EXHIBIT 10.1
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DRILLING AND OPERATING AGREEMENT
FOR
ATLAS AMERICA SERIES 26-2005 L.P.
DATED AUGUST 25, 2005
INDEX
SECTION PAGE
1. Assignment of Well Locations; Representations and Indemnification Associated with the
Assignment of the Lease; Designation of Additional Well Locations;
Outside Activities Are Not Restricted.......................................................................1
2. Drilling of Wells; Timing; Depth; Interest of Developer; Right to Substitute Well Locations.................2
3. Operator - Responsibilities in General; Covenants; Term.....................................................3
4. Operator's Charges for Drilling and Completing Wells; Payment; Completion Determination;
Dry Hole Determination; Excess Funds and Cost Overruns - Intangible Drilling Costs; Excess
Funds and Cost Overruns - Tangible Costs....................................................................4
5. Title Examination of Well Locations; Developer's Acceptance and Liability; Additional Well Locations........7
6. Operations Subsequent to Completion of the Wells; Fee Adjustments;
Extraordinary Costs;
Pipelines; Price Determinations; Plugging and Abandonment...................................................7
7. Billing and Payment Procedure with Respect to Operation of Wells; Disbursements; Separate Account for
Sale Proceeds; Records and Reports; Additional Information..................................................9
8. Operator's Lien; Right to Collect From Oil or Gas Purchaser................................................11
9. Successors and Assigns; Transfers; Appointment of Agent....................................................11
10. Operator's Insurance; Subcontractors' Insurance; Operator's Liability......................................12
11. Internal Revenue Code Election; Relationship of Parties; Right to Take Production in Kind..................13
12. Effect of Force Majeure; Definition of Force Majeure; Limitation...........................................14
13. Term.......................................................................................................14
14. Governing Law; Invalidity..................................................................................14
15. Integration; Written Amendment.............................................................................15
16. Waiver of Default or Breach................................................................................15
17. Notices....................................................................................................15
18. Interpretation.............................................................................................15
19. Counterparts...............................................................................................15
Signature Page.............................................................................................16
Exhibit A Description of Leases and Initial Well Locations
Exhibits A-l through A-9 Maps of Initial Well Locations
Exhibit B Form of Assignment
Exhibit C Form of Addendum
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DRILLING AND OPERATING AGREEMENT
THIS AGREEMENT made this 25th day of August 2005, by and between ATLAS
RESOURCES, INC., a Pennsylvania corporation (hereinafter referred to as "Atlas"
or "Operator"),
and
ATLAS AMERICA SERIES 26-2005 L.P., a Delaware limited partnership, (hereinafter
referred to as the "Developer").
WITNESSETH THAT:
WHEREAS, the Operator, by virtue of the Oil and Gas Leases (the "Leases")
described on Exhibit A attached to and made a part of this Agreement, has
certain rights to develop the nine (9.0) initial well locations (the "Initial
Well Locations") identified on the maps attached to and made a part of this
Agreement as Exhibits A-l through A-9;
WHEREAS, the Developer, subject to the terms and conditions of this Agreement,
desires to acquire certain of the Operator's rights to develop the Initial Well
Locations and to provide for the development on the terms and conditions set
forth in this Agreement of additional well locations ("Additional Well
Locations") which the parties may from time to time designate; and
WHEREAS, the Operator is in the oil and gas exploration and development
business, and the Developer desires that Operator, as its independent
contractor, perform certain services in connection with its efforts to develop
the aforesaid Initial and Additional Well Locations (collectively the "Well
Locations") and to operate the wells completed on the Well Locations, on the
terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants herein contained and
subject to the terms and conditions hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. ASSIGNMENT OF WELL LOCATIONS; REPRESENTATIONS AND INDEMNIFICATION
ASSOCIATED WITH THE ASSIGNMENT OF THE LEASE; DESIGNATION OF ADDITIONAL
WELL LOCATIONS; OUTSIDE ACTIVITIES ARE NOT RESTRICTED.
(a) ASSIGNMENT OF WELL LOCATIONS. The Operator shall execute an
assignment of an undivided percentage of Working Interest in the
Well Location acreage for each well to the Developer as shown on
Exhibit A attached hereto, which assignment shall be limited to a
depth from the surface to the deepest depth penetrated at the
cessation of drilling operations.
The assignment shall be substantially in the form of Exhibit B
attached to and made a part of this Agreement. The amount of
acreage included in each Initial Well Location and the
configuration of the Initial Well Location are indicated on the
maps attached as Exhibits A-l through A-9. The amount of acreage
included in each Additional Well Location and the configuration
of the Additional Well Location shall be indicated on the maps to
be attached as exhibits to the applicable addendum to this
Agreement as provided in sub-section (c) below.
(b) REPRESENTATIONS AND INDEMNIFICATION ASSOCIATED WITH THE
ASSIGNMENT OF THE LEASE. The Operator represents and warrants to
the Developer that:
(i) the Operator is the lawful owner of the Lease and
rights and interest under the Lease and of the
personal property on the Lease or used in connection
with the Lease;
(ii) the Operator has good right and authority to sell and
convey the rights, interest, and property;
(iii) the rights, interest, and property are free and clear
from all liens and encumbrances; and
(iv) all rentals and royalties due and payable under the
Lease have been duly paid.
These representations and warranties shall also be included in
each recorded assignment of the acreage included in each Initial
Well Location and Additional Well Location designated pursuant to
sub-section (c) below, substantially in the manner set forth in
Exhibit B.
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The Operator agrees to indemnify, protect and hold the Developer
and its successors and assigns harmless from and against all
costs (including but not limited to reasonable attorneys' fees),
liabilities, claims, penalties, losses, suits, actions, causes of
action, judgments or decrees resulting from the breach of any of
the above representations and warranties. It is understood and
agreed that, except as specifically set forth above, the Operator
makes no warranty or representation, express or implied, as to
its title or the title of the lessors in and to the lands or oil
and gas interests covered by said Leases.
(c) DESIGNATION OF ADDITIONAL WELL LOCATIONS. If the parties hereto
desire to designate Additional Well Locations to be developed in
accordance with the terms and conditions of this Agreement, then
the parties shall execute an addendum substantially in the form
of Exhibit C attached to and made a part of this Agreement
(Exhibit "C") specifying:
(i) the undivided percentage of Working Interest and the
Oil and Gas Leases to be included as Leases under
this Agreement;
(ii) the amount and configuration of acreage included in
each Additional Well Location on maps attached as
exhibits to the addendum; and
(iii) their agreement that the Additional Well Locations
shall be developed in accordance with the terms and
conditions of this Agreement.
(d) OUTSIDE ACTIVITIES ARE NOT RESTRICTED. It is understood and
agreed that the assignment of rights under the Leases and the oil
and gas development activities contemplated by this Agreement
relate only to the Initial Well Locations and the Additional Well
Locations. Nothing contained in this Agreement shall be
interpreted to restrict in any manner the right of each of the
parties to conduct without the participation of the other party
any additional activities relating to exploration, development,
drilling, production, or delivery of oil and gas on lands
adjacent to or in the immediate vicinity of the Well Locations or
elsewhere.
2. DRILLING OF WELLS; TIMING; DEPTH; INTEREST OF DEVELOPER; RIGHT TO
SUBSTITUTE WELL LOCATIONS.
(a) DRILLING OF WELLS. Operator, as Developer's independent
contractor, agrees to drill, complete (or plug) and operate nine
(9) oil and gas wells on the nine (9) Initial Well Locations in
accordance with the terms and conditions of this Agreement.
Developer, as a minimum commitment, agrees to participate in and
pay the Operator's charges for drilling and completing the wells
and any extra costs pursuant to Section 4 in proportion to the
share of the Working Interest owned by the Developer in the wells
with respect to all initial wells. It is understood and agreed
that, subject to sub-section (e) below, Developer does not
reserve the right to decline participation in the drilling of any
of the initial wells to be drilled under this Agreement.
(b) TIMING. Operator shall begin drilling the first well within
thirty (30) days after the date of this Agreement, and shall
begin drilling each of the other initial wells for which payment
is made pursuant to Section 4(b) of this Agreement before the
close of the 90th day after the close of the calendar year in
which this Agreement is entered into by Operator and the
Developer. Subject to the foregoing time limits, Operator shall
determine the timing of and the order of drilling the Initial
Well Locations.
(c) DEPTH. All of the wells to be drilled under this Agreement shall
be:
(i) drilled and completed (or plugged) in accordance with
the generally accepted and customary oil and gas
field practices and techniques then prevailing in the
geographical area of the Well Locations; and
(ii) drilled to a depth sufficient to test thoroughly the
objective formation or the deepest assigned depth,
whichever is less.
(d) INTEREST OF DEVELOPER. Except as otherwise provided in this
Agreement, all costs, expenses, and liabilities incurred in
connection with the drilling and other operations and activities
contemplated by this Agreement shall be borne and paid, and all
wells, gathering lines of up to approximately 2,500 feet on the
Well Location in connection with a natural gas well, equipment,
materials, and facilities acquired, constructed or installed
under this Agreement shall be owned, by the Developer in
proportion to the share of the Working Interest owned by the
Developer in the wells. Subject to the payment of lessor's
royalties and other royalties and overriding royalties, if any,
production of oil and gas from the wells to be drilled under this
Agreement shall be owned by the Developer in proportion to the
share of the Working Interest owned by the Developer in the
wells.
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(e) RIGHT TO SUBSTITUTE WELL LOCATIONS. Notwithstanding the
provisions of sub-section (a) above, if the Operator or Developer
determines in good faith, with respect to any Well Location,
before operations begin under this Agreement on the Well
Location, that it would not be in the best interest of the
parties to drill a well on the Well Location, then the party
making the determination shall notify the other party of its
determination and its basis for its determination and, unless
otherwise instructed by Developer, the well shall not be drilled.
This determination may be based on:
(i) the production or failure of production of any other
wells which may have been recently drilled in the
immediate area of the Well Location;
(ii) newly discovered title defects; or
(iii) any other evidence with respect to the Well Location
as may be obtained.
If the well is not drilled, then Operator shall promptly propose
a new well location (including all information for the Well
Location as Developer may reasonably request) to be substituted
for the original Well Location. Developer shall then have seven
(7) business days to either reject or accept the proposed new
well location. If the new well location is rejected, then
Operator shall promptly propose another substitute well location
pursuant to the provisions of this sub-section.
Once the Developer accepts a substitute well location or does not
reject it within said seven (7) day period, this Agreement shall
terminate as to the original Well Location and the substitute
well location shall become subject to the terms and conditions of
this Agreement.
3. OPERATOR - RESPONSIBILITIES IN GENERAL; COVENANTS; TERM.
(a) OPERATOR - RESPONSIBILITIES IN GENERAL. Atlas shall be the
Operator of the wells and Well Locations subject to this
Agreement and, as the Developer's independent contractor, shall,
in addition to its other obligations under this Agreement do the
following:
(i) arrange for drilling and completing the wells and, if
a gas well, installing the necessary gas gathering
line systems and connection facilities;
(ii) make the technical decisions required in drilling,
testing, completing, and operating the wells;
(iii) manage and conduct all field operations in connection
with the drilling, testing, completing, equipping,
operating, and producing the wells;
(iv) maintain all wells, equipment, gathering lines if a
gas well, and facilities in good working order during
their useful lives; and
(v) perform the necessary administrative and accounting
functions.
In performing the work contemplated by this Agreement, Operator
is an independent contractor with authority to control and direct
the performance of the details of the work.
(b) COVENANTS. Operator covenants and agrees that under this
Agreement:
(i) it shall perform and carry on (or cause to be
performed and carried on) its duties and obligations
in a good, prudent, diligent, and workmanlike manner
using technically sound, acceptable oil and gas field
practices then prevailing in the geographical area of
the Well Locations;
(ii) all drilling and other operations conducted by, for
and under the control of Operator shall conform in
all respects to federal, state and local laws,
statutes, ordinances, regulations, and requirements;
(iii) unless otherwise agreed in writing by the Developer,
all work performed pursuant to a written estimate
shall conform to the technical specifications set
forth in the written estimate and all equipment and
materials installed or incorporated in the wells and
facilities shall be new or used and of good quality;
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(iv) in the course of conducting operations, it shall
comply with all terms and conditions, other than any
minimum drilling commitments, of the Leases (and any
related assignments, amendments, subleases,
modifications and supplements);
(v) it shall keep the Well Locations and all wells,
equipment and facilities located on the Well
Locations free and clear of all labor, materials and
other liens or encumbrances arising out of
operations;
(vi) it shall file all reports and obtain all permits and
bonds required to be filed with or obtained from any
governmental authority or agency in connection with
the drilling or other operations and activities; and
(vii) it will provide competent and experienced personnel
to supervise drilling, completing (or plugging), and
operating the wells and use the services of competent
and experienced service companies to provide any
third party services necessary or appropriate in
order to perform its duties.
(c) TERM. Atlas shall serve as Operator under this Agreement until
the earliest of:
(i) the termination of this Agreement pursuant to Section
13;
(ii) the termination of Atlas as Operator by the Developer
at any time in the Developer's discretion, with or
without cause on sixty (60) days' advance written
notice to the Operator; or
(iii) the resignation of Atlas as Operator under this
Agreement which may occur on ninety (90) days'
written notice to the Developer at any time after
five (5) years from the date of this Agreement, it
being expressly understood and agreed that Atlas
shall have no right to resign as Operator before the
expiration of the five-year period.
Any successor Operator shall be selected by the Developer.
Nothing contained in this sub-section shall relieve or release
Atlas or the Developer from any liability or obligation under
this Agreement which accrued or occurred before Atlas' removal or
resignation as Operator under this Agreement. On any change in
Operator under this provision, the then present Operator shall
deliver to the successor Operator possession of all records,
equipment, materials and appurtenances used or obtained for use
in connection with operations under this Agreement and owned by
the Developer.
4. OPERATOR'S CHARGES FOR DRILLING AND COMPLETING WELLS; PAYMENT; COMPLETION
DETERMINATION; DRY HOLE DETERMINATION; EXCESS FUNDS AND COST
OVERRUNS-INTANGIBLE DRILLING COSTS; EXCESS FUNDS AND COST
OVERRUNS-TANGIBLE COSTS.
(a) OPERATOR'S CHARGES FOR DRILLING AND COMPLETING WELLS. Each oil
and gas well which is drilled and completed under this Agreement
shall be drilled and completed on a Cost plus an unaccountable,
fixed payment reimbursement of $15,000 per well for the share of
Operator's general and administrative overhead charged by
Developer to its Participants plus 15% basis. "Cost," when used
with respect to services, shall mean the reasonable, necessary,
and actual expenses incurred by Operator on behalf of Developer
in providing the services under this Agreement, determined in
accordance with generally accepted accounting principles. As used
elsewhere, "Cost" shall mean the price paid by Operator in an
arm's-length transaction.
The estimated price for each of the wells shall be set forth in
an Authority for Expenditure ("AFE") which shall be attached to
this Agreement as an Exhibit, and shall cover all ordinary costs
which may be incurred in drilling and completing each well. This
includes without limitation, site preparation, permits and bonds,
roadways, surface damages, power at the site, water, Operator's
overhead and profit, rights-of-way, drilling rigs, equipment and
materials, costs of title examinations, logging, cementing,
fracturing, casing, meters (other than utility purchase meters),
connection facilities, salt water collection tanks, separators,
siphon string, rabbit, tubing, an average of 2,500 feet of
gathering line per well in connection with a gas well, and
geological and engineering services.
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(b) PAYMENT. The Developer shall pay to Operator, in proportion to
the share of the Working Interest owned by the Developer in the
wells, one hundred percent (100%) of the estimated Intangible
Drilling Costs and Tangible Costs as those terms are defined
below, for drilling and completing all initial wells on execution
of this Agreement. Notwithstanding, Atlas' payments for its share
of the estimated Tangible Costs as that term is defined below of
drilling and completing all initial wells as the Managing General
Partner of the Developer shall be paid within five (5) business
days of notice from Operator that the costs have been incurred.
The Developer's payment shall be nonrefundable in all events in
order to enable Operator to do the following:
(i) commence site preparation for the initial wells;
(ii) obtain suitable subcontractors for drilling and
completing the wells at currently prevailing prices;
and
(iii) insure the availability of equipment and materials.
For purposes of this Agreement, "Intangible Drilling Costs" shall
mean those expenditures associated with property acquisition and
the drilling and completion of oil and gas wells that under
present law are generally accepted as fully deductible currently
for federal income tax purposes. This includes:
(i) all expenditures made with respect to any well before
the establishment of production in commercial
quantities for wages, fuel, repairs, hauling,
supplies and other costs and expenses incident to and
necessary for the drilling of the well and the
preparation of the well for the production of oil or
gas, that are currently deductible pursuant to
Section 263(c) of the Internal Revenue Code of 1986,
as amended, (the "Code"), and Treasury Reg. Section
1.612-4, which are generally termed "intangible
drilling and development costs";
(ii) the expense of plugging and abandoning any well
before a completion attempt; and
(iii) the costs (other than Tangible Costs and Lease costs)
to re-enter and deepen an existing well, complete the
well to deeper formations or reservoirs, or plug and
abandon the well if it is nonproductive from the
targeted deeper formations or reservoirs.
"Tangible Costs" shall mean those costs associated with property
acquisition and the drilling and completion of oil and gas wells
which are generally accepted as capital expenditures pursuant to
the provisions of the Code. This includes:
(i) all costs of equipment, parts and items of hardware
used in drilling and completing a well;
(ii) the costs (other than Intangible Drilling Costs and
Lease costs) to re-enter and deepen an existing well,
complete the well to deeper formations or reservoirs,
or plug and abandon the well if it is nonproductive
from the targeted deeper formations or reservoirs;
and
(iii) those items necessary to deliver acceptable oil and
gas production to purchasers to the extent installed
downstream from the wellhead of any well and which
are required to be capitalized under the Code and its
regulations.
With respect to each additional well drilled on the Additional
Well Locations, if any, Developer shall pay Operator, in
proportion to the share of the Working Interest owned by the
Developer in the wells, one hundred percent (100%) of the
estimated Intangible Drilling Costs and Tangible Costs for the
well on execution of the applicable addendum pursuant to Section
l(c) above. Notwithstanding, Atlas' payments for its share of the
estimated Tangible Costs of drilling and completing all
additional wells as the Managing General Partner of the Developer
shall be paid within five (5) business days of notice from
Operator that the costs have been incurred. The Developer's
payment shall be nonrefundable in all events in order to enable
Operator to do the following:
(i) commence site preparation;
(ii) obtain suitable subcontractors for drilling and
completing the wells at currently prevailing prices;
and
(iii) insure the availability of equipment and materials.
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Developer shall pay, in proportion to the share of the Working
Interest owned by the Developer in the wells, any extra costs
incurred for each well pursuant to sub-section (a) above within
ten (10) business days of its receipt of Operator's statement for
the extra costs.
(c) COMPLETION DETERMINATION. Operator shall determine whether or not
to run the production casing for an attempted completion or to
plug and abandon any well drilled under this Agreement. However,
a well shall be completed only if Operator has made a good faith
determination that there is a reasonable possibility of obtaining
commercial quantities of oil and/or gas.
(d) DRY HOLE DETERMINATION. If Operator determines at any time during
the drilling or attempted completion of any well under this
Agreement, in accordance with the generally accepted and
customary oil and gas field practices and techniques then
prevailing in the geographic area of the Well Location that the
well should not be completed, then it shall promptly and properly
plug and abandon the well.
(e) EXCESS FUNDS AND COST OVERRUNS-INTANGIBLE DRILLING COSTS. Any
estimated Intangible Drilling Costs, which are the Intangible
Drilling Costs set forth on the AFE, paid by Developer with
respect to any well which exceed Operator's price specified in
sub-section (a) above for the Intangible Drilling Costs of the
well shall be retained by Operator and shall be applied to:
(i) the Intangible Drilling Costs for an additional well
or wells to be drilled on the Additional Well
Locations; or
(ii) any cost overruns owed by the Developer to Operator
for Intangible Drilling Costs on one or more of the
other wells on the Well Locations;
in proportion to the share of the Working Interest owned by the
Developer in the wells.
Conversely, if Operator's price specified in sub-section (a)
above for the Intangible Drilling Costs of any well exceeds the
estimated Intangible Drilling Costs, which are the Intangible
Drilling Costs set forth on the AFE, paid by Developer for the
well, then:
(i) Developer shall pay the additional price to Operator
within five (5) business days after notice from
Operator that the additional amount is due and owing;
or
(ii) Developer and Operator may agree to delete or reduce
Developer's Working Interest in one or more wells
which have not yet been completed to provide funds to
pay the additional amounts to Operator. If doing so
results in any excess prepaid Intangible Drilling
Costs, then these funds shall be applied to:
(a) the Intangible Drilling Costs for an
additional well or wells to be drilled on
the Additional Well Locations; or
(b) any cost overruns owed by Developer to
Operator for Intangible Drilling Costs on
one or more of the other wells on the Well
Locations;
in proportion to the share of the Working Interest
owned by the Developer in the wells.
The Exhibits to this Agreement with respect to the affected wells
shall be amended as appropriate.
(f) EXCESS FUNDS AND COST OVERRUNS - TANGIBLE COSTS. Any estimated
Tangible Costs, which are the Tangible Costs set forth on the
AFE, paid by Developer with respect to any well which exceed
Operator's price specified in sub-section (a) above for the
Tangible Costs of the well shall be retained by Operator and
shall be applied to:
(i) the Intangible Drilling Costs or Tangible Costs for
an additional well or wells to be drilled on the
Additional Well Locations; or
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(ii) any cost overruns owed by Developer to Operator for
Intangible Drilling Costs or Tangible Costs on one or
more of the other wells on the Well Locations;
in proportion to the share of the Working Interest owned by the
Developer in the wells.
Conversely, if Operator's price specified in sub-section (a)
above for the Tangible Costs of any well exceeds the estimated
Tangible Costs, which are the Tangible Costs set forth on the
AFE, paid by Developer for the well, then:
(i) Developer shall pay the additional price to Operator
within ten (10) business days after notice from
Operator that the additional price is due and owing;
or
(ii) Developer and Operator may agree to delete or reduce
Developer's Working Interest in one or more wells
which have not yet been completed to provide funds to
pay the additional price to Operator. If doing so
results in any excess prepaid Tangible Costs, then
these funds shall be applied to:
(a) the Intangible Drilling Costs or Tangible
Costs for an additional well or wells to be
drilled on the Additional Well Locations; or
(b) any cost overruns owed by Developer to
Operator for Intangible Drilling Costs or
Tangible Costs on one or more of the other
wells on the Well Locations;
in proportion to the share of the Working Interest
owed by the Developer in the wells.
The Exhibits to this Agreement with respect to the affected wells
shall be amended as appropriate.
5. TITLE EXAMINATION OF WELL LOCATIONS, DEVELOPER'S ACCEPTANCE AND LIABILITY;
ADDITIONAL WELL LOCATIONS.
(a) TITLE EXAMINATION OF WELL LOCATIONS, DEVELOPER'S ACCEPTANCE AND
LIABILITY. The Developer acknowledges that Operator has furnished
Developer with the title opinions identified on Exhibit A, and
other documents and information which Developer or its counsel
has requested in order to determine the adequacy of the title to
the Initial Well Locations and leased premises subject to this
Agreement. The Developer accepts the title to the Initial Well
Locations and leased premises and acknowledges and agrees that,
except for any loss, expense, cost, or liability caused by the
breach of any of the warranties and representations made by the
Operator in Section l(b), any loss, expense, cost or liability
whatsoever caused by or related to any defect or failure of the
title shall be the sole responsibility of and shall be borne
entirely by the Developer.
(b) ADDITIONAL WELL LOCATIONS. Before beginning drilling of any well
on any Additional Well Location, Operator shall conduct, or cause
to be conducted, a title examination of the Additional Well
Location, in order to obtain appropriate abstracts, opinions and
certificates and other information necessary to determine the
adequacy of title to both the applicable Lease and the fee title
of the lessor to the premises covered by the Lease. The results
of the title examination and such other information as is
necessary to determine the adequacy of title for drilling
purposes shall be submitted to the Developer for its review and
acceptance. No drilling on the Additional Well Locations shall
begin until the title has been accepted in writing by the
Developer. After any title has been accepted by the Developer,
any loss, expense, cost, or liability whatsoever, caused by or
related to any defect or failure of the title shall be the sole
responsibility of and shall be borne entirely by the Developer,
unless such loss, expense, cost, or liability was caused by the
breach of any of the warranties and representations made by the
Operator in Section l(b).
6. OPERATIONS SUBSEQUENT TO COMPLETION OF THE WELLS; FEE ADJUSTMENTS;
EXTRAORDINARY COSTS; PIPELINES; PRICE DETERMINATIONS; PLUGGING AND
ABANDONMENT.
(a) OPERATIONS SUBSEQUENT TO COMPLETION OF THE WELLS. Beginning with
the month in which a well drilled under this Agreement begins to
produce, Operator shall be entitled to an operating fee of $285
per month for each well being operated under this Agreement,
proportionately reduced to the extent the Developer owns less
than 100% of the Working Interest in the wells. This fee shall be
in lieu of any direct charges by Operator for its services or the
provision by Operator of its equipment for normal superintendence
and maintenance of the wells and related pipelines and
facilities.
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If a third-party serves as the actual operator of the well, then
this fee shall be $25 above the actual third-party operator's
monthly charges. The $25 will be retained by Operator each month
for reviewing the costs and expenses charged by the third-party
operator and monitoring the third-party operator's accounting and
production records for the well on behalf of the Developer.
The operating fees shall cover all normal, regularly recurring
operating expenses for the production, delivery and sale of
natural gas, including without limitation:
(i) well tending, routine maintenance and adjustment;
(ii) reading meters, recording production, pumping,
maintaining appropriate books and records;
(iii) preparing reports to the Developer and government
agencies; and
(iv) collecting and disbursing revenues.
The operating fees shall not cover costs and expenses related to
the following:
(i) the production and sale of oil;
(ii) the collection and disposal of salt water or other
liquids produced by the wells;
(iii) the rebuilding of access roads; and
(iv) the purchase of equipment, materials or third party
services;
which, subject to the provisions of sub-section (c) of this
Section 6, shall be paid by the Developer in proportion to the
share of the Working Interest owned by the Developer in the
wells.
Any well which is temporarily abandoned or shut-in continuously
for the entire month shall not be considered a producing well for
purposes of determining the number of wells in the month subject
to the operating fee.
(b) FEE ADJUSTMENTS. The monthly operating fee set forth in
sub-section (a) above may in the following manner be adjusted
annually as of the first day of January (the "Adjustment Date")
each year beginning January l, 2006. Such adjustment, if any,
shall not exceed the percentage increase in the average weekly
earnings of "Crude Petroleum, Natural Gas, and Natural Gas
Liquids" workers, as published by the U.S. Department of Labor,
Bureau of Labor Statistics, and shown in Employment and Earnings
Publication, Monthly Establishment Data, Hours and Earning
Statistical Table C-2, Index Average Weekly Earnings of "Crude
Petroleum, Natural Gas, and Natural Gas Liquids" workers, SIC
Code #131-2, or any successor index thereto, since January l,
2004, in the case of the first adjustment, and since the previous
Adjustment Date, in the case of each subsequent adjustment.
(c) EXTRAORDINARY COSTS. Without the prior written consent of the
Developer, pursuant to a written estimate submitted by Operator,
Operator shall not undertake any single project or incur any
extraordinary cost with respect to any well being produced under
this Agreement reasonably estimated to result in an expenditure
of more than $5,000, unless the project or extraordinary cost is
necessary for the following:
(i) to safeguard persons or property; or
(ii) to protect the well or related facilities in the
event of a sudden emergency.
In no event, however, shall the Developer be required to pay for
any project or extraordinary cost arising from the negligence or
misconduct of Operator, its agents, servants, employees,
contractors, licensees, or invitees.
8
All extraordinary costs incurred and the cost of projects
undertaken with respect to a well being produced shall be billed
at the invoice cost of third-party services performed or
materials purchased together with a reasonable charge by Operator
for services performed directly by it, in proportion to the share
of the Working Interest owned by the Developer in the wells.
Operator shall have the right to require the Developer to pay in
advance of undertaking any project all or a portion of the
estimated costs of the project in proportion to the share of the
Working Interest owned by the Developer in the wells.
(d) PIPELINES. Developer shall have no interest in the pipeline
gathering system, which gathering system shall remain the sole
property of Operator or its Affiliates and shall be maintained at
their sole cost and expense.
(e) PRICE DETERMINATIONS. Notwithstanding anything herein to the
contrary, the Developer shall pay all costs in proportion to the
share of the Working Interest owned by the Developer in the wells
with respect to obtaining price determinations under and
otherwise complying with the Natural Gas Policy Act of 1978 and
the implementing state regulations. This responsibility shall
include, without limitation, preparing, filing, and executing all
applications, affidavits, interim collection notices, reports and
other documents necessary or appropriate to obtain price
certification, to effect sales of natural gas, or otherwise to
comply with the Act and the implementing state regulations.
Operator agrees to furnish the information and render the
assistance as the Developer may reasonably request in order to
comply with the Act and the implementing state regulations
without charge for services performed by its employees.
(f) PLUGGING AND ABANDONMENT. The Developer shall have the right to
direct Operator to plug and abandon any well that has been
completed under this Agreement as a producer. In addition,
Operator shall not plug and abandon any well that has been
drilled and completed as a producer before obtaining the written
consent of the Developer. However, if the Operator in accordance
with the generally accepted and customary oil and gas field
practices and techniques then prevailing in the geographic area
of the well location, determines that any well should be plugged
and abandoned and makes a written request to the Developer for
authority to plug and abandon the well and the Developer fails to
respond in writing to the request within forty-five (45) days
following the date of the request, then the Developer shall be
deemed to have consented to the plugging and abandonment of the
well.
All costs and expenses related to plugging and abandoning the
wells which have been drilled and completed as producing wells
shall be borne and paid by the Developer in proportion to the
share of the Working Interest owned by the Developer in the
wells. Also, at any time after one (1) year from the date each
well drilled and completed is placed into production, Operator
shall have the right to deduct each month from the proceeds of
the sale of the production from the well up to $200, in
proportion to the share of the Working Interest owned by the
Developer in the wells, for the purpose of establishing a fund to
cover the estimated costs of plugging and abandoning the well.
All of these funds shall be deposited in a separate interest
bearing escrow account for the account of the Developer, and the
total amount so retained and deposited shall not exceed
Operator's reasonable estimate of Developer's share of the costs
of plugging and abandoning the well.
7. BILLING AND PAYMENT PROCEDURE WITH RESPECT TO OPERATION OF WELLS;
DISBURSEMENTS; SEPARATE ACCOUNT FOR SALE PROCEEDS; RECORDS AND REPORTS;
ADDITIONAL INFORMATION.
(a) BILLING AND PAYMENT PROCEDURE WITH RESPECT TO OPERATION OF WELLS.
Operator shall promptly and timely pay and discharge on behalf of
the Developer, in proportion to the share of the Working Interest
owned by the Developer in the wells, the following:
(i) all expenses and liabilities payable and incurred by
reason of its operation of the wells in accordance
with this Agreement, such as severance taxes,
royalties, overriding royalties, operating fees, and
pipeline gathering charges; and
(ii) any third-party invoices rendered to Operator with
respect to costs and expenses incurred in connection
with the operation of the wells.
Operator, however, shall not be required to pay and discharge any
of the above costs and expenses which are being contested in good
faith by Operator.
9
Operator shall:
(i) deduct the foregoing costs and expenses from the
Developer's share of the proceeds of the oil and/or
gas sold from the wells; and
(ii) keep an accurate record of the Developer's account,
showing expenses incurred and charges and credits
made and received with respect to each well.
If the proceeds are insufficient to pay the costs and expenses,
then Operator shall promptly and timely pay and discharge the
costs and expenses, in proportion to the share of the Working
Interest owned by the Developer in the wells, and prepare and
submit an invoice to the Developer each month for the costs and
expenses. The invoice shall be accompanied by the form of
statement specified in sub-section (b) below, and shall be paid
by the Developer within ten (10) business days of its receipt.
(b) DISBURSEMENTS. Operator shall disburse to the Developer, on a
monthly basis, the Developer's share of the proceeds received
from the sale of oil and/or gas sold from the wells operated
under this Agreement, less:
(i) the amounts charged to the Developer under
sub-section (a); and
(ii) the amount, if any, withheld by Operator for future
plugging costs pursuant to sub-section (f) of Section
6.
Each disbursement made and/or invoice submitted pursuant to
sub-section (a) above shall be accompanied by a statement
itemizing with respect to each well:
(i) the total production of oil and/or gas since the date
of the last disbursement or invoice billing period,
as the case may be, and the Developer's share of the
production;
(ii) the total proceeds received from any sale of the
production, and the Developer's share of the
proceeds;
(iii) the costs and expenses deducted from the proceeds
and/or being billed to the Developer pursuant to
sub-section (a) above;
(iv) the amount withheld for future plugging costs; and
(v) any other information as Developer may reasonably
request, including without limitation copies of all
third-party invoices listed on the statement for the
period.
(c) SEPARATE ACCOUNT FOR SALE PROCEEDS. Operator agrees to deposit
all proceeds from the sale of oil and/or gas sold from the wells
operated under this Agreement in a separate checking account
maintained by Operator. This account shall be used solely for the
purpose of collecting and disbursing funds constituting proceeds
from the sale of production under this Agreement.
(d) RECORDS AND REPORTS. In addition to the statements required under
sub-section (b) above, Operator, within seventy-five (75) days
after the completion of each well drilled, shall furnish the
Developer with a detailed statement itemizing with respect to the
well the total costs and charges under Section 4(a) and the
Developer's share of the costs and charges, and any information
as is necessary to enable the Developer:
(i) to allocate any extra costs incurred with respect to
the well between Tangible Costs and Intangible
Drilling Costs; and
(ii) to determine the amount of investment tax credit or
marginal well production tax credit, if applicable.
(e) ADDITIONAL INFORMATION. Operator shall promptly furnish the
Developer with any additional information as it may reasonably
request, including without limitation geological, technical, and
financial information, in the form as may reasonably be
requested, pertaining to any phase of the operations and
activities governed by this Agreement. The Developer and its
authorized employees, agents and consultants, including
independent accountants shall, at Developer's sole cost and
expense:
10
(i) on at least ten (10) days' written notice have access
during normal business hours to all of Operator's
records pertaining to operations, including without
limitation, the right to audit the books of account
of Operator relating to all receipts, costs, charges,
expenses and disbursements under this Agreement,
including information regarding the separate account
required under sub-section (c); and
(ii) have access, at its sole risk, to any wells drilled
by Operator under this Agreement at all times to
inspect and observe any machinery, equipment and
operations.
8. OPERATOR'S LIEN; RIGHT TO COLLECT FROM OIL OR GAS PURCHASER.
(a) OPERATOR'S LIEN. To secure the payment of all sums due from
Developer to Operator under the provisions of this Agreement the
Developer grants Operator a first and preferred lien on and
security interest in the following:
(i) the Developer's interest in the Leases covered by
this Agreement;
(ii) the Developer's interest in oil and gas produced
under this Agreement and its proceeds from the sale
of the oil and gas; and
(iii) the Developer's interest in materials and equipment
under this Agreement.
(b) RIGHT TO COLLECT FROM OIL OR GAS PURCHASER. If the Developer
fails to timely pay any amount owing under this Agreement by it
to the Operator, then Operator, without prejudice to other
existing remedies, may collect and retain from any purchaser or
purchasers of oil or gas the Developer's share of the proceeds
from the sale of the oil and gas until the amount owed by the
Developer, plus twelve percent (12%) interest on a per annum
basis, and any additional costs (including without limitation
actual attorneys' fees and costs) resulting from the delinquency,
has been paid. Each purchaser of oil or gas shall be entitled to
rely on Operator's written statement concerning the amount of any
default.
9. SUCCESSORS AND ASSIGNS; TRANSFERS; APPOINTMENT OF AGENT.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding on and
inure to the benefit of the undersigned parties and their
respective successors and permitted assigns. However, without the
prior written consent of the Developer, the Operator may not
assign, transfer, pledge, mortgage, hypothecate, sell or
otherwise dispose of any of its interest in this Agreement, or
any of the rights or obligations under this Agreement.
Notwithstanding, this consent shall not be required in connection
with:
(i) the assignment of work to be performed for Operator
by subcontractors, it being understood and agreed,
however, that any assignment to Operator's
subcontractors shall not in any manner relieve or
release Operator from any of its obligations and
responsibilities under this Agreement;
(ii) any lien, assignment, security interest, pledge or
mortgage arising under Operator's present or future
financing arrangements; or
(iii) the liquidation, merger, consolidation, or other
corporate reorganization or sale of substantially all
of the assets of Operator.
Further, in order to maintain uniformity of ownership in the
wells, production, equipment, and leasehold interests covered by
this Agreement, and notwithstanding any other provisions to the
contrary, the Developer shall not, without the prior written
consent of Operator, sell, assign, transfer, encumber, mortgage
or otherwise dispose of any of its interest in the wells,
production, equipment or leasehold interests covered by this
Agreement unless the disposition encompasses either:
(i) the entire interest of the Developer in all wells,
production, equipment and leasehold interests subject
to this Agreement; or
(ii) an equal undivided interest in all such wells,
production, equipment, and leasehold interests.
11
(b) TRANSFERS. Subject to the provisions of sub-section (a) above,
any sale, encumbrance, transfer or other disposition made by the
Developer of its interests in the wells, production, equipment,
and/or leasehold interests covered by this Agreement shall be
made:
(i) expressly subject to this Agreement;
(ii) without prejudice to the rights of the Operator; and
(iii) in accordance with and subject to the provisions of
the Lease.
(c) APPOINTMENT OF AGENT. If at any time the interest of the
Developer is divided among or owned by co-owners, Operator may,
at its discretion, require the co-owners to appoint a single
trustee or agent with full authority to do the following:
(i) receive notices, reports and distributions of the
proceeds from production;
(ii) approve expenditures;
(iii) receive billings for and approve and pay all costs,
expenses and liabilities incurred under this
Agreement;
(iv) exercise any rights granted to the co-owners under
this Agreement;
(v) grant any approvals or authorizations required or
contemplated by this Agreement;
(vi) sign, execute, certify, acknowledge, file and/or
record any agreements, contracts, instruments,
reports, or documents whatsoever in connection with
this Agreement or the activities contemplated by this
Agreement; and
(vii) deal generally with, and with power to bind, the
co-owners with respect to all activities and
operations contemplated by this Agreement.
However, all the co-owners shall continue to have the right to
enter into and execute all contracts or agreements for their
respective shares of the oil and gas produced from the wells
drilled under this Agreement in accordance with sub-section (c)
of Section 11.
10. OPERATOR'S INSURANCE; SUBCONTRACTORS' INSURANCE; OPERATOR'S LIABILITY.
(a) OPERATOR'S INSURANCE. Operator shall obtain and maintain at its
own expense so long as it is Operator under this Agreement all
required Workmen's Compensation Insurance and comprehensive
general public liability insurance in amounts and coverage not
less than $1,000,000 per person per occurrence for personal
injury or death and $1,000,000 for property damage per
occurrence, which shall include coverage for blow-outs and total
liability coverage of not less than $10,000,000.
Subject to the above limits, the Operator's general public
liability insurance shall be in all respects comparable to that
generally maintained in the industry with respect to services of
the type to be rendered and activities of the type to be
conducted under this Agreement. Operator's general public
liability insurance shall, if permitted by Operator's insurance
carrier:
(i) name the Developer as an additional insured party;
and
(ii) provide that at least thirty (30) days' prior notice
of cancellation and any other adverse material change
in the policy shall be given to the Developer.
However, the Developer shall reimburse Operator for the
additional cost, if any, of including it as an additional insured
party under the Operator's insurance.
12
Current copies of all policies or certificates of the Operator's
insurance coverage shall be delivered to the Developer on
request. It is understood and agreed that Operator's insurance
coverage may not adequately protect the interests of the
Developer and that the Developer shall carry at its expense the
excess or additional general public liability, property damage,
and other insurance, if any, as the Developer deems appropriate.
(b) SUBCONTRACTORS' INSURANCE. Operator shall require all of its
subcontractors to carry all required Workmen's Compensation
Insurance and to maintain such other insurance, if any, as
Operator in its discretion may require.
(c) OPERATOR'S LIABILITY. Operator's liability to the Developer as
Operator under this Agreement shall be limited to, and Operator
shall indemnify the Developer and hold it harmless from, claims,
penalties, liabilities, obligations, charges, losses, costs,
damages, or expenses (including but not limited to reasonable
attorneys' fees) relating to, caused by or arising out of:
(i) the noncompliance with or violation by Operator, its
employees, agents, or subcontractors of any local,
state or federal law, statute, regulation, or
ordinance;
(ii) the negligence or misconduct of Operator, its
employees, agents or subcontractors; or
(iii) the breach of or failure to comply with any
provisions of this Agreement.
11. INTERNAL REVENUE CODE ELECTION; RELATIONSHIP OF PARTIES; RIGHT TO TAKE
PRODUCTION IN KIND.
(a) INTERNAL REVENUE CODE ELECTION. With respect to this Agreement,
each of the parties elects under Section 761(a) of the Internal
Revenue Code of 1986, as amended, to be excluded from the
provisions of Subchapter K of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended. If the income tax laws
of the state or states in which the property covered by this
Agreement is located contain, or may subsequently contain, a
similar election, each of the parties agrees that the election
shall be exercised.
Beginning with the first taxable year of operations under this
Agreement, each party agrees that the deemed election provided by
Section 1.761-2(b)(2)(ii) of the Regulations under the Internal
Revenue Code of 1986, as amended, will apply; and no party will
file an application under Section 1.761-2 (b)(3)(i) and (ii) of
the Regulations to revoke the election. Each party agrees to
execute the documents and make the filings with the appropriate
governmental authorities as may be necessary to effect the
election.
(b) RELATIONSHIP OF PARTIES. It is not the intention of the parties
to create, nor shall this Agreement be construed as creating, a
mining or other partnership or association or to render the
parties liable as partners or joint venturers for any purpose.
Operator shall be deemed to be an independent contractor and
shall perform its obligations as set forth in this Agreement or
as otherwise directed by the Developer.
(c) RIGHT TO TAKE PRODUCTION IN KIND. Subject to the provisions of
Section 8 above, the Developer shall have the exclusive right to
sell or dispose of its proportionate share of all oil and gas
produced from the wells to be drilled under this Agreement,
exclusive of production:
(i) that may be used in development and producing
operations;
(ii) unavoidably lost; and
(iii) used to fulfill any free gas obligations under the
terms of the applicable Lease or Leases.
Operator shall not have any right to sell or otherwise dispose of
the oil and gas. The Developer shall have the exclusive right to
execute all contracts relating to the sale or disposition of its
proportionate share of the production from the wells drilled
under this Agreement.
Developer shall have no interest in any gas supply agreements of
Operator, except the right to receive Developer's share of the
proceeds received from the sale of any gas or oil from wells
developed under this Agreement. The Developer agrees to designate
Operator or Operator's designated bank agent as the Developer's
collection agent in any contracts. On request, Operator shall
assist Developer in arranging the sale or disposition of
Developer's oil and gas under this Agreement and shall promptly
provide the Developer with all relevant information which comes
to Operator's attention regarding opportunities for sale of
production.
13
If Developer fails to take in kind or separately dispose of its
proportionate share of the oil and gas produced under this
Agreement, then Operator shall have the right, subject to the
revocation at will by the Developer, but not the obligation, to
purchase the oil and gas or sell it to others at any time and
from time to time, for the account of the Developer at the best
price obtainable in the area for the production. Notwithstanding,
Operator shall have no liability to Developer should Operator
fail to market the production.
Any purchase or sale by Operator shall be subject always to the
right of the Developer to exercise at any time its right to take
in-kind, or separately dispose of, its share of oil and gas not
previously delivered to a purchaser. Any purchase or sale by
Operator of any other party's share of oil and gas shall be only
for reasonable periods of time as are consistent with the minimum
needs of the oil and gas industry under the particular
circumstances, but in no event for a period in excess of one (1)
year.
12. EFFECT OF FORCE MAJEURE; DEFINITION OF FORCE MAJEURE; LIMITATION.
(a) EFFECT OF FORCE MAJEURE. If Operator is rendered unable, wholly
or in part, by force majeure (as defined below) to carry out any
of its obligations under this Agreement, including but not
limited to beginning the drilling of one or more wells by the
applicable times set forth in Section 2(b) or in any Addendum to
this Agreement, the obligations of the Operator, so far as it is
affected by the force majeure, shall be suspended during but no
longer than, the continuance of the force majeure. The Operator
shall give to the Developer prompt written notice of the force
majeure with reasonably full particulars concerning it. Operator
shall use all reasonable diligence to remove the force majeure as
quickly as possible to the extent the same is within reasonable
control.
(b) DEFINITION OF FORCE MAJEURE. The term "force majeure" shall mean
an act of God, strike, lockout, or other industrial disturbance,
act of the public enemy, war, blockade, public riot, lightning,
fire, storm, flood, explosion, governmental restraint,
unavailability of drilling rigs, equipment or materials, plant
shut-downs, curtailments by purchasers and any other causes
whether of the kind specifically enumerated above or otherwise,
which directly preclude Operator's performance under this
Agreement and is not reasonably within the control of the
Operator including but not limited to, the inability of Operator
to begin the drilling of the wells subject to this Agreement by
the applicable times set forth in Section 2(b) or in any Addendum
to this Agreement due to decisions of third-party operators to
delay drilling the wells, poor weather conditions, inability to
obtain drilling permits, access right to the drilling site or
title problems.
(c) LIMITATION. The requirement that any force majeure shall be
remedied with all reasonable dispatch shall not require the
settlement of strikes, lockouts, or other labor difficulty
affecting the Operator, contrary to its wishes. The method of
handling these difficulties shall be entirely within the
discretion of the Operator.
13. TERM.
This Agreement shall become effective when executed by Operator and the
Developer. Except as provided in sub-section (c) of Section 3, this
Agreement shall continue and remain in full force and effect for the
productive lives of the wells being operated under this Agreement.
14. GOVERNING LAW; INVALIDITY.
(a) GOVERNING LAW. This Agreement shall be governed by, construed and
interpreted in accordance with the laws of the Commonwealth of
Pennsylvania.
(b) INVALIDITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions
of this Agreement, and this Agreement shall be construed in all
respects as if the invalid or unenforceable provision were
omitted.
14
15. INTEGRATION; WRITTEN AMENDMENT.
(a) INTEGRATION. This Agreement, including the Exhibits to this
Agreement, constitutes and represents the entire understanding
and agreement of the parties with respect to the subject matter
of this Agreement and supersedes all prior negotiations,
understandings, agreements, and representations relating to the
subject matter of this Agreement.
(b) WRITTEN AMENDMENT. No change, waiver, modification, or amendment
of this Agreement shall be binding or of any effect unless in
writing duly signed by the party against which the change,
waiver, modification, or amendment is sought to be enforced.
16. WAIVER OF DEFAULT OR BREACH.
No waiver by any party to any default of or breach by any other party
under this Agreement shall operate as a waiver of any future default or
breach, whether of like or different character or nature.
17. NOTICES.
Unless otherwise provided in this Agreement, all notices, statements,
requests, or demands which are required or contemplated by this Agreement
shall be in writing and shall be hand-delivered or sent by registered or
certified mail, postage prepaid, to the following addresses until changed
by certified or registered letter so addressed to the other party:
(i) If to the Operator, to:
Atlas Resources, Inc.
311 Rouser Road
Moon Township, Pennsylvania 15108
Attention: President
(ii) If to Developer, to:
Atlas America Series 26-2005 L.P.
c/o Atlas Resources, Inc.
311 Rouser Road
Moon Township, Pennsylvania 15108
Notices which are served by registered or certified mail on the parties in
the manner provided in this Section shall be deemed sufficiently served or
given for all purposes under this Agreement at the time the notice is
mailed in any post office or branch post office regularly maintained by
the United States Postal Service or any successor. All payments shall be
hand-delivered or sent by United States mail, postage prepaid to the
addresses set forth above until changed by certified or registered letter
so addressed to the other party.
18. INTERPRETATION.
The titles of the Sections in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction
of any of the terms and provisions of this Agreement. As used in this
Agreement, the plural shall include the singular and the singular shall
include the plural whenever appropriate.
19. COUNTERPARTS.
The parties may execute this Agreement in any number of separate
counterparts, each of which, when executed and delivered by the parties,
shall have the force and effect of an original; but all such counterparts
shall be deemed to constitute one and the same instrument.
15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ATLAS RESOURCES, INC.
By: /s/ Frank P. Carolas
Frank P. Carolas, Executive Vice President
ATLAS AMERICA SERIES 26-2005 L.P.
By its Managing General Partner:
ATLAS RESOURCES, INC.
By: /s/ Frank P. Carolas
Frank P. Carolas, Executive Vice President
16
DESCRIPTION OF LEASES AND INITIAL WELL LOCATIONS
[To be completed as information becomes available]
1. WELL LOCATION
(a) Oil and Gas Lease from ______________________________________ dated
_____________________ and recorded in Deed Book Volume __________,
Page __________ in the Recorder's Office of County, ____________,
covering approximately _________ acres in ____________________________
Township, ___________________ County, __________________________.
(b) The portion of the leasehold estate constituting the
____________________________________________ No. __________ Well
Location is described on the map attached hereto as Exhibit A-l.
(c) Title Opinion of _________________________________, ____________________
________________, ________________________________________, ____________
____________________________, dated ___________________, 200___.
(d) The Developer's interest in the leasehold estate constituting this
Well Location is an undivided % Working Interest to those oil and gas
rights from the surface to the bottom of the __________________
Formation, subject to the landowner's royalty interest and overriding
royalty interests.
Exhibit A
(Page 1)
Well Name, Twp.
County, State
ASSIGNMENT OF OIL AND GAS LEASE
STATE OF _______________________________
COUNTY OF _____________________________
KNOW ALL MEN BY THESE PRESENTS:
THAT the undersigned _____________ (hereinafter called "Assignor"), for
and in consideration of One Dollar and other valuable consideration ($1.00 ovc),
the receipt whereof is hereby acknowledged, does hereby sell, assign, transfer
and set over unto _______________ (hereinafter called "Assignee"), an undivided
_____________________________ in, and to, the oil and gas lease described as
follows:
together with the rights incident thereto and the personal property thereto,
appurtenant thereto, or used, or obtained, in connection therewith.
And for the same consideration, the assignor covenants with the said
assignee his or its heirs, successors, or assigns that assignor is the lawful
owner of said lease and rights and interest thereunder and of the personal
property thereon or used in connection therewith; that the undersigned has good
right and authority to sell and convey the same, and that said rights, interest
and property are free and clear from all liens and encumbrances, and that all
rentals and royalties due and payable thereunder have been duly paid.
In Witness Whereof, the undersigned owner ______ and assignor ______
ha___ signed and sealed this instrument the ______ day of _______________,
200___.
Signed and acknowledged in the presence of ________________________________
_____________________________________________ ________________________________
_____________________________________________ ________________________________
Exhibit B
(Page 1)
ACKNOWLEDGMENT BY INDIVIDUAL
STATE OF ____________________________________
BEFORE ME, a Notary Public, in and for said
COUNTY OF ___________________________________
County and State, on this day personally appeared ___________ who
acknowledged to me that ____ he ____ did sign the foregoing instrument and that
the same is _____________ free act and deed.
In testimony whereof, I have hereunto set my hand and official seal, at
_____________________________, this ______ day of _______________, A.D., 200___.
_____________________________
Notary Public
CORPORATION ACKNOWLEDGMENT
STATE OF ____________________________________
BEFORE ME, a Notary Public, in and for said
COUNTY OF ___________________________________
County and State, on this day personally appeared ___________ known to
me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged that the same was the act of the said
______________________________________________, a corporation, and that he
executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
In testimony whereof, I have hereunto set my hand and official seal, at
_____________________________, this ______ day of _______________, A.D., 200___.
_____________________________
Notary Public
This instrument prepared by:
Atlas Resources, Inc.
311 Rouser Road
P.O. Box 611 Moon Township, PA 15108
Exhibit B
(Page 2)
ADDENDUM NO. __________
TO DRILLING AND OPERATING AGREEMENT
DATED ___________________, 200___
THIS ADDENDUM NO. __________ made and entered into this ______ day of
________________, 200___, by and between ATLAS RESOURCES, INC., a Pennsylvania
corporation (hereinafter referred to as "Operator"),
and
ATLAS AMERICA SERIES 26-2005 L.P., a Delaware limited partnership, (hereinafter
referred to as the Developer).
WITNESSETH THAT:
WHEREAS, Operator and the Developer have entered into a Drilling and Operating
Agreement dated ___________________, 200___, (the "Agreement"), which relates to
the drilling and operating of ________________ (______) wells on the
________________ (______) Initial Well Locations identified on the maps attached
as Exhibits A-l through A-______ to the Agreement, and provides for the
development on the terms and conditions set forth in the Agreement of Additional
Well Locations as the parties may from time to time designate; and
WHEREAS, pursuant to Section l(c) of the Agreement, Operator and Developer
presently desire to designate ________________ Additional Well Locations
described below to be developed in accordance with the terms and conditions of
the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Addendum and intending to be legally bound, the parties agree as follows:
1. Pursuant to Section l(c) of the Agreement, the Developer hereby authorizes
Operator to drill, complete (or plug) and operate, on the terms and conditions
set forth in the Agreement and this Addendum No.__________, ________________
additional wells on the ________________ Additional Well Locations described on
Exhibit A to this Addendum and on the maps attached to this Addendum as Exhibits
A-______ through A-______.
2. Operator, as Developer's independent contractor, agrees to drill, complete
(or plug) and operate the additional wells on the Additional Well Locations in
accordance with the terms and conditions of the Agreement and further agrees to
begin drilling the first additional well within thirty (30) days after the date
of this Addendum and to begin drilling all the additional wells before the close
of the 90th day after the close of the calendar year in which this Addendum is
entered into by Operator and the Developer.
3. Developer acknowledges that:
(a) Operator has furnished Developer with the title opinions identified on
Exhibit A to this Addendum; and
(b) such other documents and information which Developer or its counsel has
requested in order to determine the adequacy of the title to the above
Additional Well Locations.
The Developer accepts the title to the Additional Well Locations and leased
premises in accordance with the provisions of Section 5 of the Agreement.
4. The drilling and operation of the additional wells on the Additional Well
Locations shall be in accordance with and subject to the terms and conditions
set forth in the Agreement as supplemented by this Addendum No. __________ and
except as previously supplemented, all terms and conditions of the Agreement
shall remain in full force and effect as originally written.
5. This Addendum No. __________ shall be legally binding on, and shall inure to
the benefit of, the parties and their respective successors and permitted
assigns.
Exhibit C
(Page 1)
WITNESS the due execution of this Addendum on the day and year first above
written.
ATLAS RESOURCES, INC.
By ________________________________
ATLAS AMERICA SERIES 26-2005 L.P.
By its Managing General Partner:
ATLAS RESOURCES, INC.
By ________________________________
Exhibit C
(Page 2)
EXHIBIT A
DRILLING AND OPERATING AGREEMENT DATED AUGUST 25, 2005
ATLAS AMERICA SERIES 26-2005 L.P.
WELL STATE COUNTY TOWNSHIP
- ------------------------------------------ --------------- ---------------------------- -------------------------------------
EGLINTON #1 PA CRAWFORD VERNON
SMITH #11 PA CRAWFORD HAYFIELD
DILLAMAN #3 PA CRAWFORD HAYFIELD
SKUFKA #2 PA FAYETTE PERRY
TRIPLETT #6 PA FAYETTE NICHOLSON
CHRISTOPHER #4 PA FAYETTE GERMAN
BR-1029 TN SCOTT FORK MOUNTAIN FIELD
BR-1030 TN SCOTT FORK MOUNTAIN FIELD
BR-1032 TN SCOTT FORK MOUNTAIN FIELD