Exhibit 10.1
ASSET PURCHASE, FARMOUT AND
JOINT EXPLORATION AGREEMENT
Treasure Island Project
THIS AGREEMENT is made and entered into as of the 1st day of March, 2002
("EFFECTIVE DATE"), by and between BP Exploration & Production Inc., ("BP")
and EEX Corporation, ("EEX"). In this Agreement BP and EEX are sometimes
referred to individually as a "Party" and are referred to collectively
as "Parties".
WHEREAS, the Parties were the successful bidders to acquire interest in
certain OCS lease blocks at OCS Lease Sale No. 182, pursuant to the terms of
that certain Joint Bidding Agreement dated March 1, 2002, by and between the
Parties.
WHEREAS, BP desires to acquire interest in certain other leases
currently owned by EEX in the OCS-Gulf of Mexico, and to provide for evaluation
leading to potential exploratory drilling on such leases.
WHEREAS, due to the magnitude of the anticipated risks inherent in oil
and gas exploration by virtue of variable geological conditions, the inexact
nature of technological measurements and interpretations involved in the
prediction of oil and gas accumulations and the anticipated high costs of
seismic processing, lease acquisition and the exploration and development of the
OCS Leases covered by this Agreement, the Parties deem it necessary to join
together under the terms of this Agreement for the purpose of sharing such risks
and minimizing their individual costs related to the proper exploration and
development of those leases acquired at OCS Lease Sale No. 182 by the Parties,
and of those certain leases currently owned by EEX;
WHEREAS, EEX owns an interest in certain OCS leases as more fully
described on Exhibit "A" hereto.
WHEREAS, EEX desires to transfer, assign, and farmout those Leases and
the operatorship of those Leases (where EEX is currently designated as operator)
on the terms and conditions set forth herein.
WHEREAS, EEX desires to enter into this transaction with BP because BP
brings certain financial and engineering resources, to develop the Leases and
Prospects.
WHEREAS, BP is able to acquire and reprocess the seismic data necessary
to develop the Prospects.
WHEREAS, EEX acknowledges that BP's commitment to acquire and reprocess
the seismic data for the Prospects, as well as BP's ability to explore and
develop the Leases and Prospects and carry EEX on certain development costs are
fair and adequate consideration to support this Agreement.
WHEREAS, this Agreement, and the technical and financial resources of
BP, will allow EEX to expedite exploration and development of the Leases and
Prospects.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations exchanged in this Agreement, the Parties agree as
follows:
SECTION 1-DEFINED TERMS
Definitions As used in this Agreement, the defined terms listed below shall have
the following meanings:
Adverse Downhole Conditions: shall mean conditions encountered in the drilling
of any well drilled pursuant to this Agreement such as mechanical difficulties,
heaving shale, rocksalt, excessive saltwater flow, excessive pressure,
practicably impenetrable formations or other conditions in the hole that would
cause a reasonably prudent operator under the same or similar circumstance to
discontinue drilling and to plug and abandon such well.
AFE: shall mean an authority to expend funds prepared by a Party to describe an
operation being proposed and to estimate the costs to be incurred in conducting
an operation under the JOA.
AMI: shall mean the geographical confines of the area or areas for the Prospects
described in Exhibit "C". The terms and conditions of the AMI shall be set forth
in the JOA.
Cretaceous Section: shall mean the lesser depth of 31,500 feet (true vertical
depth) or 1,500 feet (true vertical depth) below that depth at which the benthic
foraminifera Globotruncana Gansseri, or an older fossil, is first encountered.
The Globotruncana Gansseri is seen at 8,920 feet (measured depth) in the OCS-G
5701 Well No. 1 at Main Pass Block 154.
EEX Carry: BP's obligation to bear the risks, costs and expense of EEX's
twenty-five percent (25%) interest in the drilling of the Initial Well, Second
Well or Third Well, as set forth more fully herein. The EEX Carry shall not
apply to costs for sidetrack or other subsequent operations. beyond the drilling
of the Initial Well, Second Well or Third Well, after rig release for such well,
including but not limited to, construction of facilities, delivery
infrastructure, processing costs or other development costs. The EEX Carry shall
not apply to subsequent operations once Objective Depth is attained, except as
provided in the final paragraph of Sections 7, 10, and 12.
Exhibits: shall mean the Exhibits listed as follows:
Exhibit "A" Leases Jointly Owned by the Parties:
Section I-EEX Owned Leases (Working Interest to be assigned to BP).
Section II-Leases Acquired by the Parties at OCS Lease Sale No. 182.
Section III-Listing of Currently Existing Agreements.
Exhibit "B-1" Form of Record Title Assignment.
Exhibit "B-2" Form of Operating Rights Assignment.
Exhibit "C" Prospects and Areas of Mutual Interest ("AMI").
Exhibit "D" Joint Operating Agreement ("JOA").
Exhibit "E" Repurchase Price-Properties
Initial Well: shall mean the first well (or its substitute) on the first
Prospect drilled pursuant to this Agreement.
-2-
JOA: shall mean the joint operating agreement to be executed concurrently with
execution of this Agreement, by the Parties covering the Leases within the AMI
for each Prospect. BP is designated as Operator under the JOA. The form of JOA
shall be as set forth in Exhibit "D". The JOA shall govern the mutual
obligations of BP and EEX to develop and operate the Leases and Prospects;
provided, however, that in the event of conflict between the provisions of the
JOA and this Agreement, the provisions of this Agreement shall rule and take
precedence.
Leases: shall mean those OCS federal oil and gas leases (or portion thereof) and
the lands covered by the Leases and governed by this Agreement, as described in
Sections I and II of Exhibit "A" and any OCS federal oil and gas leases (or
portions thereof) acquired jointly pursuant to the terms of the AMI.
Objective Depth: shall mean the shallower of:
1. 27,500 feet (true vertical depth); or,
2. 500 feet (true vertical depth) below that depth at which the benthic
foraminifera Cristellaria R, or an equivalent or older fossil, is
first encountered. The Cristellaria R is seen at 6,480 feet
(measured depth) in the OCS-G 5701 Well No. 1 at Main Pass Block
154.
Permitted Encumbrances: shall mean:
(a) Royalties, overriding royalties, production payments, net
profits interests and similar burdens to the extent the net
cumulative effect of such burdens do not operate to reduce the
Net Revenue Interests of the Leases to less than the Net
Revenue Interests set forth in Exhibit "A";
(b) Rights reserved to or vested in any governmental agency having
appropriate jurisdiction to control or regulate any of the
Leases in any manner whatsoever;
(c) Easements, rights-of-way, servitudes, sub-surface leases,
production handling agreements, platform usage agreements,
pipelines, and structures on, over and through the Leases, to
the extent such rights, interests and structures do not
materially interfere with the operation or value of the Leases
to BP;
(d) Liens for taxes or assessments not yet due or not yet
delinquent or, if delinquent, that are being contested by EEX
in good faith in the normal course of business; provided
however, that such contest would not interfere with the
operation or value of the Leases to BP, and EEX shall remain
responsible for any and all taxes and other assessments
associated with the period of time prior to the Effective
Date; and
(e) Liens of operators relating to obligations not yet due or not
yet delinquent or, if delinquent, that are being contested by
EEX in good faith in the normal course of business; provided
however, that such contest would not interfere with the
operation or value of the Leases to BP, and EEX shall remain
responsible for any and all liens associated with the period
of time prior to the Effective Date.
-3-
Project Costs: shall mean one hundred percent (100%) of those costs incurred by
BP prior to January 1, 2004, in the acquisition and/or reprocessing of all
seismic data (including data from those blocks over which EEX may already own
licenses to such data) reasonably incurred by BP in its evaluation of the
Treasure Island Project and twenty-five percent (25%) of those costs incurred by
BP in the acquisition of leasehold interest in the Treasure Island Project in
which EEX elects to participate, including the cost of acquisition of those
Leases described in Section II of Exhibit "A".
Prospect or Prospects: shall mean the areas described in Exhibit "C", and any
Leases owned jointly by the Parties within the AMI for that Prospect.
Repurchase Price: shall mean all of EEX's right, title and interest in and to
one (1) of those properties listed in Exhibit "E". The choice of such interest
shall be at the option of EEX, subject to BP's right (i) to conduct due
diligence with respect to the interest to be assigned prior to acceptance, and
(ii) to reject the assignment in the event in BP's sole opinion good defensible
title without any liens, encumbrances or impediments, can be conveyed to BP's
satisfaction. EEX's offer of assignment shall be deemed to satisfy the
Repurchase Price consideration obligations, regardless of whether BP rejects or
accepts assignment of the interests offered.
Right of Repurchase: shall mean the right of EEX, upon: (i) withdrawal of BP
upon the terms and conditions set forth herein and in the JOA and (ii) to
payment to BP of the Repurchase Price, to repurchase from BP an assignment of
BP's Working Interest in the Leases described in Exhibit "A" within the
applicable Prospect(s) which Working Interests shall bear no liens or burdens in
excess of those existing at the time of BP's acquisition of such Working
Interest (except as may be contemplated in the Agreement or the JOA), and which
assignment shall be made using the applicable form as set forth in Exhibit "B-1"
or Exhibit "B-2". The Repurchase Price shall be set forth in the JOA. EEX shall
have no Right of Repurchase with respect to any Lease or interest therein
acquired by BP pursuant to the provisions of the AMI. As between the parties
hereto, it is agreed that the first well drilled subsequent to the assignment of
BP's working interest in the Leases within a Prospect(s) pursuant to this Right
of Repurchase, shall be considered to be an Exploratory Well within the meaning
of the JOA with respect to the Prospect on which said well is drilled.
Second Well: shall mean the second well (or its substitute) on the second
Prospect drilled pursuant to this Agreement.
Shallow Discovery: shall mean a discovery of commercial hydrocarbons made at any
depth above the Objective Depth in the drilling of the Initial Well, Second Well
and/or Third Well based upon the reasonable judgment of BP. The declaration by
BP of a Shallow Discovery may only apply to one well whether it is the Initial
Well, Second Well or Third Well.
Substitute Well: shall mean that if prior to reaching Objective Depth in the
Initial Well, Second Well or Third Well, BP encounters Adverse Downhole
Conditions and elects to abandon such well ("Discontinued Well"), BP shall have
the right, but not the obligation, to commence sidetracking operations on such
well or actual drilling operations on another well, (hereinafter referred to as
the "Substitute Well") at a location of its choice on the Prospect upon which
the Discontinued Well was located within sixty (60) days after the date the rig
was released from the last operation on the Discontinued Well in an effort to
reach Objective Depth. If such Substitute Well is timely and properly commenced
and drilled in compliance with all terms and conditions provided herein for the
Discontinued Well, and BP has satisfied all other then applicable covenants and
conditions of this Agreement, the Substitute Well shall in all respects be
-4-
considered as if it were the Initial Well, Second Well or Third Well (as the
case may be). BP shall have a continuing option to drill additional Substitute
Wells on the Prospect upon which the Discontinued Well was located, provided
that no more than sixty (60) days elapse between the date the rig was released
from the last operation on such well and the date of commencement of drilling
operations for the next Substitute Well drilled therefor.
Third Well: shall mean the first well (or its substitute) on the third Prospect
drilled pursuant to this Agreement.
Treasure Island Project: shall mean the area covered by all OCS blocks in all of
the AMIs.
Working Interest: shall mean the record title interest and associated operating
rights interest of each Party in and to each of the Leases covered by this
Agreement, expressed as the percentage set forth in Exhibit "A" to the JOA for
each Prospect, by virtue of which a Party has the right to explore for, develop
and produce hydrocarbons or to conduct any other operations contemplated by the
Leases.
SECTION 2-ASSIGNMENT OF LEASE INTEREST
AND OPERATORSHIP, AND PREFERENTIAL RIGHTS
Subject to the provisions of the next paragraph, concurrently with the execution
of this Agreement, EEX shall sell, transfer, convey, and assign to BP all of
EEX's right, title and interest, oil and gas leasehold interest, mineral
leasehold interests, to an undivided seventy-five percent (75%) of its Working
Interest in those Leases set forth in Section I of Exhibit "A". Such assignment
of Working Interest shall utilize the form of assignment as set forth for record
title interest in Exhibit "B-1", or for operating rights interest in Exhibit
"B-2", as appropriate. The interests assigned from EEX to BP shall bear no
burdens in excess of those set forth in Exhibit "A", but shall be subject to the
terms of those currently existing agreements which are identified in Section III
of Exhibit "A". Additionally, as to those Leases where EEX is currently
designated as operator, EEX shall transfer operatorship and shall designate BP
as the operator of the Leases. Furthermore, EEX grants to BP the exclusive right
to drill Exploratory Wells on the Leases and Prospects as set forth herein by
virtue of its farmout of the remaining 25% interest in those Leases for the
duration of the EEX Carry.
OCS-G 18020 (Ship Shoal Block 260), OCS-G 14505 (Ship Shoal Block 261) and OCS-G
14439 (South Marsh Island Block 80) are subject to pre-existing agreements which
provide for preferential rights to purchase in favor of third parties. EEX has
established a value of $237,944.10 for OCS-G 18020, $297,430.70 for OCS-G 14505
and $133,843.10 for OCS-G 14439. Concurrent with execution of this Agreement,
EEX will notify such third parties of their preferential right to purchase for
the value established by EEX. In the event either or both third parties exercise
their preferential right to purchase, the total amount of Project Costs and the
amount of Project Costs that BP must spend prior to January 1, 2003, as provided
in Section 4, or pay to EEX as provided in Sections 5, 6, 8 or 9, shall be
reduced by the amount received by EEX from the third party or parties as a
result of their exercise of the preferential right to purchase.
SECTION 3 - PURCHASE PRICE
-5-
The Leases and operatorship thereof (where EEX is designated as
operator) shall be assigned in consideration for: (a) BP's obligation to
acquire, process and reprocess the seismic data or acquire leasehold interest as
set forth in Sections 4 and 5 hereof and (b) for the assumed obligations of BP
as set forth in Sections 6 - 14 hereof and in the JOA, including the EEX Carry
and expenditures of Project Costs. EEX has estimated that the consideration
given to EEX for this transaction has a fair market value of $23.75 million.
SECTION 4-BP WORK COMMITMENT, SEISMIC
AND LEASE ACQUISITION
BP shall spend, or incur binding commitments to spend, and thereafter spend, a
total of five million dollars ($5,000,000.00 U.S.D.) in Project Costs prior to
January 1, 2004, of which three million dollars ($3,000,000.00) must be spent,
or contractually committed to be spent, prior to January 1, 2003. BP, at its
option, may spend Project Costs in excess of what is required. EEX shall incur
no expense in connection with BP's spending, or its binding commitments for
spending, of Project Costs prior to commencement of the Initial Well.
Any Project Costs associated with the acquisition of leasehold interest shall be
limited to two million dollars ($2,000,000.00) net to the Working Interest of
EEX in its acquisition of such interest. Subsequent to this spending limit being
reached with respect to the leasehold interest acquisition, EEX, subject to the
provisions of Section 3., shall be obligated to pay for its proportionate share
of any leasehold interest which it elects to acquire.
EEX shall receive copies of all seismic data acquired and/or reprocessed as a
result of BP's expenditure of the Project Costs, as if EEX were a paying
participant in the acquisition thereof. However, EEX's rights to receive such
data shall be subject to third party licensing agreements and restrictions
customary in the industry.
BP shall negotiate with vendors of seismic data to acquire licenses to seismic
data covering OCS lease blocks within the Treasure Island Project. As a material
consideration to EEX, BP agrees to negotiate in good faith with such vendors of
seismic data to allow EEX the opportunity, but not the obligation, to acquire
licenses to the seismic data at the same rate, and for the same cost, as BP. EEX
shall pay the costs to acquire its license(s) to such seismic data, and such
costs shall not be a part of the Project Costs. BP shall have no liability to
EEX for its failure to obtain such rights for EEX, but shall make commercially
reasonable efforts to do so. In the event EEX fails to obtains licenses from
such vendors, BP shall have no liability for failure to provide any reprocessing
with respect thereto, but BP expenditures of reprocessing cost therefore, shall
nonetheless be considered to be Project Costs.
SECTION 5-FAILURE TO FUND WORK COMMITMENT,
SEISMIC AND LEASE ACQUISITION
If BP, at its option, elects not to fully fund the Project Costs as provided in
the first paragraph of Section 4 prior to January 1, 2003, then the result shall
be:
1. Termination of this Agreement as to the rights of both Parties;
2. BP will pay EEX on or before January 11, 2003, the difference
between three million dollars ($3,000,000.00) and the amount of
Project Costs actually spent, or contractually committed to be
spent, by BP prior to January 1, 2003.; and
-6-
3. EEX shall be entitled to exercise its Right of Repurchase.
SECTION 6-INITIAL WELL COMMITMENT
On or before June 1, 2003, BP shall give written notice to EEX of its decision
concerning the drilling of the Initial Well. BP's election to not drill the
Initial Well shall result in:
. Termination of this Agreement as to the rights of both Parties.
. BP obligation to pay EEX within ten (10) days from termination of
this Agreement, the difference (if any) between five million dollars
($5,000,000.00) and the amount of Project Costs actually spent, or
contractually committed to be spent, by BP, and
. EEX shall be entitled to exercise its right of Right of Repurchase.
SECTION 7-DRILLING OF THE INITIAL WELL
If BP, in its sole discretion, elects to drill the Initial Well as provided in
Section 5., then BP shall commence the drilling of the Initial Well on or before
December 31, 2003. The Initial Well shall be drilled at a location mutually
agreeable to the Parties. BP shall provide EEX with notice of its proposed
location no later than one hundred and twenty (120) days prior to commencement
of such well. In event the Parties cannot agree on the location for the Initial
Well within ninety (90) days from the date of the proposal of such well by BP,
then the location proposed by BP shall be considered mutually agreeable by the
Parties.
The cost of drilling the Initial Well shall be based upon a reasonable, good
faith estimate for such costs in the AFE prepared and furnished by BP. The
Initial Well shall be drilled to a minimum of the Objective Depth, but BP, at
its option, may propose to drill deeper.
The proposal for the Initial Well, and all operations conducted pursuant
thereto, shall be governed by the provisions of the JOA. BP shall be the
designated operator under the JOA.
BP shall pay the EEX Carry through the drilling of the Initial Well to Objective
Depth (or such deeper depth as proposed by BP), which shall include the cost of
temporary abandonment or permanent abandonment of the Initial Well at its
ultimate total depth, as the case may be. The EEX Carry shall be limited to one
hundred and fifteen percent (115%) of the amount set forth in the AFE.
Thereafter, subject to the provisions of the next paragraph, all risk, costs and
expense on the Initial Well, and on the Prospect where the Initial Well was
drilled, shall be shared by the Parties on a proportionate basis, as per the
JOA.
After reaching Objective Depth in the Initial Well (or such deeper depth as
proposed by BP), but prior to rig release for the Initial Well, should BP elect
to participate in a proposal that results in a deepening operation as defined in
the JOA, then BP shall pay the EEX Carry for such deepening operation in the
same manner as provided in the immediately preceding paragraph, subject to the
limits as set forth therein.
SECTION 8-FULL EXPENDITURE OF PROJECT COSTS
As of January 1, 2004, if BP has timely commenced the drilling of the Initial
Well, but has not fully spent, or incurred binding commitments to spend, the
Project Costs, it shall pay to EEX the
-7-
difference (if any) between five million dollars ($5,000,000.00) and the amount
of Project Costs actually spent, or contractually committed to be spent, by BP.
SECTION 9-INITIAL WELL-TERMINATION EVENTS
If BP elects, at its option, not to timely commence the Initial Well, or, if
timely commenced, to, a) drill the Initial Well to Objective Depth (or a
Substitute Well); or b) spend one hundred and fifteen percent (115%) of the
amount set forth in the AFE the result shall be:
1. Termination of this Agreement; and,
2. BP being obligated to pay EEX within ten (10) days from
termination of this Agreement, the difference (if any) between
five million dollars ($5,000,000.00) and the amount of Project
Costs actually spent, or contractually committed to be spent, by
BP as of such date of termination; and
3. EEX shall be entitled to exercise its Right of Repurchase.
Notwithstanding the foregoing consequences and obligations set forth in this
Section:
A) Initial Well Encounters Adverse Downhole Conditions: In the event,
. the Initial Well is timely commenced,
. reaches a minimum depth of 18,000 feet true vertical depth; and,
. BP is unable to drill deeper due to Adverse Downhole Conditions
and elects not to timely commence a Substitute Well,
BP shall not be subject to the consequences or obligations set forth
previously in this Section if it provides written notice to EEX within
thirty (30) days of rig release of such well, of its commitment to
timely drill the Second Well. Such written notice shall be accompanied
by depth restricted assignment of all of BP's interest in the Leases
listed in Exhibit "A" the Prospect upon which the Initial Well was
drilled, limited to only those rights below the total depth drilled in
the Initial Well. Such depth restricted assignment shall be at no cost
to EEX and the interest assigned therein shall be subject to no
burdens other than those existing on such interests at the time of
BP's acquisition thereof.
Concurrent with the partial assignment by BP under 9A) the JOA shall
terminate for the Prospect as to those depths assigned by BP to EEX,
and the AMI for such Prospect shall terminate in its entirety to all
depths. Notwithstanding anything to the contrary herein, EEX has no
Right of Repurchase for any interest above the total depth drilled in
the Initial Well as to those Leases in the Prospect on which the
Initial Well was drilled.
B) Initial Well is the Shallow Discovery: In the event the Initial Well
reaches a minimum depth of 18,000 feet true vertical depth and BP
determines that it is a Shallow Discovery, BP shall not be subject to
the consequences or obligations set forth previously in this Section
if, within ninety (90) days (if Shallow Discovery is at a shallower
depth than 18,000') or one hundred fifty (150) (if Shallow Discovery
is at a deeper depth than 18,000') from rig release from the Shallow
Discovery, BP i) commences and diligently pursues operations to
appraise and/or develop the Shallow Discovery, and; ii) bears the
portion of the EEX Carry for the Initial Well (if any) that was not
expended in the drilling of the Shallow Discovery. Failure by BP to
meet the conditions of i) and ii) herein shall result in:
-8-
. termination of future rights to be gained by the Parties under
this Agreement; and,
. BP being obligated to pay EEX within ten (10) days from
termination of this Agreement, the difference (if any) between
five million dollars ($5,000,000.00) and the amount of Project
Costs actually spent, or contractually committed to be spent, by
BP; and,
. EEX shall be entitled to exercise its Right of Repurchase.
SECTION 10-DRILLING OF THE SECOND WELL
BP shall have the option to commence the drilling of the Second Well within one
hundred and eighty (180) days from the date of rig release on the Initial Well.
The Second Well shall be drilled at a location mutually agreeable to the
Parties. BP shall provide EEX with notice of its proposed location no later than
one hundred and twenty (120) days prior to commencement of such well. In event
the Parties cannot agree on the location for the Second Well within ninety (90)
days from the date of the proposal of such well by BP, then the location
proposed by BP shall be considered mutually agreeable by the Parties.
The cost of drilling the Second Well shall be based upon a reasonable, good
faith estimate for such costs in the AFE prepared and furnished by BP.
The Second Well shall be drilled to a minimum of the Objective Depth, but BP, at
its option, may propose to drill deeper.
The proposal for the Second Well, and all operations conducted pursuant thereto,
shall be governed by the provisions of the JOA. BP shall be the designated
operator under the JOA.
BP shall pay the EEX Carry through the drilling of the Second Well to Objective
Depth or such deeper depth as proposed by BP), which shall include the cost of
temporary abandonment or permanent abandonment of the Second Well at its
ultimate total depth, as the case may be. The EEX Carry shall be limited to one
hundred and fifteen percent (115%) of the amount set forth in the AFE.
Thereafter, subject to the provisions of the next paragraph, all risk, costs and
expense on the Second Well, and on the Prospect where the Second Well was
drilled, shall be shared by the Parties on a proportionate basis, as per the
JOA.
After reaching Objective Depth in the Second Well (or such deeper depth as
proposed by BP), should BP elect to participate in a proposal that results in a
deepening operation as defined in the JOA, then BP shall pay the EEX Carry for
such operation in the same manner as provided in the immediately preceding
paragraph, subject to the limits as set forth therein.
SECTION 11-SECOND WELL-TERMINATION EVENTS
If BP elects, at its option, not to timely commence the Second Well, or, if
timely commenced, to, a) drill the Second Well (or a Substitute Well) to
Objective Depth; or b) spend one hundred and fifteen percent (115%) of the
amount set forth in the AFE the result shall be:
1. Termination of future rights to be gained by the Parties under
this Agreement, subject to BP's retention of any rights or
interests above the total depth drilled in the Initial Well as to
those Leases in the Prospect on which the Initial Well was
drilled; and,
-9-
2. EEX may exercise its Right of Repurchase. However, in this event,
the Right of Repurchase, as to those Leases in the Prospect on
which the Initial Well was drilled, shall be limited to those
rights below the total depths drilled in the Initial Well.
Notwithstanding the foregoing consequences and obligations set forth in this
Section:
A) Second Well Encounters Adverse Downhole Conditions: In the event,
. the Second Well is timely commenced, and;
. reaches a minimum depth of 18,000 feet true vertical depth; and,
. BP is unable to drill deeper due to Adverse Downhole Conditions and
elects not to timely commence a Substitute Well,
BP shall not incur the foregoing consequences or obligations set forth
previously in this Section if it provides written notice to EEX within
thirty (30) days of rig release of such well, of its commitment to timely
drill the Third Well. Such written notice shall be accompanied by
assignment of all of BP's interest in the Leases listed in Exhibit "A" in
the Prospect upon which the Second Well was drilled, limited to those
rights below the total depth drilled in the Second Well. Such assignment
shall be at no cost to EEX and the interest assigned therein shall be
subject to no burdens other than those existing on such interests at the
time of BP's acquisition thereof; or,
B) Second Well is the Shallow Discovery: Provided BP has not previously
declared the Initial Well as the Shallow Discovery, and the Second Well
reaches a minimum depth of 18,000 feet true vertical depth, and BP
determines that it is a Shallow Discovery, BP shall not be subject to the
consequences or obligations set forth previously in this Section if, within
ninety (90) days (if Shallow Discovery is at a shallower depth than
18,000') or one hundred ten (110) (if Shallow Discovery is at a deeper
depth than 18,000') from rig release from the Shallow Discovery, BP i)
commences and diligently pursues operations to appraise and/or develop the
Shallow Discovery, and; ii) bears the portion of the EEX Carry for the
Second Well (if any) that was not expended in the drilling of the Shallow
Discovery. Failure by BP to meet the conditions of i) and ii) herein shall
result in:
. termination of future rights to be gained by the Parties
under this Agreement; subject to BP's retention of any
rights or interests above the total depth drilled in the
Initial Well as to those Leases listed in Exhibit "A" in the
Prospect on which the Initial Well was drilled, and,
. EEX may exercise its Right of Repurchase, subject to BP's
retention of rights or interests in the Prospect for the
Initial Well above the total depth drilled in the Initial
Well. However, as to the Prospect upon which the Initial
Well was drilled, the Right of Repurchase shall be limited
to those rights below the total depth drilled in the Initial
Well. Such assignment shall be at no cost to EEX and the
interest assigned therein shall be subject to no burdens
other than those existing on such interests at the time of
BP's acquisition thereof.
Concurrent with the assignment by BP under 11A) or 11B), the JOA shall
terminate for the Prospect(s) as to those depths assigned by BP to EEX, and
the AMI for such Prospect(s) shall terminate in its entirety as to all
depths. Notwithstanding anything to the contrary herein, EEX has no Right
of Repurchase for any interest above the total depth drilled in the Initial
Well (or Second Well, if applicable for 11A) ) as to those Leases listed in
Exhibit "A" in the Prospect on which the Initial Well was drilled (or
-10-
Second Well, as applicable for 11A) ) on a Prospect by Prospect basis. The
Right of Repurchase shall not apply if BP timely commences to appraise
and/or develop the Shallow Discovery.
SECTION 12-DRILLING OF THE THIRD WELL
BP shall have the option to commence the drilling of the Third Well within one
hundred twenty (120) days from the date of rig release on the Second Well. The
Third Well shall be drilled at a location mutually agreeable to the Parties. In
event the Parties cannot agree on the location for the Third Well within sixty
(60) days from the date of the proposal of such well by BP, then the location
proposed by BP shall be considered mutually agreeable by the Parties.
The cost of drilling the Third Well shall be based upon a reasonable, good faith
estimate for such costs in the AFE prepared and furnished by BP.
The Third Well shall be drilled to a minimum of the Objective Depth, but BP, at
its option, may propose to drill deeper.
The proposal for the Third Well, and all operations conducted pursuant thereto,
shall be governed by the provisions of the JOA. BP shall be the designated
operator under the JOA.
Subject to the provisions of the next paragraph, BP shall pay the EEX Carry
through the drilling of the Third Well to Objective Depth (or to such deeper
depth as proposed by BP), which shall include the cost of temporary abandonment
or permanent abandonment of the Third Well at its ultimate total depth, as the
case may be. The EEX Carry shall be limited to one hundred and fifteen percent
(115%) of the amount set forth in the AFE. Thereafter, subject to the provisions
of the next paragraph, all risk, costs and expense on the Third Well, and on the
Prospect where the Third Well was drilled, and in the Treasure Island Project,
shall be shared by the Parties on a proportionate basis, as per the JOA.
In the event that either the Initial Well or Second Well has tested the
Cretaceous Section, then BP shall be obligated to pay only one-half of the EEX
Carry in the drilling of the Third Well (i.e. EEX shall pay one half of its cost
share for the drilling of the Third Well in this event). As to the remaining
Working Interest of EEX in the Prospect not subject to the EEX Carry for the
Third Well, EEX shall make its election concerning participation in the Third
Well as provided in the JOA.
Should BP elect to participate in a proposal that results in a deepening
operation as defined in the JOA, then BP shall pay the EEX Carry for such
deepening operation in the same manner as provided previously in this Section,
subject to the limit as set forth therein.
SECTION 13-THIRD WELL-TERMINATION EVENTS
If BP elects, at its option, not to timely commence the Third Well, or, if
timely commenced, to, a) drill the Third Well (or a Substitute Well) to
Objective Depth; or b) spend one hundred and fifteen percent (115%) of the
amount set forth in the AFE; the result shall be:
1. Termination of future rights to be gained by the Parties under this
Agreement, subject to BP's retention of any rights or interests above
the total depths drilled in the Initial and Second Wells, on a
Prospect by Prospect basis; and,
-11-
2. EEX may exercise its Right of Repurchase. However, in this event, the
Right of Repurchase, as to those Leases in the Prospects on which the
Initial Well and Second Well were drilled, shall be limited to those
rights below the total depths drilled in the Initial Well and Second
Well, on a Prospect by Prospect basis.
Notwithstanding the foregoing consequences and obligations set forth in this
Section:
A) Third Well Encounters Adverse Downhole Conditions: In the event,
. the Third Well is timely commenced, and;
. reaches a minimum depth of 18,000 feet true vertical depth; and,
. BP is unable to drill deeper due to Adverse Downhole Conditions and
elects not to commence a Substitute Well,
BP shall within ten (10) days from rig release, assign EEX all rights of
BP's interest in the Leases listed in Exhibit `A" in the Prospect upon
which the Third Well was drilled, limited to those rights below the total
depth drilled in the Third Well. Such assignment shall be at no cost to EEX
and the interest assigned therein shall be subject to no burdens other than
those existing on such interests at the time of BP's acquisition thereof;
or,
B) Third Well is the Shallow Discovery: Provided BP has not previously
declared the Initial Well or Second Well as the Shallow Discovery, and the
Third Well reaches a minimum depth of 18,000 feet true vertical depth, BP
may determine the well to be a Shallow Discovery, and shall not be subject
to the consequences or obligations set forth previously in this Section if,
within ninety (90) days (if Shallow Discovery is at a shallower depth than
18,000') or one hundred ten (110) (if Shallow Discovery is at a deeper
depth than 18, 000') from rig release from the Shallow Discovery, BP i)
commences and diligently pursues operations to appraise and/or develop the
Shallow Discovery, and; ii) bears the portion of the EEX Carry for the
Third Well (if any) that was not expended in the drilling of the Shallow
Discovery. Failure by BP to meet the conditions of i) and ii) herein shall
result in:
. termination of future rights to be gained by the Parties under
this Agreement, subject to BP's retention of any rights or
interests as to those Leases listed in Exhibit "A" in the
Prospects on which the Initial Well and Second Well were drilled,
above the total depths drilled in the Initial and Second Wells,
on a Prospect by Prospect basis; and,
. EEX may exercise its Right of Repurchase. However, in this event,
the Right of Repurchase, as to those Leases in the Prospects on
which the Initial Well and Second Well were drilled, shall be
limited to those rights below the total depths drilled in the
Initial Well and Second Well, on a Prospect by Prospect basis.
Such assignment shall be at no cost to EEX and the interest
assigned therein shall be subject to no burdens other than those
existing on such interests at the time of BP's acquisition
thereof
Concurrent with the assignment by BP under 13A) or 13B), the JOA shall
terminate for the Prospect as to those depths assigned by BP to EEX, and
the AMI for such Prospect shall terminate in its entirety to all depths.
Notwithstanding anything to the contrary herein, EEX has no Right of
Repurchase for any interests above the total depth drilled in the Initial
Well and Second Well (or Third Well if applicablefor 13A) as to those
Leases listed in Exhibit "A" in the Prospects on which the Initial Well and
Second Well were
-12-
drilled (or Third Well, as applicable for 13A )), on a Prospect by Prospect
basis. The Right of Repurchase shall not apply if BP timely commences to
appraise and/or develop the Shallow Discovery.
SECTION 14- RIGHT TO OBTAIN THIRD PARTY SUPPORT
BP shall have the right to obtain third party support for the drilling of any
wells pursuant to this Agreement, and may show any Confidential Data (as defined
in the JOA) with respect to any wells drilled pursuant to this Agreement. BP
shall provide prior written notice to EEX that it intends to make Confidential
Data available to third Parties. EEX shall be granted the same right to make
Confidential Data available to third parties for the purpose of obtaining
support for any operation to be conducted pursuant to this Agreement that is not
subject to the EEX Carry. These rights shall be applied on a Prospect by
Prospect basis.
Prior to the commencement of the Third Well the interest of BP as covered by the
JOA shall not be subject to the provisions of the JOA concerning the
maintenance, sale or transfer of interest.
EEX shall have the right to sell, transfer or convey all or a portion of its
twenty-five percent (25%) interest in Leases subject to this Agreement to a
third party, but subject to the provisions of the JOA concerning the
maintenance, sale or transfer of interest.
SECTION 15-FORCE MAJEURE
All obligations of one party to the other parties hereto shall be suspended,
except the obligation to make payments hereunder, if and so long as the
performance of such obligation is prevented or hindered in whole or in part by
reason of fire, earthquake, action of the elements, strikes, riots, lockouts,
civil commotion, acts of the country's enemy, contractor delay, inability to
obtain the necessary material for the performance of such obligations on the
open market, or for any other cause except financial, whether similar or
dissimilar to those specifically enumerated herein (but not including Adverse
Downhole Conditions), which shall be beyond the reasonable control of the party
claiming such suspension ("Force Majeure"). Upon the occurrence of any such
Force Majeure event, any party claiming a suspension of obligations by reason
thereof shall verbally notify the other parties followed by a written
communication within seven (7) days, specifying in reasonable detail the reason
for non-performance. The party giving such notice shall thereafter exercise all
reasonable diligence to eliminate such cause, but it shall not be or become
obligated to settle any strike or lockout.
SECTION 16- TITLE REVIEW
16.1 Review of Title. EEX shall make available to BP, in EEX's offices
located at 2500 CityWest Blvd, Suite 1400, Houston, Texas 77042 all records in
EEX's possession or control relating to the title to the Leases, and BP shall be
entitled to review such records. BP shall have the right to receive from EEX
copies of any and all such title records.
SECTION 17- WARRANTY
17.1 Special Warranty of Title. EEX shall warrant and forever defend title
to the Leases conveyed to BP against every person whomsoever lawfully claiming
title to the
-13-
Leases or any part thereof by, through or under EEX, but not otherwise. The
conveyance of the Leases from EEX to BP shall be made with full substitution and
subrogation given in and to all of the rights and actions of warranty that EEX
may have against EEX's predecessors in title.
SECTION 18- EEX'S REPRESENTATIONS
AND WARRANTIES
EEX represents and warrants to BP that, as of the date of execution of this
Agreement:
18.1 Organization and Good Standing. EEX is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and
has all requisite corporate power and authority to own and lease the Leases. EEX
is duly licensed or qualified to do business as a foreign corporation and is in
good standing in all jurisdictions in which the Leases are located.
18.2 Corporate Authority; Authorization of Agreement. EEX has all
requisite corporate power and authority to execute and deliver this Agreement,
to consummate the transactions contemplated herein and to perform all of the
terms and conditions to be performed by it as provided for in this Agreement.
The execution and delivery of this Agreement by EEX, the performance by EEX of
all of the terms and conditions to be performed by it and the consummation of
the transactions contemplated herein have been duly authorized and approved by
all necessary corporate action. This Agreement has been duly executed and
delivered by EEX and constitutes the valid and binding obligation of EEX,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws relating
to or affecting the enforcement of creditors' rights and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity).
18.3 No Violations. Assuming expiration or termination of the applicable
waiting period under the Hart Scott Rodino (HSR) Act, if applicable, the
execution and delivery of this Agreement by EEX does not, and the fulfillment
and compliance with the terms and conditions hereof and the consummation of the
transactions contemplated herein, will not:
(a) Conflict with or require the consent of any person or entity
under any of the terms, conditions or provisions of the
certificate of incorporation or bylaws of EEX;
(b) Violate any provision of, or require any filing, consent or
approval under any law applicable to or binding upon EEX;
(c) Conflict with, result in a breach of, constitute a default under
or constitute an event that with notice or lapse of time, or
both, would constitute a default under, accelerate or permit the
acceleration of the performance required by, or require any
consent, authorization or approval under, (i) any mortgage,
indenture, loan, credit agreement or other agreement evidencing
indebtedness for borrowed money to which EEX is a party, by which
EEX is bound or to which the Leases are subject, or (ii) any
order, judgment or decree of any governmental entity; or
-14-
(d) Result in the creation or imposition of any lien or encumbrance
upon the Leases.
18.4 No Default. The Leases are in full force and effect in accordance
with their respective terms, and there exist no defaults in the performance of
any obligation thereunder. Additionally, EEX is not aware of any event that with
notice or lapse of time, or both, would constitute a default under any of the
Leases.
18.5 Absence of Certain Changes. Since the execution of the March 1, 2002
OCS Lease Sale 182 agreement, there has not been:
(a) A sale, assignment or other disposition of the Leases;
(b) A mortgage, pledge or grant of a lien or security interest in any
of the Leases; or
(c) A contract or commitment to do any of the foregoing.
18.6 Operating Costs. All costs and expenses incurred in connection with
the operation of the Leases have been fully paid and discharged by EEX, except
normal costs and expenses incurred in operating the Leases within the previous
thirty (30) Days or as to which EEX has not yet been billed.
18.7 Litigation. There is no action, suit or proceeding pending against
EEX or the Leases which could have a adverse effect on the value or operation of
the Leases or that would prevent the consummation of the transaction
contemplated by this Agreement.
18.8 Compliance with Laws. EEX is in compliance with all laws applicable
to the ownership, and, with respect to the Leases which EEX operates, operation,
maintenance or repair of the Leases, including all environmental laws applicable
to the ownership or operation of the Leases. EEX has not entered into and the
Leases are not subject to any agreements, consent orders, administrative orders
or similar obligation based on a violation or an alleged violation of
environmental laws.
18.9 Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by, or threatened against EEX.
18.10 Employment Matters. BP shall have no obligation to employ or consider
employing the employees of EEX. Additionally, BP shall not incur any liability
of any kind whatsoever with respect to employment matters of EEX or any
affiliate of EEX, including without limitation, liability for compensation or
other benefits as a consequence of consummating the transactions contemplated by
this Agreement, nor will the Leases be subject to any kind of lien or
encumbrance in connection with such employment matters.
18.11 Marketing Agreements. None of the Leases or production therefrom is
subject to any purchase agreement, sale agreements or similar marketing
arrangement.
18.12 Tax Partnerships. The Leases are not subject to any tax partnerships.
-15-
18.13 Tax Filings. All returns, statements and reports with respect to
taxes based upon, measured by or imposed with respect to the ownership or
operation of the Leases have been timely filed with the appropriate governmental
entity and all such taxes have been paid.
18.14 Non-Consent Operations. Since the execution of this Agreement, there
have been no operations under an operating agreement, unit agreement
or governmental order with respect to which EEX has become a
non-consenting party.
18.15 Defensible Title: Subject to and except for the Permitted
Encumbrances:
(a) EEX is entitled to receive not less than the "Net Revenue
Interests" set forth in Exhibit "A" of all oil, gas and
associated liquid and gaseous hydrocarbons produced, saved and
marketed from the Leases;
(b) EEX is obligated to bear costs and expenses relating to the
ownership, operation, maintenance and repair of the wells and
facilities located on or attributable to the Leases in an amount
not greater than the "Working Interests" set forth in Exhibit
"A".
(c) The Leases are free and clear of liens, encumbrances and
encroachments.
SECTION 19- BP'S REPRESENTATIONS AND WARRANTIES
19.1 Organization and Good Standing. BP is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own and lease the Leases.
BP is duly licensed or qualified to do business as a foreign corporation and is
in good standing in all jurisdictions in which the Leases are located.
19.2 Corporate Authority; Authorization of Agreement. BP has all requisite
corporate power and authority to execute and deliver this Agreement, to
consummate the transactions contemplated herein and to perform all the terms and
conditions to be performed by it as provided for in this Agreement. The
execution and delivery of this Agreement by BP, the performance by BP of all the
terms and conditions to be performed by it and the consummation of the
transactions contemplated herein have been duly authorized and approved by all
necessary corporate action. This Agreement has been duly executed and delivered
by BP and constitutes the valid and binding obligation of BP, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or other laws relating to or affecting the
enforcement of creditors' rights and general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
19.3 No Violations. Assuming expiration or termination of the applicable
waiting period under the HSR Act, if applicable, the execution and delivery of
this Agreement by BP does not, and the fulfillment and compliance with the terms
and conditions hereof by BP and the consummation of the transactions
contemplated herein, will not:
(a) Conflict with or require the consent of any person or entity
under any of the terms, conditions or provisions of the
certificate of incorporation or bylaws of BP;
-16-
(b) Violate any provision of, or require any filing, consent or
approval under any law applicable to or binding upon BP; or
(c) Conflict with, result in a breach of, constitute a default under
or constitute an event that with notice or lapse of time, or
both, would constitute a default under, accelerate or permit the
acceleration of the performance required by, or require any
consent, authorization or approval under, (i) any mortgage,
indenture, loan, credit agreement or other agreement evidencing
indebtedness for borrowed money to which BP is a party or by
which BP is bound, or (ii) any order, judgment or decree of any
governmental entity.
19.4 SEC Disclosure. BP is acquiring the Leases for its own account for
use in its trade or business, and not with a view toward or for sale in
connection with any distribution thereof, nor with any present intention of
making a distribution thereof within the meaning of the Securities Act of 1933,
as amended.
SECTION 20-ADDITIONAL ASSURANCES
20.1 Negative Assurances of EEX. From the Effective Date hereof until
execution of this Agreement, EEX represents that it has not:
(a) Waived any right relating to any of the Leases;
(b) Conveyed, encumbered, mortgaged, pledged or disposed of any
of the Leases;
(c) Entered into, modified or terminated any of the Leases; or
(d) Contracted or committed itself to do any of the foregoing.
20.2 Affirmative Assurances of EEX. From the Effective Date hereof until
execution of this Agreement, EEX represents that it has:
(a) Operated the Leases (where it is designated as operator) in
a prudent manner in accordance with good industry standards
and practices;
(b) Performed all its obligations in accordance with the terms
and conditions contained in the Leases;
(c) Maintained the oil and gas leases in full force and effect,
including without limitation, made all payments of
royalties, overriding royalties, delay rentals, minimum
royaltiesand similar payments which have become due;
(d) Maintained all required bonds related to the Leases;
(e) Filed or caused to be filed all reports or filings required
by any governmental entity having appropriate jurisdiction
relating to the ownership or operation of the Leases;
-17-
(f) Obtained BP's prior written consent before electing, voting
(whether affirmatively or negatively) or failing to vote
under any operating agreement, unit agreement or similar
agreement;
(g) Obtained BP's prior written consent before electing or
voting (whether affirmatively or negatively) under any order
of a governmental entity; and
(h) Consulted with BP prior to making any decision which could
have a material impact on the value or operation of the
Leases.
20.3 Notice of Loss. From the Effective Date hereof until execution of
this Agreement, EEX has promptly notified BP of any loss or damage to the
Leases, or any part thereof, known to EEX and exceeding Five Hundred Thousand
and No/100 Dollars (US$500,000.00).
20.4 Exclusive Negotiations. From the Effective Date hereof until the
execution date of this Agreement, EEX has not solicited from any person or
entity any proposals or offers, or entered into any negotiations, relating to
the interest in the Leases to be assigned to BP.
20.4 BP's Assumption of Obligations. Except as otherwise provided in this
Agreement, BP assumes and shall timely perform and discharge its proportionate
duties and obligations of the owner, to the extent applicable to the interest
being acquired, and as operator of the Leases relating to the period of time
after the execution of this Agreement and during the term of this Agreement;
provided, however, BP shall not assume responsibility for the following:
(a) Any condition existing as of the execution date of this
Agreement attributable to operations conducted by or on
behalf of EEX, including without limitations, spills,
releases, and disposal, sites;
(b) Any obligation, commitment, debt, lien or liability not
disclosed in writing by EEX to BP;
(c) Any litigation to the extent the claims are based on acts,
omissions, events or occurrences attributable to operations
conducted or actions taken or not taken prior to the
execution of this Agreement;
(d) Federal, state, local, or other tax liability to the extent
attributable to EEX's ownership or operation of the Leases
accruing prior to the Effective Date; or
(e) Federal, state, local, or other income tax liability to the
extent attributable to EEX's ownership or operation of the
Leases accruing prior to the execution of this Agreement.
20.6 Records. Within ten (10) Days after the execution of this Agreement,
EEX shall furnish to BP copies of all records pertinent to the Leases which are
maintained by or in the possession or control of EEX.
SECTION 21-ADMINISTRATIVE PROVISIONS
-18-
a. Assignability: Except as provided in Section 14, neither
Party shall have the right to transfer or assign its
interest in this Agreement (or the lands affected thereby).
b. Governing Law: This Agreement (and the incorporated exhibits
and attachments) shall be governed by the laws of the State
of Texas without reference to choice of law principles which
might refer matters in dispute to the law of another
jurisdiction.
c. Entire Agreement: This Agreement, including the
Confidentiality Agreements dated September 26, 2001 and
February 22, 2002 (except as expressly set forth in Section
22 hereof), OCS Lease Sale 182 Agreement dated March 1, 2002
and the Joint Bidding Agreement of the same date which are
deemed incorporated as if restated in their entirety
represents the entire Agreement by and between the Parties.
It may not be changed except by a written agreement executed
by all the Parties.
d. Incorporation of Exhibits: Each of the exhibits and
attachments attached to this Agreement are incorporated into
this Agreement by reference as fully as if the text of each
exhibit and attachment were set forth within the body of
this Agreement.
e. Severability: If any provision of this Agreement is for any
reason held in violation of any applicable law, governmental
rule or regulation, or if the provision is held to be
unenforceable or unconscionable, then the invalidity of that
specific provision shall not be held to invalidate the
remaining provisions of this Agreement. All other provisions
in the entirety of this Agreement (including all exhibits
and attachments) shall remain in full force and effect
unless the removal of the invalid provisions destroys the
legitimate purposes of this Agreement, in which event this
Agreement shall be canceled and terminated.
f. Binding Effect: Upon execution by all Parties, this
Agreement shall be binding upon and inure to the benefit of
the Parties, their successors and assigns. This Agreement
may be executed in multiple counterparts each of which shall
be deemed an original, and all of which when taken together
shall constitute but one in the same Agreement. This
Agreement does not benefit or create any rights in any
person or entity not a party to this Agreement.
g. Further Assurances: Each Party (including any related
entities successors or assigns) further agrees that it shall
take any and all steps and sign and execute any and all
documents and agreements reasonably necessary to implement
the terms of this Agreement. EEX agrees to provide all
necessary approvals necessary for BP to obtain permits and
to fulfill the obligations hereunder. Each Party further
agrees to refrain from taking any action, either expressly
or impliedly, which would have the effect of prohibiting or
hindering the performance of any Party to this Agreement.
The Parties agree that this Agreement may not be terminated,
nor shall a Party be deemed to be in default hereunder, if
any obligations owed by one Party to another are frustrated,
impeded, or
-19-
prevented by creditors, lenders, orders of courts or
government agencies.
h. Drafting of Agreement: BP and EEX each declare that they
have contributed to the drafting of this Agreement or have
had it reviewed by their counsel before signing it. It is
expressly agreed that this Agreement shall not be construed
against any Party on the basis of who drafted this Agreement
or who supplied the form of Agreement. Each Party agrees
that it has been purposefully drawn and correctly reflects
their understanding of this transaction that it
contemplates.
i. Notices: the Parties agree that for the purposes of giving
and receiving any notices under this Agreement, the
following persons are designated as authorized
representatives:
For BP:
E. P. Zseleczky, Jr.(Designated Representative)
Tel: (281) 366-0939
Fax: (281) 366-7569
Chris Wager (Alternate Representative)
Tel: (281) 366-7675
Fax: (281) 366-7569
501 WestLake Park Blvd.
Houston, Texas 77079
For EEX:
Ben Davis (Designated Representative)
Tel: (713) 243-3247
Fax: (713) 243-3422
Mike Padgett (Alternate Representative)
Tel: (713) 243-3559
Fax: (713) 243-3422
2500 CityWest Blvd., Suite 1400
Houston, Texas 77042
Except as otherwise specified in this Agreement, all
required notices and responses shall be made in writing and
delivered to the designated representative of the other
Party in person or by facsimile transmission (followed by a
phone call confirming receipt), U.S. Mail, overnight
express, or private courier service. Any notice, may be
given to the designated representative by telephone,
provided that such telephonic communication shall be
confirmed by each Party in writing within twenty four (24)
hours of the telephone call (Saturdays, Sundays and national
holidays excepted). Any notices and responses shall be
effective only when received by the designated
representative of the Party to whom such notice or response
is directed unless receipt is presumed under one of the
following circumstances:
. Any notice or response transmitted by facsimile
shall be deemed given and received only after the
receiving Party has confirmed receipt of such
facsimile by telephone.
-20-
. Any notice or response transmitted by overnight
express or courier shall be deemed given and received
twenty-four (24) hours (exclusive of Saturdays,
Sundays, and federal holidays) after such notice or
response is deposited or transmitted.
. Any notice or response by U.S. Mail (other than
overnight express) shall be deemed given and received
seventy-two (72) hours (exclusive of Saturdays,
Sundays, and federal holidays) after the notice or
response is deposited in the mail.
j. Waiver: Any failure by any party to comply with any of its
obligations, agreements or conditions herein contained may be
waived, by the party to whom such compliance is owed by an
instrument signed by the party to whom compliance is owed and
expressly identified as a waiver, but not in any other manner. No
waiver of, or consent to a change in, any of the provisions of
this Joint Venture Agreement shall be deemed or shall constitute
a waiver of, or consent to a change in, other provisions hereof
(whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
k. Waiver of Consequential Damages: Notwithstanding anything to
the contrary contained herein and except for subsection (g)
above, no Party to this Agreement shall be liable to any other
Party to this Agreement for damage to a reservoir(s), loss of
hydrocarbons, or for loss of profits or for other consequential
or business interruption damages.
l. Recitals. The parties to this Agreement acknowledge that the
Recitals set forth hereinabove are true and correct and are
incorporated into this Agreement and become an integral part
hereof.
m. No Further Obligation of EEX/Survival. Except as set forth in
the JOA and the representations, covenants and warranties which
survive the execution of this Agreement, after EEX has assigned
the Leases as contemplated in Section 3 hereinabove, EEX shall
have no further obligations to explore, develop or operate the
Leases
n. Confidentiality and Public Announcements. EEX and BP agree
that the terms and conditions of this Agreement are confidential
and proprietary. Neither EEX nor BP (including any of its
affiliates in either case) shall disclose the terms of this
Agreement to any third party, or issue a public statement or
press release with respect to the terms of this transaction
(including the consideration and other terms) without the prior
written consent of the other party, except as required by law or
listing agreement with a national security exchange and then only
after prior consultation with the other party.
SECTION 22-PREVIOUS AGREEMENTS
This Agreement shall replace and supersede the provisions of the following
agreements:
-21-
1. Paragraph 16 of that certain Confidentiality Agreement dated
September 26, 2001, by and between the Parties.
2. Paragraph 16 of that certain Confidentiality Agreement dated
February 22, 2002, by and between the Parties.
IN WITNESS WHEREOF, each Party, through its duly authorized agent or
representative, has executed this Agreement effective as of the date first above
written.
BP EXPLORATION & PRODUCTION INC.
By: /s/ O. Kirk Wardlaw
---------------------------------
O. Kirk Wardlaw
Attorney-in-Fact
EEX CORPORATION
By: /s/ Ben Davis
---------------------------------
Ben Davis
Land Manager-Offshore
-22-
EXHIBIT "A"
Attached to and made a part of that certain Joint Venture Agreement for the
Treasure Island Project
dated March 1, 2002 by and between
BP Exploration & Production Inc. and EEX Corporation
SECTION I: EEX Owned Leases
EXPIRATION
PROSPECT AREA NAME BLOCK NO. OCS-G DATE RI WI NRI
- ------------------------------------------------------------------------------------------------------------------------
Dawson S. Timbalier 188 21670 * 4/30/05 16.66667% 100.00000% 83.33333%
224 21673 4/30/05 16.66667% 100.00000% 83.33333%
226 21674 4/30/05 16.66667% 100.00000% 83.33333%
227 21675 4/30/05 16.66667% 100.00000% 83.33333%
Blackbeard, W. S. Timbalier 141 21665 4/30/05 16.66667% 100.00000% 83.33333%
142 21666 4/30/05 16.66667% 100.00000% 83.33333%
167 21668 4/30/05 16.66667% 100.00000% 83.33333%
168 21669 4/30/05 16.66667% 100.00000% 83.33333%
Blackbeard, E. S. Timbalier 144 21667 6/30/05 16.66667% 100.00000% 83.33333%
Morgan S. Timbalier 215 21672 4/30/05 16.66667% 100.00000% 83.33333%
Ship Shoal 211 22714 4/30/06 16.66667% 100.00000% 83.33333%
Ship Shoal 236 22716 4/30/06 16.66667% 100.00000% 83.33333%
Capt. Kidd Ship Shoal 260 ** 18020 6/30/02 16.66667% 20.00000% 16.26667% ***
261 ** 14506 HBP 16.66667% 25.00000% 20.83333%
263 21658 4/30/05 16.66667% 100.00000% 83.33333%
281 21660 4/30/05 16.66667% 100.00000% 83.33333%
282 22720 4/30/06 16.66667% 100.00000% 83.33333%
Bellamy Ship Shoal 306 22724 4/30/06 16.66667% 100.00000% 83.33333%
331 21661 4/30/05 16.66667% 50.00000% 41.66667%
Lafitte Eugene Island 222 22672 4/30/06 16.66667% 100.00000% 83.33333%
223 21640 4/30/05 16.66667% 100.00000% 83.33333%
Barataria S. Marsh Island 80 ** 14439 HBP 16.66667% 11.25000% 9.15000% ***
*Lease covers only S 1/2 and NE 1/4 of Block.
-23-
**Depth Limitations
SS 260 - EEX owns 20% WI below 12,000 ft TVD.
SS 261 - EEX owns 25% WI below 15,000'.
SMI 80 - S/2 N/2 N/2; S/2 N/2; S/2: EEX owns 11.25% WI below the
stratigraphic equivalent of the deepest productive reservoir
discovered in the field which is defined as the base of the
11200' Sand as seen in the OCS-G 14439 Well No. A-5 ST at
approximately 13,146' MD; and N/2 N/2 N/2: EEX owns 11.25% WI
below 9,000' subsea.
***Leases burdened by 2% ORRI in favor of Lee B. Backsen, et al.
SECTION II: Leases Acquired by the Parties at OCS Lease Sale No. 182
EXPIRATION
PROSPECT AREA NAME BLOCK NO. OCS-G DATE RI WI NRI
- -----------------------------------------------------------------------------------------------------------------
Morgan Ship Shoal 212 Pending 2007 16.66667% 100% 83.33333%
235 Pending 2007 16.66667% 100% 83.33333%
Blackbeard W. Ship Shoal 186 Pending 2007 16.66667% 100% 83.33333%
Bellamy Ship Shoal 309 Pending 2007 16.66667% 100% 83.33333%
310 Pending 2007 16.66667% 100% 83.33333%
Lafitte Eugene Island 201 Pending 2007 16.66667% 100% 83.33333%
SECTION III: Currently Existing Agreements
1. Offshore Operating Agreement attached as Exhibit "B-3" to that
certain Amended Acquisition & Management Agreement dated March 5,
1994, by and between General Atlantic Resources, Inc.,
General Atlantic Oils Ltd., General Atlantic Gulf Coast, Inc. and
Taurus Exploration U.S.A., Inc.,
covering OCS-G 14439 (South Marsh Island Block 80).
2. Offshore Operating Agreement dated August 1, 1997, by and between
UMC Petroleum Corporation,
Taurus Exploration U.S.A., Inc. and Smacko, Ltd., covering OCS-G
10820 (Ship Shoal Block 260).
3. Offshore Operating Agreement dated March 19, 1996, by and between
Enserch Exploration, Inc. and
Cairn Energy USA, Inc., covering OCS-G 14506 (Ship Shoal Block
261).
-24-
4. Offshore Operating Agreement dated May 1, 2000, by and between
Remington Oil & Gas Corporation and
EEX Corporation, covering OCS-G 21661 (Ship Shoal Block 331).
5. Letter Agreement dated January 22, 2002, by and between Aviara
Energy Corporation and EEX Corporation, covering OCS-G 22712
(Ship Shoal 188).
-25-
EXHIBIT "B-1"
Attached to and made a part of that certain
Joint Venture Agreement for the
Treasure Island Project dated March
1, 2002, by and between BP
EXPLORATION & PRODUCTION INC. and
EEX CORPORATION.
ASSIGNMENT OF RECORD TITLE INTEREST IN OIL AND GAS LEASE
OCS-G_________
______________
UNITED STATES OF AMERICA (S)
(S) KNOW ALL MEN BY THESE PRESENTS:
OUTER CONTINENTAL SHELF (S)
That ____________________________ ("Assignor"), whose address is
____________________________________________________, for and in consideration
of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable
consideration in hand paid by _______________, a _____ corporation,
("Assignee"), whose address is __________________________, the receipt and
sufficiency of which consideration are hereby acknowledged and confessed by
Assignor, does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER
and DELIVER unto Assignee, effective _____________ (the "Effective Date"), an
undivided 75% of Assignor's right, title and interest in and to:
That certain Oil and Gas Lease dated ____________, executed by the
United States of America, as "Lessor," to ______________________, as
"Lessee", covering Block ___ in the ____________________,
______________, OCS Leasing Map, ________________, OCS-G Lease No.
_____ (the "Lease").
said undivided _75% interest in and to the Lease being herein referred to as the
"Subject Interest".
As a result of the assignment of an undivided 75% interest in and to the Leases,
the interests in the Lease shall be held by the parties hereto in the
proportions set forth opposite their names below
EEX 25%
BP 75%
-26-
This Assignment is made by Assignor and accepted by Assignee subject to
the terms and provisions of (a) the Lease, including a pro rata part of the
burden of the lessor's royalties therein reserved, (b) that certain Asset
Purchase, Farmout, and Joint Exploration Agreement dated March 1, 2002, by and
between Assignor and Assignee. This Assignment is further subject to approval by
the Minerals Management Service of the U.S. Department of the Interior.
By its acceptance hereof, Assignee assumes, and agrees to be bound by,
all of the future obligations accruing after the Effective Date under the
Subject Interest, insofar as the same are attributable to the period after the
Effective Date. The terms and provisions of this Assignment shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
Assignor shall indemnify and hold Assignee harmless for any and all
claims, demands or causes of action arising from operations on or in any way
connected with the Lease before the Effective Date hereof.
TO HAVE AND TO HOLD the Subject Interest, together with all and
singular the rights and appurtenances thereunto in anywise belonging, unto
Assignee, its successors and assigns, forever, and Assignor does hereby bind
itself, its successors and assigns, to warrant and forever defend all and
singular the Subject Interest unto Assignee, its successors and assigns, against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, by, through or under Assignor, but not otherwise, subject, however, to
the matters set forth herein.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed in multiple counterparts, each of which shall be deemed an original
for all purposes but all of which shall constitute one and the same instrument,
on the dates of the respective acknowledgements set forth hereinbelow, to be
effective, however, for all purposes, as of the Effective Date.
WITNESSES:
ASSIGNOR:
______________________________
______________________________ BY: __________________________
NAME: _____________________
______________________________ TITLE: _______________________
ASSIGNEE:
______________________________
______________________________ BY: __________________________
NAME:_________________________
TITLE: _______________________
-27-
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
Be it known, that on this ______ day of ______________, ____, before me
the undersigned authority, personally came and appeared ___________________, of
___________________________, to me personally known, and known by me to be the
person whose genuine signature is affixed to the foregoing document, who signed
said document before me and in the presence of the two witnesses whose names are
thereto subscribed as such, being competent witnesses, and who acknowledged, in
my presence and in the presence of said witnesses, that he signed the above and
foregoing document as his own fee act and deed and for the uses and purposes
therein set forth and apparent.
In witness whereof, the said appearer has signed these presents and I
have hereunto affixed my hand and seal, together with the said witnesses on the
day and date first above written.
___________________________________________
Notary Public in and for the
State of Texas
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
Be it known, that on this ______ day of ______________, ____, before me
the undersigned authority, personally came and appeared
_________________________, of ____________________, a _____ Corporation, to me
personally known, and known by me to be the person whose genuine signature is
affixed to the foregoing document, who signed said document before me and in the
presence of the two witnesses whose names are thereto subscribed as such, being
competent witnesses, and who acknowledged, in my presence and in the presence of
said witnesses, that he signed the above and foregoing document as his own fee
act and deed and for the uses and purposes therein set forth and apparent.
In witness whereof, the said appearer has signed these presents and I
have hereunto affixed my hand and seal, together with the said witnesses on the
day and date first above written.
___________________________________________
Notary Public in and for the State of Texas
-28-
EXHIBIT "B-2"
Attached to and made a part of that certain
Joint Venture Agreement for the
Treasure Island Project dated March
1, 2002, by and between BP
EXPLORATION & PRODUCTION INC. and
EEX CORPORATION.
OCS-G _____
__________________
ASSIGNMENT OF OPERATING RIGHTS
UNITED STATES OF AMERICA (S)
(S) KNOW ALL MEN BY THESE
OUTER CONTINENTAL SHELF (S) PRESENTS:
That _______________, a _____ corporation, whose address is
__________________________ __________________________ ("Assignor"), for and in
consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and
valuable consideration in hand paid by ____________________________,
("Assignee"), whose address is ______________________________, the receipt and
sufficiency of which consideration are hereby acknowledged and confessed by
Assignor, does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER
and DELIVER unto Assignee, effective as of ._______________ (the "Effective
Date"), an undivided _______% interest in and to:
The entire (i.e. 100%) operating rights in and to the following
described oil and gas lease, to-wit:
That certain Oil and Gas Lease dated ____________, executed by the
United States of America, as "Lessor," to _______________, as "Lessee,"
covering Block ____ in the ____________ Area of the Outer Continental
Shelf, OCS Official Protraction Diagram, _______, OCS-G Lease No.
______ (the "Lease").
(the "Subject Lands");
said undivided ________% interest in and to the operating rights in and to the
Lease insofar as the Lease covers the Subject Lands being herein referred to as
the "Subject Interest".
As a result of this Assignment, ownership of the operating rights owned
by Assignor in the Lease insofar as such operating rights pertain to the Subject
Lands, immediately prior to the Effective Date (being an undivided _________%
interest in the entire (i.e. 100%) operating rights in and to the Lease insofar
as such operating rights pertain to the "Subject Lands") shall be held by the
parties hereto in the proportions set forth opposite their names below:
-29-
_________________________________ _______%
Total %
This Assignment is made by Assignor and accepted by Assignee subject to the
terms and provisions of (a) the Lease, including a pro rata (i.e., ________%)
part of the burden of the lessor's royalties therein reserved, and (b) that
certain Asset Purchase, Farmout, and Joint Exploration Agreement between
Assignor and Assignee dated as of March 1, 2002. This Assignment is further
subject to approval by the Minerals Management Service of the U.S. Department of
the Interior.
By its acceptance hereof, Assignee assumes, and agrees to be bound by,
all of the future obligations accruing after the Effective Date under the
Subject Interest insofar as the same are attributable to the period after the
Effective Date. The terms and provisions of this Assignment shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
TO HAVE AND TO HOLD the Subject Interest, together with all and
singular the rights and appurtenances thereunto in anywise belonging, unto
Assignee, its successors and assigns, forever, and Assignor does hereby bind
itself, its successors and assigns, to warrant and forever defend all and
singular the Subject Interest unto Assignee, its successors and assigns, against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, by, through or under Assignor, but not otherwise, subject, however, to
the matters set forth herein.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed in multiple counterparts, each of which shall be deemed an original
for all purposes but all of which shall constitute one and the same instrument,
on the dates of the respective acknowledgments set forth hereinbelow, to be
effective, however, for all purposes, as of the Effective Date.
WITNESSES:
ASSIGNOR:
______________________________
By:____________________________
Name: _________________________
Title: ________________________
______________________________
ASSIGNEE:
______________________________
By: ___________________________
Name:__________________________
______________________________ Title:_________________________
-30-
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
On this ______ day of ______________, ____, before me, appeared
__________________________, of __________________________, a _____ Corporation,
to me personally known and known by me to be the person whose genuine signature
is affixed to the foregoing document, who signed said document before me and in
the presence of the two witnesses whose names are thereto subscribed as such,
being competent witnesses, and who acknowledged, in my presence and in the
presence of said witnesses, that he signed the above and foregoing document as
his own free act and deed and for the uses and purposes therein set forth and
apparent.
In witness whereof, the said appearer has signed these presents and I
have hereunto affixed my hand and seal on the day and date first above written.
----------------------------------------------
Notary Public in and for the State of Texas
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
On this ______ day of ______________, ____, before me, appeared
__________________________, of __________________________, a _____ Corporation,
to me personally known and known by me to be the person whose genuine signature
is affixed to the foregoing document, who signed said document before me and in
the presence of the two witnesses whose names are thereto subscribed as such,
being competent witnesses, and who acknowledged, in my presence and in the
presence of said witnesses, that he signed the above and foregoing document as
his own free act and deed and for the uses and purposes therein set forth and
apparent.
In witness whereof, the said appearer has signed these presents and I
have hereunto affixed my hand and seal on the day and date first above written.
---------------------------------------------------
Notary Public in and for the State of Texas
-31-
EXHIBIT "C"
Attached to and made a part of that certain
Joint Venture Agreement for the
Treasure Island Project dated March
1, 2002, by and between BP
EXPLORATION & PRODUCTION INC. and
EEX CORPORATION.
AREA OF MUTUAL INTEREST (AMI)
PROSPECT NAME Area Name Block Numbers
Dawson South Timbalier 160, 161, 176-180, 184-
189, 204-204, 223-228,
232-235, 252, 253, 262,
263
Blackbeard West Ship Shoal 186-190
South Timbalier 141, 142, 167-170
Blackbeard East South Timbalier 108-110, 143-145, 164-
166, 171-173, 192, 193,
201
Morgan Ship Shoal 209-214, 234-237, 258,
259
South Timbalier 196-198, 214-217
Bellamy Ship Shoal 285, 286, 305, 306,
308-310, 329-331
Captain Kidd Ship Shoal 238, 256, 257, 260-263
280-282
Lafitte South Marsh Island 62-65
Eugene Island 200, 201, 221-225, 241-
244
Barataria South Marsh Island 77-81
-32-
EXHIBIT "D"
Attached to and made a part of that certain Joint
Venture Agreement for the Treasure Island
Project dated March 1, 2002, by and between
BP EXPLORATION & PRODUCTION INC. AND EEX
CORPORATION.
Form of Joint Operating Agreement ("JOA")
INSERT JOA HERE
-33-
EXHIBIT "E"
Attached to and made a part of that certain
Joint Venture Agreement for the
Treasure Island Project dated March 1,
2002, by and between BP EXPLORATION &
PRODUCTION INC. AND EEX CORPORATION.
Repurchase Price-Properties
Property No. 1 (9M-07020)
An undivided one-fourth (1/4) mineral interest in an 88.36 acre tract in the
SE/4NE/4 and the E/2NE/4 of Section 3, Township 9 North, Range 12 West, Van
Buren County, Arkansas.
Property No. 2 (9M-12004)
An undivided eleven and four-tenths (11.4) mineral interest in 175.5 acres in
three tracts in Sections 8,17 and 20, Township 7 South, Range 18 East, Alachua
County, Florida.
Property No. 3 (9R-04006)
An undivided one one-hundredth (1/100/th/) royalty interest in the E/2 of
Section 8, Township 27 North, Range 2 West, Pondera County, Montana.
-34-