Drilling Program. A. The Drilling Program shall be conducted as ▇▇▇▇▇▇▇ in its capacity as Operator and shall consist of the drilling, logging, testing and the completing and equipping for production (or if applicable, the plugging and abandonment) of ten (10) ▇▇▇▇▇ upon the subject prospects (the “Program ▇▇▇▇▇”), with such ▇▇▇▇▇ being located at sites selected by ▇▇▇▇▇▇▇ and being drilled to a subsurface depth equal to such depth as is necessary to penetrate prospectively productive sands of the Frio Formation (“Contract Depth”). The total operational and overhead costs for one hundred percent (100%) interest in the 10-Well Drilling Program is U.S. $3,500,000.00 or less. ▇▇▇▇▇▇▇ shall use all reasonable efforts to cause the initial Drilling Program Well to be spudded on or before April 1, 2006, and to thereafter conduct the Drilling Program on a sequential basis in such a manner so that the Drilling Program shall be completed within nine (9) months of the date on which the initial Program Well was spudded. The parties acknowledge delays in drilling may be occasioned by lack of rig availability, weather conditions and, where applicable, flood waters of the Mississippi River. When any such condition exists, the completion date of the Drilling Program may be extended by such period of time as equals the period access to a location or locations was impractical or unduly burdensome. ▇▇▇▇▇▇▇ shall cause each horizon encountered by each Program Well that is potentially capable of producing hydrocarbons in commercial quantities to undergo the following logging and testing program: (i) a dual induction sonic electrical log or its equivalent; and, (ii) side wall core testing of all potentially productive formations. ▇▇▇▇▇▇▇ shall provide Investor with reasonable notice of the conducting of each such logging and testing program in such manner and time as to allow Investor sufficient opportunity to have a representative present during such logging and testing. Based upon the results of the logging and testing, ▇▇▇▇▇▇▇ shall decide whether or not a completion attempt should be conducted as to any one or more of the tested horizons. In the event that ▇▇▇▇▇▇▇ should decide against any completion attempt as to a particular Program Well, then such Program Well shall be immediately plugged and abandoned. In the event that ▇▇▇▇▇▇▇ should decide to conduct one or more completion attempts as to a particular Program Well, then such completion attempt shall be conducted by ▇▇▇▇▇▇▇. B. Prior to the spudding of each Program Well, ▇▇▇▇▇▇▇ shall: (i) hold defensible title to the oil, gas and mineral leasehold estate covering the Prospect; (ii) obtain and deliver to Investor a drill site title opinion, which shall be addressed to ▇▇▇▇▇▇▇, covering the applicable well site acreage and indicating that the title to interests to be acquired by Investor hereunder is of a nature that is customarily relied upon by a reasonable person engaged in activities similar to those contemplated by the Drilling Program; (iii) obtain from the applicable governmental authority all necessary licenses and permits; (iv) use its reasonable efforts to (1) obtain leases covering any mineral estate underlying the applicable well site acreage that is not otherwise subject to a lease held by ▇▇▇▇▇▇▇; provided that such leases, without the prior consent of Investor, shall not provide for more than twenty-five percent (25%) of eight-eighths (8/8) royalty and overriding royalty interest; (2) enter into a drilling contract with a drilling contractor regularly engaged in such business on such terms as ▇▇▇▇▇▇▇ deems to be in the best interest of the Drilling Program. 1. Within forty-eight (48) hours after the execution of this Agreement by Investor, Investor shall cause to be wired to the Truly, ▇▇▇▇▇ & ▇▇▇▇▇▇ Trust Account (the “Escrow Agent”) at the Natchez Main Office of AmSouth Bank the sum of $110,000.00 (U.S. Dollars) to cover costs and expenses of ▇▇▇▇▇▇▇ in managing the Drilling Program, costs previously incurred in obtaining and processing seismic information and ▇▇▇▇▇▇▇’▇ ongoing office overhead expenses. The said $110,000.00 shall be paid to ▇▇▇▇▇▇▇ by the Escrow Agent only after receipt from ▇▇▇▇▇▇▇ certifying the owner or owners of the remaining fifty percent (50%) interest of the Drilling Program, who are unrelated third parties to the Investor, had paid their fifty percent (50%) share, or $550,000.00, of the costs and expenses in managing the Drilling Program, costs previously incurred in obtaining and processing seismic information and ▇▇▇▇▇▇▇’▇ ongoing office overhead expenses. Failure of ▇▇▇▇▇▇▇ to receive from the other unrelated third party owners of fifty percent (50%) of the Drilling Program their contribution to cover said costs and expenses within forty-eight (48) hours of Investor’s payment to the Escrow Agent shall give rise to Investor the right to demand from the Escrow Agent a return of the full escrow payment. The liability of the Escrow Agent shall be limited to the receipt, holding and disbursing of the escrowed funds as set out above. 2. Upon the payments for which provision is made in Paragraph 1 above, Investor shall caused to be wired to ▇▇▇▇▇▇▇ the sum of $240,000.00 (U.S. Dollars), which payment shall be made on or before January 20, 2006. This payment is conditioned upon Investor and ▇▇▇▇▇▇▇ entering into a mutually acceptable Joint Operating Agreement containing provisions customarily found in such Operating Agreements covering Frio ▇▇▇▇▇ in Southwest Mississippi. Failure to agree upon a Joint Operating Agreement by January 20, 2006, shall permit either party to terminate this Drillling Program Agreement, at which time any funds paid by Investor shall be returned to Investor and neither party shall have any further obligation to the other. The remaining $240,000.00 shall be deposited in a separate ▇▇▇▇▇▇▇ bank account appropriately identified as the Investor Drilling Fund. As costs are incurred in drilling, completing, operating and constructing pipelines, ▇▇▇▇▇▇▇ may withdraw from the fund Investor’s proportionate costs of such expenses. Nothing in this Agreement shall be construed as requiring Investor to contribute more than his initial contribution of $350,000.00. Upon the completion of the Drilling Program, any remaining funds in the Investor Drilling Fund shall be refunded to Investor. ▇▇▇▇▇▇▇ shall deliver to Investor on a monthly basis an accounting using generally accepted accounting practices, which accounting shall reflect all withdrawals from the Investor Drilling Fund and the amount remaining in it.
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Drilling Program. A. The Drilling Program shall be conducted as ▇▇▇▇▇▇▇ in its capacity as Operator and shall consist of the drilling, logging, testing and the completing and equipping for production (or if applicable, the plugging and abandonment) of ten (10) ▇▇▇▇▇ upon the subject prospects (the “"Program ▇▇▇▇▇”"), with such ▇▇▇▇▇ being located at sites selected by ▇▇▇▇▇▇▇ and being drilled to a subsurface depth equal to such depth as is necessary to penetrate prospectively productive sands of the Frio Formation (“"Contract Depth”"). The total operational and overhead costs for one hundred percent (100%) % interest in the 10-Well well Drilling Program is U.S. $are US$3,500,000.00 or less. ▇▇▇▇▇▇▇ shall use all reasonable efforts to cause the initial Drilling Program Well to be spudded on or before April 1, 2006, and to thereafter conduct the Drilling Program on a sequential basis in such a manner so that the Drilling Program shall be completed within nine (9) months of the date on which the initial Program Well was spudded. The parties acknowledge delays in drilling may be occasioned by lack of rig availability, weather conditions and, where applicable, flood waters of the Mississippi River. When any such condition exists, the completion date of the Drilling Program may be extended by such period of time as equals the period access to a location or locations was were impractical or unduly burdensome. ▇▇▇▇▇▇▇ shall cause each horizon encountered by each Program Well that is potentially capable of producing hydrocarbons in commercial quantities to undergo the following logging and testing program:
(i) a dual induction sonic electrical log or its equivalent; and,
(ii) side wall core testing of all potentially productive formations. ▇▇▇▇▇▇▇ shall provide Investor with reasonable notice of the conducting of each such logging and testing program in such manner and time as to allow Investor sufficient opportunity to have a representative present during such logging and testing. Based upon the results of the logging and testing, ▇▇▇▇▇▇▇ shall decide whether or not a completion attempt should be conducted as to any one or more of the tested horizons. In the event that ▇▇▇▇▇▇▇ should decide against any completion attempt as to a particular Program Well, then such Program Well shall be immediately plugged and abandoned. In the event that ▇▇▇▇▇▇▇ should decide to conduct one or more completion attempts as to a particular Program Well, then such completion attempt shall be conducted by ▇▇▇▇▇▇▇.
B. Prior to the spudding of each Program Well, ▇▇▇▇▇▇▇ shall:
(i) hold defensible title to the oil, gas and mineral leasehold estate covering the Prospect;
(ii) obtain and deliver to Investor a drill site title opinion, which shall be addressed to ▇▇▇▇▇▇▇, covering the applicable well site acreage and indicating that the title to interests to be acquired by Investor hereunder is of a nature that is customarily relied upon by a reasonable person engaged in activities similar to those contemplated by the Drilling Program;
(iii) obtain from the applicable governmental authority all necessary licenses and permits;
(iv) use its reasonable efforts to (1) obtain leases covering any mineral estate underlying the applicable well site acreage that is not otherwise subject to a lease held by ▇▇▇▇▇▇▇; provided that such leases, without the prior consent of Investor, shall not provide for more than twenty-five percent (25%) of eight-eighths (8/8) royalty and overriding royalty interest; (2) enter into a drilling contract with a drilling contractor regularly engaged in such business on such terms as ▇▇▇▇▇▇▇ deems to be in the best interest of the Drilling Program.
1. Within forty-eight (48) hours after the execution of this Agreement by Investor, Investor shall cause to be wired to the Truly, ▇▇▇▇▇ & ▇▇▇▇▇▇ Trust Account (the “Escrow Agent”) at the Natchez Main Office of AmSouth Bank the sum of $110,000.00 (U.S. Dollars) to cover costs and expenses of ▇▇▇▇▇▇▇ in managing the Drilling Program, costs previously incurred in obtaining and processing seismic information and ▇▇▇▇▇▇▇’▇ ongoing office overhead expenses. The said $110,000.00 shall be paid to ▇▇▇▇▇▇▇ by the Escrow Agent only after receipt from ▇▇▇▇▇▇▇ certifying the owner or owners of the remaining fifty percent (50%) interest of the Drilling Program, who are unrelated third parties to the Investor, had paid their fifty percent (50%) share, or $550,000.00, of the costs and expenses in managing the Drilling Program, costs previously incurred in obtaining and processing seismic information and ▇▇▇▇▇▇▇’▇ ongoing office overhead expenses. Failure of ▇▇▇▇▇▇▇ to receive from the other unrelated third party owners of fifty percent (50%) of the Drilling Program their contribution to cover said costs and expenses within forty-eight (48) hours of Investor’s payment to the Escrow Agent shall give rise to Investor the right to demand from the Escrow Agent a return of the full escrow payment. The liability of the Escrow Agent shall be limited to the receipt, holding and disbursing of the escrowed funds as set out above.
2. Upon the payments for which provision is made in Paragraph 1 above, Investor shall caused to be wired to ▇▇▇▇▇▇▇ the sum of $240,000.00 (U.S. Dollars), which payment shall be made on or before January 20, 2006. This payment is conditioned upon Investor and ▇▇▇▇▇▇▇ entering into a mutually acceptable Joint Operating Agreement containing provisions customarily found in such Operating Agreements covering Frio ▇▇▇▇▇ in Southwest Mississippi. Failure to agree upon a Joint Operating Agreement by January 20, 2006, shall permit either party to terminate this Drillling Program Agreement, at which time any funds paid by Investor shall be returned to Investor and neither party shall have any further obligation to the other. The remaining $240,000.00 shall be deposited in a separate ▇▇▇▇▇▇▇ bank account appropriately identified as the Investor Drilling Fund. As costs are incurred in drilling, completing, operating and constructing pipelines, ▇▇▇▇▇▇▇ may withdraw from the fund Investor’s proportionate costs of such expenses. Nothing in this Agreement shall be construed as requiring Investor to contribute more than his initial contribution of $350,000.00. Upon the completion of the Drilling Program, any remaining funds in the Investor Drilling Fund shall be refunded to Investor. ▇▇▇▇▇▇▇ shall deliver to Investor on a monthly basis an accounting using generally accepted accounting practices, which accounting shall reflect all withdrawals from the Investor Drilling Fund and the amount remaining in it.
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