EXHIBIT 10.7
ASSIGNMENT AGREEMENT
THIS AGREEMENT (the "Assignment Agreement") is made and entered into on this
27th day of June, 2006, between:
PIN PETROLEUM PARTNERS LTD, a company incorporated under the
laws of the Province of British Columbia, having an office
address of Suite 2410, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
(the "Assignor")
AND:
RADIAL ENERGY INC., a company organized under the laws of the
State of Nevada, having an office at Suite 223, 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx, XXX, 00000
(the "Assignee")
WHEREAS, the Assignor has certain rights and obligations under three Assignment
Agreements dated May 23, 2005, August 24, 2005 and August 24, 2005,
respectively, with Skyline Energy, LLC, to properties located in Cherokee
County, Texas, known as the Junction Prospect, the Northwest Jacksonville
Prospect and the Highway 79 Prospect (hereinafter collectively referred to as
the "Cherokee Agreements"), copies of which are attached hereto as Schedules A,
B and C; and
WHEREAS, the Assignor wishes to assign all of its rights and obligations in the
Cherokee Agreements to the Assignee; and
WHEREAS, the Assignee accepts such assignment and has agreed to be bound by the
Cherokee Agreements.
NOW THEREFORE in consideration of the mutual covenants and agreements contained
herein, IT IS HEREBY AGREED by the Assignor and the Assignee as follows:
1. The Assignor hereby assigns and transfers to the Assignee all of its rights
and obligations in, to, and under the Cherokee Agreements, subject to all the
terms and conditions thereof.
2. The Assignee hereby agrees to assume all of the Assignor's rights and
obligations under the Cherokee Agreements.
3. The Assignor reaffirms and represents and warrants that:
2
(a) the Cherokee Agreements are valid and in full force and effect, and
that the representations and warranties contained in the Cherokee
Agreements are true and correct on the date hereof;
(b) it has not entered into any negotiations, arrangements or agreements
(either oral or written) relating to the Cherokee Agreements;
(c) the Cherokee Agreements and all of Assignor's rights, titles and
interests therein and thereto are free and clear of any and all liens,
charges, encumbrances and claims of whatsoever nature;
(d) Assignor has any and all corporate action necessary and/or required
under all applicable laws, rules and regulations, including corporate
governance law in British Columbia, in order to transfer its rights,
titles and interests in, to and under the Cherokee Agreements to
Assignee; and
(e) Assignor has full right and authority to enter into this Assignment
Agreement and transfer, assign and convey to Assignee all of
Assignor's rights, titles and interests relating to the Cherokee
Agreements.
4. As consideration for the assignment of the Cherokee Agreements, the Assignee
agrees to:
(a) pay to the Assignor the sum of Seven Hundred Thousand Dollars
($700,000) in US funds within ninety (90) days from the date of this
Assignment Agreement; and
(b) grant to the Assignor an overriding royalty interest in the sum of
four percent (4%) from the Assignee's share of net revenue interest,
pursuant to the Cherokee Agreements.
5. In the event the Assignee fails to make payment to the Assignor pursuant to
item 4(a) hereof, after Assignor gives Assignee written notice of such failure,
then the Assignor shall, at its option:
(a) be entitled, upon written notice of its intent to do so, have the
rights and obligations under the Cherokee Agreements transferred
hereunder revert back to the Assignor; or
(b) receive from the Assignee a penalty payment in the amount of One
Hundred Twenty percent (120%) of the consideration set out in item
4(a) hereof, and at the option of the Assignor, such sum shall be
convertible into securities of the Assignee at a price equal to the
lowest offering price of the Assignees securities to the general
public during the current fiscal period.
6. By executing this Assignment Agreement, the Assignor and Assignee confirm
their intention to execute and deliver as promptly as practicable any other
documentation which may be required to give effect to this Assignment Agreement,
and to obtain the approval, agreement, and consent of their respective Boards of
Directors or governing bodies with respect to this Assignment Agreement. The
parties shall also cooperate in Assignee's compliance with applicable state and
federal securities laws, rules and regulations. This Assignment Agreement and
the execution hereof shall be strictly confidential between the parties and no
notice or press release relating to this Assignment Agreement shall be given by
either party without the prior written consent of the other party. Each party
shall provide information concerning terms of this Assignment Agreement and the
execution hereof only to its respective management and employees, and then, only
on a "need-to-know" basis.
3
7. This Assignment Agreement may not be amended or otherwise modified except by
an instrument in writing signed by both parties.
8. This Assignment Agreement shall be governed by and interpreted in accordance
with the laws of the State of Nevada and the parties irrevocably attorn to the
jurisdiction of the courts of Washoe County, Nevada. All disputes which may
arise under, out of, in connection with or in relation to this Agreement shall
be submitted to and finally settled by arbitration, which shall be subject to
the provisions of the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") in effect from time to time, be conducted in Reno, Nevada,
by a single arbitrator under (and appointed in accordance with) the rules
established for domestic commercial arbitrations under the AAA in effect from
time to time, be administered by the AAA ,and be conducted in the English
language. The prevailing party in any such arbitration shall be entitled, in
addition to an award from the arbitrator, an award of all costs, expenses and
attorney fees incurred in the arbitration.
9. If any one or more of the provisions contained herein should be invalid,
illegal or unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provisions shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
10. This Agreement constitutes and contains the entire agreement and
understanding between the parties and supersedes all prior agreements,
memoranda, correspondence, communications, negotiations and representations,
whether oral or written, express or implied, statutory or otherwise, between the
parties or any of them with respect to the subject matter hereof.
11. This Agreement may not be assigned without the prior written consent of the
Assignor.
12. This Agreement may be executed in counterpart, each of which such
counterpart, whether in original or facsimile form, notwithstanding the date or
dates upon which this Agreement is executed and delivered by any of the parties,
shall be deemed to be an original and all of which will constitute one and the
same agreement, effective as of the reference date given above.
IN WITNESS WHEREOF, the Assignor and the Assignee have executed this Assignment
Agreement on the day and year first written above.
PIN PETROLEUM PARTNERS LTD.
/s/ XXXXXXX XXXXXXX
________________________________
Per: Xxxxxxx Xxxxxxx, President
RADIAL ENERGY INC.
/s/ G. XXXXX XXXXX
_______________________________
Per: G. Xxxxx Xxxxx, President
SCHEDULE "A"
____________
Skyline Energy, LLC
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Tele: 000-000-0000 Fax: 000-000-0000
May 23, 2005
See Exhibit "A" for Addressees
Re: Junction Prospect
Cherokee County, Texas
(the "Prospect")
Gentlemen:
This agreement (hereinafter referred to as "Agreement") is made and entered
into by and between Skyline Energy, L.L.C., who address is 0000 Xxxxxx Xxxxxx,
Xxxxxxxx, Xxxxx 00000 (hereinafter referred to as "Assignor") and the signatory
parties identified on Exhibit "A" and "A-l" relative to the leasehold interest
more fully described in Exhibit "B" attached hereto and incorporated herein for
all purposes, (hereinafter singularly referred to as "Assignee" or collectively
as "Assignees"). Subject to elections made to the contrary, it is agreed that
all rights and benefits as well as all risks, costs and expenses granted herein
unto Assignees shall be owned and borne by each Assignee in the percentage set
forth next to his name in Exhibit "A-l" hereto.
Assignor represents that it is the present owner of all right, title and
interest in and to the oil and gas leases more fully described in Exhibit "B"
attached hereto and incorporated herein for all purposes. Said leases cover 500
+- gross, more or less, out of the X. Xxxxxxx Survey, A-564, and the X. Xxxx
Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx (hereinafter referred to as the "Leases").
The Leases cover the lands shaded yellow on the plat attached hereto as Exhibit
"C" which is incorporated herein for all purposes.
Assignee is desirous of acquiring from Assignor the undivided interest
herein described in the Leases and participating in the drilling of a Test Well,
as defined below, for oil and gas thereon subject to the terms, conditions,
reservations and limitations herein provided. The parties therefore agree as
follows:
With respect to the Leases, Assignor represents and warrants to Assignee that:
1. Assignor owns each of the Leases free and clear of any liens, security
interests or encumbrances of any kind placed thereon by Assignor.
2. To the best of Assignor's knowledge, the Leases are in full force and
effect, are valid and subsisting leases, and all rentals and other
payments due under the Leases have been properly and timely paid, and
all conditions necessary to keep the Leases in force have been fully
performed.
3. To the best of Assignor's knowledge, no suit, action or other
proceeding is pending before any court or governmental agency and no
cause of action exists that relates to the Leases or that might result
in impairment or loss of Assignee's title to any portion of the
Leases.
1.
Consideration
_____________
For and in consideration of the sums set. forth herein, Assignor agrees to
assign, in accordance with Section 9.I. below, and with warranty of title, by,
through and under Assignor, but not otherwise, and further subject to the terms,
reservations and conditions of this Agreement, the leasehold interest in the
Leases to each Assignee in the proportions set forth in Exhibit "A-l" beside
Assignee's name; provided, however, as a condition precedent to such assignment,
Assignee shall have paid to Assignor its pro rata share of the Initial
Consideration, defined as eight eighths (8/8ths) of the cost of the Leases,
legal fees, and geological and administrative costs through the date hereof, and
which is set forth on Exhibit "A-l" hereto, and its pro rata share of Estimated
Dry Hole Costs, as hereinafter defined. The Initial Consideration is comprised
of the following sums:
Land and Legal Costs
Geological and Administrative Costs to Date $195,000.00
___________
Total Initial Consideration $195,000.00
===========
It is further agreed that attached hereto as Exhibit "A-2" which is
incorporated herein for all purposes is an Authority for Expenditure ("AFE")
which sets forth the estimated costs necessary to drill the Test Well to Total
Depth, evaluate same with a triple combination log and plug and abandon same if
a dry hole ("Estimated Dry Hole Costs"). By execution of this Agreement,
Assignor and Assignee do each agree to bear and pay their respective share of
the Estimated Dry Hole Costs of the Test Well. Such actual drilling costs which
shall include, without limitation, surface damage and restoration costs.
Assignee agrees to bear and pay for their proportionate share {Assignee's
"Before Prospect Payout Interest") of the costs associated with the drilling and
development of the prospect before Prospect Payout as hereinafter defined, and
their proportionate share (Assignee's "After Prospect Payout Interest") of the
costs associated with the prospect after Prospect Payout, as hereinafter
defined.
Operator shall notify each Assignee of the estimated spud date of the Test Well
and request the advance payment of Assignee's Estimated Dry Hole Costs. Each
Assignee shall advance to Operator its share of the Estimated Dry Hole Costs
within fifteen (15) days from the date of receipt of said notification. Should
any party fail or refuse to timely forward to Operator its share of the
Estimated Dry Hole Costs within said fifteen (15) day period, then Operator
shall notify such party by certified mail that it is delinquent in making such
payment. It is understood that Operator shall not request the advance payment of
the Estimated Dry Hole Costs prior to thirty (30) days in advance of the
estimated spud date of the Test Well.
Should any Assignee fail to pay Operator its share of the Estimated Dry
Hole Costs, such Assignee shall further forfeit its right to participate in the
drilling of the Test Well and this Agreement shall be of no further force and
effect with respect to such forfeiting Assignee whereupon such Assignee shall
forfeit, as liquidated damages and not as a penalty, its share of the Initial
Consideration previously paid to Assignor hereunder.
Notwithstanding any terms contained in this Agreement to the contrary, upon
payment of the Initial Consideration by Assignee to Assignor, Assignor shall
have no liability to any Assignee or to Operator in the event any Assignee
subsequently fails to fund its share of the Estimated Dry Hole Costs; provided,
however, should another party fail to fund the Initial Consideration resulting
in the failure of the Test Well to be drilled to total depth, Assignor agrees it
will promptly refund Assignee's share of the Initial Consideration.
Additionally, except as otherwise provided in the Operating Agreement, Assignor
shall have no liability to Assignee for any acts or omissions of Operator in any
way associated with the drilling of the Test Well or any other well which may be
drilled under the terms of this Agreement.
In the event that Operator does not commence actual drilling operations for the
Test Well on or before February 28, 2 005, this Agreement shall terminate and
Assignor shall immediately refund the Initial Consideration to Assignee;
provided, however, the
commencement date for the Test Well shall be extended in the event the Test Well
is not timely spudded due to delays caused by the drilling contractor. In the
event this Agreement terminates, Assignee shall have no obligation with respect
to any costs or liabilities incurred by Assignor with respect to this Agreement
and Operator agrees to indemnify and hold Assignee harmless against any and all
costs, expenses, claims, demands and causes of action of whatsoever kind or
character, including court costs and attorneys' fees, arising out of any
operations conducted, commitment made or any action taken or omitted with
respect to the Leases in the event the Test Well is not timely spudded by the
Operator as herein provided.
2.
Test Well
_________
On or before February 28, 2 006, Oakwood Energy, Inc. as initial operator
(the "Operator"), shall commence operations for the drilling of a test well
(hereinafter referred to as the "Test Well") at a location on the Leases as
designated on the AFE, and shall thereafter diligently and in a good and
workmanlike manner proceed to cause the drilling of the Test Well to the
stratigraphic equivalent of the lesser of either (i) a true vertical depth of
approximately 5,000 feet beneath the surface of the earth or (ii) a depth
sufficient to test the upper Woodbine Sands as seen at a depth sufficient to
test the upper Woodbine Sands as seen at a depth of 4,790' to 4912' in the
Xxxxxxx Oil & Gas #1 McDonald, Total Depth 5155' (hereinafter referred to as
"Total Depth"); provided, however, Assignor may at its sole option extend the
Test Well commencement date subject to rig availability.
3.
Substitute Well
_______________
In the event the Test Well is lost or junked due to mechanical difficulty,
or there is encountered in the drilling thereof salt, domal formation, cavity,
igneous rock, heaving shale, high pressure gas, saltwater flow or such other
conditions which render further drilling impracticable, unduly difficult or
expensive by ordinary standards of the oil industry, then in lieu of drilling to
Total Depth, Assignees, for a period of ninety (90) days after abandoning said
Test Well, for any of the reasons above noted, shall have the option to
commence, or cause to be commenced, actual drilling of a substitute well. Such
well shall be drilled at a mutually acceptable location, in a like manner and
under the same terms and conditions to the depth specified for the Test Well,
and the term "Test Well" as used herein shall be construed to include any
substitute well drilled under the terms of this Agreement; provided, however, in
the event Assignee does not elect to
participate in the substitute well, Assignee shall forfeit the Initial
Consideration previously paid to Assignor.
4.
Operating Agreement
___________________
Except as otherwise set forth herein, all operations on the lands
covered by the Leases shall be conducted in accordance with the terms of this
Agreement and the Operating Agreement attached as Exhibit "D" which designates
Oakwood Energy, INC. as operator and which is executed contemporaneously
herewith. In the event of a conflict between the terms of this Agreement and the
Operating Agreement, the terms of this Agreement shall prevail and control.
5.
Overriding Royalty
__________________
It is agreed and understood that Assignor hereby reserves unto itself, or
its designees, an overriding royalty burdening the lands covered by the Leases
equal to twenty-five percent (25%) less presently existing leasehold burdens
thereby delivering Assignee its pro rata share of a seventy-five percent of
eight-eights (75% of 8/8ths) net revenue interest.
In the event any of the Leases do not cover a full mineral interest, or
Assignor does not own the full leasehold interest therein, then the overriding
royalty herein reserved shall be proportionately reduced. Furthermore, should
any of the Leases cover less than all of the lands included within a pooled unit
allocated to any well drilled pursuant to the terms hereof, such overriding
royalty reserved by Assignor herein shall be further reduced and paid in
proportion to the total number of surface acres covered by the Leases included
within the pooled unit bears to the total number of surface acres within said
unit.
6.
Well Information
________________
Assignee or its representatives shall have access at its own risk and at
all times to the location and xxxxxxx floor during the drilling of any well
hereunder. Each Assignee shall further be entitled to all information concerning
any well drilled hereunder and the Leases unless any such party is delinquent in
the payment of its joint interest xxxxxxxx to Operator for a period greater
than thirty (30) days in which event Operator at its sole option may withhold
any information to such delinquent party.
7.
Area of Mutual Interest
_______________________
The parties hereto hereby establish an Area of Mutual Interest ("AMI")
which covers and includes all lands depicted within the area one (1) mile
outside the perimeter of the lands covered by the Leases which are depicted on
the plat attached hereto as Exhibit "C". In the event that any party hereto
hereafter acquires an oil and gas leasehold interest, or contractual right to
earn an oil and gas leasehold interest, covering lands lying in whole or in part
within the AMI, the acquiring party shall, in writing, offer to assign, without
warranty of title, to the nonacquiring parties, within ten (10) days of purchase
or acquisition, the entire proportionate interest which the nonacquiring parties
are ratably entitled to acquire within the AMI under this Agreement. Such notice
shall include a copy of the lease or contract, paid draft and other pertinent
and available data. Each nonacquiring party shall, within ten (l0) days after
receipt of such offer, elect whether to purchase such interest by paying the
acquiring parties such nonacquiring party's proportionate part of the actual
cost and expenses, if any, incurred by the acquiring party in acquiring such
lease or contract. Failure by any nonacquiring party to timely notify the
acquiring party shall be deemed an election by such nonacquiring party not to
acquire its ratable interest in the leasehold interest offered. When any
nonacquiring party elects not to acquire its ratable interest from the
acquiring party, such nonacquiring party's interest in such lease or contract
which is the subject of such offer shall be offered to the parties electing to
acquire its proportionate share of such non-acquiring party's interest and shall
not be subject to this Agreement but an operating agreement identical to Exhibit
D, after allowing for nonjoinder by the non-acquiring party. Unless otherwise
mutually agreed, this AMI shall terminate six (6) months after the expiration of
the last lease within the AMI. All interests under this paragraph shall be
offered on either a Before Prospect Payout Basis or After Prospect Payout Basis
based on the occurrence of Prospect Payout.
8.
Prospect Payout
_______________
Upon the occurrence of "Prospect Payout" as defined below, Assignor shall
back-in against the interest of Assignee in the Leases for a twenty-five percent
of eight-eighths (25% of 8/8ths)
working interest whereupon the parties shall own the After Prospect Payout
interests set forth in Exhibit "A-l" hereto. All costs and expenses incurred
prior to the occurrence of Prospect Payout shall be borne by the parties in
accordance with their respective Before Prospect Payout interests set forth in
Exhibit "A-l" hereto.
"Prospect Payout" is defined as and shall occur at 12:01 a.m. on the first day
of the month following the day when the net proceeds received by Assignee out of
production from the Test Well and all subsequent xxxxx drilled on. the prospect
(after first deducting the production and severance taxes, and all royalty
payments effective as of the effective date of this Agreement, lessor's royalty,
overriding royalties including, without limitations, the overriding royalties
reserved by Assignor herein, non-participating royalties, and production
payments) shall equal the sum of Assignee's share of the:
(a) Initial Consideration;
(b) cost of land and legal costs and all costs for leases; acquired by
Assignee within the AMI prior to the occurrence of Prospect Payout or
other land related costs and land maintenance costs, geological cost,
seismic costs, or other non-drilling related costs incurred by
Assignee prior to Prospect Payout;
(c) the costs of drilling, testing, evaluating, completing and equipping
the Test Well and all subsequent xxxxx drilled on the prospect, prior
to Prospect Payout into the point of sale which includes but is not
limited to the wellhead, tank batteries, gathering lines and all other
related surface equipment and facilities; and
(d) the operating costs, and reworking or re-completing costs incurred on
such xxxxx during the payout period.
The Operator agrees to provide all parties to this Agreement with quarterly
payout statements.
9.
Miscellaneous
_____________
A. Paragraph Headings
The paragraph headings inserted in this Agreement are utilized solely for
reference purposes and do not constitute substantive matter to be considered in
construing the terms of this Agreement.
B. Time is of the Essence
It is specifically understood and agreed that time is of the essence
hereunder.
C. Liability
It is not the purpose of this Agreement to create a partnership, mining
partnership, partnership for a specific purpose, joint venture, or any other
relationship which would render the parties liable as partners, associates, or
joint venturers.
D. Entire Agreement
This Agreement shall constitute the entire Agreement between the parties
hereto and supersedes any prior agreements, promises, negotiations or
representations, whether written or oral, not expressly set forth in this
Agreement. No variations, modifications, or changes herein or hereof shall be
effective unless evidenced by written document executed by the parties hereto.
E. Counterparts
This Agreement may be executed in any number of counterparts and each
counterpart so executed shall be deemed an original for all purposes and shall
be binding upon each party executing same whether or not executed by all
parties.
F. Governing Law
This Agreement shall be governed by the laws of the State of Texas.
G. Binding Agreement
The terms, covenants and conditions of this Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and to their
respective heirs, executors, administrators, successors and assigns, and such
terms, covenants and conditions shall be deemed as covenants running with the
lands and leases covered hereby. It is stipulated, however, that no assignment
or transfer by or, however accomplished, of any right, title or interest
acquired hereunder shall relieve such party of any liability or obligation
herein assumed, except with written consent of the other party.
H. Acceptance
If the foregoing fully sets forth your understanding of our agreement,
please so indicate by execution in the space provided
below and return one (1) fully executed original hereof together with your share
of the Initial Consideration described in Section 1. hereof. If this Agreement
is not accepted and returned within fifteen (15) days from the date hereof with
your share of the Initial Consideration, this Agreement shall be voidable by any
party and such shares of Initial Consideration shall be returned promptly to the
Assignee.
I. Delivery of Assignment
With Assignee's tendering of its pro-rata share of the Initial
Consideration and its pro-rata share of the Estimated Dry Hole Costs as provided
herein, Assignor shall upon request provide Assignee with complete lease
purchase packages for the Leases. Assignor shall record an assignment of the
Leases to the Assignee and upon receipt provide Assignee with a copy of such
recorded assignment.
J. Notices
All notices required under this agreement shall be made to the parties at
the addresses and fax numbers identified in Exhibit "A".
K. Well Data Requirements
Assignor shall provide or cause to be provided certain well data required
by Assignee in all xxxxx in which Assignee is a participant. Such requirements
will be fully identified under separate cover.
X. Xxxxx Rental Payments
Any and all delay rental payments shall be paid by Assignor and invoiced to
Assignee based on it current working interest. Delay rentals accruing (if any)
prior to reaching casing point in the Test Well shall be a proportionate
obligation on the part of all parties; however after such a time same shall be
the subject of future recommendations and elections.
Very truly yours,
SKYLINE ENERGY, L.L.C.
By: /s/ XXXXXX XXXXX
___________________________
Xxxxxx Xxxxx, President
AGREED TO AND ACCEPTED THIS
8th DAY OF September 2005
Pin Petroleum Partners Inc.
By: /s/ XXXXXXX XXXXXXX
_______________________________
Name: _________________________
Title: ________________________
AGREED TO AND ACCEPTED THIS
________ DAY OF_________, 2005
G-White
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________ DAY OF_________, 2005
Oakwood Energy, Inc.
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________DAY OF_________, 2005
Stardust Energy, Inc.
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________ DAY OF_________, 2005
Blake Cmajadalka
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________DAY OF _________, 2005
Xxxxxx Resources, Inc.
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________DAY OF_________, 2005
By:____________________________
Name:__________________________
Title:_________________________
EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
ADDRESSEES
Pin Petroleum Partners Inc.
Xxxxx 0000, 000 Xxxx Xxxxxxx Xxxxxx
P. O. Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
Telephone: 000-000-0000
Telecopy: 000-000-0000
Oakwood Energy, INC.
P. O. Xxx 000
Xxxxxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
Xxxxxx Resources, Inc.
P. O. Xxx 0000
Xxxxxxxx Xxxx, XX 00000-0000
Attn: Xxxx Xxxxxx
Telephone: 000-000-0000
Telecopy:
Stardust Energy, Inc.
Attention: Xxx Xxxxxxxx
P 0 Box 150909
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy:
Xxxxx Xxxxxxxxx
0000 Xxxxxxx Xx.
Xxxxxxxx Xxxxx, 00000
Telephone: Telecopy:
Skyline Energy, LLC
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Attn: Xxxxxx Xxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
EXHIBIT "A-l"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED August 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
Party Before Prospect Payout After Prospect Payout Initial
Interest Interest Consideration
__________________________________________________________________________________________________________
Pin Petroleum 30.00% 22.500% $58,500.00
Partners Inc.
__________________________________________________________________________________________________________
G-White 5.00% 3.750% $9,750.00
__________________________________________________________________________________________________________
Oakwood Energy, Inc . 2.00% 1.500% $3,900.00
__________________________________________________________________________________________________________
Xxxxxx Energy, Inc . 2.00% 1.500% $3,900.00
__________________________________________________________________________________________________________
Stardust Energy, Inc . 1.50% 1.125% $2,925.00
__________________________________________________________________________________________________________
Blake Cmajakaika 1.00% .750% $1,950.00
__________________________________________________________________________________________________________
Skyline Energy, L.L.C. 58.500% 68.875% NA
Etal
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
Total 100% 100%
__________________________________________________________________________________________________________
EXHIBIT "A-2"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
AFE TO BE FURNISHED BY MLC OPERATING LP
EXHIBIT "B"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
THE LEASES
1. Oil, Gas and Mineral Lease dated, September 20, 2004 by and between, Xxxxxx
X. Xxxx, et ux, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume __________________________, Page ________, Deed
Records, Cherokee County, Texas.
2. Oil, Gas and Mineral Lease dated, September 29, 2004 , by and between Xxxx
Xxxx Xxxxxx Trust I & II , as Lessors, and Skyline Energy, L.L.C., as
Lessee, covering certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000,
Xxxxxxxx Xxxxxx, Xxxxx, and recorded in Volume
_______________________________, Page _________ , Deed Records, Cherokee
County, Texas.
3. Oil, Gas and Mineral Lease dated, October 1, 2004, by and between Xxxxxxx
Xxxxxx Xxxxxxxx, as Lessor, and Skyline Energy, L.L.C, as Lessee, covering
certain lands in the Xxxxxx Xxxxxx Survey, A-564, Cherokee County, Texas,
and recorded in Volume ___________________________, Page ________, Deed
Records, Cherokee County, Texas.
4. Oil, Gas and Mineral Lease dated, October 1, 2004, by and between, Xxx
Xxxxxxxx Xxxxx as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Survey, A-, Cherokee County, Texas, and recorded in
Volume_____, Page _____, Deed Records, Cherokee County, Texas
5. Oil, Gas and Mineral Lease dated, October 1,2004, by and between, Xxxxx
Xxxxxxxx Young, as Lesser, and Skyline Energy, L.L.C, as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume , Page____________________________________, Deed
Records, Cherokee County, Texas .
6. Oil, Gas and Mineral Lease dated, October 1, 2004, by and between, Xxx
Xxxxxxxx Xxxxxx, as Lessor, and Skyline Energy, L.L.C, as Lessee, covering
certain lands in the Xxxxxx Merril1 Survey, A-5 64, Cherokee County, Texas,
and recorded in Volume __________________________ , Page __________, Deed
Records, Cherokee County, Texas.
7. Oil, Gas and Mineral Lease dated, October 1, 2004, by and between, Xxxxxx
Xxxxxx Xxxxxxxx, as Lessor, and Skyline Energy, L.L.C, as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume 169 8, Page 000, Xxxx Xxxxxxx, Xxxxxxxx Xxxxxx,
Xxxxx.
8. Oil, Gas and Mineral Lease dated, October 1, 2 004, by and between, Xxxxx
Xxxxxxxx Xxxxxxxxx, as Lessor, and Skyline Energy, L.L.C, as Lessee,
covering certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx
Xxxxxx, Xxxxx, and recorded in Volume __________________________ , Page
__________, Deed Records, Cherokee County, Texas.
9. Oil, Gas and Mineral Lease dated, October 1, 2004, by and between, Xxxxxx
X. Xxxxxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume __________________, Page _______, Deed. Records,
Cherokee County, Texas.
10. Oil, Gas and Mineral Lease dated, October 4, 2004, by and between Xxx
Xxxxxxxx Xxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume___________________, Page_________, Deed Records,
Cherokee County, Texas.
11. Oil, Gas and Mineral Lease dated, October 4, 2004, by and between, Xxx Xxxx
Xxxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx, and
recorded in Volume___________________, Page ________, Deed Records,
Cherokee County, Texas.
12. Oil, Gas and Mineral Lease dated, October 4, 2004, by and between, Xxxx
Xxxxxx Xxxx, as Lessors, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume__________________, Page_________, Deed Records,
Cherokee County, Texas.
13. Oil, Gas and Mineral Lease dated, October 15, 2004, by and between, H. D.
Industries Inc., as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume __________________________ , Page __________, Deed
Records, Cherokee County, Texas.
14. Oil, Gas and Mineral Lease dated, October 18, 2004 by and between, Xxxx
Xxxxxxx Xxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume_______________________, Page _________, Deed
Records, Cherokee County, Texas.
15. 011, Gas and Mineral Lease dated, October 18, 2004, by and between, Xxxxx
X. Xxxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume __________________ Page__________, Deed Records,
Cherokee County, Texas."
16. 011, Gas and Mineral Lease dated, November 4, 2004 by and between, Xxxxxxx
X. Xxxxxxx dec'd, rep. by Xxxx X. XxXxxxxx, as Lessor, and Skyline Energy,
L.L.C., as Lessee, covering certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-
000, Xxxxxxxx Xxxxxx, Xxxxx, and recorded in Volume
_____________________________ , Page ________, Deed Records, Cherokee
County, Texas.
17. Oil, Gas and Mineral Lease dated, January 13, 2005 by and between, Drake
Sales, Inc., as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxx Xxxxx Survey, A-260, Cherokee County, Texas, and
recorded in Volume __________________, Page ________, Deed Records,
Cherokee County, Texas.
18. Oil, Gas and Mineral Lease dated, January 13, 2005, by and between, Xxxxx
Xxxx Xxxx, et ux, as Lessor, and Skyline Energy, L.L.C., as Lessee,
covering certain lands in the Xxxxx Xxxxxxxx Survey, A-72 8, Cherokee
County, Texas, and recorded in Volume __ , Page
__________________________________, Deed Records, Cherokee County, Texas.
19. Oil, Gas and Mineral Lease dated, January 14, 2005, by and between, Xxxx X.
Xxxxxx et ux, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxx Xxxxxxxx Survey, A-728, Cherokee County, Texas,
and recorded in Volume ___________________________, Page _________, Deed
Records, Cherokee County, Texas.
20. Oil, Gas and Mineral Lease dated, January 31, 2005, by and between, Xxxxxx
Xxxxxx & Xxxx X. Xxxxxxxx, as Lessor, and Skyline Energy, L.L.C., as
Lessee, covering certain lands in the Xxxxx Xxxxxxxx Survey, A-728,
Cherokee County, Texas, and recorded in Volume
_________________________________, Page _________, Deed Records, Cherokee
County, Texas.
21. Oil, Gas and Mineral Lease dated, February 14, 2005, by and between, Xxxxxx
X. XxXxxxxx, et ux, as Lessor, and Skyline Energy, L.L.C., as Lessee,
covering certain lands in the Xxxxx Xxxxxxxx Survey, A-728, Cherokee
County, Texas, and recorded in Volume _________________________________,
Page ________, Deed Records, Cherokee County, Texas.
22. Oil, Gas and Mineral Lease dated, February 14, 20C5, by and between, Xxxxxx
X. XxXxxxxx, his wife, Xxxxxxx X. XxXxxxxx and Xxxxxx Xxxxxx, as Lessor,
and Skyline Energy, L.L.C., as Lessee, covering certain lands in the Xxxxx
Xxxxxxxx Survey, A-728, Cherokee County, Texas, and recorded in Volume
________, Page _______, Deed Records, Cherokee County, Texas.
23. Oil, Gas and Mineral Lease dated, March 8, 2005, by and between, Xxxxxxx X.
Xxxxxxxxx, individually and as Independent Executor of the Estate of Xxxxxx
Xxxxxxxxx, Deceased, as Lessor, and Skyline Energy, L.L.C., as Lessee,
covering certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx
Xxxxxx, Xxxxx, and recorded in Volume _______________________________ ,
Page __________, Deed Records, Cherokee County, Texas.
24. Oil, Gas and Mineral Lease dated, March 9, 2005, by and between, Mr. & Xxx.
Xxx Xxxx Xxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx,
and recorded in Volume ___________________________, Page __________, Deed
Records, Cherokee County, Texas.
25. 0il, Gas and Mineral Lease dated, March 9, 2005, by and between, Xxxxx'x
Chapel Cemetary Association, as Lessor, and Skyline Energy, L.L.C., as
Lessee, covering certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000,
Xxxxxxxx Xxxxxx, Xxxxx, and recorded in
Volume__________________________________Page ___________, Deed Records,
Cherokee County, Texas.
26. Oil Gas and Mineral Lease dated, April 1, 2005, by and between, Xxxxxxx X.
Xxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxxx Xxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx, and
recorded in Volume__________________, Page__________, Deed Records,
Cherokee County, Texas.
27. Oil, Gas and Mineral Lease dated, April 20, 2005, by and between, Xxxx X.
Xxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxxx Xxxxx Survey, A-260, Cherokee County, Texas, and
recorded in Volume _____________, Page ________, Deed Records, Cherokee
County, Texas.
28. Oil, Gas and Mineral Lease dated, April 25, 2005, by and between, Xxxx
Xxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxxx Xxxxx Survey, A-260, Cherokee County, Texas, and
recorded in Volume _____________ , Page _________, Deed Records, Cherokee
County, Texas.
29. Oil, Gas and Mineral Lease dated, April 27, 2005, by and between, Xxxx X.
Xxxxxxxx Xx. & Wife, Xxxxxxx, as Lessor, and Skyline Energy, L.L.C., as
Lessee, covering certain lands in the Xxxxxx Xxxxxxx Xxxxxx, X-000,
Xxxxxxxx Xxxxxx, Xxxxx, and recorded in Volume
________________________________, Page ._______, Deed Records, Cherokee
County, Texas.
30. Oil, Gas and Mineral Lease dated, April 20, 2005, by and between, Ray Xxxx
Xxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxxx Xxxxx Survey, A-260, Cherokee County, Texas, and
recorded in Volume _____________, Page ________, Deed Records, Cherokee
County, Texas.
31. Oil, Gas and Mineral Lease dated, April 19, 2005, by and between, Xxxxxxx
Xxxx Xxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxx Xxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx, and
recorded in Volume___________________, Page ________, Deed Records,
Cherokee County, Texas.
32. Oil, Gas and Mineral Lease dated, April 20, 2005, by and between, Xxxxxxx
X. Xxxxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxx Xxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx, and
recorded in Volume___________________, Page ________, Deed Records,
Cherokee County, Texas.
33. Oil, Gas and Mineral Lease dated, April 20, 2 005, by and between. Xxxx X.
Xxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxxx Xxxxx Survey, A-260, Cherokee County, Texas, and
recorded in Volume _____________ , Page_________, Deed Records, Cherokee
County, Texas.
34. Oil, Gas and Mineral Lease dated, April 20, 2005, by and between, Xxxxx
Xxxxx Xxxxxx, et ux, as Lessor, and Skyline Energy, L.L.C., as Lessee,
covering certain lands in the Xxxxx Xxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx,
Xxxxx, and recorded in Volume_______________________, Page _________, Deed
Records, Cherokee County, Texas.
35. Oil, Gas and Mineral Lease dated, April 25, 2005, by and between, Xxxx
Xxxxxxxx Xxxxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxx Xxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx, and
recorded in Volume_______________________, Page___________Deed Records,
Cherokee County, Texas.
36. Oil, Gas and Mineral Lease dated, April 25, 2 005, by and between, Xxxxxxx
Xxxxxxxx Xxxxx, as Lesser, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxxx Xxxxx Xxxxxx, X-000, Xxxxxxxx Xxxxxx, Xxxxx, and
recorded in Volume___________________, Page_________, Deed Records,
Cherokee County, Texas.
37. Oil, Gas and Mineral Lease dated, May 2, 2005, by and between, Xxxxx X.
Xxxx, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxxx Xxxxx Survey, A-260, Cherokee County, Texas, and
recorded in Volume _____________, Page ________, Deed Records, Cherokee
County, Texas.
EXHIBIT "C"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
[Attach Plat]
[Junction Prospect Cherokee Co., Texas Map Appears Here]
EXHIBIT "D"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
JOA TO BE FURNISHED BY MLC OPERATING LP
SCHEDULE "B"
____________
SKYLINE ENERGY, LLC
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Tele: 000-000-0000 Fax: 000-000-0000
August 24, 2005
See Exhibit "A" for Addressees
Re: Northwest Jacksonville Prospect
Cherokee County, Texas
(the "Prospect")
This agreement (hereinafter referred to as "Agreement") is made and entered
into by and between Skyline Energy, L.L.C., who address is 0000 Xxxxxx Xxxxxx,
Xxxxxxxx, Xxxxx 00000 (hereinafter referred to as "Assignor") and the signatory
parties identified on Exhibit "A" and "A-l" relative to the leasehold interest
more fully described in Exhibit "B" attached hereto and incorporated herein for
all purposes, (hereinafter singularly referred to as "Assignee" or collectively
as "Assignees"). Subject to elections made to the contrary, it is agreed that
all rights and benefits as well as all risks, costs and expenses granted herein
unto Assignees shall be owned and borne by each Assignee in the percentage set
forth next to his name in Exhibit "A-l" hereto.
Assignor represents that it is the present owner of all right, title and
interest in and to the oil and gas leases more fully described in Exhibit "B"
attached hereto and incorporated herein for all purposes. Said leases cover 350
+- gross, more or less, out of the Xxxx Xxxxxx West Four League Grant Survey,
A-40, Cherokee County, Texas (hereinafter referred to as the "Leases"). The
Leases cover the lands shaded yellow on the plat attached hereto as Exhibit "C"
which is incorporated herein for all purposes.
Assignee is desirous of acquiring from Assignor the undivided interest
herein described in the Leases and participating in the drilling of a Test Well,
as defined below, for oil and gas thereon subject to the terms, conditions,
reservations and limitations herein provided. The parties therefore agree as
follows:
With respect to the Leases, Assignor represents and warrants to Assignee that:
1. Assignor owns each of the Leases free and clear of any liens, security
interests or encumbrances of any kind placed thereon by Assignor.
2. To the best of Assignor's knowledge, the Leases are in full force and
effect, are valid and subsisting leases, and all rentals and other
payments due under the Leases have been properly and timely paid, and
all conditions necessary to keep the Leases in force have been fully
performed.
3. To the best of Assignor's knowledge, no suit, action or other
proceeding is pending before any court or governmental agency and no
cause of action exists that relates to the Leases or that might result
in impairment or loss of Assignee's title to any portion of the
Leases.
1.
Consideration
_____________
For and in consideration of the sums set. forth herein, Assignor agrees to
assign, in accordance with Section 9.I. below, and with warranty of title, by,
through and under Assignor, but not otherwise, and further subject to the terms,
reservations and conditions of this Agreement, the leasehold interest in the
Leases to each Assignee in the proportions set forth in Exhibit "A-l" beside
Assignee's name; provided, however, as a condition precedent to such assignment,
Assignee shall have paid to Assignor its pro rata share of the Initial
Consideration, defined as eight eighths (8/8ths) of the cost of the Leases,
legal fees, and geological and administrative costs through the date hereof, and
which is set forth on Exhibit "A-l" hereto, and its pro rata share of Estimated
Dry Hole Costs, as hereinafter defined. The Initial Consideration is comprised
of the following sums:
Land and Legal Costs
Geological and Administrative Costs to Date $170,000.00
___________
Total Initial Consideration $170,000.00
===========
It is further agreed that attached hereto as Exhibit "A-2" which is
incorporated herein for all purposes is an Authority for Expenditure ("AFE")
which sets forth the estimated costs necessary to drill the Test Well to Total
Depth, evaluate same with a triple combination log and plug and abandon same if
a dry hole ("Estimated Dry Hole Costs"). By execution of this Agreement,
Assignor and Assignee do each agree to bear and pay their respective share of
the Estimated Dry Hole Costs of the Test Well. Such actual drilling costs which
shall include, without limitation, surface damage and restoration costs.
Assignee agrees to bear and pay for their proportionate share {Assignee's
"Before Prospect Payout Interest") of the costs associated with the drilling and
development of the prospect before Prospect Payout as hereinafter defined, and
their proportionate share (Assignee's "After Prospect Payout Interest") of the
costs associated with the prospect after Prospect Payout, as hereinafter
defined.
Operator shall notify each Assignee of the estimated spud date of the Test Well
and request the advance payment of Assignee's Estimated Dry Hole Costs. Each
Assignee shall advance to Operator its share of the Estimated Dry Hole Costs
within fifteen (15) days from the date of receipt of said notification. Should
any party fail or refuse to timely forward to Operator its share of the
Estimated Dry Hole Costs within said fifteen (15) day period, then Operator
shall notify such party by certified mail that it is delinquent in making such
payment. It is understood that Operator shall not request the advance payment of
the Estimated Dry Hole Costs prior to thirty (30) days in advance of the
estimated spud date of the Test Well.
Should any Assignee fail to pay Operator its share of the Estimated Dry
Hole Costs, such Assignee shall further forfeit its right to participate in the
drilling of the Test Well and this Agreement shall be of no further force and
effect with respect to such forfeiting Assignee whereupon such Assignee shall
forfeit, as liquidated damages and not as a penalty, its share of the Initial
Consideration previously paid to Assignor hereunder.
Notwithstanding any terms contained in this Agreement to the contrary, upon
payment of the Initial Consideration by Assignee to Assignor, Assignor shall
have no liability to any Assignee or to Operator in the event any Assignee
subsequently fails to fund its share of the Estimated Dry Hole Costs; provided,
however, should another party fail to fund the Initial Consideration resulting
in the failure of the Test Well to be drilled to total depth, Assignor agrees it
will promptly refund Assignee's share of the Initial Consideration.
Additionally, except as otherwise provided in the Operating Agreement, Assignor
shall have no liability to Assignee for any acts or omissions of Operator in any
way associated with the drilling of the Test Well or any other well which may be
drilled under the terms of this Agreement.
In the event that Operator does not commence actual drilling operations for the
Test Well on or before February 28, 2 005, this Agreement shall terminate and
Assignor shall immediately refund the Initial Consideration to Assignee;
provided, however, the
commencement date for the Test Well shall be extended in the event the Test Well
is not timely spudded due to delays caused by the drilling contractor. In the
event this Agreement terminates, Assignee shall have no obligation with respect
to any costs or liabilities incurred by Assignor with respect to this Agreement
and Operator agrees to indemnify and hold Assignee harmless against any and all
costs, expenses, claims, demands and causes of action of whatsoever kind or
character, including court costs and attorneys' fees, arising out of any
operations conducted, commitment made or any action taken or omitted with
respect to the Leases in the event the Test Well is not timely spudded by the
Operator as herein provided.
2.
Test Well
_________
On or before February 28, 2006, MLC Operating LP, as initial operator
(the "Operator"), shall commence operations for the drilling of a test well
(hereinafter referred to as the "Test Well") at a location on the Leases as
designated on the AFE, and shall thereafter diligently and in a good and
workmanlike manner proceed to cause the drilling of the Test Well to the
stratigraphic equivalent of the lesser of either (i) a true vertical depth of
approximately 5,000 feet beneath the surface of the earth or (ii) a depth
sufficient to test the upper Woodbine Sands as seen at a depth sufficient to
test the upper Woodbine Sands as seen at a depth of 4,790' to 4912' in the
Xxxxxxx Oil & Gas #1 McDonald, Total Depth 5155' (hereinafter referred to as
"Total Depth"); provided, however, Assignor may at its sole option extend the
Test Well commencement date subject to rig availability.
3.
Substitute Well
_______________
In the event the Test Well is lost or junked due to mechanical difficulty,
or there is encountered in the drilling thereof salt, domal formation, cavity,
igneous rock, heaving shale, high pressure gas, saltwater flow or such other
conditions which render further drilling impracticable, unduly difficult or
expensive by ordinary standards of the oil industry, then in lieu of drilling to
Total Depth, Assignees, for a period of ninety (90) days after abandoning said
Test Well, for any of the reasons above noted, shall have the option to
commence, or cause to be commenced, actual drilling of a substitute well. Such
well shall be drilled at a mutually acceptable location, in a like manner and
under the same terms and conditions to the depth specified for the Test Well,
and the term "Test Well" as used herein shall be construed to include any
substitute well drilled under the terms of this Agreement; provided, however, in
the event Assignee does not elect to
participate in the substitute well, Assignee shall forfeit the Initial
Consideration previously paid to Assignor.
4.
Operating Agreement
___________________
Except as otherwise set forth herein, all operations on the lands
covered by the Leases shall be conducted in accordance with the terms of this
Agreement and the Operating Agreement attached as Exhibit "D" which designates
Oakwood Energy, INC. as operator and which is executed contemporaneously
herewith. In the event of a conflict between the terms of this Agreement and the
Operating Agreement, the terms of this Agreement shall prevail and control.
5.
Overriding Royalty
__________________
It is agreed and understood that Assignor hereby reserves unto itself, or
its designees, an overriding royalty burdening the lands covered by the Leases
equal to twenty-five percent (25%) less presently existing leasehold burdens
thereby delivering Assignee its pro rata share of a seventy-five percent of
eight-eights (75% of 8/8ths) net revenue interest.
In the event any of the Leases do not cover a full mineral interest, or
Assignor does not own the full leasehold interest therein, then the overriding
royalty herein reserved shall be proportionately reduced. Furthermore, should
any of the Leases cover less than all of the lands included within a pooled unit
allocated to any well drilled pursuant to the terms hereof, such overriding
royalty reserved by Assignor herein shall be further reduced and paid in
proportion to the total number of surface acres covered by the Leases included
within the pooled unit bears to the total number of surface acres within said
unit.
6.
Well Information
________________
Assignee or its representatives shall have access at its own risk and at
all times to the location and xxxxxxx floor during the drilling of any well
hereunder. Each Assignee shall further be entitled to all information concerning
any well drilled hereunder and the Leases unless any such party is delinquent in
the payment of its joint interest xxxxxxxx to Operator for a period greater
than thirty (30) days in which event Operator at its sole option may withhold
any information to such delinquent party.
7.
Area of Mutual Interest
_______________________
The parties hereto hereby establish an Area of Mutual Interest ("AMI")
which covers and includes all lands depicted within the area one (1) mile
outside the perimeter of the lands covered by the Leases which are depicted on
the plat attached hereto as Exhibit "C". In the event that any party hereto
hereafter acquires an oil and gas leasehold interest, or contractual right to
earn an oil and gas leasehold interest, covering lands lying in whole or in part
within the AMI, the acquiring party shall, in writing, offer to assign, without
warranty of title, to the nonacquiring parties, within ten (10) days of purchase
or acquisition, the entire proportionate interest which the nonacquiring parties
are ratably entitled to acquire within the AMI under this Agreement. Such notice
shall include a copy of the lease or contract, paid draft and other pertinent
and available data. Each nonacquiring party shall, within ten (l0) days after
receipt of such offer, elect whether to purchase such interest by paying the
acquiring parties such nonacquiring party's proportionate part of the actual
cost and expenses, if any, incurred by the acquiring party in acquiring such
lease or contract. Failure by any nonacquiring party to timely notify the
acquiring party shall be deemed an election by such nonacquiring party not to
acquire its ratable interest in the leasehold interest offered. When any
nonacquiring party elects not to acquire its ratable interest from the
acquiring party, such nonacquiring party's interest in such lease or contract
which is the subject of such offer shall be offered to the parties electing to
acquire its proportionate share of such non-acquiring party's interest and shall
not be subject to this Agreement but an operating agreement identical to Exhibit
D, after allowing for nonjoinder by the non-acquiring party. Unless otherwise
mutually agreed, this AMI shall terminate six (6) months after the expiration of
the last lease within the AMI. All interests under this paragraph shall be
offered on either a Before Prospect Payout Basis or After Prospect Payout Basis
based on the occurrence of Prospect Payout.
8.
Prospect Payout
_______________
Upon the occurrence of "Prospect Payout" as defined below, Assignor shall
back-in against the interest of Assignee in the Leases for a twenty-five percent
of eight-eighths (25% of 8/8ths)
working interest whereupon the parties shall own the After Prospect Payout
interests set forth in Exhibit "A-l" hereto. All costs and expenses incurred
prior to the occurrence of Prospect Payout shall be borne by the parties in
accordance with their respective Before Prospect Payout interests set forth in
Exhibit "A-l" hereto.
"Prospect Payout" is defined as and shall occur at 12:01 a.m. on the first day
of the month following the day when the net proceeds received by Assignee out of
production from the Test Well and all subsequent xxxxx drilled on. the prospect
(after first deducting the production and severance taxes, and all royalty
payments effective as of the effective date of this Agreement, lessor's royalty,
overriding royalties including, without limitations, the overriding royalties
reserved by Assignor herein, non-participating royalties, and production
payments) shall equal the sum of Assignee's share of the:
(a) Initial Consideration;
(b) cost of land and legal costs and all costs for leases; acquired by
Assignee within the AMI prior to the occurrence of Prospect Payout or
other land related costs and land maintenance costs, geological cost,
seismic costs, or other non-drilling related costs incurred by
Assignee prior to Prospect Payout;
(c) the costs of drilling, testing, evaluating, completing and equipping
the Test Well and all subsequent xxxxx drilled on the prospect, prior
to Prospect Payout into the point of sale which includes but is not
limited to the wellhead, tank batteries, gathering lines and all other
related surface equipment and facilities; and
(d) the operating costs, and reworking or re-completing costs incurred on
such xxxxx during the payout period.
The Operator agrees to provide all parties to this Agreement with quarterly
payout statements.
9.
Miscellaneous
_____________
A. Paragraph Headings
The paragraph headings inserted in this Agreement are utilized solely for
reference purposes and do not constitute substantive matter to be considered in
construing the terms of this Agreement.
B. Time is of the Essence
It is specifically understood and agreed that time is of the essence
hereunder.
C. Liability
It is not the purpose of this Agreement to create a partnership, mining
partnership, partnership for a specific purpose, joint venture, or any other
relationship which would render the parties liable as partners, associates, or
joint venturers.
D. Entire Agreement
This Agreement shall constitute the entire Agreement between the parties
hereto and supersedes any prior agreements, promises, negotiations or
representations, whether written or oral, not expressly set forth in this
Agreement. No variations, modifications, or changes herein or hereof shall be
effective unless evidenced by written document executed by the parties hereto.
E. Counterparts
This Agreement may be executed in any number of counterparts and each
counterpart so executed shall be deemed an original for all purposes and shall
be binding upon each party executing same whether or not executed by all
parties.
F. Governing Law
This Agreement shall be governed by the laws of the State of Texas.
G. Binding Agreement
The terms, covenants and conditions of this Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and to their
respective heirs, executors, administrators, successors and assigns, and such
terms, covenants and conditions shall be deemed as covenants running with the
lands and leases covered hereby. It is stipulated, however, that no assignment
or transfer by or, however accomplished, of any right, title or interest
acquired hereunder shall relieve such party of any liability or obligation
herein assumed, except with written consent of the other party.
H. Acceptance
If the foregoing fully sets forth your understanding of our agreement,
please so indicate by execution in the space provided
below and return one (1) fully executed original hereof together with your share
of the Initial Consideration described in Section 1. hereof. If this Agreement
is not accepted and returned within fifteen (15) days from the date hereof with
your share of the Initial Consideration, this Agreement shall be voidable by any
party and such shares of Initial Consideration shall be returned promptly to the
Assignee.
I. Delivery of Assignment
With Assignee's tendering of its pro-rata share of the Initial
Consideration and its pro-rata share of the Estimated Dry Hole Costs as provided
herein, Assignor shall upon request provide Assignee with complete lease
purchase packages for the Leases. Assignor shall record an assignment of the
Leases to the Assignee and upon receipt provide Assignee with a copy of such
recorded assignment.
J. Notices
All notices required under this agreement shall be made to the parties at
the addresses and fax numbers identified in Exhibit "A".
K. Well Data Requirements
Assignor shall provide or cause to be provided certain well data required
by Assignee in all xxxxx in which Assignee is a participant. Such requirements
will be fully identified under separate cover.
X. Xxxxx Rental Payments
Any and all delay rental payments shall be paid by Assignor and invoiced to
Assignee based on it current working interest. Delay rentals accruing (if any)
prior to reaching casing point in the Test Well shall be a proportionate
obligation on the part of all parties; however after such a time same shall be
the subject of future recommendations and elections.
Very truly yours,
SKYLINE ENERGY, L.L.C.
By: /s/ XXXXXX XXXXX
___________________________
Xxxxxx Xxxxx, President
AGREED TO AND ACCEPTED THIS
8th DAY OF September 2005
Pin Petroleum Partners Inc.
By: /s/ XXXXXXX XXXXXXX
_______________________________
Name: _________________________
Title: ________________________
AGREED TO AND ACCEPTED THIS
________ DAY OF_________, 2005
G-White
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________ DAY OF_________, 2005
Oakwood Energy, Inc.
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________DAY OF_________, 2005
Stardust Energy, Inc.
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________ DAY OF_________, 2005
Blake Cmajadalka
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________DAY OF _________, 2005
Xxxxxx Resources, Inc.
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________DAY OF_________, 2005
By:____________________________
Name:__________________________
Title:_________________________
EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED MAY 23, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
ADDRESSEES
Pin Petroleum Partners Inc.
Xxxxx 0000, 000 Xxxx Xxxxxxx Xxxxxx
P. O. Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
Telephone: 000-000-0000
Telecopy: 000-000-0000
G-White Investments
0000 Xxxxxxxxx Xx.
Xxxxx, Xxxxx 00000
Attention: Xxxx Xxx
Telephone: 000-000-0000
Telecopy:
Oakwood Energy, INC.
P. X. Xxx 000
Xxxxxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
Xxxxxx Resources, Inc.
P. O. Xxx 0000
Xxxxxxxx Xxxx, XX 00000-0000
Attn: Xxxx Xxxxxx
Telephone: 000-000-0000
Telecopy:
Stardust Energy, Inc.
Attention: Xxx Xxxxxxxx
P 0 Box 150909
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy:
Xxxxx Xxxxxxxxx
0000 Xxxxxxx Xx.
Xxxxxxxx Xxxxx, 00000
Telephone: Telecopy:
Skyline Energy, LLC
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Attn: Xxxxxx Xxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
EXHIBIT "A-l"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED August 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
Party Before Prospect Payout After Prospect Payout Initial
Interest Interest Consideration
__________________________________________________________________________________________________________
Pin Petroleum 30.00% 22.500% $51,000.00
Partners Inc.
__________________________________________________________________________________________________________
G-White 5.00% 3.750% $8,500.00
__________________________________________________________________________________________________________
Oakwood Energy, Inc . 2.00% 1.500% $3,400.00
__________________________________________________________________________________________________________
Xxxxxx Energy, Inc . 2.00% 1.500% $3,400.00
__________________________________________________________________________________________________________
Stardust Energy, Inc . 1.50% 1.125% $2,550.00
__________________________________________________________________________________________________________
Blake Cmajakaika 1.00% .750% $1,700.00
__________________________________________________________________________________________________________
Skyline Energy, L.L.C. 58.500% 66.625% NA
Etal
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
Total 100% 100%
__________________________________________________________________________________________________________
EXHIBIT "A-2"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
AFE TO BE FURNISHED BY MLC OPERATING LP
EXHIBIT "B"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
THE LEASES
1. Oil, Gas and Mineral Lease dated, August 10, 2004 by and between, Xxxxxxx
Xxx Xxxxx, etux, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxx Xxxxxx Survey, A-40, Cherokee County, Texas, and
recorded in Volume _____, Page _____, Deed Records, Cherokee County, Texas.
2. Oil, Gas and Mineral Lease dated, August 10, 2004 , by and between Xxxxx X.
Xxxxxx Xx., etux, as Lessors, and Skyline Energy, L.L.C., as Lessee,
covering certain lands in the Xxxx Xxxxxx Survey, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
3. Oil, Gas and Mineral Lease dated, August 10, 2004, by and between Xxxxx X.
Xxxxxxxx, etux, as Lessor, and Skyline Energy, L.L.C, as Lessee, covering
certain lands in the Xxxx Xxxxxx Survey, A-40, Cherokee County, Texas, and
recorded in Volume _____, Page _____, Deed Records, Cherokee County, Texas.
4. Oil, Gas and Mineral Lease dated, September 8, 2004, by and between,
Jacksonville Independent School District, as Lessor, and Skyline Energy,
L.L.C., as Lessee, covering certain lands in the Xxxx Xxxxxx Survey, A-40,
Cherokee County, Texas, and recorded in Volume _____, Page _____, Deed
Records, Cherokee County, Texas.
5. Oil, Gas and Mineral Lease dated, September 13, 2004, by and between, Xxxxx
Xxxx Xxxxx Xxxx, separate property, as Lessors, and Skyline Energy, L.L.C,
as Lessee, covering certain lands in the Xxxx Xxxxxx Survey, A-40, Cherokee
County, Texas, and recorded in Volume _____, Page _____, Deed Records,
Cherokee County, Texas.
6. Oil, Gas and Mineral Lease dated, September 13, 2004, by and between, Xxxx
Xxxxxx, etux as Lessor, and Skyline Energy, L.L.C, as Lessee, covering
certain lands in the Xxxx Xxxxxx Survey, A-40, Cherokee County, Texas, and
recorded in Volume _____, Page _____, Deed Records, Cherokee County, Texas.
7. Oil, Gas and Mineral Lease dated, September 29, 2004, by and between,
Xxxxxx Living Trust, etal, as Lessor, and Skyline Energy, L.L.C, as Lessee,
covering certain lands in the Xxxx Xxxxxx Survey, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
8. Oil, Gas and Mineral Lease dated, February 28, 2005, by and between,
Xxxxxxxxx X. Xxxxxx, as Lessor, and Skyline Energy, L.L.C, as Lessee,
covering certain lands in the Xxxx Xxxxxx Survey, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
9. Oil, Gas and Mineral Lease dated, February 28, 2005, by and between, Xxxxx
Xxxxxx Xxxxxx as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxx Xxxxxx Survey, A-40, Cherokee County, Texas, and
recorded in Volume _____, Page _____, Deed Records, Cherokee County, Texas.
10. Oil, Gas and Mineral Lease dated, March 15, 2005, by and between Xxxxx
Xxxxx, etux, as Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxx Xxxxxx Survey, A-40, Cherokee County, Texas, and
recorded in Volume _____, Page _____, Deed Records, Cherokee County, Texas.
EXHIBIT "C"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
[Attach Plat]
[NW Jacksonville Prospect Cherokee Co., Texas Map Appears Here]
EXHIBIT "D"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
JOA TO BE FURNISHED BY MLC OPERATING LP
SCHEDULE "C"
____________
SKYLINE ENERGY, LLC
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Tele: 000-000-0000 Fax: 000-000-0000
August 24, 2005
See Exhibit "A" for Addressees
Re: Northwest Jacksonville Prospect
Cherokee County, Texas
(the "Prospect")
This agreement (hereinafter referred to as "Agreement") is made and entered
into by and between Skyline Energy, L.L.C., who address is 0000 Xxxxxx Xxxxxx,
Xxxxxxxx, Xxxxx 00000 (hereinafter referred to as "Assignor") and the signatory
parties identified on Exhibit "A" and "A-l" relative to the leasehold interest
more fully described in Exhibit "B" attached hereto and incorporated herein for
all purposes, (hereinafter singularly referred to as "Assignee" or collectively
as "Assignees"). Subject to elections made to the contrary, it is agreed that
all rights and benefits as well as all risks, costs and expenses granted herein
unto Assignees shall be owned and borne by each Assignee in the percentage set
forth next to his name in Exhibit "A-l" hereto.
Assignor represents that it is the present owner of all right, title and
interest in and to the oil and gas leases more fully described in Exhibit "B"
attached hereto and incorporated herein for all purposes. Said leases cover 322
+- gross and 315+- net acres,, more or less, out of the Xxxx Xxxxxx West Four
League Grant Survey, A-40, Cherokee County, Texas (hereinafter referred to as
the "Leases"). The Leases cover the lands shaded yellow on the plat attached
hereto as Exhibit "C" which is incorporated herein for all purposes.
Assignee is desirous of acquiring from Assignor the undivided interest
herein described in the Leases and participating in the drilling of a Test Well,
as defined below, for oil and gas thereon subject to the terms, conditions,
reservations and limitations herein provided. The parties therefore agree as
follows:
With respect to the Leases, Assignor represents and warrants to Assignee that:
1. Assignor owns each of the Leases free and clear of any liens, security
interests or encumbrances of any kind placed thereon by Assignor.
2. To the best of Assignor's knowledge, the Leases are in full force and
effect, are valid and subsisting leases, and all rentals and other
payments due under the Leases have been properly and timely paid, and
all conditions necessary to keep the Leases in force have been fully
performed.
3. To the best of Assignor's knowledge, no suit, action or other
proceeding is pending before any court or governmental agency and no
cause of action exists that relates to the Leases or that might result
in impairment or loss of Assignee's title to any portion of the
Leases.
1.
Consideration
_____________
For and in consideration of the sums set. forth herein, Assignor agrees to
assign, in accordance with Section 9.I. below, and with warranty of title, by,
through and under Assignor, but not otherwise, and further subject to the terms,
reservations and conditions of this Agreement, the leasehold interest in the
Leases to each Assignee in the proportions set forth in Exhibit "A-l" beside
Assignee's name; provided, however, as a condition precedent to such assignment,
Assignee shall have paid to Assignor its pro rata share of the Initial
Consideration, defined as eight eighths (8/8ths) of the cost of the Leases,
legal fees, and geological and administrative costs through the date hereof, and
which is set forth on Exhibit "A-l" hereto, and its pro rata share of Estimated
Dry Hole Costs, as hereinafter defined. The Initial Consideration is comprised
of the following sums:
Land and Legal Costs
Geological and Administrative Costs to Date $185,000.00
___________
Total Initial Consideration $185,000.00
===========
It is further agreed that attached hereto as Exhibit "A-2" which is
incorporated herein for all purposes is an Authority for Expenditure ("AFE")
which sets forth the estimated costs necessary to drill the Test Well to Total
Depth, evaluate same with a triple combination log and plug and abandon same if
a dry hole ("Estimated Dry Hole Costs"). By execution of this Agreement,
Assignor and Assignee do each agree to bear and pay their respective share of
the Estimated Dry Hole Costs of the Test Well. Such actual drilling costs which
shall include, without limitation, surface damage and restoration costs.
Assignee agrees to bear and pay for their proportionate share {Assignee's
"Before Prospect Payout Interest") of the costs associated with the drilling and
development of the prospect before Prospect Payout as hereinafter defined, and
their proportionate share (Assignee's "After Prospect Payout Interest") of the
costs associated with the prospect after Prospect Payout, as hereinafter
defined.
Operator shall notify each Assignee of the estimated spud date of the Test Well
and request the advance payment of Assignee's Estimated Dry Hole Costs. Each
Assignee shall advance to Operator its share of the Estimated Dry Hole Costs
within fifteen (15) days from the date of receipt of said notification. Should
any party fail or refuse to timely forward to Operator its share of the
Estimated Dry Hole Costs within said fifteen (15) day period, then Operator
shall notify such party by certified mail that it is delinquent in making such
payment. It is understood that Operator shall not request the advance payment of
the Estimated Dry Hole Costs prior to thirty (30) days in advance of the
estimated spud date of the Test Well.
Should any Assignee fail to pay Operator its share of the Estimated Dry
Hole Costs, such Assignee shall further forfeit its right to participate in the
drilling of the Test Well and this Agreement shall be of no further force and
effect with respect to such forfeiting Assignee whereupon such Assignee shall
forfeit, as liquidated damages and not as a penalty, its share of the Initial
Consideration previously paid to Assignor hereunder.
Notwithstanding any terms contained in this Agreement to the contrary, upon
payment of the Initial Consideration by Assignee to Assignor, Assignor shall
have no liability to any Assignee or to Operator in the event any Assignee
subsequently fails to fund its share of the Estimated Dry Hole Costs; provided,
however, should another party fail to fund the Initial Consideration resulting
in the failure of the Test Well to be drilled to total depth, Assignor agrees it
will promptly refund Assignee's share of the Initial Consideration.
Additionally, except as otherwise provided in the Operating Agreement, Assignor
shall have no liability to Assignee for any acts or omissions of Operator in any
way associated with the drilling of the Test Well or any other well which may be
drilled under the terms of this Agreement.
In the event that Operator does not commence actual drilling operations for the
Test Well on or before February 28, 2 005, this Agreement shall terminate and
Assignor shall immediately refund the Initial Consideration to Assignee;
provided, however, the
commencement date for the Test Well shall be extended in the event the Test Well
is not timely spudded due to delays caused by the drilling contractor. In the
event this Agreement terminates, Assignee shall have no obligation with respect
to any costs or liabilities incurred by Assignor with respect to this Agreement
and Operator agrees to indemnify and hold Assignee harmless against any and all
costs, expenses, claims, demands and causes of action of whatsoever kind or
character, including court costs and attorneys' fees, arising out of any
operations conducted, commitment made or any action taken or omitted with
respect to the Leases in the event the Test Well is not timely spudded by the
Operator as herein provided.
2.
Test Well
_________
On or before February 28, 2006, MLC Operating LP, as initial operator
(the "Operator"), shall commence operations for the drilling of a test well
(hereinafter referred to as the "Test Well") at a location on the Leases as
designated on the AFE, and shall thereafter diligently and in a good and
workmanlike manner proceed to cause the drilling of the Test Well to the
stratigraphic equivalent of the lesser of either (i) a true vertical depth of
approximately 5,000 feet beneath the surface of the earth or (ii) a depth
sufficient to test the upper Woodbine Sands as seen at a depth sufficient to
test the upper Woodbine Sands as seen at a depth of 4,790' to 4912' in the
Xxxxxxx Oil & Gas #1 McDonald, Total Depth 5155' (hereinafter referred to as
"Total Depth"); provided, however, Assignor may at its sole option extend the
Test Well commencement date subject to rig availability.
3.
Substitute Well
_______________
In the event the Test Well is lost or junked due to mechanical difficulty,
or there is encountered in the drilling thereof salt, domal formation, cavity,
igneous rock, heaving shale, high pressure gas, saltwater flow or such other
conditions which render further drilling impracticable, unduly difficult or
expensive by ordinary standards of the oil industry, then in lieu of drilling to
Total Depth, Assignees, for a period of ninety (90) days after abandoning said
Test Well, for any of the reasons above noted, shall have the option to
commence, or cause to be commenced, actual drilling of a substitute well. Such
well shall be drilled at a mutually acceptable location, in a like manner and
under the same terms and conditions to the depth specified for the Test Well,
and the term "Test Well" as used herein shall be construed to include any
substitute well drilled under the terms of this Agreement; provided, however, in
the event Assignee does not elect to
participate in the substitute well, Assignee shall forfeit the Initial
Consideration previously paid to Assignor.
4.
Operating Agreement
___________________
Except as otherwise set forth herein, all operations on the lands
covered by the Leases shall be conducted in accordance with the terms of this
Agreement and the Operating Agreement attached as Exhibit "D" which designates
Oakwood Energy, INC. as operator and which is executed contemporaneously
herewith. In the event of a conflict between the terms of this Agreement and the
Operating Agreement, the terms of this Agreement shall prevail and control.
5.
Overriding Royalty
__________________
It is agreed and understood that Assignor hereby reserves unto itself, or
its designees, an overriding royalty burdening the lands covered by the Leases
equal to twenty-five percent (25%) less presently existing leasehold burdens
thereby delivering Assignee its pro rata share of a seventy-five percent of
eight-eights (75% of 8/8ths) net revenue interest.
In the event any of the Leases do not cover a full mineral interest, or
Assignor does not own the full leasehold interest therein, then the overriding
royalty herein reserved shall be proportionately reduced. Furthermore, should
any of the Leases cover less than all of the lands included within a pooled unit
allocated to any well drilled pursuant to the terms hereof, such overriding
royalty reserved by Assignor herein shall be further reduced and paid in
proportion to the total number of surface acres covered by the Leases included
within the pooled unit bears to the total number of surface acres within said
unit.
6.
Well Information
________________
Assignee or its representatives shall have access at its own risk and at
all times to the location and xxxxxxx floor during the drilling of any well
hereunder. Each Assignee shall further be entitled to all information concerning
any well drilled hereunder and the Leases unless any such party is delinquent in
the payment of its joint interest xxxxxxxx to Operator for a period greater
than thirty (30) days in which event Operator at its sole option may withhold
any information to such delinquent party.
7.
Area of Mutual Interest
_______________________
The parties hereto hereby establish an Area of Mutual Interest ("AMI")
which covers and includes all lands depicted within the area one (1) mile
outside the perimeter of the lands covered by the Leases which are depicted on
the plat attached hereto as Exhibit "C". In the event that any party hereto
hereafter acquires an oil and gas leasehold interest, or contractual right to
earn an oil and gas leasehold interest, covering lands lying in whole or in part
within the AMI, the acquiring party shall, in writing, offer to assign, without
warranty of title, to the nonacquiring parties, within ten (10) days of purchase
or acquisition, the entire proportionate interest which the nonacquiring parties
are ratably entitled to acquire within the AMI under this Agreement. Such notice
shall include a copy of the lease or contract, paid draft and other pertinent
and available data. Each nonacquiring party shall, within ten (l0) days after
receipt of such offer, elect whether to purchase such interest by paying the
acquiring parties such nonacquiring party's proportionate part of the actual
cost and expenses, if any, incurred by the acquiring party in acquiring such
lease or contract. Failure by any nonacquiring party to timely notify the
acquiring party shall be deemed an election by such nonacquiring party not to
acquire its ratable interest in the leasehold interest offered. When any
nonacquiring party elects not to acquire its ratable interest from the
acquiring party, such nonacquiring party's interest in such lease or contract
which is the subject of such offer shall be offered to the parties electing to
acquire its proportionate share of such non-acquiring party's interest and shall
not be subject to this Agreement but an operating agreement identical to Exhibit
D, after allowing for nonjoinder by the non-acquiring party. Unless otherwise
mutually agreed, this AMI shall terminate six (6) months after the expiration of
the last lease within the AMI. All interests under this paragraph shall be
offered on either a Before Prospect Payout Basis or After Prospect Payout Basis
based on the occurrence of Prospect Payout.
8.
Prospect Payout
_______________
Upon the occurrence of "Prospect Payout" as defined below, Assignor shall
back-in against the interest of Assignee in the Leases for a twenty-five percent
of eight-eighths (25% of 8/8ths)
working interest whereupon the parties shall own the After Prospect Payout
interests set forth in Exhibit "A-l" hereto. All costs and expenses incurred
prior to the occurrence of Prospect Payout shall be borne by the parties in
accordance with their respective Before Prospect Payout interests set forth in
Exhibit "A-l" hereto.
"Prospect Payout" is defined as and shall occur at 12:01 a.m. on the first day
of the month following the day when the net proceeds received by Assignee out of
production from the Test Well and all subsequent xxxxx drilled on. the prospect
(after first deducting the production and severance taxes, and all royalty
payments effective as of the effective date of this Agreement, lessor's royalty,
overriding royalties including, without limitations, the overriding royalties
reserved by Assignor herein, non-participating royalties, and production
payments) shall equal the sum of Assignee's share of the:
(a) Initial Consideration;
(b) cost of land and legal costs and all costs for leases; acquired by
Assignee within the AMI prior to the occurrence of Prospect Payout or
other land related costs and land maintenance costs, geological cost,
seismic costs, or other non-drilling related costs incurred by
Assignee prior to Prospect Payout;
(c) the costs of drilling, testing, evaluating, completing and equipping
the Test Well and all subsequent xxxxx drilled on the prospect, prior
to Prospect Payout into the point of sale which includes but is not
limited to the wellhead, tank batteries, gathering lines and all other
related surface equipment and facilities; and
(d) the operating costs, and reworking or re-completing costs incurred on
such xxxxx during the payout period.
The Operator agrees to provide all parties to this Agreement with quarterly
payout statements.
9.
Miscellaneous
_____________
A. Paragraph Headings
The paragraph headings inserted in this Agreement are utilized solely for
reference purposes and do not constitute substantive matter to be considered in
construing the terms of this Agreement.
B. Time is of the Essence
It is specifically understood and agreed that time is of the essence
hereunder.
C. Liability
It is not the purpose of this Agreement to create a partnership, mining
partnership, partnership for a specific purpose, joint venture, or any other
relationship which would render the parties liable as partners, associates, or
joint venturers.
D. Entire Agreement
This Agreement shall constitute the entire Agreement between the parties
hereto and supersedes any prior agreements, promises, negotiations or
representations, whether written or oral, not expressly set forth in this
Agreement. No variations, modifications, or changes herein or hereof shall be
effective unless evidenced by written document executed by the parties hereto.
E. Counterparts
This Agreement may be executed in any number of counterparts and each
counterpart so executed shall be deemed an original for all purposes and shall
be binding upon each party executing same whether or not executed by all
parties.
F. Governing Law
This Agreement shall be governed by the laws of the State of Texas.
G. Binding Agreement
The terms, covenants and conditions of this Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and to their
respective heirs, executors, administrators, successors and assigns, and such
terms, covenants and conditions shall be deemed as covenants running with the
lands and leases covered hereby. It is stipulated, however, that no assignment
or transfer by or, however accomplished, of any right, title or interest
acquired hereunder shall relieve such party of any liability or obligation
herein assumed, except with written consent of the other party.
H. Acceptance
If the foregoing fully sets forth your understanding of our agreement,
please so indicate by execution in the space provided
below and return one (1) fully executed original hereof together with your share
of the Initial Consideration described in Section 1. hereof. If this Agreement
is not accepted and returned within fifteen (15) days from the date hereof with
your share of the Initial Consideration, this Agreement shall be voidable by any
party and such shares of Initial Consideration shall be returned promptly to the
Assignee.
I. Delivery of Assignment
With Assignee's tendering of its pro-rata share of the Initial
Consideration and its pro-rata share of the Estimated Dry Hole Costs as provided
herein, Assignor shall upon request provide Assignee with complete lease
purchase packages for the Leases. Assignor shall record an assignment of the
Leases to the Assignee and upon receipt provide Assignee with a copy of such
recorded assignment.
J. Notices
All notices required under this agreement shall be made to the parties at
the addresses and fax numbers identified in Exhibit "A".
K. Well Data Requirements
Assignor shall provide or cause to be provided certain well data required
by Assignee in all xxxxx in which Assignee is a participant. Such requirements
will be fully identified under separate cover.
X. Xxxxx Rental Payments
Any and all delay rental payments shall be paid by Assignor and invoiced to
Assignee based on it current working interest. Delay rentals accruing (if any)
prior to reaching casing point in the Test Well shall be a proportionate
obligation on the part of all parties; however after such a time same shall be
the subject of future recommendations and elections.
Very truly yours,
SKYLINE ENERGY, L.L.C.
By: /s/ XXXXXX XXXXX
___________________________
Xxxxxx Xxxxx, President
AGREED TO AND ACCEPTED THIS
8th DAY OF September 2005
Pin Petroleum Partners Inc.
By: /s/ XXXXXXX XXXXXXX
_______________________________
Name: _________________________
Title: ________________________
AGREED TO AND ACCEPTED THIS
________ DAY OF_________, 2005
G-White
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________ DAY OF_________, 2005
Oakwood Energy, Inc.
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________DAY OF_________, 2005
Stardust Energy, Inc.
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________ DAY OF_________, 2005
Blake Cmajadalka
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________DAY OF _________, 2005
Xxxxxx Resources, Inc.
By:____________________________
Name:__________________________
Title:_________________________
AGREED TO AND ACCEPTED THIS
________DAY OF_________, 2005
By:____________________________
Name:__________________________
Title:_________________________
EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED MAY 23, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
ADDRESSEES
Pin Petroleum Partners Inc.
Xxxxx 0000, 000 Xxxx Xxxxxxx Xxxxxx
P. O. Xxx 00000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
Telephone: 000-000-0000
Telecopy: 000-000-0000
Oakwood Energy, INC.
P. O. Xxx 000
Xxxxxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
Xxxxxx Resources, Inc.
P. O. Xxx 0000
Xxxxxxxx Xxxx, XX 00000-0000
Attn: Xxxx Xxxxxx
Telephone: 000-000-0000
Telecopy:
Stardust Energy, Inc.
Attention: Xxx Xxxxxxxx
P 0 Box 150909
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Telecopy:
Xxxxx Xxxxxxxxx
0000 Xxxxxxx Xx.
Xxxxxxxx Xxxxx, 00000
Telephone: Telecopy:
Skyline Energy, LLC
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Attn: Xxxxxx Xxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
EXHIBIT "A-l"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED August 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
Party Before Prospect Payout After Prospect Payout Initial
Interest Interest Consideration
__________________________________________________________________________________________________________
Pin Petroleum 30.00% 22.500% $55,500.00
Partners Inc.
__________________________________________________________________________________________________________
G-White 5.00% 3.750% $9,250.00
__________________________________________________________________________________________________________
Oakwood Energy, Inc . 2.00% 1.500% $3,700.00
__________________________________________________________________________________________________________
Xxxxxx Energy, Inc . 2.00% 1.500% $3,700.00
__________________________________________________________________________________________________________
Stardust Energy, Inc . 1.50% 1.125% $2,775.00
__________________________________________________________________________________________________________
Blake Cmajakaika 1.00% .750% $1,850.00
__________________________________________________________________________________________________________
Skyline Energy, L.L.C. 58.500% 66.625% NA
Etal
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
Total 100% 100%
__________________________________________________________________________________________________________
EXHIBIT "A-2"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
AFE TO BE FURNISHED BY MLC OPERATING LP
EXHIBIT "B"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
THE LEASES
1. Oil, Gas and Mineral Lease dated, January 12, 2005 by and between, Xxxxxx
Station, Individually and as Trustee, Lessor, and Skyline Energy, L.L.C.,
as Lessee, covering certain lands in the Xxxx Xxxxxx West Four League
Grant, A-40, Cherokee County, Texas, and recorded in Volume _____, Page
_____, Deed Records, Cherokee County, Texas.
2. Oil, Gas and Mineral Lease dated, March 4, 2005 by and between Regions
Bank, Trustee for Xxxx Xxxxxx Xxxxxx, et al, Lessor, and Skyline Energy,
L.L.C., as Lessee, covering certain lands in the Xxxx Xxxxxx West Four
League Grant, A-40, Cherokee County, Texas, and recorded in Volume _____,
Page _____, Deed Records, Cherokee County, Texas.
3. Oil, Gas and Mineral Lease dated, March 28, 2005 by and between Xxxxxx X.
Angle, et ux, Lessor, and Skyline Energy, L.L.C, as Lessee, covering
certain lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee
County, Texas, and recorded in Volume _____, Page _____, Deed Records,
Cherokee County, Texas.
4. Oil, Gas and Mineral Lease dated, March 28, 2005, by and between, Xxxxxx X.
Xxxxxx, Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
5. Oil, Gas and Mineral Lease dated, March 28, 2005, by and between, Xxxxx
Xxxxx Spiers, Lessor, and Skyline Energy, L.L.C, as Lessee, covering
certain lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee
County, Texas, and recorded in Volume _____, Page _____, Deed Records,
Cherokee County, Texas.
6. Oil, Gas and Mineral Lease dated, March 28, 2005, by and between, Xxxxxx
Xxx Xxxxxxx, Lessor, and Skyline Energy, L.L.C, as Lessee, covering certain
lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
7. Oil, Gas and Mineral Lease dated, March 28, 2005, by and between, Xxxxxxxx
Xxxxxxxx, Lessor, and Skyline Energy, L.L.C, as Lessee, covering certain
lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
8. Oil, Gas and Mineral Lease dated, May 27, 2005 by and between, Xxxxxxx
Revocable Trust, Lessor, and Skyline Energy, L.L.C, as Lessee, covering
certain lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee
County, Texas, and recorded in Volume _____, Page _____, Deed Records,
Cherokee County, Texas.
9. Oil, Gas and Mineral Lease dated, May 27, 2005, by and between, Xxxxxx X.
Xxxxxxx, Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
10. Oil, Gas and Mineral Lease dated, April 4, 2005, by and between Chardonnay
1, Ltd., Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
11. Oil, Gas and Mineral Lease dated, April 5, 2005, by and between, Xxxxxx X.
Xxxx, et ux, Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee
County, Texas, and recorded in Volume _____, Page _____, Deed Records,
Cherokee County, Texas.
12. Oil, Gas and Mineral Lease dated, April 4, 2005, by and between, F. B. and
X. X. Xxxxxxx Living Trust, Lessor, and Skyline Energy, L.L.C., as Lessee,
covering certain lands in the Xxxx Xxxxxx West Four League Grant, A-40,
Cherokee County, Texas, and recorded in Volume _____, Page _____, Deed
Records, Cherokee County, Texas.
13. Oil, Gas and Mineral Lease dated, April 4, 2005, by and between, Xxxxxx
Xxxxxxxx, Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
14. Oil, Gas and Mineral Lease dated, April 5, 2005by and between, Xxxxxx X.
Xxxxx, et ux, Lessor, and Skyline Energy, L.L.C., as Lessee, covering
certain lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee
County, Texas, and recorded in Volume _____, Page _____, Deed Records,
Cherokee County, Texas.
15. 011, Gas and Mineral Lease dated, May 11, 2005, by and between, Xxxxx Xxxx,
et ux, Lessor, and Skyline Energy, L.L.C., as Lessee, covering certain
lands in the Xxxx Xxxxxx West Four League Grant, A-40, Cherokee County,
Texas, and recorded in Volume _____, Page _____, Deed Records, Cherokee
County, Texas.
EXHIBIT "C"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
[Attach Plat]
[Hwy 79 Prospect Cherokee Co., Texas Map Appears Here]
EXHIBIT "D"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PARTICIPATION AGREEMENT
DATED AUGUST 24, 2005
BY AND BETWEEN SKYLINE ENERGY, L.L.C. AND
PIN PETROLEUM PARTNERS INC., ETAL
JOA TO BE FURNISHED BY MLC OPERATING LP
