EXHIBIT 10.12
PARTICIPATION AGREEMENT
PACIFIC CREEK PROSPECT
GREEN RIVER BASIN, WYOMING
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS, EXHIBITS, AND REPRESENTATIONS AND WARRANTIES.........1
ARTICLE 2 - TITLE REVIEW......................................................5
2.1 Title Data...........................................................5
2.2 Notification.........................................................6
2.3 Defects..............................................................6
2.4 Defect Adjustment....................................................7
2.5 Lease Files..........................................................7
ARTICLE 3 - AREA OF MUTUAL INTEREST...........................................7
3.1 Establishment and Term...............................................7
ARTICLE 4 - 3D SEISMIC DATA SURVEY............................................10
4.1 Funding..............................................................10
4.2 Licenses.............................................................10
ARTICLE 5 - TEST XXXXX........................................................10
5.1 Funding..............................................................10
5.2 Selection of Well Design, Rig Contractor and Drillsite Location......10
5.3 Operations...........................................................10
5.4 Test Xxxxx. .........................................................11
5.5 Substitute Well. ....................................................11
5.6 Payments. ...........................................................11
5.7 HSE/Business Principles..............................................11
5.8 Well Take Over.......................................................12
ARTICLE 6 - EARNING PROVISIONS................................................12
6.1 Interests to be Earned...............................................12
ARTICLE 7 - ASSIGNMENTS.......................................................13
7.1 Shell/Wolverine Assignments to Pacific...............................13
7.2 Assignment Form......................................................13
ARTICLE 8 - FORCE MAJEURE.....................................................13
8.1 Force Majeure........................................................13
ARTICLE 9 - WELL INFORMATION AND TECHNICAL DATA...............................14
9.1 Shell and Wolverine Data.............................................14
9.2 Future Data Acquisitions. ...........................................14
9.3 Well Information.....................................................14
ARTICLE 10 - CONFIDENTIALITY..................................................14
10.1 Defined.............................................................14
10.2 Confidentiality Agreement...........................................15
10.3 No Disclosure.......................................................15
10.4 Unauthorized Access. ...............................................15
10.5 Compulsory Disclosure. .............................................15
10.6 Announcements.......................................................15
ARTICLE 11 - MARKETING, GATHERING, PROCESSING AND TREATING FACILITIES.........16
11.1 Exclusive Rights....................................................16
ARTICLE 12 - NOTICES..........................................................16
12.1 Notices. ...........................................................16
ARTICLE 13 - MISCELLANEOUS....................................................17
13.1 Relationship........................................................17
13.2 Indemnity...........................................................17
13.3 Taxes...............................................................17
13.4 Governing Law.......................................................17
13.5 Arbitration.........................................................17
13.6 Term................................................................17
13.7 Further Assurances..................................................18
13.8 Integration. .......................................................18
13.9 Amendments..........................................................18
13.10 Binding Effect.....................................................18
13.11 Covenants..........................................................18
13.12 Third Parties......................................................18
13.13 Assignment.........................................................18
13.14 Severability.......................................................18
Exhibit A Project Area
Exhibit B Schedule of Leases
Exhibit C Arbitration Procedure
Exhibit D Ratification of Pacific Creek Joint Operating Agreement
Exhibit E Assignment of Leases
Exhibit F Tax Partnership
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PARTICIPATION AGREEMENT
PACIFIC CREEK PROSPECT
GREEN RIVER BASIN, WYOMING
This Participation Agreement (the "AGREEMENT"), entered into as of the
30th day of August, 2005 effective as of June 1, 2005, is by and between SWEPI
LP, whose address is P. 0. Xxx 000, Xxxxxxx, XX 00000 ("SHELL"), WOLVERINE GAS
AND OIL CORPORATION, a Michigan corporation whose address is Xxx Xxxxxxxxxx
Xxxxx, 00 Xxxxxx XX, Xxxxx Xxxxxx, XX 00000-0000 ("WOLVERINE"), and PACIFIC
ENERGY RESOURCES LIMITED, a Delaware corporation whose address is 0000 Xxxx Xxxx
X Xxxxxx, Xxxx Xxxxx, XX 00000 ("PACIFIC"). Shell, Wolverine and Pacific may be
referred to individually as a "PARTY," and collectively as the "PARTIES."
RECITALS
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Shell and Wolverine own and Pacific desires to acquire certain interests in
various oil and gas leases comprising ninety nine thousand three hundred eighty
nine (99,389) net acres in the Green River Basin, more particularly located in
Fremont, Sweetwater, and Sublette Counties, State of Wyoming. This Agreement
sets forth the terms and conditions whereby Pacific may earn such interests. In
consideration of the covenants set forth below, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:
ARTICLE 1 - DEFINITIONS, EXHIBITS, AND REPRESENTATIONS AND WARRANTIES
1.1 As used in this Agreement, the following terms shall have
these respective meanings:
o "ACQUISITION" shall have the meaning set forth in Section
3.1(b).
o "AFFILIATE" shall mean any company or legal entity, whether
private or public, which controls, or is controlled by, or
which is controlled by an entity which controls, a Party. In
the case of Shell, "Affiliate" shall mean its parent companies
("Parent Companies"), N.V. Koninklijke Nederlandsche Petroleum
Maatschappij, The "Shell" Transport and Trading Company Plc,
or either of them and means only Royal Dutch Shell plc when
that company controls both of the two previously stated
companies, and any company or legal entity (except Shell)
directly or indirectly controlled by such Parent Companies or
either of them. "Control" means the ownership directly or
indirectly of fifty (50) percent or more of the voting rights
in a company or other legal entity.
o "AMI" shall have the meaning set forth in Section 3.1.
o "CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 10.1.
o "DEFECT ADJUSTMENT" shall have the meaning set forth in
Section 2.4.
o "EARNING DEPTH" shall mean a minimum true vertical depth of
sixteen thousand (16,000) feet beneath the surface, or a
depth sufficient to test the base of the Xxxxxxx Formation or
the stratigraphic equivalent as defined by the logs for the
Pacific Creek B3-33 Well at a measured depth of thirteen
thousand (13,000) feet, whichever is the lesser.
o "EFFECTIVE DATE" shall mean June 1, 2005.
o "FORCE MAJEURE" shall have the meaning as set forth in Section
8.1.
o "JOA" shall mean that certain Pacific Creek Operating
Agreement dated May 1, 2001 by and between SWEPI as Operator
and Wolverine as Non-Operator.
o "LAND" shall mean Leases and Acquisitions.
o "LEASE" or "LEASES" shall mean certain interests and mineral
rights owned by Shell and Wolverine in oil and gas leases
comprising ninety nine thousand three hundred eighty nine
(99,389) net acres in the Green River Basin, more particularly
located in Fremont, Sweetwater, and Sublette Counties, State
of Wyoming. Specific descriptions of the Leases are set forth
in Exhibit B.
o "MARKETABLE" shall have the meaning as set forth in Section
2.3.
o "PERFORMANCE," "PERFORMING," or "PERFORMED" shall mean Pacific
shall have, pursuant to the terms and conditions of the JOA
and this Agreement: (i) made the Seismic Payment upon
execution of this Agreement; and (ii) funded the drilling,
testing and completion of the Test Xxxxx.
o "PROJECT AREA" shall mean the area described as "Pacific Creek
Prospect Area of Mutual Interest" on Exhibit A hereto,
provided that the Lands to be earned by Pacific in T26N-R105W
only, shall be limited to the rights below the base of the
Fort Union Formation.
o "SEISMIC PAYMENT" shall have the meaning set forth in Section
4.1.
o "SEISMIC SURVEY" shall have the meaning set forth in Section
4.1.
o "TEST WELL(S)" shall mean the two exploration xxxxx to be
drilled by Pacific within the Project Area as further set
forth in Article 5.
o "TITLE DATA" shall have the meaning set forth in Section 2.1.
o "TITLE DEFECT" shall have the meaning set forth in Section
2.3.
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1.2 The following exhibits, as indicated below and attached
hereto, are incorporated in and made a part hereof:
Exhibit A Project Area
Exhibit B Schedule of Leases
Exhibit C Arbitration Procedure
Exhibit D Ratification of Pacific Creek Joint
Operating Agreement
Exhibit E Assignment of Leases
Exhibit F Tax Partnership
1.3 Shell represents and warrants to Pacific;
a. Shell is a limited partnership duly organized,
validly existing in good standing under the laws of
the State of Delaware and is in good standing in all
jurisdictions where the nature of its properties or
business requires it.
b. Shell has the power and authority to execute, deliver
and perform its obligations under this Agreement, and
the JOA. The execution, delivery, and performance of
this Agreement and of the JOA by Shell
(i) have been duly authorized by requisite
company action; and
(ii) do not conflict or result in a violation or
breach of or result in the acceleration of
rights, benefits or payments under the
corporate documents of Shell.
This Agreement and the JOA constitute a
legal, valid and binding obligation of
Shell, enforceable against Shell, except as
the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting
creditors' rights generally and general
principles of equity (regardless of whether
enforceability is considered in a proceeding
at law or in equity).
c. No consent, waiver, approval, order, authorization or
other action by or filings with any governmental
authority or other person is required in connection
with the execution, delivery and performance by Shell
of this Agreement. Neither the execution and delivery
of this Agreement by Shell is, nor the consummation
of the transactions contemplated hereby or thereby
will violate or conflict with or result in the
acceleration of rights, or benefits or payments under
any agreement, instrument, statute, regulation, rule,
order, writ, judgment or decree to which Shell is
subject.
d. There are no lawsuits or other proceedings pending or
to the knowledge of Shell threatened against or
affecting Shell or the Lands by or before any
governmental authority.
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e. Exhibit B contains a list of the Leases within the
Project Area as of the Effective Date.
1.4 Wolverine represents and warrants to Pacific:
a. Wolverine is a corporation, duly formed and is
validly existing, in good standing under the laws of
the State of Michigan and is in good standing as a
corporation in all jurisdictions where the nature of
its properties or business requires it.
b. Wolverine has the power and authority to execute,
deliver and perform its obligations under this
Agreement and the JOA. The execution, delivery, and
performance of this Agreement and of the JOA by
Wolverine
(i) have been duly authorized by requisite
company action; and
(ii) do not conflict or result in a violation or
breach of or result in the acceleration of
rights, benefits or payments under the
corporate documents of Wolverine.
This Agreement and the JOA constitute a
legal, valid and binding obligation of
Wolverine, enforceable against Wolverine,
except as the enforceability thereof may be
limited by bankruptcy, insolvency,
reorganization, moratorium or other similar
laws affecting creditors' rights generally
and general principles of equity (regardless
of whether enforceability is considered in a
proceeding at law or in equity).
c. No consent, waiver, approval, order, authorization or
other action by or filings with any governmental
authority or other person is required in connection
with the execution, delivery and performance by
Wolverine of this Agreement. Neither the execution
and delivery of this Agreement by Wolverine is, nor
the consummation of the transactions contemplated
hereby or thereby will violate or conflict with or
result in the acceleration of rights, or benefits or
payments under any agreement, instrument, statute,
regulation, rule, order, writ, judgment or decree to
which Wolverine is subject.
d. There are no lawsuits or other proceedings pending or
to the knowledge of Wolverine threatened against or
affecting Wolverine or the Lands by or before any
governmental authority.
e. Exhibit B contains a list of the Leases within the
Project Area as of the Effective Date.
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1.5 Pacific represents and warrants to Shell and Wolverine:
a. Pacific is a corporation, duly formed and is validly
existing, in good standing under the laws of the
State of Delaware and is in good standing as a
corporation in all jurisdictions where the nature of
its properties or business requires it.
b. Pacific has the power and authority to execute,
deliver and perform its obligations under this
Agreement and the JOA. The execution, delivery, and
performance of this Agreement and of the JOA by
Pacific
(i) have been duly authorized by requisite
company action; and
(ii) do not conflict or result in a violation or
breach of or result in the acceleration of
rights, benefits or payments under the
organization documents of Pacific.
This Agreement and the JOA constitute a legal, valid
and binding obligation of Pacific, enforceable
against Pacific, except as the enforceability thereof
may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws
affecting creditors' rights generally and general
principles of equity (regardless of whether
enforceability is considered in proceeding at law or
in equity).
c. No consent, waiver, approval, order, authorization or
other action by or filings with any governmental
authority or other person is required in connection
with the execution, delivery and performance by
Pacific of this Agreement. Neither the execution and
delivery of this Agreement by Pacific is, nor the
consummation of the transactions contemplated hereby
or thereby will violate or conflict with or result in
the acceleration of rights, or benefits or payments
under any agreement, instrument, statute, regulation,
rule, order, writ, judgment or decree to which
Pacific is subject.
ARTICLE 2 - TITLE REVIEW
2.1 TITLE DATA. Shell represents, but does not warrant, except by,
through and under Shell, that Shell's undivided working
interest in the Leases described in Exhibit "B" cover an
interest in ninety nine thousand three hundred eighty nine
(99,389) net acres. Wolverine represents, but does not
warrant, except by, through and under Wolverine, that
Wolverine's undivided working interest in the Leases described
in Exhibit "B" cover an interest in ninety nine thousand three
hundred eighty nine (99,389) net acres. Shell shall make
available to Pacific copies of all oil and gas leases, proof
of payment, affidavits of heirship, title opinions, title
abstracts, rental receipts, correspondence and other title
material in Shell's possession or control relating to the
Leases (collectively, the "TITLE DATA"). The Title Data shall
be provided by Shell to Pacific hereunder, without
representation or warranty as to the accuracy, completeness or
correctness thereof. Pacific's review of the Title Data shall
be subject to the confidentiality provisions contained in
Article 10.
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2.2 NOTIFICATION. If Pacific determines that any of the Leases are
subject to any Title Defects, Pacific shall deliver to Shell
and Wolverine written notice of such defects on or before
September 30, 2005, along with written documentation in
reasonable detail describing such Title Defects. Any Title
Defect that is not contained in such notice to Shell and
Wolverine shall be deemed waived as to such Lease(s). Shell
and Wolverine shall use reasonable efforts in good faith to
cure, at Shell and Wolverine's cost and expense, the Title
Defects to Pacific's reasonable satisfaction on or before
October 30, 2005.
2.3 DEFECTS. For the purposes of this Agreement, a "TITLE DEFECT"
shall mean any lien, encumbrance or defect which renders Shell
and/or Wolverine's title to a Lease less than Marketable. For
purposes of this Agreement, "MARKETABLE" shall mean title to
the Leases (on a Lease by Lease basis) which in accordance
with the custom and practice in the oil and gas industry:
a. entitles Shell and Wolverine to one hundred percent
(100%) of the oil and gas operating rights in the net
acres set forth in Exhibit "B";
b. obligates Shell and Wolverine to bear not more than
that share of costs and expenses relating to
development of and operations on the land covered by
each Lease equal to Shell and Wolverine's net mineral
acres covered by such Lease divided by the gross
mineral acres in the land covered by such Lease;
c. is free and clear of all mortgages, liens and
encumbrances, except liens for taxes not delinquent,
excluding any and all mortgages, deeds of trust,
financing statements or security agreements covering
a lassoes fee estate in and under the Leases to the
extent placed of record after the recording of the
applicable Lease; and,
d. is deducible from public record and is free from
reasonable doubt to the end that a prudent person
engaged in the business of ownership, development and
operation of oil and gas leases with knowledge of all
the facts would be willing to accept the same.
2.4 DEFECT ADJUSTMENT. If any Title Defects are not cured or
removed to the reasonable satisfaction of Pacific on or before
October 30, 2005, and Pacific does not waive such Title
Defects, Shell and Wolverine shall each refund to Pacific,
their proportionate share, of an amount equal to twenty five
dollars ($25.00) per net acre affected by each such uncured
and unwaived Title Defects (the "DEFECT ADJUSTMENT") within a
reasonable time following Pacific's Performance. The Leases
affected by such Title Defects shall not be included in the
Project Area and shall be free and clear of this Agreement.
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2.5 LEASE FILES. After Performance has occurred and upon written
request by Pacific, Shell shall provide Pacific with copies of
all lease files and records. Copying costs shall be divided
proportionately between the Parties.
ARTICLE 3 - AREA OF MUTUAL INTEREST
3.1 ESTABLISHMENT AND TERM. The Parties hereby acknowledge and
agree to be bound by an area of mutual interest for the
Project Area ("AMI"), commencing on the Effective Date and
continuing until May 1, 2008, as set forth in Exhibit H to the
JOA subject to the following modifications:
a. EXCLUSION. The South Pass Prospect Area portion of
the AMI set forth in the JOA is specifically excluded
for the purposes of this Agreement and the JOA as
related to Pacific.
b. ACQUISITION INTERESTS. For purposes of this
Agreement, an "ACQUISITION" shall mean any oil and
gas leasehold interest covering land within the
Project Area acquired by the Parties, or their
respective Affiliates, directly), or indirectly,
during the term of the AMI including, without
limitation, oil and gas leases, mineral interest,
overriding royalty interest, options to lease,
farm-ins, options to farm-in, acreage contributions,
bottom hole agreements or exploratory agreements.
Subject to Article VIIIB of the JOA, where the
Parties interest may be proportionately reduced:
(i) if Pacific has Performed and all Parties
elect to participate in an interest acquired
pursuant to the AMI, the proportionate
interests of the Parties shall be:
Shell forty two percent (42%)
Pacific forty percent (40%)
Wolverine eighteen percent (18%)
(ii) if Pacific has Performed and Pacific and
Shell elect to participate in art interest
acquired and Wolverine elects not to
participate pursuant to the AMI the
proportionate interests of the Parties shall
be:
Shell sixty percent (60%)
Pacific forty percent (40%)
Wolverine zero percent (0%)
(iii) if Pacific has Performed and Pacific and
Wolverine elect to participate in an
interest acquired and Shell elects not to
participate pursuant to the AMI the
proportionate interests of the Parties shall
be:
Shell zero percent (0%)
Pacific forty percent (40%)
Wolverine sixty percent (60%)
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(iv) if Pacific has Performed and Shell and
Wolverine elect to participate in an
interest acquired and Pacific elects not to
participate pursuant to the AMI the
proportionate interests of the Parties shall
be:
Shell seventy percent (70%)
Pacific zero percent (0%)
Wolverine thirty percent (30%)
c. ADDITIONAL EXCLUSION. An Acquisition shall
specifically exclude any assets acquired pursuant to
a merger, consolidation or acquisition of
substantially all of the assets of another person or
entity.
d. OVERLAPPING LEASE. If an Acquisition includes lands
located within the Project Area and lands located
outside the boundaries of the Project Area, the
Acquisition shall be deemed to include only the lands
located inside the Project Area, unless the Parties
agree otherwise.
e. RESTRICTIONS ON ACQUISITIONS. Shell and Wolverine may
make Acquisitions in the Project Area at their
discretion. In the event that Pacific, prior to
Performing, desires to make an Acquisition within the
Project Area, such Acquisition may only be made with
Shell and Wolverine's prior approval in writing, such
approval shall not be unreasonably withheld. In the
event that Pacific does not Perform, Shell and
Wolverine shall have the option to purchase, at
Pacific's actual cost, any Acquisitions made by
Pacific within the Project Area.
f. NOTIFICATION. All Acquisitions made prior to
Performance, must be reported by the acquiring
Parties to the non-acquiring Party within sixty (60)
days after the completion of Performance. Such
notification shall include, but not be limited to, a
description of the interest acquired, the area
covered, the terms of the Acquisition and the cost
(including brokerage fees), and a copy of the
proposed agreement for the Acquisition. After the
completion of the Performance, all Acquisitions must
be reported by the acquiring Parties to the
non-acquiring Party within thirty (30) days of the
effective date of such Acquisition.
g. OPTION TO ACQUIRE. For a period of thirty (30) days
from receipt of such notification, the non-acquiring
Party shall have the option of acquiring its
proportionate interest, as set forth above, in the
Acquisitions, by notifying the acquiring Party of its
desire to do so, said notification to be accompanied
by check or other payment for the cost of its
proportionate share of the costs and expenses
specified in the notification. Upon receipt of said
notification and payment, the acquiring Party shall
promptly assign the interests covered by the
notification. Failure by the non-acquiring Party to
respond within the period herein above provided,
shall be deemed an election not to acquire such
interest.
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h. ACQUISITION COSTS. Any Party making an Acquisition
shall be financially responsible for such Acquisition
until Performance takes place. The acquiring Party
shall not burden the Acquisition in any fashion, and
shall be entitled to reimbursement of its actual
costs, including bonus, brokerage fees, title costs
and rentals of said Acquisition.
i. DELAY RENTALS AND RENEWAL BONUSES FOR LEASES. Shell
and Wolverine shall use their reasonable efforts to
administer the payment of all rentals and renewal
bonuses for the Leases and Acquisitions in the
Project Area. If Shell and Wolverine used reasonable
efforts to make such payments, then neither Shell nor
Wolverine shall have any liability whatsoever to
Pacific for failure to timely make a rental or
renewal bonus payment. After completion of
Performance, Pacific shall reimburse Shell and
Wolverine for their proportionate interests of the
rentals and renewal bonuses paid by Shell and
Wolverine for the Leases and Acquisitions from the
Effective Date until the Performance is completed.
After the completion of the Performance, all jointly
owned Leases and Acquisitions will continue to be
maintained by the acquiring Party, and the
non-acquiring Parties shall be billed for their
proportionate share on a monthly basis.
ARTICLE 4 - 3D SEISMIC DATA SURVEY
4.1 FUNDING. Upon execution of this Agreement, Pacific shall fund
one hundred percent (100%) of the cost of two licenses for a
non-exclusive, approximately one hundred thirty point five
(130.5) square mile 3D Seismic Data Survey to image the
Project Area ("SEISMIC SURVEY"). The total cost for the
Seismic Survey is Four Million Dollars ($4,000,000.00)
("SEISMIC PAYMENT"). The Seismic Payment shall be paid by
Pacific to Shell within seven (7) business days of August 30,
2005.
4.2 LICENSES. Shell and Wolverine shall each receive one of the
two licenses, acquired in Section 4.1. Subject to Section
10.3, Pacific and its Affiliates and their respective
consultants shall, at no further cost than the Seismic
Payment, have the right to access the data and a seismic work
station at Shell's office during normal business hours by
giving reasonable notice.
ARTICLE 5 - TEST XXXXX
5.1 FUNDING. Based on the results of the Seismic Survey, Pacific
may elect, at its sole option, to fund one hundred percent
(100%) of all cost and expense incurred and actually paid to
third parties in the drilling, reasonable testing and
completing of the Test Xxxxx including, without limitation,
all costs to locate, permit, drill, re-enter, re-drill,
re-work, directionally drill, operationally sidetrack,
re-complete, plug back, kick, fish, perforate, hydraulically
fracture, stimulate, test and complete as a well capable of
producing oil and/or gas, or plugging and abandonment as a dry
hole, as the case may be, each Test Well. If a substitute well
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is drilled under Section 5.5, the costs and expenses incurred
in the drilling, testing and completing of both the original
well and the substitute well shall be paid by Pacific. Prior
to commencement of drilling each Test Well, Pacific shall post
for each Test Well an abandonment site restoration bond in
compliance with applicable laws and regulations.
The non-operating Parties shall have the right to have their
personnel at the well site location at all times. Such access
shall be at the sole risk and expense of the non-operating
Parties.
5.2 SELECTION OF WELL DESIGN, RIG CONTRACTOR AND DRILLSITE
LOCATION. Prior to the drilling of each Test Well, the Parties
shall mutually agree on (i) the well design; (ii) the rig
contractor, and (iii) the drillsite location of the Test Well
based on the results of the Seismic Survey.
5.3 OPERATIONS. During the term of this Agreement, the JOA shall
govern as to the Parties regardless of who is operator. If
there are any conflicts between this Agreement and the JOA,
this Agreement shall prevail. If there are any conflicts
between this Agreement and the Purchase and Sale and
Exploration Agreement between Shell and Wolverine dated April
30, 2001 this Agreement shall prevail. Shell, as Operator of
the JOA, shall designate Pacific as operator for the sole
purpose of drilling the Test Xxxxx. Pacific's designation as
operator shall be limited to the field operations performed
while drilling, testing and completing the Test Xxxxx. The
Test Xxxxx shall be drilled, tested, and completed as a well
capable of producing oil and/or gas or as a dry hole, in
accordance with all applicable laws, rules and regulations of
the appropriate governmental and regulatory authorities. Upon
Performance, Pacific shall relinquish operations of such Test
Well in favor of Shell.
5.4 TEST XXXXX. Operations for the drilling of the Test Xxxxx
shall be commenced on or before December 31, 2006 and be
located in the Project Area. The Test Xxxxx shall be drilled
with due diligence and reasonable dispatch to the Earning
Depth.
5.5 SUBSTITUTE WELL. Should Pacific, as operator during the
drilling of any of the Test Xxxxx, encounter impenetrable
substances or other conditions which make the further drilling
of such Test Well impracticable prior to reaching the
objective depth as set forth above, Pacific may elect, at its
sole option, within ninety (90) days of the discontinuance of
such Test Well, to commence drilling operations for a
substitute Test Well. In such event, the substitute Test Well
shall be located as near as practicable to the discontinued
Test Well and shall be drilled to the stratigraphic equivalent
of the Earning Depth. If Pacific drills a substitute Test Well
as above provided, then such substitute Test Well shall be
deemed to constitute the Test Well for which it is a
substitute for purposes of clause (ii) of the definition of
"Performance" herein.
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5.6 PAYMENTS. Pacific shall pay all invoices for the drilling,
testing, and completing of any Test Well.
5.7 HSE BUSINESS PRINCIPLES. With respect to the conduct of
operations in the Project Area, the Parties to this Agreement
state that they share a commitment to the protection of the
health and safety of the people working in the Project Area
and to the protection of the environment. In accordance with
this commitment, Pacific shall, with the support and
cooperation of Shell and Wolverine, work to develop a Health
Safety and Environmental ("HSE") Management System and
Policies that will effectively implement the following
elements in the conduct of operations hereunder:
a. A systematic approach to HSE management designed to
ensure compliance with the law and to achieve
continuous performance improvement;
b. Set targets for improvement; measure, appraise and
report performance;
c. Require contractors to manage HSE in line with this
policy;
d. Ensure that HSE is the responsibility of all
managers, teams and individuals;
e. Permit any individual to stop any work, or prevent
any work from starting, where adequate controls of
HSE risks are found not to be in place; and
f. Include HSE performance in the appraisal of operating
staff and contractors and reward them accordingly.
In addition to the foregoing responsibilities of Pacific,
Pacific, Shell, and Wolverine shall meet annually to: 1)
review the HSE performance of joint operations in the Project
Area during the previous year relative to previous mutually
agreed performance measures; and 2) to set new mutually agreed
performance measures for the following year. Pacific shall be
responsible for conducting joint operations in compliance with
these measures. Pacific shall permit Shell and Wolverine to
jointly conduct such auditing activities as may be reasonably
necessary to verify operator's reported HSE performance,
including review of any relevant records and inspection of
facilities or other operational sites to the extent they are
directly related to Project Area operations. Shell and
Wolverine's right to conduct such audits shall be limited to
one audit per calendar year unless otherwise agreed by Pacific
as operator. Audit activities shall only be conducted during
normal business hours and in a manner that minimizes undue
disruption of Pacific's activities.
5.8 WELL TAKE OVER. Shell shall have the right to take-over the
drilling of any Test Well that Pacific intends to abandon
pursuant to Article VI(e) of the JOA. If Shell takes over a
Test Well, Shell and Wolverine (if Wolverine elects to
participate for its proportionate interest) shall be
responsible for all drilling, testing, producing, completion,
plugging and site restoration costs incurred from the date of
take-over.
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ARTICLE 6 - EARNING PROVISIONS
6.1 INTERESTS TO BE EARNED. Upon Performance, Pacific shall earn
an undivided working interest of Shell and Wolverine's right,
title and interest in the Project Area subject to all existing
lease burdens, royalties and overriding royalties as of the
Effective Date as follows:
a. In the Project Area where Shell as of the Effective
Date, owns seventy percent (70%) and Wolverine owns
thirty percent (30%) of an one hundred percent (100%)
undivided working interest, Pacific shall receive a
forty percent (40%) undivided working interest as
follows:
o twenty eight percent (28%) from Shell;
o twelve percent (12%) from Wolverine;
resulting in the following undivided working
interests:
o Shell forty two percent (42%)
o Pacific forty percent (40%)
o Wolverine eighteen percent (18%)
b. In the Project Area where Shell, as of the Effective
Date, owns forty percent (40%) and Wolverine owns
thirty percent (30%) out of a total seventy percent
(70%) undivided working interest, Pacific shall
receive a twenty eight percent (28%) undivided
working interest as follows:
o sixteen percent (16%) from Shell;
o twelve percent (12%) from Wolverine.
resulting in the following undivided working
interests:
o Shell twenty four percent (24%)
o Pacific twenty eight percent (28%)
o Wolverine eighteen percent (18%)
c. if Pacific fails to make the Seismic Payment or
elects, not to fund one hundred percent (100%) or
fails to, drill, complete and test both Test Xxxxx as
set forth in Section 5.1 (Performance), Pacific shall
not earn any undivided working interest in the
Project Area.
ARTICLE 7 - ASSIGNMENTS
7.1 SHELL/WOLVERINE ASSIGNMENTS TO PACIFIC. Within thirty (30)
days following the completion of Performance, Shell and
Wolverine shall execute and deliver unto Pacific proper
assignments of the Leases. Pacific shall concurrently
reimburse both Shell and Wolverine for their proportionate
share of the cost as set forth in Sections 3.1(i).
7.2 ASSIGNMENT FORM. All assignments made under this Agreement
shall be substantially in the form attached hereto as Exhibit
"E" or the standard forms of assignment for Leases acquired
from the State of Wyoming and the United States of America and
shall be properly executed and notarized for recording
purposes.
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XXXXXXX 0 - XXXXX XXXXXXX
8.1 FORCE MAJEURE. If any Party is rendered unable, in whole or in
part, by an event of "FORCE MAJEURE" to carry out its
obligations under this Agreement, other than an obligation to
make money payments or to provide an indemnity, such Party
shall give to the other Parties prompt written notice of the
event of Force Majeure accompanied by reasonably detailed
information concerning such event; thereupon, the obligations
of the Party giving such notice, so far as they are affected
by the event of Force Majeure, shall be suspended during, but
no longer than, the continuance of the event of Force Majeure.
As used herein, the term "EVENT OF FORCE MAJEURE" shall mean
an act of God, strike, lockout or other industrial
disturbance, act of a public enemy, war, blockade, riot,
lightning, storm, fire, flood or other act of nature,
governmental action, governmental delay, governmental delays
regarding environmental or permitting requirements,
governmental restraint or governmental inaction,
unavailability of equipment or transportation of same, and any
other cause, whether of the kind specifically enumerated above
or otherwise, which is not reasonably within the control of
the Party claiming Force Majeure. The affected Party shall use
reasonable diligence to remove the event of Force Majeure, or
mitigate the effects thereof, as promptly as reasonably
practicable.
ARTICLE 9 - WELL INFORMATION AND TECHNICAL DATA
9.1 SHELL AND WOLVERINE DATA. Pacific shall have access to the
Confidential Information for its own and its Affiliates use
during the life of the Agreement and must hold such data
strictly confidential as required in Article 10.
9.2 FUTURE DATA ACQUISITIONS. Costs for all future geological and
geophysical data (seismic, magnetotelluric, etc.) that the
Parties agree to mutually pursue in the Project Area, shall be
acquired on a proportionate share basis and shall be subject
to the confidentiality provisions set forth in Article 10.
Whenever one Party desires to pursue the acquisition of
additional data in the Project Area that the other Parties
elect not to participate in, the non-participating Part(ies)
agrees to provide reasonable access to its acreage to the
acquiring Party. The non-participating Part(ies) shall have no
rights to such data.
9.3 WELL INFORMATION. Each Party shall have the right to receive
the data from the Test Xxxxx drilled within the Project Area,
subject to the confidentiality provisions set forth in Article
10.
ARTICLE 10 - CONFIDENTIALITY
10.1 DEFINED. Confidential and proprietary data shall include, but
not be limited to Shell's and Wolverine's geological,
geophysical, land, engineering, environmental, well
information, technical information, including interpretations
and models covering the AMI, together with ail legal
information, terms, negotiations or any other information
regarding the potential business transaction between the
Parties, or information regarding an aspect of participation
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in the Agreement itself (collectively referred to herein as
"CONFIDENTIAL INFORMATION"). The term Confidential information
shall not include information that (a) is in a Party's or its
Affiliate's possession prior to disclosure, (b) is or becomes
known to the public other than as a result of a breach of this
Agreement, (c) becomes available to a Party on a
non-confidential basis from a source other than the other
Parties) or (d) is developed by a Party without the use of
Confidential Information.
10.2 CONFIDENTIALITY AGREEMENT. Upon execution of this Agreement,
the Confidentiality Agreement by and between Shell and Pacific
dated February 23, 2005 shall terminate and Article 10 of the
Agreement shall govern.
10.3 NO DISCLOSURE. Unless required by law, no Party shall disclose
the Confidential Information to any person or entity,
including current leaseholders and mineral owners in the
Project Area, except to its own and its Affiliates, and its
and their officers, directors, employees and outside
attorneys, accountants and financial, engineering and
geological advisors, agents, consultants, representatives, to
carry out the purpose of this Agreement and each Party agrees
to direct such persons to not disclose to any other person or
persons the Confidential Information, and accepts full
responsibility should they disclose such.
10.4 UNAUTHORIZED ACCESS. The Parties shall use reasonable efforts
to prevent access by unauthorized persons to the Confidential
Information, such efforts to reflect at least the same general
degree of security that each Party accords its own
Confidential Information, including, without limitation,
ensuring that each outside attorney, accountant and any other
advisor to whom it discloses the Confidential Information has
a written obligation to hold it confidential.
10.5 COMPULSORY DISCLOSURE. In the event a Party is requested or
required under compulsion of legal process to disclose
Confidential Information, such Party shall not, unless
required by law, disclose the Confidential Information until
the other Parties have first (a) received prompt written
notice of such request or requirement to disclose, and (b) had
an adequate opportunity to obtain a protective order or other
reliable assurance that confidential treatment will be
accorded to its Confidential Information. The Party so
requested shall not oppose actions by the other Part(ies) to
assure such confidential treatment.
10.6 ANNOUNCEMENTS. Except to the extent permitted above or as
required to be disclosed under stock exchange regulations, no
Party shall issue any press release or make any public
announcement related to this Agreement or the activities
hereunder without the prior written consent of the other
Parties, which consent shall not be unreasonably withheld.
Copies of any permitted press release or announcement shall be
sent to the other Parties for approval in advance of its
publication, so that the other Parties may make comments
and/or modifications.
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ARTICLE 11 - MARKETING, GATHERING, PROCESSING AND TREATING FACILITIES
11.1 EXCLUSIVE RIGHTS. Each Party shall have the exclusive right to
provide gathering, processing, treating and related services
for its own equity production. Notwithstanding, the Parties
shall meet and work together to consider the development of
joint gathering, processing and treating facilities, including
but not limited to consideration of appropriate third party
provider proposals, if any. The Parties shall share land
access and right of way where reasonably possible.
11.2 The Parties shall mutually agree to outline all required
wellhead delivery conditions and pertinent sales redelivery
conditions in the Project Area.
11.3 Each Party shall have the right to market their own gas
arising out of the Project Area.
ARTICLE 12 - NOTICES
12.1 NOTICES. Any notice to be provided hereunder, shall be deemed
received by the addressee upon the earliest of: (a) actual
receipt; (b) five (5) days after deposit with the United
States Postal Service, by certified mail, postage prepaid,
return receipt requested; or (c) four (4) days after deposit
with Federal Express. Each Party shall have the right to
change its address for notice purposes by so notifying the
other Parties in writing. Facsimile notices shall be deemed
received upon confirmation of receipt by the Party notified.
The address of each Party for notice purposes is:
SWEPT LP
000 Xxxxx Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Onshore Land Manager
Facsimile: 000-000-0000
Telephone: 000-000-0000
Wolverine Gas and Oil Corp.
Xxx Xxxxxxxxxx Xxxxx
00 Xxxxxx XX
Xxxxx Xxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxx
Facsimile: 000-000-0000
Telephone: 000-000-0000
Pacific Energy Resource Ltd.
0000 Xxxx Xxxx X Xxxxxx
Xxxx Xxxxx, XX 00000
Attention: Xxxxxxxx Xxxxx
Facsimile: 000-000-0000
Telephone: 000-000-0000
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ARTICLE 13 MISCELLANEOUS
13.1 RELATIONSHIP. it is not the intention of the Parties hereto to
create a partnership, joint venture, mining partnership or
association taxable as a corporation; and neither this
Agreement nor the operations hereunder shall be construed as
creating such a relationship. The liability of the Parties
hereto shall be several and not joint or collective, and each
Party shall be responsible only for its obligations. Nothing
contained herein shall be construed to constitute any Party to
be the partner of the other Part(ies).
13.2 INDEMNITY. Prior to Performance, Pacific shall be one hundred
percent (100%) liable for and agrees to hold harmless Shell
and Wolverine for any and all liability to or claims by third
parties arising out of or in connection with the shooting of
the Seismic Survey or the drilling of the Test Xxxxx as set
forth in Article 5, except that Pacific shall have no
liability for any claims arising out of or in connection with
Shell or Wolverine's gross negligence or willful misconduct.
13.3 TAXES. During the term of this Agreement, the Parties shall
enter into a tax partnership as set forth in Exhibit F.
13.4 GOVERNING LAW. This Agreement and the legal relations between
the Parties shall be governed by and construed in accordance
with the laws of the State of Texas, without regard to
principles of conflicts of laws otherwise applicable to such
determinations.
13.5 ARBITRATION. Any disputes between the Parties arising out of
or in connection with this Agreement shall be referred to and
determined by binding arbitration in accordance with the
procedures set forth in Exhibit C.
13.6 TERM. The term of this Agreement shall be until the later of
May 1, 2008 or for so long as there is any production from the
Lands. The JOA, as applicable shall continue in accordance
with its terms. No termination of this Agreement or the JOA,
as applicable shall operate to relieve any Party of its
obligations that shall have arisen or accrued at the time of
termination.
13.7 FURTHER ASSURANCES. The Parties agree to execute, acknowledge
and deliver all instruments, agreements or other documents,
and to take all action which may be necessary or advisable to
consummate the transactions contemplated by this Agreement.
13.8 INTEGRATION. This Agreement and the documents to be executed
hereunder and the Exhibits attached hereto constitute the
entire agreement between the Parties pertaining to the subject
matter hereof, and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or
written, of the Parties pertaining to the subject matter
hereof.
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13.9 AMENDMENTS. This Agreement may not be altered, or amended, nor
any rights hereunder waived, except by an instrument in
writing executed by the Party or Parties to be charged with
such amendment or waiver.
13.10 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the Parties hereto, and their
respective successors and assigns.
13.11 COVENANTS. This Agreement and the terms, conditions and
covenants herein shall be deemed to be covenants running with
the land, and a burden upon each of the Party's interest in
the Leases, for the benefit of the other Parties interest in
the Lands.
13.12 THIRD PARTIES. Nothing in this Agreement, express or implied,
is intended to confer upon any third party any benefits,
rights or remedies.
13.13 ASSIGNMENT. No Party shall assign this Agreement nor shall the
obligations and benefits herein be assigned to any third party
without the written consent of the other Parties. Such consent
however, will not be unreasonably withheld. Notwithstanding
anything to the contrary in this Agreement, a Party may assign
its rights and interests under this Agreement to an Affiliate
without the prior written consent of the other Parties.
13.14 SEVERABILITY. Each provision hereof is intended to be
severable. If any term, clause or provision of this Agreement
is or becomes unenforceable in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect
the validity, legality, or enforceability of any other term,
clause or provision and such invalid, illegal or unenforceable
term, clause or provision shall be, as to such jurisdiction,
severable from this Agreement to the maximum extent possible.
END OF AGREEMENT
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EXECUTED in multiple counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement, effective
for all purposes as of the Effective Date, June 1, 2005.
Pacific Energy Resources Limited SWEPI LP
By: /S/ XXXXXXXX XXXXX By: /S/ X. X. XXXXXXX
------------------------------ ------------------------------
Name: Xxxxxxxx Xxxxx Name: X. X. Xxxxxxx
Title: Chairman & CEO Title: Attorney-In-Fact
Wolverine Gas and Oil Corporation
By: /S/ XXXXXXX X. XXXXXX
------------------------------
Name: Xxxxxxx Xxxxxx
Title: Vice President of Land
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