GAS WELL OPERATING AGREEMENT
THIS OPERATING AGREEMENT made this 1st day of October, 1998, by and between
Wilon Resources, Inc., hereinafter referred to as Wilon, and Mid American
Completion Co., Inc., hereinafter referred to as Mid American.
WHEREAS, Mid American is an independent oil and gas management, development
and production company, and currently operates and manages oil and gas xxxxx in
Kentucky and West Virginia, and
WHEREAS, Wilon has gas xxxxx located in Xxxxxx District, Xxxxx County, West
Virginia and desires Mid American as an independent contractor to act on its
behalf as the operator of said gas xxxxx, and
WHEREAS, this agreement is entered into to effectuate the agreements and
covenants contained herein.
NOW THEREFORE, in consideration of the promises and mutual covenants
contained herein, the parties do hereby agree as follows:
1. OPERATING AREA
The Operating Area is designated as the Xxxxxx District, Xxxxx County, West
Virginia and shall include the xxxxx, the surface and subsurface equipment
associated with the gas xxxxx, the gas gathering system, the gas pipelines from
the xxxxx to the master sales meters and the well access roads, hereinafter
simply as the "xxxxx". A list of said xxxxx is attached hereto as Exhibit A and
made a part of this agreement.
2. OPERATOR
Mid American is appointed by Wilon as Operator of the xxxxx. Mid American
shall manage and conduct all well operations as required or permitted pursuant
to the terms and conditions of this agreement. Mid American shall have no
liability to Wilon for losses sustained or liabilities incurred in the operation
of the xxxxx, except such as may result from gross negligence or willful
misconduct by Mid American.
3. TERM OF OPERATING AGREEMENT
(1) This agreement shall become effective as of the day and year first written
above, when executed by the parties hereto, and except as provided for in
3(2) hereof, shall continue and remain in full force and effect during the
productive life of the xxxxx.
(2) This agreement shall terminate between the parties hereto, upon the
earliest of (a) the plugging or abandonment of the xxxxx, (b) the
resignation of Mid American as operator, which may be effected with just
cause, upon ninety (90) days prior written notice to Wilon, or (c) the
removal of Mid American as operator, which may be effected with just cause,
upon thirty (30) days prior written notice to Mid American, from Wilon.
(3) Upon resignation or removal of Mid American as operator, as provided
herein, Mid American shall provide the successor operator, upon written
request by such operator, all well records, books and property pertaining
to the xxxxx.
4. WELL INTERESTS
Wilon hereby represents and warrants to Mid American that it is the legal
owners of the xxxxx.
5. WELL OPERATIONS
The term "well operations" shall generally mean any labor or service,
including third party services, required to maintain the xxxxx, the surface and
subsurface equipment associated with the xxxxx, gas gathering system, gas
pipelines, well access roads and right of ways, and to maintain the quality of
gas as the standard requires by the gas purchasing entities, and all other
services that would be required following the end of the month.
6. CHARGES FOR WELL OPERATION
(1) Mid American shall be paid, except as specifically provided for in 6(2)
hereof, the invoice price for all supplies, equipment, insurance, labor and
services, including third party services, that Mid American supplies,
purchases or contracts for, pertaining to or for the benefit of the xxxxx.
(2) Mid American shall be paid a monthly operating fee of $200.00 per well, for
each month a well has any production. The monthly operating fee paid Mid
American shall include the cost of (a) a well tender and a four (4) wheel
drive vehicle, (b) the routine maintenance and adjustments to the
wellheads, gas gathering system, pipelines and meters, and the services for
maintaining well records.
(3) The monthly operating fee paid Mid American, as provided for in 6(2)
hereof, shall not include the costs of (a) supplies used in the maintenance
of the xxxxx, gas pipelines and meters, (b) the equipment, labor or third
party services to repair or service the xxxxx, gas gathering system,
pipelines, meters and well access roads, (c) any special fees or reports
required by State or Federal agencies, including well bonds, and (d) the
costs associated with title opinions or gas purchase contracts.
7. PAYMENTS AND APPROVALS
(1) Mid American shall in good faith conduct all well operations in a prudent
and workmanlike manner using technically sound, customary and generally
accepted oil and gas field practices and techniques currently prevailing
within the geographical area of the xxxxx.
(2) Mid American shall not start any project or incur any extraordinary costs
to the xxxxx reasonably estimated to result in an expenditure of more than
$1,000.00, without first sending written notice and then receiving written
approval from Wilon, unless such project or costs are necessary in the sole
opinion of Mid American to protect person, persons, or property in the
event of a sudden emergency.
(3) Mid American shall send written notice to Wilon of any project pertaining
to the xxxxx estimated to result in an expenditure of more than $1,000.00,
as provided for in 7(3) hereof. Such notice shall specify (a) the well or
xxxxx, (b) the purpose of the project, (c) the equipment, labor and third
party services required for the project, and (d) the estimated cost of the
project. Such notice shall require Wilon to advance payment of the
estimated cost of the project.
(4) Mid American shall not plug or abandon a well without first receiving the
written approval from Wilon unless such plugging or abandonment of a well
or xxxxx is required by a written order from a State or Federal agency.
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(5) Mid American shall have the right to employ its own equipment in the
operation of the xxxxx, but in no event shall Mid American charges for its
equipment or services exceed the prevailing rates in the area for similar
equipment or services; and its services shall be performed pursuant the
same terms and conditions as customary in the area.
8. ACCOUNTING AND STATEMENTS
(1) Mid American shall maintain accurate records of all operating, production
and business affairs pertaining to the xxxxx. The records shall include the
gas production from the xxxxx and other business records that would be
customary in the day to day operation of the xxxxx.
(2) Mid American shall have the right and be entitled to receive advance
payment from Wilon for such expenditures as set forth in 7(2) hereof within
fifteen (15) days after receipt of Mid American's written notice, as
provided for herein. Mid American shall not be required to commence a
project until such payment is made.
9. LIENS AND SECURITY INTEREST
Wilon hereby grants Mid American, as operator, a first lien and security
interest in said xxxxx for any unpaid charges, fees or expenditures due Mid
American, which remain unpaid for a period of sixty (60) days.
10. ACCESS TO INFORMATION AND XXXXX
(1) Wilon, its agents or representatives, including attorneys, by appointment,
shall have the right during normal business hours, to review or audit the
records pertaining to the xxxxx.
(2) Wilon, its agents or representatives, including attorneys, at their sole
risk, liability and expense, shall have the right to enter the property and
inspect the xxxxx.
1.1. NOTICES
(1) All notices required pursuant to this agreement shall be writing and either
personally delivered or transmitted by mail, registered or certified,
return receipt requested, postage prepaid to the parties hereto.
(2) All notices shall be effective upon personal delivery or upon being
deposited in the United State mail.
(3) Each party shall have the right, from time to time, during the term of this
agreement, to change their address for notices by giving the other party
written notice of such change.
(4) All notices, as provided herein, may also be delivered by facsimile
transmission, provided there is sufficient evidence of actual receipt of
such transmission by the receiving party.
12. RELATIONSHIP OF THE PARTIES
(1) It is not the intention of the parties hereto to create, nor shall this
agreement be construed or considered as creating, any type of partnership
or association between the parties for any purpose or reason whatsoever,
including rendering either party liable as partners.
(2) It is agreed and clearly understood that Mid American shall be deemed to be
an independent contractor and shall perform its duties and obligations as
the operator of the xxxxx, as set forth within this agreement.
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13. CONFLICTS OF INTEREST
(1) Mid American currently operates and services other oil and gas xxxxx for
its own account and in conjunction with others, and intends to continue to
engage in such activities, and intends to develop, operate and service
additional xxxxx in the future, within the geographical area of the xxxxx,
which may result in a conflict of interest.
(2) The operations of the xxxxx may result in proving up the acreage
surrounding the xxxxx and, since Mid American may acquire acreage
surrounding the xxxxx in the future, Mid American will benefit from the
information obtained during its operations of the xxxxx at the risk and
expense of Wilon, which may result in a conflict of interest.
(3) Mid American may have problems in allocating time and services between
existing xxxxx it currently operates and services and future xxxxx it may
operate and service; therefore, Mid American will in good faith devote as
much of its time and service to the operations of these xxxxx that is
reasonably necessary in the sole opinion of Mid American, which may result
in a conflict of interest.
14. FORCE MAJEURE
If Mid American or Wilon is rendered unable, wholly or in part, by force
majeure to carry out their obligations pursuant to this agreement, other than
the obligation to make money payments, they shall give written notice to the
other party hereto of the force majeure with full particulars; thereupon, the
obligations of either party, as the case may be, shall be suspended during, but
not longer than the continuance of the force majeure. Either party shall use all
reasonable diligence to remove the force majeure as quickly as possible to the
extent the force majeure is within the reasonable control of either party. The
term "force majeure shall mean any act of God, strike, lockout, or other
industrial disturbance, act of public enemy, war, public riot, lightning, fire,
storm, flood, explosion, government restraint, unavailability of equipment,
adverse weather conditions or any other cause, whether of the kind specifically
enumerated herein or otherwise, which directly precludes performance hereunder
and is not reasonably within the control of either party.
15. GOVERNING LAW
This agreement shall be governed by, and construed in accordance with the
laws of the State of West Virginia and by no other state.
16. CAPTIONS
The articles, sections, titles of captions contained in this agreement are
inserted only as a matter of convenience and reference, and in no way define,
limit, extend or describe the scope of this agreement, or the intent of any
provision hereof.
17. SEVERABILITY
If any provision of this agreement, or the application thereof to any
person, entity or circumstances, shall be invalid or unenforceable to any
extent, the remainder of this agreement, and the application of such provision
to other persons, entities or circumstances, shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
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18. COUNTERPARTS
This agreement may be executed in any number of counterparts and all such
counterparts shall, for all purposes, constitute one agreement, binding upon the
parties hereto.
19. BINDING AGREEMENT
This agreement shall be binding on and shall inure to the benefit of the
parties hereto and their respective successors and assigns
20. ENTIRE AGREEMENT
This agreement contains the entire agreement between the parties hereto,
pertaining to Mid American's operation of the xxxxx and supersedes all prior and
contemporaneous oral and written representations, agreements, arrangements and
undertakings whatsoever between the parties hereto. No variations, modifications
or changes to this agreement shall be binding upon the parties hereto, unless
set forth in a document duly executed by the parties.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
day and year first above written.
Mid American Completion Co., Inc.
By: /s/Xxxxxxx Xxxxxxx
Its President
Wilon Resources, Inc.
By: /s/Xxxxx Xxxxxxxx
Its President
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