EXHIBIT 10.6
[XXXXXX EXPLORATION COMPANY - LETTERHEAD]
May 18, 1999
Mr. C.E. "Gene" Xxxxxx
Eagle Investment Inc.
0000 Xxxxx Xxxxxx Xx.
Traverse City, MI 49685
RE: Participation Letter Agreement
Xxxxx #6 Well
Midway Dome
Xxxxx County, MS
Dear Xxxx,
This Participation Letter Agreement (hereinafter referred to as "the
Agreement") is written for the purpose of setting forth the terms and
conditions between Xxxxxx Exploration Company ("Xxxxxx") and Eagle Investment
Inc. ("Eagle") with respect to Xxxxx's participation in the drilling of the
Xxxxxx Xxxxx #6 well ("Xxxxx#6") located on the Midway Dome Prospect, Xxxxx
County, MS. The terms and conditions of Eagle's participation are as follows:
1. Xxxxx agrees that concurrently with the execution of this
Agreement, Eagle shall pay to Xxxxxx twenty six and two thirds
percent (26.67%) of the one million three hundred and forty
thousand dollar ($1,340,000.00) estimated dry hole costs
attributable to the Xxxxx#6. Eagle recognizes that the amount of
the AFE is an estimate only, and Eagle shall pay twenty six and
two thirds percent (26.67%) of the actual cost and expense of
drilling the Xxxxx#6 as such costs are determined under the terms
of this Agreement and the March 1, 1999 Joint Operating Agreement
("Operating Agreement") governing the operations of the Xxxxx#6,
whether incurred prior to or after the date of this Agreement to
production casing point as defined in the Operating Agreement.
Such costs shall include, if applicable and by way of
illustration and not limitation, the following: permits; staking
and surveying; legal fees as relating to title examination and
curative, spacing; fee of consultants; rights-of-way; surface
leases; damages; roads, canals and locations; drilling mud and
chemicals; rentals and services; drilling contractor costs;
supplies and materials; fuel and water, cement and services;
transportation; tubular goods; well head equipment (casinghead and
slips); logging; coring; surveys (velocity, etc,); analyses or
reports, travel and telephone expenses of Operator's employees
directly related to the costs described herein; drafting;
reproduction; plugging and abandoning. However, Eagle shall not
pay leasehold or brokerage expenses and shall not pay a prospect
fee and/or any geological or geophysical expenses incurred by
Xxxxxx in the Midway Dome Prospect.
2. It is agreed that contemporaneously with the execution of this
Agreement by Eagle, Xxxxxx shall assign to Eagle twenty percent
(20%) of 8/8ths of those portions of the oil, gas and mineral
leases and a like interest in any other oil, gas and mineral
leases owned or controlled by Xxxxxx in Section 31-T4N-15W, Xxxxx
County, MS inclusive of the
Page 2
Eagle Investment
Xxxxx #6 Participation Agreement
Xxxxx#6 640 acre unit (hereinafter called "Xxxxx#6 Unit Leases").
The Xxxxx#6 Unit Leases are hereby subject to the Operating
Agreement. In the event of conflict or inconsistency between the
terms and provisions of this Agreement and those of the Operating
Agreement or the Joint Venture Agreement, the terms and
provisions of this Agreement shall prevail as to the interests of
the parties hereunder.
3. Eagle will have the right, but not the obligation to participate
for twenty percent (20%) interest in any completion attempt on
the Xxxxx#6. It is agreed and understood that Xxxxx's after
casing point interest in the Xxxxx#6 will be tweny percent (20%).
4. In the event Xxxxxx proposes a well to be drilled offsetting the
Xxxxxx Xxxxx #3 well in Section 20, T4N-R15W, Eagle will have the
option to participate under the same terms and conditions as its
participation in the Xxxxx #6. However, Xxxxxx may elect to
assign Eagle a two percent (2%) of 8/8ths overriding royalty
interest in the leases included in the unit designated for the
above reference offset well in lieu of Eagle's participation.
Should the foregoing meet with your approval, please so indicate where
provided below and return one executed copy to the undersigned at MEXP's Houston
office. Upon receipt Xxxxxx will immediately provide Eagle with an assignment of
the Xxxxx #6 unit leases.
Sincerely,
XXXXXX EXPLORATION COMPANY
/s/ X.X. Xxxxxxx, Xx.
---------------------------------------
X.X. Xxxxxxx, Xx.
Manager Land & Acquisitions
AGREED TO AND ACCEPTED THIS 19TH DAY OF MAY, 1999.
EAGLE INVESTMENTS INC.
BY: /s/ X.X. Xxxxxx
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C.E. ("Xxxx") Xxxxxx-President
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