Exhibit 10.8
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (the "Agreement") is effective as of the
22nd day of November, 2002 ("Effective Date"), by and between AMERICAN NATURAL
ENERGY CORPORATION ("ANEC"), an Oklahoma corporation, and EXXON MOBIL
CORPORATION ("ExxonMobil"), a New Jersey Corporation hereinafter collectively
referred to as the ("Parties") or individually as a ("Party").
WITNESSETH:
WHEREAS, ANEC is currently the holder of the rights of lessee under the
"Bayou Couba Lease" (as herein defined); and
WHEREAS, ExxonMobil is the owner of certain mineral fee interests in
the "ExxonMobil Lands" (as herein defined); and
WHEREAS, ANEC owns a 3-D seismic survey covering all of a 00.000 xxxxxx
xxxx xxxx as indicated on Exhibit "A" hereto; and
WHEREAS, the Parties desire to establish and create an Area of Mutual
Interest ("AMI"), which shall be defined as the area lying within the red
outline, as set forth on Exhibit "A" hereto, covering approximately 8,427 acres;
and
WHEREAS, the Parties desire to set forth the Parties' agreement to
jointly develop the AMI.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
CONTENTS
--------
ARTICLE PAGE
------- ----
1. DEFINITIONS 2
2. SEISMIC 3
3. ESTABLISHMENT OF AMI 4
4. OPERATIONS WITHIN THE AMI 5
5. CONFIDENTIALITY 7
6. TERM 7
7. PRODUCTION HANDLING AND GAS LIFT SUPPORT 8
8. MISCELLANEOUS 8
1
ARTICLE 1.
DEFINITIONS
The following terms shall have the following meanings for purposes of
this Agreement:
1.01 "Acreage" shall mean all fee mineral interests, term mineral
interests, mineral leasehold rights, prescribed interests, farm-in rights, force
pooled acreage, rights under voluntary unitization agreements, option rights,
and all other rights, whether by recorded instruments or under contract, giving
rise to the right to drill upon lands lying within the geographic boundaries of
an AMI.
1.02 "Affiliate" shall mean any Company that is owned or controlled by
a Party. Ownership or control is deemed to exist if fifty percent (50%) or more
of the stock of such company, having the right to vote for directors, is owned
or controlled, directly or indirectly, by the particular Party. An Affiliate of
a Party also includes any company that is owned or controlled, directly or
indirectly, by any other company that is owned or controlled by a Party. An
Affiliate of a Party also includes any parent company that owns or controls,
directly or indirectly, fifty percent (50%) or more of the voting shares,
partnership interests or voting rights, or other equity interest of such Party.
1.03 "AMI" or "Area of Mutual Interest" shall mean the area lying
within the red outline, as set forth on Exhibit "A" hereto, covering
approximately 8,427 acres.
1.04 "XXX XXX" shall mean the AAPL Form 610-1982 Model Form Operating
Agreement, as modified, attached as Exhibit "B" hereto.
1.05 "Bayou Couba Lease" shall mean all of the undivided working
interest owned by ANEC in a 1,319.991 gross acre divided portion of that certain
Oil, Gas, and Mineral Lease from Delta Securities Company, Inc. as Lessor to
Gulf Refining Company as Lessee dated November 14, 1941, recorded in Entry No.
1458, Conveyance Book SS, Folio 382, of the records of St. Xxxxxxx Xxxxxx,
Louisiana.
1.06 "Confidential Data" shall mean all geological, geophysical or
reservoir information, including, without limitation, the 3D Seismic (and
reprocessed 3D Seismic), logs or other information pertaining to the progress,
tests or results of any well drilled within the AMI, furnished by one Party to
the other pursuant to this Agreement which is not otherwise available in the
public domain.
1.07 "Drilling Prospects" shall mean any geologic presentation proposed
in a Notice which shall be specifically identified as to (a) a legal geographic
location of the initial wellbore, (b) maximum depth to be drilled, (c) the
estimated cost to drill the well and (c) anticipated areal extent of a proposed
prospect area surrounding such unit and well (not to exceed 1280 acres), unless
otherwise agreed by the Parties.
2
1.08. "ExxonMobil Lands" shall mean the real property located in the
area within the AMI outlined in yellow, as set forth on Exhibit "A" hereto.
1.09 "Notice" shall mean a written notice of drilling opportunity or
acquisition opportunity described in Article III of this Agreement which Notice
shall set forth all pertinent information with respect to such opportunity and
shall be delivered in the manner prescribed in Section 6.04 below.
1.10 "3D Seismic" shall mean the 3D seismic survey owned by ANEC and
covering the real property depicted on Exhibit "A" attached hereto.
ARTICLE II.
SEISMIC
2.01 Reprocessing: ANEC represents and warrants that it possesses 3D
Seismic which has been reprocessed using pre-stacked time and pre-stacked depth
migration techniques with respect to an area encompassing approximately 23.138
square miles as shown on Exhibit "A" hereto. All cost and expense related to
such reprocessing have been assumed by ANEC and ExxonMobil shall have no
liability therefor.
2.02 Sharing: Upon execution of this Agreement, ANEC agrees that it
shall provide ExxonMobil with a copy of the reprocessed 3D Seismic, in any form
available to ANEC, for ExxonMobil and its Affiliates' use in evaluating
prospects on ExxonMobil's fee acreage. Furthermore, ANEC agrees, upon request,
to provide ExxonMobil copies of any other information, including all well files
for xxxxx located on ANEC's "Bayou Couba Lease" as defined herein, which may
assist ExxonMobil's evaluation. ANEC shall provide copies of the reprocessed 3D
seismic and additional information at no cost to ExxonMobil, except that
ExxonMobil shall reimburse ANEC for reasonable costs of reproducing such
information.
2.03 Additional 3-D Seismic Data Acquisition: During the Primary Term
of this Agreement (as defined below), if ExxonMobil elects to acquire additional
3-D seismic or reprocess existing 3-D Seismic over the AMI, ANEC shall have the
option to participate in such seismic data acquisition. If ANEC elects not to
participate in the acquisition or reprocessing of seismic data, ANEC shall
permit ExxonMobil to proceed at its own risk and expense to acquire or reprocess
3-D seismic data over the entire AMI with no consideration due ANEC for such
permission.
3
ARTICLE III.
ESTABLISHMENT OF AMI
3.01 ESTABLISHMENT OF AMI: The Parties hereby establish and create an
AMI, which shall be defined as the area lying within the red outline, as set
forth on Exhibit "A" hereto, covering approximately 8,427 acres.
The following four classes of Acreage comprise the AMI:
"CLASS 1": ANEC's "Bayou Couba Lease" on ExxonMobil's Bayou Couba
fee acreage contributing approximately 1319 acres.
"CLASS 2": ExxonMobil's unleased fee acreage contributing
approximately 3,240 acres to the AMI. ExxonMobil shall
reserve a 25% royalty interest on all production
attributable to its unleased fee acreage in addition to its
rights to participate to earn up to 50% of 8/8ths working
interest in the proceeds of production for Drilling
Prospects developed pursuant to this Agreement.
"CLASS 3": ANEC's State Lease No. 17353 contributing approximately
1,491 acres to the AMI.
"CLASS 4": Currently unleased State and private acreage comprising
approximately 2,377 acres. If ANEC acquires any interest in
any oil and gas leases, farmouts, options, assignments or
other contractual rights in this acreage, the cost and
burdens associated with such acquisition shall be the sole
responsibility of ANEC and ExxonMobil shall have no
obligation in connection with any such acquisition. ANEC or
ExxonMobil may generate prospects for drilling opportunities
within such acquired Acreage and ExxonMobil will be entitled
to participate to earn up to 50% of 8/8ths working interest
in the proceeds of production for Drilling Prospects
developed pursuant to this Agreement.
3.02 NO CROSS-ASSIGNMENT: The Parties hereby agree there shall be no
cross assignment of interests between ExxonMobil and ANEC affecting Acreage
subject to the AMI.
3.03 BURDENS: ANEC acknowledges that its working interest in the
acreage it is committing or may subsequently acquire in the AMI may be less than
100%, and furthermore that its working interest in the AMI is burdened by
overriding royalty interests, net profits interests, production payments and/or
other burdens on production. The Parties hereto agree that ExxonMobil's working
interest and royalty share of production from the AMI shall be free and clear of
any such burdens, and all such burdens shall be borne solely by ANEC's share of
production developed under the AMI.
3.04 INDEMNITY: The Parties agree that each Party is solely responsible
for its own lease obligations, royalties, overriding royalties and other burdens
as described in Section 3.03. The Party so burdened shall assume and alone bear
all obligations and shall indemnify, defend, protect and hold the other harmless
(including all costs and attorneys' fees) from all claims, demands, and causes
of action filed by any party related to any alleged interest in production from
the AMI.
4
ARTICLE IV
OPERATIONS WITHIN THE AMI
4.01 PROPOSED AMI DRILLING PROSPECTS: During the term of this Agreement
ANEC and ExxonMobil agree as follows with respect to each drilling opportunity
within the AMI:
(a) Either Party may propose Drilling Prospects. Such a
Drilling Prospect shall be presented by Notice to the other Party for
review. Upon receipt of the Notice, such Party shall have a period of
sixty (60) calendar days (the "election period"), from its receipt of
such Notice, to elect to participate in the Drilling Prospect by
delivering written notice of such election to the proposing Party.
(Failure to respond within the election period shall be deemed an
election to not participate in such Drilling Prospect.) ExxonMobil's
election to participate shall also contain an election as to the
undivided percentage of the Drilling Prospect which ExxonMobil has
opted to take, if any, provided such percentage may not exceed fifty
percent (50%) of 8/8ths working interest in the proceeds of production
from the Drilling Prospect.
(b) If either Party timely notifies the proposing Party of its
election to participate in such Drilling Prospect, such Party shall be
responsible for its proportionate share of all drilling and completion
costs incurred in connection with the drilling of the Drilling Prospect
in which such Party has elected to participate, and operations shall
proceed pursuant to section 4.04 of this Article IV.
4.02 ALLOCATION OF PROCEEDS AND EXPENSE:
(A) PROCEEDS. In the event ExxonMobil elects to participate in
a Drilling Prospect, whether such Drilling Prospect contains Acreage
from Class I, Class II, Class III, Class IV or any combination thereof,
it shall have the right to participate to earn up to 50% of 8/8ths
working interest in the proceeds of production from Drilling Prospects
developed under this Agreement under terms as set forth herein.
(b) LIABILITY OF PARTIES: The liability of the Parties shall
be several, not joint or collective. Subject to the provisions of this
Agreement and each XXX XXX, each Party shall be responsible only for
its obligations, and shall be liable only for its share of the costs of
developing, operating, and abandoning the Drilling Prospect which shall
be in the same proportion as its working interest share of the proceeds
of production from the Drilling Prospect.
4.03 ELECTION NOT TO PARTICIPATE: In the event either Party elects or
is deemed not to have elected to participate in a Drilling Prospect affecting
one or more of the four classes of Acreage contributing to the AMI, the
proposing party shall have 150 days from the end of the election period within
which to commence drilling operations on the Drilling Prospect. If the proposing
5
party fails to commence drilling operations as aforesaid or the well drilled
fails to produce oil and/or gas in paying quantities, the Acreage within the
Drilling Prospect shall again be subject to this provision, and any Party
wishing to propose a Drilling prospect thereon must comply with the procedures
set forth in Section 4.01. If the proposing party commences drilling operations
as aforesaid, the following conditions shall apply as to the affected Drilling
Prospect acreage:
(a) EXXONMOBIL'S NON-PARTICIPATION IN THE DRILLING PROSPECT:
- Class 1 Acreage: ANEC may proceed with development at
its own risk and expense subject to ExxonMobil's
reserved 20% royalty interest.
- Class 2 Acreage: ANEC may proceed with development at
its own risk and expense. ExxonMobil issues a
one-year oil and gas lease to ANEC from the surface
to the stratigraphic equivalent of the base of the
formation into which ANEC completes a well capable of
producing oil and/or gas in paying quantities,
encompassing solely the area of the Drilling
Prospect, reserving to ExxonMobil a twenty-five
percent (25%) royalty interest.
- Class 3 Acreage: ANEC may proceed with development at
its own risk and expense, and ExxonMobil has no
interest in production attributable to the Drilling
Prospect insofar as it affects this Class 3 Acreage.
- Class 4 Acreage: If ANEC has obtained an oil and gas
lease, option, farmout, or other contractual interest
in this Class 4 Acreage, ANEC may proceed at its own
risk and expense, and ExxonMobil has no interest in
production attributable to the Drilling Prospect
insofar as it affects this Class 4 Acreage.
b) ANEC NON-PARTICIPATION IN THE DRILLING PROSPECT:
- Class 1 Acreage: ExxonMobil proceeds at its own risk
and expense and ANEC has no interest in Drilling
Prospect production attributable to the affected
acreage.
- Class 2 Acreage: Same as Class 1 Acreage.
- Class 3 Acreage: ANEC issues a one-year sublease to
ExxonMobil from the surface to the stratigraphic
equivalent of the base of the formation into which
ExxonMobil completes a well capable of producing oil
and/or gas in paying quantities, encompassing solely
the area of the Drilling Prospect, reserving to ANEC
an overriding royalty interest of thirty percent
(30%) less existing lease burdens.
- Class 4 Acreage: If ANEC has obtained an oil and gas
lease on the affected acreage, it shall issue to
ExxonMobil a one-year sublease from the surface to
the stratigraphic equivalent of the base of the
formation into which ExxonMobil completes a well
capable of producing oil and/or gas in paying
quantities, encompassing solely the area of the
Drilling Prospect, reserving to ANEC an overriding
royalty interest of thirty percent (30%) less
existing lease burdens.
6
In the event a designated Drilling Prospect encompasses two or more
classes of acreage, then the conditions in a) and b), set forth above, shall be
applied proportionately according to the contribution of each class of acreage
to the Drilling Prospect area.
4.04 XXX XXX: All Drilling Prospects for which the receiving Party
elects to participate pursuant to Section 4.01 above shall be subject to and
conducted pursuant to a separate operating agreement (the "XXX XXX") in the form
attached hereto as Exhibit "B". Each XXX XXX shall cover only the areal extent
of the Drilling Prospect from the surface to the stratigraphic equivalent of the
base of the formation into which a completion is made resulting in production of
oil and/or gas in paying quantities. ANEC shall be designated operator under
each XXX XXX; however, ExxonMobil shall have the right, to be exercised in its
sole discretion at any time, to assume operatorship of any Drilling Prospect(s),
and ANEC shall remain operator of any remaining Drilling Prospects. Each XXX XXX
shall govern all operations within each Drilling Prospect, provided, however, in
the event of a conflict between this Agreement and the XXX XXX, then this
Agreement shall take precedence. Upon termination of this Agreement, the
Operating Agreement shall remain in force.
ARTICLE V.
CONFIDENTIALITY
5.01 CONFIDENTIALITY: Except as provided for in Sections 5.02 and 5.03,
and except for necessary disclosures to governmental agencies, no Party shall
release Confidential Data unless agreed to by each Party.
5.02 LIMITED DISCLOSURE: Any Party may make Confidential Data available
to reputable engineering firms for hydrocarbon reserve or other technical
evaluations, to accountants, tax advisers, attorneys, reputable financial
institutions for study prior to commitment of funds, to outside professional
consultants and to the extent required under applicable laws or by a
governmental authority, provided that the governmental authority is requested to
hold such data confidential, and to a "third Party" with whom a Party is engaged
in a bona fide effort to sell, farm out or trade any portion of all of its
interest in the AMI. The Confidential Data made available shall not be removed
from the custody or premises of the Party making such data available. Any third
Party permitted such access shall first agree in writing neither to disclose
such data to others nor to use such data except for the purposes for which it is
disclosed.
5.03 AFFILIATES: Despite the provisions of section 5.01, there shall be
no requirement for approval with respect to the disclosure of Confidential Data
to Affiliates of the Parties.
ARTICLE VI.
TERM
6.01 TERM: This Agreement shall commence on the date first written
above and shall remain in effect for a period of four years, provided, that no
more than 280 days shall elapse between cessation of drilling operations on one
7
well and commencement of drilling operations on another well within the AMI. In
the event that more than a 280 day cessation occurs, this Agreement shall
terminate unless otherwise agreed by the Parties. Notwithstanding the provisions
of this Section above, each XXX XXX and the applicable provisions of this
Agreement shall remain in effect with respect to each Drilling Prospect which
contains a producing well for so long as such well continues to produce in
paying quantities and the Drilling Prospect is then abandoned. Furthermore, any
Drilling Prospect for which a drilling or deepening AFE has been executed by the
Parties prior to the date this Agreement terminates shall remain subject to the
terms of this Agreement.
ARTICLE VII.
PRODUCTION HANDLING AND GAS LIFT SUPPORT
7.01 HANDLING OF AMI PRODUCTION: Production developed pursuant to this
Agreement shall, where appropriate and at ExxonMobil's option, be handled
through ANEC's Bayou Couba facilities. When ExxonMobil has a working interest
share of production in a Drilling Prospect, ExxonMobil's share shall be handled
on a throughput basis; i.e., ExxonMobil shall be responsible solely for its
share of facilities operating costs attributable to ExxonMobil's working
interest share of production. ExxonMobil shall not be responsible for any
operating costs for production from Drilling Prospects in which ExxonMobil has
elected not to participate.
7.02 GAS LIFT SUPPORT: ExxonMobil agrees that for the duration of this
Agreement ANEC may utilize the wellbores of the Waterford #1 Well (Serial No.
056712) and Waterford #2 Well (Serial No. 165206), located on ExxonMobil's fee
acreage solely for gas lift purposes in support of xxxxx on ANEC's Bayou Couba
Lease. ANEC shall assume plugging liability for both the Waterford #1 and #2
well, as well as sole and total abandonment liability for any and all existing
facilities located on ExxonMobil Lands within the AMI.
ARTICLE VIII.
MISCELLANEOUS
8.01 NOTICES: Any Notice, notice, demand, request or report required or
permitted to be given or made to a Party under this Agreement shall be in
writing and shall be deemed given or made when sent by first-class mail, postage
prepaid, certified mail or facsimile to the Party at the following addresses:
If to ANEC: American Natural Energy Corporation
0000 Xxxxx Xxxx Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
e-mail: xxx@xxxxx.xxx
8
If to ExxonMobil: Exxon Mobil Production Company
X.X. Xxx 00000
Xxx Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
e-mail: xxxxx.x.xxxxxxxxx@xxxxxxxxxx.xxx
8.02 NON-PARTNERSHIP ELECTION: The Parties specifically elect to be
excluded from the application of Subchapter K of Chapter 1, Subtitle A of the
Internal Revenue Code, as may be amended, insofar as said Subchapter or portion
thereof may apply to the Parties hereto with respect to the activities or
operations covered by this Agreement. It is not the intention or purpose of this
Agreement to create, and nothing herein shall be construed as creating, a mining
or other partnership or association, or to render any Party hereto responsible
for any act, whether of omission or commission, of the other Parties hereto.
8.03 ASSIGNABILITY: This Agreement is personal in nature and may not be
assigned by either Party, in whole or in part, except with the prior written
consent of the other Party. ExxonMobil shall, upon written request from ANEC,
consent for ANEC to assign a partial interest, but not operatorship, to the
Wiser Company and Transatlantic Petroleum Corp., conditioned upon ANEC as
assignor and its assignees executing ExxonMobil's standard Consent to Assign
letter, a sample of which is Exhibit "C" attached hereto. Additionally, no Party
shall sell, encumber, transfer or make other disposition of its interest, or a
portion thereof, in the Acreage embraced within the AMI and in xxxxx, equipment
and production unless such disposition shall be made expressly subject to this
Agreement and shall be made without prejudice to the right of the other Party.
8.04 BINDING EFFECT: This Agreement shall be binding upon and inure to
the benefit of the Parties to this Agreement, their Affiliates and their
respective successors and permitted assigns.
8.05 CONFLICTS: If there are any conflicts between this Agreement and
the XXX XXX, this Agreement shall control as between ANEC and ExxonMobil.
8.06 GOVERNING LAW: This Agreement is deemed by the Parties to be made
and performed in the State of Louisiana. The terms shall be interpreted,
construed and governed under and by the laws of the State of Louisiana.
8.07 SEVERABILITY: Each section and provision of this Agreement is
severable and should any court of competent jurisdiction declare any provision
of this Agreement invalid or unenforceable, the remaining provisions hereof
shall continue to be in full force and effect.
9
8.08 ENTIRE AGREEMENT: This Agreement, together with Exhibits hereto,
embodies the full and complete agreement and understanding of the Parties, and
any other agreements concerning the matters addressed herein are merged herein.
Alterations, modifications or amendments shall not be effective or binding upon
the Parties unless agreed to by the Parties in writing.
8.09 MEMORANDUM OF RECORD: Upon request of either party, both parties
shall promptly execute a memorandum of this agreement suitable for filing of
record.
8.10 COUNTERPARTS: This Agreement may be executed in counterparts and
each shall be deemed an original for all purposes.
IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the
Effective Date.
AMERICAN NATURAL ENERGY
CORPORATION
By: __________________________
Xxxxxxx Xxxxx President
EXXON MOBIL CORPORATION
By: ___________________________
Name: ____________________
12/03/02 Title: _____________________
BayouCouba dev v3
10
