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EXHIBIT 10.1
[UNION PACIFIC RESOURCES LETTERHEAD]
April 21, 1999
United States Exploration, Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx
Re: Contract Amendment
Exploration Agreement Effective June 1, 1998 (the "Agreement")
Wattenberg Area
Weld, Adams, and Arapahoe Counties, Colorado
Gentlemen:
The purpose of this letter is to formalize the amendments to the
Agreement that have been agreed to between Union Pacific Resources Company
("UPR") and United States Exploration, Inc. ("UXP"). The following responses
should correspond to the numbered requests set forth in UXP's letter dated
March 1, 1999 (copy of which is attached as Exhibit "A"). Any capitalized term
used herein shall have the same meaning as in the Agreement.
1) UPR agrees that should UXP drill a well on lands and/or leases that
were acquired pursuant to the terms of that certain Asset Purchase and
Sale Agreement dated April 9, 1998, as amended, in which UPR is
entitled to receive a royalty or ORRI payment and the well is drilled
in a manner consistent with the requirements for a Commitment Well
then such well shall count as a Commitment Well only for the purposes
of UXP's minimum drilling commitment under the Agreement. A well
drilled under these circumstances, however, will not serve to earn any
additional interest in or to such lands.
2) UPR does not agree with XXX's proposed amendment to the Agreement.
Since UXP will be earning a lease covering an entire section of land
by the drilling of a Commitment Well, only one well per section shall
count as a Commitment Well.
3) Subject to paragraph 2 hereinabove, UPR agrees that with respect to
the fifteen Commitment Xxxxx required to be drilled during the first
18-month period (i.e., the Initial Term) of the Agreement any
deepening and/or re-entry of a wellbore to 4,000' or greater and to a
formation in which there is no then currently producing well, shut-in
well, or well capable
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of production in the drillsite section shall count as a Commitment
Well. However, such deepenings and/or re-entries shall not be included
in the calculation of the number of excess Commitment Xxxxx which can
be credited against the minimum drilling requirement for the next
Option Year. In other words, allowing for any deepenings and/or
re-entries to count as Commitment Xxxxx is limited to those occurring
during the Initial Term. UXP's request for the application of this
right to additional Option Years will be considered by UPR on an
annual basis.
4) UPR agrees that if UXP recompletes a well on the Subject Lands in a
formation which is currently not under lease or committed to a third
party then UXP shall earn a lease. The lease will be specific to the
producing horizon and cover the lands necessary to establish ownership
in the production from the wellbore (i.e. the drillsite spacing unit).
In no event shall a recompletion count as a Commitment Well.
5) UPR agrees that if a proposed operation falls under an existing
operating agreement and is to be conducted by a third party who is the
designated operator under said operating agreement, UXP does not need
UPR's consent if UXP elects to participate in the proposed operation.
Provided, however, should UXP desire to grant support or allow a third
party to operate a well which it wishes to qualify as a Commitment
Well, or for that matter any other assignment of UXP's rights under
the Agreement, UXP must obtain the prior written consent of UPR in
accordance with the terms of the Agreement. Further, it has been UPR's
policy that even when it consents to the assigning of an interest
under an agreement the assigning party remains liable for the actions
and inactions of the assignee.
If the foregoing is acceptable to UXP, please execute in the space provided
below and return one original to Xxx X'Xxxxxx.
Very truly yours,
UNION PACIFIC RESOURCES COMPANY
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Its: Attorney in Fact
AGREED and ACCEPTED
this 3rd day of May 1999.
UNITED STATES EXPLORATION, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Its: President
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EXHIBIT A
UNITED STATES EXPLORATION, INC.
0000 XXXXXXXX, XXXXX 0000
XXXXXX, XXXXXXXX 80202
TELEPHONE FACSIMILE
(000) 000-0000 (000) 000-0000
March 1, 1999
Xx. Xxxxxx X. Xxxxxxx
Union Pacific Resources Company
P.O. Box 7
Fort Worth, Texas 76101-0007
Re: Exploration Agreement
Dated April 9, 1998, Effective June 1, 1998
Wattenberg Area
Dear Xxx:
United States Exploration, Inc. ("UXP") has been unsuccessful in the
past to amend the Exploration Agreement into a workable agreement considering
the nature of the Wattenberg area. UXP recently met with Union Pacific
Resources Company ("UPRC") in Fort Worth to discuss UXP's concerns with the
Exploration Agreement and suggested amendments to same. UPRC agreed in
principle with XXX's suggestions. To expedite finalization of a workable
agreement, UXP hereby sets out those items which were discussed in our most
recent meeting and requests that the Exploration Agreement be amended as
follows:
1. By virtue of that certain Asset Purchase and Sale Agreement
dated April 9, 1998, as amended, between UXP and UPRC, UXP
acquired some nonproducing leases. Because the lands are
undeveloped, UPRC agrees that these leases and lands shall be
included under the definition of "Subject Lands" as defined
in the Exploration Agreement, allowing UXP's operations
conducted on these leases, or on lands pooled therewith, to
count against its commitments under the Exploration
Agreement.
2. The Exploration Agreement is unclear whether a "Commitment
Well" may be located in a section in which another
"Commitment Well" is located. UPRC agrees that a "Commitment
Well" shall earn all of UPRC's interest in the section in
which the well is located; however, a "Commitment Well" may
be located in each drilling and spacing unit as established
by order of the Colorado Oil and Gas Conservation Commission
for the objective depth of such "Commitment Well",
irrespective that another "Commitment Well" may be located in
the same section. In the event the area is unspaced, the
drilling and spacing unit shall be deemed to be a 320-acre
unit, either stand-up or lay-down at UXP's choice, for a well
with an objective depth
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Xx. Xxxxxx X. Xxxxxxx
Union Pacific Resources Company
March 1, 1999
Page Two of Three
intended to test the D-Sand, J-Sand, or Dakota formations,
and an 80-acre unit, either stand-up or lay-down at UXP's
choice, for a well with an objective depth intended to test
the Xxxxxxx, Sussex, Niobrara, or Codell formations.
3. In UXP's short time operating in the Wattenberg field, it has
found that many xxxxx are being deepened and previously
abandoned xxxxx are being re-entered rather than new xxxxx
being drilled. Accordingly, UPRC agrees that all deepenings
and/or reentries under the Exploration Agreement shall
qualify as a "Commitment Well", subject to Paragraph 2 above.
4. Additionally, xxxxx may be recompleted in zones above
presently producing formations wherein UPRC owns an unleased
mineral interest. Although UXP is not requesting that such a
recompletion qualify as a "Commitment Well", the Exploration
Agreement only addresses earning by "drilling a well".
Accordingly, UPRC agrees that UXP shall earn the same
interest as a "Commitment Well" by recompleting a well in a
new zone, even though such well would not qualify as a
"Commitment Well".
5. UPRC advised that it would amend the Exploration Agreement
whereby UPRC's written consent would not be necessary when a
third party wanted to drill a "Commitment Well". Presently,
the Exploration Agreement requires UPRC's prior written
consent before a third party may drill a "Commitment Well".
UPRC agrees that if a proposed operation, which would fall
under the Exploration Agreement, falls under an existing
operating agreement naming a third party as operator, no
written consent from UPRC for such third party to operate is
necessary. If a third party wishes to drill on the "Subject
Lands", or on lands pooled therewith, and earn an interest
under the terms of the Exploration Agreement via UXP, UXP
agrees to remain primarily liable under the Exploration
Agreement for such third party's operations, and by doing so,
UPRC agrees that no written consent under the Exploration
Agreement for such party to drill and operate such well is
necessary. Nor will written consent from UPRC be required for
UXP to assign to such third party an interest in the lease
acquired by UXP under the Exploration Agreement. In any
event, UXP agrees to notify UPRC prior to commencement of any
operation conducted under the Exploration Agreement of the
name and address of the operator, if not UXP.
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Xx. Xxxxxx X. Xxxxxxx
Union Pacific Resources Company
March 1, 1999
Page Three of Three
The above changes to the Exploration Agreement will allow UXP the
flexibility to begin an effective exploration program under today's current
environment which obviously will help improve cash-flow for both companies. If
the above changes are acceptable, by completing the operations which fall under
the definition of a "Commitment Well", UXP shall earn an interest in the
"Subject Lands" as provided in the Exploration Agreement and amended hereby.
UXP respectfully requests that UPRC give the above proposed changes
its careful consideration and if acceptable, please so indicate by signing,
dating, and returning one copy of this letter to the undersigned.
Sincerely,
UNITED STATES EXPLORATION, INC.
Xxxx X. Xxxxxxx,
Vice President
cc: Xx. Xxxxx Xxxxxx
Xx. Xxxxxx Xxxxxxx
ACCEPTED and AGREED to this _________ day of March, 1999, by:
UNION PACIFIC RESOURCES COMPANY
UNION PACIFIC LAND RESOURCES CORPORATION
By:
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Name:
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Title:
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