AGREEMENT BETWEEN
CXY NIGERIA OIL FIELD SERVICES LTD. (CXY)
ATLAS PETROLEUM INTERNATIONAL (ATLAS) ,
- -AND
SUMMIT OIL AND GAS WORLDWIDE LTD (SOGW}
CXY, ATLAS AND SOGW AGREE AS FOLLOWS:
1. ATLAS AND SOGW AGREE TO, AND THE OPERATING COMMITTEE SHALL IMMEDIATELY
APPROVE, ALL MATTERS LISTED ON ATTACHED SCHEDULE "A" (INCLUDING ASSOCIATED
PO'S) ENTITLED "RESOLUTIONS OF THE OPERATING COMMITTEE".
2. THE ATTACHED ECONOMICS AND CALCULATION PROCEDURES, FROM THE JUNE 21, 1997
LETTER BY CXY (THE COVER LETTER, SCHEDULE "B" AND SCHEDULE "C") ARE APPROVED
AS DEMONSTRATING THE SERVICE FEE AND CORPORATE CHARGE.
3. CXY IS RELIEVED FROM DRILLING THE REMAINING OBLIGATORY EXPLORATION WELL.
ALL RIGHTS EARNED BY CXY OUTSIDE OF THE EJULEBE DEVELOPMENT BLOCK WITHIN
OML-l 09 AREA ARE FORFEITED.
4. THE STORAGE AND HANDLING FEE TO CONOCO ENERGY NIGERJA LTD. WILL BE
RENEGOTIATED, THE TARGET BEING $1.00 U.S.D. OR LESS, TO BE ACCOMPLISHED BY
JULY 31, 1997.
5. A MINIMUM TOTAL JOINT REVENUE TO ATLAS AND SUMMIT OF $510,000 PER CALENDAR
YEAR WILL BE GUARANTEED BY CXY (UNDER SCHEDULE C, CLAUSE 2(E)) DURING THE
LIFE OF THE EJULEBE FIELD OR THE SUBCONTRACT IS TERMINATED. IT WILL BE
PAYABLE WITHIN 15 BUSINESS DAYS FOLLOWING DECEMBER 31 OF THE RELEVANT
CALENDAR YEAR OF PRODUCTION BEGINNING IN THE SECOND CALENDAR YEAR FOLLOWING
FIRST PRODUCTION. SUCH PAYMENTS WILL NOT BE COST RECOVERABLE AND PAYMENTS
WILL BE PRORATED TO THE NUMBER OF DAYS THAT THE EJULEBE FIELD IS PRODUCING
DURING THE RELEVANT YEAR (NON-PRODUCTION DAYS MUST BE 30 CONSECUTIVE DAYS OR
MORE).
6. IF THE EJULEBE FIELD IS NOT PRODUCING WITHIN 15 MONTHS OF THIS AGREEMENT,
ALL CORPORATE CHARGES WILL NOT BE CHARGED FROM THE END OF THE 15TH MONTH
UNTIL FIRST PRODUCTION.
7. ATLAS AND SOGW SHALL SELECT A BANK FOR THE JOINT ACCOUNT WITHIN 60 DAYS OF
BEING FURNISHED A LIST OF SWISS BANKS BY CXY.
DATED THIS 02 DAY OF JULY, 1997.
FOR:
ATLAS PETROLEUM INTERNATIONAL LTD.
SUMMIT OIL AND GAS WORLDWIDE LTD.
CXY NIGERIA OIL FIELD SERVICES LTD.
SOGW OP Comm Resolutions 7.02.97
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SCHEDULE A
RESOLUTIONS OF OPERATING COMMITTEE
I. APPROVAL OF DEVELOPMENT PLAN, CONCEPT PLAN AND ASSOCIATED AFES FOR THE
DEVELOPMENT OF THE EJULEBE FIELD:
The Development Plan, Concept Plan and associated AFEs (attached summary) for
the development of the Ejulebe Field, summaries of which are attached hereto,
are hereby approved.
II. APPROVAL OF DRILLING CONTRACT WITH GLOBAL MARINE LTD. AND ASSOCIATED AFE:
The award of the Contract for Drilling Services between CXY Nigeria Oilfield
Services Ltd. and Global Marine Ltd. as assigned to CXY Nigeria Oilfield
Services Ltd. by Atlas and the associated AFEs (summaries attached) are
hereby approved.
III. APPROVAL OF FACILITY AND RELATED SUPPLEMENTAL AFE:
The Facility AFE and related supplemental (attached summaries) are hereby
approved.
IV. APPROVAL OF CONTRACT WITH SERT-BAKER LTD:
The award of the Contract for water injection equipment and services to Sert
- -Baker Ltd. is hereby approved; and CXY Nigeria Oilfield Services Ltd. is
hereby authorised to enter into such contract.
V. CONTRACT FOR ENGINEERING SERVICES FOR PRODUCTION PLATFORM WITH MUSTANG
ENGINEERS & CONTRACTORS, INC.: The award of the Contract for Services
regarding the engineering of the production platform for the Ejulebe Field
between International Capital Corporation Ltd., (being an Affiliate of CXY
Nigeria Oilfield Services Ltd.), and Mustang Engineers & Contractors, Inc. is
hereby approved; and International Capital Corporation Ltd. is hereby
authorised to enter into such contract.
VI. PLATFORM FABRICATION AND INSTALLATION AGREEMENT WITH DICKSON ALUSTEEL
JOINT VENTURE:
The award of the contract for the fabrication and installation of the
production platform for the Ejulebe Field between International Capital
Corporation Ltd., (being an Affiliate of CXY Nigeria Oilfield Services Ltd.),
and Dickson Alusteel Joint Venture is hereby approved; and International
Capital Corporation Ltd. is hereby authorised to enter into such a contract.
VII. APPROVAL OF STORAGE AND HANDLING AGREEMENT WITH CONOCO ENERGY NIGERIA LTD.
The award of the contract for the storage and handling of production from the
Ejulebe Field with Conoco Energy Nigeria Ltd. .is hereby approved subject to the
provisions of Clause 4 of this agreement; and CXY Nigeria Oilfield Services Ltd.
is hereby authorised to enter into such contract.
SOGW OP Comm Resolutions 7.02.97
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SCHEDULE A CONT'D
VIII. APPROVAL OF SERVICE AGREEMENTS WITH AFFILIATES:
The following Affiliates of CXY Nigeria Oilfield Service Ltd. have been
requested by CXY Nigeria Oilfield Services Ltd. to perform selected duties and
services under the Subcontract. The Operating Committee recognizes and approves
the involvement of these Affiliates subject to the provisions of Schedule C,
Clause 5 of the Subcontract.
A. International Capital Corporation Ltd;
B. Canadian Occidental Petroleum Ltd.;
C. Canadian Petroleum International Resources Ltd.; and
D. Canadian Petroleum International Ltd.
SOGW OP Comm Resolutions 7.02.97
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SCHEDULE B
June 21, 1997 Via Fax Ray Crockett (Hand Delivery)
Atlas Petroleum International Ltd., 1B, Ibiyinka Olorunnimbe Close, On Amodu
Ojkutu Street, Victoria Island Lagosn Nigeria
ATTENTION: PRINCE ARTHUR EZE
Dear Sir:
RE: FEDERAL REPUBLIC OF NIGERIA
OML 109
CASH FLOW FORECASTS
Attached are the cash flows in detail that you have requested. As you know,
there are many assumptions in a cash flow forecast, including prices and
reserves. These assumptions are outlined as follows:
Prices: $18/bbl for Nigerian crude escalated at 3% per year.
Inflation: 3%
Operating Expenses: Composed of a variable: $1.57/bbl includes
the Conoco tariff, chemicals, treating costs, fuel
costs, electricity and other items of a variable to
throughput, and Fixed which includes platform
operating expenses such as living accommodation and
supplies, technical and administration expenses.
CAPITAL EXPENSE 1996 1997 1998
- -----------------------------------------------------------------------------------
Drilling Note 1 15.0 3.6
5.5 -
1.5 7.7
Subtotal:
22.0 11.3
Facilities: Note 1 13.0 34.4
---- ----
Note 1: The 1996 capital breakdown is as per Rha Dawood's Progress sheet as
of Dec 31, 1996.
SOGW OP Comm Resolutions 7.02.97
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From the attached spreadsheet we would point out the following over the life
of the project
$MM
- ------------------------------------------------------------
Gross Revenues: 369
Royalties: 68
--
Net Revenue: 301
Capital Costs: 102
Past Costs Reim.: 10
Operating Costs: 92
--
SubTotal: 204
Remainder: 97 to be split plus 10 reimbursement
Atlas/SOGW Share: 50.4 (40.4+10)
CXYN Share: 58.4 less non-recoverable G&A of 6.0
It should be noted that income taxes are also a part of the netback
calculation. These are company specific but will be in addition to the
royalties paid to the government.
We have already pointed out the need for quick decisions. We sincerely hope
that this information will be useful to reaching the necessary
recommendations and decisions required for proceeding. We also have pointed
out that these are forecasts. Reserves and price changes make a significant
difference to all our cash flows but at this time we feel this is a best
estimate.
We hope that you will find these attachments useful.
Yours truly,
CANADIAN PETROLEUM INTERNATIONAL RESOURCES LTD.
Gord Harris
Region Manager, Africa
Gh/dm
Cc: Ray Crockett - CPFSNL
Atlas/SOGW Operating Committee
Dr. Okey Eze - Atlas Petroleum
Emeka Okafor - Atlas Petroleum
Bob Cowen - SOGWN
Scott Larsen - SOGW
John Fleming - Profco Resources
SOGW OP Comm Resolutions 7.02.97
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