Exhibit 10.1
FARMOUT AGREEMENT
THIS AGREEMENT is entered into on the 4th day of June 2007 by and between
Xxxxxxx Xxxxxxxx Energy, Inc., a company existing under the laws of Texas
(hereinafter referred to as "Farmor") and New Frontier Energy, Inc. , a company
existing under the laws of Colorado (hereinafter referred to as "Farmee"). The
companies named above may individually be referred to as "Party" and
collectively as the "Parties". Capitalized terms used herein are defined in
Exhibit A attached hereto and made a part hereof.
WITNESSETH:
WHEREAS, as of the date of this Agreement, Farmor holds a certain
percentage of the rights and obligations in the Underlying Leases and is the
Operator of the Focus Ranch Unit; and
WHEREAS, Farmor is willing to assign and transfer a certain undivided
interest in its rights and obligations in the Underlying Leases described in
Exhibit B to Farmee in accordance with the terms set forth herein and Farmee
wishes to acquire such interest, and Farmor is willing to designate Farmee as
the Operator of the Focus Ranch Unit;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and obligations set out below and to be performed, the Farmor and Farmee agree
as follows:
ARTICLE 1
ASSIGNMENT OF INTEREST
1.1 Initial Grant
Subject to the satisfaction of the Conditions Precedent, and in exchange
for the Consideration, Farmor shall assign and transfer to Farmee, and
Farmee agrees to accept, interests in the Underlying Leases as follows:
(a) In exchange for the Consideration described in Article 3, Farmor shall
transfer to Farmee an undivided 100% of Farmor's Interests in the
Underlying Leases, and the Parties shall execute and deliver the
Assignment concurrent with the execution of this agreement. The above
described interests shall be from surface to total depth. and include
rights to oil, gas, or any other substance covered by the Underlying
Leases. Farmee's interests under this Agreement shall be fully
assignable. Farmor shall submit the Assignment to the Government for
approval within five (5) days of the execution of this Agreement.
(b) In the event that Farmee establishes commercial production from the
Focus Ranch Federal 12-1 well, Farmor shall own a production payment
("Production Payment") in an amount equal to Two Million Dollars
($2,000,000 U.S.) payable out of 35% of the Net Proceeds at the
wellhead from the sale of oil, gas, and associated hydrocarbons
produced from the Underlying Leases subject to this Agreement to the
extent that such Net Proceeds are attributable to the Underlying
Leases. "Net Proceeds" shall mean revenues from the sale of such
production by Farmee less royalties, existing overriding royalties,
taxes measured by the value of production, operating costs, and costs
to gather, treat, process, compress, dehydrate, and sell the
production. Farmor's rights are limited to funds payable out of Net
Proceeds from the Underlying Leases subject to this Agreement and
Farmor shall have no recourse against Farmee for any amounts other
than those payable out of Net Proceeds.
(c) In the event that, prior to Farmor receiving its full Production
Payment described above, any additional well drilled or reentered by
Farmee located on the Underlying Leases begins producing hydrocarbons
in commercial quantities, Farmor shall be entitled to a Production
Payment equal to 35% of the Net Proceeds from this well, in addition
to Farmor's Production Payment from the Focus Ranch Federal 12-1 well,
until such time as Farmor's total Production Payments received under
this Agreement total $2,000,000.
(d) Farmee shall have the right to fulfill its obligations under this
Agreement in total by making payments to Farmor totaling $2,000,000,
regardless of the source of the payments.
(e) At such time as Farmor has received out of production from all xxxxx
subject to this Agreement the full amount of its Production Payment as
described above, or at such time as Farmee has fulfilled its
obligations to Farmor under Paragraph 1.1(d), or at such time as
Farmee ceases production on the Underlying Leases prior to Farmor
receiving the full amount of its Production Payment as described
above, Farmor's right to any Production Payment shall expire and
Farmor shall no longer have any interest in any of the Underlying
Leases or the Focus Ranch Unit.
(f) Farmor and Farmee shall work in conjunction to delay restoration of
the Focus Ranch Federal 3-1 well. Farmee shall have the right to
re-enter and test the Focus Ranch Federal 3-1 well. In the event
Farmee does re-enter the 3-1 well, Farmee shall be solely responsible
for reclamation of the site.
(g) Upon execution of this Agreement, Farmor shall resign as operator of
the Focus Ranch Unit and agrees to vote for Farmee as successor unit
operator under the terms of the Focus Ranch Unit Agreement and Unit
Operating Agreement.
1.2 Operations
Farmee shall conduct all operations in accordance with the terms of the
Focus Ranch Unit Operating Agreement and Farmor shall have no control over
Farmee's operations on the Focus Ranch Federal 12-1 well, or any additional
well subject to this Agreement.
1.3 Lease Payments
Within 10 days following execution of this Agreement, Farmor shall provide
to Farmee all data necessary for Farmee to assume rental payment
responsibilities on the Underlying Leases. Beginning with rental payment
due on or after the first of the month of the month following Farmee's
receipt of such information, Farmee shall be responsible for the payment of
all rentals, shut-in gas royalties, and minimum royalties payable under the
terms of the Underlying Leases. However, Farmee shall have no liability to
Farmor for any failure to timely or properly pay such rentals or other
payments.
ARTICLE 2
CONDITIONS PRECEDENT TO ASSIGNMENT
2.1 Conditions
The execution of the Assignment hereunder is subject to the satisfaction or
waiver of each of the following conditions, collectively called "Conditions
Precedent".
A. Farmor obtains a waiver or other evidence in writing of the expiration
or non-exercise of any Preferential Right at Farmor's sole cost by
July 1, 2007.
B. Farmor obtains any required third party consents for the transfer of
the interest to be transferred hereunder in writing by July 1, 2007;
and
C. Farmor shall make any geologic and geophysical information and all
evaluations of the Drill Site in its possession available to Farmee,
including but not limited to seismic and geologic data well logs,
cement bond logs, well samples, coring data, etc. Farmor makes no
warranties as to the accuracy of such information. Farmee shall be
obligated to keep such information confidential. Farmee shall have ten
days to terminate this Agreement in its sole discretion after
receiving such information and Farmee shall have no further obligation
to Farmor whatsoever in the event of such termination.
D. Farmor shall make available to the Farmee copies of the Underlying
Leases and all title documentation material to the acreage subject to
this Agreement which Farmor has in its possession. Such title
documentation shall be provided without warranty by Farmor. Farmee
shall have the right to terminate this Agreement within 10 days after
receipt of all title information in Farmor's possession or control if
Farmee is not satisfied that Farmor has adequate title.
E. The parties obtain from the Xxxxx Ranch and Sheep Mountain Ranch a
transfer of rights to use the road that leads to the Focus Ranch
Federal 12-1 well by July 1, 2007.
2.2 Performance and Termination:
Each party shall use commercially reasonable efforts to execute all
documents, and do and procure to be done all such acts and things as are
reasonably within its power to ensure the Conditions Precedent are
satisfied as soon as is reasonably practicable after execution of this
Agreement. Except as set forth above, if the Conditions Precedent are not
satisfied by ten (10) days from the execution of this Agreement, then the
non-breaching party, or either party if both breach, shall have the right
to terminate this Agreement by giving notice to the other Party in
accordance with the provisions of Article 9.
ARTICLE 3
CONSIDERATION:
3.1 Consideration for Initial Assignment
In consideration for receiving the assignment described in section 2.1,
Farmee agrees as follows:
a. On or before August 1, 2007, Farmee, at its sole cost, shall commence
the testing of the Niobrara and Frontier formations in the Focus Ranch
Federal 12-1 well. The conduct of such testing and any related
operations shall be in Farmee's sole control and discretion but shall
include the intervals from 6914' to 6945' and from 6985' to 7034'.
Subject to Article 11, if Farmee does not commence such testing on or
before August 1, 2007, then this Agreement shall terminate and neither
Party shall have any further obligation to the other. Farmee shall not
reconvey any interests initially conveyed by Farmor and described in
Article 1.1, but shall
i. Plug and abandon the well and reclaim the Drill Site to BLM
standards, and
ii. Reclaim the existing 12 mile service road to BLM standards.
b. In the event Farmee, in its sole discretion, determines that natural
gas capable of being produced in commercial quantities is present in
the Drill Site, in either the Niobrara or Frontier formations, Farmee
shall
i. Install, at Farmee's sole cost and in accordance with any
applicable DOT specifications, an approximately 12 mile, 4 inch
natural gas line ("Gas Line"). The Gas Line shall connect with
and transport gas to Farmee's existing 6 inch gathering line,
which is connected to Questar's main line at the Westside Canal
terminal near Baggs, Wyoming.
c. In the event Farmee, in its sole discretion, determines natural gas
capable of being produced in commercial quantities is not present in
the Drill Site Farmee shall have the right to abandon the Focus Ranch
Unit and shall :
i. Plug and abandon the well and reclaim the Drill Site to BLM
standards, and
ii. Reclaim the existing 12 mile service road to BLM standards.
d. Regardless of whether Farmee determines natural gas capable of being
produced in commercial quantities is present in the Drill Site, Farmee
shall use its best efforts to take whatever steps are necessary to
preserve the existence of the Focus Ranch Unit for a period of one
year, or for such time as Farmee remains the Unit Operator, whichever
is shorter. Should it be necessary to drill additional xxxxx in the
Focus Ranch Unit in order to preserve the Focus Ranch Unit, Farmee
shall seek BLM approval to commence drilling such xxxxx. Upon
receiving BLM approval, Farmee shall drill such xxxxx. The location of
such xxxxx shall be chosen in Farmee's sole discretion.
e. Should any subcontractors be necessary to assist Farmee in achieving
its obligations under this Agreement, such subcontractors shall be
selected in the sole discretion of Farmee.
3.2 Farmee shall not be liable in damages to Farmor for failure to commence,
drill, test, complete or equip the Focus Ranch Federal 12-1 well, but
Farmee shall remain subject to the obligations stated in Article 3.1(a).
3.3 Any costs, expenses, fees, or duties payable to a Government in connection
with the Assignment, excluding taxes described in Article 7, herein shall
be borne and paid by Farmee.
ARTICLE 4
OBLIGATIONS UNDER THE UNDERLYING LEASES
4.1 Acceptance of Prior Terms
Farmee hereby ratifies, confirms and accepts the terms of the Underlying
Leases and during the Interim Period, Farmee agrees to abide by the terms
of such agreements to the extent of its Working Interest.
ARTICLE 5
UNDERTAKING OF THE PARTIES
5.1 Farmor Obligations
During the Interim Period, Farmor shall comply with the following:
A. Material Developments. Farmor shall promptly notify Farmee and provide
details upon the occurrence of: (a) any written notice of default or
termination received or given to Farmor with respect to the Underlying
Leases or the Focus Ranch Unit, (b) any written notice of any pending
or threatened claim, demand, action, suit, inquiry or proceeding
related to the Underlying Leases or Focus Ranch Unit, or (c) any event
or condition between the date of this Agreement and the Approval Date
that would render impossible Farmor's performance of its obligations
under this Agreement.
B. If during the Interim Period, any decision or approval is required
which would affect the Farmee's interest in the Underlying Leases,
Farmor shall consult with Farmee and vote its interest or take such
action as may be in accordance with Farmee's instructions.
5.2 Farmee Obligations
A. Insurance. During such time as Farmee is conducting operations under
this Agreement, Farmee shall maintain workmen's compensation insurance
and general liability insurance with bodily injury limits of $500,000
per occurrence and property damage insurance with a limit of $200,000.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Except as otherwise disclosed on the attached schedules, all warranties
made herein are as of the date of execution of this Agreement. The Parties
shall not take any action, or fail to take any action, prior to the
Approval Date that would result in a breach of any representations or
warranties under this Agreement.
6.1 Farmor's Representations and Warranties
A. Farmor's Rights. Farmor holds the rights to a certain undivided
interest in the Underlying Leases described in Exhibit B, free and
clear of any liens, claims, burdens or encumbrances, other than the
liens, claims, burdens or encumbrances in favor of the lessors and
such interest entitles The Farmor is currently the Unit Operator of
the Focus Ranch Unit. The Underlying Leases and Focus Ranch Unit are
in full force and effect and no notice of default, termination, or
breach has been received by Farmor nor, to the knowledge of Farmor,
any other person or entity. The Underlying Leases and Unit Agreement
and Unit Operating Agreement, together with applicable Laws, contain
the entirety of the obligation of Farmor to the lessors, and no other
understanding or agreement exists between Farmor and any lessor in
relation to the subject matter of this Agreement, except as otherwise
stated in this Agreement.
B. Documents. Farmor has provided Farmee with complete and correct copies
of the Underlying Leases and of the Focus Ranch Unit Agreement and
Unit Operating Agreement. In addition, Farmor will provide Farmee
proof that the rentals for all of the subject leases have been paid in
a timely manner and that there are no rentals due at closing for any
lease that is a part of the Focus Ranch Unit. Farmee is hereby
advised, certain leases subject to this Agreement which are outside
the Focus Ranch Unit have unpaid rentals past due. These leases are
described in Exhibit C.
C. Claims and Litigation. There are no material claims, demands, actions,
suits, governmental inquiries, or proceedings pending or, to Farmor's
knowledge, threatened in connection with the Underlying Leases or
Focus Ranch Unit which would have an adverse effect upon the
consummation of the transactions contemplated by this Agreement.
Farmee is hereby advised of continuing claims by the Three Forks Ranch
that the Focus Ranch Unit is not valid.
6.2 Farmee's Representations and Warranties
A. Claims and Litigation. There are no material claims, demands, actions,
suits, governmental inquiries, or proceedings pending, or to Farmee's
knowledge, threatened, against Farmee which would have an adverse
effect upon the consummation of the transactions contemplated by this
Agreement.
B. Financial and Technical Capability. Farmee has sufficient funds to
enable it to fulfill all of its obligations under this Agreement.
Farmee has the technical capability, personnel and resources to
fulfill its obligations under this Agreement.
6.3 Mutual Representations and Warranties
A. Corporate Authority. Each Party is duly organized and validly existing
under the laws of the United States. To the extent required, each
Party is qualified to conduct business in the jurisdiction as
necessary to perform the Agreement. Each Party has all requisite
corporate power and authority to enter into this Agreement, to perform
its obligations hereunder, and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by each Party and constitutes a legal, valid and binding
obligation of each Party, enforceable against each Party in accordance
with its terms.
B. Other Representations and Warranties. Except as disclosed in schedules
attached to this Agreement, the execution, delivery, and performance
of this Agreement by each Party, the consummation of the transactions
contemplated hereby, and the compliance with the provisions hereof
will not, to the best of each Party's knowledge and belief,: (a)
violate any applicable Laws/Regulations, judgment, decree or award;
(b) contravene the organization documents of a Party; or (c) result in
a violation of a term or provision, or constitute a default or
accelerate the performance of an obligation under any contract or
agreement executed by a Party hereto.
C. All representations and warranties given under this Article 6 shall,
for the contractual term set forth herein, be deemed repeated and
valid, true and correct as of the Approval Date, and each Party agrees
to inform the other Party of any material changes to the facts in the
representations and warranties prior to the Approval Date or the
execution of the Assignment, whichever is later.
D. Each of the Parties agrees to indemnify and hold the other Party
harmless for any claims, causes of action, or liabilities, which arise
out of the breach of any of the warranties and representations under
this Article by the indemnifying Party.
6.4 Disclaimer of Other Representations and Warranties Except for the
representations and warranties provided in this article, Farmor and Farmee
make no, and disclaim any, warranty or representation of any kind, either
express, implied, statutory, or otherwise, including, without limitation,
the accuracy or completeness of any data, reports, records, projections,
information, or materials now, heretofore, or hereafter furnished or made
available to Farmee in connection with this agreement.
ARTICLE 7
TAX
7.1 Tax Obligations
Each Party shall be responsible for reporting and discharging its own tax
measured by the profit or income of the Party and the satisfaction of such
Party's share of all obligations under this Agreement. Each Party shall
protect, defend and indemnify each other Party from any and all loss, cost
or liability arising from the indemnifying Party's failure to report and
discharge such taxes or satisfy such obligations. The Parties intend that
all income and all tax benefits (including deductions, depreciation,
credits and capitalization) with respect to the expenditures made by the
Parties hereunder will be allocated by the Government tax authorities to
the Parties based on the share of each tax item actually received or borne
by each Party. If such allocation is not accomplished due to the
application of the Laws / Regulations or other Government action, the
Parties shall attempt to adopt mutually agreeable arrangements that will
allow the Parties to achieve the financial results intended.
ARTICLE 8
CONFIDENTIALITY
8.1 Except as otherwise provided in the Underlying Leases or Focus Ranch Unit
Agreement or Unit Operating Agreement, each Party agrees that all
information disclosed under this Agreement, except information in the
public domain or lawfully in possession of a Party prior to the date of
this Agreement, shall be considered confidential and shall not be disclosed
to any other person or entity without the prior written consent of the
Party which owns such confidential information. This obligation of
confidentiality shall remain in force during the term of this Agreement and
for a period of two (2) years thereafter.
ARTICLE 9
NOTICES
9.1 All notices authorized or required between the Parties by any of the
provisions of this Agreement shall be in writing and delivered in person or
by courier service or by any electronic means of transmitting written
communications which provides written confirmation of complete
transmission, and properly addressed to the other Party. Verbal
communication does not constitute notice for purposes of this Agreement,
and e-mail addresses and telephone numbers for the Parties are listed below
as a matter of convenience only. A notice given under any provision of this
Agreement shall be deemed delivered only when received by the Party to whom
such notice is directed, and the time for such Party to deliver any notice
in response to such originating notice shall run from the date the
originating notice is received. "Received" for purposes of this Article
shall mean actual delivery of the notice to the address of the Party
specified hereunder.
Name: New Frontier Energy, Inc. Name: ClaytonWilliams Energy, Inc.
Address: 0000 X. Xxxxxxxxx Xxxx. Address: 0 Xxxxx Xx., Xxxxx 0000
Xxxxxxxxx, XX Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx Attention: Xxxx Xxxxxxx
Facsimile: Facsimile: (000) 000-0000
Email: xxxxxx@xxxxxx.xxx Email: xxxxxxxx@xxxxxxxxxxxxxxx.xxx
Telephone: 000-000-0000 Telephone (000) 000-0000
ARTICLE 10
LAW AND DISPUTE RESOLUTION
10.1 Governing Law
The substantive law of Colorado, exclusive of any conflicts of laws
principles that could require the application of any other law, shall
govern this Agreement.
10.2 Dispute Resolution
Except as may be otherwise agreed in the Underlying Leases or Focus Ranch
Unit Agreement or Unit Operating Agreement, any and all claims, demands,
causes of action, disputes, controversies and other matters in question
arising out of or relating to this Agreement, including any question
regarding its breach, existence, validity or termination, which the Parties
do not resolve amicably, shall be resolved by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association. The place of arbitration shall be Denver, Colorado. A dispute
shall be deemed to have arisen when either Party notifies the other Party
in writing to that effect. No notice of intent to arbitrate shall be
necessary. The arbitrators may therefore award both monetary and equitable
relief, including injunctive relief and specific performance. A Party may
apply to any competent judicial authority for interim or conservatory
relief. The application for such measures, or for the enforcement of such
measures ordered by the arbitrator, shall not be deemed an infringement or
waiver of the agreement to arbitrate and shall not affect the powers of the
arbitrator.
ARTICLE 11
FORCE MAJEURE
11.1 If Farmee is rendered unable, in whole or in part, to carry out its
obligations under this Agreement due to Force Majeure, performance is
excused to the extent it is affected by the Force Majeure and Farmee's
obligations hereunder shall be suspended during the period of Force
Majeure. The term "Force Majeure" will mean an act of God, strike, lockout
or other industrial disturbance, act of the public enemy, war blockage,
public riot, lightning, fire, flood, explosion, governmental action,
governmental delay, restraint, or inaction, delays in obtaining permits,
unavailability of equipment, and any other cause, whether of the kind
specifically enumerated above or otherwise, which is not reasonably within
Farmee's control. Farmee shall give notice to Farmor of the Force Majeure
within a reasonable time after the events occur, and reasonably describe
the events constituting the Force Majeure.
ARTICLE 12
IMPRACTICABILITY
12.1 If, in exploring the initial test well as described in Article 3.1(a), or a
subsequent well as described in Article 3.1(b)(ii), the operator encounters
a drilling condition or substance before meeting the provisions of Section
3.1(a), or formation which cannot be overcome by means or methods
customarily used by prudent operators in the area, as determined in
Farmee's sole discretion, then the test well may be plugged and abandoned
at the depth at which the substance or condition is encountered and
operator is hereby given the option to commence and drill a substitute
well. In the event Farmee elects not to drill a substitute well, or
encounters similar difficulties with the substitute well, Farmee may elect
to proceed in accordance with Article 3.1 (c).
ARTICLE 13
GENERAL PROVISIONS
13.1 Relationship of Parties
The rights, duties, obligations and liabilities of the Parties under this
Agreement shall be individual, not joint or collective. It is not the
intention of the Parties to create, nor shall this Agreement be deemed or
construed to create, a mining or other partnership, joint venture or
association or a trust. This Agreement shall not be deemed or construed to
authorize any Party to act as an agent, servant or employee for any other
Party for any purpose whatsoever except as explicitly set forth in this
Agreement. In their relations with each other under this Agreement, the
Parties shall not be considered fiduciaries except as expressly provided in
this Agreement.
13.2 Further Assurances
Each of the Parties shall do all such acts and execute and deliver all such
documents as shall be reasonably required in order to fully perform and
carry out the terms of this Agreement.
13.3 Waiver
No waiver by any Party of any one or more defaults by another Party in the
performance of any provision of this Agreement shall operate or be
construed as a waiver of any future default or defaults by the same Party
whether of a like or of a different character. Except as expressly provided
in this Agreement, no Party shall be deemed to have waived, released or
modified any of its right under this Agreement unless such Party has
expressly stated, in writing, that it does waive, release or modify such
right.
13.4 Joint Preparation
Each provision of this Agreement shall be construed as though all Parties
participated equally in the drafting of the same. Any rule of construction
that a document is to be construed against the drafting party shall not be
applicable to this Agreement.
13.5 Severance of Invalid Provisions
If and for so long as any provision of this Agreement shall be deemed to be
judged invalid for any reason whatsoever, such invalidity shall not affect
the validity or operation of any other provision of this Agreement except
only so far as shall be necessary to give effect to the construction of
such invalidity, and any such invalid provision shall be deemed severed
from this Agreement without affecting the validity of the balance of this
Agreement.
13.6 Modifications
There shall be no modification of this Agreement except by written consent
of all Parties.
13.7 Priority of Agreement
In the event of any conflict between the provisions of the main body of
this Agreement and its Exhibits, the provisions of the main body of the
Agreement shall prevail. In the event of any conflict between this
Agreement and the Focus Ranch Unit Agreement or Focus Ranch Unit Operating
Agreement, this Agreement shall prevail unless such would be in violation
of the Laws of Colorado or the terms of the Underlying Leases
13.8 Headings
The topical headings used in this Agreement are for convenience only and
shall not be construed as having any substantive significance or as
indicating that all of the provisions of this Agreement relating to any
topic are to be found in any particular Article.
13.9 Counterpart Execution
This Agreement may be executed in any number of counterparts and each such
counterpart shall be deemed an original Agreement for all purposes;
provided that no Party shall be bound to this Agreement unless and until
all Parties have executed a counterpart. For purposes of assembling all
counterparts into one document, either party is authorized to detach the
signature page from one or more counterparts and, after signature thereof
by the respective Party, attach each signed signature page to a
counterpart.
13.10 Entirety
With respect to the subject matter contained herein, this Agreement (i) is
the entire agreement of the Parties; and (ii) supersedes all prior
understandings and negotiations of the Parties.
13.11 Merger
This Agreement shall not merge but shall survive all conveyances of
interests.
New Frontier Energy, Inc. Xxxxxxx Xxxxxxxx Energy, Inc
by by
/s/ Xxxx Xxxxx /s/ Xxxx Xxxxxxxx
------------------------ ------------------------
Xxxx Xxxxx, President Xxxx Xxxxxxxx
Dated this 25th day of May, 2007 Dated this 4th day of June, 2007
EXHIBIT A
DEFINITIONS
Agreement means this Farmout Agreement together with the Exhibits, and any
extension, renewal or amendment hereof agreed to in writing by the Parties.
Approval Date means the date on which the Government formally approves or
endorses the Assignment of the Working Interest transferred hereunder.
Assignment means the document, attached as Exhibit D, by which the interest in
the Underlying Leases transferred and conveyed to the Farmee by the Farmor as
provided hereunder.
Complete means the point at which the well is producing hydrocarbons in
commercial quantities.
Commercial Quantities means Hydrocarbons sufficient to cover the payment of all
royalties and any and all expenses associated with the producing and operating
an oil and/or gas well or a productive oil and gas field.
Drill site means the area located in the Niobrara or Frontier formations in the
Focus Ranch Federal 12-1 well, located in Section 00, Xxxxxxxx 00 Xxxxx Xxxxx 00
Xxxx, Xxxxx Xxxxxx, Xxxxxxxx.
Government means the government of United States or the State of Colorado and
any political subdivision, agency or instrumentality thereof.
Interim Period means the period commencing from the date of the execution of
this Agreement until the Approval Date.
Operator means the entity designated to conduct operations under this Agreement.
Proceeds means income received as a result of operations under this Agreement.
Preferential Rights means a right held by any third party to pre-empt the
transaction contemplated by this Agreement or affect its terms in any way.
Substitute Well means a well commenced after the initial, or prior, well was
abandoned due to impracticability or Force Majeure
Testing means an operation intended to evaluate the capacity of a Zone to
produce Hydrocarbons.
Underlying Leases means the leases which are subject to this Agreement and
attached in Exhibit B.
Working Interest means an interest in property that entitles the owner of that
interest to a share of the mineral production from the property, after payment
of costs and royalties.
Zone means a stratum of earth containing or thought to contain an accumulation
of Hydrocarbons separately producible from any other accumulation of
Hydrocarbons.
