EXHIBIT 10.1
CONTRACT OPERATING AGREEMENT
This Contract Operating Agreement (this "Agreement") is entered into
effective as of the 1st day of June, 1998, and is by and between VISTA
RESOURCES, INC., whose address is 550 West Texas Avenue, Suite 700, Midland,
Texas 79701 ("Contractor"), and MIDLAND RESOURCES OPERATING COMPANY, INC.,
whose address is 616 FM 1960 West, Suite 600, Houston, Texas 77090 (including
it parent and affiliated companies "Owner").
1. Effective as of June 1, 1998, Contractor, as an independent contractor,
agrees to provide contract operating services for all of the operated
wells, leases, and related facilities of Owner now owned or hereinafter
acquired during the term of this Agreement (the "Properties"). Contractor
shall perform such duties and services hereunder as and to the extent
requested by Owner; provided such duties and services are customarily
performed by contract operators in the usual course of producing and
maintaining oil and gas wells including the following:
o pumper services
o field foreman assistance
o engineering supervision and analysis
o geological review and analysis
o land and legal review and analysis
o accounting and production reporting assistance
2. It is understood and agreed that Owner shall remain the operator of record
with the Texas Railroad Commission ("RRC") and other relevant state and
federal agencies such as the General Land Office, University Lands
Department, Texas Office of the Comptroller, the Department of Energy and
the Environmental Protection Agency. Accordingly, all reports and filings
made with such agencies shall be the responsibility of, and shall be made
by, Owner with such assistance from Contractor as Owner reasonably
requests. Likewise all accounting and production reporting functions
(including, without limitation, all revenue tracking and distribution,
joint interest billing, payable and receivable functions and state
production and tax reporting) shall remain the responsibility of, and shall
be accomplished by, Owner with such assistance from Contractor as Owner
reasonably requests.
1. Owner shall pay Contractor for the work so performed and services provided
hereunder as follows:
o For pumper and field foreman services - on an actual cost basis for all
direct costs and expenses incurred by Contractor hereunder for such
employees (based on allocating the cost and expense of such employees
over the Properties on a well by well basis).
o Engineering and supervision charges for specific projects (i.e.,
engineering or geological studies) or specific property related
procedures (i.e., well site work in connection with workovers,
recompletions, drilling activities, completions or major facilities
work) shall be pre-approved by Owner and shall be charged by
Contractor to Owner at the rate of Four Hundred Dollars ($400.00) per
day (with a half day minimum charge, plus reimbursement for actual out
of pocket direct expenses incurred) for each Vista employee engaged by
Owner to provide such services.
o For general and administrative services provided hereunder by
Contractor to Owner (including, without limitation, office space,
telephone, fax, office supplies and copying services provided to Owner
by Contractor) Contractor shall charge Owner a fixed charge of $1,500
per month through October 1998. From and after November 1, 1998, such
charge shall be increased from $1,500 to $3,000 per month. Any general
and administrative assistance requested by Owner over and above the
limited services contemplated in this subparagraph shall be billed on
agreed upon hourly rates for the number and type of Contractor
employees requested by Owner.
o For all services rendered by Contractor for the benefit of Owner and
not generally described above or not specifically contemplated at the
time of the signing of this Agreement, Contractor and Owner agree to
work with each other in good faith to establish a fair compensation
for such services on a case by case basis.
Contractor shall submit detailed invoices for all services rendered hereunder
monthly on or before the last day of each succeeding calendar month and Owner
will remit payment within 15 business days of receipt of each proper invoice.
4. Contractor shall not be liable for any losses or damages sustained to any
of the Properties of Owner caused by any fire, storm, flood, explosion,
theft or other cause whatsoever unless such loss is the result of the
willful or grossly negligent act of Contractor or its employees. Owner
shall, at its sole cost and expense, make all repairs and do any
reconditioning necessary of the Properties as it deems necessary to the
operations of the Properties. Contractor shall make such minor mechanical
adjustments and repairs as are ordinarily performed by a contract operator
in the course of his regular duties, but Owner shall furnish, at its
expense, all material and equipment required therefor. Contractor shall
promptly notify Owner of the need for any repairs, replacements, servicing
or reconditioning which may be or become necessary in connection with the
Properties.
1. Contractor will cause to be issued and maintained a current Certificate of
Insurance with Owner at all times during the term of this Agreement with
such Certificate of Insurance evidencing the insurance coverages and
amounts as set out on Exhibit A hereto.
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2. It is understood and agreed that Contractor is acting solely as an
independent contractor under this Agreement. Accordingly, this Agreement
is not intended to create, and shall not be construed as creating, any
assignment, assumption or transfer by Owner of any liabilities or potential
liabilities to Contractor, and Contractor expressly does not assume any
such liabilities. This Agreement shall not be considered as creating a
partnership or employee/employer relationship between Contractor and Owner.
7. At all times during the term of this Agreement, Contractor, its management,
supervisory and support staff, and any third party consultants engaged by
Contractor, shall have complete and total access to all books, files and
records of Owner, including, without limitation, all accounting, tax and
financial records; lease, land, division order and contract files and
records; well, production and operations files, data and information;
geological and geophysical files, data, and information; reserve and
engineering files, data and information; and all other files, data and
information within the possession or control of Owner and in any way
relating to the Properties ("Owner Files and Records"). Owner authorizes
Contractor to communicate with all accountants, auditors, attorneys,
consultants and other parties who have heretofore performed or who may
hereafter perform services for and on behalf of Owner to obtain from such
parties copies of any Owner Files and Data which Contractor deems necessary
or advisable to obtain in order to effectively perform the services
contemplated hereunder. At any time during the term of this Agreement
Contractor shall have the power and authority to transfer or cause the
transfer of the originals of the Owner Files and Data to its premises in
Midland, Texas; provided that Owner shall have complete access thereto at
all times during business hours. Upon termination of this Agreement (if
the merger between Owner and Vista Resources Partners, L.P. as contemplated
by that certain Agreement and Plan of Merger dated May 22, 1998 has not
occurred at such time), upon Owner's request, Contractor shall return the
originals of the Owner Files and Data to Owner.
8. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Texas, excluding any
choice-of-law provisions thereof.
1. This Agreement shall continue through October 31, 1998 unless otherwise
terminated by the agreement of both parties hereto. After October 31, 1998
this Agreement shall continue on a month-to-month basis unless terminated
by either party upon prior written notice of termination. If such notice of
termination is received by the other party then this Agreement shall
terminate on the first day of the next succeeding month after the lapse of
30 days from the date of receipt of the notice of termination.
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9. All written correspondence and communication shall be sent by first class
U.S. mail, telecopier or hand/overnight delivery as follows:
IF TO CONTRACTOR:
Vista Resources, Inc.
550 West Texas Avenue, Suite 700
Midland, Texas 79701
Attention: Mr. Steve Gray
FAX (915) 688-0589
IF TO OWNER:
Midland Resources Operating Company, Inc.
c/o Mr. Robert R. Donnelly, President
415 West Wall, Suite 1415
Midland, Texas 79701
FAX (915) 683-6295
EXECUTED effective as of the date set out above.
OWNER: CONTRACTOR:
MIDLAND RESOURCES OPERATING VISTA RESOURCES, INC.
COMPANY, INC.
By: By:
----------------------------- ----------------------
Robert R. Donnelly, President C. Randall Hill, CEO
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EXHIBIT A
CERTIFICATE OF INSURANCE
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