FORELAND 2561 South 0000 Xxxx, Xxxxx 000
XXXXXXXXXXX Xxxxx Xxxxx, Xxxx 00000
(000) 000-0000
Fax: (000) 000-0000
Letter Agreement
May 1, 2000
This letter is intended to memorialize the terms of an agreement
between Foreland Corporation, a Nevada Corporation ("Foreland") and Deerfield
Production Corporation, a Delaware Corporation ("Deerfield") concerning a
farmout of the "Hay Ranch" prospect in Eureka County, Nevada. It is anticipated
that a complete farmout agreement and operating agreement will be prepared for
execution forthwith.
1. On or before July 31, 2000 the Xxxxxxxx Group ("Xxxxxxxx") will at its sole
cost and expense, commence or cause to be commenced a test well in Section 16,
T29N-R52E, Eureka Co. Nevada, and drill and complete or plus and abandon a 6000'
Newark Canyon/Chainman test well. Foreland will be operator of the well.
2. By drilling and completing or plugging and abandoning the test well (the
"test well"), Xxxxxxxx would earn an assignment of a 75% working interest in the
well and the eight surrounding 160 acre wellsites (1280) acres to a depth equal
to the total depth of the test well within the 5345.96 acres comprising the
approved but not as yet authorized Federal Unit, (the "Unit"), (see attached
Unit map and Table). The Test Well will also earn a 50% interest in the balance
of the Unit acreage to TD. Deerfield will deliver to Xxxxxxxx an 80% net revenue
interest ("NRI"), proportionately reduced to Deerfield's interest (where
possible) in Said Leases. The NRI delivered pursuant to this Agreement may be
less than 80%, proportionately reduced, when acquired by Deerfield.
3. Foreland and Deerfield will share the promoted 25% carried interest on a 1/3
Foreland 2/3 Deerfield basis, respectively.
4. An acreage fee of $10 per acre on the 5345.96 acres within the Unit will be
paid by Xxxxxxxx with such fee to be split between Foreland and Deerfield
proportionately on the same basis as in item three.
/s/RSJ
/s/BD
Oil and Gas Exploration Development
Page 2
5. within thirty (30) days of reaching total depth on the initial well, Xxxxxxxx
shall elect to:
(1) drill within 60 days of its election at its sole cost and expense a
second test well in the same Federal Unit to test the Devonian anticipated at
8000', to earn the same interests as previously stated below TD of the first
Test Well, with no additional acreage fee due, or
(2) drill on below the Newark Canyon formation at its sole cost and
expense to test the Devonian anticipated at 8000' to earn the same interests as
previously stated below the Newark Canyon formation, with no additional acreage
fee due, or
(3) reserve for a period of nine months a right to participate on a
"most favored nations" basis 50% of the working interest if the Devonian test is
sold to a third party, including any acreage fee charged to that third party.
6. The Test Well and any subsequent xxxxx drilled under the terms of this letter
agreement will be operated in accordance with a mutually agreeable 1989 AAPL
Operating Agreement and Area of Mutual Interest Agreement. Said Operating
Agreement will provide for drilling and producing well rates of $6,500 and $650
respectively. The operating agreement will have a nonconsent penalty for
subsequent operations of 300%.
7. It is acknowledged that Foreland may participate in drilling as part o the
"Xxxxxxxx Group" subject to the success of Foreland's fundraising efforts.
8. Notwithstanding anything to the contrary in this Letter Agreement, the
parties acknowledge and agree that Deerfield's obligations hereunder are
conditioned upon the execution of a written agreement between Foreland and
Xxxxxxxx on the terms and conditions set out in this Letter Agreement. If
Foreland and Xxxxxxxx fail to reach such agreement by June 1, 2000, then
Deerfield shall have no obligation to either Foreland or Xxxxxxxx under this
Letter Agreement.
/s/RSJ
/s/BD
Page 3
(Foreland/Deerfield letter agreement)
Agreed this 1st day of May, 2000.
Deerfield Production Foreland Corporation
/s/Xxxxxx Xxxx /s/ Xxxxx X. Xxxxxx
--------------------------- ------------------------
President Vice-President
Title Title
Deerfield Production Corporation
June 23, 2000
Xxxxx X. Xxxxxx
Foreland Corporation
0000 Xxxxx 0000 Xxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
Re: Proposed Amendment to Letter Agreement dated May 1, 2000 between
Foreland and Deerfield (the "Hay Ranch Agreement"):
Dear Xxxxx:
With respect to the captioned Hay Ranch Agreement,
1. The date in the first sentence of Paragraph 1, "July 31,
2000," shall be deleted and replaced by "September 1, 2000."
2. Paragraph 4 shall be deleted and replaced in its entirety by
the following:
"An acreage fee of $10 per acre on the 5,345.96 acres within
the Unit will be paid by Foreland with such fee to be split
between Foreland and Deerfield proportionately on the same
basis as in item 3."
Please acknowledge these changes by signing and returning a
copy of this letter to me.
Sincerely,
Xxxxxx X. XxXxxxxx
Vice President
(page 2 of Amendment to Letter Agreement dated May 1, 2000)
Agreed to this 23rd day of June, 2000.
FORELAND CORPORATION
By: /s/ Xxxxx X. Xxxxxx
------------------------
Xxxxx X. Xxxxxx
Vice-President
