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EXHIBIT 10.25
FORM OF FARMOUT AGREEMENT
2001 FARMOUT AND OPTION AGREEMENT
PROSPECT #__ (___________________)
(UXP'S CONTRACT NUMBER __________)
THIS AGREEMENT, is entered into between United States Exploration,
Inc., with an office at 0000 Xxxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000,
hereinafter referred to as "Farmor," and Petroleum Development Corporation, with
an office at 000 Xxxx Xxxx Xxxxxx, Xxxxxxxxxx, Xxxx Xxxxxxxx 00000, hereinafter
referred to as "Operator," collectively referred to as the "Parties" or
individually as "Party."
WITNESSETH, THAT:
WHEREAS, Farmor has entered into that certain Exploration Agreement
dated effective June 1, 1998, as amended, ("Exploration Agreement") with Union
Pacific Resources Company ("UPRC") which allows Farmor to conduct certain
drilling operations and thereby acquire by lease UPRC's interest in any unleased
oil and gas mineral estate under certain lands which is not under contract with
a third party;
WHEREAS, Operator would like to drill and earn certain interests from
Farmor; and,
WHEREAS, Farmor has agreed to grant to Operator and Operator has agreed
to accept from Farmor assignments covering certain interests, on the terms,
covenants, and conditions as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and agreements
hereinafter contained, to be performed by the parties hereto, it is agreed
between the parties as follows:
1. INITIAL TEST WELL AND SUBSEQUENT TEST WELL(S):
All of UPRC's interest available to Farmor under the Exploration
Agreement and covering lands located in the Prospect described on Exhibit "1",
attached hereto and by reference made a part hereof, shall be subject to this
Agreement, hereinafter referred to as "Farmout Lands."
1.1 INITIAL TEST WELL: Subject to the terms contained in this
Agreement, on or before _____________, Operator shall commence the actual
drilling of the Initial Test Well at a legal location on the Farmout Lands, and
within ninety (90) days from the commencement thereof either complete the
Initial Test Well as a well capable of producing oil and/or gas in commercial
quantities or plug and abandon it as a dry hole. The Initial Test Well shall be
drilled in a diligent and workmanlike manner, without unnecessary delay, to a
depth to test adequately the J-Sand formation in accordance with all applicable
laws, rules, regulations, orders, and this Agreement.
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1.2 SUBSEQUENT TEST WELL(s): Subject to Farmor having
sufficient rights under the Exploration Agreement, by drilling and completing
the Initial Test Well as a well capable of producing oil and/or gas in
commercial quantities or plugging and abandoning it as a dry hole, in the time
and manner herein provided and otherwise having complied with the terms and
conditions of this Agreement, Operator has a continuing option to drill
Subsequent Test Xxxxx hereunder. The actual drilling of each Subsequent Test
Well, whether one or more, shall be commenced on or before two years from the
date of this Agreement or expiration of the Exploration Agreement, whichever
occurs first, at legal locations on the Farmout Lands and each well shall be
completed as a well capable of producing oil and/or gas in commercial quantities
or plugged and abandoned as a dry hole within ninety (90) days after
commencement of the actual drilling operations in such well. All Subsequent Test
Xxxxx shall be drilled in a diligent and workmanlike manner, without unnecessary
delay, to a depth to test adequately the J-Sand formation in accordance with all
applicable laws, rules, regulations, orders, and this Agreement.
1.3 REFERENCE TO "TEST WELL": For all purposes of this
Agreement, reference to "Test Well" shall be a reference to the Initial Test
Well, Subsequent Test Well(s), and any substitute well therefor, and each
reference to a Test Well shall be deemed to be a reference to the well being
drilled at any particular time
1.4 SUBSTITUTE WELL: If prior to reaching the objective depth,
impenetrable substances, heaving shale, excessive salt, mechanical conditions,
or other condition which makes further drilling impracticable and which
Operator, after a diligent effort, is unable to overcome, Operator shall have
the right, but not the obligation, to drill a substitute well at a lawful
location selected by it in the same quarter-quarter section on which the
discontinued well is located, provided the actual drilling of said substitute
well is commenced not later than thirty (30) days after the abandonment of the
discontinued well.
The substitute well shall be drilled in the manner and to the
depth specified for the discontinued well. If the substitute well is commenced,
drilled, and completed as herein provided, Operator shall be deemed to have
complied with this Agreement to the same extent as if the discontinued well had
been commenced, drilled, and completed in accordance herewith. If Operator fails
to drill a substitute well as provided above, Operator shall earn no interest
in, to, or under such well. However, Operator may continue to drill Subsequent
Test Xxxxx as provided herein.
1.5 DRILLING AND COMPLETION OF THE TEST XXXXX: All of
Operator's operations hereunder shall be conducted prudently in a diligent and
workmanlike manner, without unnecessary delay, and in accordance with all
applicable laws, rules, regulations, and orders. Additionally, Operator shall
comply with all of the terms and conditions contained in the Exploration
Agreement attached hereto as Exhibit "3", including but not limited to,
providing UPRC with all notices and reports required therein for operations
conducted hereunder. After actual drilling has commenced, and continuing until
the total depth is reached and Operator has completed a Test Well as a
commercial producer or plugged and abandoned it as a dry hole, Operator shall
furnish to Farmor daily reports as to the progress of drilling, as well as all
other information as required to be furnished to Farmor relative to the drilling
of a Test Well as provided on the Exhibit "2" attached hereto and by reference
made a part hereof. Farmor shall have full and free access to any Test Well and
to the records thereof at any and all reasonable times.
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If Operator determines that a Test Well is capable of
producing oil or gas in commercial quantities at any depth drilled; or, if the
information from any drillstem test, core, cutting, or formation survey
indicates that the Test Well is capable of producing oil or gas in commercial
quantities at any depth drilled, Operator shall attempt to complete such Test
Well as a producer and, if successful, shall equip such well for production
through and including the tank battery if an oil well, or pipeline connection if
a gas well.
1.6 PROCEDURE TO INITIATE THE DRILLING OF A TEST WELL: Prior
to the spudding of a Test Well hereunder, Operator must have received from
Farmor written notice that title to drill such Test Well has been approved by
Farmor. There shall be no nonconsent election in the drilling of a Test Well
proposed under this Agreement.
The rights granted to Operator herein to drill a Test Well and earn an
interest is subject to Farmor's obtaining the necessary consents from UPRC
allowing Operator to operate a Test Well and Farmor to assign an interest into
Operator. Upon entering into this Agreement, Farmor will attempt to obtain
UPRC's consent, as required under the Exploration Agreement, just once to allow
Operator to operate all of the Test Xxxxx drilled hereunder; and, to allow
Farmor to assign to Operator the interest as provided herein under any UPRC
lease to which Operator shall be entitled by the drilling of such Test Xxxxx. If
UPRC is unwilling to give a blanket consent, Farmor shall obtain such consents
as such Test Xxxxx are proposed by Operator.
2. TITLES:
Upon request, Farmor shall furnish to Operator such title information
as Farmor has in its files, but there shall be no obligation on the part of
Farmor to purchase new or supplemental abstracts or to do any curative work in
connection with the title to any Test Well. Operator agrees to have title
covering at least the drillsite spacing unit examined by a competent oil and gas
attorney and title cured so that title is marketable prior to commencing
operations on a Test Well. The drillsite spacing unit shall be as established by
order of the Colorado Oil and Gas Conservation Commission. If no such order
exists, the drillsite spacing unit for purposes of title examination shall be at
least the governmental quarter section on which the Test Well is proposed.
Operator shall furnish Farmor copies of all title opinions and all title
material obtained by Operator covering any of the Test Xxxxx in sufficient time
to allow Farmor to review same prior to Operator's spudding of such xxxxx.
Farmor makes no representation as to the accuracy of any information provided to
Operator hereunder.
3. EARNING:
Operator must satisfy itself as to what lands will be earned by Farmor
under the Exploration Agreement from UPRC by Operator's drilling operations
conducted hereunder. This Agreement is made expressly subject to the Exploration
Agreement. Operator shall comply with all of the terms and conditions contained
therein. A copy of the Exploration Agreement and its amendments are attached
hereto as Exhibit "3", by reference made a part hereof. The terms and conditions
of the Exploration Agreement shall be held strictly confidential and no part
thereof shall be disclosed by Operator to a third party without prior written
consent from Farmor. Operator must satisfy itself as to what rights Farmor has
under the Exploration Agreement prior to commencing any well hereunder. Farmor
is under no obligation to exercise any option contained in the Exploration
Agreement and failure to do so shall result in no liability upon Farmor.
NOTWITHSTANDING ANYTHING
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CONTAINED HEREIN TO THE CONTRARY, IT IS UNDERSTOOD THAT FARMOR'S FAILURE TO
EXERCISE AN OPTION UNDER THE EXPLORATION AGREEMENT WILL RESULT IN FARMOR'S LOSS
OF CERTAIN RIGHTS THEREUNDER WHICH MAY AFFECT OPERATOR'S RIGHTS UNDER THIS
AGREEMENT. By Operator's accepting an assignment affecting a lease covering
UPRC-owned minerals from Farmor as provided herein, Operator agrees that UPRC's
royalty interest shall never be placed into suspense.
By Operator's timely drilling of a Test Well in the manner provided
herein, and completing same as a well capable of producing oil and/or gas in
commercial quantities, and submitting evidence thereof to Farmor, and otherwise
complying with and performing all other terms, covenants, and conditions hereof,
and as contained in the operating agreement affecting such Test Well, Operator
shall earn and be entitled to receive from Farmor an assignment of either
seventy-five percent (75%) [if Farmor elects to participate in the completion
attempt as provided in Article 4.2 below]; or, ninety-four percent (94%) [if
Farmor elects not to participate in the completion attempt as provided in
Article 4.2 below] of Farmor's interest in the Farmout Lands contributed to the
Spacing Unit for such Test Well, only insofar as to those lands located in such
Spacing Unit, limited to the wellbore of the Test Well earning such assignment,
and further limited in depth from the surface down to the stratigraphic
equivalent of the total depth reached in the earning Test Well, subject to all
burdens, whether actual or contractual, affecting Farmor's interest. "Spacing
Unit" shall be defined as the drilling and spacing unit as established by order
of the Colorado Oil and Gas Conservation Commission, or if unspaced, the 40-acre
quarter-quarter section on which the well is drilled. It may be necessary to
enter into segregation agreements to reduce the size of a unit which may be for
working interest purposes only, or for working interest and royalty purposes.
Prior to obtaining an assignment from Farmor as provided herein, Operator grants
to Farmor the authority to enter into such segregation agreements and Operator
agrees to be subject to same. Farmor shall provide Operator with copies of all
segregation agreements entered into and affecting a Test Well in which Operator
has participated.
3.1 ASSIGNMENTS: Any assignment made into Operator pursuant to
this Agreement shall be:
(A) Made without warranty of title, either
express or implied;
(B) Limited to the wellbore and further limited
in depth from the surface down to the
stratigraphic equivalent of the total depth
reached in the Test Well earning such
assignment;
(C) Subject to all of the express and implied
terms of the lease;
(D) Subject to all agreements affecting the
lease;
(E) Subject to any gas purchase contract and gas
gathering contract affecting the assigned
interests on the date of the assignment;
(F) Subject to the terms and provisions of this
Agreement; and,
(G) Substantially in the form of assignment as
attached hereto as Exhibit "4", by reference
made a part hereof, effective as of the date
the Test Well earning such assignment is
completed.
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Notwithstanding anything to the contrary contained herein, it
is understood that Operator must request such assignment in writing within
thirty (30) days from the date the Test Well earning the assignment is
completed, time being of the essence in this Agreement. This Agreement shall
survive any assignment made into Operator pursuant hereto. Upon receipt of an
assignment earned by Operator under this Agreement, Operator agrees promptly to
record same in the real estate records of the county in which the earning Test
Well is located and furnish Farmor with a copy of the recorded assignment as
soon as it is available.
It is Farmor's understanding that Operator is entering into this
Agreement on its own behalf with the possibility of assigning all or part of its
interest acquired pursuant to this Agreement into one or more Limited
Partnerships under which Operator is, or will be, the General Partner with full
authority to commit such Limited Partnership(s) in any operation contemplated
hereunder. Operator shall notify Farmor of any assignment of any interest
acquired by Operator hereunder by providing Farmor with a copy of the recorded
document assigning such interest. Operator shall be responsible for obtaining
all consents to assign any interest acquired by Operator hereunder whether from
UPRC or otherwise.
4. CONTRIBUTION TO AND COST OF THE TEST XXXXX, CASING POINT
ELECTION, COST SHARING:
Farmor shall contribute its leasehold interest to be earned from UPRC
pursuant to the Exploration Agreement by drilling any approved Test Well
hereunder for either a six percent (6%) working interest or twenty-five percent
(25%) working interest [provided Farmor elects to participate for a nineteen
percent (19%) working interest at Casing Point as provided in Article 4.2 below
which is in addition to the six percent (6%) working interest] in such Test Well
and the production therefrom. Operator shall pay one hundred percent of the
drilling costs attributable to Farmor's six percent (6%) working interest. Such
drilling costs shall include, but not be limited to, those costs incurred in the
drilling, testing, completing, equipping of a well through the tanks, hookup
through a gas sales meter, including tap fee and cost of meter, laying of
pipeline, plugging and abandoning costs, site reclamation, all title work,
broker expenses, attorney fees, and all other reasonable costs incurred in the
preparation, drilling, and completing of a well, and gathering of gas. Farmor
shall be responsible for payment of its six percent (6%) share of costs and
expenses incurred after the date of first production and hookup to a gas
pipeline, if necessary, for any Test Well drilled hereunder except for the cost
to install tubing or complete an additional zone if such work is commenced
within thirty-six months from the date of spudding a particular Test Well which
shall be deemed to be additional drilling costs.
If Farmor controls, via the interest to be acquired from UPRC under the
Exploration Agreement, less than one hundred percent (100%) of the working
interest in a proposed Test Well, Farmor's working interest, as indicated above
and in Article 4.2, in such Test Well, shall be proportionately reduced.
4.1 COSTS TO CASING POINT: All costs and expenses incurred in
the drilling of any Test Well hereunder to "Casing Point" as defined herein
shall be paid by Operator, subject to reimbursement as provided below. "Casing
Point" shall mean when such Test Well has reached its authorized depth and all
logs, cores or other tests have been completed prior to running production
casing, and the results thereof furnished to Farmor.
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4.2 CASING POINT ELECTION: When Casing Point is reached in a
Test Well, Operator shall give Farmor notice indicating whether Operator elects
to participate in a completion attempt in such Test Well. Farmor shall have
forty-eight (48) hours (exclusive of Saturday, Sunday and legal holidays) from
receipt of notice in which to elect by delivery of notice to Operator to
participate in a completion attempt for a nineteen percent (19%) working
interest. If Farmor elects not to participate for a nineteen percent (19%)
working interest in a completion attempt, and Operator elects to attempt a
completion, all costs incurred in such completion attempt and subsequent
plugging and abandoning costs, if the completion attempt is unsuccessful, shall
be borne solely by Operator and Farmor's rights to the nineteen percent (19%)
working interest in and to such Test Well shall terminate. However, Farmor's
election not to participate in a completion attempt for the nineteen percent
(19%) working interest shall not affect Farmor's six percent (6%) working
interest in such Test Well. If Operator elects not to participate in a
completion attempt and Farmor elects to attempt a completion, all rights under
this Agreement, insofar as it affects such Test Well and the Farmout Lands under
such Test Well, shall terminate and be reassigned to Farmor and Farmor shall
take over such Test Well and attempt a completion. The reassigned lands shall no
longer be subject to this Agreement. However, Operator shall have the right to
drill Subsequent Test Xxxxx hereunder on the Farmout Lands if a location is
available and if Operator so wishes.
4.3 COST SHARING: If Farmor and Operator elect to participate
in a completion attempt, all costs incurred after Casing Point in such Test
Well, including but not limited to, the plugging and abandoning costs if such
attempt is unsuccessful, shall be shared eighty-one percent (81%) by Operator
and nineteen percent (19%) by Farmor. In the Initial Test Well drilled
hereunder, Farmor shall bear no costs incurred to reach Casing Point;
irrespective if Farmor only or both Parties participate in the completion
attempt. Thereafter, in all Subsequent Test Xxxxx drilled hereunder in which
both Parties elect to participate in a completion attempt Farmor shall reimburse
the Operator for nineteen percent (19%) of the costs incurred to reach Casing
Point; and, in all Subsequent Test Xxxxx in which only Farmor elects to attempt
a completion, Farmor shall reimburse Operator for ninety-four percent (94%) of
all of the costs incurred to reach Casing Point. Notwithstanding anything to the
contrary contained in the first paragraph of this Article 4, if only Farmor
elects to participate in a completion attempt, after Casing Point, Farmor shall
bear one hundred percent (100%) of the costs and expenses from Casing Point
forward including the cost to plug and abandon such Test Well including surface
restoration costs. If Farmor and Operator both elect not to attempt a completion
and to plug and abandon a Test Well as a dry hole, all plugging and abandoning
costs shall be borne solely by Operator. The cost-sharing interests stated
herein assume that Farmor contributes one hundred percent (100%) of the working
interest in a Test Well drilled hereunder. If Farmor contributes less than one
hundred percent (100%) of the working interest, such cost-sharing interests
shall be reduced proportionately.
5. GEOLOGICAL REQUIREMENTS:
Operator agrees to provide Farmor with all of the information contained
in Exhibit "2", attached hereto and by reference made a part hereof, for all
Test Xxxxx drilled hereunder and shall ensure that UPRC receives all information
required either under the Exploration Agreement or under any existing lease.
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6. AGREEMENT GRANTING OVERRIDING ROYALTY:
By Agreement dated _____________, by and between _____________________,
and Farmor, Farmor agreed to assign to the _____________ overriding royalty
equal to two and one half percent (2 1/2%), subject to proportionate reduction,
which shall burden all interests acquired by Farmor from UPRC under the
Exploration Agreement. Accordingly, any assignment acquired by Operator pursuant
to this Agreement shall be burdened with such overriding royalty.
7. INDEMNIFICATION:
Operator shall protect, indemnify, and hold harmless Farmor, its
directors, officers, employees, and agents from and against all risks, expenses,
claims, demands, losses, liabilities and causes of action of every kind and
character, (including, but not limited to, attorney's fees, expense of
investigation and litigation, injury to or loss or destruction of property, and
injury to or death of any person) arising out of, incident to, in connection
with, or resulting from Operator's performance or failure to perform under the
Exploration Agreement or any UPRC lease under which Operator has received, or
will receive, an assignment by the drilling of a Test Well as provided in this
Agreement, or the acts of or failure to act by Operator's employees, agents,
contractors and subcontractors. Farmor shall notify Operator in writing of any
matter which gives rise to a claim for indemnification against Operator
hereunder. Farmor shall have the option of assuming and conducting its defense
and billing Operator for the cost of same, or Farmor may ask Operator to conduct
the defense of such matter with counsel of its choice reasonably satisfactory to
Farmor and paying for same directly. However, Operator shall not consent to the
entry of any judgment or enter into any settlement with respect to any third
party claim without the prior written consent of Farmor, unless the judgment or
proposed settlement involves only the payment of money damages and does not
impose an injunction or other equitable relief upon Farmor, nor constitutes an
admission of guilt, liability, fault or assumption of responsibility by Farmor.
8. MARKETING OF PRODUCTS:
When gas must be nominated on the HS Gathering gas pipeline, Farmor and
Operator may nominate their respective gas volumes separately and receive their
gross revenues directly from the gas purchaser, or Farmor will also market
Operator's share of gas production and make disbursements to Operator. Farmor
has entered into a Letter of Intent dated June 14, 2000 with North American
Resources Company ("NARCO") wherein the lands covered hereunder may be subject
thereto. Provided NARCO pays for the cost to gather the gas from any well
drilled hereunder to its gas gathering system, which would cause a reduction in
the percentage of proceeds pursuant to Paragraph 11 of said Letter of Intent,
Operator agrees promptly to reimburse NARCO in full for such "Payout Cost", as
defined in said Letter of Intent, upon Operator's receipt of a detailed
accounting of the actual costs incurred by NARCO to gather the gas to avoid any
reduction of the percentage of proceeds. Operator agrees that Farmor may enter
into a formal contract with NARCO without Operator's consent, approval, or
execution thereof provided it is entered into based on the terms and conditions
as contained in the Letter of Intent. Farmor shall furnish Operator with a copy
of the fully executed formal agreement when available. Additionally, the lands
covered hereby may also be subject to that certain Gas Gathering Agreement dated
effective July 30, 1991, between KN Energy, Inc. and KN Front Range Gathering
Company, as Gatherer, and Union Pacific Resources Company, as Producer, as
amended by that certain Agreement for Release and Termination dated November 20,
1999, by and among United States Exploration, Inc.; Xxxxxx Xxxxxx, Inc.,
formerly KN Energy, Inc.; HS Resources, Inc.; and Resource Gathering Systems,
Inc. If Operator acquires
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an interest in lands subject to either agreement, Operator agrees to comply with
same and obtain the necessary releases from dedication when required. If
Operator markets any production, it shall cause all revenues received for UPRC's
royalty interest, and any other burdens affecting its working interest, and
Farmor's gross working interest if marketing same, to be disbursed in a timely
manner. In no event is UPRC's royalty interest to be placed in suspense. Farmor
and Operator shall work together to obtain the best price for any oil
production.
9. OPERATING AGREEMENT:
All operations conducted in a Test Well drilled hereunder shall be
subject to and operated under the terms and provision of an operating agreement
in the form of operating agreement attached hereto as Exhibit "5", by reference
made a part hereof. In the event there is a conflict between the operating
agreement for a Test Well and this Agreement, this Agreement shall control.
Operator agrees to prepare a separate operating agreement for each Test Well for
Famor's execution in a timely manner which may be after a well is completed.
10. AREA OF MUTUAL INTEREST:
An Area of Mutual Interest ("AMI") shall be established covering the
lands contained in the Prospect described on Exhibit "1", excluding any Farmout
Lands. Such AMI shall terminate two years from the date of this Agreement or
expiration of the Exploration Agreement, whichever occurs first. Neither Farmor
nor Operator is obligated to offer to the other any interest in any oil and gas
lease acquired in the AMI prior to the date of this Agreement.
During the term of the AMI created hereunder, if either Party acquires,
directly or indirectly, an interest in an oil and gas lease, regardless of type
of interest, or an oil or gas mineral interest, or contractual rights thereto,
covering lands any part thereof falling in such AMI, the acquiring Party
promptly shall notify the other Party hereto of the terms of such acquisition by
written notice which shall also indicate the total costs incurred to acquire
such interest. The Party receiving such notice shall have a period of ten (10)
days after receipt of such notice in which to elect to participate in such
acquisition. Failure to respond within said ten (10) days shall be deemed to be
an election not to participate in such acquisition. If the non-acquiring Party
wishes to participate in such acquisition and timely responds to the acquiring
Party, it shall reimburse the acquiring Party for its proportionate share of the
acquisition costs within thirty (30) days following receipt of an assignment of
its interest and an invoice. If the non-acquiring Party does not wish to
participate in such acquisition, the interest acquired shall not be subject to
this Agreement. If both Parties elect to participate in an acquisition each
Party shall pay its proportionate share of the acquisition costs and the
non-acquiring Party shall receive an assignment covering its proportionate
interest which shall be twenty-five percent (25%) for Farmor and seventy-five
percent (75%) for Operator.
The acquiring Party shall be responsible for making all payments required under
the interest acquired, e.g. rental and shut-in payments, and billing the
non-acquiring Party for its proportionate share.
11. ______________________:
On ____________, , Farmor and ________________ entered into an
agreement affecting the lands described on Exhibit "1". By execution of this
Agreement, ___ agrees that this Agreement is
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not in violation of said _______________ agreement. ___ acknowledges that it has
assigned its interest under the Exhibit "1" lands to Operator. Operator and
_____ agree that they will enter into an agreement separate from this Agreement
which will incorporate those general terms and conditions as contained in that
certain e-mail sent by ___ to Operator and Farmor on or about ________________.
All monetary consideration due ___ and any interest in the Exhibit "1" lands,
xxxxx drilled thereon and production produced therefrom or allocated thereto to
which ___ is entitled pursuant to the agreement between Operator and ___,
respectively, will be paid solely by Operator and burden Operator's interest
only. Farmor's interest in the Exhibit "1" lands, xxxxx drilled thereon and
production produced therefrom or allocated thereto shall be free and clear of
any burden or interest Operator grants ___, or its designee.
12. ARBITRATION:
Any disputes under this Agreement shall be resolved through binding
arbitration using the same method and procedure as provided under Article 17 of
the Exploration Agreement attached hereto as Exhibit "3".
13. SHUT-IN PAYMENTS:
Under any lease Operator acquires an interest pursuant to this
Agreement, Operator shall be responsible for making any and all shut-in payments
which may become due by virtue of any well drilled hereunder of which Operator
operates and billing Farmor for its proportionate share. Operator shall notify
Farmor immediately whenever a Test Well is shut-in for whatever reason.
14. ASSIGNABILITY:
This Agreement shall be binding on the Parties hereto and their
respective successors and assigns. Operator shall not assign its rights and
duties under this Agreement, in whole or part, without Farmor's prior written
consent, which consent shall not be unreasonably withheld. Any attempted
assignment by Operator of its rights and duties arising under this Agreement
without such written consent shall be void and of no effect.
15. ENTIRE AGREEMENT:
This Agreement constitutes the entire agreement between Farmor and
Operator regarding the drilling of the Test Xxxxx hereunder and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they are related in any way to the subject matter
hereof. This Agreement shall not be amended or modified except by a written
instrument duly executed by Farmor and Operator.
16. GOVERNING LAW:
This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado without giving effect to any choice or
conflict of law provision.
17. NOTICES:
All notices or other communications required or permitted hereunder,
shall be in writing,
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postage or charges prepaid, and shall be deemed given only when received by the
Party to whom the same is directed as follows:
Except as instructed in Exhibit "2" attached hereto:
United States Exploration, Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Telephone: 000-000-0000
Fax: 000-000-0000
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Petroleum Development Corporation
P. O. Xxx 00
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Attention: Xx. Xxxx Xxxxxxx
Telephone: 000-000-0000
Fax: 000-000-0000
Each Party may change its address or telephone/fax number for any or
all purposes by notifying the other Party of such change in writing. A return
receipt of the United States Post Office shall be proof of the date and time of
receipt of notice. Any notice given by fax transmittal shall be deemed given
upon confirmation of transmission of the fax, provided that any attachment
referenced in the notice is also sent via fax at the same time; however, a Party
giving notice by fax transmittal shall also send a hard copy of the notice, and
any attachments referenced therein, promptly by regular mail.
18. DEFAULT:
The only penalty for Operator's failure to drill any Test Well
as provided for herein shall be the loss of all rights to an assignment
associated with such Test Well. If Operator materially breaches the terms of
this Agreement, Farmor, at its option, may terminate this Agreement and be
released from all subsequent obligations hereunder; provided, that in so doing
Farmor shall not waive or otherwise be precluded from exercising any other
rights or remedies, at law or in equity, which it may have available for
Operator's breach of this Agreement.
19. "COMMITMENT XXXXX":
Farmor and Operator previously have entered into that certain 2000
Development Agreement dated June 30, 2000, which provides for the drilling of
certain Commitment Xxxxx on or before certain dates which are to qualify as
"Commitment Xxxxx" as provided under the Exploration Agreement. Provided that
any of the locations as contained in the 2000 Development Agreement for a
Commitment Well are found to be "Undrillable", as defined herein, because of
title or surface issues, any well drilled hereunder which qualifies as a
"Commitment Well" under the Exploration Agreement may be substituted for an
Undrillable Commitment Well under the 2000 Development Agreement. However, this
provision shall in no way decrease the number of xxxxx provided for under the
2000 Development Agreement nor alter the time in which such Commitment Xxxxx
must be drilled under the 2000 Development Agreement. "Undrillable", as used
herein, shall mean that the time and/or money required to cure title or remedy a
surface issue to allow Operator to drill same is of such unreasonable magnitude
as to deem such location undrillable. Any Undrillable location and its
substitute hereunder shall be documented in writing which shall be acknowledged
by both Parties.
20. RIGHTS RESERVED BY FARMOR:
With respect to each assignment earned hereunder, Farmor reserves all
interests, rights, horizons, strata and formations which are not included in
such assignment, including, but not limited to, the right of ingress and egress
and concurrent use of the surface and the right to drill through the intervals
earned hereunder.
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21. RELATIONSHIP OF PARTIES:
It is not the intention of the Parties to create any partnership,
mining partnership, or association, and neither this Agreement nor the
operations contemplated hereunder shall be construed or considered as creating
any such legal relationship. The liabilities of the Parties shall be several,
and not joint or collective.
22. HEADINGS:
The headings contained in this Agreement are inserted for convenience
and identification only and are in no way intended to describe, interpret,
define, or limit the scope, extent, or intent of this Agreement or any provision
hereof.
23. SEVERABILITY:
If any term or provision hereof is determined to be illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
validity of the remainder of this Agreement.
24. COUNTERPART EXECUTION:
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement on this
________ day of ______________ , 2001.
UNITED STATES EXPLORATION, INC.
BY:
---------------------------------
Xxxxx X. Xxxxxx, President
PETROLEUM DEVELOPMENT CORPORATION
BY:
---------------------------------
Xxxx X. Xxxxxxx
Vice President, Exploration
and Development
BY:
---------------------------------
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LISTING OF EXHIBITS ATTACHED:
Exhibit "1": Description of Lands in Prospect
Exhibit "2": Geological Requirement Sheet
Exhibit "3": Exploration Agreement
Exhibit "4": Form of Assignment
Exhibit "5": Operating Agreement
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