Common use of Well Completion Clause in Contracts

Well Completion. Notwithstanding anything contained herein or in any documents executed in connection herewith, it is the intent of Seller and Buyer that within the three year period following the Closing, Buyer shall (a) conduct and pay for all seismic work necessary to evaluate, in Buyer’s absolute discretion, the optimal drilling locations for the development of oil and gas on the C▇▇▇▇▇ Lease and the C▇▇▇ Lease with D▇▇▇▇▇ Seismic, Midland, Texas, or another seismic company mutually agreeable to the Parties; (ii) drill and complete (1) at least four (4) w▇▇▇▇ carried to the pipeline described below and (2) at least four (4) w▇▇▇▇ carried to the casing point (collectively, the “E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇”) on the portion of the Land subject to the C▇▇▇▇▇ Lease penetrating to the E▇▇▇▇▇▇▇▇▇▇ Group or stratigraphic equivalent to the E▇▇▇▇▇▇▇▇▇▇ interval as defined in the Conoco W▇▇▇▇ ▇▇▇▇▇▇ No. 1 (API#4▇-▇▇▇-▇▇▇▇▇; sec. 10 of the E. JH. H▇▇▇▇▇ Survey, Val Verde County, Texas), the top of the E▇▇▇▇▇▇▇▇▇▇ interval being defined as 14,003 measured depth and the Parties agree that the maximum depth shall be 16,000 feet, and (iii) with respect to the w▇▇▇▇ carried to the pipeline, construct all pipelines and related equipment and facilities necessary to connect such w▇▇▇▇ to the Cross Tex Processing Plant (collectively, the “Required Post-Closing Work”). Buyer shall drill the E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇ that will be carried to the pipelines before the E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇ that will be carried to the casing point, and all E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇ shall be drilled with air and not mud, unless the Parties mutually agree that drilling with mud is not feasible. Buyer further agrees to consult with W▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to the extent he is agreeable to do so with regard to the location of the E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇ and all shallower w▇▇▇▇ drilled before the E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇ are completed. The Parties agree that, while Buyer values M▇. ▇▇▇▇▇▇’ consultation and believes that it will instructive, the Buyer has no obligation to accept his recommendations or advice. The Parties agree to enter into a mutually agreeable Joint Operating Agreement appointing Buyer or its designee as operator (the “Joint Operating Agreement”) with regard to the operation of the Leases. Buyer shall pay 100% of the cost of the Required Post-Closing Work and shall have a 75% Net Revenue Interest in such w▇▇▇▇ which shall be split 87% to Buyer and 13% to Seller. Buyer acknowledges that the initiation and completion of the Post-Closing Work is a material inducement to Seller to enter into this Agreement and that Seller would not have entered into this Agreement, but for such commitment. Consequently, if Buyer shall fail to commence drilling at least one well to the S▇▇▇▇▇ Carbonate formation at 13,500 feet or an E▇▇▇▇▇▇▇▇▇▇ Well within eighteen (18) months following the Closing, Buyer agrees that Seller may, at its option, require Buyer to re-assign and convey the Assets to Seller, except for w▇▇▇▇ and infrastructure actually drilled and constructed and those being drilled at such time by Buyer and the leasehold interests under the Leases for the portion of the Lands which have been allocated to such w▇▇▇▇ drilled by Buyer. Buyer shall have no obligation to drill any further w▇▇▇▇ not included within the Required Post-Closing Work, but to the extent Buyer does drill additional w▇▇▇▇ on the Lands, (a) for any w▇▇▇▇ drilled before the completion of the eight (8) E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇, Seller shall have a 13% carried interest whereby Seller shall receive 13% of the Net Revenue Interest owned by Buyer in such w▇▇▇▇, but bear none of the cost thereof, and (b) for any w▇▇▇▇ drilled after the completion of the eight (8) E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇, Seller shall have a participating 13% working interest in such w▇▇▇▇ whereby Seller shall be responsible for 13% of the costs and shall receive 13% of the 75% Net Revenue Interest owned by Buyer in such w▇▇▇▇. In the event Seller elects not to participate in the drilling of subsequent w▇▇▇▇, Seller shall be deemed to have a “non-consent” status and shall retain a 13% post-completion working interest in the well after Buyer has received a 300% return on its investment in such well. Buyer shall also have a right of first refusal to acquire the 13% working interest of Seller for the purposes of obtaining an undivided 100% working interest in each such well. Prior to commencement of any well drilled under the Leases, Seller and Buyer shall negotiate, execute and record all documentation reasonably requested by Seller to evidence the net revenue interests and overriding royalty interests to be retained by Seller or the affiliates of Seller hereunder.

Well Completion. “Notwithstanding anything contained herein herein, or in any documents document executed in connection herewith, it is the intent of Seller and Buyer that within the three (3) year period following the Closingclosing, Buyer shall will (a) conduct and pay for all seismic work necessary to evaluate, in Buyer’s absolute sole discretion, the optimal drilling locations for the development of oil and gas on the C▇▇▇▇▇▇ Lease and the C▇▇▇▇ Lease with DLease; (b) drill and complete (if formations encountered during drilling indicate that oil or gas may be found in sufficient quantities that a reasonably prudent operator would make a completion attempt) on the lands covered by the ▇▇▇▇▇▇ SeismicLease, Midland, Texas, or another seismic company mutually agreeable to the Parties; (ii) drill and complete (1) at least four (4) w▇▇▇▇ carried to the pipeline described below and (2) at least four (4) w▇▇▇▇ carried to the casing point (collectively, the “E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇”▇, and at least four (4) on the portion of the Land subject to the Cadditional ▇▇▇▇▇ Lease penetrating drilled to the E▇▇▇▇▇▇▇▇▇▇▇, or at Buyer’s option, to depths shallower than the ▇▇▇▇▇▇▇▇▇▇▇ Group or depth (but in no event shallower than the depth necessary to penetrate the ▇▇▇▇▇▇ formation).For purposes hereof, the ▇▇▇▇▇▇▇▇▇▇▇ depth is defined as the stratigraphic equivalent to of the E▇▇▇▇▇▇▇▇▇▇▇ interval as defined in the Conoco W▇▇▇▇▇▇ ▇▇▇▇▇▇ No. 1 No.1 (API#4▇API # 42-▇▇▇465-▇▇▇▇▇; sec. 30385) located in Section 10 of the E. JH. H▇▇▇▇▇▇ Survey, Val Verde County, Texas), the top of said interval being defined at 14,003 subsurface. Buyer and Seller agree that the Emaximum depth proposed for any ▇▇▇▇▇▇▇▇▇▇▇ interval being defined as 14,003 measured depth and well will not exceed 16,000 feet subsurface unless otherwise agreed by the Parties agree parties. Buyer agrees that the maximum depth shall be 16,000 feet, and (iii) with respect to the w▇▇▇▇ carried to the pipeline, construct all pipelines and related equipment and facilities necessary to connect such w▇▇▇▇ to the Cross Tex Processing Plant (collectively, the “Required Post-Closing Work”). Buyer shall drill the E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇ that will be carried to the pipelines before the E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇ that will be carried to the casing point, and all E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇ shall be drilled with air and not mud, unless the Parties parties mutually agree that drilling with mud air is not feasible. Buyer further agrees to consult with W▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to the extent he is agreeable to do so with regard to the location of the E▇▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇▇ and all shallower w▇▇▇▇▇ drilled before on the E▇▇▇▇▇▇ Lease lands. The parties agree that while Buyer values ▇▇. ▇▇▇▇▇▇’▇ consultation, and anticipates that it will be instructive, Buyer has no obligation to follow or accept his advice. Buyer and Seller agree that the ▇▇▇▇▇ anticipated by this agreement shall be grouped or classified into two (2) phases, with the first four (4) ▇▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇ are completed. The Parties agree that, while Buyer values M▇. ▇▇▇▇▇▇’ consultation and believes that it will instructive, the Buyer has no obligation to accept his recommendations or advice. The Parties agree to enter into a mutually agreeable Joint Operating Agreement appointing Buyer or its designee as operator (the “Joint Operating Agreement”) with regard to the operation of the Leases. Buyer shall pay 100% of the cost of the Required Post-Closing Work and shall have a 75% Net Revenue Interest in such w▇▇▇▇ which shall be split 87% to Buyer and 13% to Seller. Buyer acknowledges that the initiation and completion of the Post-Closing Work is a material inducement to Seller to enter into this Agreement and that Seller would not have entered into this Agreement, but for such commitment. Consequently, if Buyer shall fail to commence drilling at least one well to the S▇▇▇▇▇ Carbonate formation at 13,500 feet or an Ebeing referred to as the “Initial ▇▇▇▇▇▇▇▇▇▇▇ Well within eighteen ▇▇▇▇▇”, and the second group of four (184) months following the Closing, Buyer agrees that Seller may, at its option, require Buyer to re-assign and convey the Assets to Seller, except for w▇▇▇▇▇ and infrastructure actually drilled and constructed and those being drilled at such time by Buyer and hereinafter referred to as the leasehold interests under the Leases for the portion of the Lands which have been allocated to such w“▇▇▇▇ drilled by Buyer. Buyer shall have no obligation to drill any further w▇▇▇▇ not included within the Required Post-Closing Work, but to the extent Buyer does drill additional w▇▇▇▇ on the Lands, (a) for any w▇▇▇▇ drilled before the completion of the eight (8) E▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇, Seller shall have a 13% carried interest whereby Seller shall receive 13% of the Net Revenue Interest owned by Buyer in such w▇▇▇▇, but bear none of the cost thereof, and (b) for any w▇▇▇▇ drilled after the completion of the eight (8) EOptional ▇▇▇▇▇▇▇▇▇▇ W▇▇▇▇, Seller shall have a participating 13% working interest in such w▇▇▇▇ whereby Seller shall be responsible for 13% of the costs and shall receive 13% of the 75% Net Revenue Interest owned by Buyer in such w▇▇▇▇. In the event Seller elects not to participate in the drilling of subsequent w▇▇▇▇, Seller shall be deemed to have a “non-consent” status and shall retain a 13% post-completion working interest in the well after Buyer has received a 300% return on its investment in such well. Buyer shall also have a right of first refusal to acquire the 13% working interest of Seller for the purposes of obtaining an undivided 100% working interest in each such well. Prior to commencement of any well drilled under the Leases, Seller and Buyer shall negotiate, execute and record all documentation reasonably requested by Seller to evidence the net revenue interests and overriding royalty interests to be retained by Seller or the affiliates of Seller hereunder”.