Common use of DRILLING TO DISCOVERY Clause in Contracts

DRILLING TO DISCOVERY. The unit operator shall, within sixty (60) days after the effective date of this agreement, commence operations upon an adequate test well for oil and gas upon some pan of the lands embraced within the unit area and shall drill said well with due diligence to a depth sufficient to attain the top ofthe „San Andresformation or to such a depth as unitized substances shall be discovered in paying quantities at a lesser depth or until it shall, in the opinion ofunit operator, be determined that the further drilling of said well shall be unwarranted or impracticable; provided, however, that unit operator shall not, in any event, be required to drill said well to a depth in excess of5,700 MD feeL Until a discovery ofa deposit ofunitized substances capable ofbeing produced in paying quantities (to wit: quantities sufficient to repay the costs ofdrilling and producing operations with a reasonable profit) unit operator shall continue drilling diligently, one well at a time, allowing not more than six months between the completion ofone well and the beginning ofthe next well, until a well capable ofproducing unitized substances in paying quantities is completed to the satisfaction of die Commissioner or until it is reasonably proven to the satisfaction ofthe unit operator that the unitized land is incapable ofproducing unitized substances in paying quantities in the formation drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and drilled to the depth provided herein for the drilling ofan initial test well shall be considered as complying with the drilling requirements hereof with respect to the initial welt. The Commissioner may modify the drilUngrequirements of this section by granting reasonable extensions of time when in his opinion such action is warranted. Upon failure to comply with the drilling provisions ofthis article the Commissioner may, after reasonable notice to the unit operator and each working interest owner, xxxxxx and lessor at their last known addresses, declare this unit agreement terminated, and all rights privileges and obligations granted and assumed by this unit agreement shall cease and terminate as of such date.

DRILLING TO DISCOVERY. The unit operator shall, within sixty (60) days 601 davs after the effective date of this the’effective xxxx ofthis agreement, commence operations upon an adequate test well for oil and gas upon some pan of the part ofthe lands embraced within the unit area and shall drill said well with wiih due diligence to a depth sufficient to attain oitain the top ofthe „San Andresformation Son Xxxxxx formation or to such a depth as unitized substances shall be discovered in .. paying quantities at a lesser depth or until it shall, in the opinion ofunit of unit operator, be determined that the further flintier drilling of said well shall shell be unwarranted or impracticable; provided, however, that unit operator shall not, in any event, be required to drill said sold well to a depth in excess of5,700 MD feeL of 5,644 feet orthe base ofthe San Xxxxxx formation, whichever is lesser. Until a discovery ofa deposit ofunitized substances capable ofbeing produced in paying quantities (to wit: quantities sufficient to repay the costs ofdrilling of drilling and producing operations with a reasonable profit) unit operator shall continue drilling diligently, one well at a timelime, allowing not more than six months between the completion ofone well and the beginning ofthe next well, ,' until a well capable ofproducing of producing unitized substances in paying quantities is completed to the satisfaction of die the Commissioner or until it is reasonably proven to the satisfaction ofthe unit operator that the unitized land is incapable ofproducing unitized substances in paying quantities in • the formation drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and end drilled to the depth provided herein . for the drilling ofan of an initial test well shall be considered as complying with the drilling requirements hereof with respect to the initial weltwell. The / Commissioner may modify the drilUngrequirements drilling requirements of this section by granting reasonable extensions of time when in his opinion such action is . warranted. Upon failure to comply with the drilling provisions ofthis article the (he Commissioner may, after reasonable notice to the unit operator and each working interest owner, xxxxxx lessee and lessor at their last known addresses, declare this unit agreement terminated, and all rights privileges and obligations granted and assumed by this unit agreement shall cease and terminate as of such ofsuch date.

DRILLING TO DISCOVERY. The unit operator shall, within sixty Within six (606) days after months afler the effective date of this agreementhereof, the Unit Operator shall commence operations upon to drill an adequate test well for oil at a location approved by the AO and gas upon some pan the Land Commissioner, unless on such effective date a well is being drilled in conformity with the terms hereof, and thereafter continue such drilling diligently until the Gallup portion of the lands embraced within the unit area and shall drill said well with due diligence to a depth sufficient to attain the top ofthe „San Andresformation or to such a depth as unitized substances shall Mancos Formation has been tested which can be discovered produced in paying quantities (to-wit: quantities sufilcicnt to repay the costs of drilling, completing, and producing operations, with a reasonable profit) or the Unit Operator shall at a lesser depth or until it shallany time establish to the satisfaction ofthe AO and the Land Commissioner, in the opinion ofunit operator, be determined that the further drilling of said well shall would be unwarranted or impracticable; , provided, however, that unit operator Unit Operator shall not, not in any event, event be required to drill said well to a depth lateral wellbore to a length in excess of5,700 MD feeL of 1,500 feet. Until a the discovery ofa deposit ofunitized of unitized substances capable ofbeing of being produced in paying quantities (to wit: quantities sufficient to repay quantities, the costs ofdrilling and producing operations with a reasonable profit) unit operator Unit Operator shall continue drilling diligently, one well at a time, allowing not more than six months one (l) year between the completion ofone of one well and the beginning ofthe commencement of drilling operations for the next well, until a well capable ofproducing of producing unitized substances in paying quantities is completed to the satisfaction of die the AO and the Land Commissioner or until it is reasonably proven to the satisfaction ofthe unit operator proved that the unitized land is incapable ofproducing of producing unitized substances in paying quantities in the formation formations drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and drilled to the depth provided herein for the drilling ofan initial test well Nothing in this section shall be considered deemed to limit the right of the Unit Operator to resign as complying provided in Section 5 hereof, or as requiring Unit Operator to commence or continue any drilling during the period pending such resignation becoming effective in order to comply with the drilling requirements hereof with respect to the initial weltofthis section. The AO and the land Commissioner may modify the drilUngrequirements of this any ofthe drilling requirements ofthis section by granting reasonable extensions of time when when, in his opinion their opinion, such action is warranted. Upon failure to comply with commence any well as provided for in this section within the time allowed including any extension of time granted by the AO and the Land Commissioner, this agreement will automatically terminate. Upon failure to continue drilling provisions ofthis article diligently any well commenced hereunder, the AO and the Land Commissioner may, after reasonable fifteen (15) days notice to the unit operator and each working interest owner, xxxxxx and lessor at their last known addressesUnit Operator, declare this unit agreement terminated. Ihe parties to this agreement may not initiate a request to voluntarily terminate this agreement during the first six (6) months of its term unless at least one obligation well has been drilled in accordance with the provisions of this section. The failure to commence a well subsequent to the drilling of the initial obligation well, or in the case of multiple well requirements, if specified, subsequent to the drilling of those multiple xxxxx, as provided for in this (these) section(s). within the time allowed including any extension of time granted by the AO and all rights privileges the Land Commissioner, shall cause this agreement to terminate automatically. Upon failure to continue drilling diligently any well other than the obligation well(s) commenced hereunder, the AO and obligations granted and assumed by the Land Commissioner may, after 15 days notice to the Unit Operator, declare this unit agreement terminated. Failure to commence drilling the initial obligation well, or the first of multiple obligation xxxxx, on time and to drill it diligently shall cease result in the unit agreement approval being declared invalid ab initio by the AO and terminate as the I.and Commissioner. In the case of such datemultiple well requirements, failure to commence drilling the required multiple xxxxx beyond the first well, and to drill them diligently, may result in the unit agreement approval being declared invalid ab initio by the AO and the Land Commissioner.

DRILLING TO DISCOVERY. The unit operator shall, within sixty (60) days after the effective date of this agreement, commence operations upon an adequate test well for oil and gas upon some pan of the lands embraced within the unit area and shall drill said well with due diligence to a depth sufficient to attain the top ofthe „San Andresformation or to such a depth as unitized substances shall be discovered in paying quantities at a lesser depth or until it shall, in the opinion ofunit operator, be determined that the further drilling of said well shall be unwarranted or impracticable; provided, however, that unit operator shall not, in any event, be required to drill said well to a depth in excess of5,700 MD feeL Until a discovery ofa deposit ofunitized substances capable ofbeing produced in paying quantities (to wit: quantities sufficient to repay the costs ofdrilling and producing operations with a reasonable profit) unit operator shall continue drilling diligently, one well at a time, allowing not more than six months between the completion ofone well and the beginning ofthe next well, until a well capable ofproducing unitized substances in paying quantities is completed to the satisfaction of die Commissioner or until it is reasonably proven to the satisfaction ofthe unit operator that the unitized land is incapable ofproducing unitized substances in paying quantities in the formation drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and drilled to the depth provided herein for the drilling ofan initial test well shall be considered as complying with the drilling requirements hereof with respect to the initial welt. The Commissioner may modify the drilUngrequirements of this section by granting reasonable extensions of time when in his opinion such action is warranted. Upon failure to comply with the drilling provisions ofthis article the Commissioner may, after reasonable notice to the unit operator and each working interest owner, xxxxxx lessee and lessor at their last known addresses, declare this unit agreement terminated, and all rights privileges and obligations granted and assumed by this unit agreement shall cease and terminate as of such date.

DRILLING TO DISCOVERY. The unit operator shall, within sixty (60) days after the effective date of this agreement, commence operations upon an adequate test well for oil and gas upon some pan of the part ofthe lands embraced within the unit area and shall drill said well with due diligence to a depth sufficient to attain the top ofthe „San Andresformation Pennsylvanian Shal6/Wolfcamp *0*formation or to such a depth as unitized substances shall be discovered in paying quantities at a lesser depth or until it shall, in the opinion ofunit of unit operator, be determined that the further drilling of said well shall be unwarranted or impracticable; provided, however, that unit operator shall not, in any event, be required to drill said well to a depth in excess of5,700 MD feeL of11,800feet. Until a discovery ofa of a deposit ofunitized of unitized substances capable ofbeing of being produced in paying quantities (to wit: quantities sufficient to repay the costs ofdrilling of drilling and producing operations with a reasonable profit) unit operator shall continue drilling diligently, one well at a time, allowing not more than six months between the completion ofone well and the beginning ofthe next well, until a well capable ofproducing unitized substances in paying quantities is completed to the satisfaction of die the Commissioner or until it is reasonably proven to the satisfaction ofthe unit operator that the unitized land is incapable ofproducing unitized substances in paying quantities in the formation drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and drilled to the depth provided herein for the drilling ofan of an initial test well shall be considered as complying with the drilling requirements hereof with respect to the initial weltwell. The Commissioner may modify the drilUngrequirements drilling requirements of this section by granting reasonable extensions of time oftime when in his opinion such action is warranted. Upon failure to comply with the drilling provisions ofthis article the Commissioner may, after reasonable notice to the unit operator and each working interest owner, xxxxxx and lessor at their last known addresses, declare this unit agreement terminated, and all rights privileges and obligations granted and assumed by this unit agreement shall cease and terminate as of such date.

DRILLING TO DISCOVERY. The unit operator shall, within sixty (60) days after the effective date of this agreement, commence operations upon an adequate test well for oil and gas upon some pan of the part ofthe lands embraced within the unit area and shall drill said well with due diligence to a depth sufficient to attain the top ofthe „San Andresformation Pennsylvanian Shal6/Wolfcamp *0*formation or to such a depth as unitized substances shall be discovered in paying quantities at a lesser depth or until it shall, in the opinion ofunit of unit operator, be determined that the further drilling of said well shall be unwarranted or impracticable; provided, however, that unit operator shall not, in any event, be required to drill said well to a depth in excess of5,700 MD feeL of11,800feet. Until a discovery ofa of a deposit ofunitized of unitized substances capable ofbeing of being produced in paying quantities (to wit: quantities sufficient to repay the costs ofdrilling of drilling and producing operations with a reasonable profit) unit operator shall continue drilling diligently, one well at a time, allowing not more than six months between the completion ofone well and the beginning ofthe next well, until a well capable ofproducing unitized substances in paying quantities is completed to the satisfaction of die the Commissioner or until it is reasonably proven to the satisfaction ofthe unit operator that the unitized land is incapable ofproducing unitized substances in paying quantities in the formation drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and drilled to the depth provided herein for the drilling ofan of an initial test well shall be considered as complying with the drilling requirements hereof with respect to the initial weltwell. The Commissioner may modify the drilUngrequirements drilling requirements of this section by granting reasonable extensions of time oftime when in his opinion such action is warranted. Upon failure to comply with the drilling provisions ofthis article the Commissioner may, after reasonable notice to the unit operator and each working interest owner, xxxxxx lessee and lessor at their last known addresses, declare this unit agreement terminated, and all rights privileges and obligations granted and assumed by this unit agreement shall cease and terminate as of such date.

DRILLING TO DISCOVERY. The unit operator shall, within sixty (60) days after the effective date of this agreement, commence operations upon an adequate test well for oil and gas upon some pan part of the lands embraced within the unit area and shall drill said well with due diligence to a depth sufficient to attain the top ofthe „San Andresformation of the formation or to such a depth as unitized substances shall be discovered in paying quantities at a lesser depth or until it shall, in the opinion ofunit of unit operator, be determined that the further drilling of said well shall be unwarranted or impracticable; provided, however, that unit operator shall not, in any event, be required to drill said well to a depth in excess of5,700 MD feeL of feet. Until a discovery ofa of a deposit ofunitized of unitized substances capable ofbeing of being produced in paying quantities (to wit: quantities sufficient to repay the costs ofdrilling of drilling and producing operations with a reasonable profit) unit operator shall continue drilling diligently, one well at a time, allowing not more than six months between the completion ofone of one well and the beginning ofthe of the next well, until a well capable ofproducing of producing unitized substances in paying quantities is completed to the satisfaction of die the Commissioner or until it is reasonably proven to the satisfaction ofthe of the unit operator that the unitized land is incapable ofproducing of producing unitized substances in paying quantities in the formation drilled hereunder. Any well commenced prior to the effective date ofthis of this agreement upon the unit area and drilled to the depth provided herein for the drilling ofan of an initial test well shall be considered as complying with the drilling requirements hereof with respect to the initial weltwell. The Commissioner may modify the drilUngrequirements drilling requirements of this section by granting reasonable extensions of time when in his opinion such action is warranted. Upon failure to comply with the drilling provisions ofthis of this article the Commissioner may, after reasonable notice to the unit operator and each working interest owner, xxxxxx lessee and lessor at their last known addresses, declare this unit agreement terminated, and all rights privileges and obligations granted and assumed by this unit agreement shall cease and terminate as of such date.

DRILLING TO DISCOVERY. The unit operator shall, within sixty Within six (606) days months after the effective date of this agreementhereof, the Unit Operator shall commence operations upon to drill an adequate test well for oil at a location approved by the AO, ifon Federal or Indian land, or by the Land Commissioner, ifon State land, and gas upon some pan of by the lands embraced within Division if on Fee land, unless on such effective date a well is being drilled in conformity with the unit area terms hereof, and shall drill said well with due diligence to thereafter continue such drilling diligently until a 500 foot horizontal lateral in the Fruitland Fomiation has been tested or until at a lesser depth sufficient to attain the top ofthe „San Andresformation or to such a depth as unitized substances shall be discovered which can be produced in paying quantities (to-wit: quantities sufficient to repay the costs of drilling, completing, and producing operations, with a reasonable profit) or the Unit Operator shall at a lesser depth any time establish to the satisfaction of the AO if on Federal or until it shallIndian land, in or the opinion ofunit operatorLand Commissioner if on State land, be determined or the Division if located on Fee land, that the further drilling of said well shall would be unwarranted or impracticable; , provided, however, that unit operator Unit Operator shall not, not in any event, event be required to drill said well to a depth in excess of5,700 MD feeL of 1,200 feet. Until a the discovery ofa deposit ofunitized of unitized substances capable ofbeing of being produced in paying quantities (to wit: quantities sufficient to repay quantities, the costs ofdrilling and producing operations with a reasonable profit) unit operator Unit Operator shall continue drilling diligently, one well at a time, allowing not more than six (6) months between the completion ofone of one well and the beginning ofthe commencement of drilling operations for the next well, until a well capable ofproducing of producing unitized substances in paying quantities is completed to the satisfaction of die the AO if it be on Federal or Indian trust land or of the Land Commissioner if on State land, or the Division if on Fee land, or until it is reasonably proven to the satisfaction ofthe unit operator proved that the unitized land is incapable ofproducing of producing unitized substances in paying quantities in the formation formations drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and drilled to the depth provided herein for the drilling ofan initial test well Nothing in this section shall be considered deemed to limit the right ofthe Unit Operator to resign as complying provided in Section 5 hereof, or as requiring Unit Operator to commence or continue any drilling during the period pending such resignation becoming effective in order to comply with the requirements of this section. The AO and Land Commissioner may modify any of the drilling requirements hereof with respect to the initial welt. The Commissioner may modify the drilUngrequirements of this section by granting reasonable extensions of time when when, in his opinion their opinion, such action is warranted. Upon failure to comply with commence any well as provided for in this section within the time allowed, prior to the establishment of a participating area, including any extension of time granted by the AO and the Land Commissioner, this agreement will automatically terminate. Upon failure to continue drilling provisions ofthis article diligently any well commenced hereunder, the AO and the Land Commissioner may, after reasonable fifteen (15) days notice to the unit operator and each working interest owner, xxxxxx and lessor at their last known addressesUnit Operator, declare this unit agreement terminated. The parties to this agreement may not initiate a request to voluntarily terminate this agreement during the first six (6) months of its term unless at least one obligation well has been drilled in accordance with the provisions ofthis section. Until the establishment of a participating area, the failure to commence a well subsequent to the drilling of the initial obligation well, or in the case of multiple well requirements, if specified, subsequent to the drilling of those multiple xxxxx, as provided for in this (these) section(s), within the time allowed including any extension of time granted by the AO and all rights privileges Land Commissioner, shall cause this agreement to terminate automatically. Upon failure to continue drilling diligently any well other than the obligation well(s) commenced hereunder, the AO and obligations granted and assumed by Land Commissioner may, after 15 days notice to the Unit Operator, declare this unit agreement terminated. Failure to commence drilling the initial obligation well, or the first of multiple obligation xxxxx, on time and to drill it diligently shall cease result in the unit agreement approval being declared invalid ab initio by the AO and terminate as Land Commissioner. In the case of such datemultiple well requirements, failure to commence drilling the required multiple xxxxx beyond the first well, and to drill them diligently, may result in the unit agreement approval being declared invalid ab-initio by the AO and Land Commissioner. After completion of a well capable of producing unitized substances in paying quantities, the Unit Operator shall continue drilling one well at a time, allowing not more than one (1) year between the completion of one well and the commencement of drilling operations for the next well, until the Unit is fully developed to the satisfaction ofthe AO ifon Federal or Indian trust land or the Land Commissioner if on State land.

DRILLING TO DISCOVERY. The unit operator shall, within sixty (60) days after the effective date For die purposes of this agreementUnit Agreement, commence operations upon an adequate test well for oil and gas upon some pan of the lands embraced within the unit area and shall drill said Encana Escrlto X00 0000 01H well with due diligence to a depth sufficient to attain the top ofthe „San Andresformation or to such surface location in theNW4NW4 of Section 30. Township 24 North, Range 8 West. N.M.P.M., aud a depth as unitized substances shall be discovered in paying quantities at a lesser depth or until it shall, 5.741 foot horizontal lateral in the opinion ofunit operator, be determined that the further drilling Mancos Shale Group located in ALL of said Section 30, which Unit Operator commenced on August 2. 2013 and completed on September 27,2013. shall herebybe approved by the AO. FIMO, the Land Commissioner and the Division as the obligation well necessary to validate this Unit Agreement (Initial Well). Within six (6) months after final approval of this Unit Agreement, the Uuit Operator shall submit a paying well detennination report for the Initial Well to die AO to detennine ifthe Initial Well can be unwarranted or impracticable; provided, however, that unit operator shall not, in any event, be required to drill said well to a depth in excess of5,700 MD feeL Until a discovery ofa deposit ofunitized substances capable ofbeing produced in paying quantities (to to-wit: quantities sufficient to repay the costs ofdrilling ofdrilliug, completing, and producing operations operations, with a reasonable profit) unit operator ). If the Initial Well is not capable ofproducing in paying quantities, then. Unit Operator shall continue drilling diligently, one well at a time, allowing not more than six months between diau one (1) yearbetween the completion ofone well and die commencement ofdrilling operations for the beginning ofthe next wellwell * the Cist ofwhich shall commence within one (1) year from non-paying detennination by AO of the Initial Well, until a well capable ofproducing of producing unitized substances in paying quantities is completed to the satisfaction of die the AO, ifou Federal or Indiau trust land, or the Land Commissioner if on State land or until it is reasonably proven to the satisfaction ofthe unit operator that proved (hat the unitized land is incapable ofproducing unitized substances in paying quantities in the formation formations drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and drilled to the depth provided herein for the drilling ofan initial test well Nothing in this section shall be considered deemed to limit the right of the Unit Operator to resign as complying provided in Section 5 hereof, or as requiring Unit Operator to commence or continue any drilling during the period pending such resignation becoming effective in order to comply with the requirements of this section. The AO and the Land Commissioner may modify any of the drilling requirements hereof with respect to the initial welt. The Commissioner may modify the drilUngrequirements of this tliis section by granting reasonable extensions of time when when, in his opinion their opinion, such action is warranted. Upou failure to commeuce any well as provided for in this section witltin the time allowed including any extension oftime granted by the AO and the Land Commissioner, this agreement will automaticallyterminate. Upou failure to continue drilling diligently any well commenced hereunder, the AO and the Land Commissioner may. after fifteen (15) days notice to the Unit Operator, declare tliis unit agreement terminated. The parties to this agreement may not initiate a request to voluntarily terminate this agreement during the first six (6) months of its term unless at least one obligation well has been drilled in accordance with the provisions of this section. The failure to commence a well subsequent to the drilling of the initial obligation well, or til the case of multiple well requiremeuls, if specified, subsequent to the drilling of those multiple xxxxx, as provided for in this (these) sections), within the time allowed including any extension of lime granted by the AO and the Land Commissioner, shall cause tins agreement to terminate automatically. Upon failure to comply with continue drilling diligently any well other than the drilling provisions ofthis article obligation well(s) commenced hereunder, the AO and the Land Commissioner may, after reasonable 15 days notice to the unit operator and each working interest owner, xxxxxx and lessor at their last known addressesUnit Operator, declare this unit agreement terminated. Failure to commence chilling the initial obligation well, or the first of multiple obligation xxxxx, ou time and to dnll it diligently sltall result in the unit agreement approval being declared invalid ab initio by the AO and die Land Commissioner. In the case ofmultiple well requirements, failure to commeuce drilling the requited multiple xxxxx beyond the first well, and all rights privileges and obligations granted and assumed by this to drill them diligently, may result iu the unit agreement shall cease approval being declared invalid ab initio by the AO. and terminate as of such datethe Land Commissioner.

DRILLING TO DISCOVERY. The unit operator shall, within sixty (60) days after the effective date of this agreement, commence operations upon an adequate test well for oil and gas upon some pan of the part ofthe lands embraced within the unit area and shall drill said well with due diligence to a depth sufficient to attain the top ofthe „San Andresformation of the Pennsylvanian Shale/Wolfcamp "D” formation or to such a depth as unitized substances shall be discovered in paying quantities at a lesser depth or until it shall, in the opinion ofunit of unit operator, be determined that the further drilling of said well shall be unwarranted or impracticable; provided, however, that unit operator shall not, . in any event, be required to drill said well to a depth in excess of5,700 MD feeL of 11,950feet. Until a discovery ofa deposit ofunitized of unitized substances capable ofbeing of being produced in paying quantities (to wit: quantities sufficient to repay the costs ofdrilling and producing operations with a reasonable profit) unit operator shall continue drilling diligently, one well at a time, allowing not more than six months between the completion ofone of one well and the beginning ofthe of the next well, until a well capable ofproducing of producing unitized substances in paying quantities is completed to the satisfaction of die the Commissioner or until it is reasonably proven to the satisfaction ofthe unit operator that the unitized land is incapable ofproducing unitized substances in paying quantities in the formation drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and drilled to the depth provided herein for the drilling ofan initial test well shall be considered as complying with the drilling requirements hereof with respect to the initial weltwell. The Commissioner may modify the drilUngrequirements drilling requirements of this section by granting reasonable extensions of time when in his opinion such action is warranted. Upon failure to comply with the drilling provisions ofthis of this article the Commissioner may, . after reasonable notice to the unit operator and each working interest owner, xxxxxx and lessor at their last known addresses, declare this unit agreement terminated, and all rights privileges and obligations granted and assumed by this unit agreement shall cease and terminate as of such date.

DRILLING TO DISCOVERY. The unit operator shall, within sixty (60) days after For the effective date purposes of this agreementUnit Agreement, commence operations upon an adequate test well for oil and gas upon some pan of the lands embraced within the unit area and shall drill said Encana Escrito D30 2408 01H well with due diligence to a depth sufficient to attain the top ofthe „San Andresformation or to such a depth as unitized substances shall be discovered in paying quantities at a lesser depth or until it shall, surface location in the opinion ofunit operatorNW4NW4 of Section 30, be determined that Township 24 North, Range 8 West, N.M.P.M., and a 5,74! foot horizontal lateral in the further drilling Mancos Shale Group located in ALL of said Section 30, which Unit Operator commenced on August 2, 2013 and completed on September 27, 2013, shall hereby be approved by the AO, FIMO, the Land Commissioner and the Division as the obligation well necessary to validate this Unit Agreement (Initial Well). Within six (6) months after final approval of this Unit Agreement, the Unit Operator shall submit a paying well determination report for the Initial Well to the AO to determine if the Initial Well can be unwarranted or impracticable; provided, however, that unit operator shall not, in any event, be required to drill said well to a depth in excess of5,700 MD feeL Until a discovery ofa deposit ofunitized substances capable ofbeing produced in paying quantities (to to-wit: quantities sufficient to repay the costs ofdrilling of drilling, completing, and producing operations operations, with a reasonable profit) unit operator ). If the Initial Well is not capable of producing in paying quantities, then, Unit Operator shall continue drilling diligently, one well at a time, allowing not more than six months one (1) year between the completion ofone of one well and the beginning ofthe commencement of drilling operations for the next well, the first of which shall commence within one (I) year from non-paying determination by AO of the Initial Weil, until a well capable ofproducing of producing unitized substances in paying quantities is completed to the satisfaction of die the AO, if on Federal or Indian trust land, or the Land Commissioner if on State land or until it is reasonably proven to the satisfaction ofthe unit operator proved that the unitized land is incapable ofproducing of producing unitized substances in paying quantities in the formation formations drilled hereunder. Any well commenced prior to the effective date ofthis agreement upon the unit area and drilled to the depth provided herein for the drilling ofan initial test well Nothing in this section shall be considered deemed to limit the right of the Unit Operator to resign as complying provided in Section 5 hereof, or as requiring Unit Operator to commence or continue any drilling during the period pending such resignation becoming effective in order to comply with the requirements of this section. The AO and the Land Commissioner may modify any of the drilling requirements hereof with respect to the initial welt. The Commissioner may modify the drilUngrequirements of or this section by granting reasonable extensions of time when when, in his opinion their opinion, such action is warranted. Upon failure to comply with commence any well as provided for in this section within the time allowed including any extension of time granted by the AO and the Land Commissioner, this agreement will automatically terminate. Upon failure to continue drilling provisions ofthis article diligently any well commenced hereunder, the AO and the Land Commissioner may, after reasonable fifteen (15) days notice to the unit operator and each working interest owner, xxxxxx and lessor at their last known addressesUnit Operator, declare this unit agreement terminated. The parties to this agreement may not initiate a request to voluntarily terminate this agreement during the first six (6) months of its term unless at least one obligation well has been drilled in accordance with the provisions of this section. The failure to commence a well subsequent to the drilling of the initial obligation well, or in the case of multiple well requirements, if specified, subsequent to the drilling of those multiple xxxxx, as provided for in this (these) section(s), within the time allowed including any extension of lime granted by the AO and all rights privileges the Land Commissioner, shall cause this agreement to terminate automatically. Upon failure to continue drilling diligently any well other than the obligation well(s) commenced hereunder, the AO and obligations granted and assumed by the Land Commissioner may, after 15 days notice to the Unit Operator, declare this unit agreement terminated. Failure to commence drilling the initial obligation well, or the first of multiple obligation xxxxx, on time and to drill it diligently shall cease result in the unit agreement approval being declared invalid ab initio by the AO and terminate as the Land Commissioner. In the case of such datemultiple well requirements, failure to commence drilling the required multiple xxxxx beyond the first well, and to drill them diligently, may result in the unit agreement approval being declared invalid ab initio by the AO. and the Land Commissioner.