Form of Drilling and Operating Agreement
Form
of Drilling and Operating Agreement
This Agreement is entered into by and
between Rockies Region 2007 Limited Partnership, a West Virginia limited
partnership, hereinafter designated and referred to as the "Partnership," and
Petroleum Development Corporation, hereinafter referred to and designated as
"PDC."
Whereas, the parties to this Agreement
desire to enter into an agreement to explore and develop certain Prospects for
the production of oil and gas as hereinafter provided,
It is agreed as follows:
ARTICLE
I
DEFINITIONS
As used in this Agreement, the
following words and terms shall be defined as follows:
A. The
term "oil and gas" shall mean oil, natural gas, casing head gas, gas condensate,
and all other liquid or gaseous hydrocarbons and other marketable substances
produced therewith, unless an intent to limit the inclusiveness of this term is
specifically stated.
B. The
term "Prospect" shall be deemed to consist of the drilling or spacing unit on
which the well will be drilled by the Partnership which is the minimum area
permitted by state law or local practice on which one well may be
drilled.
C. "Royalty"
shall mean a fractional undivided interest in the production of oil and gas
xxxxx, or the proceeds therefrom to be received free and clear of all costs of
development, operations or maintenance.
D. "Overriding
royalty" shall mean an interest in the oil and gas produced under a specified
oil and gas lease or leases, or the proceeds from the sale thereof, carved out
of the working interest, to be received free and clear of all costs of
development, operation, or maintenance.
E. "Proportionate
Working Interest" shall mean an interest in a well or Prospect of less than 100%
which bears that same percentage of costs of development and production as it
receives in production revenues after deducting for royalty and overriding
royalties.
F. "Non-operators"
shall mean all parties holding a proportionate working interest in a Prospect,
including the Additional General Partners and the Limited Partners, but
excluding PDC if it is also serving as Operator.
ARTICLE
II
EXHIBITS
The following exhibits are incorporated
in and made a part of this Agreement:
A. Exhibit
"A," Prospects.
1. Identification
of each Prospect to be drilled.
2. Target
formation.
3. The
Partnership fractional interest therein.
B. Exhibit
"B," Insurance.
C. Exhibit
"C," Additional Prospects.
1. Identification
of additional Prospects added or substituted after the original date of this
Agreement, and if substituted, identification of the Prospect which is
replaced.
2. Target
formation.
3. The
Partnership fractional interest therein.
4. Approval
by the Partnership and PDC.
ARTICLE
III
OPERATOR
A. Designation
and Responsibilities of Operator:
PDC shall be the Operator of the
Prospects, and shall conduct and direct and have full control of all operations
on the Prospects as permitted and required by, and within the limits of this
Agreement. It shall conduct all such operations in a good workmanlike
manner, but it shall have no liability as Operator to the Partnership for losses
sustained or liabilities incurred, except such as may result from negligence or
misconduct. The Managing General Partner may subcontract with another
operator or operators to perform some of all of the duties of the operator, on
Terms and conditions substantially the same as those discussed
herein. The Managing General Partner will supervise operations by
other non-affiliated drilling contractors and subcontractors.
B. Resignation
or Removal of Operator and Selection of Successor:
1. Resignation
or Removal of Operator: PDC may resign as Operator at any time by
giving written notice thereof to the Partnership. If PDC terminates
its legal existence, no longer owns an interest in the Prospects, has filed a
petition under the Federal bankruptcy laws or any state insolvency law or a
receiver, fiscal agent, or similar officer has been appointed by a court for the
business or property of PDC, or is otherwise no longer capable of serving as
Operator, PDC shall be deemed to have resigned without any action by the
Partnership, except the selection of a successor. PDC may be removed
by the affirmative vote of Non-Operators owning a majority working interest in
each Prospect after excluding the voting interest of Operator. Such
resignation or removal shall not become effective until 7:00 o'clock A.M.,
Eastern time, on the first day of calendar month following the expiration of
ninety (90) days after the giving of notice of resignation of PDC or action by
the Non-Operators to remove PDC as Operator, unless a successor Operator has
been selected and assumes the duties of PDC at an earlier date. PDC,
after effective date of resignation or removal, shall be bound by the terms
hereof as a Non-Operator. A change of a corporate name or structure
of PDC or transfer of PDC's interest to any single subsidiary, parent or
successor corporation shall not be the basis for removal of PDC as
Operator.
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2. Selection
of Successor Operator: Upon the resignation or removal of PDC, a
successor Operator shall be selected by the parties. The successor
Operator shall be selected by the affirmative vote of parties owning a majority
working interest in each Prospect; provided, however, if an Operator which has
been removed fails to vote or votes only to succeed itself, the successor
Operator shall be selected by the affirmative vote of parties owning a majority
interest after excluding the voting interest of the Operator that was
removed.
C. Employees:
The number of employees used by PDC in
conducting operations hereunder, their selection, and the hours of labor and the
compensation for services performed shall be determined by PDC.
ARTICLE
IV
DRILLING
PROSPECTS
A. Prospects:
Exhibit "A" lists Prospects initially
to be acquired by the Partnership, and its proportionate working interest in
each Prospect. Most xxxxx to be drilled by the Partnerships will be
offsets to, or located nearby, producing xxxxx. The Partnership will
be assigned single well drilling or spacing units or portions thereof for
prospects located on PDC's Xxxxxxx or Chevron acreage in Garfield County,
Colorado or on acreage in PDC's Xxxxxx or Xxxxxx Project acreage in North Dakota
or on development prospects located in the Greater Wattenberg Field
Area. If an exploratory well is drilled on PDC's acreage in the above
areas, and the well proves up reserves on the immediately adjacent spacing or
drilling units, if PDC owns an interest in the adjacent units, PDC will assign
the Partnership an interest equivalent to that owned in the exploratory well,
proportionately reduced if PDC owns less than a 100% interest in the adjacent
spacing units.
B. Cost:
The Partnership shall reimburse PDC for
its proportionate share of the lesser of:
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1. The
fair market value of the Prospect, or
2. The
"Cost" of acquisition of the Prospect including: (a) the price paid by PDC for
such property; (b) title examination, abstracting, brokers commissions, filing
fees, recording costs, transfer taxes, and other charges incurred in connection
with the acquisition of the property; (c) bonuses, rentals and ad valorem taxes
paid by PDC with respect to the Prospect to the date of its transfer to the
Partnership, interest on funds used to acquire or maintain such property, and
such portion of PDC's expenses for geological, drafting, accounting, legal and
other like services allocated to the Prospect in accordance with generally
accepted accounting principles, not including for expenses incurred in the prior
drilling of xxxxx, and provided such expenses shall have been incurred not more
than 36 months prior to the purchase by the program.
C. Substitution:
As drilling progresses other, more
desirable Prospects may become may become less desirable as a result of
additional information not available as of the date of this
Agreement. For any undrilled Prospect, the Partnership may request
that PDC substitute another Prospect, in which case the entire acquisition cost
paid for the Prospect or a substitute thereof will be applied against the cost
of the substituted Prospect, and against other costs of this contract if and to
the extent the cost of the substitute Prospect is less than the cost of the
original Prospect it replaces. An amendment to this Agreement in the
form of Exhibit "C" shall be used for the addition or substitution of a
Prospect.
D. Title
Examination and Opinion:
Title examination shall be made by
outside attorneys on the drillsite of any proposed well prior to commencement of
drilling operations. The opinion will include ownership of the
working interest, mineral, royalty, overriding royalty, and production payments
under the applicable leases. A copy of the opinion will be furnished
to the Partnership.
PDC shall take such steps as are
necessary in its best judgment to render title to the leases assigned to the
Partnership acceptable for the purposes of the Partnership. No
operation shall be commenced on leases acquired by the Partnership unless the
Partnership Manager is satisfied that necessary title requirements have been
satisfied by PDC and that the undertaking of such operation would be in the
interest of the Partnership. PDC shall be free, however, to use its
own best judgment in waiving title requirements and shall not be liable to the
Partnership, or Participants for any mistakes of judgment; nor shall PDC be
deemed to be making any warranties or representations, express or implied, as to
the validity or merchantability of the title to any lease assigned to the
Partnership or the extent of the interest covered thereby.
ARTICLE
V
INTEREST
IN COSTS AND PRODUCTION
A. Royalties
and Overriding Royalties:
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The Partnership interest in production
from drilling Prospects will be subject to the payment to non-affiliated parties
of royalties and overriding royalties, provided the weighted average of all
royalties for all Partnership Prospects drilled shall not exceed 25% gross
revenues. No such royalty or overriding royalty will be paid to PDC
or its affiliates.
B. Proportionate
Working Interest:
The Partnership may acquire 100% of the
working interest in a Prospect or a proportionate interest of less than
100%. If the Partnership acquires a proportionate interest, the
respective obligations and benefits acquired by the Partnership will be
proportionately the same as the working interest acquired. PDC and
its affiliates may not retain any overrides or other burdens on the interest
conveyed to the Partnership. The Partnership will pay a proportionate
share of the total of lease, development, and operating costs, and will be
entitled to receive a proportionate share of production subject only to
royalties and overriding royalties discussed in Article V, § A.
C. Joint
Venture Activities:
PDC may retain an interest or convey
interests in undrilled Prospects to other Joint Venturers, retaining for its own
account a profit or promotional interest on the interest
conveyed. PDC shall require any party acquiring such an interest to
acquire a proportionate working interest and to assume and bear alone all
obligation associated with such an interest, and to bear alone and hold the
Partnership and other Joint Venturers harmless from all costs, claims, and
burdens associated with the interest acquired. At the discretion of
the Managing General Partner, the Partnership may enter into joint ventures
which allow a functional allocation of tangible, intangible and lease costs,
where each joint venturer is responsible for its overhead costs, provided the
Partnership's interest in the revenues and income of such a joint venture is
proportional to its contribution to the total cost of such venture.
D. Adjustments:
Payment of any xxxx shall not prejudice
the right of the Partnership to protest or question the correctness
thereof: provided, however, all bills and statements rendered to the
Partnership by PDC during any calendar year shall conclusively be presumed to be
true and correct after a twenty-four (24) month period unless the Partnership
takes written exception thereto and makes claim on PDC for
adjustment. No adjustment favorable to PDC shall be made unless it is
made within the same prescribed period. The provisions of this
paragraph shall not prevent adjustments resulting from a physical inventory of
controllable material.
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E. Audits:
The Partnership, upon notice in writing
to PDC and all other Non-Operators, shall have the right to audit PDC's accounts
and records relating to the Partnership xxxxx for any calendar year within the
twenty-four (24) month period following the end of the calendar year to be
audited; provided, however the making of an audit shall not extend the time for
the taking of written exception to and the adjustments of
account. Where there are two or more Non-Operators, the Non-Operators
shall make every reasonable effort to conduct a joint audit in a manner which
will result in a minimum of inconvenience to PDC. PDC shall bear no
portion of the Non-Operators audit cost incurred under this paragraph unless
agreed to by PDC. The audits shall not be conducted more than once
each year without prior approval of PDC, except upon the resignation or removal
of PDC as operator, and shall be made at the expense of those Non-Operators
requesting such audit.
PDC shall reply in writing to an audit
report within 75 days after receipt of such report.
ARTICLE
VI
DRILLING
AND DEVELOPMENT
A. Agreement
To Drill and Complete:
PDC shall commence drilling of a well
or xxxxx on each Prospect following the initial formation and funding of the
Partnership, but in no case later than March 30, 2008 and shall continue
drilling thereafter with due diligence to the Target formation unless a
condition which renders further drilling impractical is encountered at a lesser
depth, or unless the Partnership agrees to complete or abandon the well at a
lesser depth.
PDC shall make reasonable tests of all
formations encountered during drilling which give indication of containing
economic quantities of oil and/or gas. If such tests indicate the
presence of economic quantities of oil and/or gas, PDC shall complete the well
and install such surface and well equipment, gathering pipelines, heaters,
separators, etc., as are necessary and normal in the area in which the Prospect
is located. If it is determined that the well is not likely to
produce oil and/or gas in commercial quantities PDC shall plug and abandon the
well in accordance with applicable regulations.
B. Cost
of Drilling and Completion:
The Partnership shall bear its
proportionate share of the cost of drilling and completing or drilling and
abandoning each Partnership well, where the Managing General Partner serves as
operator as follows:
1. The
Cost of the Prospect, as defined;
2. The
intangible costs of drilling and completing the well, including the Managing
General Partner's compensation for acting as operator, equal to 12.6% of the
total direct well cost if the investor partners' interest in the well is 63%,
and proportionally reduced if the tangible costs exceed 37% of the direct well
costs on average for the Partnership's xxxxx, so that the Managing General
Partner's contribution to and interest in the Partnership is increased above
37%; and
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3. The
tangible Costs of drilling and completing the Partnership xxxxx and of gathering
pipelines necessary to connect the well to the nearest appropriate sales point
or delivery point.
If the Partnership acquires less than
100% of a Prospect, its Drilling and Completion Costs of that Prospect will
proportionately decrease.
Intangible drilling costs will include
a monthly drilling well fixed overhead based on the most recently published
Ernst & Young fixed rate overhead survey. The rate will be
determined by state and well depth.
In addition, the Managing General
Partner may also provide direct services in the drilling and completion of the
xxxxx, including land and legal services, roustabout and construction services,
supervision of drilling and completion operations, engineering and geological
services, and other services. Such services will be provided at the
Managing General Partner's cost determined in accordance with generally accepted
accounting principles and subject to written agreements.
If the foregoing rates for direct
services exceed competitive rates available from other non-affiliated persons in
the area engaged in the business of rendering or providing comparable services
or equipment, the foregoing rates will adjust to an amount equal to that
competitive rate.
C. Completion
By Less Than All Parties:
If not all Participants in a well wish
to participate in a completion attempt, the parties desiring to do so may pay
all costs of the completion attempt including the cost of necessary well
equipment and a gathering pipeline, and such parties shall receive all income
and pay all operating costs from the well until they have received an amount
equal to 300% of the completion and connection costs, after which time the
non-consenting parties shall have the right to receive their original interest
in further revenues and expenses.
D. Prepayment:
The Partnership agrees to pay PDC the
full cost of all planned Prospects prior to December 31, 2007 in order to assure
the Partnership of the rates quoted in Article VI, § B, to arrange for the
drilling equipment for the xxxxx through subcontractors and to provide PDC with
working capital for the drilling of the xxxxx.
E. Refunds:
In no event shall PDC be obligated to
refund any moneys paid to it by the Partnership under this
Agreement. If any amounts paid under Article VI, § D exceed costs due
under Article VI, § B, such excess shall be credited to the Partnership and
shall be expended for additional drilling.
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ARTICLE
VII
PRODUCTION
AND SUBSEQUENT OPERATIONS
A. Commencement
of Production:
For purposes of this Agreement,
production will commence:
1. In
the case of gas xxxxx, when gas is first delivered from the well through a
pipeline or other delivery system to a purchaser;
2. In
the case of oil xxxxx, when the well has produced 100 barrels; or
3. In
the case of combination xxxxx, when either of criteria have been
satisfied.
A well will be deemed to be "in
production" in any month thereafter in which oil or gas are produced in
commercial quantities.
B. Production
Operations:
PDC shall provide all necessary labor,
vehicles, supervision, management, accounting, and overhead services for normal
production operations, and lease accounting, and shall be entitled to deduct
from Partnership revenues a monthly well-tending fee of $400 per Wattenberg
Field well, $700 per Piceance Basin, $950 for Red Desert Basin or Williston
Basin well and a monthly operating charge of $100 per
well. If the Partnership has producing xxxxx in areas different from
those above, the operator will charge a monthly Partnership Administration fee
of $100 per well plus a competitive industry rate for operations and field
supervision. Nonroutine operations will be billed to the Partnership
at their proportionate cost. Any nonroutine operation with an
estimated cost exceeding $10,000 will be authorized for expenditure ("AFE" or
"AFE'd") and submitted to the Non-Operators for approval. Approval of
a majority of the working interest owners will be required to authorize such
operations. If the Partnership authorized such operations, PDC shall
have the right to deduct payment for the cost from Partnership
revenues.
C. Abandonment
of Xxxxx That Have Produced:
Any well which has been completed as a
producer shall not be plugged and abandoned without the consent of all
Non-Operators. If all parties consent to such abandonment, the well
shall be plugged and abandoned in accordance with applicable regulations and at
the cost, risk of expense of all owners. If, within (30) days after
receipt of the notice of the proposed abandonment of any well, all parties do
not agree to the abandonment of such well, those wishing to continue its
operations from the interval(s) of the formation(s) then open to production
shall tender to each of the other parties its proportionate share of the value
of the well's salvageable material and equipment, less the estimated cost of
salvaging and assign the non-abandoning parties, without warranty, express or
implied, as to title or as to quantity, or fitness for use of the equipment and
material, all of its interest in the well and related equipment, together with
its interest in leasehold estate as to, but only as to, the interval or
intervals of the formation or formations then open to
production.
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D. Marketing
of Production:
The Partnership shall have the right to
take in kind and separately dispose of its share of all oil and gas produced
from the Prospects, excluding its proportionate share of production required for
lease operations and production unavoidably lost. Initially the
Partnership designates PDC as its agent to market such production and authorizes
PDC to enter into and bind the Partnership in such agreements as it deems in the
best interest of the Partnership for the sale of such oil and/or
gas. The Partnership may rescind the designation of PDC as its agent
with regard to all subsequent marketing agreements by written notice at any
time, but agrees to be bound by such agreements as may then be in effect during
their terms. The Partnership shall bear its proportionate share of
all marketing costs, if any. If PDC provides marketing services, its
charge shall be no greater than those charges made by unaffiliated
marketers. If pipelines which have been built by PDC are used in the
delivery of natural gas to market, PDC may charge a gathering fee not to exceed
that which would be charged by a nonaffiliated third party for a similar
service.
E. Escalation
in the Event of Rising Costs:
The production and accounting charges
provided in Article VII, § B, may be adjusted annually beginning January 1,
2009, to an amount equal to the rates from Article VII, § B, multiplied by the
average of the then current Oil and Gas Extraction Index and the Professional
and Technical Services Index, , as published by the United States Department of
Labor, Bureau of Labor Statistics, provided that the charge may not exceed the
rate which would be charged by other comparable operators in the area of
operations. This average is commonly referred to as the Accounting
Procedure Wage Index Adjustment which is published annually by the Council of
Petroleum Accountants Societies.
ARTICLE
VIII
LIABILITY
OF PARTIES
A. Liability
of Parties:
If the Partnership participates in a
well with third parties, the liability of the parties shall be several, not
joint or collective. The Partnership shall be responsible only for
its obligations, and shall be liable only for its proportionate share of the
costs of developing and operating the Prospects. It is not the
intention of the parties to create, nor shall this Agreement be construed as
creating, a mining or other partnership or association, or to render the parties
liable as partners.
B. Liens
and Payment Defaults:
The Partnership grants to PDC a lien
upon its oil and gas rights in the Contract Area, and a security interest in its
share of oil and/or gas when extracted and its interest in all equipment, to
secure payment of its share of expense, together with interest
thereon. If PDC has a security interest under the Uniform Commercial
Code of the state, PDC shall be entitled to exercise the rights and
remedies of a secured party under the Code. The bringing of a suit
and the obtaining of judgment by PDC for the secured indebtedness shall not be
deemed an election of remedies or otherwise affect the lien rights or security
interest as security for the payment thereof. In addition, upon
default by the Partnership in the payment of its share of expense, PDC shall
have the right, without prejudice to other rights or remedies, to collect from
the purchaser the proceeds from the sale of the Partnership's share of oil
and/or gas until the amount owed by the Partnership, plus interest, has been
paid. Each purchaser shall be entitled to rely upon PDC's written
statement concerning the amount of any default. PDC grants a like
lien and security interest to the Partnership to secure payment of PDC's
proportionate share of expenses.
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If any party fails or is unable to pay
its share of expense within sixty (60) days after rendition of a statement
therefor by PDC, PDC shall pay the unpaid amount in the proportion that the
interest of each such party bears to the interest of all such
parties.
C. Payments
and Accounting:
Except as herein otherwise specifically
provided, PDC shall promptly pay and discharge expenses incurred in the
development and operation of the Contract Area pursuant to this
Agreement. PDC shall keep an accurate record of the account
hereunder, showing expenses incurred and charges and credits made and
received.
Regardless of which party has
contributed the lease(s) and/or oil and gas interest(s) hereto on which royalty
is due and payable, PDC shall pay or deliver or cause to be paid or delivered
the royalty and overriding royalty payments due under the terms associated with
the acquisition of each Prospect, and shall deduct such payments from the
revenue of the Partnership.
D. Taxes:
Unless the Partnership elects to take
production in kind, PDC shall pay or cause to be paid all production, severance,
excise, gathering and other taxes imposed upon or with respect to the production
or handling of such party's share of oil and/or gas produced under the terms of
this Agreement, and shall be entitled to reimbursement for such taxes from
partnership revenue.
E. Insurance:
At all times while operations are
conducted hereunder, PDC shall comply with the workmen's compensation laws of
the state of West Virginia and in each state where the Partnership is conducting
drilling and production operations. PDC shall also carry or provide
insurance as outlined in Exhibit "B," attached to and made a part
hereof. PDC shall require all contractors engaged in work on or for
the Contract Area to comply with the workmen's compensation law of the state
where the operations are being conducted and to maintain such other insurance as
PDC may require.
No additional charge will be made for
such insurance during drilling and completion operations. When xxxxx
have been placed in production PDC may xxxx for the cost of providing such
insurance, allocated among xxxxx and operations in accordance with generally
accepted accounting principles.
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ARTICLE
IX
INTERNAL
REVENUE CODE ELECTION
This Agreement is not intended to
create, and shall not be construed to create, a relationship of partnership or
an association for profit between or among the parties
hereto. Notwithstanding any provision herein that the rights and
liabilities hereunder are several and not joint or collective, or that this
agreement and operations hereunder shall not constitute a
partnership, if, for federal income tax purposes, this Agreement and the
operations hereunder are regarded as a partnership, each party hereby affected
elects to be excluded from the application of all of the provisions of
Subchapter "K," Chapter 1, Subtitle "A" of the Internal Revenue Code of 1986, as
amended (the "Code") as permitted and authorized by Code Section 761 and the
regulations promulgated thereunder. PDC is authorized and directed to
execute on behalf of the Partnership such evidence of this election as may be
required by the Secretary of the Treasury of the United States or the Federal
Internal Revenue Service, including specifically, but not by way of limitation,
all of the returns, statements, and the data required by Regulations
1.761. Should there be any requirement that each party hereby
affected to give further evidence of this election, each such party shall
execute such documents and furnish such other evidence as may be required by the
Federal Internal Revenue Service or as may be necessary to evidence this
election. No such party shall give any notices or take any other
action inconsistent with the election made hereby. If any present or
future income tax laws of the state or states in which the Contract Area is
located or any future income tax laws of the United States contain provisions
similar to those in Subchapter "K," Chapter l, Subtitle "A," of the Code, under
which an election similar to that provided by Section 761 of the Code is
permitted, each party hereby affected shall make such election as may be
permitted or required by such laws. In making the foregoing election,
each such party states that the income derived by such party from operations
hereunder can be adequately determined without the computation of partnership
taxable income.
ARTICLE
X
CLAIMS
AND LAWSUITS
PDC may settle any single uninsured
third party damage claim or suit arising from operations hereunder if the
expenditure does not exceed One Thousand Dollars ($1,000.00) and if the payment
is in complete settlement of such claim or suit. If the amount
required for settlement exceeds the above amount, the Partnership shall assume
and take over the further handling of its interest in the claim suit, unless
such authority is delegated to PDC. All costs and expenses of
handling, settling, or otherwise discharging such claim or suit shall be at the
joint expenses of the parties participating in the operation from which the
claim or suit arises. If a claim is made against any party or if any
party is sued on account of any matter arising from operations hereunder over
which such individual has no control because of the rights given Operator by
this Agreement, such party shall immediately notify all other parties, and the
claim or suit shall be treated as any other claim or suit involving operations
hereunder all claims and suits involving title to any interest subject to this
Agreement shall be treated as a claim or suit against all parties participating
in the Prospect so affected.
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ARTICLE
XI
FORCE
MAJEURE
If either party is rendered unable,
wholly or in part, by force majeure to carry out its obligations under this
Agreement, other than the obligation to make money payments, that party shall
give to the other party prompt written notice of the force majeure with
reasonably full particulars concerning its inability; thereupon, the obligations
of the party giving the notice, so far as they are affected by the force
majeure, shall be suspended during, but no longer than, the continuance of the
force majeure. The affected party shall use all reasonable diligence
to remove the force majeure situation as quickly as practicable.
The requirement that any force majeure
shall be remedied with all reasonable dispatch shall not require the settlement
of strikes, lockouts, or other labor difficulty by the party involved, contrary
to its wishes; how all such difficulties shall be handled shall be entirely
within the discretion of the party concerned.
The term "force majeure," as here
employed, shall mean act of God, strike, lockout, or other industrial
disturbance act of the public enemy, war, blockade, public riot, lightning,
fire, storm, flood, explosion, governmental action, governmental delay,
restraint or inaction, unavailability of equipment or market for oil and/or gas,
and any other cause, whether of the kind specifically enumerated above or
otherwise, which is not reasonably within the control of the party claiming
suspension.
ARTICLE
XII
NOTICES
All notices required by this Agreement
shall be given in writing addressed to the parties as follows:
1. For
the Partnership:
Petroleum
Development Corporation, Managing General Partner of Rockies Region 2007 Limited
Partnership, X.X. Xxx 00 Xxxxxxxxxx, XX 00000
2. For
PDC:
Petroleum
Development Corporation
X.X. Xxx
00
Xxxxxxxxxx,
XX 00000
Each party shall have the right to
change its address at any time, by giving written notice to all other
parties.
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ARTICLE
XIII
TERM OF
AGREEMENT
If a well drilled under any provision
of this Agreement, results in production of oil and/or gas in paying quantities,
this Agreement shall continue in force so long as any such well or xxxxx
produce, or are capable of production, and for an additional period of 180 days
from cessation of all production; provided, however, if, prior to the expiration
of such additional period, one or more of the parties hereto are engaged in
drilling, reworking, deepening, plugging back, testing or attempting to complete
a well or xxxxx hereunder, this Agreement shall continue in force until such
operations have been completed; and if production results therefrom, this
Agreement shall continue in force as provided herein.
It is agreed, however, that the
termination of this Agreement shall not relieve any party hereto from any
liability which has accrued or attached prior to the date of such
termination.
ARTICLE
XIV
COMPLIANCE
WITH LAWS AND REGULATIONS
A. Laws,
Regulations and Order:
This Agreement shall be subject to the
conservation laws of the state in which the Prospects are located, to the valid
rules, regulations, and orders of any duly constituted regulatory body of said
state; and to all other applicable federal, state, and local laws, ordinances,
rules, regulations, and orders.
B. Governing
Law:
This Agreement and all matters
pertaining hereto, including, but not limited to, matters of performance,
non-performance, breach, remedies, procedures, rights, duties and interpretation
or construction, shall be governed and determined by the law of the state in
which the Prospect is located.
C. Regulatory
Agencies:
Nothing herein contained shall grant,
or be construed to grant, PDC the right or authority to waive or release any
rights, privileges, or obligations which the Partnership may have federal or
state laws or under rules, regulations or orders promulgated under such laws in
reference to oil, gas and mineral operations, including the location, operation,
or production of xxxxx, on tracts offsetting or adjacent to the Contract
Area.
With respect to operations hereunder,
the Partnership agrees to release PDC from any and all losses, damages,
injuries, claims and causes of action arising out of, incident to or resulting
directly or indirectly from Operator's interpretation or application of rules,
rulings, regulations, or orders of the Department of Energy or predecessor or
successor agencies to the extent such interpretation or application was made in
good faith. The Partnership further agrees to reimburse PDC for any
amounts applicable to the Partnership's share of production that PDC may be
required to refund, rebate or pay as a result of such an incorrect
interpretation or application.
13
ARTICLE
XV
MISCELLANEOUS
This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and to their respective
heirs, devisees, legal representative, successors and assigns.
This Agreement may be executed in any
number of counterparts, each of which shall be considered an original for all
purposes.
IN WITNESS WHEREOF, this Agreement
shall be effective as of __ day of June 2007.
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Xxxxxx
X. Xxxxx,
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CAO
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Petroleum
Development Corporation
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Xxxxxxx X. XxXxxxxxxx,
CFO
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Petroleum
Development Corporation
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Managing
General Partner of
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Rockies
Region 2007 Limited Partnership
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* * * * *
14
