision in
the body of this Agreement is in conflict with a provision in an exhibit
hereto, the provision in the body of this Agreement shall
prevail. In the event of a conflict/inconsistency between the
terms and provisions of this Agreement and the terms and provisions of the
Operating Agreement, this Agreement shall
prevail.
|
|
|
j.
|
No Consequential
Damages.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN NO EVENT
SHALL ONE PARTY BE LIABLE TO THE OTHER PARTY FOR ANY EXEMPLARY, PUNITIVE,
SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE, OR SPECULATIVE DAMAGES, EVEN IF
CAUSED BY THE SOLE, JOINT, AND/OR CONCURRENT NEGLIGENCE, STRICT LIABILITY,
OR OTHER FAULT OF A PARTY.
|
- 6
-
|
|
k.
|
No Third Party
Beneficiaries. Nothing in this Agreement, expressed or implied,
shall give or be construed to give any person, other than the Parties and
their heirs, legal representative, successors and permitted assigns, any
legal or equitable right, remedy or claim under or in respect to this
Agreement, except as specifically provided
herein.
|
|
|
l.
|
Warranties and
Representations. Xxxxxx makes no
warranty, either express or implied, with respect to ownership of the
Leasehold mineral estate except to claims made by, through and under
Xxxxxx, but not otherwise.
|
Delta
warrants that it is duly organized and validly existing under the laws of the
jurisdiction where it is organized. Delta has all requisite corporate
power and authority to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby.
Delta and
Xxxxxx each warrant that this Agreement has been duly executed and delivered by
them and this Agreement constitutes a legal, valid and binding obligation of
each Party, enforceable against each Party in accordance with its
terms.
Delta
represents that it has sufficient cash, available lines of credit or other
sources of immediately available funds to enable it to fulfill all of its
obligations under this Agreement and the Operating Agreement. Delta represents
that it has the technical capability, personnel and resources to fulfill its
obligations under this Agreement and the Operating Agreement.
|
|
m.
|
Time is of the
Essence. The Parties hereto stipulate and agree that
time is of the essence in the performance of all terms, duties, and
obligation and provisions of this
Agreement.
|
|
|
n.
|
Expenses. Delta
and Xxxxxx shall be responsible for their respective expenses in
connection with the performance of the provisions of this
Agreement.
|
|
|
o.
|
Counterpart
Execution. This Agreement may be executed in two
counterparts and each such counterpart shall be deemed an original
agreement for all purposes; provided that neither Party shall be bound to
this Agreement unless and until both Parties have executed a
counterpart. If this document is transmitted by facsimile
machine, it shall be treated for all purposes as an original
document. The signature of any Party on this document
transmitted by way of a facsimile machine shall be considered for all
purposes as an original signature and shall have the same binding legal
effect as an original signature on an original
document.
|
- 7
-
|
|
p.
|
Waiver.
|
|
|
No
waiver by either Party of any one or more defaults by the other Party in
the performance of any provision of this Agreement shall operate or be
construed as a waiver of any future default or defaults by the same Party
whether of a like or of a different character. Except as expressly
provided in this Agreement, no Party shall be deemed to have waived,
released or modified any of its right under this Agreement unless such
Party has expressly stated, in writing, that it does waive, release or
modify such right.
|
|
|
q.
|
Joint
Preparation.
|
|
|
Each
provision of this Agreement shall be construed as though both Parties
participated equally in the drafting of the same. Consequently, the
Parties acknowledge and agree that any rule of construction that a
document is to be construed against the drafting Party shall not be
applicable to this Agreement.
|
|
|
r.
|
Notices.
|
|
|
All
notices authorized or required between the Parties by any of the
provisions of this Agreement shall be in writing and delivered in person
or by courier service or by any electronic means of transmitting written
communications which provides written confirmation of complete
transmission, and properly addressed to the other Party. Verbal
communication does not constitute notice for purposes of this
Agreement. A notice given under any provision of this Agreement
shall be deemed delivered only when received by the Party to whom such
notice is directed, and the time for such Party to deliver any notice in
response to such originating notice shall run from the date the
originating notice is received. “Received” for purposes of this
Article shall mean actual delivery of the notice to the address of the
Party specified hereunder.
|
IN WITNESS WHEREOF, each Party has executed this Agreement, to become binding on
the Parties effective as of the Effective Date.
Xxxxx
Xxxxxx
/s/ Xxxxx
Xxxxxx
Delta Oil
& Gas, Inc.
/s/
Xxxxxxx X.
Xxxxx
Xxxxxxx
X. Xxxxx,
Chief
Executive Officer
- 8
-
