EXHIBIT (10) (a)
Form of Drilling and Operating Agreement
DRILLING AND OPERATING AGREEMENT
This Agreement is entered into by and between PDC 1998- Limited
Partnership, hereinafter designated and referred to as the "Partnership",
and Petroleum Development Corporation, hereinafter referred to and
designated as "PDC".
Whereas, the parties to this agreement desire to enter into an
agreement to explore and develop certain Prospects for the production of
oil and gas as hereinafter provided,
It is agreed as follows:
ARTICLE I
DEFINITIONS
As used in this agreement, the following words and terms shall be
defined as follows:
A. The term "oil and gas" shall mean oil, gas, casinghead gas,
gas condensate, and all other liquid or gaseous hydrocarbons and other
marketable substances produced therewith, unless an intent to limit the
inclusiveness of this term is specifically stated.
B. The term "Prospect" shall mean a spacing unit established
according to state regulatory guidelines and industry practice on which
the Partnership proposes to drill a well. Generally spacing units for
Appalachian gas xxxxx cover approximately 25-40 acres, and spacing units
for Michigan Basin gas xxxxx cover approximately 80-100 acres.
C. "Royalty" shall mean a payment from gross revenues made to the
owner of the oil and gas mineral rights of a Prospect.
D. "Overriding royalty" shall mean a payment from gross revenues
to a party other than the owner of oil and gas mineral rights of a
Prospect.
E. "Proportionate Working Interest" shall mean an interest in a
well or Prospect of less than 100% which bears that same percentage of
costs of development and production as it receives in production revenues
after deducting for royalty and overriding royalties.
F. "Non-operators" shall mean all parties holding a proportionate
working interest in a Prospect, including the Additional General Partners
and the Limited Partners, but excluding PDC if it is also serving as
Operator.
ARTICLE II
EXHIBITS
The following exhibits are incorporated in and made a part of this
agreement:
A. Exhibit "A", Prospects.
1. Identification of each Prospect to be drilled.
2. Target formation.
3. The Partnership fractional interest therein.
B. Exhibit "B", Insurance.
C. Exhibit "C", Additional Prospects.
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1. Identification of additional Prospects added or
substituted after the original date of this agreement, and if substituted,
identification of the Prospect which is replaced.
2. Target formation.
3. The Partnership fractional interest therein.
4. Approval by the Partnership and PDC.
ARTICLE III
OPERATOR
A. Designation and Responsibilities of Operator:
PDC shall be the Operator of the Prospects, and shall conduct
and direct and have full control of all operations on the Prospects as
permitted and required by, and within the limits of this agreement. It
shall conduct all such operations in a good workmanlike manner, but it
shall have no liability as Operator to the Partnership for losses
sustained or liabilities incurred, except such as may result from
negligence or misconduct. The Managing General Partner may subcontract
with another operator or operators to perform some of all of the duties of
the operator, on Terms and conditions substantially the same as those
discussed herein. The Managing General Partner will supervise operations
by other non-affiliated drilling contractors and subcontractors.
B. Resignation or Removal of Operator and Selection of Successor:
1. Resignation or Removal of Operator: PDC may resign as
Operator at any time by giving written notice thereof to
the Partnership. If PDC terminates its legal existence,
no longer owns an interest in the Prospects, has filed
a petition under the Federal bankruptcy laws or any
state insolvency law or a receiver, fiscal agent, or
similar officer has been appointed by a court for the
business or property of PDC, or is otherwise no longer
capable of serving as Operator, PDC shall be deemed to
have resigned without any action by the Partnership,
except the selection of a successor. PDC may be removed
by the affirmative vote of Non-Operators owning a
majority working interest in each Prospect after
excluding the voting interest of Operator. Such
resignation or removal shall not become effective until
7:00 o'clock A.M., Eastern time, on the first day of
calendar month following the expiration of ninety (90)
days after the giving of notice of resignation of PDC or
action by the Non-Operators to remove PDC as Operator,
unless a successor Operator has been selected and
assumes the duties of PDC at an earlier date. PDC,
after effective date of resignation or removal, shall be
bound by the terms hereof as a Non-Operator. A change
of a corporate name or structure of PDC or transfer of
PDC's interest to any single subsidiary, parent or
successor corporation shall not be the basis for removal
of PDC as Operator.
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2. Selection of Successor Operator: Upon the resignation
or removal of PDC, a successor Operator shall be selected by the parties.
The successor Operator shall be selected by the affirmative vote of
parties owning a majority working interest in each Prospect; provided,
however, if an Operator which has been removed fails to vote or votes only
to succeed itself, the successor Operator shall be selected by the
affirmative vote of parties owning a majority interest after excluding the
voting interest of the Operator that was removed.
C. Employees:
The number of employees used by PDC in conducting operations
hereunder, their selection, and the hours of labor and the compensation
for services performed shall be determined by PDC.
ARTICLE IV
DRILLING PROSPECTS
A. Prospects:
Exhibit "A" lists Prospects initially to be acquired by the
Partnership, and its proportionate working interest in each Prospect.
Most xxxxx to be drilled by the Partnerships will be offsets to producing
xxxxx. Therefore, it is unlikely that a well drilled on a Prospect will
prove up any additional acreage outside the Prospect. If a Partnership
well does prove up additional acreage, PDC will assign the Partnership a
proportionate interest in such spacing units.
B. Cost:
The Partnership shall reimburse PDC for its proportionate
share of the lesser of:
1. The fair market value of the Prospect, or
2. The "Cost" of acquisition of the Prospect including: (a)
the price paid by PDC for such property; (b) title
examination, abstracting, brokers commissions, filing
fees, recording costs, transfer taxes, and other charges
incurred in connection with the acquisition of the
property; (c) bonuses, rentals and ad valorem taxes paid
by PDC with respect to the Prospect to the date of its
transfer to the Partnership, interest on funds used to
acquire or maintain such property, and such portion of
PDC's expenses for geological, drafting, accounting,
legal and other like services allocated to the Prospect
in accordance with generally accepted accounting
principles, not including for expenses incurred in the
prior drilling of xxxxx, and provided such expenses
shall have been incurred not more than 36 months prior
to the purchase by the program.
C. Substitution:
As drilling progresses other, more desirable Prospects may
become may become less desirable as a result of additional information not
available as of the date of this agreement. For any undrilled Prospect,
the Partnership may request that PDC substitute another Prospect, in which
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case the entire acquisition cost paid for the Prospect or a substitute
thereof will be applied against the cost of the substituted Prospect, and
against other costs of this contract if and to the extent the cost of the
substitute Prospect is less than the cost of the original Prospect it
replaces. An amendment to this agreement in the form of Exhibit "C" shall
be used for the addition or substitution of a Prospect.
D. Title Examination and Opinion:
Title examination shall be made by outside attorneys on the
drillsite of any proposed well prior to commencement of drilling
operations. The opinion will include ownership of the working interest,
mineral, royalty, overriding royalty, and production payments under the
applicable leases. A copy of the opinion will be furnished to the
Partnership.
PDC shall take such steps as are necessary in its best
judgment to render title to the leases assigned to the Partnership
acceptable for the purposes of the Partnership. No operation shall be
commenced on leases acquired by the Partnership unless the Partnership
Manager is satisfied that necessary title requirements have been satisfied
by PDC and that the undertaking of such operation would be in the interest
of the Partnership. PDC shall be free, however, to use their own best
judgment in waiving title requirements and shall not be liable to the
Partnership, or Participants for any mistakes of judgment; nor shall PDC
be deemed to be making any warranties or representations, express or
implied, as to the validity or merchantability of the title to any lease
assigned to the Partnership or the extent of the interest covered thereby.
ARTICLE V
INTEREST IN COSTS AND PRODUCTION
A. Royalties and Overriding Royalties:
The Partnership interest in production from drilling Prospects
will be subject to the payment to non-affiliated parties of royalties and
overriding royalties which may range from 12.5% to 20.00% of gross
revenues, provided the weighted average for all Partnership Prospects
drilled shall not exceed 17% gross revenues. No such royalty or
overriding royalty will be paid to PDC or its affiliates.
B. Proportionate Working Interest:
The Partnership may acquire 100% of the working interest in a
Prospect or a proportionate interest of less than 100%. In the event the
Partnership acquires a proportionate interest, the respective obligations
and benefits acquired by the Partnership will be proportionately the same
as the working interest acquired. PDC and its affiliates may not retain
any overrides or other burdens on the interest conveyed to the
Partnership. The Partnership will pay a proportionate share of the total
of lease, development, and operating costs, and will be entitled to
receive a proportionate share of production subject only to royalties and
overriding royalties discussed in Article V, A.
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C. Joint Venture Activities:
PDC may retain an interest or convey interests in undrilled
Prospects to other Joint Venturers, retaining for its own account a profit
or promotional interest on the interest conveyed. PDC shall require any
party acquiring such an interest to acquire a proportionate working
interest and to assume and bear alone all obligation associated with such
an interest, and to bear alone and hold the Partnership and other Joint
Venturers harmless from all costs, claims, and burdens associated with the
interest acquired. At the discretion of the Managing General Partner, the
Partnership may enter into joint ventures which allow a functional
allocation of tangible, intangible and lease costs, where each joint
venturer is responsible for its overhead costs, provided the Partnerships
interest in the revenues and income of such a joint venture is
proportional to its contribution to the total cost of such venture.
D. Adjustments:
Payment of any xxxx shall not prejudice the right of
Partnership to protest or question the correctness thereof: provided,
however, all bills and statements rendered to Partnership by PDC during
any calendar year shall conclusively be presumed to be true and correct
after a twenty-four (24) month period unless the Partnership takes written
exception thereto and makes claim on PDC for adjustment. No adjustment
favorable to PDC shall be made unless it is made within the same
prescribed period. The provisions of this paragraph shall not prevent
adjustments resulting from a physical inventory of controllable material.
E. Audits:
The Partnership, upon notice in writing to PDC and all other
Non-Operators, shall have the right to audit PDC's accounts and records
relating to the Partnership xxxxx for any calendar year within the
twenty-four (24) month period following the end of such calendar year;
provided, however the making of an audit shall not extend the time for the
taking of written exception to and the adjustments of account. Where
there are two or more Non-Operators, the Non-Operators shall make every
reasonable effort to conduct a joint audit in a manner which will result
in a minimum of inconvenience to PDC. PDC shall bear no portion of the
Non-Operators audit cost incurred under this paragraph unless agreed to by
PDC. The audits shall not be conducted more than once each year without
prior approval of PDC, except upon the resignation or removal of PDC as
operator, and shall be made at the expense of those Non-Operators
requesting such audit.
PDC shall reply in writing to an audit report within 75 days
after receipt of such report.
ARTICLE VI
DRILLING AND DEVELOPMENT
A. Agreement To Drill and Complete:
PDC shall commence drilling of a well or xxxxx on each
Prospect within 180 days of the date of the initial formation of the
Partnerships, but in no case later than March 30, 1999 with respect to the
partnerships designated "PDC 1998- Limited Partnership"; March 30, 2000
with respect to the partnerships designated "PDC 1999- Limited
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Partnership"and March 30, 2001 with respect to the partnerships
designated "PDC 2000 Limited Partnership" and shall continue drilling
thereafter with due diligence to the Target formation unless a condition
which renders further drilling impractical is encountered at a lesser
depth, or unless the Partnership agrees to complete or abandon the well at
a lesser depth.
PDC shall make reasonable tests of all formations encountered
during drilling which give indication of containing economic quantities of
oil and/or gas. If such tests indicate the presence of economic
quantities of oil and/or gas, PDC shall complete the well and install such
surface and well equipment, gathering pipelines, heaters, separators,
etc., as are necessary and normal in the area in which the Prospect is
located. If it is determined that the well is not likely to produce oil
and/or gas in commercial quantities PDC shall plug and abandon the well in
accordance with applicable regulations.
B. Cost of Drilling and Completion:
The Partnership shall bear its proportionate share of the cost
of drilling and completing or drilling and abandoning each Appalachian
Basin Partnership well as follows:
1. The Cost of the Prospect as defined in Article IV, B,
and:
2. For intangible well costs:
a. For each well completed and placed in production
an amount equal to the depth of the well in feet
at its deepest penetration as recorded by the
drilling contractor multiplied times $60.00 per
foot to a depth of 2,200 feet plus $16.00 per
foot in excess of 2,200 feet, plus the actual
extra intangible completion cost of zones
completed in excess of the actual extra
intangible cost of running a mine string if an
underground mine is encountered by the wellbore
plus the actual cost for directional drilling
services, if required.
b. For each well in which the Partnership elects not
to complete, an amount equal to $33.00 per foot
multiplied times the depth of the well to 2,200
feet plus $9.00 per foot for each additional foot
below 2,200 feet as specified above plus the
actual costs for directional drilling services,
if required.
3. The cost of tangible well equipment and gathering
pipeline necessary to connect the well to the nearest
appropriate sales point or delivery point.
The Partnership shall bear its proportionate share of the cost
of drilling and completing or drilling and abandoning each Michigan Basin
Partnership well as follows:
1. The Cost of the Prospect, as defined; and
2. For intangible well Costs:
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a. For each well completed and placed in production,
an amount equal to the depth of the well in feet
at its deepest penetration as recorded by the
drilling contractor multiplied by $138 per foot
for the first 1,000 feet of well depth plus $22
per foot for each additional foot below 1,000
feet to the deepest penetration of the well; plus
in each case the actual extra cost of zones
completed in excess of the cost of the first zone
and actual additional costs for work required by
state law in the event an intermediate or third
string of surface casing is run, plus the actual
costs for directional drilling services, it
required, or
b) For each well which the Partnership elects not to
complete, an amount equal to the depth of the
well in feet at its deepest penetration as
recorded by the drilling contractor multiplied by
$60 per foot for the first 1,000 feet of well
depth plus $12 per foot for each additional foot
below 1,000 feet to the deepest penetration of
the well, as specified above and in each case
actual additional costs for work required by
state law in the event an intermediate or third
string of surface casing is run, plus the actual
costs for directional drilling services, if
required; and
3. The tangible cost of drilling and completing the
Partnership xxxxx.
It is anticipated that the Partnerships, PDC, and other third
party joint venturers will share the cost of the Michigan Antrim projects.
The Partnerships will be allocated the well cost with the additional
project costs for multiple flow lines, saltwater injection well, equipment
for the central production facility and Leases allocated to the other
joint venture partners through the use of tax partnership. In return for
contribution of the well costs to an Antrim project, the Partnerships will
acquire 55% Working Interest in the project. Remaining Working Interests
will be allocated to the parties bearing the project costs for multiple
flowlines, leases, salt water injection well, and equipment for the
central production facility. Michigan Antrim project Leases are unitized
for the purpose of payment of royalties, distribution of working interest
revenue and allocation of project production expenses. Project working
interest revenue and project production expenses are allocated to working
interest owners based on the number of net xxxxx drilled, completed and
placed into production, expressed as a percentage of the total number of
xxxxx in a project. To the extent that a Partnership drills and pays for
less than the total number of xxxxx in a project, its overal Working
Interest in the project will be proportionally reduced. Each Partnership
will be responsible only for its obligtions and will be liable only for
its proportionate share of the costs of developing and operating the
Prospects; and, in the event of the default of another party, the Managing
General Partner has agreed to indemnify the Partnership and its Partners
for the obligations of such party. If any party fails or is unable to pay
its share of expense within 60 days after rendition of a statement
therefor by the Managing General Partner, the Managing General Partner
will pay the unpaid amount in the proportion that the interest of each
such party bears to the interest of all such parties.
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In the event the foregoing rates exceed competitive rates
available from other persons in the area engaged in the business of
rendering comparable services or equipment, the foregoing rates will be
adjusted to an amount equal to that competitive rate, but not less than
the cost of providing such services or equipment.
C. Completion By Less Than All Parties:
In the event not all Participants in a well wish to
participate in a completion attempt, the parties desiring to do so may pay
all costs of the completion attempt including the cost of necessary well
equipment and a gathering pipeline, and such parties shall receive all
income and pay all operating costs from the well until they have received
an amount equal to 300% of the completion and connection costs, after
which time the non-consenting parties shall have the right to receive
their original interest in further revenues and expenses.
D. Prepayment:
The Partnership agrees to pay PDC the Prospect cost for each
planned well prior to the spud date. The Partnership shall pay drilling
and completion costs of the Operator as incurred. Notwithstanding the
foregoing, PDC may require full prepayment by December 31, 1998 for any
xxxxx to be spudded after December 31, 1998 [or by December 31, 1999 with
respect to partnerships designated "PDC 1999-_ Limited Partnership" or by
December 31, 2000 with respect to partnerships designated "PDC 2000-_
Limited Partnership"] in order to assure the Partnership of the rates
quoted in Article VI, B, to arrange for the drilling equipment for the
xxxxx through subcontractors and to provide PDC with working capital for
the drilling of the xxxxx.
E. Refunds:
In no event shall PDC be obligated to refund any moneys paid
to it by the Partnership under this Agreement. In the event any amounts
paid under Article VI, D exceed costs due under Article VI, B, such excess
shall be credited to the Partnership and shall be expended for additional
drilling.
ARTICLE VII
PRODUCTION AND SUBSEQUENT OPERATIONS
A. Commencement of Production:
For purposes of this agreement, production will commence:
1. In the case of gas xxxxx when gas is first delivered
from the well through a pipeline or other delivery
system to a purchaser;
2. In the case of oil xxxxx when the well has produced 100
barrels; or
3. In the case of combination xxxxx when either of criteria
have been satisfied.
A well will be deemed to be "in production" in any month thereafter
in which oil or gas are produced in commercial quantities.
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B. Production Operations:
PDC shall provide all necessary labor, vehicles, supervision,
management, accounting, and overhead services for normal production
operations, and lease accounting, and shall be entitled to deduct from
Partnership revenues a monthly operating charge of $225 per well and a
monthly accounting and management charge of $75 per well. Nonroutine
operations will be billed to the Partnership at their proportionate cost.
Any nonroutine operation with an estimated cost exceeding $2,000 will be
authorized for expenditure ("AFE" or "AFE'd") and submitted to the
Non-Operators for approval. Approval of a majority of the working
interest owners will be required to authorize such operations. If the
Partnership authorized such operations PDC shall have the right to deduct
payment for the cost from Partnership revenues.
C. Abandonment of Xxxxx That Have Produced:
Any well which has been completed as a producer shall not be
plugged and abandoned without the consent of all Non-operators. If all
parties consent to such abandonment, the well shall be plugged and
abandoned in accordance with applicable regulations and at the cost, risk
of expense of all owners. If, within (30) days after receipt of the
notice of the proposed abandonment of any well, all parties do not agree
to the abandonment of such well, those wishing to continue its operations
from the interval(s) of the formation(s) then open to production shall
tender to each of the other parties its proportionate shale of the value
of the xxxxx salvageable material and equipment, less the estimated cost
of salvaging and assign the non-abandoning parties, without warranty,
express or implied, as to title or as to quantity, or fitness for use of
the equipment and material, all of its interest in the well and related
equipment, together with its interest in leasehold estate as to, but only
as to, the interval or intervals of the formation or formations then open
to production.
D. Marketing of Production:
The Partnership shall have the right to take in kind and
separately dispose of its share of all oil and gas produced from the
Prospects, excluding its proportionate share of production required for
lease operations and production unavoidably lost. Initially the
Partnership designates PDC as its agent to market such production and
authorizes PDC to enter into and bind the Partnership in such agreements
as it deems in the best interest of the Partnership for the sale of such
oil and/or gas. The Partnership may rescind the designation of PDC as its
agent with regard to all subsequent marketing agreements by written notice
at any time, but agrees to be bound by such agreements as may then be in
effect during their terms. The Partnership shall bear its proportionate
share of all marketing costs, if any. In the event PDC provides marketing
services, its charge shall be no greater than those charges made by
unaffiliated marketers. If pipelines which have been built by PDC are
used in the delivery of natural gas to market, PDC may charge a gathering
fee not to exceed that which would be charged by a nonaffiliated third
party for a similar service.
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E. Escalation in the Event of Rising Costs:
The production and accounting charges provided in Article VII,
B, may be adjusted annually beginning January 1, 1999, to an amount equal
to the rates from Article VII, B, multiplied by the ratio of the then
current average weekly earnings of Crude Petroleum and Gas Production
workers to the average weekly earnings of Crude Petroleum and Gas
Production workers for 1991, as published by the United States Department
of Labor, Bureau of Labor Statistics, provided that the charge may not
exceed the rate which would be charged by other comparable operators in
the area of operations.
ARTICLE VIII
LIABILITY OF PARTIES
A. Liability of Parties:
If the Partnership participates in a well with third parties
the liability of the parties shall be several, not joint or collective.
The Partnership shall be responsible only for its obligations, and shall
be liable only for its proportionate share of the costs of developing and
operating the Prospects. It is not the intention of the parties to
create, nor shall this agreement be construed as creating, a mining or
other partnership or association, or to render the parties liable as
partners.
B. Liens and Payment Defaults:
The Partnership grants to PDC a lien upon its oil and gas
rights in the Contract Area, and a security interest in its share of oil
and/or gas when extracted and its interest in all equipment, to secure
payment of its share of expense, together with interest thereon. To the
extent that PDC has a security interest under the Uniform Commercial code
of the state, PDC shall be entitled to exercise the rights and remedies
of a secured party under the Code. The bringing of a suit and the
obtaining of judgment by PDC for the secured indebtedness shall not be
deemed an election of remedies or otherwise affect the lien rights or
security interest as security for the payment thereof. In addition, upon
default by the Partnership in the payment of its share of expense, PDC
shall have the right, without prejudice to other rights or remedies, to
collect from the purchaser the proceeds from the sale of the Partnership's
share of oil and/or gas until the amount owed by the Partnership, plus
interest, has been paid. Each purchaser shall be entitled to rely upon
PDC's written statement concerning the amount of any default. PDC grants
a like lien and security interest to the Partnership to secure payment of
PDC's proportionate share of expenses.
If any party fails or is unable to pay its share of expense
within sixty (60) days after rendition of a statement therefor by PDC, PDC
shall pay the unpaid amount in the proportion that the interest of each
such party bears to the interest of all such parties.
C. Payments and Accounting:
Except as herein otherwise specifically provided, PDC shall
promptly pay and discharge expenses incurred in the development and
operation of the Contract Area pursuant to this agreement. PDC shall keep
an accurate record of the account hereunder, showing expenses incurred and
charges and credits made and received.
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Regardless of which party has contributed the lease(s) and/or
oil and gas interest(s) hereto on which royalty is due and payable, PDC
shall pay or deliver or cause to be paid or delivered the royalty and
overriding royalty payments due under the terms associated with the
acquisition of each Prospect, and shall deduct such payments from the
revenue of the Partnership.
D. Taxes:
Unless Partnership elects to take production in kind, PDC
shall pay or cause to be paid all production, severance, excise, gathering
and other taxes imposed upon or with respect to the production or handling
of such party's share of oil and/or gas produced under the terms of this
agreement, and shall be entitled to reimbursement for such taxes from
partnership revenue.
E. Insurance:
At all times while operations are conducted hereunder, PDC
shall comply with the workmen's compensation laws of the state of West
Virginia. PDC shall also carry or provide insurance as outlined in
Exhibit "B", attached to and made a part hereof. PDC shall require all
contractors engaged in work on or for the Contract Area to comply with the
workmen's compensation law of the state where the operations are being
conducted and to maintain such other insurance as PDC may require.
No additional charge will be made for such insurance during
drilling and completion operations. When xxxxx have been placed in
production PDC may xxxx for the cost of providing such insurance,
allocated among xxxxx and operations in accordance with generally accepted
accounting principles.
ARTICLE IX
INTERNAL REVENUE CODE ELECTION
This agreement is not intended to create, and shall not be construed
to create, a relationship of partnership or an association for profit
between or among the parties hereto. Notwithstanding any provision herein
that the rights and liabilities hereunder are several and not joint or
collective, or that this agreement and operations hereunder shall not
constitute a partnership, if, for federal income tax purposes, this
agreement and the operations hereunder are regarded as a partnership, each
party hereby affected elects to be excluded from the application of all of
the provisions of Subchapter "K", Chapter 1, Subtitle "A", of the Internal
Revenue Code of 1986, as amended (the"Code") as permitted and authorized
by Code Section 761 and the regulations promulgated thereunder. PDC is
authorized and directed to execute on behalf of the Partnership such
evidence of this election as may be required by the Secretary of the
Treasury of the United States or the Federal Internal Revenue Service,
including specifically, but not by way of limitation, all of the returns,
statements, and the data required by Regulations 1.761. Should there be
any requirement that each party hereby affected to give further evidence
of this election, each such party shall execute such documents and furnish
such other evidence as may be required by the Federal Internal Revenue
Service or as may be necessary to evidence this election. No such party
shall give any notices or take any other action inconsistent with the
election made hereby. If any present or future income tax laws of the
state or states in which the Contract Area is located or any future income
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tax laws of the United States contain provisions similar to those in
Subchapter "K", Chapter l, Subtitle "A", of the Code, under which an
election similar to that provided by Section 761 of the Code is permitted,
each party hereby affected shall make such election as may be permitted or
required by such laws. In making the foregoing election, each such party
states that the income derived by such party from operations hereunder can
be adequately determined without the computation of partnership taxable
income.
ARTICLE X
CLAIMS AND LAWSUITS
PDC may settle any single uninsured third party damage claim or suit
arising from operations hereunder if the expenditure does not exceed One
Thousand Dollars ($1,000.00) and if the payment is in complete settlement
of such claim or suit. If the amount required for settlement exceeds the
above amount, the Partnership shall assume and take over the further
handling of its interest in the claim suit, unless such authority is
delegated to PDC. All costs and expenses of handling, settling, or
otherwise discharging such claim or suit shall be at the joint expenses of
the parties participating in the operation from which the claim or suit
arises. If a claim is made against any party or if any party is sued on
account of any matter arising from operations hereunder over which such
individual has no control because of the rights given Operator by this
agreement, such party shall immediately notify all other parties, and the
claim or suit shall be treated as any other claim or suit involving
operations hereunder all claims and suits involving title to any interest
subject to this Agreement shall be treated as a claim or suit against all
parties participating in the Prospect so affected.
ARTICLE XI
FORCE MAJEURE
If either party is rendered unable, wholly or in part, by force
majeure to carry out its obligations under this agreement, other than the
obligation to make money payments, that party shall give to the other
party prompt written notice of the force majeure with reasonably full
particulars concerning its; thereupon, the obligations of the party giving
the notice, so far as they are affected by the force majeure, shall be
suspended during, but no longer than, the continuance of the force
majeure. The affected party shall use all reasonable diligence to remove
the force majeure situation as quickly as practicable.
The requirement that any force majeure shall be remedied with all
reasonable dispatch shall not require the settlement of strikes, lockouts,
or other labor difficulty by the party involved, contrary to its wishes;
how all such difficulties shall be handled shall be entirely within the
discretion of the party concerned.
The term "force majeure", as here employed, shall mean act of God,
strike, lockout, or other industrial disturbance act of the public enemy,
war, blockade, public riot, lightning, fire, storm, flood, explosion,
governmental action, governmental delay, restraint or inaction,
unavailability of equipment or market for oil and/or gas, and any other
cause, whether of the kind specifically enumerated above or otherwise,
which is not reasonably within the control of the party claiming
suspension.
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ARTICLE XII
NOTICES
All notices required by this agreement shall be given in writing
addressed to the parties as follows:
1. For the Partnership:
Petroleum Development Corporation, Managing General
Partner PDC 1998- [1999-; 2000- ] Limited Partnership
X.X. Xxx 00 Xxxxxxxxxx, XX 00000
2. For PDC:
Petroleum Development Corporation
X.X. Xxx 00
Xxxxxxxxxx, XX 00000
Each party shall have the right to change its address at any time,
by giving written notice to all other parties.
ARTICLE XIII
TERM OF AGREEMENT
In the event a well drilled under any provision of this agreement,
results in production of oil and/or gas in paying quantities, this
agreement shall continue in force so long as any such well or xxxxx
produce, or are capable of production, and for an additional period of 180
days from cessation of all production; provided, however, if, prior to the
expiration of such additional period, one or more of the parties hereto
are engaged in drilling, reworking, deepening, plugging back, testing or
attempting to complete a well or xxxxx hereunder, this agreement shall
continue in force until such operations have been completed and if
production results therefrom, this agreement shall continue in force as
provided herein.
It is agreed, however, that the termination of this agreement shall
not relieve any party hereto from any liability which has accrued or
attached prior to the date of such termination.
ARTICLE XIV
COMPLIANCE WITH LAWS AND REGULATIONS
A. Laws, Regulations and Order:
This agreement shall be subject to the conservation laws of
the state in which the Prospects are located, to the valid rules,
regulations, and orders of any duly constituted regulatory body of said
state; and to all other applicable federal, state, and local laws,
ordinances, rules, regulations, and orders.
B. Governing Law:
This agreement and all matters pertaining hereto, including,
but not limited to, matters of performance, non-performance, breach,
remedies, procedures, rights, duties and interpretation or construction,
shall be governed and determined by the law of the state in which the
Prospect is located.
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C. Regulatory Agencies:
Nothing herein contained shall grant, or be construed to
grant, PDC the right or authority to waive or release any rights,
privileges, or obligations which Partnership may have federal or state
laws or under rules, regulations or orders promulgated under such laws in
reference to oil, gas and mineral operations, including the location,
operation, or production of xxxxx, on tracts offsetting or adjacent to the
Contract Area.
With respect to operations hereunder, the Partnership agrees
to release PDC from any and all losses, damages, injuries, claims and
causes of action arising out of, incident to or resulting directly or
indirectly from Operator's interpretation or application of rules,
rulings, regulations, or orders of the Department of Energy or predecessor
or successor agencies to the extent such interpretation or application was
made in good faith. The Partnership further agrees to reimburse PDC for
any amounts applicable to Partnerships share of production that PDC may be
required to refund, rebate or pay as a result of such an incorrect
interpretation or application.
ARTICLE XV
MISCELLANEOUS
This agreement shall be binding upon and shall inure to the
benefit of the parties hereto and to their respective heirs, devisees,
legal representative, successors and assigns.
This instrument may be executed in any number of counterparts,
each of which shall be considered an original for all purposes.
IN WITNESS WHEREOF, this agreement shall be effective as of
day of 19 .
Xxxx X. Xxxxxxxxx,
Executive V.P.
Petroleum Development Corp.
Xxxxxx X. Xxxxxxxx, President
Petroleum Development Corp.,
Managing General Partner
PDC 199 - [2000 -] Limited Partnership
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