Common use of DRILLING OPERATIONS Clause in Contracts

DRILLING OPERATIONS. (a) A Party's election to participate in a Prospect Area in accordance with the terms of Article IV above does not constitute a commitment to participate in the drilling of a well within the Prospect Area. Any Party that has participated in a Prospect Area may propose the drilling of the initial well (being the first well drilled by any of the Participants within the applicable Prospect Area and being hereinafter referred to as an "Initial Well") or any subsequent well (being any well drilled within a Prospect Area following the drilling of the Initial Well and being hereinafter referred to as a "Subsequent Well") within the Prospect Area in accordance with the procedures set forth in the Operating Agreement. (b) In the event that a Party elects not to participate in the drilling of the Initial Well proposed and drilled within the Prospect Area, anything to the contrary contained in the applicable (or deemed applicable) Operating Agreement to the contrary, such Party (i) must permanently relinquish and assign (without reimbursement for costs) all of its right, title and interest in the applicable Prospect Area to the Participants participating in the drilling of such Initial Well (in the ratio that each participating Party's leasehold working interest in the acreage included within the drilling and/or proration unit for such Initial Well bears to the total of the leasehold working interests of all of the Participants hereto participating in the operation), (ii) shall no longer (as of the date it elects not to participate in the drilling of the Initial Well) be deemed a party to the Operating Agreement for such Prospect Area, and (iii) shall not own or acquire any mineral, leasehold, royalty or other interest in oil, gas and/or other minerals within such Prospect Area for a period of five (5) years from the date of this Agreement. (c) In the event that a Party has participated in the drilling of the Initial Well drilled within a Prospect Area but such Party does not participate in the drilling of any Subsequent Well within such Prospect Area, such Party (i) must permanently relinquish (without reimbursement for costs) and assign all of its right, title and interest in the drilling and/or proration unit for such Subsequent Well to the Participants participating in the drilling of such Subsequent Well (in the ratio that each participating Party's leasehold working interest in the acreage included within the drilling and/or proration unit for such Subsequent Well bears to the total of the leasehold working interests of all of the Participants hereto participating in the operation), (ii) shall permanently relinquish (as of the date it elects not to participate in the drilling of such Subsequent Well) all of its rights and interests under the applicable Operating Agreement insofar as it covers the relinquished drilling and/or proration unit, and (iii) shall not own or acquire any mineral, leasehold, royalty or other interest in oil, gas and/or other minerals within the drilling and/or proration unit for such Subsequent Well for a period of five (5) years from the date of this Agreement. (d) In the event that a Party has participated in the drilling of the Initial Well or any Subsequent Well within a Prospect Area and then elects not to participate in a completion operation proposed for such well, such Party (i) must permanently relinquish (without reimbursement for costs) and assign all of its right, title and interest in the completed formation within the drilling and/or proration unit for such well and all of the production which may be obtained from such completed formation within that well to the Participants participating in such completion of such formation (in the ratio that each participating Party's leasehold working interest in the acreage included within the drilling and/or proration unit for such well bears to the total of the leasehold working interests of all of the Participants hereto participating in the operation), (ii) shall relinquish (as of the date it elects not to participate in the completion operation) all of its rights and interests under the applicable Operating Agreement insofar as it covers the relinquished completed formation within the drilling and/or proration unit for such well, and (iii) shall not own or acquire any mineral, leasehold, royalty or other interest in oil, gas Geophysical Exploration Agreement Southwest Danbury Project 12 13 and/or other minerals located within the completed formation within the drilling and/or proration unit for such well for a period of five (5) years form the date of this Agreement. If a Party has elected to participate in the drilling of a well and then elects not to participate in a proposed completion operation within the well, but then subsequently participates in the completion of another formation within the same well, such Party will be obligated to pay for its proportionate share of the completion operation costs which were previously incurred in completing the other formation in accordance with the drilling footage ratio method set forth in COPA▇ ▇▇▇letin No. 2 in paragraph B.1(b) for intangible costs and in paragraphs B.1 and B.2 for tangible costs. (e) If there is no drilling or proration unit for a well or if there is no other allocation for spacing or allowable purposes, then to the extent practicable, an area in the form of a square within the Prospect Area with the well being located in the center thereof of six hundred and forty (640) acres around a gas well and eighty (80) acres around an oil well, shall be deemed to be the drilling or proration unit for such well, in either event with the east and west boundary lines of such square running as nearly as possible due north and south; provided, however, that it is the Participants' intent that the relinquishment and assignment of interests provided for in this Section 5.1 for failure to participate in the drilling of a Subsequent Well or a completion operation apply to all and only all of the leasehold interests, mineral interests and production that are allocated to the relevant well (or completed formation) and the Participants hereto agree that in the event that such allocation changes in the future, the Participants shall execute any future or further relinquishment instruments or other documentation that is necessary to effectuate that intent. (f) Any well drilled to replace a well drilled within a Prospect Area because of drilling or mechanical difficulties incurred in the drilling of such well shall be deemed to be the same well for purposes of the relinquishment and assignment provisions of this Section 5.1; provided, however, that only the Participants that participated in the original drilling of the well shall have the right to participate in the drilling of a replacement well for such well. (g) In the event of any required relinquishment and assignment of interests as provided in this Section 5.1, the relinquishing Party shall promptly execute all conveyance instruments necessary to effectuate such relinquishment and assignment.

DRILLING OPERATIONS. (a) A Party's election to participate in The designation of a Prospect Area in accordance with the terms of Article IV V above does not constitute a commitment to participate in the drilling of a well within the Prospect Area. Any After a Prospect Area has been designated in accordance with terms of Article V above, subject to the limitations set forth in Section 6.8 below, any Party that has participated owning an interest in a Options, Leases or Farm-Ins within such Prospect Area may propose the drilling of the initial well (being the first well drilled by any of the Participants Parties within the applicable Prospect Area and being hereinafter referred to as an "Initial Well") or any subsequent well (being any well drilled within a Prospect Area following the drilling of the Initial Well within such Prospect Area and being hereinafter referred to as a "Subsequent Well") within the Prospect Area in accordance with the procedures set forth in the form Operating Agreement which is attached hereto as Exhibit F. In the event that a Party proposes a completion operation within an Initial Well or Subsequent Well hereunder, in addition to the information which must be included with the completion proposal as set forth in the Operating Agreement, such proposing Party shall specify the exact interval (by log depths) within the well bore which such Party reasonably believes may produce from the completion operations which are proposed (the formation(s) or partial formation(s) which are located between the high and low log depth which are reasonably described in such completion proposal being herein referred to as the "Completion Interval," regardless of the exact location of the perforations within said Completion Interval). (b) In the event that a Party elects does not to participate in the drilling of the Initial Well proposed and drilled within the Prospect Area, anything to the contrary contained in the applicable (or deemed applicable) Operating Agreement to the contrary, such Party (i) must permanently relinquish and assign (without reimbursement for costs) to the Parties participating (in proportion to the interest in the Initial Well acquired by such Party from the non-participating Party in accordance with the terms of the Operating Agreement) in the drilling of such Initial Well all of its right, title and interest in the applicable Prospect Area as to all depths from the Participants participating surface to two hundred feet (200') below the deepest depth drilled in the drilling of such Initial Well (in the ratio that each participating Party's leasehold working interest in the acreage included within the drilling and/or proration unit for such Initial Well bears to the total of the leasehold working interests of all of the Participants hereto participating in the operation), (ii) shall no longer (as of the date it elects not to participate in the drilling of the Initial Well) be deemed a party to the Operating Agreement for such Prospect Area, and (iiiii) shall not own or acquire any mineral, leasehold, royalty or other interest in oil, gas and/or other minerals within such Prospect Area as to all depths located from the surface to two hundred feet (200') below the deepest depth drilled in such Initial Well for a period of five fifteen (515) years from the effective date of this Agreement. (c) In the event that a Party has participated in the drilling of the Initial Well drilled within a Prospect Area but such Party does not participate in the drilling of any Subsequent Well which is proposed and drilled within such Prospect Area, such Party Party (i) must permanently relinquish and assign (without reimbursement for costs) and assign to the Parties participating (in proportion to the interest in the Subsequent Well acquired by such Party from the non- participating Party in accordance with the terms of the Operating Agreement) in the drilling of such Subsequent Well all of its right, title and interest in the drilling and/or proration unit Drilling/Proration Unit (as such term is defined below in Section 6.1(e)) for such Subsequent Well as to all depths from the Participants participating surface to two hundred feet (200') below the deepest depth drilled in the drilling of such Subsequent Well (in the ratio that each participating Party's leasehold working interest in the acreage included within the drilling and/or proration unit for such Subsequent Well bears to the total of the leasehold working interests of all of the Participants hereto participating in the operation), (ii) shall permanently relinquish (as of the date it elects not to participate in the drilling of such Subsequent Well) all of its rights and interests under the applicable Operating Agreement insofar as it covers the relinquished drilling and/or proration unit, and (iiiii) shall not own or acquire any mineral, leasehold, royalty or other interest in oil, gas and/or other minerals within the drilling and/or proration unit Drilling/Proration Unit for such Subsequent Well well as to all depths from the surface to two hundred feet (200') below the deepest depth drilled in such well for a period of five fifteen (515) years from the effective date of this Agreement. (d) In the event that a Party has participated in the drilling of the Initial Well or any Subsequent Well within a Prospect Area and then elects not to participate in a completion operation proposed for such well, such Party (i) must permanently relinquish and assign (without reimbursement for costs) and assign all of its right, title and interest in the completed formation Completion Interval within the drilling and/or proration unit Drilling/Proration Unit for such well and all to the Parties participating (in proportion to the interest in the completed formation acquired by such Party from the non-participating Party in accordance with the terms of the production which may be obtained from such completed formation within that well to Operating Agreement) in the Participants participating in such completion of such formation (in the ratio that each participating Party's leasehold working interest in the acreage included within the drilling and/or proration unit for such well bears to the total of the leasehold working interests of all of the Participants hereto participating in the operation)Completion Interval, and Geophysical Exploration Agreement Welder Project 12 13 (ii) shall relinquish (as of the date it elects not to participate in the completion operation) all of its rights and interests under the applicable Operating Agreement insofar as it covers the relinquished completed formation within the drilling and/or proration unit for such well, and (iii) shall not own or acquire any mineral, leasehold, royalty or other interest in oil, gas Geophysical Exploration Agreement Southwest Danbury Project 12 13 and/or other minerals located within the completed formation Completion Interval within the drilling and/or proration unit Drilling/Proration Unit for such well for a period of five fifteen (515) years form from the effective date of this Agreement. If a Party has elected to participate in The Parties recognize that the drilling depth of a well and then elects not to participate in a proposed completion operation the Completion Interval may vary within the well, but then subsequently participates Drilling/Proration Unit and it is the Parties' intent that the relinquishment and assignment provisions contained in this Section 6.1(d) shall apply to the completion stratigraphic equivalent of another formation the Completion Interval within the same well, such Party will be obligated to pay for its proportionate share of Drilling/Proration Unit despite the completion operation costs which were previously incurred in completing fact that the other formation in accordance with Completion Interval's depth may vary within the drilling footage ratio method set forth in COPA▇ ▇▇▇letin No. 2 in paragraph B.1(b) for intangible costs and in paragraphs B.1 and B.2 for tangible costsDrilling/Proration Unit. (e) If there For purposes of this Section 6.1, "Drilling/Proration Unit" shall be defined as follows: (1) in the event that a voluntary pooled unit is no formed prior to or after the drilling or proration unit for a completion of the well or if there is no other allocation for spacing or allowable purposes, then to by the extent practicable, an area Parties that are participating in the form well operations that are being conducted at the time that such unit is formed, the "Drilling/Proration Unit shall be made up of the lands included within such voluntary pooled unit, provided that such voluntary pooled unit does not violate the terms and provisions of any Lease or Farm-In which covers any part of the lands that are included in the voluntary pooled unit; (2) in the event that a square within voluntary pooled unit is not formed prior to or after the Prospect Area drilling or completion of the well, (i) if the well is drilled or completed as an oil well, the Drilling/Proration Unit shall be an 80 acre tract with the well being located in within the center thereof tract and the exact configuration of six hundred and forty (640) acres around a gas well and eighty (80) acres around an oil well, shall be deemed to be the drilling or proration unit for such well, in either event with the east and west boundary lines of the 80 acre tract to be determined by the Parties participating in the well operations that are being performed after any non- consent or non-participation elections have been made with respect to such square running operations, and (ii) if the well is drilled or completed as nearly as possible due north a gas well, the Drilling/Proration Unit shall be a 640 acre tract with the well being located within the tract and souththe exact configuration of the boundary lines of the 640 acre tract to be determined by the Parties participating in the well operations that are being performed after any non-consent or non-participation elections have been made with respect to such operations; provided, however, that it in the event that the Drilling/Proration Unit as described in this Section 6.1(e) would violate the terms of any Lease or Farm-In which covers lands which are included in the Drilling/Proration Unit, the Drilling/Proration Unit shall be re-configured by the Parties participating in the well to conform to the terms of the applicable Lease or Farm-In. It is the Participants' intent of the Parties that the relinquishment and assignment of interests provided for in this Section 5.1 6.1 for failure to participate in the drilling of a Subsequent Well or a completion operation apply to all and only all of the leasehold interests, mineral interests and production that are allocated to the relevant well (or completed formation) for production purposes and the Participants Parties hereto agree that in the event that such allocation changes in the future, the Participants Parties shall execute any future or further relinquishment instruments or other documentation that is necessary to effectuate that intent. (f) Any well drilled to replace a well drilled within a Prospect Area because of drilling or mechanical difficulties incurred in the drilling of such well shall be deemed to be the same well for purposes of the relinquishment and assignment provisions of this Section 5.1; provided, however, that only the Participants that participated in the original drilling of the well shall have the right to participate in the drilling of a replacement well for such well. (g) In the event of any required relinquishment and assignment of interests as provided in this Section 5.1, the relinquishing Party shall promptly execute all conveyance instruments necessary to effectuate such relinquishment and assignment.