[LOGO OMITTED] Ridgewood Energy W. Greg Tabor
Executive Vice President
March 7, 2007
El Paso E & P Company, LLP
1001 Louisiana Street
Houston, TX 77002
Attention: Mr. Anthony Wiltz
Re: Offer to Participate-
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West Cameron Block 75, OCS-G 22505 #2 Well
Offshore, Louisiana
Gentlemen:
Whereas El Paso E&P Company, L.P. ("EP") is marketing certain working interest
participation percentage in the West Cameron Block 75, OCS-G 22505 #2 Well
Offshore Louisiana, ("The Well") and has made said working interest available to
Ridgewood Energy Corporation ("REC").
Whereas EP is desirous of selling said working interest participation percentage
in The Well and REC desires to acquire a specified level of working interest
participation percentage in The Well,, REC hereby submits below the terms and
conditions of a participation proposal to acquire said working interest and net
revenue interest in The Well, and enter into a formal Participation Agreement
with EP under the following general terms and conditions:
1. REC hereby agrees to execute the EP AFE dated January 18, 2007 for the
drilling and or plugging and abandonment of The Well in the amount of
$42,772,550.00 thereby evidencing agreement to participate and pay 45%
of the costs being $19,247,647.00 net to REC. REC's 45% participation
level will be capped at 100% of the $42,772,550.00 DHC. At such time
as the DHC reach $42,772,550.00 all further REC well costs will be at
the 40% working interest participation level.
2. In return for REC agreeing to participate in The Well and evidencing
said participation by executing the above referenced AFE, EP shall
immediately but no later than 10 business days upon REC's execution of
AFE, convey to REC a 40% operating rights interest in The Well and any
production thereof via an MMS acceptable form of assignment and
therein EP shall reserve a 1% of 6th/6th ORRI.
3. REC's participation rights hereunder shall be strictly governed and
11700 Old Katy Road, Suite 280, Houston, TX 77079 o T: (281) 293-8449
F: (281) 293-7705
gtabor@ridgewoodenergy.com o www.ridgewoodenergy.com
subject to that certain Offshore Operating Agreement dated August 20,
2004 between EL Paso Production Company as Operator and Chevron
U.S.A., Inc. and Merit Energy Partners formerly The Houston
Exploration Company as Non-operators (the "JOA").
4. The parties acknowledge the acreage on which The Well is located was
previously dedicated to Triton Gathering, LLC and Stingray Pipeline
Company, LLC. Accordingly, should The Well be successfully completed
and result in production, EP and REC agree, EP will market REC's share
of gas production pursuant to the terms provided under the JOA for the
term of REC's working interest ownership in The Well. EP will pay REC
based on the actual price received at the onshore interconnects with
Stingray by EP for the month, net of actual Stingray transport cost
incurred, minus $0.17 per mmbtu for as long as EP pays a firm demand
charge under its Triton Gathering Agreement then such fee shall be
reduced to EP's actual transport charge at Triton. EP shall make
payment to REC on the 25th of the month following the month of
production via wire transfer.
EP agrees to timely and formally request and maintain sufficient
capacity to enable EP to market REC's share of oil and gas under its
Triton Firm Gathering Agreement and its Stingray Pipeline Transport
Agreement(s).
5. EP and REC agree that REC shall be entitled to its proportionate share
of Royalty Relief granted to the WC 75 lease block, OCS G22505 by the
MMS.
6. [PARAGRAPH DELETED] BJB
7. This offer is subject to all final due diligence by REC. EP shall
provide Ridgewood with full and complete access to EP's files, records
and data, so that Ridgewood may perform its due diligence review of
EP's acquisition, ownership and obligations associated with the lease.
Additionally, EP shall provide REC with access to technical data
associated with the exploration prospect(s), including seismic, maps,
well data and geologic data (including EP's interpretive data),
subject however, to all confidentiality and license restrictions.
This foregoing proposal by REC to EP expresses our intent to participate in the
above referenced well subject to the terms and conditions stated herein.
Should you wish to accept this offer and the foregoing terms and conditions are
acceptable to you, please execute two copies of this letter and return one copy
by fax to: (281) 293-7391; and one original to my attention at the letterhead
address. Should you have any questions regarding this offer, please contact
Randy Bennett at (281) 293-9384 or the undersigned at (281) 293-8449.
This offer to participate by REC is subject to REC's final management approval
and shall remain open until the end of business, or 5:00 pm, on Friday, March 9,
2007, after which such time the offer will terminate.
Very truly yours,
/s/ W. G. Tabor
W. Greg Tabor
Executive Vice President
AGREED TO AND ACCEPTED THIS 12th DAY OF March 2007.
BY: /s/ [ILLEGIBLE SIGNATURE]
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TITLE: President
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[SEAL OMMITED]
IN WITNESS WHEREOF, each Party, through its duly authorized agent or
representative, has executed this Agreement as of the date indicated below, but
effective as of the date first above written.
WITNESSES: EL PASO PRODUCTION COMPANY
/s/ [ILLEGIBLE SIGNATURE] By: /s/ William M. Griffin
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William M. Griffin
/s/ [ILLEGIBLE SIGNATURE] Vice President
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[SEAL OMITTED]
THE HOUSTON EXPLORATION COMPANY
By:
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Tracy Price
Senior Vice President - Land
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CHEVRON U.S.A. INC
/s/ [ILLEGIBLE SIGNATURE] By: /s/ B.G. McCloskey
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B.G. McCloskey
/s/ [ILLEGIBLE SIGNATURE] Assistant Secretary
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RIDGEWOOD ENERGY CORPORATION
/s/ [ILLEGIBLE SIGNATURE] BY: /s/ W. G. Tabor
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W. Greg Tabor *
/s/ [ILLEGIBLE SIGNATURE] Executive Vice President
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(Signature Page for Offshore Operating Agreement covering Block 75,
West Cameron Area, Lease No. OCS-G 22505, Offshore Louisiana)
*Attached to and made part of that certain Offer to Participate letter dated
March 7, 2007, between El Paso E&P Company, L.P., and Ridgewood Energy
Corporation.
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IN WITNESS WHEREOF, each Party, through its duly authorized agent or
representative, has executed this Agreement as of the date indicated below, but
effective as of the date first above written.
WITNESSES: EL PASO PRODUCTION COMPANY
By:
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William M. Griffin
Vice President
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THE HOUSTON EXPLORATION COMPANY
/s/ [ILLEGIBLE SIGNATURE] By: /s/ Tracy Price
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Tracy Price
/s/ [ILLEGIBLE SIGNATURE] Senior Vice President - Land
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CHEVRON U.S.A. INC
By: /s/ B.G. McCloskey
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B.G. McCloskey
Assistant Secretary
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(Signature Page for Offshore Operating Agreement covering Block 75,
West Cameron Area, Lease No. OCS-G 22505, Offshore Louisiana)
70