AMENDMENT
TO PETROLEUM SERVICES SUBCONTRACT
AND
2ND JULY 1997 AGREEMENT
THIS AMENDMENT TO PETROLEUM SERVICES SUBCONTRACT is made and effective
________day of October 1998.
BETWEEN
CXY NIGERIA OILFIELD SERVICES LTD., a body corporate incorporated under the
laws of Barbados and an office in St. Michael, Barbados (hereafter referred
to as "Contractor");
ATLAS PETROLEUM INTERNATIONAL LIMITED, a body corporate incorporated under the
laws of Federal Republic of Nigeria and having an office in Lagos, Nigeria
(hereinafter referred to as "Atlas").
SUMMIT OIL & GAS WORLDWIDE LTD. a body corporate incorporated in the
Commonwealth of Bahamas and having an office in the city of Nassau
(hereinafter referred to as "Summit").
The Contractor and Atlas and Summit are collectively referred to as the
"Parties" and individually a "Party".
RECITALS
(1) WHEREAS, under the terms and provisions of the Federal Republic of
Nigeria Oil Mining Lease No.109 dated 27 May, 1996 issued to Atlas and
held by Atlas and Summit (the technical advisor to Atlas), Atlas and
Summit are engaged in the production of petroleum from OML 109; and
(2) WHEREAS, pursuant to the terms of the Petroleum Services Subcontract
dated January 14, 1996, as amended (the "Petroleum Services Subcontract")
between Contractor, Atlas and Summit, Contractor performs the "Services" (as
defined therein) to, inter alia, facilitate the production of Petroleum from
the area of OML109 known as the "Contract Area" for and on behalf of Atlas
and Summit. All defined terms in the Petroleum Services Subcontract are
incorporated herein and adopted by reference, and
(3) WHEREAS, the Petroleum Services Subcontract was amended pursuant to an
agreement dated July 2, 1997 between the Parties (the "July 2, 1997
Agreement") and
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(4) WHEREAS, pursuant to the terms of agreement between Atlas and Summit and
Atlas/ Summit Crude Marketing Ltd, entered into, or to be entered into, all
Petroleum produced from the Contract Area will be sold by Atlas and Summit to
Atlas/ Summit Crude/Marketing Ltd., subject, however, to terms and conditions
of the Petroleum Services Subcontract; and
(5) WHEREAS, the sale of the Petroleum produced from the Contract Area to
Atlas/ Summit Crude Marketing Ltd. changes the manner in which the parties
originally contemplated the Petroleum would be marketed and sold.
Accordingly, certain modifications to the Petroleum Services Subcontract are
required to accommodate the new marketing arrangements; and
(6) WHEREAS, the Parties agree that the Joint Account shall be revised to
require the signatures of all three parties to the Joint Account for
distributions therefrom; and
(7) WHEREAS, the Parties agree to provide that in the event Atlas and Summit
can secure from the Federal Government of Nigeria relief from some or all
Nigerian Royalty payable to the Federal Government of Nigeria which is
currently chargeable against the Petroleum or the producers of the Petroleum,
then Atlas and Summit shall retain the benefits of relief from Nigerian
Royalty and the revenues resulting therefrom shall not be included in the
revenues subject to Contractor's Service Fee; and
(8) WHEREAS, the Parties agree to provide that the receipt by Atlas and
Summit of any relief from Nigerian Royalty shall not reduce the annual
non-recoverable payment of $510,000 per year provided for in Paragraph 5 of
the July 2, 1997 Agreement between the Parties; and
(9) WHEREAS, the Parties now wish to provide that instead of the annual
non-recoverable payment of $510, 000 provided for in Paragraph 5 of the July
2, 1997 Agreement, being paid in a lump sum, that it shall accrue daily (over
a period of 365 days and such accrued amount shall be paid upon the
distribution of funds associated with each lifting from the Joint Account.
(10) The payment to Atlas and Summit described in Recital (9) above shall be
made pursuant to the Petroleum Services Subcontract (as amended herein) and
not under the July 2, 1997 Agreement which shall be amended to reflect this
NOW THEREFORE, in consideration of the covenants herein contained, including
the recitals hereto, the Parties hereby agree to amend the Petroleum Services
Subcontract as follows:
SUSPENSION OF ORIGINAL BROKERAGE AGREEMENT
Pursuant to the Petroleum Services Subcontract, Atlas and Summit entered into
a Brokerage Agreement dated January 14,1996 (the "Original Brokerage
Agreement) with West Africa Crude Marketing Ltd. (hereinafter called "WACM"),
Under the new marketing arrangements, Atlas and Summit shall sell all
Petroleum produced from the Contract Area to
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Atlas/SOGW Crude Marketing Ltd. (hereinafter called and "ASCML") and WACM
shall act as broker for ASCML (pursuant to a brokerage agreement hereinafter
called the ASCLM Brokerage Agreement"). For so long as Atlas and Summit sell
all Petroleum produced from the Contract area to ASCML and that WACM acts as
broker under the ASCLM Brokerage Agreement for such sales, then the Original
Brokerage Agreement shall be treated as suspended and its terms and
provisions shall not apply between the parties thereto. The Original
Brokerage Agreement shall automatically be received and reinstated if any
party to the ASCML Brokerage Agreement terminates the services of WACM as
broker as set out thereunder.
2. AMENDMENTS TO THE PETROLEUM SERVICES SUBCONTRACT
(a) Definitions "Contract Area" shall be amended to mean the following,
"means the Ejulebe field Area and the Exploration Blocks to be identified in
accordance with Schedule "H" hereof, (as the same may be amended from time to
time in accordance with the terms hereof) but excluding the area drained by
any well within such area that was not drilled by the Contractor pursuant to
the provisions of this Agreement."
(b) SERVICE FEE: Section 13 (a) of the Petroleum Services Subcontract and
Clause 2 of Schedule "C" Entitled "Service Fee" to the Petroleum Services
Subcontract are identical and provide for the establishment of the" Joint
Account" and provide further how proceeds from the sale of Petroleum produced
from the Contract Area and deposited into the Joint Account are to be paid
and distributed. The parties hereby agree to delete Section 13 (a) of the
Petroleum Services Subcontract and Clause 2 of Schedule "C" to the Petroleum
Services Subcontract and replace each of the paragraphs with the following.
"The parties agree that Contractor shall recover the Service Fee payable
hereunder out of, and only out of, the sale proceeds or proceeds from any
other disposition of Petroleum produced saved and marketed from the Contract
Area. Atlas, Summit and West Africa Crude Marketing Ltd. (WACM) shall open an
account (the "Joint Account} into which all sales proceeds or other
disposition of Petroleum from the Contract Area shall be paid. WACM, Atlas
and Summit shall each be a signatory to the Joint Account. The operation of
the Joint Account shall require all three (3) signatories of the account
holders.
Out of the receipt of proceeds of sale or other disposition of Petroleum from
the Contract Area into the Joint Account the distribution of funds shall be
in accordance with the terms of this Agreement.
(A) From that portion of the proceeds of sale or other dispositions of sale
that are received into the Joint Account equating to 18.5% of the total
proceeds received from a discrete sale, Atlas and Summit shall direct W
ACM to pay and transfer:
(1) Firstly, into an account nominated by the Federal Government of Nigeria, an
amount equal to the Nigerian Royalty for and on behalf of Atlas and Summit; then
secondly
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(2) to Atlas and/or Summit and or such other party the amount of any Nigerian
Royalty previously paid directly to the Government of the Federal Republic or
Nigeria by Atlas and or Summit and or directly by such other party, as the
case mav be, for which reimbursement has not been previously made, and then
finally.
(3) Once all Nigerian Royalty has been discharged or reimbursed relating to
the period of production ending on the date that export production volumes
from the Conoco FPSO moored in OML 108 are calculated (ten days prior to each
lifting or such other time period as Contractor may agree with from time to
time with Conoco) there shall be transferred into an account nominated by
Atlas and Summit the balance of the proceeds remaining from the 18.5(degree)
of total proceeds received into the Joint Account as aforesaid.
(B) From that portion of the proceeds of sale or other dispositions of sale
that are received into the Joint Account equating to 81.5% of the total
proceeds received from a discrete sale, Atlas and Summit shall direct WACM to
pay and transfer:
(1) Firstly, to WACM, based on an invoice approved by ASCML an amount equal
to the Brokerage Costs (as that term is defined in the ASCML Brokerage
Agreement); then secondly;
(2) To WACM, based on an invoice approved by ASCML, the Marketing Fee (as
that term is defined in the ASCML Brokerage Agreement); then thirdly
(3) To Contractor, based on an invoice presented by Contractor and approved
by Atlas and Summit, the Service Fee, then finally
(4) To Atlas, Summit and ASCML the balance of the proceeds remaining from the
81.5% of total proceeds received into the Joim Account, as aforesaid Such
payment herein to be made pursuant to a written directive signed jointly by
Atlas and Summit.
The order of priority of payment referred to in Clause 13(a)(A) and (B) above
shall not be changed without the consent of the Parties hereto."
Clause 13(b) is amended through adding the following: "For the avoidance of
doubt any and all advances made by Contractor (if any) to pay Nigerian
Royalty shall not be charged the 10% Operation Cost Overhead Allowance
specified in paragraph 3(a) of Schedule "C". Further, any costs included as
Brokerage Costs under the Brokerage Agreement between West Africa Crude
Marketing Ltd. and Atlas/SOGW Crude Marketing Ltd. shall not be included as
Operating Costs under the Service Fee calculation."
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The parties agree to amend the Petroleum Services Subcontract to add a new
subsection 13(i) entitled "'Other Conditions Pertaining to Crude Sales" and
to amend Schedule "C" to add a new Clause 8 which is identical to new
subsection 13(i) as follows:
13(i) OTHER CONDITIONS PERTAINING TO CRUDE OIL SALES AND THE JOINT ACCOUNT
If the law, decree, regulation or legal notice of any jurisdiction requires
the withholding of tax levy, duty or assessment from payments due hereunder,
then the Parties shall comply with such requirements to withhold such funds
in the Joint Account and so complying shall remit such withholding to the
proper authorities on behalf of the other Parties. The amount to be withheld
in the Joint Account pursuant to this subsection shall be restricted to the
legal minimum. The remitting Party. shall provide and deliver to the other
Parties receipts in respect of all sums remitted.
Under Paragraph 5 of the Agreement dated July 2, 1997 between the Parties,
Contractor agreed to pay to Atlas and Summit a minimum guaranteed annual
payment of $510,000 per calendar year. The Parties hereby agree to amend the
terms defining the manner in which the $510,000 per year payment shall be
made. Accordingly, Paragraph 5 of the July 2, 1997 Agreement is deleted and
the Petroleum Services Subcontract is amended by adding new Subsection 13(j)
entitled "Guaranteed Annual Payment" to read as follows.
"13(j) GUARANTEED ANNUAL PAYMENT
(a) A guaranteed annual payment to Atlas and Summit of $510,000 per year
(accruing daily) will be paid by Contractor for the term of production from
the Ejulebe Field or, if earlier, until the Subcontract is terminated ("the
Guaranteed Annual Payment").
(b) In the event that the Subcontract is terminated mid-year the Guaranteed
Annual Payment that has accrued on a daily basis for that part of the year
will become the amount that is payable to Atlas and Summit.
(c) The Guaranteed Annual Payment will not be cost recoverable.
(d) The Guaranteed Annual Payment will be payable for each year commencing
with the year starting 1st January 1999.
(e) The Guaranteed Annual Payment shall be payable by Contractor into an
account to be nominated by Atlas and Summit as follows: AS soon as reasonably
possible following
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the final distribution of the proceeds of sale or other dispositions of sale
that are received into the Joint Account pursuant to Clause 13(a)(B)
Contractor shall pay to Atlas and Summit that portion of the Guaranteed
Annual Payment that shall have accrued on a daily basis since the 1st January
for the relevant year to the date of the first bill of lading in that same
year, or if there has a been a previous lifting in that current year, from
the day following the immediately preceding bill of lading date to the date
of the bill of lading for the current lifting (inclusive). Contractor shall
pay to Atlas and Summit within 10 days of the start of the next succeeding
year the outstanding balance (if any) of the Guaranteed Annual Payment not
paid to Atlas and Summit for the preceding year due, arising as a result of
Contract Area Petroleum not lifted on 31st December of the preceding year.
The payment of the Guaranteed Annual Payment can be expressed by the formula:
$ = A X B
-----
C
A = $510,00000
B = Number of elapsed days from 1st January to the bill of lading date, or
the number of days elapsed between two successive bill of lading dates, or
the number of days elapsed between the last bill of lading date in the
current year and 31stDecember in that year, as the case maybe.
C = 365 (366 in leap years)
The Petroleum Services Subcontract and the July 2, 1997 Agreement, as both
are amended by the provisions contained in this Agreement, are and shall
remain in full force and effect, and save as otherwise provided defined terms
used in this Agreement shall, unless otherwise provided, have the same
meaning as that used in the Petroleum Services Subcontract.
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IN WITNESS WHEREOF, the parties have executed this Amendment to Petroleum
Services subcontract effective as of the date first stated above.
ATLAS PETROLEUM INTERNATIONAL LIMITED CXY NIGERIA OILFIELD SERVICES, LTD.
BY: BY:
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NAME: NAME:
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TITLE: TITLE:
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SUMMIT OIL & GAS WORLDWIDE LTD. CXY NIGERIA OILFIELD SERVICES
BY: BY:
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NAME: NAME:
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TITLE: TITLE:
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