Common use of Test Well Clause in Contracts

Test Well. a) As between the parties comprising Farmee, all operations with respect to the Test Well shall be subject to the provisions of the Operating Procedure as amended by the Head Agreement. Damascus shall be appointed initial Operator. If the Farmee elects to drill the Test Well pursuant to clause 4, it shall spud the Test Well at a mutually agreeable location on the Farmout Lands within 90 days of making such election and shall then diligently and continuously drill the Test Well to Contract Depth at its sole cost. In the event surface access to the drill site cannot be reasonably obtained by the required date because of surface conditions, weather conditions, rig availability or regulatory approval, Farmee shall, before the required date, advise Farmor in writing, of the reasons why access cannot be obtained. Farmor shall, thereupon, grant an extension to the commencement date which shall be reasonable under the circumstances. If production of petroleum substances in paying quantities is indicated, Farmee shall equip the Test Well and thereafter use its best efforts to produce and dispose of the said substances. b) Farmee shall be solely responsible for the costs to drill, complete, evaluate, equip and tie in or abandon the Test Well. c) Subject to Article 3.00 of the Farmout & Royalty Procedure, the Farmee will earn the following interests in the Farmout Lands after complying with the provisions of this clause: (i) a 100% Working Interest in the Farmout Lands, subject to the Farmee’s Overriding Royalty reserved in Article 5.00 of the Farmout and Royalty Procedure which overriding royalty shall be convertible to a 45% Working Interest after Payout. d) 50% of the cost of the Seismic Program shall be added to the Payout account for the Test Well.