Exhibit 10.3
PARTICIPATION AGREEMENT
Portion of Main Pass Block 275
This Participation Agreement ("Agreement") is made and entered into
effective as of the 13th day of December, 2006 (the "Effective Date"), by and
between Newfield Exploration Company ("Newfield") and Ridgewood Energy
Corporation ("Ridgewood"). Newfield and Ridgewood are also sometimes hereinafter
referred to collectively as the "Parties" or individually as a "Party".
WITNESSETH:
WHEREAS, Apache Corporation ("Apache"), (referred to as the "MP 275 Owner")
owns one hundred percent (100%) operating rights interest in the following
described portion of oil and gas lease and area, hereinafter referred to as the
"Contract Area":
Oil and Gas Lease dated September 1, 1995, bearing serial number OCS-G
15395, by and between the United States of America, acting through the
Director, Bureau of Land Management, as Lessor, and Vastar Resources, Inc.,
as Lessee, covering all of Block 275, Main Pass Area, South and East
Addition, INSOFAR AND ONLY INSOFAR AS said lease covers the SW/4 and
further limited to those depths from the surface down to 11,400' TVD or the
stratigraphic equivalent depth of the top of the 11,100' sand as seen at
11,051' TVD in OCS-G 15395 A-2 well, whichever is shallower, and further
limited to the area situated Southward of the Northwest-Southeast Fault,
immediately south and separate from the A-1 ST well and Northwest of the
A-2 well.
WHEREAS, Newfield and the Apache entered into that certain Option
Agreement, dated September 21, 2005 ("Option Agreement"), which provided the
Apache the option to either (i) participate with Newfield in drilling a test
well on the Contract Area or (ii) farmout the Contract Area to Newfield.
WHEREAS, pursuant to the Option Agreement, Apache elected to farmout the
Contract Area to Newfield, and Newfield has entered into a formal farmout
agreement with Apache dated effective July 7, 2006 ("Farmout Agreement")
covering the Contract Area, which will provide that Apache shall reserve an
overriding royalty interest ("ORRI") of 8.3333% of 6/6ths, but proportionately
in the event that Apache owns less than one hundred percent (100%) of the record
title and/or operating rights in the Contract Area which Newfield may earn. A
copy of the Farmout Agreement is attached hereto as Exhibit "A";
WHEREAS, Ridgewood agrees to bear its proportionate share of drilling costs
associated with the Initial Test Well (defined in Paragraph 3.1 hereinbelow) in
order to earn an interest in the Contract Area, pursuant to the terms and
conditions of this Agreement and the Farmout Agreement.
WHEREAS, the Parties desire to enter into this Agreement to set forth the
manner in which the cost of drilling, producing and operating wells, and the
production from the Contract Area and interest in the Contract Area shall be
shared and/or owned.
NOW, THEREFORE, for the consideration, being the mutual benefits and
advantages accruing hereunder, the sufficiency of which is hereby acknowledged,
the Parties agree as follows:
Article 1 - Interest of the Parties
-----------------------------------
The costs, risk and liabilities associated with the exploration and
development of the Contract Area (including all wells, platforms, pipelines,
facilities and equipment associated directly with the specified operations
herein) and all oil and gas produced from wells drilled pursuant to the terms
hereof, shall be borne and owned, subject to the terms and conditions set out
herein and in the Option Agreement and the Farmout Agreement, and unless
otherwise agreed, by the Parties in accordance with the following percentage
working interests ("Working Interests"):
Party Working Interests
----- -----------------
Newfield 50.000%
Ridgewood 50.000%
* Subject to an obligation to pay a disproportionate share of Initial Test Well
costs, as further described in Article 3.
Article 2 - Operating Agreement
-------------------------------
2.1 Newfield is designated as the Operator of the Contract Area, and all
operations conducted on the Contract Area shall be performed in accordance with
and shall be subject to the terms and provisions of this Agreement, the Farmout
Agreement and the Operating Agreement attached hereto as Exhibit "B" ("Operating
Agreement"). The Parties shall execute the Operating Agreement simultaneously
with this Agreement.
2.2 Notwithstanding anything herein to the contrary, the non-consent
penalties set forth in Article XII of the Operating Agreement shall not be
applicable to drilling operations on the Initial Test Well, or substitute
therefor, prior to the Parties drilling an Earning Well (as hereinafter
defined).
Article 3 - Initial Test Well
-----------------------------
3.1 On or before January 1, 2007, Newfield shall commence actual drilling
operations for the Main Pass 275 (OCS-G-15395) No. 3 Well at an approximate
surface location of 2,474 FSL and 5,656 FWL of Main Pass 275 and bottom-hole
location of 2,977' FSL and 5,320' FWL of Main Pass 275, ("Initial Test Well").
The Initial Test Well shall be drilled to an approximate depth of 11,200' TVD,
or a depth sufficient to test the 10,800' sand, whichever depth is shallower
("Contract Depth").
3.2 As additional consideration for the opportunity to earn its Working
Interest in the Contract Area, the Parties will pay the following percentages of
the costs to drill the Initial Test Well to Casing Point (as described in
Article 3.3 below):
Newfield 33.3333%
Ridgewood 66.6667%
The dry hole cost for the Initial Test Well is estimated to be
$9,454,931.00 ("Dry Hole Cost") as outlined in the drilling authorization for
expenditure ("AFE") for the Initial Test Well attached hereto as Exhibit "C". By
its execution of this Agreement, Ridgewood has approved the AFE. Ridgewood's
disproportionate cost sharing will cease once cumulative costs and expenses for
the Initial Test Well, and if drilled, the substitute well therefore, exceeds
115% of the actual Dry Hole Cost being $10,873,170, or the well reaches Casing
Point, whichever is less. Thereafter Newfield will bear its 50% and Ridgewood
will bear its 50% share of subsequent costs, subject to the non-consent rights
set out in the Operating Agreement.
3.3 Casing Point is defined as that point in time when the Initial Test
Well, or substitute well therefor, has been drilled to the Contract Depth,
appropriate tests have been performed and a recommendation is made to (i) set
casing and complete the well, (ii) plug and abandon the well or (iii) conduct
other operations as provided within the priority of operations outlined within
the Operating Agreement.
3.4 If the Initial Test Well is either, i) unable to reach the Contract
Depth due to encountering domal material, heaving shale, saltwater, salt or
other impenetrable substance, or suffers any adverse condition (mechanical,
structural, stratigraphic or otherwise) in drilling said well, which substance
or condition cannot be overcome at a reasonable cost by means considered
customary or ordinary in the industry; or, ii) plugged and abandoned as a dry
hole, then any Party shall have the right to propose a substitute well in the
same manner as provided for hereinabove. Each Party shall have the option, but
not the obligation, to participate in such substitute well; however, if a Party
elects not to participate in a substitute well, it shall forfeit its rights
under this Agreement, and in the Farmout Agreement. If actual drilling
operations are commenced on the substitute well within ninety (90) days from the
date of rig release of the Initial Test Well, then said well shall be considered
the Initial Test Well for purposes of this Agreement.
Article 4 - Assignment and Assumption of Rights
-----------------------------------------------
4.1 Newfield shall obtain Apache's written consent to assignment, by
Newfield to Ridgewood, of a 50.000% interest in the rights, duties and
obligations conferred by the Farmout Agreement.
4.2 Upon Ridgewood's participation pursuant to the terms and conditions
set forth herein and in the Farmout Agreement, and upon the Party drilling an
Earning Well (as defined in the Farmout Agreement) and satisfying the Earning
Requirements defined and set out in the Farmout Agreement, the Party who
participated in the Earning Well, and the full satisfaction of the Earning
Requirements, shall receive from Apache, an assignment of Apache's Working
Interest share of the operating rights interest in the Contract Area, from the
surface down to the base of the deepest productive interval in said well and its
stratigraphic equivalent, plus one hundred (100) feet.
4.3 The interests assigned to the Party pursuant hereto shall be subject
only to the federal 1/6th royalty (subject to any applicable royalty relief
granted by the Minerals Management Service), the Apache ORRI, shall be free and
clear of any other overriding royalty interest, production payments, or other
burdens on production. The Farmout Agreement provides that Apache's assignment
of interest in the Contract Area shall contain a special warranty of title
whereby Apache shall warrant title to the assigned interest by, through, or
under Apache, but not otherwise.
Article 5 - Ownership of Production
-----------------------------------
Production from each well drilled on the Contract Area will be owned
pursuant to the terms of this Agreement, the Farmout Agreement and the Operating
Agreement.
Article 6 - Insurance
---------------------
In connection with any drilling and/or production operations on the
Contract Area, the Operator shall carry the type and amount of insurance
required by the Farmout Agreement and the Operating Agreement. No other
insurance shall be required of the Operator hereunder.
Article 7 - Confidentiality
---------------------------
Except for required disclosures as provided in the Operating Agreement, or
the Farmout Agreement, no Party shall release any geological, geophysical, or
reservoir information or any logs or other information pertaining to the
progress, tests, or results of any well drilled pursuant to this Agreement.
Article 8 - Conflicts
---------------------
Unless provided for otherwise in this Agreement, in the event of any
conflict between the terms and conditions as set forth herein and the terms and
conditions set forth in the Farmout Agreement, the terms and conditions set
forth in the Farmout Agreement shall control. In the event of any conflict
between the terms and conditions as set forth herein and the terms and
conditions set forth in the Operating Agreement, the terms and condition set
forth herein shall control.
Article 9 - Notices
-------------------
All notices, requests or demands to be given under this Agreement shall be
in writing and shall be deemed to have been given (i) three (3) business days
after being sent by registered mail or certified mail, postage prepaid, or (ii)
on the day sent, if hand delivered or sent by facsimile, with receipt confirmed
and verbal confirmation, in each case addressed as follows or to such other
address as may have been furnished in writing to the other Parties hereto in
accordance herewith:
If to Newfield:
--------------
Newfield Exploration Company
363 N. Sam Houston Pkwy. E., Suite 2020
Houston, Texas 77060
Attention: Ms. Christina Linscomb
Office Phone: (281) 847-6074
Fax Number: (281) 405-4207
If to Ridgewood:
-----------------
Ridgewood Energy Corporation
11700 Old Katy Road, Suite 280
Houston, Texas 77079
Attn: Mr. Greg Tabor
Office Phone: (281) 293-8449
Fax Number: .(281) 293-7705
Article 10 - Topical Headings
-----------------------------
Topical headings appearing at the top of each numbered article have been
inserted for convenience only and are to be given no force or affect whatsoever
in the interpretation of this Agreement.
Article 11 - Successors and Assigns
-----------------------------------
This Agreement shall be binding upon each Party and their successors and
assigns. An assignment by a Party of any lands affected by this Agreement shall
be made expressly subject to, and the assignee shall expressly agree to assume
and comply with, the terms and provisions of this Agreement, the Farmout
Agreement and the Operating Agreement.
Article 12 - Counterpart Execution
----------------------------------
This Agreement may be executed by signing the original or a counterpart
thereof. If this Agreement is executed in counterparts, all counterparts taken
together shall have the same effect as if all the Parties had signed the same
instrument. However, this Agreement shall not be effective as to any Party,
until it has been executed by all Parties.
IN WITNESS WHEREOF, this instrument is executed by each of the Parties on
the dates noted below, but shall be effective as of the Effective Date
hereinabove first written.
WITNESSES: NEWFIELD EXPLORATION COMPANY
/s/ Rachelle Taylor By: /s/ W.M. Blumenshine
- --------------------- ------------------------
Name: W.M. Blumenshine
/s/ Rhonda Vaughn Title: Attorney-in-Fact
- ---------------------
WITNESSES: RIDGEWOOD ENERGY CORPORATION
/s/ Randy Bennett By: /s/ W. Greg Tabor
- --------------------- ------------------------
Name: W Greg Tabor
/s/ Harvey Dupry Title: Executive Vice President
- ---------------------
EXHIBIT "A"
[NEWFIELD LOGO]
December 19, 2006
Christina Barker Linscomb
Landmark
Apache Corporation
2000 Post Oak Blvd., Suite 100
Houston, TX 77056
Attn. Mr. Darrell Donaldson
Re: Farmout Agreement
Main Pass Block 275; OCS-G 15395
Federal Offshore Louisiana
Gentlemen:
The Farmout Agreement dated July 7, 2006, between Newfield Exploration
Company and Apache Corporation provides that subject to rig availability,
weather conditions and acquiring all necessary permits, Newfield shal1
commence the drilling of the OCS-G 15395 No. A-3 Well ("Initial Test Well")
on the Lease on or before January 1, 2007.
The Ocean Summit has been contracted to drill the Initial Test Well and is
currently under tow to the Main Pass Area, but has been delayed by weather.
Due to the delay of the Ocean Summit, Newfield respectfully requests an
extension to commence drilling the Initial Test Well until January 30,
2006.
If you an in agreement to extend the commencement date of the Initial Test
Well, please indicate your approval by executing in the space below and
returning one copy to the undersigned at your earliest convenience.
Sincerely,
/s/ Chris Linscomb
Christina B. Linscomb
AGREED TO ON THIS 21ST DAY OF DECEMBER, 2006.
APACHE CORPORATION
By: /s/ C.R. Harden
Name: C.R. Harden
Title: Land Manager, Gulf Coast Region
Newfield Exploration Company 363 N. Sam Houston Pkwy E Suite 2020
Houston, Texas 77060 (281) 647-6074 Fax (281) 405-4207
EXHIBIT "A"
Attached to and made a part of that certain Participation Agreement dated
December 13, 2006 by and between Newfield Exploration Company and Ridgewood
Energy Corporation
FARMOUT AGREEMENT
MAIN PASS AREA, BLOCK 275
OFFSHORE LOUISIANA
This Farmout Agreement ("Agreement") is entered into the 7th day of July, 2006
(the "Effective Date"), between Apache Corporation ("Farmor") and Newfield
Exploration Company ("Farmee"). Farmor and Farmee and their respective
successors and assignees (if any) may sometimes individually be referred to as
"Party" and collectively as the "Parties". This Agreement is entered into by the
parties hereto pursuant to that certain Option Agreement executed by Farmor and
Farmee and dated September 21, 2005.
WITNESSETH:
WHEREAS, Farmor is the owner of OCS-15395, dated effective September 1, 1995,
between the United States of America, acting through the Director, Bureau of
Land Management, as LESSOR, and Vastar Resources, Inc., as LESSEE, covering and
affecting lands described as all of Block 275, Main Pass Area, containing
4994.55 acres, more or less (the "Lease"); and
WHEREAS, Farmor is willing to assign and transfer to Farmee the right to acquire
one hundred percent (100%) of Farmor's interests in the Lease limited to the
Southwest Quarter (SW/4), INSOFAR AND ONLY INSOFAR as the lease covers depths
from the surface down to 11,400' TVD or the stratigraphic equivalent depth of
the top of the 11,100' sand as seen at 11,051' TVD in the Vastar Resources,
Inc.'s OCS-G 15395 A-2 Well, whichever is shallower, and further limited to the
area situated Southward of the Northwest-Southeast Fault, immediately south and
separate from the.A-1 ST well, and northwest of the A-2 well ("Contract Area"),
in accordance with the terms set forth herein and Farmee wishes to acquire such
interest; and
WHEREAS, Farmee represents and warrants to Farmor that Farmee is duly qualified
with the United States Minerals Management Service ("MMS") to do business in the
Outer Continental Shelf, Gulf of Mexico; and
WHEREAS, this Agreement implements an election by Farmor, pursuant to that
certain Option Agreement dated September 21, 2005, between the Parties, to
farmout its interest in the Contract Area and not to participate in Farmee's
proposed OCS-G 15395 Well No. A-3.
NOW THEREFORE, in consideration of the premises and the mutual covenants and
obligations set out below and to be performed, the Parties agree as follows:
1
I.
INITIAL TEST WELL
-----------------
A. Subject to rig availability, weather conditions and acquiring all necessary
permits, Farmee will commence or cause to be commenced the drilling of the OCS-G
15395 Well No. A-3 ("Initial Test Well") on or before January 1, 2007, from the
MP 275 A Platform at a surface location of 2,474' FSL and 5,656' FWL of Main
Pass Block 275. The well will be drilled in accordance with Farmee's AFE No.
10400 and to a proposed depth of 11, 200' TVD or to a depth sufficient to test
the 10,800' sand, whichever is lesser, with a BHL location of approximately
2,977' FSL and 5,320' FWL of Main Pass Block 275 ("Objective Depth").
B. Farmee shall not commence operations under this Agreement until Farmor has
received a fully executed copy of this Agreement, Farmee has been designated as
Operator for conducting operations under this Agreement and Farmee has acquired
all the necessary permits.
C. The Initial Test Well, Subsequent well(s) or any Substitute Well (defined
in Section II below) drilled under the terms of this Agreement, shall be drilled
free of any cost and/or liability of any kind or character to Farmor, and all
risk, liability, costs or expenses incurred in connection with drilling,
testing, completing, operating and associated tie-in of said well(s) and/or
plugging or abandoning said well(s) shall be borne solely by Farmee.
D. Notwithstanding anything as stated in this Agreement above, Farmee shall
have the right, but shall not be obligated to drill or commence drilling the
Initial Test Well of any other well under the terms of this Agreement. If Farmee
fails to timely commence drilling the Initial Test Well, Farmee will suffer no
penalty other than the forfeiture of all rights under this Agreement.
II.
SUBSTITUTE WELL AND SUBSEQUENT WELL(S)
--------------------------------------
A. If, during the drilling of the Initial Test Well or a Substitute Well (as
defined in this paragraph), Farmee encounters impenetrable substances or
conditions, including loss of the hole due to mechanical difficulties, which in
the opinion of a reasonably prudent Operator under the same or similar
conditions would render further drilling impractical or hazardous, and such
condition prevents further drilling of the well, Farmee may commence another
well ("Substitute Well"), provided actual drilling of this Substitute Well is
commenced within one hundred and twenty (120) days after release of the drilling
rig and is drilled pursuant to all the terms and provisions of this Agreement
applicable to the well for which it is substituted.
B. If the Initial Test Well or any Substitute Well therefore reaches Objective
Depth but does not qualify as an Earning Well as described in Section III below,
Farmee shall have the continuing right to drill a further additional well
("Subsequent Well") on the Contract Area provided that each such Subsequent Well
shall be subject to all the terms and provisions of this Agreement, and further
provided that Farmee commences actual drilling operations on such Subsequent
Well within one hundred and eighty (180) days from the release of the drilling
rig used for the prior well.
C. After drilling the Earning Well, Farmee shall have the right, but not the
obligation, to drill additional wells (an "Additional Well") within the Contract
Area, provided that Farmee commences drilling operations on such well or wells
within one hundred and eighty (180) days of completion or plugging of the last
well drilled, to earn deeper depths if the Earning Well was not drilled to
Deepest Earning Depth (defined in Section II below).
2
III.
INTEREST EARNED
---------------
A. Should Farmee drill the Initial Test Well or a Subsequent Well (or a
Substitute Well for either the Initial Test Well or a Subsequent Well) to the
Objective Depth, comply with the terms of this Agreement, and the well meets the
criteria of a well capable of commercial production as provided under 30 CFR
250.115 or 30 CFR.250 116 (or if not meeting these qualification requirements
the Farmee nevertheless completes and equips said well for the production) and
Farmee commences actual production within one (1) year of release of the
drilling rig, then said well shall be deemed the "Earning Well" and Farmor shall
execute and deliver to Farmee an assignment in the operating rights to the
Contract Area. The Assignment shall:
1. be prepared by Farmor and delivered to Farmee within sixty (60) days
of a well being deemed and Earning Well, with the effective date of the
assignment being the date that the well is deemed an Earning Well;
2. be without warranty of title, statutory, express or implied, other
than a limited warranty by, through and under Farmor, and subject only to
the MMS reserved royalty interest, and the ORRI, as hereinafter defined,
reserved by Farmor as provided in Section III.A.6 below and any overriding
royalty interest of other burdens affecting the Contract Area and filed of
record as of April 28, 2005;
3. be subject to the approval of the authorized officer of the MMS;
4. convey to Farmee all of Farmor's interest in and to the operating
rights in the Contract Area, from the surface to the stratigraphic
equivalent of the total depth drilled in the Earning Well plus one-hundred
feet (100'), (the "Assigned Premises"). Notwithstanding the above, in no
event shall Farmee earn an interest in depths below the depth of 11,400'
TVD or the stratigraphic equivalent depth of the top of the 11,100' sand as
seen at 11,051' TVD in the Vastar Resources, Inc.'s OCS-G 15395 A-2 Well,
whichever is shallower (the "Deepest Earning Depth");
5. reserve to Farmor all rights to drill through the Assigned Premises
in order to explore, develop and/or operate all rights owned by Farmor
below the Assigned Premises or on lands pooled, or to be pooled, unitized
or communitized therewith; and
6. reserve to Farmor an overriding royalty interest ("ORRI") in the
Assigned Premises, including the Earning Well, of eight and one-third
percent (8.33333%) of al liquid and/or gaseous hydrocarbon substances
produced and/or saved, either through testing or production within the
Assigned Premises.
B. Farmor's ORRI shall be computed in the same manner and paid at the same
time as the Lessor's royalty under the Lease and shall be free and clear of al
royalty (other than MMS royalty), overriding royalty, and other burdens
associated with production and all costs and expenses of drilling and
production, except that the ORRI shall be charged with and bear its
proportionate part of ad valorem, production, severance; excise and other
similar taxes on production. In the event the interest owned by Farmor in the
Assigned Premises is less than a full leasehold interest, then the ORRI retained
by Farmor and the interest earned by Farmee shall be proportionately reduced.
3
C. Farmee shall not earn an interest in nor assume any additional liability
associated with any well, platform, facility, or pipeline currently located on
the Lease or within the Contract Area, except as may be provided in Sections IV
or VI of this Agreement or under any production handling agreement or platform
sublease agreement to be entered into pursuant to this Agreement. Except as
provided Sections IV and VI of this Agreement or under any production handling
agreement or platform sublease agreement to be entered into pursuant to this
Agreement, Apache shall retain one hundred percent (100%) of its rights,
liabilities and interests in any such well, platform, facility or pipeline(s)
currently located on the Lease or within the Contract Area as of the date
hereof, including, but not limited to, the obligation to abandon same.
D. The purpose of this paragraph is to set out the conditions under which
Farmee may produce oil and/or gas production from the Contract Area.
1. Exhibit "C" attached hereto sets forth each of the producing
reservoirs ("PDP Zones"), and proved developed behind pipe reservoirs
("PDBP Zones") encountered in either of the Main Pass 275 A-1 and A-2
wellbores (the Apache Wells") and the corresponding bottom hole pressures
in the applicable Apache Well(s) with respect to each PDP Zone.
2. Farmor will not produce or cause to be produced any new wells or
sidetrack existing any wells on MP 275 which would compete with or drain
reserves discovered by any wells drilled pursuant to this Farmout Agreement
in which Newfield is allowed to produce under the provision of Section
III.D.4. below.
3. Farmee may drill wells to any zones in the Contract Area. In the
event the Initial Test Well, Substitute Well or any Additional Well
encounters a PDBP Zone, Farmee agrees not to produce such PDBP Zone until
such time as all Apache Well(s) have ceased to produce from such zone.
4. In the event the Initial Test Well, Substitute Well or any Additional
Well encounters a PDP Zone, Farmee will take a bottom hole pressure in such
well in such PDP Zone (such pressure to be obtained through MDT or
equivalent pressure testing tool or actual stabilized shut in bottom hole
pressure as measured by a downhole pressure gauge). Farmee will adjust such
measured bottom hole pressure to account for any difference in true
vertical depth between the PDP Zone in the Initial Test Well, Substitute
Well or any Additional Well and the mid point of the perforations in the
PDP Zone in the Apache Well(s) so that the pressures will be compared at a
common datum. Farmee will calculate this adjustment by subtracting the true
vertical depth subsea of the PDP in the Initial Test Well, Substitute Well
or any Additional Well from the true vertical depth subsea of the midpoint
of the perforations of PDP Zone in the Apache Well(s), and multiplying such
difference in true vertical depth by the appropriate pressure gradient as
determined through the above mentioned pressure measurement techniques, or
in the absence of measured pressure gradients then at 0.15 psi/ft. If such
adjusted bottom hole pressure is greater than or equal to the result
obtained by subtracting 250 psi from the original bottom hole pressure for
the corresponding PDP Zone in the applicable Apache Well(s) (as set forth
on Exhibit "C")., then Farmee may produce that PDFP Zone from such well
without delay. Should the adjusted bottom hole pressure for the PDP Zone in
the Initial Test Well, Substitute Well or any Additional Well be more than
250 psi below the original bottom hole pressure for the corresponding PDP
Zone in the applicable Apache Well(s) (as set forth on Exhibit "C"), then
Farmee may not produce such well in such PDP Zone until such PDP Zone
ceases to produce from the Apache Well(s) or is abandoned to a different
zone. In the event Farmee is prohibited from immediately producing any PDP
Zone because of the conditions contained in this paragraph, then
notwithstanding the above, Farmee may make a written request that Farmor
4
permit Farmee to produce oil and/or gas production from such PDP Zone,
provided, however, Farmor may at its sole discretion withhold such consent.
E. In the event Farmee fails to commence production from the Earning Well (or
any subsequent well drilled pursuant to the Agreement) within two (2) years from
rig release on the Earning Well then, unless (i) Farmee can demonstrate a good
faith effort on its part in attempting to initiate the sale of production from
Contract Area or (ii) Farmee's production is delayed under Section III.D. above,
Farmee will reassign to Farmor any interest assigned to Farmee in the Contract
Area.
F. Upon the total cessation of production from all wells drilled under this
Agreement for consecutive period of one hundred twenty days (120) days, during
which period of time no operations are being conducted on the Contract Area in a
good faith effort to re-establish production, or one hundred twenty (120) days
after completion of any good faith effort to reestablish production, Farmee will
reassign to Farmor any interest earned under this Agreement unless Farmee can
demonstrate to Farmor that reasonable circumstances exist which prohibit Farmee
from conducting operations to re-establish production, but that Farmee is
preparing to conduct such operations no later than one hundred fifty (150) days
following such total cessation of production.
G. Any interest assigned from Farmee to Farmor shall be free and. clear of any
liens, claims or other .burdens created by, through or under Farmee.
IV.
PRODUCTION HANDLING AND FEES
----------------------------
A. Subject to Farmor's facility and equipment capacity limitations, Farmee
shall have the option, but not the obligation, to process its Contract Area
production through Farmor's existing production handling facilities located on
Main Pass Block 289. Farmor and Farmee shall endeavor and attempt to enter into
a mutually acceptable production handling agreement which will incorporate,
among other provisions, processing and handling rates of .13/mcf for gas,
$.85/bbl for oil and condensate, $.85/bbl for water, $.05/mcf per stage of
compression and a monthly operating fee of $10,000;00 for the first well and
$5,000.00 for each additional well for manned facility or $12,500.00 for the
first well and $5,000.00 for each additional well for an unmanned facility
(collectively "Fees"). In any month in which there is production from the
Contract Area, and there is sufficient available facility and equipment
capacity, and if the Fees excluding the monthly contract operating fee do not
equal or exceed $12,500.00 in any calendar month, then a minimum fee of
$12,500.00 will be charged to Farmee in lieu of fees based upon throughput for
such month, regardless of actual throughput. In any month in which there is no
production from the Contract Area and there is sufficient available facility and
equipment capacity to meet the minimum monthly fee, the minimum monthly fee
shall not exceed $7,500.00. The Fees (excluding the minimum monthly fee) will be
adjusted on the first day of April of each year, beginning in April, 2007, by
the relevant increases or decreases in the Overhead Adjustment Index as such is
published by the council of Petroleum Accountant societies or COPAS (the "COPAS
Index").
B. To the extent equipment or facilities on Farmor's Platform must be
installed, redesigned or modified in order to accommodate production from any
well(s) drilled pursuant to this Agreement, all costs and expenses associated
therewith shall be borne by the parties participating in the drilling of any
such well(s) in proportion to their working interest. Notwithstanding anything
contained herein to the contrary, in the event Farmor processes its gas at third
party facilities, then Farmor shall not be obligated to provide production
handling services as provided in this paragraph.
C. Notwithstanding the above, in the event Farmor determines in its sole
discretion that it is uneconomic to continue to process the Farmee's production
at Farmor's production facilities, then Farmor discontinue the production
5
handling services upon thirty (30) days' written notice to Farmee. In such case,
and subject to any priority rights under existing agreements, Farmor and Farmee
will attempt to negotiate (i) the terms of a purchase and sale agreement for the
sale of the production facilities and platform to Farmee; or (ii) or platform
sublease agreement to allow continued production from wells drilled pursuant to
this Agreement. In the event the parties cannot reach an agreement within ninety
(90) days after Farmor's notice to Farmee as provided above, then the production
handling agreement shall terminate.
V.
DOWNTIME FEES
-------------
A. In addition to the Fees as provided in Section 3.(a), Farmee shall pay a
downtime fee ("Downtime Fee") to Farmor as compensation for the production
downtime attributable to Farmor's production (not to include third part PHA
revenue or volumes) which is required to be shut-in due to operations conducted
on any well(s) drill pursuant to this Option Agreement. The Downtime Fee shall
be calculated on an hourly basis as follows:
Total Downtime Fee = (AxB) x C
---------
45x24
Where:
A = number of hours of Downtime per Downtime event less the initial
forty eight (48) hours of downtime at no charge
B = Processor's total daily net working interest production in mcf
for previous forty-five (45) days
C = Processor's average commodity sale price (net of any
transportation, gathering fuel and other marketing costs which
would have been reasonable incurred), during the period of any
Downtime
Notwithstanding the above, the Downtime Fee shall be charged for the first
forty-eight (48) hours of downtime and the Downtime Fee will be capped at
seventy-two (72) hours production equivalent at which time Farmor, it its
option, may recommence its production that was shut-in as a result of the one
hundred twenty (120) hour downtime.
VI.
SLOT FEES
---------
A. To the extent Farmee intends to utilize an available open slot on a Farmor
platform, Farmee shall pay a slot fee equal to $100,000 gross per well per slot
utilized to Farmor on behalf of the platform owners. In addition, Farmee will be
responsible for its proportionate share (based on Farmee's working interest in
such well(s) of all plugging and abandonment (P&A) costs in accordance with MMS
requirements associated with any well(s) drilled from an existing slot of a
Farmor platform or any existing wellbore from an Farmor platform which may be
re-entered and sidetracked. Farmee further agrees that it will not sidetrack any
existing well(s) without first obtaining Farmor's prior written consent. Should
Farmee re-enter and sidetrack an existing well from the Farmor platform,
Farmee's assumption of P&A liability for such wells will be in lieu of the slot
fee.
6
VII.
INFORMATION REQUIREMENTS
------------------------
Farmee shall deliver to Farmor, free of cost, the information set out in Exhibit
"A", attached hereto, and all other geological and geophysical, engineering,
technical, production test, exploratory, and reservoir information, and any logs
or other information and data that Farmee might acquire from the Initial Test
Well or any other well drilled by Farmee hereunder but only to the extent that
such information is not restricted by licensing agreements.
VIII.
CONFIDENTIALITY
---------------
A. The term "Confidential Information" shall mean any and all information
delivered by Farmee to Farmor pursuant to Section VII above include any
geological, geophysical, engineering, technical, production test, exploratory,
or reservoir information, or any logs. Confidential Information shall be the
property of the Parties and shall be maintained by Farmor as confidential for a
period of two (2) years from the effective date of this Agreement or until such
information is made public by a governmental authority, whichever is earlier.
Each Party shall use at least the same degree of care in protecting the
Confidential Information as it uses in protecting its own proprietary materials.
B. Farmor shall not have any obligation to limit disclosure or use of any
portion of. Confidential Information which:
1. is already in Farmor's possession prior to receipt hereunder;
2. is now in or hereafter becomes publicly available through no fault of
Farmor;
3. is disclosed to Farmor without obligation of confidence by a third
party which has the right to make such disclosure; or
4. is independently developed by or for Farmor without reference to
Confidential Information received under this Agreement.
C. Any Party may make Confidential Information available to third parties
without the consent of the other Party as follows:
1. to a consultant or engineering firm for hydrocarbon reserve or other
technical evaluation; analysis or interpretation or for reprocessing,
provided that such consultant or engineering firm is not allowed to
retain a copy of the Confidential Information after completion of its
services and agrees in writing to treat it as confidential;
2. to show, but not provide copies, to a third party with which a Party
is negotiating sale of all or part of its interest in the Contract
Area, or a possible merger or consolidation or sale of its business
operations; provided that such third party or parties agree in writing
to hold all such Confidential Information in confidence. In the event
of completion of a transaction contemplated by this Section VIII.C.2.,
a copy of all Confidential Information may be provided to the
successor in interest of such Party and such Party may also retain
copies for the Confidential Information with all the rights and
obligations which it had prior to the completion of the transaction;
7
3. to show and provide copies of the Confidential Information to an
Affiliate (as hereinafter defined) or financial institutions provided
that such Affiliate or financial institutions agree to be bound by the
confidentiality provisions of this Agreement. "Affiliate" shall mean
any company or legal entity which (i) controls either directly or
indirectly a Party, or (ii) which is controlled directly or indirectly
by such Party, or (iii) is directly or indirectly controlled by a
company or entity which directly or indirectly controls such Party.
"Control" means the right to exercise fifty percent (50%) or more of
the voting rights in the appointment of the directors or managers of
such company or legal entity.
4. to show the Confidential Information to and provide copies thereof to
agencies of federal and state governments having jurisdiction to the
extent required by applicable law, rule or regulation, provided that
such Party shall take all actions to require the confidential
treatment of the Confidential Information which is disclosed.
IX.
CONSENT TO ASSIGN
-----------------
Except for assignments to affiliates of Farmee, internal partners of Farmee or
financial institutions as part of a financing arrangement, Farmee may not assign
any rights under this Agreement without the prior written consent of Farmor, and
any assignment made without such consent shall be void. Such request shall
contain the name, address and percentage of participation of the proposed
assignee. Should Farmee request Farmor's consent to assign to a willing and
financially able party, Farmor's consent shall not be unreasonably withheld.
Notwithstanding Farmor's consent to assign, Farmee shall remain fully liable to
Farmor for the performance of all obligations incurred prior to the effective
date of the assignment under this Agreement. All assignments shall be made
expressly subject to this Agreement and Farmor, shall not be, under any
obligation to recognize any assignment of this Agreement pursuant to the terms
hereof unless and until it has received from Farmee a true and correct copy of
same and assignee has ratified this Agreement.
X.
INDEMNITY
---------
FARMEE SHALL RELEASE, DEFEND, INDEMNIFY, AND HOLD FARMOR, ITS AFFILIATES AND
CONTRACTORS, AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, OR REPRESENTATIVES, CONTRACTORS, SUBCONTRACTORS, SUCCESSORS AND ASSIGNS
HARMLESS, TO THE MAXIMUM EXTENT PERMITTED BY LAW, FROM AND AGAINST ANY CLAIMS,
LIABILITIES, AND LOSSES FOR INJURY, DEATH OR DAMAGE OF EVERY KIND AND CHARACTER
TO PERSONS, PROPERTY OR THE ENVIRONMENT (INCLUDING, BUT NOT LIMITED TO THE COST
OF LITIGATION AND ATTORNEY'S FEES INCURRED IN CONNECTION WITH THE SAME) ARISING
OUT OF OR IN CONNECTION WITH FARMEE'S OPERATIONS CONDUCTED. ON THE LEASE
PURSUANT TO THE TERMS OF THIS AGREEMENT, OR FARMEE, ITS DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR REPRESNETATIVES, CONTRACTORS, SUBCONTRACTORS, SUCCESSORS,
AND ASSIGNS; PROVIDED THAT IF ANY SUIT IS FILED ON ANY CLAM, FARMEE SHALL
IMMEDIATELY NOTIFY FARMOR OR PERMIT FARMOR TO PARTICIPATE IN THE DEFENSE THEREOF
WITHOUT WAIVER OR IMPAIRMENT OF FARMEE INDEMNITIES TO FARMOR; HOWEVER,THE ABOVE
SHALL NOT APPLY TO FARMOR IN THE EVENT OF FARMOR'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
8
XI.
ASSUMPTION OF LIABILITIES
-------------------------
A. It is understood that Farmee shall assume all duties, responsibilities and
liabilities in connection with all of its operations on the Contract Area
limited to the interests subject to this Agreement, and that Farmee shall
perform all duties and make any and all filings and reports as necessary or
required by permits in connection with the drilling and plugging and abandoning
of any well or wells drilled under the terms of this Agreement. FARMEE DOES
HEREBY AGREE TO DEFEND, INDEMNIFY, RELEASE AND HOLD HARMLESS FARMOR FROM AND
AGIANST ANY SUCH DUTIES, RESPONSIBILITIES AND LIABILITIES.
B. Although Farmor, as the current Operator, will provide Farmee copies of
permits and site data (including any shallow hazard surveys, bathymetry reports,
and any soil boring reports) if and when available, FARMOR MAKES NO WARRANTY,
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND HEREBY EXPRESSLY DISCLAIMS ALL
SUCH WARRANTIES, AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION, PERMITS
OR DATA SO FURNISHED. FARMEE HEREBY EXPRESSLY ASSUMES THE RISK OF THE
INNACCURACY OR INCOMPLETENESS OF SUCH INFORMATION, PERMITS OR DATA ASSUMES
THE RISK OF THE INACCURACY OR INCOMPLETENESS OF SUCH INFORMATION, WAIVES ANY
CLAIMS AGAINST FARMOR REGARDING SUCH INFORMATION, PERMITS OR DATA, AND
ACKNOWLEDGES THAT, WITHOUT SUCH WAIVER, FARMOR WOULD NOT FURNISH SUCH
INFORMATION, PERMITS OR DATA.
C. Notwithstanding the above, neither Party hereto shall be liable in an
action initiated by one (1) against the other for special, indirect,
consequential, exemplary or punitive damages resulting from or arising out of
this Agreement, including, without limitation, loss of profit or business
interruptions, however same may be caused.
XII.
SEVERAL LIABILITY
-----------------
The Parties hereby agree that the respective obligations and liabilities of the
Parties under this Agreement shall be several, not joint or collective, and each
Party shall be responsible for its own obligations. It is not the intention of
the Parties to create, nor shall this Agreement be construed as creating, a
mining or other partnership, agency or association between the Parties or to
render them liable as partners, agents or associates.
XIII.
COMPLIANCE
----------
Farmee shall comply with all laws and regulations applicable to any activities
carried out by Farmee under the provisions of this Agreement and any amendments
hereto. Farmee agrees to immediately notify Farmor of any material failures to
comply with applicable laws or regulations, AND AGREES TO RELEASE, INDEMNIFY,
DEFEND, AND HOLD HARMLESS FARMOR FROM AND AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DEMANDS, ORDERS, JUDGMENTS, NOTICES, DAMAGES OR OTHER
MATTERS, WHETHER SIMILAR OR DISSIMILAR IN NATURE WHICH MAY ARISE FROM FARMEE'S
FAILURE TO COMPLY WITH SUCH LAWS AND REGULATIONS.
9
XIV.
INSURANCE
---------
A. During the term of this Agreement, Farmee shall maintain insurance
coverage, with reasonable deductibles and insurers acceptable to Farmor, as set
forth in Exhibit "B ". Farmee shall also require its contractors and
subcontractors to carry prudent insurance coverage for the types of operations
undertaken. Any deficiencies in the insurance policies of Farmee's contractors
and subcontractors shall be the sole responsibility of Farmee. It is expressly
understood and agreed that the coverages required in Exhibit "B" represent
Farmee's minimum insurance requirements and are not to be construed to fund or
limit the liability of any indemnity obligations that are undertaken by Farmee
in this Agreement.
B. With respect to the liabilities assumed in this Agreement, the insurers of
the specified policies of insurance hereunder, including those insurance
policies required of Farmee's contractors and/or subcontractors, shall waive
their rights of subrogation against Farmor, their subsidiary and affiliated
companies, their directors, officers, employees, agents, representatives,
invitees, co-lessees, co-owners, partners, joint venturers, contractors and
subcontractors, and their insurers, and each of their respective successors,
spouses, relatives, dependents, heirs and estates.
C. With respect to the liabilities assumed in this Agreement, the insurers of
the specified policies of insurance required hereunder shall include Farmor and
their subsidiary and affiliated companies as additional insureds. However, this
provision shall not apply to the Workers' Compensation policies of either Farmee
or of its contractors and/or subcontractors.
D. Prior to any .work commencing under this Agreement, Farmee shall furnish
Farmor with certificates of insurance indicating that the required insurance
policies are in full force, and that such policies shall not be cancelled
without (30) days prior written notice to Farmor.
XV.
REPORTING ACCURACY
------------------
All financial settlements, billings and reports rendered to Farmor by Farmee and
all bills given to Farmee by Farmor pursuant to this Agreement and/or any
amendments, shall reflect properly the facts about all activities and
transactions. Each Party agrees to notify the other Party promptly upon
discovery of any instance where it has reason to believe data supplied is no
longer accurate or complete.
XVI.
AUDIT RIGHTS
------------
Farmor, upon written notice to Farmee, shall have the right, for a period of
twenty-four (24) months from the end of the calendar year in which a payout
statement or ORRI disbursement is or should have been received, to audit
Farmee's records of all proceeds, ORRI disbursements and the rights of Farmor
pursuant to this Agreement.
XVII.
WELL TAKOVER
------------
A. If Farmee elects to permanently abandon any well drilled under this
Agreement provided that Farmee does not wish to use the well to sidetrack,
deepen or otherwise utilize the wellbore for its own account as a Substitute
Well or Additional Well, then Farmor shall have the option to take over said
well for any purpose. If Farmee elects to abandon such a well, it shall give
notice to Farmor within forty-eight (48) hours (inclusive of weekends and
holidays) of making its decision to so abandon. Within ten (10) business days
10
after receipt of such notice, or if a drilling rig is on location, within
forty-eight (48) hours, inclusive of weekends and holidays, Farmor shall notify
Farmee whether it elects to exercise its option. Failure to respond timely shall
be deemed a negative election.
B. If Farmor exercises the option to take over the well, it shall be entitled
to operate the well in conjunction with any facilities which are or would have
been connected with operation of the well, and Farmor shall further be entitled
to produce the well from any zone, formation, or reservoir previously
encountered in the well to be taken over whether or not the zone, formation, or
reservoir has been previously completed. In the event Farmor exercises such well
takeover option, it shall pay Farmee the salvage value of the well and
associated equipment (including the salvage value of the platform and facilities
associated with the well), if any, less the estimated costs of salvaging and
shall thereafter assume all further risk, responsibility and expense of plugging
and abandoning the well. If Farmor elects not to take over the well, then Farmee
shall thereafter promptly plug and abandon it and any associated flowline or
pipeline in accordance with all the rules and regulations of the MMS.
XVIII.
RIGHTS TO PRODUCTION
--------------------
Each Party shall own and have the right to receive in-kind and to separately
dispose of its proportionate share of the oil and gas production from Assigned
Premises.
XIX.
LEASE MAINTENANCE PAYMENTS
--------------------------
Farmor shall pay any rentals and/or minimum royalty necessary to perpetuate the
Lease; provided however, Farmor may be relieved of such obligation at such time
as all wells on the Lease in which Farmor has a working interest are no longer
capable of producing in Farmor's sole judgment and Farmor give Farmee notice at
least sixty (60) days prior to any payment due date, and thereafter Farmee shall
be responsiblefor such payments. Upon the written request of a non-paying Party,
the Party responsible for making the rental or minimum royalty payments shall
provide proof of any such payment.
XX.
APPLICABLE LAW
--------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN
DISREGARDING ANY CONFLICT OF LAWS RULE WHICH WOULD RESULT IN THE APPLICATION OF
THE LAWS OF ANY OTHER JURISDICTION; PROVIDED, HOWEVER, THAT NO LAW, THEORY, OR
PUBLIC POLICY SHALL BE GIVEN EFFECT WHICH WOULD UNDERMINE, DIMINISH, OR REDUCE
THE EFFECTIVENESS OF THE WAIVER OF DAMAGES PROVIDED IN THE PRECEDING SECTION
XI.C ABOVE, IT BEING THE EXPRESS INTENT, UNDERSTANDING, AND AGREEMENT OF THE
PARTIES THAT SUCH WAIVER IS TO BE GIVEN THE FULLEST EFFECT, NOTWITHSTANDING THE
NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), GROSS NEGLIGENCE, WILLFUL
MISCONTDUCT, STRICT LIABILITY OR OTHER LEGAL FAULT OF PARTY. In the event this
Agreement or such operations, or any part thereof, contemplated hereby are found
to be inconsistent with or contrary to any such laws, rules, regulations or
orders, the laws, rules, regulations or orders shall be deemed to control and
this Agreement shall be regarded as modified accordingly and as so modified
shall continue in full force and effect.
11
XXI.
MISCELLANEOUS
-------------
A. Except as otherwise provided for in this Agreement and the Option
Agreement, this Agreement contains and comprises the entire agreement between
the Parties regarding the Lease and Contract Area and supersedes any previous
negotiations or documents related thereto. Any amendments, changes or
modifications to the rights and obligations of the Parties hereto shall be in
writing and shall be effective only when agreed in writing by all Parties.
Farmor makes no warranty, statutory; express or implied, with respect to its
ownership in the Lease, except by, through or under Farmor.
B. The section headings used herein are for convenience only and shall not be
construed as having any substantive significance or as indicating that all of
the provisions of this Agreement relating to any particular topic are to be
found in any particular section.
C. All notices given hereunder, except information as specified in Exhibit
"A", shall be given to the Parties at the following addresses:
Apache Corporation
2000 Post Oak Blvd, Suite 100
Houston, TX 77056
Attn: Land Manager - Offshore Region
Telephone: (713) 296-6349
Facsimile: (713) 296-7024
Newfield Exploration Company
363 N. Sam Houston Parkway E, Suite 2020
Houston, Texas 77060
Attn: Land Manager - Gulf of Mexico
Telephone: (281) 847-6131
Facsimile: (281) 847-6094
D. All notices hereunder shall be deemed given for all purposes if in writing
and delivered personally, sent by documented mail or overnight delivery service
or, to the extent receipt is confirmed, telecopy, facsimile or other electronic
transmission service to the appropriate address or number set forth above, and
deemed delivered when received.
E. All obligations imposed by this Agreement on each Party, except for the
payment of money and providing of indemnification, shall be suspended and all
periods of time for exercising any rights hereunder shall be extended while
compliance is prevented, in whole or in part, by a labor dispute, fire, flood,
hurricane, war, civil disturbance, or act of God; by laws; by governmental
rules, regulations, or orders; by governmental action or governmental delay; by
inability to obtain a rig or secure materials; or by any other cause, whether
similar or dissimilar, beyond the reasonable control of the said Party;
provided, however, that performance shall be resumed within a reasonable time
after such cause has been removed; and provided further that no Party shall be
required against its will to settle any labor dispute ("Force Majeure").
Whenever a Party's obligations or rights are suspended or extended hereunder,
such Party shall immediately notify the other Party, giving full particulars of
the reason for such suspension or extension, and such Party shall thereafter
diligently endeavor to remove or correct the cause of such Force Majeure event
as soon as reasonably possible. If necessary to maintain the Lease (or either of
them) in full force and effect, Farmor will provide Farmee with all reasonable
assistance in filing for and seeking MMS approval of a Suspension of
Operations/Production ("SOP") (or such other documents, applications and
requisite governmental permits) to cover a time period adequate to allow Farmee
to obtain all necessary drilling permits and
12
until a rig is in place. In the event an SOP is obtained, which extends the time
period during which drilling operations and/or production must be commenced or
obtained in order to maintain the Lease, the Parties shall amend the first
paragraph of Section I of this Agreement to make the mandatory commencement date
for the Initial Test Well consistent with any extension provided under the
MMS-approved SOP or other authority.
F. Any overriding royalty, production payment, or net profits interest burden
that may be created by Farmor subsequent to the date of the Letter of Intent
dated April 28, 2005 other than the ORRI reserved by Farmor under this Agreement
("Excess Burdens") shall not burden, in any manner, the interests that Farmee
may earn.
G. The Exhibits to this Agreement, listed below, are hereby incorporated
herein for all intents and purposes.
Exhibit "A" -- Well Information
Exhibit "B" -- Farmee's Insurance Provisions
Exhibit "C" -- Existing Reservoirs
If the foregoing terns and conditions are acceptable to Farmee, please execute
and return an original to.
FARMOR
Apache Corporation
By: /s/ C. R. Harden
----------------
Name: C. R. Harden
Title: Land Manager - Gulf Coast Region
Date: 7/17/06
--------
FARMEE
Newfield Exploration Company
By: /s/ W. M. Blumenshine
---------------------
Name: W. M. Blumenshine
Title: Land Manager
Date: 8/2/2006
-----------
13
EXHIBIT "A"
Attached to and made a part of that certain Farmout Agreement between Apache
Corporation and Newfield Exploration Company dated July 7, 2006
WELL INFORMATION REQUIREMENTS
FOR NON-OPERATED PROPERTIES
TO: Newfield Exploration Company
PROSPECT: Main Pass Block 275
OCS-G 15395, Farmout Wells
OFFSHORE/STATE: Offshore Louisiana
PLEASE SEND THE NUTMBER OF COPIES INDICATED FOR EACH OF THE DATA LISTED BELOW
TO:
Apache Corporation
2000 Post Oak Blvd., Suite 100
Houston, Texas 77056-4400
Attn: Joe Young
---------------
PRIOR TO SPUDDING - DATA
- --------------------------------------------------------------------------------
No. of Copies
- -------------
1 Application for Well Permit
1 Wellsite Survey Plat
1 Drilling AFE with Drilling Program
1 Drilling Geological Prognosis
1 Notice of Spudding
AFTER SPUDDING
- --------------------------------------------------------------------------------
Daily Well Report:
E-mail to: Joe Young at joe.young@apachecorp.com
Dan Moore at daniel.moore@apachecorp.com
Kathy Mangum at kathy.mangum@apachecorp.com
Daily transmission of mud log data and MWD/LWD data e-mailed to Joe
Young and Dan Moore.
1 LAS Format w/TIFF images
2 DST or FT Data
3 Field Print of all Log Runs
2 Preliminary Core and Fluid Analyses
2 Directional Surveys
1 Notice of Abandonment
1 Completion Program
DURING COMPLETION
- --------------------------------------------------------------------------------
No. of Copies
- -------------
3 All Logs Run After Setting Production Casing
3 Perforation Records
3 Complete Description of Stimulation Treatments
3 Daily Reports during Production
AFTER COMPLETION OR ABANDONMENT
- --------------------------------------------------------------------------------
NUMBER OF COPIES
- ----------------
3 Drilling and Completion Reports, DST Charts
3 Final Copies of:
Fluid and Core Analyses
Sample Descriptions
Paleo
Mud Logs
Directional Surveys, etc.
6 Final hard copies of 1"& 5" Log Prints 1 CD with TIFF images
of all wireline
logs & tests
1 Composite LAS Format on CD Rom
1 Copies of all Reports Sent to Regulatory Bodies
ADDITIONALLY:
- -------------
All 1" and 5" logs through all objective and other hydrocarbon bearing
sands after being logged, should be e-mailed or faxed to:
Joe Young at joe.young@apachecorp.com
Dan Moore at daniel.moore@apachecorp.com
Joe Young at fax: (713) 296-6461 (routine office hours)
Any digital well data from the rig (i.e. log curves, directional
survey information) should be e-mailed to joe.young@apachecorp.com
PRIOR TO LOGGING, PLEASE NOTIFY:
Geologist:
----------
Joe Young Office: (713) 296-6567
Home: (281) 360-9568
Cell: (713) 501-9866
Reservoir Engineer:
-------------------
Dan Moore Office: (713) 296-6351
Home: (281) 373-9044
Cell: (281) 627-0312
EXHIBIT "B"
Attached to and made a part of that certain Farmout Agreement between
Apache Corporation and Newfield Exploration Company dated July 7, 2006
FARMEE'S INSURANCE PROVISIONS
Farmee shall secure and maintain and/or cause its contractors and subcontractors
to arrange and maintain the following insurance coverages:
A. Farmee will ensure that all personnel, whether employees, agents,
representatives, consultants, contractors or subcontractors involved with the
operations contemplated in, this Agreement are covered by Worker's Compensation
and Employer's Liability Insurance in accordance with all applicable federal,
state and maritime laws (including the Longshoremen's and Harbor Worker's' Act
and its extension by the Outer Continental Shelf Lands Act, the Death on the
High Seas Act and the Jones Act) covering Farmee's personnel, with limits for
Employer's Liability Insurance, including Maritime Employer's Liability, of not
less than $1,000,000 per occurrence. If applicable, such insurance shall include
a territorial extension covering the area of the Gulf of Mexico where the
operations under this Agreement are to be performed.
B. General Liability Insurance, with limits of liability for bodily injury
and property damage of not less than $1,000,000 any occurrence. Such insurance
shall provide coverage for pollution liability and contractual liability, and
should also include the following:
1. Territorial extension to include coverage for the area of the Gulf of
Mexico where the operations under this Agreement are to be performed.
2. "In rem" endorsement, stating that an action "in rem" shall be treated
as a claim against the insured "in personam"
C. Aircraft Liability Insurance for any of Farmee's operations that may
require the use of aircraft, including helicopters, secured by either Farmee or
the aircraft owner, with a combined single limit of no less than $5,000,000 per
occurrence covering public liability, passenger liability, and property damage
liability. Such insurance shall cover all owned and non-owned aircraft,
including helicopters, used by Farmee or its contractors or subcontractors in
connection with its operations contemplated in this Agreement.
D. Excess liability insurance over the liability insurance policies listed
above with limits of not less than $25,000,000.
E. During any drilling, completion, plugging, workover or recompletion
activity on any well drilled hereunder, Operator's Extra Expense insurance, with
a minimum limit of $35,000,000, which includes coverage for Control of Well,
Pollution Liability and Cleanup, Deliberate Well Firing, Making Wells Safe and
voluntary Removal of Wreck/Debris whether such removal is at the request of a
government authority of Farmor.
F. Vessel P&I and Hull Insurance secured by Farmee or the vessel owner for
all vessels owned, chartered or operated by Farmee, its contractors or
subcontractors in performance of operations contemplated in this Agreement
secured by either Farmee or the vessel owner. The Hull insurance shall be in an
17
amount equal to the value of the vessel(s), and the P&I insurance shall be in an
amount equal to the value of the vessel(s) or $10,000,000, whichever is greater.
G. With respect to its offshore operations, Farmee shall comply with all
applicable governmental regulations including the demonstration of Oil Spill
Financial Responsibility for its offshore facilities. Farmor has agreed to
undertake the obligation to assume OSFR demonstration to the MMS on behalf of
Farmee with respect to the operations contemplated herein.
H. Operators Care Custody and Control Limit of not less than $2,000,000.
The remainder of this page is left blank intentionally
18