CHENIERE ENERGY, INC.
TWO XXXXX CENTER
0000 XXXXX XXXXXX, XXXXX 0000
XXXXXXX, XXXXX 00000-0000
(000) 000-0000
FAX: (000) 000-0000
January 6, 1999
Beta Oil & Gas, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xx. Xxxxx Xxxxx, President
Re: Option Agreement
Heron, Stingray, and King Creole Prospects
West Cameron Area, Louisiana
Gentlemen:
Cheniere is the owner of interests in:
(i) the Oil, Gas and Mineral Leases described in Exhibit A-1
attached hereto (the "Heron Leases"), which cover lands
comprising the prospect known to Cheniere as the "Heron
Prospect." The lands covered by the Heron Prospect are
depicted on Exhibit A-2 as the yellow shaded "Lease Block"
(the "Heron Lease Block").
(ii) the Oil, Gas and Mineral Leases described in Exhibit B-1
attached hereto (the "Stingray Leases"), which cover lands
comprising the prospect known to Cheniere as the "Stingray
Prospect." The lands covered by the Stingray Prospect are
depicted on Exhibit B-2 as the yellow shaded "Lease Block"
(the "Stingray Lease Block").
(iii) the Oil, Gas and Mineral Leases described in Exhibit C-1
attached hereto (the "King Creole Leases"), which cover lands
comprising the prospect known to Cheniere as the "King Creole
Prospect." The lands covered by the King Creole Prospect are
depicted on Exhibit C-2 as the yellow shaded "Lease Block"
(the "King Creole Lease Block").
For and in consideration of ONE HUNDRED DOLLARS ($100) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Cheniere hereby grants to Beta Oil & Gas, Inc. ("Beta") the option
for a period of sixty (60) days after the date hereof to purchase from Cheniere
an undivided fifteen percent (15%) of 8/8ths interest in the Heron Leases,
Stingray Leases and/or King Creole Leases. The purchase prices for the undivided
fifteen percent interest in the Heron Leases, Stingray Leases, and King Creole
Leases, respectively, are:
Heron Leases $255,000
Stingray Leases $100
King Creole $230,000
(the aggregate of such purchase prices being equal to a portion of seismic costs
incurred by Cheniere in connection with such prospects plus 20% of the aggregate
of leasehold acquisition costs incurred Cheniere for the Heron, Stingray and
King Creole Leases). If additional leasehold acquisition costs (including,
without limitation, delay rentals) for the Heron Leases, Stingray Leases or King
Creole Leases are incurred by or billed after the date hereof, then Cheniere
will notify Beta of such additional costs, with supporting documentation, and
the purchase price for the affected Leases shall be adjusted upward by an amount
equal to fifteen percent (15%) of such additional costs.
The option granted herein may be separately exercised by Beta as to the
Heron Leases, Stingray Leases and King Creole Leases, by (i) Beta's payment to
Cheniere of the purchase price(s), as provided above, for the Leases covering
the respective prospect(s) which Beta elects to acquire; and (ii) Beta's
execution and delivery to Cheniere of a prospect agreement, substantially in the
form of Exhibit D attached hereto, for each such prospect Beta elects to
acquire. This option shall terminate if within sixty (60) days after the date
hereof Cheniere has not received from Beta the purchase price and executed
prospect agreement provided above.
If Beta does not exercise its option to acquire an interest in
the Heron, Stingray, or King Creole Leases, then Beta agrees (i) to maintain the
confidentiality of all information in the possession of Beta concerning such
Leases and prospects; and (ii) for a period of three (3) years after the date
hereof, not to acquire oil and gas interests (including, without limitation,
leasehold interests, fee mineral interests, net profits interests, royalty or
overriding royalty interests, farmouts or other interests) covering lands within
the respective Lease Block or the Area of Mutual Interest for the rejected
prospect, as shown in the exhibits hereto. If, notwithstanding the foregoing,
Beta acquires such interests, then within fourteen (14) days after receipt of
assignments or conveyances of such interests, Beta shall by written notice offer
to assign such interests to Cheniere upon Cheniere's payment to Beta of Beta's
acquisition costs therefor, documentation of which shall be furnished by Beta to
Cheniere. Cheniere shall have thirty (30) days after receipt of such notice in
which to elect whether to acquire such interest. If Cheniere does not tender the
purchase price for such interests within such period, Cheniere shall be deemed
to have elected not to acquire such interest. Contemporaneously with Cheniere's
payment of the purchase price therefor, Beta shall deliver executed and
acknowledged assignments of such interests to Cheniere in form and substance
reasonably acceptable to Cheniere, free of all claims or encumbrances by,
through or under Beta.
This Option Agreement may not be assigned by Beta without the prior
written consent of Cheniere, which consent may be withheld by Cheniere at its
sole discretion; provided, however, that this provision shall not apply to
assignments by Beta of leasehold interests acquired upon exercise of its options
hereunder.
The notices provided for in this agreement shall be in writing and
delivered by certified U.S. mail, return receipt requested, telecopy, or
overnight courier or messenger with receipt confirmation, to the addresses
below:
CHENIERE ENERGY, INC.
Two Xxxxx Center
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
phone (000) 000-0000
fax (000) 000-0000
BETA OIL & GAS, INC.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxx
phone (000) 000-0000
fax (000) 000-0000
Notices hereunder shall be deemed made upon receipt.
Time is of the essence in the performance or exercise of this Option
Agreement.
Please indicate your acceptance of the foregoing by signing an original
counterpart of this letter in the space provided below and returning it to me.
Sincerely,
CHENIERE ENERGY, INC.
/s/Xxxxxx X. Xxxxxxxx
President & CEO
AGREED TO AND ACCEPTED THIS _____ DAY OF _______________, 1999.
BETA OIL AND GAS, INC.
/s/Xxxxx Xxxxx
President & CEO
