Renata Resources Inc.
October 4, 2001
page 3
9. Earning
Upon drilling the Test Well to Contract Depth, and upon testing, completing, capping or abandoning the Test Well in accordance with the Farmout and Royalty Procedure which is incorporated herein, with the elections and amendments as specified in Schedule "B" attached hereto, and provided Farmee is not in default hereunder, Farmee shall earn the following interest in the Earning Block of the Farmout Lands:
a) 100% of Farmor's pre-farmout working interest (or Pooled Working Interest in the event the pooling pursuant to Clause 5 is in effect) in the Earning Block of the Farmout Lands and Title Documents related thereto, subject to the reservation of the Lessor's royalty and a non-convertible gross overriding royalty of 10% on petroleum, natural gas and other leased substances calculated on 100% of production and paid on Farmor's pre-farmout working interest or Pooled Working Interest, as the case may be, (the "GOR"). The parties confirm that the royalty shall be subject to those deductions as allowed by the Crown and that all other terms of the Farmout and Royalty Procedure shall apply in respect of the GOR.
10. Drilling of Substitute Well
(a) If in the drilling of the Test Well, Farmee encounters operating difficulties (which shall not include lack of finances) or impenetrable formations that in Farmee's reasonable opinion make further drilling of the Test Well inadvisable, Farmee shall promptly notify Farmor of the problems so encountered and Farmee's intention to abandon the well.
Within thirty (30) days of receipt by Farmor of notification that the Test Well has been abandoned, Farmee may, subject to surface access, rig availability and regulatory approval, spud a substitute well at a location of its choice on the Farmout Lands. The substitute well shall be deemed to be the Test Well and all provisions of this Agreement which apply to the Test Well shall apply, mutatis mutandis, with the same force and effect to the substitute well.
(b) Notwithstanding anything to the contrary contained herein, in the event Farmee has drilled the Test Well to at least 3000 metres of measured depth and encounters operating difficulties as set out above, whether or not Farmee elects to spud a substitute well, Farmee shall be deemed to have earned the interest as provided in Clause 9 herein to the base of the deepest formation fully penetrated, logged and tested by the drilling of the Test Well. In such an instance, the parties agree that all grouping/validation rights shall be applied to the Block A and Block B Farmout Lands.
Within one hundred and eighty (180) days of receipt by Farmor of notification that the drilling of the Test Well has been discontinued pursuant to this Clause 10(b), Farmee may, subject to surface access, rig availability and regulatory approval, elect to spud an additional well ("Second Test Well") at a location of its choice on the Farmout Lands and all provisions of this Agreement which apply to the Test Well as to earning in the rights below the base of the deepest formation fully penetrated by the Test Well shall apply, mutatis mutandis, with the same force and effect to the Second Test Well. If Farmee does not elect to spud an additional well
S:\Land\Smoky\100401 Rio Alto Letter-2.doc
Renata Resources Inc.
October 4, 2001
page 4
within the time frame, Farmee shall relinquish any further right to earn additional interests pursuant to this agreement.
11. Indemnification by Farmee
Farmee shall indemnify Farmor against all actions, claims, costs, and demands, loss, damages and expenses which may be brought against or suffered by Farmor or which it may sustain, pay or incur by reason of any matter or thing arising out of or in any way attributable to the operations carried on by Farmee, its servants, agents or employees pursuant to this Agreement, except any actions, suits, claims, costs and demands, loss, damages and expenses sustained, paid or incurred or as a result of any act or omission of Farmor, its servant or its employees.
12. Participants
Farmor acknowledges and agrees that Farmee has the right to bring other participants and partners into this agreement and the parties hereto further acknowledge and agree that Farmee may assign a portion of its earnable interests herein to such participants, provided however that Farmor need only look to Farmee for performance during the interest earning phase of this agreement. Farmee may release information to the participants on a confidential basis.
13. Limitations Act
The two-year period for seeking a remedial order under section 3(1 )(a) of theLimitations Act,S.A. 1996 c. L-15.1, as amended, for any claim (as defined in that Act) arising in connection with this Agreement is extended to:
(a) for claims disclosed by an audit, two years after the time this Agreement permitted that audit to be performed; or
(b) for all other claims, four years.
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Renata Resources Inc.
October 4, 2001
page 5
These are the basic terms under which Olympia would pursue the acquisition of an interest in the Farmout Lands. If the foregoing meets with your acceptance, please so indicate by signing in the space provided and returning an executed copy to the attention of the undersigned. This offer is open for acceptance until 4:00 p.m. on October 12, 2001.
Yours truly,
OLYMPIA ENERGY INC.
"Andy Kirby"AT. (Andy) Kirby
Land Manger
ATK/Imb
Accepted and Agreed to this 12th
day of October, 2001
Rio Alto Exploration Ltd., as acting agent for RENATA RESOURCES INC.
Per:"Bruce Tumbach"
Title: Landman
S:\Land\Smoky\100401 Rio Alto Letter-2.doc
SCHEDULE "A" attached to and forming part of a Farmin Proposal dated October 10, 2001 among OLYMPIA ENERGY INC., as Farmee and RENATA RESOURCES INC., as Farmor
Alberta P&NG
License # | Lands | Rights | Working Interest |
BLOCK A
FARMOUT LANDS 5497110012 | Twp 59 Rge 2 W6M
Sections 2, 3, 10, 11, 14 & 15 | All P&NG Rights Below Base Cardium | Renata - 35%
AEC - 65% |
BLOCK B
FARMOUT LANDS Ptn. 5498010029 | Twp 59 Rge 2 W6M
Sections 4, 5, 8, 9, 16 & 17 | All P&NG Rights Below base Cardium to base Winterburn | Renata - 35%
AEC - 65% |
BLOCK C
LANDS Ptn. 5498010030 | Twp 59 Rge 2 W6M
Sections 4, 5, 8, 9, 16 & 17 | All P&NG Rights below base Winterburn | Birchill - 50%
Rosetta - 50% |
SCHEDULE "B"attached to and forming part of a Farmin Proposal dated October 10, 2001 among OLYMPIA ENERGY INC., as Farmee and RENATA RESOURCES INC., as Farmor
Farmout and Royalty Procedure Elections and Amendments
1. Effective Date (Subclause 1.01 (f): October 10, 2001
2. Payout (Subclause 1.01 )(t): Alternate N/A
3. Incorporation of Clauses from 1990 CAPL Operating Procedure (Clause 1.02):
i. Insurance (311): Alternate A ___ Alternate B X
4. Article 4.00 (Option Wells) will __/ will not __X__ apply:
5. Article 5.00 (Overriding Royalty) will X / will not __ apply:
6. Quantification of Overriding Royalty (Subclause 5.01A):
i. Crude Oil (a) Alternate 1 10%
ii. Other (b) Alternate 1 10%
7. Permitted Deductions (Subclause 5.04B, if applicable): Alternate 1
8. Article 6.00 (Conversion to Overriding Royalty will __/ will X not apply:
9. Article 8.00 (Area of Mutual Interest) will __/ will X not apply:
10. Reimbursement of Land Maintenance Cost (Clause 11.02) will __/ will not X apply:
OLYMPIA
ENERGY INC.
FAXED
October 22, 2001
Birchill Resources Limited
1200, 510-5th Street S.W.
Calgary, Alberta T2P 3S2 Attention: Mr. James A. Carriere | Norglen Energy Corporation
30, 633 - 6th Ave. SW Calgary,
Alberta T2P 2Y5 Attention: Mr. Gary Kirkpatrick |
Dear Sirs:
RE: Pooling and Participation Agreement (the "Agreement")
Twp. 59 Rge 2 W6M
Smoky Area, Alberta____
Further to our numerous discussions, Olympia Energy Inc. ("Olympia") has reached the following agreement with Birchill Resources Ltd. ("Birchill") and Norglen Energy Corporation ("Norglen"), successor in interest to Rosetta Exploration Inc.
1. Pooling
Olympia has obtained the agreement of both AEC Oil & Gas ("AEC") and Rio Alto Exploration Ltd. ("RAX") for the pooling of their working interests in the P&NG rights below the base of the Cardium formation underlying the Block A and Block B Lands with the P&NG rights owned by Birchill and Norglen underlying the Block C Lands, all as detailed in Schedule "A" attached hereto. The resultant working interests of all working interest owners in the Pooled Lands (12 Sections, all P&NG rights below base of Cardium formation) shall be:
AEC | 48.75% |
RAX | 26.25% |
Birchill | 12.50% |
Norglen | 12.50% |
P 0 BOX 20059. CALGARY PLACE POSTAL OUTLET, CALGARY, ALBERTA T2P 4J2
2100, 500 - 4TH AVENUE S.W., CALGARY, ALBERTA T2P 2V6 TEL. (403) 265-2723 FAX (403) 265-2726
Birchill Resources Limited
Norglen Energy Corporation
October 22, 2001
Page 2
2. Pool & Participate in Test Well
By their execution hereof, Birchiil and Norglen agree to the pooling described in Clause 1 herein and each agrees to participate as to its undivided 12.5% Pooled Working Interest in the Test Well, as further described in Clause 4 herein.
Pursuant to Agreements dated October 4, 2001 between Olympia and AEC and October 10, 2001 between Olympia and RAX, Olympia shall be responsible for its Pooled Working Interest share of the costs associated with the Test Well attributed to AEC and RAX. (75%)
In the event that the spudding of the Test Well is delayed such that the Block A Lands expire by their own terms, then the pooling effected in Clause 1 shall be dissolved and, subject to the Agreement of AEC & RAX, shall be replaced by a pooling among the mineral interests owners of the Block B and Block C Lands such that the Pooled Working Interests shall then be:
AEC | 32.5% |
RAX | 17.5%, |
Birch | 25.0%, |
Norglen | 25.0%, |
and the Block A Lands shall become subject to the terms of Clause 6 herein (Area Of Mutual Interest.)
3. Title
Birchill and Norglen (collectively "Participant") do not warrant title to the Block C Lands or agree to convey for the pooling described in Clause 1 any better title thereto than Participant has as of the date hereof. Participant covenants only that it has complied with the terms of the Title Documents related to the Block C Lands to the extent necessary to keep them in full force and effect and has not, on or before the date of execution and delivery of this Agreement, received any notice of offset or default for the Block C Lands which has not been remedied. Participant also covenants that the Block C Lands are unencumbered, except for the lessor royalty and the encumbrance as set forth in Schedule "A" and that Participant shall continue to be responsible for the encumbrances on the Block C Lands, notwithstanding the pooling described in Clause 1.
4. Test Well
Olympia on behalf of itself and Participant, shall spud the Test Well on or before November 13, 2001 (expiry date of Alberta P&NG Licence comprising the Block A Lands), subject to surface access, rig availability and regulatory approval, at a location of its choice on nine (9) contiguous sections pre-selected from the Pooled Lands (9-9-59-2W6M) and drill such well to a depth sufficient to evaluate the Leduc formation or to a
\\NTSERVER\SHARED\Christine\102201 Birchill-Norglen Letter.doc
Birchill Resources Limited
Norglen Energy Corporation
October 22, 2001
Page 3
total depth of four thousand eight hundred (4800) metres subsurface, whichever first occurs (estimated D&A costs $10.5MM).
Cost of the Test Well shall be borne as to:
Olympia | 75.0% |
Birchill | 12.5% |
Norglen | 12.5% |
The relationship between Olympia and Participant in the Test Well operations shall be governed by the 1990 CAPL Operating Procedure and 1988 PASC Accounting Procedure (revised February 1991) with rates and elections as specified in Schedule "B" attached hereto with Olympia being appointed as Operator thereunder and Olympia hereby accepting such appointment.
5. Grouping and Validation of P&NG Licenses
Olympia shall, prior to spudding the Test Well, make application pursuant to Clause 10 of the Petroleum and Natural Gas Tenure Regulation to have the Test Well declared a "grouping well" for the validation of the P&NG Licences comprising the Block A & Block B and the Block C Lands.
6. Area of Mutual Interest
a) The Parties hereby agree to establish an Area of Mutual Interest to include all P&NG rights, 50% or more of which falls within one (1) mile of the Pooled Lands, and which, for certainty, shall include the Pooled Lands in the event that all, or a portion thereof, expires and is returned to the Crown for disposition at a future Crown Sale.
b) The provisions of this Clause 6 shall be binding upon the Parties for the period commencing on the date hereof and ending on the expiration of one (1) year therefrom (such period hereinafter called the "AMI Term").
c) The Parties shall have the right to participate in the acquisition of New Lands as to the interest which each bears in relation to the Test Well operations.
d) If any New Lands become available for acquisition at a Crown Sale and one of the Parties desires to acquire an interest therein, the Parties shall endeavour to consult prior to the sale date for the purpose of submitting a bid therefore, and shall attempt to agree upon a bid price for such lands at least forty-eight (48) hours prior to the sale. If after consultation between
S:\Christine\102201 Birchill-Norglen Letter.doc
Birchill Resources Limited
Norglen Energy Corporation
October 22, 2001
Page 4
the Parties, an agreement is reached as to the bid price, Olympia shall submit the bid on behalf of all Parties and if acquired, such New Lands shall be owned by the Parties in accordance with the interests set out in Clause 6c) herein.
e) If, after consultation in the manner hereinbefore provided, the Parties are unable to agree upon a bid price, each Party shall be free to bid for its sole account and, if acquired, such New Lands shall be owned by the acquiring Party free and clear of any obligation to the other Party. Notwithstanding the foregoing provisions of this sub-clause 6 e), if such New Lands are purchased by the acquiring Party for a price which differs by more than five percent (5%) from the price such Party last represented to the other Party it was prepared to pay, the acquiring Party shall, within seven (7) days of acquisition, notify the other Party in writing setting forth the consideration paid. The non-acquiring Party shall have the right for a period of fifteen (15) days from receipt of such notification to elect in writing to acquire its working interest in such New Lands by paying to the acquiring Party, within the said fifteen (15) day period, its working interest share, as set out in Clause 6 c) hereof, of such acquisition costs.
f) If the Parties do not consult or fail to disclose to each other the price they are prepared to pay for the acquisition of New Lands at a Crown Sale and a Party acquires New Lands, then the acquiring Party shall, within seven (7) days of acquisition, notify the other Party in writing setting forth the consideration paid and all other pertinent terms applicable thereto. A non-acquiring Party shall have the right for a period of fifteen (15) days from receipt of such notification to elect in writing to acquire its working interest in such New Lands by paying to the acquiring Party within the said fifteen (15) day period its working interest share, as set out in Clause 6 c) hereof, of such acquisition costs.
g) If a Party acquires any New Lands which become available for acquisition other than by Crown Sales including, but not limited to, purchase, option, farmin or otherwise during the AMI Term the acquiring Party, upon reaching agreement, shall forthwith give written notice to the non-acquiring Party setting forth the consideration paid or other terms and conditions under which such Party is entitled to acquire such New Lands. A non-acquiring Party shall have the right for a period of fifteen (15) days from receipt of the notice to elect in writing to acquire by paying to the acquiring Party or assuming its proportionate share of all costs and obligations in such agreement. If this right is exercised, the acquiring Party shall exercise reasonable diligence in having the Parties electing to so acquire novated into any third party agreement and until such time as such Parties are fully recognized, the acquiring Party shall hold, in proportion to each Party's respective working interest share, the interest so acquired. The acquiring Party shall, until such other Parties are novated in such said third party agreement, consult with and obtain approval from such other participating
S:\Christine\102201 Birchill-Norglen Letter.doc
Birchill Resources Limited
Norglen Energy Corporation
October 22, 2001
Page 5
Parties prior to conducting operations or giving any written notice under such third party agreement.
h) In the event that less than all Parties elect to participate in any acquisition pursuant to this Clause 6, the Parties that do elect shall be entitled to do so in the proportions that their AMI Interests bear to one another.
i) Failure to make payment as set out in this Clause 6 shall void an electing Party's notice of election or intent to acquire.
7. Participants
The parties hereto acknowledge and agree that each has the right to bring other participants and partners into this agreement and the parties hereto further acknowledge and agree that each may assign a portion of its interests herein to such participants, provided however that the provisions of Article XVIII (Confidential Information) and Article XXIV (Disposition of Interests - Clause 2401 "A") of the Operating Procedure shall apply.
8. Limitations Act
The two-year period for seeking a remedial order under section 3(1)(a) of the Limiations Ace, S.A. 1996 c. L-15.1, as amended, for any claim (as defined in that Act) arising in connection with this Agreement is extended to four years.
9.
Subject to the terms hereof, this Agreement shall enure to the benefit of and be binding upon the parties hereto, their successors and assigns.
10.
This Agreement supersedes all other Agreements, documents, writings and other verbal or written understandings among the parties hereto relative to the Pooled Lands, except for reference to seismic ownership and confidentiality in Clause 1 of the Seismic Option and Farmin Agreement dated April 6, 2001 between Olympia, Birchill and Rosetta (predecessor in interest to Norglen.)
If the foregoing accurately describes the Agreement which Olympia, Birchill and Norglen have reached in this matter, please so indicate by signing in the space provided and returning one executed copy to the attention of the undersigned. This Agreement may be executed in counterpart with the same effect as if each signature had appeared on the same execution page.
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Birchill Resources Limited
Norglen Energy Corporation
October 22, 2001
Page 6
Please feel free to call me at 260-5257 (direct line) regarding any comments or questions which may arise in this regard.
Yours truly,
OLYMPIA ENERGY INC.
"Andy Kirby"
AT. (Andy) Kirby
Land Manger
ATK/Imb
Accepted and Agreed to
this 5th day of October, 2001
BIRCHILL RESOURCES LIMITED
| | | |
Per: | "Cheré Reilly" | "Leonard D. Arcovio" | "James A. Carriere" |
Title: | Landman | Vice President, Finance | |
Accepted and Agreed
this 24th day ofOctober, 2001.
NORGLEN ENERGY CORPORATION
Per: "Gary Kirkpatrick"
Title: President
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SCHEDULE "A" attached to and forming part of a Pooling and Participation Agreement dated October 22, 2001 among OLYMPIA ENERGY INC., BIRCHILL RESOURCES LIMITED and NORGLEN ENERGY CORPORATION.
Alberta P&NG
License # | Lands | Rights | AEC Working Interest |
BLOCK A
LANDS 5497110012 | Twp 59 Rge 2 W6M
Sections 2, 3, 10, 11, 14&15 | All P&NG Rights
Below base Cardium | Rio Alto - 35%
AEC - 65% |
BLOCK B
LANDS Ptn. 5498010029 | Twp 59 Rge 2 W6M
Sections 4, 5, 8, 9, 16 &17 | All P&NG Rights
Below base Cardium to base Winterburn | Rio Alto - 35%
AEC - 65% |
BLOCK C
LANDS Ptn. 5498010030 | Twp 59 Rge 2 W6M
Sections 4, 5, 8, 9, 16 &17 | All P&NG Rights below base Winterburn | Birchill - 50%*
Norglen - 50%* |
| *encumbrances | 2% overriding royalty payable to Dinard Resources.
1% overriding royalty payably to Martex Ltd. et al. |
Birchill Resources Limited
Norglen Energy Corporation
October 22, 2001
Page 8
SCHEDULE "B"attached to and forming part of a Pooling and Participation Agreement dated October 22, 2001 between Olympia Energy Inc., Birchill Resources Limited and Norglen Energy Corporation.
C.A.P.L. - - 1990 OPERATING PROCEDURE
1. Article II, Clause 201: Operator: Olympia Energy Inc.
2. Article III, Paragraph 311: Insurance - Alternate B
3. Article VI, Clause 604: Alternate A
4. Article IX, Clause 903: Casing Point Election - Alternate A
5. Article X, Clause 1007(a)(iv): Independent Operations Penalty
(a) Development Wells 400%
(b) Exploratory Wells 500%
6. Article X, Clause 1010(a)(iv): Title Preserving Well -365 Days
7. Article XXII. Clause 2201:
Norglen Energy Corporation
830, 633 - 6 Ave. SW
Calgary, Alberta T2P 2Y5
Attention: Land Manager
Facsimile: (403) 269-7935
Olympia Energy Inc.
2100. 500-4th Ave. SW.
Calgary, Alberta T2P 2V6
Attention: Land Manager
Facsimile: (403) 265-2726
Birchill Resources Limited
1200, 510-5th St. SW.
Calgary, Alberta T2P 3S2
Attention: Land Manager
Facsimile: (403) 261-2034
7. Article XXIV, Clause 2401: Disposition of Interests-Alternate A
8. Article XXIV. Clause 2404: Recognition Upon Assignment - Deleted
Replaced with Assignment Procedure
\\NTSERVER\SHARED\Christine\102201 Birchill-Norglen Letter.doc
Birchill Resources Limited
Norglen Energy Corporation
October 22, 2001
Page 9
PASC- 1988 ACCOUNTING PROCEDURE (Revised February 1991 Version)
1. Clause 101 (a): Exhibit "I"
2. Operating Advances (Clause 105): 10%
3. Approvals (Clause 110): 2 or more parties totalling 60.0%
4. (a) Clause 202(b)(l) shall ___ shall not _X_
(b) Clause 202(b)(2) shall ___ shall not _X_
5. Employee Benefits - Non-compulsory (Clause 203(b)): 25%
6. Warehouse Handling (Clause 217):
7. Overhead (Clause 302)
(a) For each Exploration Project:
1) 5% of the first $50,000.00 of Cost plus
2) 3% of the next $100,000.00 of Cost plus
3) 1% of Cost exceeding the sum of (1) and (2)
(b) For each Drilling Well:
1) 3% of the first S50.000.00 of Cost plus
2) 2% of the next SI 00,000.00 of Cost plus
3) 1% of Cost exceeding the sum of (1) and (2)
(c) For each Construction Project:
1) 5% of the first $50,000.00 of Cost plus
2) 3% of the next $100,00.00 of Cost plus
3) 1% of Cost exceeding the sum of (1) and (2)
(d) For operation and Maintenance:
1) $250.00 per producing well/month
Rates for subclause d(2) and d(3): will___ will not_X_
10. Pricing of Joint Materials, etc. (Article IV): $25,000.00
11. Periodic Inventory: Clause 501: 5 year.
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