PARTICIPATION AGREEMENT Redacted]PROSPECT
Exhibit
10.5
Redacted]PROSPECT
This
Participation Agreement ("Agreement") is entered into and made effective this
1st day of July, 2008 ("Effective Date") by and between Newfield Exploration Company
(“NEWFIELD”), whose mailing address is 000 X. Xxx Xxxxxxx Xxxx X., Xxxxx 0000
Xxxxxxx, Xxxxx 00000, and Ridgewood Energy Corporation
(“RIDGEWOOD”), whose mailing address is 00000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000, herein referred to collectively as "Parties" and
individually as a "Party".
WITNESSETH
WHEREAS, NEWFIELD is the owner
of an undivided seventy-five percent (75%) record title interest in and to each
of the Oil and Gas Leases (collectively, the “Leases”) described as
follows:
Oil and
Gas Lease bearing [Redacted], effective [redacted], by and between the United
States of America, as Lessor, and Newfield Exploration Company and Stone Energy
Corporation, as Lessee, covering all of [Redacted], containing 5,760.00 acres
more or less (hereinafter referred to as the “[Redacted Lease”),
and
Oil and
Gas Lease bearing [Redacted], effective [redacted], by and between the United
States of America, as Lessor, and Newfield Exploration Company and Stone Energy
Corporation, as Lessee, covering all of [Redacted] containing 5,760.00 acres
more or less (hereinafter referred to as the “[Redacted] Lease”),
and
Oil and
Gas Lease bearing[Redacted], by and between the United States of America, as
Lessor, and Newfield Exploration Company and Stone Energy Corporation, as
Lessee, covering all of [Redacted], containing 5,760.00 acres more or less
(hereinafter referred to as the “[Redacted] Lease”).
WHEREAS, pursuant to that
certain Confidentiality Agreement dated effective September 4, 2008 by and
between NEWFIELD and RIDGEWOOD covering the Leases (the “Prospect CA”),
RIDGEWOOD reviewed certain confidential information supplied by NEWFIELD
relating to its [Redacted] Prospect that lies within the Leases (hereinafter
referred to as the “Prospect”) and RIDGEWOOD has advised NEWFIELD of its
election to participate in the drilling of the initial exploratory well on the
Prospect, subject to the receipt and approval of the formal authorization for
expenditure, and
WHEREAS, NEWFIELD and
RIDGEWOOD desire to set forth the terms and conditions under which RIDGEWOOD
shall participate in certain operations to be conducted on the Prospect to earn
and be assigned an undivided 15% record title interest from Newfield in and to
the Leases;
1
NOW, THEREFORE, for and in
consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowled and
confessed, together with the mutual covenants, conditions, and obligations
contained herein, NEWFIELD and RIDGEWOOD do hereby enter into this Agreement
under the following terms and conditions:
ARTICLE
I
EXHIBITS
The following Exhibits are
attached hereto and made a part of this Agreement:
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Exhibit
“A-1”
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Redacted
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Exhibit
“A-2”
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Redactedl
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Exhibit
“B”
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Operating
Agreement
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Exhibit
“C”
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Geologic
and data information requirements of RIDGEWOOD
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Exhibit
“D”
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Form
of Assignment
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Article
II
Initial Test
Well
2.1 Initial Test
Well.
NEWFIELD, as operator under the Operating Agreement (defined in Article
III below), and subject to rig availability and obtaining all requisite permits,
agrees to use reasonable efforts to commence, or cause to be commenced, on or
before [Redacted], actual drilling of the [Redacted] ("ITW") at an approximate
surface coordinate location of[Redacted]. The ITW is to be drilled as an
Exploratory Well (as such term is used in the Operating Agreement) to 22,000’ MD
/ TVD or a depth sufficient to test the stratigraphic equivalent of the ’21,000’
and 22,000’ Sand’ (the “Objective Depth”), whichever is the lesser depth.
An Authority for Expenditure (“AFE”) for the ITW is attached to this
Agreement as Exhibit “A-1” (the “Approved AFE”) and by the execution hereof,
each of NEWFIELD and RIDGEWOOD agrees to participate in the drilling of the ITW
in accordance with the terms hereof. Contemporaneously with the
execution of this Agreement, RIDGEWOOD agrees to execute and deliver to NEWFIELD
a counterpart copy of the Approved AFE.
The
failure to timely commence the drilling of the ITW and the Parties agreement to
terminate this Agreement, shall result in the termination of this Agreement, the
return of the Cash Consideration by NEWFIELD to RIDGEWOOD and the reassignment
from RIDGEWOOD to NEWFIELD of all of its record title interest in and to the
Leases. Otherwise, there shall be no penalty for failure
to timely commence the drilling of the ITW.
2.2 Substitute Well.
In the event the ITW should encounter rock salt, heaving shale, excessive
water flow, excessive pressure, igneous or other impenetrable formation or other
conditions which would render further drilling impracticable or uneconomic and
preclude the ITW from reaching the Objective Depth, then and in such event
NEWFIELD shall have the exclusive option to propose within sixty (60) days
following the abandonment of the ITW drilling of a substitute
well (“Substitute Well”) therefore, provided same is drilled to the
Objective Depth and under the same terms and conditions as the
ITW. RIDGEWOOD shall have no obligation to participate in the
Substitute Well; provided RIDGEWOOD shall have thirty (30) days, or forty-eight
(48) hours in the event that a rig is on location, from receipt of the AFE for
the Substitute Well to elect whether it shall participate in such Substitute
Well. Failure to respond within the time period allowed shall be deemed to be an
election not to participate in the Substitute Well. In the
event NEWFIELD does not propose a Substitute Well within the time
period provided for above, then RIDGEWOOD may propose the drilling of a
Substitute Well pursuant to the terms of the Operating
Agreement. NEWFIELD or Ridgewood shall have the continuing option to
drill additional Substitute Xxxxx, provided that no more than sixty (60) days
elapse between the date the drilling rig was released from the last operation on
such Substitute Well and the commencement date of drilling operations for the
next Substitute Well drilled therefor.
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2.2.1
If the ITW fails to reach its Objective Depth, and RIDGEWOOD’s share of costs
and expenses incurred in connection with the ITW has not yet reached the Promote
Cap, then:
(i) if a
Substitute Well is proposed and RIDGEWOOD elects not to
participate therein, then RIDGEWOOD shall pursuant to Article 4.3,
reconvey to NEWFIELD a 15% record title interest in and to the Leases
and this Agreement shall terminate and neither Party shall have any further
obligations or liabilities hereunder, except with respect to the fulfillment of
payment and indemnity obligations accrued prior to such
termination;
(ii) if
a Substitute Well is proposed and RIDGEWOOD does elect to
participate therein, this Agreement shall remain in full force and effect
as though the Substitute Well was the ITW; and
(iii) if
a Substitute Well is proposed and RIDGEWOOD elects to
participate therein, but such well is not drilled, RIDGEWOOD shall retain
its undivided fifteen percent (15%) record title interest in and to the Leases
previously conveyed by the Assignment hereunder and any future operations on the
Prospect by the Parties shall be governed by the Operating
Agreement.
2.2.2
If the ITW fails to reach its Objective Depth and RIDGEWOOD’s share of costs and
expenses incurred in connection with the ITW has reached the Promote Cap,
RIDGEWOOD shall retain its record title interest in and to the Leases received
by the Assignment pursuant to Section 4.2 hereof, and the consequences of
RIDGEWOOD’s election to participate or not to participate in the Substitute Well
shall be governed by the provisions of Article 16 of the Operating Agreement as
described below.
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Subject
to Sections 2.2.1 and 2.2.2, in the event that a Substitute Well is proposed by
RIDGEWOOD and drilled in accordance with this Agreement, the interest of any
non-participating Party in the drilling of such Substitute Well shall be subject
to the terms and conditions of Article 16 of the Operating Agreement as
described below; however, notwithstanding anything to the contrary in this
Agreement, in the event NEWFIELD elects not to participate in the drilling of a
Substitute Well, and RIDGEWOOD bears all or a portion of such Party’s interest
in the Substitute Well, the acquired interest shall not be subject to the
acreage forfeiture provisions of the Operating Agreement, but instead will be
subject to the non-consent penalty percentages applicable to Exploratory
Operations as defined in the Operating Agreement Article
16.5.1. Regardless of whether RIDGEWOOD elects to participate or not
to participate in a Substitute Well, NEWFIELD shall retain the Cash
Consideration, as such term is hereafter defined.
2.3 ITW Drilling
Costs. RIDGEWOOD shall bear and pay thirty percent (30.0%) of
the actual costs to drill and test the ITW to Casing Point ; however, if prior
to reaching Casing Point the actual aggregate cost of the ITW, and any
Substitute Well therefor, exceeds one hundred percent (100%) of the dry hole
cost estimate provided for in the Approved AFE (“ Promote Cap”), RIDGEWOOD shall
bear and pay fifteen percent (15%) of the actual costs to drill and test the ITW
thereafter. Casing Point shall be defined as that point in time when
the ITW (or Substitute Well therefor) has reached its Objective Depth and all
open hole logs and tests have been conducted in accordance with the Approved
AFE. If RIDGEWOOD elects to participate in a Substitute Well, any
cost to drill the ITW will be carried over to the Substitute Well to calculate
the Promote Cap for purposes of determining when RIDGEWOOD's cost-bearing
interest reduces to fifteen percent (15%). Subject to the terms and
conditions of this Agreement, all operations in the ITW subsequent to Casing
Point, shall be conducted in accordance with the terms and provisions of the
Operating Agreement and, subject to participation elections, shall be shared 15%
by RIDGEWOOD and 85% by NEWFIELD et al, its co-owner, and their successors and
assigns.
Article
III
Operating
Agreement
3.1 Operating Agreement. The Leases will be
subject to that certain Offshore Operating Agreement by and between NEWFIELD, as
Operator, and the Non-Operators designated therein, dated effective July 1, 2008
(the “Operating Agreement”), which is attached hereto as Exhibit “B”, and which
will govern operations upon the Leases (subject to RIDGEWOOD’s right to earn an
interest in the Leases per this Agreement). At the time
RIDGEWOOD executes this Agreement, RIDGEWOOD shall also execute and deliver the
Operating Agreement, at which time it shall be deemed to be a party
thereto. If there is a conflict between the terms and conditions of
this Agreement and the terms and conditions of the Operating Agreement prior to
the earlier of: (a) reaching the Objective Depth in the ITW or (b) RIDGEWOOD’s
costs and expenses incurred in the ITW and any Substitute Well therefor reaching
the Promote Cap, then the terms and conditions of this Agreement shall
control. Thereafter, the Operating Agreement shall control.
Notwithstanding the foregoing, the provisions of Article 27 of the Operating
Agreement (Area of Mutual Interest) will be applicable to the Parties hereto
from and after the Effective Date and should RIDGEWOOD be required to reassign
its interest in accordance with Article 4.3 of this Agreement then the
Reassignment will also include any and all rights or interest acquired by
RIDGEWOOD, as applicable, pursuant to said Article 27.
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3.2 Prospect
Information. NEWFIELD,
as Operator of the ITW, shall provide RIDGEWOOD with any and all raw well data
and information obtained and/or results of analyses performed through the
conduct of the drilling of any xxxxx by XXXXXXXX on the Prospect in which
RIDGEWOOD is a participant, as further provided for in Exhibit “C”, and any
additional data and/or information that RIDGEWOOD may become entitled to
pursuant to the terms of the Operating Agreement. All data delivered
to RIDGEWOOD as provided in this Section 3.2 shall be delivered to RIDGEWOOD
pursuant to the Operating Agreement.
Article
IV.
Cash Consideration and
Assignment of Interest in Lease
4.1 Cash
Consideration. Within five (5) business days after the
complete execution of this Agreement by all Parties, RIDGEWOOD shall pay to
NEWFIELD the sum of Two Million Four Hundred and Thirty-two Thousand, Two
Hundred and Fifty ($2,432,250.00) (the “Cash Consideration”) by wire
transfer to the account designated by NEWFIELD in writing to
RIDGEWOOD. Such Cash Consideration shall be nonrefundable in all
circumstances, except as otherwise provided for in Section 2.1 of this
Agreement.
4.2 Assignment. Within
ten (10) business days after receipt by NEWFIELD of the Cash Consideration,
NEWFIELD shall deliver to RIDGEWOOD an assignment of an undivided fifteen
percent (15.00%) record title interest in and to the Leases (the
“Assignment”), subject
to the following:
(a) The
Assignment shall be free and clear of any burdens, liens or encumbrances by,
through or under NEWFIELD, but not otherwise, subject only to (i) a
proportionate part of the lessors’ reserved royalty under the Lease, (ii) a 2.0%
of 8/8ths overriding royalty interest reserved in favor of NEWFIELD,
proportionately reduced by the record title interest being conveyed by NEWFIELD
, (iii) the Operating Agreement and (iv) this Agreement.
(b) The
Assignment shall be effective [redacted], subject to Minerals Management Service
(“MMS”) approval, and
the Parties shall use the form of assignment attached hereto as Exhibit
“D”.
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The
Assignment requires approval by the MMS. The assignee of the
Assignment shall promptly (i) file of record the Assignment in the adjacent
parish or county courthouse and (ii) file for approval with the MMS (or other
applicable governmental agencies) the Assignment. Should approval of
the MMS (or any other similar governmental agency having jurisdiction) be
denied, the Party receiving notice of such denial agrees to provide the other
Party with written notice of such occurrence, along with a copy of all
associated written communications, and the Parties agree to develop a revised
form of assignment in an effort to meet the MMS’ or other appropriate agency’s
requirements for approval. In the alternative, each Party shall
execute and deliver, or cause to be executed and delivered, such other documents
and take such other actions as a Party may reasonably request in an effort to
comply with any such approval requirements.
4.3 Reassignment. Subject
to Article 2.2.1(i), RIDGEWOOD shall reconvey to NEWFIELD all of its undivided
fifteen percent (15%) record title interest in and to the Leases, using a form
of assignment similar to the Assignment (the “Reassignment”), in the event
the ITW fails to reach Objective Depth and RIDGEWOOD’s share of costs
and expenses incurred in connection with the ITW has not reached the RIDGEWOOD
Promote Cap, and a Substitute Well is not proposed within one (1) year from
abandonment of the ITW on the Leases.
The
Reassignment shall be made using the form of assignment attached hereto as
Exhibit “D” and shall be made free and clear of any burdens, liens or
encumbrances by, through, or under RIDGEWOOD, but not otherwise. The
Reassignment shall be delivered by RIDGEWOOD to NEWFIELD within fifteen (15)
days after receipt by RIDGEWOOD of a request from NEWFIELD for the
Reassignment.
4.4 Earning Events. The
Reassignment shall not be due, and RIDGEWOOD shall be deemed to have earned its
record title interest in and to Leases, when the Promote Cap has been reached or
upon the ITW being drilled to Casing Point, whichever is the earliest to
occur.
Article
V
Assignability
5. Rights to
Assign. In
the event a Party is granted consent to a proposed assignment, the assignment
will be made expressly subject to this Agreement and the assignee must agree in
writing to be expressly bound by this Agreement. The assignor of an assignment
made under this Agreement shall remain primarily liable for its obligations
which have accrued prior to the latter of i) the effective date of the
assignment, or ii) the date the assignment is physically delivered to the
assignee.
After the
ratification of the Operating Agreement by RIDGEWOOD pursuant to Section 3.1 of
the Agreement, a Party’s right to assign its rights under this Agreement and in
the Leases shall be governed by the Operating Agreement.
Subject
to the restrictions on assignment as contained herein, the terms and conditions
of this Agreement shall inure to the benefit of and will be binding upon
NEWFIELD and RIDGEWOOD, and their respective successors and assigns. This
Agreement shall constitute a covenant running with the Leases.
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Article
VI
Miscellaneous
Provisions
6.1 Governing Law. THE PARTIES
HERETO HEREBY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO RULES
CONCERNING CONFLICTS OF LAW. VENUE FOR ANY ACTION SHALL BE IN XXXXXX COUNTY,
TEXAS.
6.2 Notices. Any
notices or provision of notices or disclosure, or other communications that may
be required or permitted hereunder shall be in writing and shall be delivered by
facsimile, in person or sent by United States Mail, certified mail, postage
prepaid, return receipt requested, or an equivalent delivery service, addressed
to the Parties at the following respective addresses:
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Newfield
Exploration Company
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000
Xxxxx Xxx Xxxxxxx Xxxxxxx Xxxx, Xxxxx 0000
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Xxxxxxx,
Xxxxx 00000
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Attention:
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Xxxx
X. Xxxxxxxx
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Telephone:
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(000)
000-0000
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Facsimile:
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(000)
000-0000
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Ridgewood
Energy Corporation
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00000
Xxxx Xxxxxxx, Xxxxx 000,
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Xxxxxxx,
Xxxxx 00000,
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Attention:
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Mr.
W. Xxxx Xxxxx
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Telephone:
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(000)
000-0000
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Facsimile
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(000)
000-0000
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6.3 Relationship of the
Parties. It is not the purpose or intention of this Agreement
to create, and this Agreement will never be construed as creating, a joint
venture, mining partnership or other relationship whereby any Party will be held
liable for the acts, either of omission or commission, of any other Party, and
the liabilities of each of the Parties hereto shall be several and not joint or
collective. Solely for purposes of federal income taxation and purposes of
certain state income tax laws which incorporate or follow federal income tax
principals as to tax partnerships, however, Each of the Parties hereto agrees
not to elect, under the authority of Section 761(a) of the Internal Revenue Code
of 1986, to be excluded from all the provisions of Subchapter K of Chapter I of
Subtitle A of said Internal Revenue Code of 1986. With regard to the
resulting tax partnership, the Parties hereby incorporate by this reference, as
if set forth herein in full, the tax partnership provisions set forth on Exhibit
“J” to the Operating Agreement, with the tax partners in such tax partnership
being NEWFIELD, RIDGEWOOD and the other parties to the
Operating Agreement with the Tax Reporting Partner being NEWFIELD.
This Agreement and operations hereunder relate solely to the Prospect, and no
Party hereto shall have any obligation of any kind to any other Party hereto as
to any other lease, land or minerals (whether in the vicinity of the Lease or
not) by virtue of this Agreement or such operations or otherwise except as may
be provided in the Operating Agreement, Article III hereof or evidenced by
written agreement of such Parties.
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6.4 Rentals. To the
best of NEWFIELD's knowledge, as of the effective date of the assignment, all
rentals and any other payments due pursuant to the terms of the Leases subject
to this Agreement have been properly and timely paid and said Leases are now in
full force and effect as of the Effective Date. As of the Effective Date
of this Agreement, RIDGEWOOD will be responsible for its prorata share of the
rentals on the Leases.
6.5 Further Assurances.
Following execution of the Assignment, each Party agrees to execute and deliver
to the other any instruments or other documents necessary to carry out the
intent and obligations of this Agreement.
6.6 Conflicts. Except as provided
for in Article 3.1,
in the event of any conflicts or inconsistencies between the provisions
of this Agreement and any other agreement, including any agreement referenced
herein to be executed by the Parties hereafter, the provisions of this Agreement
shall control to the extent of such conflict.
6.7 Entire Agreement. This
Agreement together with the instruments referred to herein and the Exhibits
attached hereto, embody the entire agreement between the Parties with regard to
the subject matter hereof, and supersede all other prior agreements,
arrangements, understandings, negotiations and discussions, whether oral or
written between the Parties relating to the subject matter hereof, including
without limitation, the Prospect CA executed by the Parties. There are no
warranties, representations or other agreements between the Parties in
connection with the subject matter hereof except as specifically set forth in
this Agreement or in subsequent documents delivered pursuant thereto. This
Agreement may be supplemented, altered, amended, modified or revoked only in
writing, signed by all Parties hereto.
6.8 Arbitration: This Agreement is
subject to the arbitration provisions of the Operating Agreement.
6.9 Severability. If any
provision of this Agreement is held invalid, the remainder of the Agreement
shall not be affected thereby unless the effect thereof would be to materially
alter the burdens or benefits intended by the Parties by the express language of
this Agreement.
6.10 Captions. The
captions in this Agreement are for convenience only and shall not be considered
a part hereof of affect the construction or interpretation of any provision of
this Agreement.
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6.11 Force Majeure. All
obligations imposed by this Agreement on each Party, except for payment of
money, shall be suspended and all periods of time for exercising any rights
hereunder shall be extended while compliance is prevented, in whole or in part,
by Force Majeure. “Force Majeure” shall mean a labor dispute;
explosion; fire; storm, hurricane, loop currents, and high seas; floods; wars;
civil disturbance; act of god; laws; governmental rules, regulations, orders,
action or delay; inability to secure materials after reasonable efforts; or any
other similar cause beyond the reasonable control of the Party claiming relief
hereunder; provided, however, that such Party shall promptly take all reasonable
action to remove the Force Majeure, and provided that no Party shall be required
against its will to settle any labor dispute.
6.12 Confidentiality. Except
for required disclosures, including but not limited to disclosures to
governmental agencies and/or stock exchanges, or as otherwise provided for in
the Operating Agreement, no Party shall release any geological, geophysical, or
reservoir information or any logs or other information pertained to the
progress, test, or results of any well drilled pursuant to this Agreement,
without the prior approval of the other Party.
6.13 Wavier Period. No
wavier by any Party or any default, misrepresentation, or breach of warranty, or
covenant will be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant.
6.14 Counterpart Execution. This
Agreement may be executed in counterparts and each such counterpart shall have
the same force and effect as the original hereof, provided, however, that none
of said counterparts shall be effective until all parties hereto have executed a
counterpart hereof.
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IN WITNESS WHEREOF, the
Parties hereto have executed this Agreement as of the date first hereinabove
written.
| WITNESSES: | Newfield Exploration Company | |||
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By: |
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Name: | X. X. Xxxxxxxxxxx | ||
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Title: | Vice President | ||
| Date: | ||||
| WITNESSES: | RIDGEWOOD ENERGY CORPORATION | |||
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By: |
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Name: | W. XXXX XXXXX | ||
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Title: | EXECUTIVE VICE PRESIDENT | ||
| Date: | ||||
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Exhibit
“A-1”
Attached
to and made a part of that certain Participation Agreement
effective
November
1, 2008 by and between Newfield Exploration Company and Ridgewood Energy
Corporation
[Redacted]
[AFE to
Come]
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Exhibit
“A-2”
Attached
to and made a part of that certain Participation Agreement
effective
November
1, 2008 by and between Newfield Exploration Company and Ridgewood Energy
Corporation
[Redacted]
[Well Plan to Come]
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Exhibit “B”
Attached
to and made a part of that certain Participation Agreement
effective
November
1, 2008 by and between Newfield Exploration Company and Ridgewood Energy
Corporation
OPERATING
AGREEMENT
[Operating
Agreement to Come]
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Exhibit
“C”
Attached
to and made a part of that certain Participation Agreement
effective
November
1, 2008 by and between Newfield Exploration Company and Ridgewood Energy
Corporation
GEOLOGIC AND DATA
INFORMATION REQUIREMENTS OF RIDGEWOOD ENERGY CORPORATION
WELL
INFORMATION REQUIREMENTS
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FOR:
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Ridgewood
Energy Corporation
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00000
Xxxx Xxxxxxx, Xxxxx 000
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Xxxxxxx,
Xxxxx 00000
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Phone:
(000) 000-0000 Fax: (000)
000-0000
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WELL NAME:
[Redacted]
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