Exhibit 10.32
INTERNATIONAL DAYWORK DRILLING CONTRACT - LAND
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THIS AGREEMENT, dated the 7th day of April, 1998, is made between Challenger Oil
Services, PLC, a company organized under the laws of England, with its principal
office located in London, England (hereinafter called Contractor), and
Karakuduk-Munai, Inc., a corporation organized under the laws of the Republic of
Kazakstan, with and office located at Xxxxxxxxxxxxx, Xxxxxx 0, Xxxxxxxx 00,
Xxxxx, Xxxxxxxx of Kazakstan. (hereinafter called "Operator").
WHEREAS, Operator desires to have onshore xxxxx drilled, produced or worked over
in the Operating Area and to have performed or carried out all auxiliary
operations and services as detailed in the Appendices hereto or as Operator may
require, and
VVHEREAS, Contractor is willing to furnish the land drilling rig Challenger No.
23, which is a Cabot 900 rig, together with drilling and other equipment
(hereinafter called the "Drilling Unit"), insurance and personnel, all as
detailed in the Appendices hereto for the purpose of drilling or producing said
xxxxx and performing said auxiliary operations and services for Operator.
NOVV THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises
and the covenants and agreements herein it is agreed as follows:
ARTICLE I - INTERPRETATION
101. Definitions
In this Contract, unless the context otherwise requires:
(a) "Commencement Date" means the day and time within the nearest hour that the
Contractor's drilling crew has arrived at Operator's first drilling
location and is ready to commence the rigging up of the Drilling Unit.
Operator hereby agrees to give to Contractor a written notice two weeks
before the Drilling Unit is expected to arrive at the first drilling
location in the Operating Area to enable Contractor to mobilize its
drilling crew to the first drilling location on a timely basis,
(b) "Operators Items" means the equipment, material and services owned by
Operator or which are listed in Appendix D that are to be provided at the
expense of Operator;
(c) "Contractors Items" mean the Dulling Unit, equipment, material and services
owned by Contractor or which are listed in Appendices B and D that are to
be provided at expense of Contractor;
(d) "Contractor's Personnel" means the personnel and subcontractors to be
provided by Contractor from time to time to conduct operations hereunder as
listed in Appendix C;
(e) "Operator's Personnel" means the personnel and other contractors to be
provided by Operator from time to time in connection with operations
hereunder;
(f) "Operating Area" means the area specified in Appendix A.
(g) "Operating Base" means the place onshore designated by Operator and
specified in Appendix A;
(h) "Affiliated Company" means a company owning fifty percent (50%) or more of
the stock of Operator or Contractor, a company in which Operator or
Contractor own fifty percent (50%) of more of its stock, or a company fifty
percent (50%) or more of whose stock is owned by the same company that owns
fifty percent (50~) or more of the stock of Operator or Contractor.
102. Currency
--------
In this Contract, all amounts expressed in dollars are United States dollar
amounts, unless otherwise indicated in Appendix A.
103. Conflicts
---------
Appendices A, B, C, D and E attached hereto are incorporated herein by
reference. If any provision of the Appendices conflicts with a provision in the
body hereof, the latter shall prevail.
104. Headings
--------
The paragraph headings shall not be considered in interpreting the text of
this Contract.
105. Further Assurances
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Each party shall perform the acts and execute and deliver the documents and
give the assurances necessary to give effect to the provisions of this Contract.
106. Contractor Status
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Contractor in performing its obligations hereunder shall be an independent
contractor. Operator may instruct and direct Contractor as to the results to be
obtained from Contractor's employees, however, Contractor as an independent
contractor shall have sole and complete control, supervision and direction over
the Drilling Unit, its equipment and personnel, and over all operations to be
carried out. This is a Contract for drilling services and shall not be construed
as a charter, lease or demise of Contractor's equipment. None of Contractors
employees are, nor shall be deemed to be, employees or agents of Operator. Use
of subcontractors by Contractor shall not relieve Contractor from any liability
or obligation under this Contract.
107. Governing Law
-------------
This Contract shall be construed and the relations between the parties
determined in accordance with the law designated in Appendix A, not including,
however, any of its conflicts of law rules which would direct or refer to the
laws of another jurisdiction. In the event any provision of this Contract is
inconsistent with or contrary to any applicable law, rule or regulations, said
provision shall be deemed to be modified to the extent required to comply with
said law, rule or regulation, and as so modified said provision and this
Contract shall continue in full force and effect.
ARTICLE II - TERM
201. Effective Date
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The parties shall be bound by this Contract when each of them has executed
it (hereinafter referred to as "Effective Date").
202. Duration
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This Contract shall, subject to Paragraphs 203 and 204 below, be for the
term specified in Appendix A.
203. Termination
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This Contract shall terminate:
(a) immediately if the Drilling Unit becomes an actual loss on the date
Contractor's insurance surveyor determines a constructive or arranged
total loss to have occurred;
(b) on the later of the date specified in Appendix A or, if operations are
then being conducted on a well, as soon thereafter as such operations
are completed and the Drilling Unit has been safely stacked at the
demobilization location specified in Appendix A, unless some other
location or port is mutually agreed, and all of Operator's Items have
been off loaded;
(c) in accordance with Paragraph 708;
(d) in accordance with Paragraph 802.
204. Option to Extend
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This Contract may be renewed by Operator for an additional one year term at
the same rates, terms and conditions, provided that Operator first gives to
Contractor a written notice of renewal at least ninety (90) days prior to the
expiration of the initial term of this Contract.
205. Continuing Obligations
----------------------
The provisions of Article ~X, Article 1304, 1305 and 1309 shall survive the
termination of this Contract and the Parties shall continue to be bound thereby.
206. Return of Operator's Item
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Upon termination of operations, Contractor shall return to Operator at the
last drilling location of the Drilling Unit under this Contract, or at any other
location as directed by Operator at Operator's sole cost, any of Operator's
Items which are at the time in Contractor's possession, Operator's Items shall
be returned by Contractor in the same condition in which they were received by
Contractor, normal wear and tear excepted.
ARTICLE Ill - CONTRACTOR'S PERSONNEL
301. Number. Selection, Hours of Labor and Remuneration
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Except where herein otherwise provided, the number, selection, replacement,
hours of labor and remuneration of Contractors Personnel shall be determined by
the Contractor. Such employees or subcontractors shall be the employees or
subcontractors solely of Contractor. Notwithstanding the above, minimum xxxxxxx
shall be as specified in Appendix C.
302. Contractor's Representative
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Contractor shall nominate one of its personnel as Contractors
Representative who shall be in charge of the remainder of Contractor's Personnel
and who shall have full authority to resolve all day-to-day matters which arise
between Operator and Contractor.
303. Increase in Contractor's Personnel
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Operator may, subject to mutual agreement of the parties as to additional
compensation to Contractor, require Contractor to increase the number of
Contractor's Personnel.
304. Replacement of Contractor's Personnel
-------------------------------------
Contractor will remove and replace at anytime any of Contractors Personnel
if Operator so requests. Operator shall not exercise this right in an
unreasonable or arbitrary manner and shall give to Contractor the reasons for
any such request.
305. Personnel Shortages
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Should Contractor, at any time during the term of this Contract, provide
less than a full crew of personnel as established by the Appendices, the
applicable dayrate payable to Contractor hereunder shall be reduced by an amount
calculated by multiplying the applicable dayrate by a fraction, where the number
of crew members absent from the Dolling Unit is the numerator and the total
number of required crew members is the denominator.
If at any time in Operator's opinion, Contractor's failure to provide a
full crew of personnel as established in the Appendices is interfering with or
delaying the conduct of its operations, and such failure continues for a period
of five (5) days after written notice from Operator to Contractor, then in
addition to (i) a reduction in the applicable day rate as provided herein and
(ii) any other remedies the Operator may have under this Contract, the Operator
may terminate this Contract.
306. Safety Measures
---------------
Contractor shall, at its expense, take all measures reasonably necessary or
proper to provide safe working conditions, and shall comply with Operator's
safety regulations and with all safety requirements of the country of operation.
Contractor shall give notice to all persons at the drill site of all safety
regulations which apply to such personnel. Additionally, Contractor shall ensure
that such persons are fully informed of and comply with such regulations. The
Contractor shall set up and conduct monthly safety drills.
ARTICLE IV - CONTRACTOR'S ITEMS
401. Obligation to Supply
--------------------
Contractor shall provide Contractors Items and Personnel and perform the
services to be performed by it in accordance with Appendices B, C and D.
402. Maintain Stocks
---------------
Contractor shall be responsible, at its cost, for maintaining adequate
stock levels of Contractor's Items and replenishing as necessary.
403. Maintain and Repair Equipment
-----------------------------
Contractor shall, subject to Paragraph 901, be responsible for the
maintenance and repair of all Contractor's Items and shall provide all spare
parts and materials required therefor. Contractor shall, if requested by
Operator, also maintain or repair any of Operator's Items in the Operating Area
which Contractor is qualified to and can maintain or repair with Contractor's
normal complement of personnel and equipment at the drill site, provided,
however, that Operator shall at its cost provide all spare parts and materials
required to maintain or repair Operator's Items, and the basic responsibility
and ability for furnishing and maintaining such items shall remain in Operator.
ARTICLE V - CONTRACTOR'S GENERAL OBLIGATION
501. Contractor's Standard of Performance
------------------------------------
Contractor shall carry out all its operations under this Contract on a
daywork basis For purposes hereof the term "daywork basis" means Contractor
shall furnish equipment, labor and perform services as herein provided, for a
specified sum per day under the direction and supervision of Operator (which
term is deemed to include any employee, agent, consultant of subcontractor
engaged by Operator to direct drilling operations). When operating on a daywork
basis, Contractor shall be fully paid at the applicable rates of payment and
assumes only the obligations and liabilities stated herein. Except for such
obligations and liabilities specifically assumed by Contractor, Operator shall
be solely responsible and assumes liability for all consequences of operations
by both parties while on a daywork basis, including results and all other risks
or liabilities incurred in or incident to such operations, notwithstanding any
breach of representation or warranty, either expressed or implied, or latent
defects (whether or not preexisting) and any liability based on any theory of
tort, breach of contract or strict liability, including defect or ruin or
premises, either latent or patent.
502. Operation of Drilling Unit
--------------------------
Subject to Paragraph 606, Contractor shall be responsible for the operation
of the Drilling Unit, including, supervising moving operations and positioning
on drilling locations as required by Operator. Operations under this Contract
will be performed on a twenty-four (24) hour per day, seven (7) days a week
basis. Contractor warrants that the Drilling Unit will operate efficiently and
is physically capable of drilling xxxxx to depths specified in the Appendices
hereto.
503. Compliance with Operator's Instructions
---------------------------------------
Contractor shall comply with all instructions of Operator consistent with
the provisions of this Contract, including, without limitation, drilling, well
control and safety instructions. Such instructions shall, if Contractor so
requires and time permits, be confirmed in writing by the authorized
representative of Operator. However, Operator shall not issue any instructions
which would be inconsistent with Contractors rules, policies or procedures
pertaining to the safety of its personnel, equipment or the Drilling Unit, or
require Contractor to exceed the capacity of the Drilling Unit.
504. Adverse Weather
---------------
Contractor, in consultation with Operator, shall decide when, in the face
of impending adverse weather conditions, to institute precautionary measures in
order to safeguard the well, the well equipment, the Drilling Unit and personnel
to the fullest possible extent. Contractor and Operator shall each ensure that
each respective senior representative will not act unreasonably in the exercise
of their discretion under this Paragraph.
505. Drilling Fluids and Casing Program
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Contractor shall follow any of Operator's instructions with respect to the
Drilling Fluid and Casing Program as may be specified by Operator. Operator
shall provide Contractor with any such programs reasonably in advance of the
spud date of each well to be drilled hereunder.
506. Cutting/Coring Program
----------------------
Contractor shall save and identify cuttings and cores according to
Operator's instructions and place them in containers furnished by Operator.
507. Records to be Kept by Contractor
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Contractor shall keep and furnish to Operator an accurate record of the
work performed and formations drilled on the IADC-API Daily Drilling Report Form
or other form acceptable to Operator. A legible copy of said form signed by
Contractor's Representative shall be furnished by Contractor to Operator.
508. Difficulties During Drilling
----------------------------
In the event of any difficulty arising which precludes either drilling
ahead under reasonably normal procedures or the performance of any other
operations planned for a well, Contractor may suspend the work in progress and
shall immediately notify the representative of Operator of the difficulty, and
in the meantime exert its best efforts to overcome the difficulty.
509. Well Control Equipment
----------------------
Subject to Article IX, Contractor shall maintain its well control equipment
listed in Appendices B and D in good condition at all times and shall use all
reasonable means to prevent and control fires and blowouts and to protect the
hole.
510. Inspection of Materials Furnished by Operator
---------------------------------------------
Contractor agrees to visually inspect all materials furnished by Operator
before using same and to notify Operator of any apparent defects therein.
Contractor shall not be liable for any loss or damage resulting from the use of
materials furnished by Operator.
ARTICLE Vl - OPERATOR'S RIGHTS AND OBLIGATIONS
501. Equipment and Personnel
-----------------------
Operator shall at its cost provide Operator's Items and Operator's
Personnel and perform the services to be provided or performed by it according
to Appendix D. ln addition to providing the initial supply of Operator's Items,
Operator shall be responsible, at its cost, for maintaining adequate stock
levels and replenishing as necessary. When, at Operator's request and with
Contractor's agreement, the Contractor furnishes or subcontracts for certain
items which Operator is required herein to provide, for purposes of this
Contract said items or services shall be deemed to be Operators items or
Contractors, and Operator shall not be relieved of any of its liabilities in
connection therewith. For furnishing said items and services, Operator shall
reimburse Contractor its entire cost plus a handling charge as specified in
Appendix A.
602. Maintenance and Repair
----------------------
Operator shall be responsible, at its cost, for the maintenance and repair
of all Operator's Items on the Drilling Unit which Contractor is not qualified
to or cannot maintain or repair with Contractors normal complement of personnel
and the equipment at the drill site.
603. Operator's Employees
--------------------
Operator shall designate a senior representative to resolve day-to-day
matters requiring decision by Operator who will be present at the drill site.
Contractor may treat Operator's senior representative for the time being at the
drill site as being in charge of all Operator Personnel.
604. Replacement of Operator's Personnel
-----------------------------------
Contractor shall have the right to request in writing Operator to remove
and replace any Operator Personnel at the drill site if the Contractor can show
reasonable grounds for such request; however the final decision with respect to
such removal shall rest with Operator.
605. Drilling Site and Access
------------------------
Operator shall be responsible for providing access to the drilling
location, as well as selecting, surveying, marking and clearing the drilling
locations as may be reasonably required by Contractor for location approval.
Operator shall obtain and provide all required certificates, drilling permits
and licenses required for the drilling operations and Dolling Unit hereunder.
Operator shall notify Contractor of any impediments or hazards to operations at
each drilling location or at any access routes to the drilling locations of
which it has knowledge. Notwithstanding any other provision of this Contract,
should there be obstructions at or within the area of the drill site and these
obstructions result in damage to the Drilling Unit, Operator shall be
responsible for and hold harmless and indemnify Contractor for all resulting
damage, including the payment of the Standby Rate during repairs, but Operator
shall receive credit for any physical damage insurance proceeds received by
Contractor as a result of such damage.
606. Custom or Excise Duties, Taxes and Fees
---------------------------------------
Contractor shall transport the Drilling Unit and its equipment to the port
of Houston and provide Operator with information and documentation concerning
the Drilling Unit and equipment which Operator may need to arrange shipment.
Operator shall arrange for and pay all expenses of shipping the Drilling Unit
and equipment from the Port of Houston to the Operator's first drilling location
in the Operating Area, including the costs of trip insurance to cover the
Drilling Unit during the transportation. After the first well has been spudded,
Contractor shall pay all costs of shipping and transportation of spare parts,
materials and supplies to the drill site. Operator shall be responsible for
obtaining permits and licenses and clearing customs for the initial and
subsequent items in the country in which the Operating Area is located, as well
as all related charges such as customs duties, excise duties, sales taxes, value
added taxes, clearing agent's fees, port clearances, pilotage, other similar
fees, handling charges and port dues.
607. Taxes
-----
Contractor shall pay any and all liabilities or claims for Profit Tax and
Net Income Tax or other taxes assessed or levied on account of Contractor's
earnings under this Contract which any Kazakstan taxing authority (including any
political subdivision thereof claiming jurisdiction over Contractor and its
performance of this Contract may assess or levy against Contractor up to the
aggregate sum of $850 U.S_ Dollars per day. Operator shall assume responsibility
for and pay on behalf of Contractor or reimburse to Contractor any Kazakstan
taxes which exceed $850 U.S. Dollars per day on a grossed up basis, so that
Contractor's maximum obligation for such Kazakstan taxes shall never exceed $850
U.S. Dollars per day.
Contractor shall indemnify and hold harmless Operator from and against any
personnel income taxes which may be assessed against Contractor's personnel
based on tax rates, laws and regulations as they exist as of the date of this
Contract. If, after the execution of this Contract, such tax rates, laws or
regulations pertaining to personnel income taxes increase, then Operator shall
indemnify and hold harmless Contractor from and against any such increase.
Operator shall pay or reimburse Contractor for all other taxes of any kind,
including but not limited to, VAT, Drilling Unit registration costs, Property
taxes, Road taxes and other taxes.
608. Take Over of Work
-----------------
ln the event any well drilled under this contract should blow out, catch
fire or in any manner get out of control, Operator may take over complete
control and supervision of the work of bringing the well under control or
putting out the fire. If at any time in Operator's opinion, contractor is
failing to conduct its operations in a diligent, skillful and workmanlike manner
and in all respects in strict accordance with accepted good oil field practices
pursuant to the terms of this contract, and such failure continues for a period
of ten (10) days (or in the event such failure results in a significant safety
hazard, if such failure continues for 96 hours) after notice from Operator to
contractor, Operator may take over and continue the work on the well to
completion or abandonment. In the event Operator takes over the work pursuant to
this Article 608, Operator shall have full use of Contractor's Drilling Unit and
other equipment, facilities, material, supplies and personnel at the well
location, which Contractor shall continue to insure in accordance with this
Contract, and Contractor shall continue to be paid the applicable day rates
provided for in this Contract. During any such take over period the indemnities
given by Contractor to Operator under this Contract shall be suspended and
Contractor shall have no responsibility to Operator under such indemnities. when
such take over period has ended, Operator shall return the Drilling Unit and all
of Contractor's items to Contractor in as good condition as when the take over
began, normal wear and tear excepted.
609. Operator's Well Program
-----------------------
Operator shall from time to time provide Contractor with a well drilling
program or programs, which shall include, but not be limited to hole sizes,
casing program, mud control program and Operator's deviation policy. Operator
may modify these programs while drilling is in progress.
ARTICLE VII - RATES OF PAYMENT
701. Payment
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Operator shall pay to Contractor during the term of this Contract the
amounts from time to time due calculated to the nearest hour according to the
rates of payment herein set forth, notwithstanding any breach of representation
or warranty, either expressed or implied, or latent defects or any liability
based upon any theory of tort, breach of contract or strict liability, either
latent or patent.
702. Mobilization Fee
----------------
There shall be no Mobilization Fee due and payable by Operator under this
Contract, except for Operator's obligations under Article 606 and 703 hereof.
703. (This article intentionally deleted and left blank)
704. Demobilization Fee
------------------
Operator shall pay Contractor a Demobilization Fee as specified in Appendix
A to cover Contractor's costs of demobilizing the Dulling Unit. The
Demobilization Fee shall be earned and payable on the date of termination of
this Contract. Except as is provided below, Operator shall have no further
demobilization obligations other than the payment of the Demobilization Fee.
Operator, however, shall provide to Contractor all export documentation
necessary to enable to freely export the Drilling Unit upon the termination of
this Contract. lf Contractor is unable to export the Drilling Unit from
Kazakstan for any cause other than the fault of Contractor within thirty (30)
days after termination of this Contract, then Operator shall begin paying the
Standby Rate Vathout Crews beginning on the thirty-first (31st) day and
continuing until the Drilling Unit is safely exported from Kazakstan.
705. Operating Rate
--------------
The Operating Rate specified in Appendix A will first become payable from
the moment when the Drilling Unit has been rigged up and is ready to spud the
first well under this Contract. The Operating Rate shall continue to be payable
throughout the duration of the Contract, except when some other rate herein
provided applies.
706. Standby Rate
------------
The Standby Rate specified in Appendix A will be payable as follows:
(a) during any period of delay when Contractor is unable to proceed
because of adverse weather conditions or as a direct result of an act,
instruction or omission of Operator including, without limitation, the
failure of any of Operator's Items, or the failure of Operator to
issue instructions, provide Operator Items or furnish services;
(b) from the Commencement Date until the moment when the Operating Rate
first becomes payable;
(c) during any period after Commencement Date that the Drilling Unit is
undergoing periodic inspections required for maintenance of any
Certification or Classification Certificates;
(d) during any period when operations are suspended to repair the Drilling
Unit or other Contractor Items due to blowout, fire, cratering,
shifting or punch through at a drilling location, obstacles or
obstructions or the consequences thereof;
(e) during any period when operations are being conducted hereinunder to
redrill or repair any well drilled hereunder which is lost or damaged
as a result of Contractors sole negligence;
(f) during any period when operations are suspended or are being conducted
due to difficulties encountered while drilling as provided for in
Article 508 hereof.
707. Rate During Repair
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The Repair Rate specified in Appendix A will be payable during the first
twenty-four (24) hours per month during which operations are suspended to permit
necessary replacement, inspection, repair or maintenance of Contractors Items,
except as provided in Paragraphs 608 and 708. Routine maintenance such as
lubrication, packing of swivels, changing of pump parts, slipping lines, drill
string and certification inspections, shall not be considered as maintenance for
purposes of this Paragraph.
708. Force Majeure Rate
------------------
The Force Majeure Rate specified in Appendix A will be payable during any
period in which operations are not being carried on because of Force Maleure as
defined in Paragraph 1303, including periods required to repair damage caused by
a Force Majeure event. However, should an event of Force Majeure continue in
existence for a period of Ninety (90) days, then no dayrate shall be payable for
the period after such 90 days and either Contractor or Operator shall have the
right to terminate this Contractor at anytime.
709. Moving Rate
-----------
Operator shall pay to Contractor a lump sum payment of ten ($10,000)
thousand for each move of the Drilling Unit from well site to well site in the
Kara~uduk Field.
710. Standby Rate without Crews
--------------------------
The Standby Rate without Crews shall be the rate so stated in Appendix A
711. Additional Payments
-------------------
Operator shall, in addition, pay to Contractor:
(a) the cost of any overtime paid by Contractor to Contractors Personnel
in respect of the maintenance or repair at the drill site of
Operator's Items, if requested by Operator, or other overtime required
by the Operator;
(b) Contractors costs associated with waiting on Operator furnished
transportation or as the result of an act, instruction or omission of
Operator;
(c) Contractors costs associated with evacuations and accommodations of
personnel caused by hazardous conditions or circumstances at the drill
site; and
(d) Contractor's costs associated with moving Contractor's items and
Personnel, and their personal effects, if Contractor is required to
change its operating base to a new Operating Area or within the
Operating Area.
712. Variation of Rates
------------------
The rates and Payment herein set forth shall be revised by the actual
amount of the change in Contractor's cost if an event as described below occurs
or if the cost of any of the items hereinafter listed shall increase by more
than the amount indicated below from Contractor's cost thereof on the date of
execution of this Contract:
(a) labor costs, including all payroll burden and benefits paid by
Contractor for its employees;
(b) if Operator requires Contractor to increase the number of Contractor's
Personnel;
(c) if it becomes necessary for Contractor to change the work schedule of
its personnel or change the location of its Operating Base or
Operating Area;
(d) in the event described in Paragraph 1102;
(e) if the cost of insurance premiums increases by five percent (5%) or
more;
(f) if there is any change in laws, rules, regulations, or legislation,
including the enforcement or interpretation thereof, that increases
Contractor's financial burden;
ARTICLE Vlll - INVOICES AND PAYMENTS
801. Monthly Invoices
----------------
Contractor shall xxxx Operator at the end of each month, or at the end of
each well, if sooner, for all daily charges earned by Contractor. Other charges
shall be billed as earned. Xxxxxxxx for daily charges will reflect details of
the time spent (calculated to the nearest hour) and the rate charged for that
time. Xxxxxxxx for other charges will be accompanied by invoices and other
documentation supporting costs incurred for Operator or other substantiation as
reasonably required by Operator.
802. Payment
-------
Operator shall pay all invoices within thirty days after the receipt
thereof except that if Operator disputes an item invoiced, Operator shall within
twenty days after receipt of the invoice notify Contractor of the amount
disputed, specifying the reason therefor, and payment of the disputed amount may
be withheld until settlement of the dispute, but payment shall be made of any
undisputed portion. Contractor shall have the right, upon ten (10) days prior
written notice, to terminate this Contract if Operator fails or refuses to
timely pay Contractor undisputed amounts due and owning to Contractor.
803. Manner of Payment
-----------------
All payments due by Operator to Contractor hereunder shall be made by wire
transfer or as otherwise agreed to Contractor's bank account which is specified
in Appendix A.
804. Local Currency Expenditures
---------------------------
Contractor shall have the right to specify that Operator shal[ pay
Contractor in the currency of the country where the Drilling Unit is operating
in amounts equal to Contractor's local currency expenditures (including those
expenditures incurred locally by Contractor for the account of Operator) and as
needed by Contractor. All amounts of local currency so paid Contractor during
the month shall be credited against Contractor's U.S. Dollar monthly invoice for
that month at the rate of exchange of U.S. Dollars for the local currency in
effect on the date Contractor makes the local currency payment as published by
the Central Bank of Kazakstan.
ARTICLE IX - LIABILITY
901. Equipment or Property
---------------------
Except as specifically provided herein to the contrary, each party hereto
shall at all times be responsible for and hold harmless and indemnity the other
party from and against damage to or loss of its own and its subcontractors
equipment or property, except to the extent that the proceeds from Contractor's
insurance as made available to Contractor do not compensate Contractor therefor:
Operator shall be responsible for and shall hold harmless and indemnify
Cuntractor for loss or destmcUon of or damage to Contractors drill pipe, drill
collars, subs, reamers, bumper subs, stabilizers and other in-hole equipment
when such equipment is being used In the hole below the rotary table, normal
wear excepted. Abnormal wear and/or damage for svhich Operator shall be
responsible hereunder shall include, but not be limited to, wear andlor damage
resulting from the presence of H2S or other corrosive elements In the hole
including thosa introduced into the drilling fluid, excessive wear caused by
sandcutting, damage resulting from excessive or uncontrolled pressures such as
those encountered durtng testing, blowout, or in a well out of control,
excessive deviation of the hole from vemcal, dog-leg Severity, fishing,
cementing or testing operations, Hnd from any unusual drilling practices
employed at Operatofs request. Operators responsibility for such abnormal wear
andlor damage as referred to herein shall include abnormal wear and/ar damage to
Gontractofs choke hoses and manifolds. BOP and other appurtenant equipment,
Operator shall pay the cost of repairing damaged equipment if repairable_ In the
case of equipment lost. destroyed or damaged beyond repair, Operator shall
reimburse Contractor an amouot equal to the then current replacement cost of
such equipment delivered to the Drilling Unlit.
902. The Hole
--------
In the event the hole should be lost or damagad, operator shall be
responsible for and hold harmless and indemnify Contractor from such damage to
or loss Qf the hole, including all down hole property therein,
903. Contractor's Personnel
----------------------
Contractor shall be responsible for and hold harmless and indemnify
Operator from and against all claims, demands and causes of action of every kind
and character arising in connection herewith in favor of Contractor's employees,
or Contractor's subcontractors or their employees, or Contractor's invitees, on
account of bodily injury, death or damage to property.
904. Operator's Personnel
--------------------
Operator shall be responsible for and hold harmless and indemnify
Contractor from and against all claims, demands, and causes of action of every
kind and character arising in connection herewith in favor of Operator's
employees, or Operator's other contractors (excluding Contractor hereunder) or
their employees, or Operator's invitees, on account of bodily injury, death or
damage to property.
905. Pollution and Contamination
---------------------------
Notwithstanding anything to the contrary contained herein, the
responsibility for pollution or contamination shall be as follows:
(a) Contractor shall be responsible for and hold harmless and indemnify
Operator for control and removal of pollution or contamination which
originates above the surface of the ground from spills of fuels,
lubricants, motor oils, normal water base drilling fluid and attendant
cuttings, pipe dope, paints, solvents, ballast, bilge and garbage in
Contractor's possession and control.
(b) Operator shall be responsible for and hold harmless and indemnify
Contractor against all claims, demands, and causes of action of every
kind and character (including control and removal of the pollutant
involved) arising directly or indirectly from all pollution or
contamination, other than that described in Paragraph 905(a) above,
which may occur as a result of operations hereunder, including, bit
not limited to, that which may result from fire, blowout, cratering,
seepage or any other uncontrolled flow of oil, gas, water or other
substance, as well as the use or disposition of lost circulation and
fish recovery materials and fluids, oil emulsion, oil base or
chemically treated drilling fluids. and drilling fluids other than
"normal water base drilling 9uid" defined in Paragraph 805(a) above.
(c) ln the event a third party commits an act or omission which results in
pollution or contamination for which either the Contractor or Operator
for whom such party is performing work is held to be legally liable.
the responsibility therefor shall be considered, as between the
Contractor and Operator, to be the same as if the party for whom the
work was performed had performed the same and all af the obligations
and limitations set forth in Paragraphs 205(a) and (b) above, shall be
specifically applied.
906. Debris Removal and Cost of Control
----------------------------------
Operator shall be responsible for and hold harmless and indemnify
contractor for the cost of removal of debris including the Drilling Unit.
Operator shall also be responsible for and hold harmless and indemnify
Contractor for the cost of regaining control of any wild well.
907. Underground Damage
------------------
Operator shall be responsible for and hold harmless and indemnify
Contractor for and and all claims resulting from operations under this Agreement
on account of injury to, destruction, of, or Ioss or impairment of production or
any proper right in or to oil, gas or other mineral substance or water, if at
the time of the act or omission causing such injury, destruction, loss, or
impairment, said substance had not been reduced to physical possession above the
earth surface, and for any loss or damage to any formation, strata, or reservoir
beneath the earth surface.
506. Consequential Damages
---------------------
Neither party shall be liable to the other for, and each party shall hold
harmless and indemnify the other against, special, indirect of consequential
damages resulting from or arising out of this Contract, including, without
limitation, loss of profits, loss of use or business interruptions, however same
may be caused.
910. Indemnity Obligation
--------------------
(a) The parties intend and agree that the phrase "be responsible for and
hold harmless and indemnify" in Paragraphs 505 and 901 through 908
hereof mean that the indemnifying party shall indemnify, hold harmless
and defend (including payment of reasonable attorney's fees and costs
of litigation) the indemnified party from and against any and all
claims, demands, causes of action, damages, judgements and awards of
any kind or character, without limit and without regard to the cause
or causes thereof, including pre-existing conditions, whether such
conditions be patent or latent, breach of warranty (express or
implied), strict liability, or the negligence of any person or
persons, including that of the indemnified party, whether such
negligence be sole, joint or concurrent, active, passive or gross or
due to the willful misconduct of any party.
(b) An indemnifying party's obligations contained in this Agreement shall
also extend to the indemnified party and its Affiliated Companies and
the officers, directors, employees, agents, owners, shareholders and
insurers of each and to actions in rem or in personam.
(c) The terms and provisions of Paragraphs 605 and 901 through 909 shall
have no application to claims or causes of action asserted against
Operator or Contractor by reason of any agreement of indemnity with a
person or entity not a party hereto.
ARTICLE X - INSURANCE
1001. Contractor's Insurance
----------------------
Contractor shall carry and maintain insurance coverage of the type and in
the amounts set forth in Appendix E, All references in this Contract to
"insurance" of Contractor shall mean such insurance as set forth in Appendix E.
1002. Certificates
------------
Contractor will furnish Operator, on request, with certificates indicating
that the required insurance is in full force and effect and that the same shall
not be canceled or materially and adversely changed without ten (10) days
written notice to Operator.
1003. Subcontracts
------------
For liabilities assumed hereunder by Contractor, its insurance shall be
endorsed to provide that the underwriters waive their right of subrogation
against Operator, its Affiliated Companies and co-venturers, and employees of
each. Operator will, as well, cause its insurer to waive subrogation against
Contractor and Contractor's Affiliated Companies and employees of each for
liabilities it assumes.
1004. Additional Insured
------------------
Contractor shall name Operator as additional insured, where permitted,
under its policies of insurance, but only with respect to liabilities assumed by
Contractor under this Contract. Operator shall name Contractor as additional
insured, where permitted, under its policies of insurance, but only with respect
to liabilities assumed by Operator under this Contract.
ARTICLE Xl - SUBLETTING AND ASSIGNMENT
1101. Subcontracts
------------
Operator may employ other contractors to perform any of the operations or
services to be provided or performed by it. Contractor may employ other
contractors to perform any of the operations or services to be provided or
performed by it with the prior consent of Operator.
1102. Assianment
----------
Neither party may assign this Contract to anyone other than an Affiliated
company without the prior when consent of the other, and prompt notice of any
such intent to assign shall be given of the other party. In the event of such
assignment, the assigning party shall remain liable to the other party as a
guarantor of the performance by the assignee of the terms of this Contract. If
any assignment by Operator is made that increases Contractors' financial burden,
except for any assignment by Contractor, Contractors compensation shall be
adjusted to give effect to any increase in Contractor's operating costs or
taxes.
ARTICLE IX - NOTICES
1201. Notices
-------
Notices, reports and other communications required or permitted by this
Contract to be given or sent by one party to the other shall be delivered by
hand, mailed, telexed, or telecopied to the address as specified in Appendix A.
Either party may by notice to the other party change its address. Notices shall
be effective upon receipt.
ARTICLE Xlll - GENERAL
1301. Confidential Information
------------------------
Upon written request of Operator, all information relating to the well
obtained by Contractor in the conduct of operations hereunder shall be held
confidential by contractor who will use the same degree of care it uses in
safeguarding its own confidential information.
1302. Attorney's Fees
---------------
If this Contract is placed in the hands of an attorney for collection of
any sums due hereunder, or suit is brought on same, or sums due hereunder are
collected through bankruptcy or arbitration proceedings, then the prevailing
party shall be entitled to recover reasonable attorney's fees and costs.
1303. Force Majeure
-------------
Except as otherwise provided in this Paragraph 1303, each party to this
Contract shall be excused from complying with the terms of this Contract, except
for the payment of monies when due and the honoring of indemnities, if and for
so long as such compliance is hindered or prevented by riots, strikes, wars
(declared or undeclared), insurrection, rebellions, terrorist acts, civil
disturbances, dispositions or order of governmental authority, whether such
authority be actual or assumed , acts of God or adverse weather conditions,
inability to obtain equipment, supplies or fuel, or by any act or cause (other
than financial distress or inability to pay debts when due) which is reasonably
beyond the control of such party, such cause being herein sometimes called
"Force Majeure." In the event that either party hereto is rendered unable,
wholly or in part, by any of these causes to carry out obligation under this
Contract, such party shall give notice and details of Force Majeure in writing
to the other party as promptly as possible after its occurrence. In such cases,
the obligations of the party giving the notice shall be suspended during the
continuance of any inability so caused except that Operator shall be obliged to
pay to Contractor the Force Majeure Rate provided for in Paragraph 708.
1304. Right to Audit
--------------
For a period of three years from termination of the Contract, Contractor
shall keep proper books, records and accounts of operation hereunder and shall
permit Operator at all reasonable times to inspect the portions thereof related
to any variation of the rates hereunder or charges for reimbursable items.
1305. Compliance with Laws
--------------------
Each party hereto agrees that all laws, rules and regulations of any
federal, state or local government authority which are now or may become
applicable to that party's operations covered by or arising out of the
performance of this Contract will apply. In the event any provision of this
Contract is inconsistent with or contrary to any applicable federal, state or
local law, rule or regulation, said provision shall be deemed to be modified to
the extent required to comply with said law, rule or regulation, and as so
modified said provision and this Contract shall continue is full force and
effect. If any act or omission by Contractor in response to Operator's explicit
instruction violates such law, Operator shall indemnify Contractor for any
consequences thereof. In no event however, will Contractor be requested or
required to violate any law, rule or regulations of the United States of
America.
1305. Waivers
-------
lt is fully understood and agreed that none of the requirements of this
Contract shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Contract, or other duly
authorized agent or representative of the party.
1307. Entire Agreement
----------------
This Contract supersedes and replaces any oral or written communications
heretofore made between the parties relating to the subject matter hereof.
Inurement
---------
This Contract shall inure to the benefit of and be binding upon the
successors and assigns of the parties.
1309. Resolution of Disputes
----------------------
Any dispute, controversy or claim arising out of or in relation to or in
connection with this Agreement, including without limitation any dispute as to
the construction, validity, Interpretation, enforceability or breach of this
Agreement, shall be exclusively and finally settled by arbitration, and any
Party may submit such a dispute, controversy or claim to arbitration.
A single arbitrator shall be appointed by unanimous consent of the Parties.
If the Parties, however, cannot reach agreement on an arbitrator within thirty
(30) days of the submission of a Notice of Arbitration, the appointing authority
shall be the American Arbitration Assoctiation, which can appoint an independent
arbitrator which does have any financial interest in the dispute, controversy or
claim. Unless otherwise expressly agreed in Writing by the Parties to the
arbitration proceedings:
(a) The arbitration proceedin9s:~hgll be hold in the Borough Of Manhatten,
City of New York;
(b) The arbitrator shall be and remain at all times wholly independent and
impartial;
(c) The arbitratlon pracE8dings shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration hssociaton
then in effort;
(d) Any Procedural issues not determined under the arbitrate rules
selected pursuant to this Agreement shall be-determined by the low of
the plea of erhtrefion other than those laws which would refer the
matter to another jurisdiction:
(e) Each Party shall be responsible for its own costs of the arbitration
proceedings (including attorney's fees and costs); and
(f) Judgement upon the award rendered by the arbitrator may be entered in
any court" having jurisdiction thereof.
lN WITNESS THEREOF THE PARTIES HAVE EXECUTED THIS CONTRACT ON THE DAY AND
YEAR FIRST ABOVE WRlTTEN.
OPERATOR: Karakuduk-Munai, Inc.
WITNESS:
/s/ Xxxxxx Klinhev BY: /s/ X. Xxxxx
-------------------------- --------------------------------------
General Director TITLE: General Director
CONTRACTOR: Challenger Oil Services. PC
WITNESS:
/s/ BY: /s/ Y.S. Tatanaki
-------------------------- --------------------------------------
TITLE: General Manager
APPENDIX A
Attached to and incorporated as a part of that certain Contract dated
______________________.
Para Nos.:
101 (f) Operating Area: Karakuduk Field, Kazakstan
101 (g) Operating Base: Karakuduk Field, Kazakstan
102 Currency: United States Dollars
107 Governing Law: The Laws of the State of New York
202 Duration: One (1) year from Spud in date of
the first well drilled under this
Contract.
203 (b) Termination: One (1) year from Spud in date of
the first well drilled under this
Contract or after well in progress
on that date.
203 (b) Demobilization Location: Operator's last well location in the Operating
Area.
&705 (c)
204 Option Term: One year
Option Notice: Ninety (90) days before Termination
of original term
Deadline for Mutual
Agreement: Ninety (90) days before termination
of original term
503 Maximum Well Depth: 11,500 feet with 41/2 inch drill pipe.
601 Handling Charge: Ten (10%) Percent
702 Mobilization Fee: At Operators cost
704 Demobilization Fee: $250,000
705 Operating Rate: $15,056 (includes pol. risk ins.)
706 Standby Rate without Crews: $14,706 "
707 Repair Rate: $14,706 "
Repair Time At Repair Rate for first twenty-four
(24) hours per month, then at zero rate.
708 Force Majeure Rate: $14,706
709 Moving Rate $10,000 lump sum for each move of the
Drilling Unit from well site to well
site within the Karakuduk Field.
710 Standby Rate without Crews: $8,500
Interest Rate on Late
Payments: One month LIBOR plus 2% per annum
803 Address for Payment (BANK)
Acct, No.
201 Address for Notices:
Operator:
Telex:
Telecopier:
Attention:
Contractor:
Telex:
Telecopier:
Attention:
1305 Country of Legal
Jurisdiction: Courts of the State of New York
1310 Value of Contractor's Unit and equipment: U.S.S $5,500,000.
APPENDIX B
DRILLING UNIT AND EQUIPMENT TO BE PROVIDED BY CONTRACTOR
APPENDIX E
CONTRACTOR'S INSURANCE
Workers' Compensation and Employers' Liability Insurance
--------------------------------------------------------
Workers' compensation and labor liability insurance covering all Contractor's
employees. in accordance with the statutory requirements of the state of hire or
country in which the work is to be performed. The Employer's liability insurance
shell have a limit of one million United States Dollars (U.S. $1,000,000) per
occurrence.
ll. Comprehensive General Liability
-------------------------------
Comprehensive general liability insurance with contractual liability,
products and completed operations, and broad form property damage coverage
included, providing for a combined Single limit of one million United
States Dollars (U.S. S1,000.000) (or personal injury. death or property
damage resulting from each occurrence and covering all of Contractor's
operator's under Contract. The aloresaid insurance shall cover, but not be
limiteded to, loss of or damage to Operator's and to Contractor's Equipment
and Personnel
III. Umbrella Liability Insurance
----------------------------
Umbrella liability insurance coverage excess of !he primary coverage with a
limit of no less than five million United States Rollers (U.S. $5,000,0GG)
per occurrence including all areas involved in operations covered by the
Contract.
IV. Automobile Liability
--------------------
Automobile liability insurance covering owned, non-owned and hired motor
vehicles, with combined single limits of al least one million United Slates
Dollars (U.S S1,000,000) for personal injury, death or property damage
(resulting from each occurrence.
(Subject to Confirmation With Underwriters)
