Common use of Substitute Well Clause in Contracts

Substitute Well. If, prior to reaching the Objective Depth, the Test Well encounters mechanical difficulties, heaving shale, rock salt, excessive saltwater flow, practicably impenetrable formations or other conditions in the hole that would cause a reasonably prudent operator under the same or similar circumstances to discontinue drilling and to abandon the Test Well, El Paso shall have the right, within one hundred twenty (120) days after the rig was released from the last operation on the Test Well, to commence drilling of a substitute well ("Substitute Well") at a mutually agreeable location. A proposal to sidetrack the Test Well around an obstruction in the wellbore will not be considered a Substitute Well but a continuation of the Test Well, unless the targeted bottom hole location of the sidetracked well is more than 200' from the original proposed bottom hole location. Any Substitute Well proposal shall include the estimated costs to drill to the Test Well Objective Depth, and each of the Participants shall have the option, but not the obligation, to participate in such Substitute Well. If a Participant elects to not participate in a Substitute Well, then it will forfeit all rights hereunder but will continue to be obligated for its proportionate share of any and all costs and liabilities incurred in connection with all prior Test Well operations in which it participated. If El Paso elects to drill a Substitute Well, such Substitute Well shall be considered and treated for all purposes hereof as though the same were the Test Well.