FARMOUT AGREEMENT
THIS AGREEMENT is made as of
the 15th day of December, 2009.
BETWEEN:
STONE CANYON RESOURCES, INC.,
a body corporate registered in the State of Colorado, USA, and having an office
at the City of Calgary, in the Province of Alberta, Canada
(hereinafter
called “Farmor”)
OF
THE FIRST PART
-
and -
DYNAMIC HYDROCARBONS LTD., a
body corporate registered in the State of Nevada, USA, and having an office at
the City of Austin, in the State of Texas, USA
(hereinafter
called “Farmee”)
OF
THE SECOND PART
WHEREAS Farmor is a party in
interest to the Petroleum and Natural Gas Lease Agreement described in Schedule
“A” (such agreement or agreements, including all amendments, if any, thereto
referred to as the “Agreements”);
NOW THEREFORE THIS AGREEMENT
WITNESSETH that in consideration of the terms and conditions hereinafter
contained, the Farmor shall grant to Farmee the provisions as described in this
Agreement:
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1.
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DEFINITIONS
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Each
capitalized term used in this Agreement will have the meaning given to it in the
Farmout & Royalty Procedure, and in addition:
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(a)
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“Lands”
means all petroleum and natural gas mineral rights from the Top of the
Colorado to the Base of the Pekisko as further described and verified in
Schedule “A”;
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(b)
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“Effective
Date” shall mean December 31, 2009;
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(c)
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“Farmout
Lands” means Farmor’s working interest in all Petroleum and Natural Gas
Rights in the lands as described in Schedule “A” attached
hereto;
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(d)
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“Operating Procedure” shall mean the 1990 CAPL Operating Procedure and the
1988 PASC Accounting Procedure with the summary of rates, elections,
insertions and amendments as attached hereto as Schedule
“B”;
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1
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2.
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SCHEDULES
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The
following schedules are attached hereto and incorporated into this
Agreement:
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(a)
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Schedule
“A”, which sets forth and describes Farmout Lands, the Rights and the
Title Documents, along with related Encumbrances and Pre / Post Farmout
Working Interests.
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(b)
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Schedule
“B” which sets forth the Operating Procedure and the Accounting
Procedure.
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3.
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FINANCIAL
CONSIDERATION
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On or
before December 31, 2009, Farmee shall provide Farmor with a payment of five
thousand United States dollars ($5,000.00) as the condition to proceed with the
execution of this Farmout Agreement. Upon receipt of the said
Financial Consideration, Farmor shall within ten (10) business days expedite the
full execution of this Farmout Agreement. Should Farmor fail to
expedite this Agreement within the said agreed to number of days, Farmee shall
have the right to terminate further said process and Farmor shall immediately
reimburse Farmee for all funds paid or forwarded.
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4.
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FARMEE
COMMITTMENT
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Farmee,
on or prior to December 31, 2010, shall commence the initiation of a geological
study to evaluate the hydrocarbon potential of all formations within the Farmout
Lands.
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5.
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INTEREST
EARNED
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Pursuant
to Clauses 3 and 4, Farmor shall hold in trust for Farmee, and Farmee shall have
the right to earn a four and a three-quarter percent (4.75%) Working Interest in
the Farmout Lands, upon Farmee providing to Farmor the said geological
study.
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6.
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OPERATIONS
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(a)
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All
operations of Farmee carried out with respect to the Test Well and the
Farmout Lands pursuant to this Agreement shall be conducted in accordance
with the terms and conditions and rates of the Operating
Procedure.
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(b)
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All
operations of Farmee carried out with respect to the Farmout Lands
pursuant to this Agreement shall be conducted in such manner as to avoid
any surface disturbance to the environment and to the surface land
owners.
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7.
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LIMITATION
ACT
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The
two-year period for seeking a remedial order under Section 3(1)(a) of the
Limitations Act, R.S.A. 2000 c. L-12, as amended, for any claim (as defined in
that Act) arising in connection with this agreement is extended
to:
2
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(a)
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for
claims disclosed by an audit, two years after the time this agreement
permitted that audit to be performed;
or
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(b)
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for
all other claims, four years.
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8.
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NOTICE FOR
SERVICE
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Stone
Canyon Resources, Inc.
Attention:
Land Department
0000 –
0xx
Xxxxxx XX
Xxxxxxx,
Xxxxxxx X0X 0X0
Xxxxxx
Attention:
Xxxxxx Xxxxxxxx, President
0000
Xxxxxxxxxxx Xxxxx
Xxxxxx,
Xxxxx 00000
XXX
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9.
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TRANSFERS
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Upon the
Interest Earned by Farmee, Farmor will proceed to transfer and assign all
interest in the Farmout Lands to Farmee. Farmor shall be responsible
for drafting and delivering all necessary assignment documents to Farmee on a
timely basis and Farmee shall accept and execute any documents necessary to
affect the Transfers.
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10.
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MISCELLANEOUS
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(a)
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Each
of the parties represents and warrants that it now has or is entitled to
have full right, full power and absolute authority to enter into this
Agreement.
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(b)
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In
the event of any conflict or inconsistency between the provisions of this
Agreement and those of any Schedule attached hereto, the provisions of
this Agreement shall prevail. In the event of any conflict or
inconsistency between the provisions of this Agreement and the Title
Documents, the provisions of the Title Document shall
prevail.
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(c)
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This
Agreement shall all purposes be construed and interpreted according to the
courts and the laws of Alberta.
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(d)
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Each
of the Parties represents and warrants that it now has or is entitled to
have full right, full power and absolute authority to enter into this
Agreement.
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(e)
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The
Parties shall from time to time and at all times do all such further acts
and execute and deliver all such further deeds and documents as shall be
reasonably required in order to perform fully and carry out the terms of
this Agreement.
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(f)
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This
Agreement supersedes all other agreements, documents, letters and
understandings, whether written or oral, among the parties in respect of
the Farmout Lands.
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3
IN WITNESS WHEREOF the parties
hereto have executed and delivered this Agreement as of the day and year first
above written.
STONE
CANYON RESOURCES, INC.
Signature:
Title:
Signature:
Title:
This is
an execution page to a Farmout Agreement dated December 15, 2009 between Stone
Canyon Resources, Inc. and Dynamic Hydrocarbons Ltd.
4
SCHEDULE
“A”
Attached
to and forming part of a Farmout Agreement, dated December 15, 2009, between
Stone Canyon Resources, Inc., as Farmor, and Dynamic Hydrocarbons Ltd., as
Farmee.
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LANDS:
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Farmout Lands and Rights
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Farmout Working Interest
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Encumbrances
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Twp
44, Rge 4W5:
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Before
Earned Interest:
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None
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East
Half Section 19
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-
Farmor: 9.5%
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Top
of the Colorado to Base of the Pekisko
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After Earned
Interest:
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| - Farmor: 4.75% | ||
| - Farmee: 4.75% |
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LEASE
AGREEMENT:
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Province
of Alberta, Canada, Petroleum and Natural Gas Crown Lease number 0494090860,
dated September 29, 1994 and continued indefinitely on September 29,
1999.
5
SCHEDULE
“B”
Attached
to and forming part of a Farmout Agreement, dated December 15, 2009, between
Stone Canyon Resources, Inc., as Farmor, and Dynamic Hydrocarbons Ltd., as
Farmee.
Summary
of the 1990 Joint Operating Agreement and the 1988 Accounting
Procedure:
1990 CAPL OPERATING
PROCEDURE:
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I.
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Operator:
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Harvest
Operations Corp
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II.
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Insurance
(Clause 311):
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Alternative
A
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III.
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Marketing
Fee (Clause 604):
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Alternative
A
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IV.
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Casing
Point Election (clause 903):
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Alternative
A
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V.
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Penalty
for Independent Operations (Clause 1007):
(a)
(iv) Development Xxxxx 300%
(b)
(iv) Exploration Xxxxx 500%
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VI.
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Title
Preserving Well (Clause 1010 (a) (iv):
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245
Days
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VII
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Disposition
of Interests (Clause 2401):
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Alternative
A
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VIII
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Recognition
Upon Assignment (Clause 2404):
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Alternative
A
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1988 PASC ACCOUNTING
PROCEDURE:
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I.
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Operating
Advances
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10%
Share
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II.
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Approvals
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2
or more parties totaling 75%
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III.
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Employee
Benefits
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22%
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IV.
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Warehouse
Handling
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2.5%
for tubular and New Price in excess of $5,000.00
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V.
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Overhead
Rates (Clause 302):
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(a) Exploration
Projects:
(1) 5
% of first $50,000.00
(2) 3 % of
next $100,000.00
(3) 1
% of cost exceeding sum of (1) and (2)
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(b) Development
Projects:
(1) 3
% of first $50,000.00
(2) 2 % of
next $100,000.00
(3) 1
% of cost exceeding sum of (1) and (2)
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(c) Initial
Construction Projects:
(1) 5
% of first $50,000.00
(2) 3
% of next $100,000.00
(3) 1
% of cost exceeding sum of (1) and (2)
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(f) Operations
and Maintenance:
A
flat rate of $250.00 per month, no adjustable rates.
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VII.
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Disposition
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Greater
than $25,000.00
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VIII.
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Periodic
Inventory
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5
year intervals
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6
