FIRST AMENDMENT TO JOINT OPERATING
AGREEMENT OF 1 ST AUGUST, 1995
RELATING TO OIL PROSPECTING LICENCE 75
This FIRST AMENDMENT (the "First Amendment") TO JOINT OPERATING AGREEMENT OF
1ST AUGUST, 1995 RELATING TO OIL PROSPECTING LICENCE 75 is entered into on
the 14th day of January, 1996 by and between ATLAS PETROLEUM INTERNATIONAL
LIMITED ("Atlas") and SUMMIT OIL & GAS WORLDWIDE L TD. ("SOGW").
Atlas, as Operator, and SOGW, as Technical Advisor, entered into that certain
Joint Operating Agreement of 1 st August, 1995 Relating to Oil Prospecting
Licence 75 (the "JOA") to govern all continuing operations on Oil Prospecting
Licence 75 covering Block 75 off the coast of the Federal Republic of Nigeria
("OPL 75");
Atlas and SOGW have successfully drilled 2 wells on OPL 75 called the Ejulebe
Nos. 1 & 2 Wells located in the northeast section of OPL 75 in an area known
as the Ejulebe Field;
CXY Nigeria Oilfield Services Ltd. ("CXY"), a Barbados corporation and wholly
owned subsidiary of Canadian Occidental Petroleum Ltd., proposed that Atlas
and SOGW subcontract CXY to provide certain service operations on OPL 75 to
Atlas and SOGW;
Atlas and SOGW have reached an agreement with CXY which sets for the terms
and conditions of the agreements pursuant to which Atlas and SOGW will engage
CXY to provide certain services to Atlas and SOGW as service subcontractor
(the "CXY Service Subcontract"). Defined terms from the CXY Service
Subcontract, if not defined herein or the JOA, are adopted by reference.
The Board of Directors of Atlas, SOGW and CXY and the Management Committee
for the Atlas/Summit Venture for OPL 75 have each approved the terms of the
CXY Service Subcontract and authorized the respective parties to enter into
the CXY Service Subcontract. The Board of Directors of Atlas and SOGW have
each also approved the terms of this First Amendment.
SOGW has agreed to relinquish certain rights it has under the JOA with
respect to the activities to be covered under the CXY Service Subcontract.
Under the JOA, SOGW is relieved of certain funding obligations:
Atlas and SOGW have agreed to amend the JOA by this First Amendment to
implement their agreements with respect to the CXY Service Subcontract.
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NOW, THEREFORE, in consideration of these premises and the mutual agreements
and undertakings herein set forth, Atlas and SOGW agree to amend the JOA for
all activities conducted under the CXY Service Subcontract as set forth
below. All operations conducted or to be conducted on areas not subject to
the CXY Service Subcontract (or a similar service subcontract with CXY) shall
continue to be operated under the JOA and the amendments provided for below
shall not apply to such areas.
SERVICE SUBCONTRACT WITH CXY: Pursuant to the terms and conditions of the CXY
Service Subcontract, CXY shall serve as service subcontractor to Atlas and
SOGW. Atlas shall continue as Operator and SOGW as Technical Advisor for OPL
75. The CXY Service Subcontract only covers the Ejulebe Field Area (15,000
acres) and two additional Exploration Blocks of approximately 15,000 acres,
it also shall cover for purposes of the seismic survey only, the area of OPL
75 covered by the seismic survey. All other operations on OPL 75 shall
continue to be conducted pursuant to the terms of the JOA.
Agreements with Respect to Specific Provisions of CXY Service Subcontract
1. Additional Prospects.
In the event Atlas and SOGW agree to engage CXY to develop other areas of OPL
75 consisting of approximately 15,000 acres (an "Additional Prospect") under
a service subcontract with CXY, such service subcontract shall be on terms
mutually agreeable to all Parties.
2. Capital Costs.
SOGW shall endeavor to refinance the Capital Costs under the CXY Service
Subcontract after one year on terms which must be acceptable to both Atlas
and SOGW.
Payout under the JOA. The provisions regarding Payout under the JOA shall
remain unchanged until Payout. Subject to verification by the Subcommittee
for Cost Verification, Payout shall occur when SOGW has recovered all costs
and expenses incurred by SOGW under the JOA. The charges related to the
Ejulebe NO.2 Well which are, under the CXY Service Subcontract to be treated
as a Capital Cost at the Effective Date shall not be included in the Payout
amount. To the extent SOGW advances its own funds to fund operations under
the JOA, SOGW shall continue to be entitled to the charges provided for under
the JOA.
Amendments to JOA
Article 3 -Participating Interest and Cost Sharing Agreements.
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Section 3.1 -Insert at the end of Section 3.1:
After Payout, SOGW hereby relinquishes to Atlas seven and half (7 1/2%)
percent of its participating interest in areas of OPL 75 covered by the CXY
Service Subcontract. This brings the interest of the parties after Payout to
Atlas seventy-seven and half percent (77 1/2% ), Summit twenty-two and half
percent (22 1/2%) with respect to and only with respect to the CXY Contract
Area under the CXY Service Subcontract.
Section 3.2 -Insert at the beginning of Section 3.2:
For activities under CXY Service Subcontract, all Petroleum Costs, all costs
of well incurred on any Oil Mining Lease relating to OPL 75 and all Operating
Costs shall be provided by CXY, not SOGW.
Section 3.2.4 -Insert new Section 3.2.4:
SOGW shall continue to be responsible for the monthly stipend of $20,000 per
month for operation of the Atlas office prior to Payout; provided that upon
commencement of initial production from OPL 75, SOGW shall fund an additional
$20,000 per month until the obligation to fund overhead expires.
Section 3.3 -Add to the end of Section 3.3:
After Payout, Atlas and SOGW shall each be responsible for overhead of their
respective operations.
Nothing in this agreement prevents Atlas or Summit from solely funding
operations in the Contract Area pursuant to the terms of Exhibit "E" of the
JOA.
Article 5 -Annual Work Programs and Budgets.
Section 5.1 -Insert at the beginning of Section 5.1:
For all activities under the CXY Service Subcontract, proposals for Joint
Programs and Joint Budgets, which are referred to as Development Plans, Work
Programs and Budgets therein, shall be prepared by CXY in consultation with
Atlas and approvals thereof shall be in accordance with the terms of the CXY
Service Subcontract.
Section 5.4 -Insert at the beginning of Section 5.4:
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OPL 75 1st Amendment to JOA
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For all activities under CXY Service Subcontract, AFE's shall be governed by
the procedures set out in the CXY Service Subcontract.
Article 6 -Rights and Obligations of the Parties.
Under Technical Advisor (Section 6.1), add after the first sentence in the
introduction:
For all activities under the CXY Service Subcontract, funding both before and
after Payout for both Atlas and SOGW shall be provided by CXY; however, SOGW
shall continue to be responsible for the monthly stipend of $20,000 for
overhead of the Atlas office prior to Payout which shall increase in
accordance with Section 3.2.4 above.
Under Technical Advisor (Section 6.1) add as new subparagraph (m);
(m) For all activities under the CXY Service Contract, SOGW shall
continue to advise Atlas as Technical Advisor.
Under Section 6.2 (Operator), add after the first sentence in the
introduction:
For all activities under the CXY Service Subcontract, all activities shall be
conducted under the general direction of Atlas as Operator by CXY as service
subcontractor, with advice from SOGW as Technical Advisor.
Article 7 -Management Committee.
The provisions regarding the Management Committee remains the same except
that presentations concerning discoveries on the Ejulebe Field or either
Exploration Block as to proposed work programs and budgets shall be presented
to Atlas and SOGW by CXY for approval.
Article 8 -Insurance.
As to all activities conducted under the CXY Service Subcontract, Atlas and
SOGW shall require that CXY provide all necessary and appropriate insurance
coverage (including coverage for secondees) and add Atlas and SOGW as
additional insureds.
Article 9 -Costs and Accounting.
Except as modified by the CXY Service Subcontract and as follows, the
accounting procedures and the allocation of cost recovery rights shall remain
as stated in Article 9 of the JOA.
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Section 9.4.4
Section 9.4.4 which provides for a Reserve Fund, shall not apply with respect
to all activities under the CXY Service Subcontract.
Section 9.4.5 - Add as (iii);
(iii) The provisions of Section 9.4.5 shall continue in full force and effect
until Payout; the amount which constitutes Payout shall be subject to
verification by the Cost Verification Subcommittee of the Management
Committee and shall be reduced by any of Past Costs actually reimbursed to
SOGW by CXY under the CXY Service Subcontract.
Article 10 -Disposal of Petroleum.
Section 10.1 -Insert at the beginning of Section 10.1:
The rights of the parties to dispose of Petroleum both before and after
Payout shall be modified by the CXY Service Subcontract with respect to
Petroleum produced from areas operated under the CXY Service Subcontract.
Article 17.3
In all cases in the CXY Service Subcontract or the Brokerage Agreement where
Atlas and Summit are required to nominate an arbitrator, the operator shall
exercise such rights.
Under Article 7 of the CXY Service Subcontract, the operating Committee
established thereby is composed of 1 representative of Operator and 1
representative of Technical Advisor before Payout. Decisions of the Operating
Committee before Payout shall be unanimous. After Payout, the representation
of Operator on the Operating Committee shall increase from 1 to 2
representatives and decisions of the Operating Committee after Payout shall
be by majority vote.
Exhibit C -Accounting Procedure
The Accounting Procedures in Exhibit C are modified by and amended to the
extent required to accommodate the provisions of CXY Service Subcontract.
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Exhibit D -Technical Services.
Section 2 -Duties and Responsibilities.
The duties and responsibilities of the Technical Advisor are modified with
respect to areas covered by the CXY Service Subcontract. Under those areas
covered by the CXY Service Subcontract, activities shall be conducted by CXY.
Plans and budgets for such activities shall be prepared by CXY and must be
approved by Atlas and SOGW.
Section 4.1 -Cost of Services
As to all activities conducted under the CXY Service Subcontract, the
provision entitling SOGW as Technical Advisor to charge 105% of actual goods
and services is deleted.
Section 4.2 -Administrative Overhead.
As to all operations conducted under the CXY Service Subcontract, the
provisions entitling SOGW as Technical Advisor to charge 8% of Exploration
and Drilling Costs, 6% of Development Expenditures and 5% of Operating
Expenses as Administrative Overhead are deleted.
Interest on Funds Advanced by CXY
With respect to all funds advanced by CXY under Service Subcontract, SOGW
shall not be entitled to assess any interest charge under the JOA.
IN WITNESS WHEREOF, Atlas and SOGW have executed this First Amendment this
14th day of January, 1996.
ATLAS PETROLEUM INTERNATIONAL LIMITED
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BY Prince Arthur Eze, Chairman
SUMMIT GAS & OIL WORLDWIDE LTD.
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BY:
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ITS:
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OPL 75 1st Amendment to JOA
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