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EXHIBIT 10.65
JOINT VENTURE OPERATING AGREEMENT
PEP 38256
Between:
INDO-PACIFIC ENERGY (NZ) LTD
And
TRANS-ORIENT PETROLEUM (NZ) LIMITED
OPERATING AGREEMENT
PEP 38256
Table of Contents
Clause Description Page
OPERATIVE PROVISIONS 7
1 DEFINITIONS AND INTERPRETATIONS 7
1.1 Definitions 7
1.2 Interpretation 12
1.3 Headings 13
2 JOINT VENTURE 13
2.1 Establishment of Joint Venture 13
2.2 Term of Joint Venture 13
2.3 Participating Interests 13
2.4 Tenants in Common 13
2.5 Separate Joint Ventures 14
3 MUTUAL OBLIGATIONS 14
3.1 Covenants by the Parties 14
3.2 Rights and Obligations Several 15
3.3 No Partnership 15
3.4 No Joint Liability 15
4 OPERATOR 15
4.1 Operator 15
4.2 Removal of Operator 15
4.3 Non-Operators' Power to Nullify or Suspend Removal 16
4.4 Replacement of Operator 16
4.5 Resignation of Operator 16
4.6 Appointment of New Operator 16
4.7 Consent to Appointment as Operator 17
4.8 No Appointment of Removed Operator 17
4.9 Effective Date of Appointment 17
4.10 Delivery of Property on Change of Operator 17
4.11 Consequences of Change and Delivery of Property 18
4.12 Audit of Accounts on Change of Operator 18
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5 FUNCTIONS AND DUTIES OF OPERATOR 18
5.1 Control and Management of Joint Operations 18
5.2 Independent Status of Operator 18
5.3 Proper Practices in Joint Operations 18
5.4 Books and Records 19
5.5 Protection from Liens 19
5.6 Non-Operator's Rights of Access 19
5.7 Compliance with Terms of Permit 19
5.8 Taxes and Fees 19
5.9 Budget Expenditures by Operator 20
5.10 Operator to Hold Property 20
5.11 Operator's General Duties 20
5.12 Operator to Let for Bid Certain Contracts 21
6 OPERATOR LIABILITY AND INDEMNITY 21
6.1 Liability of Operator 21
6.2 Indemnity of Operator 22
7 OPERATING COMMITTEE 22
7.1 Composition of Operating Committee 22
7.2 Formation of Operating Committee 22
7.3 Vote Required for Decisions of Operating Committee 23
7.4 Quorum for Meetings of Operating Committee 23
7.5 Meetings of Operating Committee 23
7.6 Resolution in Absence of Meeting 24
7.7 Sub-Committees 25
7.8 Place of Meetings 25
7.9 Operator's Duties Concerning Meetings 25
7.10 Operating Committee's Functions 26
7.11 Minimum Participating Interest for Representation 26
8 PROGRAMS AND BUDGETS 26
8.1 Submission of Programs and Budgets 26
8.2 Adoption of Programs and Budgets 27
8.3 Minimum Programs Budgets and Work
Obligation Determination 27
8.4 Review of Programs and Budgets 28
8.5 Authorities for Expenditure (AFEs) 28
8.6 When Expenditure in Excess of Approved AFE
is Authorised 28
8.7 Approved Well Plan 29
8.8 AFEs for Xxxxx 29
8.9 Casing Point Decision 29
8.10 Rights of Party Voting Against Operating
Programs and Budget 30
8.11 Consenting Parties' Premium 30
8.12 Notice to Operator 31
9 COSTS AND EXPENSES 31
9.1 Allocation of Expenditure 31
9.2 Accounting Procedure as Basis 31
9.3 Payment by Operator and Reimbursement 31
9.4 Calls by Operator 32
9.5 Banking of Funds 32
9.6 Investment of Funds 32
9.7 Withdrawal of Funds 32
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10 INFORMATION ON JOINT OPERATIONS 32
10.1 Information as to Petroleum Production 32
10.2 Access to Records and Information 32
10.3 Drilling Information and Privileges of Non-Operators 33
10.4 Testing and Information to Non-Operators 33
10.5 Logging Information to Non-Operators 34
10.6 Test Following Logging 34
10.7 Seismic and Other Reports 34
11 INSURANCE AND LITIGATION 34
11.1 Operator to Maintain Insurance 34
11.2 Contractors Insurance 35
11.3 Review of Insurances 35
11.4 Naming of Parties as Co-insured 35
11.5 Advice to Non-Operators of Current Insurance 36
11.6 Party's Right to Increase Insurance 36
11.7 Cost of Insurance and Charging of Losses 36
11.8 Litigation 36
12 SOLE RISK OPERATIONS 37
12.1 Sole Risk Operation 37
12.2 Proposal of Sole Risk Operation 38
12.3 Operating Committee to Consider Sole Risk
Operation Notice 38
12.4 Sole Risk Operation Notice for Existing Well 38
12.5 Sole Risk Operation Notice for Exploration Well 38
12.6 Sole Risk Operation Notice for Appraisal Well 38
12.7 Election to Participate 39
12.8 Sole Risk Interest 40
12.9 Time for Commencing Operations 40
12.10 Conduct of Sole Risk Operation 40
12.11 Operator for Sole Risk Operations 40
12.12 Sole Risk Parties May Complete and Equip 40
12.13 Premiums Accruing to Sole Risk
Parties - Exploration Xxxxx 41
12.14 Premiums Accruing to Sole Risk
Parties - Appraisal Xxxxx 41
12.15 Deepening, Plugging Back,
Reworking, Recompleting, Sidetracking 41
12.16 Premiums Accruing to Sole Risk Parties - Completing 42
12.17 Premiums Accruing to Sole Risk Parties - Equipping 42
12.18 Multiple Reservoirs 42
12.19 Sole Risk Operation Notice When Rig is on Site 43
12.20 Deepening or Sidetracking of Sole Risk Well 44
12.21 Priority of Recovery of Premium 44
12.22 Abandonment of Sole Risk
Operation - Salvable Material 44
12.23 Accounts During Sole Risk Operations and Premium Recovery45
12.24 Sole Risk Parties' Relationship 45
12.25 Indemnification of Non-Sole Risk Parties 45
12.26 Use of Joint Property 46
12.27 Non-Sole Risk Parties to Receive Information 46
12.28 Net Proceeds of Sale of Petroleum 46
12.29 Early Re-Entry by Non-Sole Risk Parties 47
12.30 Conclusion of Sole Risk Operation 47
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13 DISPOSAL OF PRODUCTION 47
13.1 Ownership 47
13.2 Royalties 48
13.3 Production Reports 48
13.4 Delivery 48
13.5 Risk 48
14 OFFTAKE AGREEMENT 48
14.1 Crude Oil 48
14.2 Natural Gas 49
15 DEFAULTS 49
15.1 Notice of Default 49
15.2 Defaulting Party Liable for Interest 49
15.3 Payment by Operator 49
15.4 Defaulting Party may be Sued 50
15.5 Non-Defaulting Parties to Contribute 50
15.6 Rights of Paying Parties 50
15.7 Defaulting Party's Petroleum 50
15.8 Suspension of Rights of Defaulting Party 51
15.9 Default of Operator in Payment 51
15.10 Application of Defaulting Party's Funds 51
15.11 Valuation of Defaulting Party's Interest 51
15.12 Option to Purchase Defaulting Party's Interest 52
16 WITHDRAWAL AND SURRENDER 54
16.1 Any Party May Withdraw 54
16.2 Notice of Withdrawal 54
16.3 Other Parties may Join in Withdrawal 54
16.4 Other Parties may Accept Assignment 54
16.5 Prompt Execution of Documents 55
16.6 Withdrawing Party's Obligations 55
16.7 Costs of Assignment 55
16.8 Assignment to all Parties 55
16.9 Selection of Area Required to be Surrendered 56
16.10 Voluntary Surrender of Area 56
17 ASSIGNMENTS AND MORTGAGES 56
17.1 Restriction on Right to Assign and Mortgage 56
17.2 Assignment to Related Companies 57
17.3 Assignment to Third Partiies 57
17.4 Assumption by Assignee 58
17.5 Consequences of Assignment 58
17.6 Charge of Participating Interest 59
18 CONFIDENTIALITY 59
18.1 Information Confidential 59
18.2 Related Companies 60
18.3 Compliance with Stock Exchange Requirements 60
18.4 Obligations to Continue 60
18.5 Termination 60
19 FORCE MAJEURE 60
19.1 Obligations Suspended by Event of Force Majeure 60
19.2 Certain Actions not Required 61
19.3 Meaning of Force Majeure 61
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20 LAWS AND REGULATIONS 61
20.1 Subject to Applicable Laws 61
20.2 Governing Law 61
20.3 Submission to Jurisdiction 61
21 NOTICES 62
21.1 Notice in Writing 62
21.2 Effective Date 62
21.3 Time of Receipt 62
21.4 Address for Service 62
21.5 Authorised Officer 63
22 GENERAL 63
22.1 Remedies not Exclusive 63
22.2 Mutual Indemnity 63
22.3 Limited Invalidity 63
22.4 Waiver 63
22.5 How Moneys Paid 63
22.6 Successors Bound 63
22.7 Further Assurance 64
22.8 Entire Agreement 64
22.9 Amendment 64
22.10 No Partition 64
22.11 Counterparts 64
22.12 Time of Essence 65
SCHEDULE 1 66
ACCOUNTING PROCEDURE 66
ARTICLE 1 - GENERAL PROVISIONS 66
1.1 Definitions 66
1.2 Statements, Xxxxxxxx and Adjustments 67
1.3 Advances and Payments 68
1.4 Audits 69
ARTICLE 2 - CHARGEABLE COSTS AND EXPENDITURES 69
2.1 Joint Account (Direct Charges) 69
2.1.1 Labour and Related Costs 69
2.1.2 Material 70
2.1.3 Transportation and Employee Relocation Costs 70
2.1.4 Services 71
2.1.5 Damage and Losses of Joint Property 71
2.1.6 Insurance 71
2.1.7 Legal Expense 72
2.1.8 Duties and Taxes 72
2.1.9 Offices, Camps and Miscellaneous Facilities 72
2.1.10 Payments to Government 72
2.1.11 Other Charges 72
2.2 Joint Account (Indirect Charges) 72
2.2.1 Administrative Overhead 72
ARTICLE 3 - MATERIAL 73
3.1 Acquisitions 73
3.2 Disposals 73
3.3 Inventories 73
SCHEDULE 2 - Description of the Xxxxxx Xxxx 00
00
THIS AGREEMENT is made on the 25th day of June, 1998.
BETWEEN INDO-PACIFIC ENERGY (NZ) LTD
of Indo Xxxxxxx Xxxxx, 000 Xxxxxx Xx, Xxxxxx,
Xxxxxxxxxx, Xxx Xxxxxxx. ("Indo")
AND TRANS-ORIENT PETROLEUM (NZ) LIMITED
of Indo Xxxxxxx Xxxxx, 000 Xxxxxx Xx, Xxxxxx,
Xxxxxxxxxx, Xxx Xxxxxxx.. ("Trans")
RECITALS
The Parties wish to enter into this Agreement to record the
terms and conditions upon which they will conduct Joint
Operations on the Area.
OPERATIVE PROVISIONS
1 DEFINITIONS AND INTERPRETATIONS
1.1 Definitions
In this Agreement, except where the context otherwise
requires, the following terms and expressions shall have the
following meanings:
"Accounting Procedure" means the method of accounting to be
applied in recording debits and credits to the Joint Account as
set out in Schedule 1;
"Act" means the Crown Minerals Act 1991 (New Zealand)
"AFE" means an authority for expenditure setting out details
of the estimated expenditure in respect of a specific project
which, when approved in accordance with this Agreement,
constitutes authorisation for the Operator to incur such
expenditure.
"Agreement" means this Agreement and the Annexures and
Schedules to this Agreement.
"Appraisal Well" means a well drilled or proposed to be
drilled for the purpose of evaluating the quantities of Petroleum
in a Reservoir discovered by an Exploration Well.
"Approved Well Plan" has the meaning given to that term in
Clause 8.7.
"Area" means the area for the time being enclosed by the
external boundaries of the Permit which boundaries are, as at the
Effective Date, for the purposes of identification only, shown on
the map attached as Schedule 2, and any other area, whether or
not contiguous to that area, which the Parties unanimously agree
shall form part of the Area.
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"Authorised Expenditure" has the meaning given to that term
in Clause 9.1.
"Business Day" means a day, other than a Saturday, Sunday or
public holiday, on which trading banks are open for business in
Wellington, New Zealand.
"Casing Point" means the time at which a well drilled under
this Agreement has reached its projected depth or such lesser
depth as the Operating Committee may have decided upon and all
logs and tests necessary to enable a decision as to whether to
plug and abandon the well or attempt to complete it as a producer
have been carried out and communicated to the Parties.
"Chargee" has the meaning given to that term in Clause 17.6.
"Chargor" has the meaning given to that term in Clause 17.6.
"Complete" means with respect to a well the completion of
the well as a producer of Petroleum, which operations shall
include (without limitation);
(a) to acquire, install and perforate production casing;
(b) to run tubing;
(c) to install equipment in the well up to and including
the wing valve of the Christmas tree (in the case of an oil
well) and to the well head (in the case of a gas well);
(d) to conduct such tests as are necessary to
demonstrate that the well is capable of production;
(e) to swab the well;
(f) to install such artificial lift equipment including
subsurface pumps, pump rods, power cables and surface pump
equipment as is necessary to initiate or promote the
production of Petroleum to the surface,
and "Completing", "Completed" and "Completion" have
corresponding meanings.
"Completion Costs" means all costs directly incurred in
respect of Completion;
"Consenting Parties" has the meaning given to that term in
Clause 8.10;
"Default Interest Rate" means in respect of any day the rate
per annum which is the aggregate of 5% per annum and the rate of
interest from time to time charged by the ASB Bank Ltd on
corporate overdraft accounts in excess of $100,000.00 as advised
by the said ASB Bank Ltd to the Operator;
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"Default Notice" has the meaning given to that term in
Clause 15.1;
"Defaulting Party" has the meaning given to that term in
Clause 15.1;
"Delivery Costs" has the meaning given to that term in
Clause 12.28;
"Delivery Point" means the point or points determined by the
Operating Committee from time to time as the point or points at
which the Parties shall take delivery of their respective shares
of Petroleum produced from the Area.
"Development Well" means a well (other than an Exploration
Well or an Appraisal Well) drilled, proposed to be drilled or
which is used or is capable of being used, for the production of
Petroleum from a previously discovered Reservoir, which is less
than 1000m from a well which is capable of producing Petroleum in
Payable Quantities from that Reservoir.
"Drill" includes, where the context permits, to deepen,
rework, fracc, plug back, run logs, velocity survey, carry out
testing on, recomplete or sidetrack a well;
"Drilling Costs" means all costs and expenses directly
incurred in drilling, deepening, reworking, plugging back,
recompleting or sidetracking a well, including without
limitation, rig mobilisation and demobilisation, conducting
tests, obtaining core and other samples, running logs and
conducting a velocity survey;
"Effective Date" means the 25th June 1998.
"Effective Date of Assignment" has the meaning given to that
term in Clause 17.5;
"Effective Date of Withdrawal" has the meaning given to that
term in Clause 16.2;
"Electing Party" has the meaning given to that term in
Clause 12.8;
"Entitlement" has the meaning given to that term in Clause
14.1;
"Equip" means (with respect to a well which has been
Completed) to acquire and install all such equipment as is
necessary to place the well in production, and to handle, treat
and bring Petroleum from such well to the Delivery Point
including flow lines, treatment and separation facilities and
stock tanks; and "Equipping" and "Equipped" have corresponding
meanings;
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"Equipping Costs" means all costs directly incurred in
Equipping a well;
"Exploration Well" means any well whose purpose at the time
of the commencement of drilling is to explore for an accumulation
of Petroleum whose existence was at that time unproven by
drilling;
"Force Majeure" has the meaning given to that term in Clause
19.3;
"Government" means the government of New Zealand;
"Gross Negligence" means such wanton and reckless conduct as
constitutes, or raises the reasonable belief that it constitutes,
an utter disregard for the harmful foreseeable and avoidable
consequences which result from it;
"Information" has the meaning given to that term in Clause
18.1;
"Joint Account" means the accounts established and
maintained by the Operator in accordance with this Agreement to
record all charges, expenditures, credits and receipts in respect
of Joint Operations which are chargeable or to be credited to
each of the individual Parties as provided for in this Agreement;
and "for the Joint Account" means for the account, expense, risk
or benefit of the Parties in accordance with their Participating
Interests;
"Joint Operations" means all activities of the Joint Venture
conducted on behalf of the Parties pursuant to this Agreement
(including without limitation, abandonment activities) but
excludes those activities which are related to Sole Risk
Operations;
"Joint Property" means:
(a) all other property of any nature or kind, whether
real or personal, (including without limitation, any
extraction, transportation, processing, treatment, storage
or other facility or chose in action and any estate or
interest therein) acquired by the Parties in the conduct, or
for the purposes of, Joint Operations, and
(b) all other estate, right, title or interest of the
Parties arising under or by virtue of this Agreement;
"Joint Venture" means the joint venture between the Parties
in accordance with and constituted by the terms of this
Agreement;
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"Net Abandonment Costs" has the meaning given to that term
in Clause 16.6;
"Net Proceeds of Sale" has the meaning given to that term in
Clause 12.28;
"Non-Consenting Party" has the meaning given to that term in
Clause 8.10;
"Non-Defaulting Parties" has the meaning given to that term
in Clause 15.1;
"Non-Operator" means a Party other than the Operator;
"Non-Sole Risk Parties" means the Parties which do not
participate in a Sole Risk Operation;
"Notice of Withdrawal" has the meaning given to that term in
Clause 16.2;
"Operating Committee" means the operating committee
established pursuant to Clause 7 of this Agreement;
"Operating Costs" means all costs directly incurred in
producing, handling, transporting and treating Petroleum from a
well, exclusive of Drilling Costs, Completion Costs and Equipping
Costs, up to the Delivery Point;
"Operator" means the party from time to time appointed
pursuant to this Agreement to carry out the management of the
Joint Venture and Joint Operations;
"Option" has the meaning given to that term in Clause 15.12;
"Option Commencement Date" has the meaning given to that
term in Clause 15.12;
"Participating Interest" means the following obligations,
benefits and rights of a Party, expressed as a percentage and
determined in accordance with this Agreement:
(a) the obligation, subject to this Agreement, to
contribute that percentage of all expenditure and all other
obligations arising under or by virtue of this Agreement;
(b) the ownership of, and the right and benefit as a
tenant in common to receive in kind and to dispose of for
its own account, that percentage of Petroleum, and
(c) the beneficial ownership as a tenant in common of
an undivided share in the percentage of all Joint Property.
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"Party" means a party to this Agreement, its successors and
permitted assigns;
"Payable Quantities" means:
(a) in the case of a well not Completed and Equipped
for production, the anticipated output from that well of
that quantity of Petroleum which, considering the Completion
Costs, Equipping Costs, Operating Costs and other costs
related to any of the foregoing, the kind and quality of
Petroleum to be produced, the price to be received therefor
and the royalties and other burdens payable in respect
thereof, would in the opinion of the Operating Committee
warrant incurring the Completion Costs and Equipping Costs
of the well; and
(b) in the case of a well Completed and Equipped for
production, the output from that well of that quantity of
Petroleum which, considering the factors referred to in
paragraph (a) above (other than Completion Costs and
Equipping Costs), would in the opinion of the Operating
Committee warrant continuing production from the well;
"Paying Party" has the meaning given to that term in Clause
15.6;
"Payment Date" has the meaning given to that term in Clause
15.5;
"Permit" means Petroleum Exploration Permit 38256 granted
under the Act the area of which is set out in Schedule 2; and any
permits or leases granted pursuant thereto together with any
extensions, renewals, conversions, substitutions, modifications
or variations thereof;
"Permit Year" means a year beginning on 25th August, and
ending on 24th August.
"Petroleum" has the meaning given to that term in the Act;
"Proceeds of Sale" has the meaning given to that term in
Clause 12.28;
"Proposing Party" means a Party giving notice of its
intention to drill, Complete or Equip a well as a Sole Risk
Operation;
"Purchaser" or "Purchasers" has the meaning given to that
term in Clause 15.12;
"Receiving Parties" means the Parties other than the
Proposing Party;
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"Related Company" shall have the meaning given in section
2(3) of the Companies Xxx 0000 of New Zealand, and for the
purposes of paragraph (d) of that section specifically includes
companies which have substantially common, actual (although not
necessarily legal) management and control;
"Reservoir" means that part of a geological formation which
contains a single pool or accumulation of Petroleum separate from
any other such pool or accumulation in the same or another
geological formation, in a single pressure system so that
production of Petroleum from any part affects the remainder;
"Sole Risk Interest" has the meaning given to that term in
Clause 12.8;
"Sole Risk Operation" means any or all of the drilling,
Completing and Equipping of a well proposed by one or more of the
Parties but in which less than all Parties participate;
"Sole Risk Operation Notice" means the notice of intention
to drill, Complete or Equip a well given by a Proposing Party in
respect of a proposed Sole Risk Operation;
"Sole Risk Operator" means a Party appointed as operator for
a Sole Risk Operation pursuant to Clause 12.11;
"Sole Risk Party" means a Party which participates in a Sole
Risk Operation;
"Unpaid Amount" has the meaning given to that term in Clause
15.1;
"Wilful Misconduct" means intentional acts and omissions
done or omitted to be done, which raise the reasonable belief
that they were the result of a conscious indifference to the
right or welfare of those who are or may be affected by them;
"Withdrawing Party" has the meaning given to that term in
Clause 16.2; and
"Work Obligation" means the minimum work or expenditure
required to be performed or made by the registered holders of the
Permit as a condition of the Permit;
1.2 Interpretation
Unless expressed to the contrary:
(a) words importing:
(i) the singular include the plural and vice versa;
and
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(ii) any gender includes the other genders;
(b) if a word or phrase is defined cognate words and
phrases have corresponding definitions;
(c) a reference to:
(i) a person includes a firm, unincorporated
association, corporation and a government or statutory
body or authority;
(ii) a person includes the legal personal
representatives, successors and assigns of that person;
(iii) a statute, ordinance, code or other law
includes regulations and other statutory instruments
under it and consolidations, amendments, re-enactments
or replacements of any of them;
(iv) a right includes a benefit, remedy, discretion,
authority or power;
(v) an obligation includes a warranty or
representation and a reference to a failure to observe
or perform an obligation includes a breach of warranty
or representation;
(d) provisions or terms of this document or another
document, agreement, understanding or arrangement include a
reference to both express and implied provisions and terms;
(e) "$", "NZ$" or "dollars" is a reference to the lawful
currency of New Zealand;
(f) this or any other document includes the document as
varied or replaced and notwithstanding any change in the
identity of the parties;
(g) writing includes any mode of representing or
reproducing words in a tangible and permanently visible
form, and includes facsimile transmission; and
(h) a reference to any thing (including, without
limitation, any amount) is a reference to the whole or any
part of it and a reference to a group of things or persons
is a reference to any one or more of them.
1.3 Headings
The clause headings used herein are for convenience only and
shall not be used in construing or interpreting any provision of
this Agreement.
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2 JOINT VENTURE
2.1 Establishment of Joint Venture
On and from the Effective Date the Parties associate
themselves in an unincorporated joint venture for the purpose of
exploration for Petroleum in the Area and if commercially viable
the production, processing, transportation and sale of Petroleum
from the Area and all things necessary and incidental thereto.
2.2 Term of Joint Venture
This Agreement shall continue in effect for so long as the
Permit remains in force and until all Joint Property which
relates to the Area has been disposed of and final settlement has
been made between the Parties in relation thereto in accordance
with their respective rights and obligations under this
Agreement.
2.3 Participating Interests
At the date of this Agreement the Parties acknowledge and
agree that the Participating Interests in this Permit are as
follows:
Indo - 50.0%
Trans - 50.0%
------
100.00%
2.4 Tenants in Common
Subject to this Agreement, all Joint Property shall be
beneficially owned by the Parties as tenants in common in shares
equal to their respective Participating Interests.
2.5 Separate Joint Ventures
This Agreement shall apply separately in relation to each
permit, lease, title or other instrument granted under the Act in
relation to the Area or any part of it so as to constitute
separate joint ventures in respect of the area comprised within
such permit, lease, title or other instrument on the same terms
and conditions, mutatis mutandis, as this Agreement.
3 MUTUAL OBLIGATIONS
3.1 Covenants by the Parties
Each Party covenants with each of the other Parties as
follows:
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(a) to do, to the extent of its Participating Interest, all
things on its part necessary to ensure that:
(i) the Work Obligation is diligently observed and
performed;
(ii) the Permit is kept in good standing and the Joint
Property in a safe and operable condition;
(iii) the Permit and all other titles necessary for
the Joint Operations hereunder are duly renewed or
extended unless the Parties shall unanimously agree
otherwise;
(b) to be just and faithful to each other Party in all
things relating to this Agreement; and
(c) not to engage (either alone or in association with
others) in any activity in relation to the Area or the Joint
Property except as authorised by this Agreement.
(d) that it has full right, power and authority to enter
into this Agreement and to engage in Joint Operations
(e) that it has obtained all requisite consents and
approvals to enter into this Agreement
(f) to attend diligently to the conduct of all Joint
Operations in which the Party is involved
(g) to pay punctually its separate debts and to indemnify
the other Parties and the Joint Property against the same
and all expenses on account thereof: to account promptly for
all moneys, cheques and negotiable instruments received by
it for and on behalf of the other Parties;
(i) to afford, when called upon to do so, all reasonable
assistance in the conduct of Joint Operations for the mutual
advantage of all Parties to observe and perform its
obligations, express and implied, under this Agreement, the
Licence and the Act; and to make full, xxxxx and prompt
disclosures and give truthful explanations to the other
Parties of all material matters coming to its attention in
respect of Joint Operations and Joint Property.
3.2 Rights and Obligations Several
The rights, duties, obligations and liabilities of the
Parties shall be several and not joint nor joint and several. It
is the express purpose and intention of the Parties that their
ownership of the Permit and the Joint Property and their
liabilities shall be as tenants-in-common.
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3.3 No Partnership
Nothing contained in this Agreement shall be construed as
creating or evidencing a partnership between the Parties or any
of them or as to lead to the joint receipt of income by the
Parties or any of them.
4 OPERATOR
4.1 Operator
Indo is hereby appointed Operator and agrees to act as such
in accordance with the terms and conditions of this Agreement.
4.2 Removal of Operator
Notwithstanding that the Operator may have given notice of
intention to resign pursuant to Clause 4.5, the Operator shall
cease to be Operator and shall be deemed to be removed if:
(a) a controller (as defined in the Companies Xxx 0000 of
New Zealand) is appointed in respect of the whole or any
part of the property of the Operator;
(b) an order is made that the Operator be wound up;
(c) a liquidator or provisional liquidator is appointed in
respect of the Operator;
(d) there is a resolution for the winding up of the
Operator except to reconstruct or amalgamate while solvent
and on terms approved by the Operating Committee, such
approval not to be unreasonably withheld;
(e) an administrator is appointed to the Operator;
(f) the Operator assigns or purports to assign, all or any
of its general powers and responsibilities of supervision
and management as Operator under this Agreement otherwise
than to a Related Company with the prior written consent of
the other Parties;
(g) the Operator becomes a Defaulting Party pursuant to
Clause 15; or
(h) the Operator commits any breach of this Agreement
(other than a default in payment for which provision is made
in Clause 15, in which case, Clause 4.2(g) shall apply)
which places the whole or any part of the Permit or Joint
Property in jeopardy and continues such breach for a period
of not less than twenty (20) Business Days after notice
requiring the same to be remedied shall have been given to
the Operator by one or more of the Parties.
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(i) the Operator and its Related Companies cease to
hold an aggregate Participating Interest of 20% or greater,
unless no other Party holds a greater Participating
Interest.
4.3 Non-Operators' Power to Nullify or Suspend Removal
Notwithstanding the provisions of Clause 4.2 and until the
appointment of a new Operator pursuant to the provisions of
Clause 4.6(a), the Parties, other than the former Operator, may
by unanimous resolution, subject to such conditions, if any, as
are specified in such resolution:
(a) nullify the removal of the Operator; and
(b) suspend or postpone the removal of the Operator either
for a specified period or for an unspecified period to be
specified by a subsequent unanimous resolution of the Non-Operators.
4.4 Replacement of Operator
The Operator shall be replaced if at least two Parties being
holders of not less than seventy-five percent (75%) of the
Participating Interests held by all the Parties so resolve and
upon such resolution the Operating Committee shall appoint a
successor Operators as provided in Clause 4.6(b).
4.5 Resignation of Operator
The Operator may resign by giving each of the Parties ninety
(90) Business Days' written notice (or such lesser period of
notice as the Operating Committee may resolve to accept) of its
intention to do so.
4.6 Appointment of New Operator
If an Operator:
(a) is deemed to have been removed pursuant to Clause 4.2 a
successor Operator shall be appointed by a vote carried by
such number of the Parties, other than the removed Operator
and any Related Company of the removed Operator, the total
of whose Participating Interests constitutes a majority of
the total of the Participating Interests of the Parties
other than the removed Operator and any Related Company of
the removed Operator; or
(b) is replaced pursuant to Clause 4.4 a successor Operator
shall be appointed by the Operating Committee provided that
in the event that a decision of the Operating Committee is
not promptly reached pursuant to Clause 7.3, then a
successor Operator may be appointed by a vote carried by
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such number of the Parties, other than the former Operator
and any Related Company of a former Operator, the total of
whose Participating Interests constitutes a majority of the
total of the Participating Interests of the Parties other
than the former Operator and any Related Company of the
former Operator; or
(c) resigns pursuant to Clause 4.5, the Operating Committee
shall appoint a new Operator.
4.7 Consent to Appointment as Operator
Except as provided in this Clause 4.7, no Party shall be
appointed Operator unless it has given written consent to the
appointment. If by reason of failure to appoint a new or
replacement Operator, no Operator is functioning at any time,
then until the appointment of an Operator the Party having the
greatest Participating Interest (excluding the Party or Related
Company of that Party removed or replaced as Operator or which
has resigned as Operator) shall act as Operator for the time
being. If two or more of such Non-Operators have equal
Participating Interests then the Operator for the time being
shall be selected by Parties (excluding the Party or Related
Company of that Party removed or replaced as Operator or which
has resigned as Operator) holding a simple majority of
Participating Interests and in the event that there are no other
such Parties then the selection shall be made by lot.
4.8 No Appointment of Removed Operator
An Operator which is deemed to have been removed under
Clause 4.2 shall not be re-appointed as its own immediate
successor Operator, except with the unanimous consent of the
Parties.
4.9 Effective Date of Appointment
The appointment of a successor Operator shall take effect in
accordance with the following provisions:
(a) in the case of the deemed removal of an Operator
pursuant to Clause 4.2, the appointment of a successor
Operator pursuant to Clause 4.6(a) or Operator for the time
being pursuant to Clause 4.7 shall take effect forthwith
upon such appointment;
(b) in the case of the replacement of an Operator pursuant
to Clause 4.4, the appointment of the outgoing Operator
shall cease at a time to be agreed upon by the Operating
Committee and the outgoing Operator or in the absence of
agreement at 8.00 am on the first Business Day of the month
following the month in which it is resolved to replace the
Operator pursuant to Clause 4.4, and the appointment of a
48
successor Operator pursuant to Clause 4.6(b) or Operator for
the time being under Clause 4.7 shall take effect in each
case at such time; and
(c) in the case of the resignation of an Operator pursuant
to Clause 4.5, the appointment of a successor Operator
pursuant to Clause 4.6(c) or Operator for the time being
under Clause 4.7 shall take effect at 8.00 am on the first
day following the expiration of ninety (90) Business Days
(or such lesser period of notice as is accepted by the
Operating Committee) after the date upon which notice of
resignation was given pursuant to Clause 4.5.
4.10 Delivery of Property on Change of Operator
At the effective date of the resignation, removal or
replacement of the Operator as herein provided, the outgoing
Operator shall deliver to the successor Operator custody of all
Joint Operations for the Joint Account or otherwise operated by
the outgoing Operator, the Joint Property, and all other
facilities held for the Joint Account or due to Sole Risk
Operations, all books of account and records kept for the Joint
Account or due to Sole Risk Operations and all documents,
agreements and other papers relating thereto and all other things
held by the Operator, as Operator.
4.11 Consequences of Change and Delivery of Property
Upon delivery of the property, books and records referred to
in Clause 4.10, the outgoing Operator shall be released and
discharged from, and the successor Operator shall assume, all
duties and obligations of the Operator, except the unsatisfied
duties and obligations of the outgoing Operator accrued prior to
the effective date of the change of Operator and for which such
outgoing Operator shall, notwithstanding its release or
discharge, continue to remain liable. In order to give effect to
the potential application of the provisions of this Clause, each
Operator shall use its best endeavours to ensure that all
contracts and engagements entered into by such outgoing Operator
for the Joint Account enure for the benefit of and are, if
applicable, assignable to a successor Operator without penalty or
premium upon such assignment.
4.12 Audit of Accounts on Change of Operator
Upon every change of Operator and not later than eighty (80)
Business Days after the successor Operator commences to act as
Operator, the Parties (other than the outgoing Operator) shall
cause an audit to be made of the books of account and records
kept for the Joint Account. The cost of the audit shall be for
the Joint Account unless the Operator has been replaced pursuant
to Clause 4.4 in which case the cost of the audit shall be
charged to those Parties who have voted to replace the Operator.
49
5 FUNCTIONS AND DUTIES OF OPERATOR
5.1 Control and Management of Joint Operations
Subject to the terms of this Agreement and to the control
and direction of the Operating Committee under this Agreement,
the Operator shall have the exclusive control and management of,
and shall be obligated to conduct, Joint Operations.
5.2 Independent Status of Operator
The Operator shall furnish or cause to be furnished all
material, labour and services necessary for Joint Operations,
consistent with approved programs and budgets. Subject to Clause
5.3, the Operator shall determine the number of employees, their
selection and the hours of labour and the compensation for
services to be paid to them in connection with Joint Operations.
All employees, agents and contractors used in Joint Operations
shall be the employees, agents and contractors of the Operator or
a Related Company of the Operator.
In all dealings with contractors, suppliers and other third
parties in accordance with this Agreement the Operator shall act
and contract as agent for the Parties.
5.3 Proper Practices in Joint Operations
The Operator shall carry on all Joint Operations in a
proper, efficient, economical and safe manner in accordance with
good oilfield practices and conservation principles, with all
reasonable skill and effort in the circumstances, with good and
sufficient equipment and in accordance with the terms and
conditions of the Permit and the Act.
5.4 Books and Records
The Operator shall, with respect to all Joint Operations
conducted by it, keep and maintain at its principal office for
the Joint Account, as required by the Act and in accordance with
generally accepted accounting principles in New Zealand, true and
correct books, records and accounts showing the development and
progress made, drilling done, other Joint Operations carried out,
the quantity of Petroleum produced from each well and the
disposition thereof.
5.5 Protection from Liens
Subject to the Operator holding sufficient funds in the
Joint Account from time to time, the Operator shall pay, or cause
to be paid, as and when they become due and payable, all accounts
of contractors and claims for wages and salaries for services
rendered or performed and insofar as it may be within its control
for materials supplied in respect of any Joint Operations, and
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keep the Permit and any property acquired for the Joint Account
free from liens and encumbrances resulting from such Joint
Operations save to the extent only that the same may arise from a
bona fide dispute with respect to any such account or claims and
shall not suffer any claims of or dues to or on behalf of any
Government, Governmental Board or Authority to remain unsatisfied
or become in arrears.
5.6 Non-Operator's Rights of Access
Subject to:
(i) the giving of 24 hours' prior notice to the Operator
(except in the case of testing, coring, logging, measurement
of total depth, plugging and abandoning); and
(ii) not causing any unreasonable interference with the
conduct of the Joint Operations,
each Non-Operator shall have the right at the Non-Operator's
sole risk, cost and expense for persons authorised and
nominated by it and advised to the Operator to have full and
free access at all reasonable times for the purposes of
inspection and observation of all Joint Operations and the
records of Joint Operations and any information obtained as
a result of Joint Operations.
5.7 Compliance with Terms of Permit
The Parties acknowledge and agree that, when the Operator
enters into any contract for the Joint Account, it contracts
solely as agent for each Party severally in proportion to its
Participating Interest, and not as principal, and notwithstanding
that the names of the non-operators do not appear on any such
contract or that the Operator does not disclose the existence or
identity of any Party as principal or the capacity of the
Operator as agent.
5.8 Taxes and Fees
The Operator shall pay for the Joint Account, all taxes
(exclusive of any taxes measured by the income of any Party or
receipt by any of them of Petroleum), fees and other payments
pertaining to the Permit and Joint Operations required to be paid
to the Government in a manner which will discharge the Parties'
obligations with respect thereto.
5.9 Budget Expenditures by Operator
The Operator shall conduct each program of Joint Operations
approved by the Operating Committee and shall not undertake any
Joint Operations not included in any approved program or incur
51
expenditures in excess of the expenditures authorised by an AFE
approved pursuant to Clause 8.5 or otherwise authorised in this
Agreement.
5.10 Operator to Hold Property
The Operator shall have and hold full and exclusive
possession, custody and control on behalf of the Parties of all
Joint Property and the title documents to the Permit.
5.11 Operator's General Duties
In the conduct of Joint Operations, the Operator shall:
(a) confer freely with the Non-Operators and keep them
currently advised of all significant matters arising in
connection with Joint Operations;
(b) acquire and maintain custody of all such premises,
furniture, fixtures, fittings, materials, supplies, plant,
machinery, equipment and services as are necessary or
desirable for such Joint Operations;
(c) obtain from outside experts and consultants such
technical, legal, accounting and other professional advice
and services as are necessary or desirable for Joint
Operations;
(d) prepare and file reports and returns (other than those
based upon or measured by income) required by law or this
Agreement and furnish the Non-Operators promptly with copies
thereof;
(e) keep books, accounts and records of Joint Operations
and prepare and furnish to the Non-Operators reports,
including but not limited to, exploration progress reports,
geological and geophysical reports, daily drilling reports,
well logs, production reports and reports furnished by the
Operator to the Government relating to Joint Operations;
(f) subject to their availability, make available to any
Non-Operator requesting the same samples of rocks, cores and
formation fluids taken from any xxxxx drilled under this
Agreement;
(g) prepare and present to the Non-Operators proposed work
programs, corresponding budgets and AFEs as provided in
Clause 8;
(h) subject to the provisions of Clause 12, carry out all
Sole Risk Operations;
52
(i) procure and maintain insurance and adjust losses and
claims arising out of such insurance as provided in this
Agreement;
(j) provide the Non-Operators, upon request, with a copy of
all or any contract entered into by the Operator pursuant to
this Agreement;
(k) do all such other acts and things as may be necessary
or desirable under this Agreement for the efficient and
economical conduct of Joint Operations;
(l) provide on a timely basis and at the cost of the Non-
Operator concerned, such data additional to that distributed
pursuant to this Agreement as is required to enable each of
the Non-Operators to make, to the extent that any such Non-
Operator legally is required so to do, public statements or
announcements to any governmental agency or official stock
exchange;
(m) within twenty (20) Business Days after the end of each
month, furnish to each Non-Operator a summary report on
Joint Operations conducted during such month;
(n) negotiate with the Government on behalf of all of the
Parties in respect of those matters which the Operating
Committee considers necessary or desirable; and
(o) provide on a timely basis and at the cost of the Non-
Operator concerned such data additional to that distributed
pursuant to this Agreement as that Non-Operator may
reasonably require.
5.12 Operator to Let for Bid Certain Contracts
Unless the Operating Committee decides otherwise, the
Operator will comply with the following provisions in relation to
entering into contracts:
(a) the Operator shall invite competitive tenders in
respect of contracts for materials or services for the Joint
Account the cost of which is likely to exceed $75,000 for
any one item or series of related items.
(b) In addition to any other approvals required under this
Agreement, the Operator shall obtain Operating Committee
approval to the principal terms of contracts for materials
or services for the Joint Account, the cost of which, in the
opinion of the Operator, is likely to exceed, for any one
item or series of related items:
(i) in the case of contracts for drilling rigs -
$500,000
53
(ii) in the case of contracts for the acquisition
and/or processing of seismic - $250,000
(iii) in the case of contracts incorporated in a
program and budget other than contracts for drilling
rigs and seismic- $150,000
(c) where bids are required under this Clause 5.12, each
Party and any Related Company of a Party shall have the
right to submit a bid.
6 OPERATOR LIABILITY AND INDEMNITY
6.1 Liability of Operator
The Operator and its directors, officers, employees, shall
not be responsible for any costs, losses, claims, damages or
liabilities suffered or incurred by any Party arising out of or
in the course of the discharge of its duties as Operator
hereunder except for:
(a) any costs, losses, claims, damages and liabilities
arising, directly or indirectly, from Wilful Misconduct or
Gross Negligence of the Operator; and
(b) those amounts which the Operator is liable to expend or
contribute in the discharge of its obligations as a Party in
terms of this Agreement.
The Operator shall not be liable in any circumstances for
any loss of profits or other consequential losses whatsoever or
howsoever occurring.
6.2 Indemnity of Operator
Each of the Non-Operators, severally to the extent of its
Participating Interest, shall at all times indemnify and keep
indemnified the Operator and its directors, officers and
employees against all liabilities, losses, damages, costs and
expenses suffered or incurred by the Operator and its directors,
officers and employees in relation to Joint Operations other than
those liabilities, losses, damages, costs or expenses arising
directly from the Wilful Misconduct or Gross Negligence of the
Operator.
7 OPERATING COMMITTEE
7.1 Composition of Operating Committee
To provide for the orderly selection, control and direction
of Joint Operations there shall be established promptly an
Operating Committee. Subject to Clause 7.11, the Operating
Committee shall be comprised of a representative of each of the
54
Parties and each Party shall appoint one representative and one
alternate representative to serve on the Operating Committee.
The Operator's representative shall be the chairman of the
Operating Committee.
7.2 Formation of Operating Committee
Subject to clause 7.11, within twenty (20) Business Days
after the Effective Date, each Party shall notify each of the
other Parties of the names and addresses of its representative
and alternate representative who shall represent such Party and
is deemed authorised to bind such Party with respect to all
matters in connection with Joint Operations. Each alternate
representative shall be entitled to attend all Operating
Committee meetings but shall have no vote at such meetings except
in the absence or disability of the representative for whom he is
the alternate. Each Party shall have the right to change its
representative and/or alternate at any time by giving notice to
such effect to the Other Parties.
In addition to the representative and alternate
representative, each Party may bring to all such meetings such
technical and other advisers as it may deem appropriate. The
Parties shall pay the expenses of attendance at Operating
Committee meetings of their own representative and/or alternative
representative and advisers.
7.3 Vote Required for Decisions of Operating Committee
Except as otherwise provided in this Agreement, all
decisions of the Operating Committee on all matters coming before
it shall be made by the affirmative vote of two or more Parties
having collectively not less than seventy five percent (75%) of
the aggregate of the Participating Interests of the Parties
entitled to vote thereon. The Operating Committee shall have no
power to make a decision:
(a) to assign or (except with the unanimous approval of the
Parties) voluntarily surrender any part or parts of the
Permit; or
(b) to enter into, amend or vary this Agreement or any
agreement between the Parties and a Government; or
(c) upon any matter in respect of which specific provision
is made in this Agreement for a decision to be made in a
different fashion.
Except as otherwise specifically provided in this Agreement,
the decisions of the Operating Committee shall be binding on the
Parties.
55
7.4 Quorum for Meetings of Operating Committee
(a) No meeting of the Operating Committee shall transact
any business unless a quorum is present.
(b) A quorum for the purposes of a meeting of the Operating
Committee shall be constituted by the representatives of not
less than two Parties present and entitled to vote holding
Participating Interests aggregating at least seventy five
percent (75%) of the Participating Interests of the Parties
entitled to vote.
(c) If a quorum is not present within an hour from the time
appointed for a meeting of the Operating Committee (or such
longer period as the Parties then present unanimously agree
to remain), the meeting shall stand adjourned for five (5)
Business Days to the same time and place.
7.5 Meetings of Operating Committee
(a) The Operating Committee may meet, either personally or
by telephone, video conference or any other form of
instantaneous communication by which all participants can
properly communicate with each other, for the dispatch of
business and, subject to this Agreement, adjourn and
otherwise regulate its meetings as it thinks fit. One of
such meetings shall be the annual meeting of the Operating
Committee and shall take place no later than 1 month prior
to the commencement of the next succeeding Permit Year.
(b) The Operating Committee shall meet whenever requested
by the giving of fifteen (15) Business Days' written notice
by the Operator and shall meet at least once each year to
consider the program and budget referred to in Clause 8. A
notice given pursuant to this Clause shall include the
agenda for the meeting. The Operating Committee may meet at
such other times as the Parties entitled to vote unanimously
agree.
(c) Any Party requesting the Operator to give a notice
requesting a meeting shall provide the Operator with
sufficient information concerning the matters to be
considered thereat to enable the Operator to comply with its
obligations pursuant to Clause 7.9(a).
(d) Any Party requesting the Operator in the manner
provided in Clause 7.5(b) to give a notice requesting a
meeting shall be entitled to give such notice in lieu of the
Operator if the Operator fails to give such notice within
five (5) Business Days of receiving the request from such
Party in which case the meeting shall be held at the time
and place as specified by such Party in the said notice.
56
(e) Meetings of the Operating Committee shall resolve only
such matters as are specified in the notice of meeting
provided however that the Operating Committee may by the
unanimous vote of the representatives of all Parties amend
any notice of meeting to include additional matters.
(f) The failure by a Party to vote on any resolution put
for decision by the Operating Committee shall be deemed to
be a vote against such resolution.
7.6 Resolution in Absence of Meeting
(a) In lieu of a meeting, the Operator may and shall
promptly at the request in writing of any Non-Operator
submit any matter which is proper for consideration by the
Operating Committee to the representatives of the Parties by
giving each representative notice by mail or facsimile
adequately describing the matter so submitted. Each
representative of a Party entitled to vote shall communicate
its vote thereon to the Operator and to the other Parties by
mail or facsimile within such period as may be designated in
the notice given by the Operator, which period shall not,
except as otherwise provided in this Agreement, be less than
six (6) Business Days after receipt of such notice.
(b) Where the Parties are requested to vote on any proposal
in circumstances other than those described in Clause 7.6(c)
or Clause 12.19 and where the matter presented for
consideration by its nature requires determination in less
than six (6) Business Days and such fact and lesser period
(which shall not be less than forty-eight (48) hours after
receipt of such notice) are so stated in the notice
submitting the proposal, the Parties shall cast their vote
within such lesser period. The Operator shall use all
reasonable endeavours to ensure that each Party is aware of
the proposal. Failure by a Party to cast its vote within
the relevant period shall be regarded as a vote by that
Party against the proposal.
(c) Where the Parties are requested to vote in
circumstances other than those described in Clause 12.19 on
any proposal in respect of a well on which drilling
equipment is then located:
(i) any request made or response given may be made or
given by telephone and shall be confirmed by facsimile
the same day or, if outside normal business hours, on
the next Business Day. Any time periods provided in
this Clause 7.6(c) shall begin to run from the time of
such request; and
57
(ii) each Party shall cast its vote within twenty-four
(24) hours of the receipt of such request or within
such longer period as is stated in the request.
Failure of a Party to cast its vote within the relevant
period shall be regarded as a vote by that Party
against the proposal.
(d) If the proposal is not one to which Clause 7.6(b),
Clause 7.6(c) or Clause 12.19 applies and within six (6)
Business Days after receipt of such notice, a request by any
Party is made for a meeting to consider such matter, it
shall be considered at a meeting duly called for that
purpose. If a meeting is not requested, then at the
expiration of the period designated in the notice given by
the Operator, the Operator shall give to each representative
written notice stating the tabulation and results of the
vote. The absence of a response by any representative shall
be deemed to be a negative vote.
(e) Decisions of the Parties made pursuant to Clause 7.6
shall be made by the same vote as is provided for in Clause
7.3 and shall have the same effect as decisions made at a
meeting of the Operating Committee pursuant to Clause 7.3.
7.7 Sub-Committees
The Operating Committee may establish such sub-committees,
including a technical sub-committee, consisting of a nominee of
each Party, as the Operating Committee may deem appropriate. The
functions of such sub-committees shall be determined by the
Operating Committee. Such sub-committees shall meet whenever
requested by the giving of ten (10) Business Days' written notice
by the Operator (which shall give such notice within five (5)
Business Days after it is requested to do so by any Party). Such
sub-committees shall be advisory only and shall have no power to
direct the Operator or the Operating Committee.
7.8 Place of Meetings
Except as provided for in Clause 7.5(c), all meetings of the
Operating Committee shall be held at an office nominated by the
Operator or such other place as may be decided by the Operating
Committee.
7.9 Operator's Duties Concerning Meetings
With respect to meetings of the Operating Committee, the
Operator's duties shall include, but not be limited to:
(a) preparation and distribution of an agenda together with
reasonably adequate supporting information;
(b) organisation and conduct of the meeting;
58
(c) preparation of a written record of decisions taken at
each meeting for signature by all Parties prior to the end
of the meeting;
(d) preparation of minutes of each meeting with copies
thereof delivered to the representatives of the Parties as
soon thereafter as possible (but no later than ten (10)
Business Days) for approval as to the accuracy thereof
provided always that if none of the representatives of the
Parties to whom copies of any such minutes are required to
be sent shall object thereto by writing to the Operator
within fifteen (15) Business Days of receipt of the copy
then such minutes are deemed to have been approved provided
further that the failure by the representatives to approve
such minutes shall not invalidate any decision taken at such
Operating Committee meeting; and
(e) maintenance of a permanent file of all Operating
Committee decisions.
7.10 Operating Committee's Functions
The functions of the Operating Committee shall include, but
not be limited to:
(a) review and approval of programs and budgets and of
AFEs;
(b) determining policies with respect to all Joint
Operations;
(c) consideration of the necessity or otherwise of
feasibility studies and terms of reference thereof in
relation to Joint Operations on the Area;
(d) approval of the locations and well plans of all
proposed xxxxx;
(e) approval of well spacing patterns;
(f) approval of production profiles;
(g) determining applications for the renewal of the Permit;
and
(h) deciding such other matters pertaining to Joint
Operations and proposed Joint Operations as may arise from
time to time and are required to be submitted to the
Operating Committee by the terms of this Agreement and to
make decisions in respect of all other matters pertaining to
this Agreement not assigned to the Operator or the Parties
hereunder.
59
7.11 Minimum Participating Interest for Representation
A Party whose Participating Interest is less than five
percent (5%) or becomes less than five percent (5%), shall not be
entitled to appoint or retain a representative or alternate
pursuant to Clause 7.2, nor to have a vote proportionate to its
Participating Interest in connection with any decision of the
Operating Committee, except as hereinafter provided.
Two or more Parties, having Participating Interests the sum
of which is five percent (5%) or more, may combine to appoint a
representative and alternate pursuant to Clause 7.2, which
representative shall represent and be deemed authorised to bind
such Parties in every way as though such Parties were one Party
having a Participating Interest equal to the sum of such Parties'
Participating Interests, and such Parties shall be entitled to
cast a vote in connection with any decision of the Operating
Committee as though such Parties were one Party having a single
vote proportionate to the sum of such Parties' Participating
Interests.
8 PROGRAMS AND BUDGETS
8.1 Submission of Programs and Budgets
During the term of this Agreement and unless otherwise
agreed by the Operating Committee the Operator shall submit to
each Party's representative on the Operating Committee by no
later than three (3) months before the commencement of each
Permit Year a recommended program and budget for such Permit
Year.
8.2 Adoption of Programs and Budgets
Unless otherwise agreed by the Operating Committee, by no
later than one (1) month before the commencement of each Permit
Year the Operating Committee shall meet to decide upon the
program and budget for such Permit Year. Subject to the
provisions of Clauses 8.4, 8.5 and 8.10 to 8.12 inclusive, such
decision shall oblige the Parties to bear and pay their
respective Participating Interest shares of all liabilities,
costs and expenses arising or incurred under the program and
budget so approved.
8.3 Minimum Programs, Budgets and Work Obligation Determination
(a) If by fifteen days before the commencement of any
Permit Year the Operating Committee having used all
reasonable endeavours has been unable to decide on the
program and budget for that Permit Year the Operating
Committee shall attempt to determine a programme and budget
sufficient to meet the Work Obligation for such Permit Year
by the affirmative vote of Parties the aggregate of whose
60
Participating Interests exceeds fifty percent (50%). If the
Parties at any time from time to time, fail to approve an
AFE necessary to meet that program and budget, then the
Operating Committee shall be deemed to have approved all
AFEs necessary for the Operator to carry out Joint
Operations sufficient to meet, all of the Work Obligation
relating to that Permit Year, which has not by that date,
been satisfied.
(b) If the Operating Committee is still unable to decide
upon a program and budget within ten (10) Business Days
after the commencement of such Permit Year, the Operator
shall prepare and dispatch without delay and in any event by
not later than thirty (30) Business Days after the
commencement of the Permit Year to each of the Parties a
program and budget sufficient to meet the Work Obligation
for such Permit Year. The Operating Committee shall be
deemed to have approved such program and budget and all AFEs
necessary to give effect thereto and each of the Parties
shall be liable to the extent of its Participating Interest
for all costs and expenses incurred by the Operator in
carrying out the Work Obligation in accordance with the
AFEs.
(c) Not less than two(2) months prior to any date on which
a Work Obligation is to be agreed with the Minister for a
new period of the Permit, the Operating Committee shall meet
to vote upon the program to be submitted as the proposed
Work Obligation.
(d) Any Party voting against a program agreed under
paragraph c) shall despite clause 16.2 (a) have the right to
withdraw from the Permit by giving notice of its intention
to do so within 10 days of the vote being taken. Such a
withdrawn party must be notified of any modified programme
submitted under 8.3 (e) and is deemed not to have withdrawn,
unless anew notice under (e) is received.
(e) If the Minister withholds approval of the program
submitted in accordance with paragraph c) above and invites
submittal of a modified program in accordance with the Act,
then the Operating Committee shall meet and vote on a
modified program; and the right for a Party to withdraw,
having voted against the modified program will apply in the
same manner as in paragraph d) above.
8.4 Review of Programs and Budgets
Each approved program and budget shall be reviewed by the
Operating Committee at such times as the Operating Committee may
decide. If upon any such review the program and budget is
amended, the amended program and budget shall become the approved
61
program and budget provided always that any such amendment shall
not invalidate any authorised commitment or expenditure made by
the Operator prior thereto.
8.5 Authorities for Expenditure (AFEs)
Subject to the provisions of Clauses 8.3, 8.6, 11.7 and
11.8, the Operator shall not enter into any commitment or incur
any expenditure whether under an approved program and budget or
otherwise except in accordance with an AFE approved in accordance
with the following provisions of this Clause 8.5:
(a) The Operator shall after the Operating Committee has
approved a program and budget prepare an AFE in respect of
each seismic program, well or other major division of work
in the approved program and submit each such AFE to the
Parties in a timely fashion having regard to the Joint
Operations to be carried out under the approved program and
the provisions of this Clause 8.5.
(b) The Parties shall consider and unless a meeting of the
Operating Committee is called for such purpose vote upon
each AFE in accordance with the procedures provided for in
Clause 7.6 except that such vote must be communicated not
later than ten (10) Business Days after its submission to
the Parties. A Party who fails to vote on such AFE within
such ten (10) Business Day period shall be deemed to have
voted not to approve the AFE.
(c) When the Operating Committee approves an AFE the
Operator shall be authorised and obliged to proceed with the
expenditure or commitment provided for therein and each
Party shall be obliged to bear and pay its respective
Participating Interest share of all liabilities, costs and
expenses arising or incurred under the AFE so approved.
(d) Each AFE submitted to the Parties and each approved AFE
shall be divided into individual meaningful categories, each
of which shall describe the operational and financial
requirements thereof in sufficient detail to identify its
scope and set out particulars of the best estimate of the
funds required to complete the work.
8.6 When Expenditure in Excess of Approved AFE is Authorised
Notwithstanding the provisions in Clause 8.5:
(a) if at any time it becomes apparent to the Operator that
the expenditure which will be incurred in respect of Joint
Operations covered by an approved AFE will exceed by more
than ten percent (10%) the amount allowed in the approved
AFE, the Operator shall forthwith prepare and submit to the
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Parties for approval by the Operating Committee a
supplementary AFE relating to such excess expenditure. The
Operator shall use all reasonable efforts to prepare and
submit such supplementary AFE to the parties before any part
of such excess expenditure is incurred. If the Operating
Committee does not approve the supplementary AFE, the
Operator shall take all steps reasonably necessary to
conclude, as expeditiously as possible, and with minimum
cost to the Parties, the Joint Operations in respect of
which the excess expenditure has been or is about to be
incurred; and
(b) in the case of emergency, the Operator may take such
action as may in its judgment be necessary for the
protection of life or property and may incur all reasonable
expenditure on behalf of the Parties in so doing. In the
event of so doing, the Operator shall report promptly to the
Parties the amount of such expenditures and the
circumstances in which they were made.
Expenditure in excess of an approved AFE properly incurred
by the Operator pursuant to the provisions of paragraph (a) or
(b) above is deemed to be Authorised Expenditure within the
meaning of Clause 9.1.
8.7 Approved Well Plan
Prior to the commencement of drilling of any well, the
Operating Committee shall have approved a well plan ("Approved
Well Plan") for that well which shall provide the detail relating
to the drilling of the well to its agreed total depth, including
but not limited to the casing program, mud program and proposed
coring, testing and wireline logging operations.
8.8 AFEs for Xxxxx
The Operator shall compile an AFE for the drilling of a well
on a dry hole basis, but to include provision for such coring or
open hole testing as is in accordance with the Approved Well Plan
for that well.
8.9 Casing Point Decision
(a) Any decision by the Operating Committee pursuant to
Clause 8 regarding the drilling, deepening, reworking,
fraccing, side-tracking or plugging back of a well shall not
be deemed an agreement or decision regarding the setting of
casing and the making of a Completion attempt for
production.
(b) After any well drilled, deepened, reworked, fracced,
side-tracked or plugged back has reached Casing Point, the
Operator shall give immediate notice pursuant to Clause
7.6(c) to all Parties.
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(c) The notice given by the Operator pursuant to the
preceding Clause 8.9(b) shall contain the Operator's
recommendation either:
(i) to plug and abandon the well; or
(ii) to Complete the well as a producer in which case
the notice shall include the appropriate Completion
procedures and the estimated cost of Completion and
Parties voting for the recommended Completion shall be
deemed to have voted in favour of a formal AFE to be
submitted as soon as practicable in the sum of such
estimated Completion costs.
(d) Each Party shall vote on the proposal in accordance
with Clause 7.6(c).
(e) If such number of Parties the aggregate of whose
Participating Interests equals or exceeds the percentage
required for an affirmative vote of the Operating Committee
pursuant to Clause 7.3 approves the Completion of such well,
the Operator shall proceed to attempt the Completion of such
well as if such Completion had been approved at a meeting of
the Operating Committee.
(f) If there is a lesser percentage of approval for
Completion than that referred to in Clause 8.9(e) or if less
than all Parties have voted to plug and abandon the well,
then the Operator shall advise all Parties of the result of
the vote and any Party which voted for the Completion of the
well may thereupon immediately request that the operation to
plug and abandon the well be delayed (at such Party's
expense) for a period of up to 24 hours to enable Sole Risk
Operations to be considered. If no such request is made or
if at the end of the said 24 hours no Sole Risk Operation
Notice has been given, the Operator shall plug and abandon
the well.
(g) Any notice to be given or election to be made pursuant
to this Clause 8.9 may be given or made by telephone and
shall be confirmed by facsimile as soon as practicable
following such telephone call. Any time periods provided in
this Clause 8.9 shall begin to run from the time of such
telephone call.
8.10 Rights of Party Voting Against Operating Programs and Budget
(a) Subject to Clause 8.3, if any Party through its
representative at a meeting of the Operating Committee held
to approve a programme and budget, votes against the
carrying out of any Joint Operations consisting of the
drilling of one or more xxxxx which are not required to meet
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the work Obligation for the relevant Permit Year
("Additional Joint Operations") but which is included within
a program and budget for that Permit Year approved or deemed
to be approved by the Operating Committee, then such Party
may notify the Operator within the relevant time limits
specified in Clause 8.12, that it will not participate in
the Additional Joint Operations ("Non-Consenting Party").
(b) Subject to Clause 8.11, all the Parties which have
approved the program and budget containing the Additional
Joint Operations ("Consenting Parties") will thereafter
share in all costs, risks, liabilities, expenses and
benefits arising or incurred with respect to the Additional
Joint Operations in the proportion that each of their
respective Participating Interests bears to the total of the
Participating Interests of all the Consenting Parties.
8.11 Consenting Parties' Premium
(a) Where a Non-Consenting Party notifies the Operator that
it will not participate in the Additional Joint Operations,
the Operator shall notify the other Parties within 7 days of
receipt of such notice. If any Party which voted for the
program and budget containing the Additional Joint
Operations then notifies the Operator within 7 days of
receipt of the Operator's notice that it does not wish to
participate in the Additional Joint Operations, the Party
shall be deemed to be a Non-Consenting Party under this
clause and thereafter shall not be responsible for any
costs, risks or expenses attributable to the Additional
Joint Operations. In this event, the remaining Parties will
be given immediate notice of their projected re-adjusted
contribution to costs, and have an extra 48 hours to advise
Operator of their consenting or non-consenting status.
Notwithstanding the above, such 7-day notice period shall be
shortened to 48 hours if the Additional Joint Operations are
currently in progress.
(b) The Consenting Parties' rights, interests and benefits
in respect of the results of the Additional Joint Operations
shall be determined in accordance with those sub-clauses of
Clause 12 applicable to the nature of the Additional Joint
Operations as if the Additional Joint Operations were Sole
Risk Operations and the Consenting Parties were Sole Risk
Parties in such Sole Risk Operations.
8.12 Notice to Operator
Notice to be given to the Operator by a Non-Consenting Party
pursuant to Clause 8.10(a) shall be given within the following
periods:
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(a) if the Additional Joint Operations are to be commenced
within 30 days after the close of the meeting of the
Operating Committee at which the program and budget
containing the Additional Joint Operations was approved,
within 7 days after the date of that meeting;
(b) if the Additional Joint Operations are to be commenced
more than 30 days after the close of the meeting of the
Operating Committee at which the program and budget
containing the Additional Joint Operations was approved,
within 15 days after the date of that meeting.
(c) if the Additional Joint Operations are currently in
progress, within 48 hours after the receipt of notice from
the Operator thereof.
9 COSTS AND EXPENSES
9.1 Allocation of Expenditure
Subject to the provisions of this Agreement, all expenditure
relating to Joint Operations, including without limitation the
handling, treating, storing and transporting to the Delivery
Point of Petroleum produced from the Area shall, except as
otherwise specifically provided herein, be borne by the Parties
in proportion to their respective Participating Interests. All
liabilities of the Joint Venture shall be borne in the same
proportions. To the extent that any such expenditure is included
in an approved AFE or is otherwise authorised pursuant to this
Agreement, such expenditure shall be deemed to be authorised and
shall be referred to as "Authorised Expenditure".
9.2 Accounting Procedure as Basis
The Accounting Procedure shall be the basis for all charges
and credits to the Joint Account except as the Accounting
Procedure may be in direct conflict with this Agreement, in which
event the provisions of this Agreement shall prevail, and the
Operator shall keep its records of costs and expenditure in
accordance with such Accounting Procedure. The Operator must
charge on the basis that it is intended to neither gain nor lose
in performing the functions and duties of the Operator under this
Agreement.
9.3 Payment by Operator and Reimbursement
The Operator shall initially pay all Authorised Expenditure
and shall debit the Parties for their respective shares thereof.
Unless the Operator shall have received advances for such
purposes as provided for in this Agreement, each Party shall
forthwith reimburse the Operator for its share of such Authorised
Expenditure in accordance with the provisions of this Agreement.
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9.4 Calls by Operator
The Operator may require the Non-Operators to advance their
respective proportions of Authorised Expenditure in which event
the provisions of Article 1.2.1 of the Accounting Procedure shall
apply.
9.5 Banking of Funds
All funds received by the Operator under the provisions of
this Agreement (other than funds received for the purpose of a
Sole Risk Operation) shall be lodged by the Operator in a
separate bank account in the name of the Joint Venture maintained
by the Operator and styled as directed by the Operating
Committee. The Operator shall deposit to such account its own
share of Authorised Expenditure or of advances to meet Authorised
Expenditure due by it within the same time limits within which
the Non-Operators are required to pay their shares to the
Operator. Pending the expenditure thereof, the funds advanced by
any Party shall be held by the Operator in trust for the
respective Party, subject to the terms of this Agreement.
9.6 Investment of Funds
Each Party hereby authorises the Operator to invest the
funds lodged in the bank account referred to in Clause 9.5 from
time to time in interest bearing deposits with such bank or in
such other forms of investment as are from time to time approved
by the unanimous resolution of the Parties. Each Party shall be
entitled to receive or be credited with the interest earned upon
the investment of its funds.
9.7 Withdrawal of Funds
The Operator is hereby authorised to withdraw funds from the
bank account or interest bearing deposit or other investments as
they are required by the Operator to pay Authorised Expenditure.
10 INFORMATION ON JOINT OPERATIONS
10.1 Information as to Petroleum Production
The Operator shall furnish to each Party each month a
statement of the amount of Petroleum produced (including any
Petroleum used, flared or lost), gathered, treated, processed,
transported, stored and delivered during the preceding month and
in stock at the end of that month within the scope of such
Operator's responsibility.
10.2 Access to Records and Information
Unless otherwise specifically provided for in this Agreement
and subject to Clause 15.8 and upon reasonable notice to the
Operator each of the Parties shall have access at all reasonable
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times for the purpose of examination and, at its own expense,
copying of all tapes, data, reports, accounts, contracts, books,
records and all other information kept by the Operator in
compliance with its obligations hereunder including but not
limited to those relating to geological and geophysical surveys,
drilling, exploration, production and gathering, those relating
to amounts of Petroleum produced, gathered, treated, processed,
transported, stored and delivered and those relating to plant and
pipeline design, construction and costs.
10.3 Drilling Information and Privileges of Non-Operators
Prior to the commencement of any well for the Joint Account,
the Operator shall provide to each Party a copy of the Approved
Well Plan. With respect to any well drilled for the Joint
Account, and subject to Clause 15.8, the Operator shall furnish
to each Party, provided that weather or communication conditions
do not prevent the Operator from so doing:
(a) prompt notice by facsimile of the date of spudding in
of the well;
(b) daily drilling and geological reports;
(c) immediate advice by facsimile or telephone of:
(i) the encountering of any porous zone with showings
of hydrocarbons;
(ii) any other occurrence not specified in the Approved
Well Plan which might justify the testing or evaluation
of the zone in question; or
(iii) any material occurrence which the Operator
considers might justify a change from the Approved Well
Plan, together with a recommendation from the Operator
of any material departure from the Approved Well Plan
which the Operator thinks appropriate in the
circumstances;
(d) on request, at the expense of the requesting Party, a
complete set of washed samples of the cuttings of the
formations penetrated if practicable;
(e) access to all cores taken; and
(f) at the expense and risk of each Party and upon
reasonable notice to the Operator, access to the drilling
rig to such persons as that Party shall nominate for the
purposes of viewing any or all Joint Operations provided
that such access does not unreasonably interfere with Joint
Operations and that such persons comply with all applicable
safety requirements and directions.
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10.4 Testing and Information to Non-Operators
With respect to any well drilled, the Operator shall:
(a) be ready to receive the comments of and discuss with
the Non-Operators any advice given by the Operator pursuant
to Clause 10.3(c);
(b) proceed in all material respects in accordance with the
Approved Well Plan unless or until such time as the
Operating Committee directs otherwise;
(c) proceed with any variation of the Approved Well Plan
directed by the Operating Committee;
(d) take representative samples and drill stem test fluid
samples and supply each Non-Operator with all information
relative thereto; and
(e) supply each Non-Operator with copies of the test and
service report on each test run, including copies of
pressure charts provided that each Non-Operator shall be
entitled to no more than two copies of each such report and
related data.
10.5 Logging Information to Non-Operators
During the drilling of the well and upon the well reaching
the total depth, the Operator shall run all log surveys as are
approved by the Operating Committee and shall as soon as
practicable supply each Non-Operator with a copy of each log so
run.
10.6 Test Following Logging
At any time prior to any Operating Committee decision which
would negate such a request, if a Party requests (which request
may be made by telephone or facsimile) that the Operator tests an
interval in the well, the Operator shall promptly request the
Parties to vote on the proposal pursuant to the provisions of
Clause 7.6(c).
10.7 Seismic and Other Reports
The Operator shall supply each Party at the expense of the
Joint Account with:
(a) a copy of all seismic sections;
(b) a copy of the final report on all seismic surveys;
(c) a copy of the well completion report for each well; and
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(d) a copy of any other reports prepared on behalf of the
Joint Venture in connection with Joint Operations.
11 INSURANCE AND LITIGATION
11.1 Operator to Maintain Insurance
The Operator shall at all times while conducting Joint
Operations purchase and maintain for the Joint Account for the
protection and indemnification of the Parties:
(a) all such insurances as are required by the terms of the
Permit;
(b) personal injury insurance and property damage insurance
in respect of motor vehicles of all kinds engaged in Joint
Operations for a minimum of $5,000,000.00 or such greater
amount as the Operating Committee may from time to time
determine;
(c) workers compensation (including unlimited common law
risk), employer's liability and other insurance of a similar
or dissimilar nature as may be required by law;
(d) public liability insurance for a minimum of
$10,000,000.00 or such greater amount as the Operating
Committee may from time to time determine;
(e) industrial special risks insurance in respect of all
Joint Property for such amount as the Operating Committee
may from time to time determine;
(f) well control, pollution, seepage, clean up and
redrilling insurance (including underground blowout and
redrilling/recompletion) for a minimum of $10,000,000.00 or
such greater amount as the Operating Committee may from time
to time determine;
(g) insurance in respect of stocks of Petroleum held prior
to arrival at the Delivery Point in such amount as the
Operating Committee shall from time to time determine; and
(h) such other insurances or indemnities as the Operating
Committee may from time to time determine.
11.2 Contractors Insurance
The Operator shall in addition, require all contractors and
sub-contractors performing work for the Joint Venture to purchase
and maintain for the protection and indemnification of the
Parties insurances of the kind referred to in paragraphs (b), (c)
and (d) of Clause 11.1 insofar as relates to such work of such
70
contractors or sub-contractors provided that the Operator may
(unless otherwise directed by the Operating Committee) dispense
with any such insurance in any case in which the Operator
determines that in all the circumstances it is appropriate to do
so and may determine such lower limit for any such insurance as
the Operator deems appropriate.
11.3 Review of Insurances
The Operator will when requested by the Operating Committee
carry out such review of the insurance effected pursuant to
Clause 11.1 as the Operating Committee may require.
11.4 Naming of Parties as Co-insured
The Operator and the other Parties and other persons for
whose benefit any policy of insurance is effected pursuant to
Clauses 11.1 or 11.2 shall be named as co-insureds therein. The
Operator shall ensure that each such policy of insurance shall
contain:
(a) a waiver of the right of subrogation by the insurer in
favour of the Parties; and
(b) a cross liabilities Clause to the effect that for the
purposes of the policy each Party and other person
comprising the insured shall be considered as a separate
unit and the policy shall apply to each such Party or other
person in the same manner as if a separate policy had been
issued to each of them in its name alone and the insurer
waives all rights of subrogation or action which it may have
or acquire against any such Party or other person.
11.5 Advice to Non-Operators of Current Insurance
The Operator will advise the Parties promptly of any
additional insurance effected or of any insurances cancelled,
altered or lapsed.
11.6 Party's Right to Increase Insurance
Any Party may at its own cost effect or increase any such
insurance so far as it relates to the interest of such Party
under this Agreement.
11.7 Cost of Insurance and Charging of Losses
The actual costs of the insurance effected by the Operator
pursuant to Clause 11.1 shall be charged to the Joint Account.
Any liability, loss, damage, claim or expense relating to Joint
Operations, whether in respect of an event which has been insured
or not, shall be charged to the Joint Account and shall be borne
and paid by the Parties (without prejudice to any right of
71
indemnity or action which any Party may have) in proportion to
their Participating Interests at the time of the liability, loss,
damage, claim or expense in question.
Any Party may elect not to participate in any insurance if:
(a) it gives prompt notice of its non-participation to the
Operator (at least prior to the time at which the Operator
has entered into a contract for such insurance);
(b) its non-participation does not interfere, directly or
indirectly, with the Operator's negotiations for such
insurance and the other Parties participating in such
insurance or prejudice such insurance once obtained;
it produces to the Operating Committee such evidence of
insurance or financial responsibility, to cover its
Participating Interest share of the risks to be insured
against, as the Operating Committee determines to be
acceptable; and
any policy it effects to cover the risks to be insured
against includes waivers of subrogation by the insurer in
favour of the other Parties with respect to Joint Operations
and Joint Property and is subject to a condition that it
cannot be cancelled or varied, or permitted to expire,
without, in each instance, the insurer having given to the
other Parties at least 14 days notice of that intent.
11.8 Litigation
(a) Subject to the provisions of this Clause 11.8, all
matters relating to the enforcement or defence of rights in
respect of or arising out of Joint Operations shall be
determined by decisions of the Operating Committee.
(b) All actions taken by the Operator pursuant to this
Clause 11.8 and all liabilities incurred pursuant thereto
shall be for the Joint Account and the payment of such
liabilities shall constitute Authorised Expenditure.
(c) All the provisions of this Agreement shall apply in
relation to matters referred to in this Clause 11.8
including without limitation the provisions of Clauses 8.5
and 8.6 relating to AFEs, the provisions of Clause 9.4
relating to calls by the Operator and the provisions of
Clause 15 relating to defaults in payment.
(d) The Operator shall promptly notify the Parties of any
claim, litigation, lien, demand or judgment relating to
Joint Operations.
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(e) The Operator shall have the authority to prosecute,
pursue, defend or settle any claim, litigation, lien, demand
or judgment relating to Joint Operations where the total
amount in dispute and/or the then total amount of damages
together with any costs is estimated by the Operator to be
less than $20,000.00 or such other amount as may from time
to time be specified by the Operating Committee.
(f) The Operator shall not except at the direction of the
Operating Committee prosecute, pursue, defend or settle any
claim, litigation, lien, demand or judgment relating to
Joint Operations where the then estimated total amount in
dispute and/or the total amount of damages together with any
costs is $20,000.00 (or such other amount as may from time
to time be specified by the Operating Committee) or greater.
(g) Each Party shall promptly notify the other Parties of
any claim, litigation, lien, demand or judgment relating to
Joint Operations and shall use all reasonable endeavours not
to conduct such proceedings in such a way as to prejudice,
affect or vitiate any insurance effected pursuant to this
Clause 11.
(h) Notwithstanding the provisions of Clause 11.8(e), each
Party shall have the right to participate in any
prosecution, defence or settlement of any proceedings
conducted in accordance with Clauses 11.8(e) and 11.8(f) at
its sole cost and expense provided however that a Party
exercising such a right shall remain liable for its share of
Joint Venture costs.
(i) Any Party participating in the prosecution, defence or
settlement of any proceedings shall at all times take all
reasonable steps to ensure that it does so in such manner as
does not prejudice the rights of any of the other Parties.
(j) The provisions of this Clause 11.8 shall not apply to
claims, litigation, liens, demands or judgments made,
brought or obtained by a Party against another Party.
12 SOLE RISK OPERATIONS
12.1 Sole Risk Operation
The Parties shall propose and conduct Sole Risk Operations
in accordance with this Clause 12. A Party shall not give an
Sole Risk Operation Notice for a Sole Risk Operation (other than
a Sole Risk Operation where there is a rig on site as provided in
Clause 12.19) unless the operation described in the Sole Risk
Operation Notice has been proposed in the Operating Committee in
complete form as contemplated in Clause 12.2 and has been
rejected or after the next ensuing meeting of the Operating
Committee it has failed to gain approval.
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12.2 Proposal of Sole Risk Operation
A Proposing Party may at any time give to the Receiving
Parties an Sole Risk Operation Notice, in which the Proposing
Party shall state the proposed location, purpose, program,
estimated commencement date and estimated cost (set out in the
form of an AFE) of the Sole Risk Operation and which shall be
accompanied by all relevant technical information (other than
that already in the hands of the Parties) and interpretations
upon which the proposal is based.
12.3 Operating Committee to Consider Sole Risk Operation Notice
The Operator shall convene a meeting of the Operating
Committee to be held not less than twenty (20) Business Days and
not more than thirty (30) Business Days after the giving of an
Sole Risk Operation Notice. Unless all Receiving Parties shall
prior to the date of such meeting give notice to all Parties that
the Sole Risk Operation may proceed the Operating Committee shall
meet and consider the Sole Risk Operation Notice.
12.4 Sole Risk Operation Notice for Existing Well
If the Sole Risk Operation Notice relates to a well which is
suspended or is then being drilled other than a well which is
being or is about to be plugged and abandoned then the Sole Risk
Operation may proceed only if the Operating Committee approves
the same proceeding and in such event subject to such conditions,
if any, as the Operating Committee may impose on such Sole Risk
Operations.
12.5 Sole Risk Operation Notice for Exploration Well
If the Sole Risk Operation Notice relates to an Exploration
Well (which term includes an operation classified as an
Exploration Well pursuant to Clause 12.15) then the Operating
Committee shall either:
(a) decide that the Joint Venture shall drill a well or
conduct an operation having the same purpose as the well or
operation described in the Sole Risk Operation Notice, to be
commenced (which in the case of the drilling of a well means
spudded) not later than six (6) months after service of the
Sole Risk Operation Notice; or
(b) make no such decision, whereupon the Proposing Party
may proceed with the Sole Risk Operation, subject to the
remaining provisions of this Agreement.
If the Operating Committee decides in accordance with
paragraph (a) above and the Joint Venture fails to commence to
conduct the operations within the six (6) months period provided
for in that paragraph, then the limitation period of six (6)
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months referred to in Clause 12.9 is extended by the period of
six (6) months and the Proposing Party may proceed with the Sole
Risk Operation, subject to the remaining provisions of this
Agreement.
12.6 Sole Risk Operation Notice for Appraisal Well
If the Sole Risk Operation Notice relates to an Appraisal
Well (which term includes without limitation, operations
respectively classified as Appraisal Xxxxx pursuant to Clause
12.15 or Clause 12.18) then:
(a) if at the time of service of the Sole Risk Operation
Notice Petroleum is not being produced from the Reservoir in
respect of which the operation described in the Sole Risk
Operation Notice is to be conducted, the Operating Committee
shall:
(i) decide that the Joint Venture shall produce
Petroleum from such Reservoir within twelve (12) months
after the service of the Sole Risk Operation Notice; or
(ii) decide that the Joint Venture shall drill a well
or conduct an operation having the same purpose as the
well or operation described in the Sole Risk Operation
Notice, to be commenced (which in the case of the
drilling of a well means spudded) not later than twelve
(12) months after the service of the Sole Risk
Operation Notice; or
(iii) make no such decision, whereupon the
Proposing Party may proceed with the Sole Risk
Operation, subject to the remaining provisions of this
Agreement; or
(b) if at the time of service of the Sole Risk Operation
Notice Petroleum is being produced from the Reservoir in
respect of which the operation described in the Sole Risk
Operation Notice is to be conducted, the Operating Committee
shall decide either:
(i) that the Joint Venture shall drill a well or
conduct an operation having the same purpose as the
well or operation described in the Sole Risk Operation
Notice to be commenced (which in the case of a well
means spudded) not later than six (6) months after
service of the Sole Risk Operation Notice; or
(ii) make no such decisions whereupon the Proposing
Party may proceed with the Sole Risk Operation subject
to the remaining provisions of this Agreement.
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If the Operating Committee decides in accordance with
paragraph (a)(i) or (a)(ii) above and the Joint Venture fails to
produce Petroleum or commence to conduct the operations within
the twelve (12) month period respectively provided for in those
paragraphs, then the limitation period of six (6) months referred
to in Clause 12.9 is extended by the period of twelve (12)
months, and the Proposing Party may proceed with the Sole Risk
Operation, subject to the remaining provisions of this Agreement.
If the Operating Committee decides in accordance with
paragraph (b)(i) above and the Joint Venture fails to commence to
conduct the operations within the six (6) month period provided
for in that paragraph, then the limitation period of six (6)
months referred to in Clause 12.9 is extended by the period of
six (6) months, and the Proposing Party may proceed with the Sole
Risk Operation subject to the provisions of this Agreement.
12.7 Election to Participate
If in consequence of the operation of Clauses 12.3, 12.4,
12.5 or 12.6 the Proposing Party may proceed with the relevant
Sole Risk Operation then the Proposing Party may give notice to
each Receiving Party that it has become entitled to and intends
to proceed with the Sole Risk Operation and each Receiving Party
shall within ten (10) Business Days of receipt of such notice
give notice to each other Party stating whether that Receiving
Party will participate in the Sole Risk Operation and, if so, the
maximum interest (being not less than its Participating Interest)
it will take in such Sole Risk Operation, failing which that
Receiving Party is deemed to have given notice to each other
Party that it will not participate in the Sole Risk Operation.
12.8 Sole Risk Interest
A Sole Risk Party shall participate in a Sole Risk Operation
and bear the costs, risks and liabilities thereof in the
proportion that its Participating Interest bears to the aggregate
of the Participating Interests of the Sole Risk Parties (such
proportion being hereinafter called its "Sole Risk Interest")
unless otherwise agreed among the Sole Risk Parties. When each
Receiving Party has given notice pursuant to Clause 12.7, the
Proposing Party shall forthwith notify each Party which elects
pursuant to Clause 12.7 to participate in the Sole Risk Operation
("Electing Party") of its then Sole Risk Interest. If the then
Sole Risk Interest of any Electing Party exceeds the maximum
interest specified in its notice pursuant to Clause 12.7, then
that Electing Party may withdraw from the Sole Risk Operation by
notice to the remaining Electing Parties and the Proposing Party
given within five (5) Business Days after receipt of notice of
its then Sole Risk Interest, where-upon the remaining Electing
Parties and the Proposing Party shall agree the Sole Risk
Interests. If the remaining Electing Parties and the Proposing
Party are unable to agree the Sole Risk Interests within ten (10)
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Business Days after the Proposing Party notifies the Electing
Parties of their then Sole Risk Interests, then the Proposing
Party may proceed with the Sole Risk Operation alone and
thereafter no other Party may participate in the Sole Risk
Operation except with the unanimous consent of the Sole Risk
Parties.
12.9 Time for Commencing Operations
The Proposing Party may begin the Sole Risk Operation after
the Sole Risk Interests have been settled in accordance with
Clause 12.8. A Sole Risk Party shall not commence a Sole Risk
Operation more than six (6) months after giving the relevant Sole
Risk Operation Notice. Another Sole Risk Operation Notice may be
given for the same Sole Risk Operation after the expiration of
the said six (6) month period. A Sole Risk Operation, once
commenced, shall be diligently prosecuted or abandoned by the
Sole Risk Parties.
12.10 Conduct of Sole Risk Operation
If less than such Parties as would be able to make a
decision of the Operating Committee pursuant to Clause 7.3, elect
to participate in a proposed Sole Risk Operation then the
operation shall continue to be a Sole Risk Operation and the
provisions of Clauses 12.11 to 12.30 shall apply and the Sole
Risk Parties shall promptly commence (subject to Clause 12.9),
carry out and complete the Sole Risk Operation diligently in
accordance with good oil field practice.
12.11 Operator for Sole Risk Operations
If the Operator is a Sole Risk Party, it shall carry out the
Sole Risk Operation. If the Operator is not a Sole Risk Party,
the Sole Risk Parties may appoint the Operator, if the Operator
agrees to accept such appointment, or one of their number as Sole
Risk Operator. All the provisions of this Agreement relating to
the conduct of Joint Operations shall (to the extent they have
application) apply mutatis mutandis, to the Sole Risk Operator
and to the Sole Risk Operation.
12.12 Sole Risk Parties May Complete and Equip
The Sole Risk Parties which drill a well as a Sole Risk
Operation are entitled, but are not obliged, to Complete such
well, or Complete and Equip such well as part of such Sole Risk
Operation at their sole risk and expense. Sole Risk Parties
which Complete a well as a Sole Risk Operation are entitled, but
are not obliged, to Equip such well as part of such Sole Risk
Operation at their sole risk and expense. Sole Risk Parties
Equipping a well as a Sole Risk Operation or as part of a Sole
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Risk Operation shall not Equip such well so as to handle
production greater than that reasonably expected from such well,
unless the Operating Committee decides otherwise.
12.13 Premiums Accruing to Sole Risk Parties - Exploration
Xxxxx
If the Sole Risk Operation is the drilling of an Exploration
Well, and the operation results in the discovery of a Reservoir
from which Petroleum is subsequently produced, the Sole Risk
Parties are entitled as follows:
(a) the Sole Risk Parties may take all Petroleum produced
from such Reservoir by all xxxxx which are drilled and
Completed for production from such Reservoir until the Net
Proceeds of Sale thereof equals the sum of the Drilling
Costs, Completion Costs and Equipping Costs (if any)
incurred by the Sole Risk Parties as part of such Sole Risk
Operation; and
(b) in addition to such entitlements, the Sole Risk Parties
may take all Petroleum produced from such Reservoir and all
subsequent xxxxx which are drilled and Completed for
production from such Reservoir until the Net Proceeds of
Sale thereof is an amount equal to one thousand per centum
(1000%) of the Drilling Costs of such well or, if such well
is Completed for production by the Sole Risk Parties as part
of such Sole Risk Operation, an amount equal to one thousand
per centum (1000%) of such of the Drilling Costs and
Completion Costs as the Sole Risk Parties incur as part of
such Sole Risk Operation.
12.14 Premiums Accruing to Sole Risk Parties - Appraisal
Xxxxx
If the Sole Risk Operation is the drilling of an Appraisal
Well and such well is Completed for production from a Reservoir
which it was the purpose of the well to intersect, the Sole Risk
Parties are entitled as follows:
(a) the Sole Risk Parties may take all Petroleum produced
from such well from such Reservoir until the Net Proceeds of
Sale thereof equals the sum of the Drilling Costs,
Completion Costs and Equipping Costs (if any) incurred as
part of the relevant Sole Risk Operation; and
(b) in addition to such entitlement, the Sole Risk Parties
may take all Petroleum produced from such well until the Net
Proceeds of Sale thereof is an amount equal to five hundred
per centum (500%) of such Drilling Costs, Completion Costs
and Equipping Costs (if any).
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12.15 Deepening, Plugging Back, Reworking, Recompleting,
Sidetracking
If the Sole Risk Operation is the deepening, plugging back,
reworking, recompleting or sidetracking of a well, and such
operation results in:
(a) the discovery of a Reservoir from which Petroleum is
subsequently produced; or
(b) production from that section of the well deepened,
plugged back, recompleted or reworked; or
(c) production from a Reservoir intersected by the
sidetracked portion of the well; or
(d) production for the first time from a Reservoir
intersected by the well plugged back, recompleted or
reworked,
then for the purpose of dealing pursuant to Clause 12.13 or
Clause 12.14 with Petroleum produced as a result of such
operation, it is classified as an Exploration Well or anAppraisal
Well by reference to the definitions of those terms in this
Agreement and to the purposes as stated in the Sole Risk
Operation Notice for which such deepening, plugging back,
reworking, recompleting or sidetracking is conducted.
12.16 Premiums Accruing to Sole Risk Parties - Completing
If the Sole Risk Operation Notice is solely for the
Completing or the Completing and Equipping of a well from which
Petroleum is subsequently produced, the Sole Risk Parties are
entitled (in addition to any entitlement they may have pursuant
to Clause 12.17) as follows:
(a) the Sole Risk Parties may take all Petroleum produced
from such well until the Net Proceeds of Sale thereof equals
the Completion Costs; and
(b) in addition to such entitlement, the Sole Risk Parties
may take all Petroleum produced from such well until the Net
Proceeds of Sale thereof is an amount equal to five hundred
per centum (500%) of the Completion Costs.
12.17 Premiums Accruing to Sole Risk Parties - Equipping
If the Sole Risk Operation Notice is solely for the
Equipping or the Completing and Equipping of a well or xxxxx, the
Sole Risk Parties are entitled (in addition to any entitlement
they may have pursuant to Clause 12.16) as follows:
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(a) the Sole Risk Parties may take all Petroleum from such
well or xxxxx until the Net Proceeds of Sale thereof equals
the Equipping Costs of such well or xxxxx; and
(b) in addition to such entitlement, the Sole Risk Parties
may take all Petroleum produced from such well or xxxxx
until the Net Proceeds of Sale thereof is an amount equal to
five hundred per centum (500%) of the Equipping Costs.
12.18 Multiple Reservoirs
(a) If a well intersects more than one Reservoir, then in
respect of each such Reservoir it may be classified as an
Exploration Well or an Appraisal Well by reference to the
purpose, as stated in the Sole Risk Operation Notice, for
which the well was drilled. A well is classified as an
Exploration Well in respect of a Reservoir which is
discovered by that well, irrespective of the purpose for
which the well was drilled.
(b) If a well intersects more than one Reservoir, and in
respect of all such Reservoirs it is classified as either an
Exploration Well, an Appraisal Well, then for the purposes
of dealing pursuant to Clauses 12.13 to 12.17 with Petroleum
produced from such well, Drilling Costs are the Drilling
Costs of the well to its total depth, Completion Costs are
equal to the sum of the Completion Costs for all Reservoirs,
and Equipping Costs are equal to the total Equipping Costs
for the well, and (without prejudice to any further
entitlements which the Sole Risk Parties may have pursuant
to the remaining provisions of Clause 12) the Sole Risk
Parties may take Petroleum from all such Reservoirs until
their total entitlements in respect of the well have been
satisfied.
(c) If a well intersects more than one Reservoir, and in
respect of any of such Reservoirs it is classified
differently from another of such Reservoirs, then for the
purposes of dealing pursuant to Clauses 12.13 to 12.17, with
Petroleum produced from such well, Completion Costs are
equal to the sum of the Completion Costs for all Reservoirs,
and Equipping Costs are equal to the total Equipping Costs
for the well. Drilling Costs are:
(i) for a Reservoir or Reservoirs in respect of which
the well is an Exploration Well, such Drilling Costs as
would have been incurred if the intersection of that
Reservoir or the deepest of such Reservoirs was the
only purpose for which the well was drilled;
(ii) for a Reservoir or Reservoirs in respect of which
the well is an Appraisal Well intersected below the
deepest Reservoir in respect of which the well is an
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Exploration Well, the difference between the Drilling
Costs as ascertained for paragraph 12.18(c)(i) and such
Drilling Costs as would have been incurred if the
intersection of the Reservoir or the deepest of such
Reservoirs in respect of which the well is an Appraisal
Well were the only purpose for which the well was
drilled; for a Reservoir or Reservoirs in respect of
which the well is an Appraisal Well, and such well does
not intersect a Reservoir in respect of which the well
is an Exploration Well, such Drilling Costs as would
have been incurred if the intersection of the Reservoir
or the deepest of such Reservoirs in respect of which
the well is an Appraisal Well were the only purpose for
which the well was drilled; and
(without prejudice to any further entitlements which the Sole
Risk Parties may have pursuant to the remaining provisions of
Clause 12) the Sole Risk Parties may take Petroleum from all such
Reservoirs until their total entitlements in respect of the well
have been satisfied.
12.19 Sole Risk Operation Notice When Rig is on Site
Notwithstanding the other provisions of this Clause 12:
(a) if a drilling rig is on the location of the well when a
Party gives an Sole Risk Operation Notice proposing the
deepening, plugging back, testing, reworking, recompleting,
sidetracking or Completing of a well, the time within which
the Operating Committee shall decide in accordance with
Clause 12.4, 12.5 or 12.6 as the case may be (such decision
being made by facsimile vote of the Parties addressed to the
Operator and each other) and within which each Receiving
Party shall give notice to the Proposing Party pursuant to
Clause 12.7 of its election to participate in the Sole Risk
Operation shall be reduced to twenty-four (24) hours from
receipt of the Sole Risk Operation Notice, or to such longer
time as the Proposing Party may stipulate in the Sole Risk
Operation Notice. Unless the Operating Committee decides
otherwise, if the Sole Risk Parties do not commence the Sole
Risk Operation within five (5) Business Days after service
of the Sole Risk Operation Notice, the Sole Risk Operator
shall abandon the Sole Risk Operation; and
(b) if the Sole Risk Operation proceeds, the Sole Risk
Parties shall pay all costs accruing from the commencement
of such twenty-four (24) hour period. If the Sole Risk
Operation does not then proceed, the Proposing Party shall
pay such extra costs as may be occasioned by delay
(including without limitation, any delay to Joint Operations
during the twenty-four (24) hour period) associated with the
giving of the Sole Risk Operation Notice.
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12.20 Deepening or Sidetracking of Sole Risk Well
(a) Any Party may participate in a Sole Risk Operation
which is the deepening or sidetracking of a well to a depth
greater than the depth of that well as at the commencement
of the relevant Sole Risk Operation, which well was
previously the subject of a Sole Risk Operation, whether or
not such Party participated in such prior Sole Risk
Operation.
(b) If Petroleum is not produced from the well as a result
of the deepening or sidetracking operation, then:
(i) the Sole Risk Parties in respect of the drilling
of the well as originally programmed will be
responsible for the costs of abandoning that section of
the well resulting from that drilling; and
(ii) the Sole Risk Parties in the deepening or
sidetracking will be responsible for the costs of
abandoning that section of the well resulting from that
deepening or sidetracking operation.
(c) If Petroleum is produced from the well as a result of
the deepening or sidetracking operation, then the Sole Risk
Parties shall apply the Net Proceeds of Sale of such
Petroleum first in reimbursement to the Parties
participating in the well as originally programmed of their
Drilling Costs of the well to the depth from which the
deepening or sidetracking Sole Risk Operation commenced.
12.21 Priority of Recovery of Premium
If more than one Sole Risk Operation is conducted in a well,
then each group of Parties to a Sole Risk Operation may take
Petroleum from the well and apply the Net Proceeds of Sale in
reduction of costs and premium pursuant to Clauses 12.13 to
12.17, in the order of priority which is the same as the order in
which each Sole Risk Operation commenced.
12.22 Abandonment of Sole Risk Operation - Salvageable
Material
(a) If a well in respect of which a deepening, plugging
back, reworking, recompleting or sidetracking operation has
been conducted as a Sole Risk Operation is abandoned,
without any production being taken from it, then the
proceeds of sale of salvageable equipment supplied at the
cost of the Sole Risk Parties accrue to the Sole Risk
Parties. The proceeds of sale of other salvageable
equipment are for the Joint Account or, if the well in
respect of which the deepening, plugging back, reworking,
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recompleting or sidetracking operation was conducted was
itself drilled as a Sole Risk Operation, such proceeds
accrue to the Sole Risk Parties in such Sole Risk Operation.
(b) If the Sole Risk Parties abandon a well which has been
the subject of a Sole Risk Operation before production from
it, if any, has been sufficient to meet all costs and
premiums payable to the Sole Risk Parties, the proceeds of
sale of all salvageable equipment in and about the well, the
initial cost of which was included in the Drilling Costs,
Completion Costs or Equipping Costs of the well, are deemed
to be part of Net Proceeds of Sale of Petroleum produced
from the well, for the purpose of accounting between the
Sole Risk Parties and the Non-Sole Risk Parties.
12.23 Accounts During Sole Risk Operations and Premium
Recovery
(a) The computation of costs and expenses relating to Sole
Risk Operations shall be made in accordance with this
Agreement and the Accounting Procedure. While carrying out
Sole Risk Operations, the Sole Risk Operator shall maintain
separate books, records and accounts for Sole Risk
Operations which shall be subject to the same examination
and audit as are applicable to the books maintained for the
Joint Account.
(b) During the period that production of Petroleum from a
well is being applied in reduction of costs and premiums
payable to Sole Risk Parties in a Sole Risk Operation the
Sole Risk Operator for such well shall supply all Parties
each month with a statement on which shall appear:
(i) the names and Sole Risk Interests of the Sole Risk
Parties;
(ii) the quantity and Proceeds of Sale of Petroleum
produced from such well (and where necessary for the
purposes of Clause 12.18, from each Reservoir in such
well and where applicable other xxxxx drilled into the
same Reservoir) for the preceding month;
(iii) the Net Proceeds of Sale for the preceding
month and the manner of calculation thereof; and
(iv) the sum of costs and premiums remaining
outstanding and the manner of calculation thereof.
(c) The Sole Risk Parties shall promptly furnish to the
Sole Risk Operator each month information necessary for the
Sole Risk Operator to prepare such statement.
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12.24 Sole Risk Parties' Relationship
Unless the Sole Risk Parties otherwise agree concerning
their relationship with each other and the relationship of the
Sole Risk Parties and the Sole Risk Operator, then subject to the
specific provisions of this Clause 12 the provisions of this
Agreement shall (to the extent that they may have application)
apply mutatis mutandis both generally and to such relationship
during the conduct of a Sole Risk Operation and until all Sole
Risk Parties' entitlements pursuant to this Clause 12 have been
satisfied. No agreement between the Sole Risk Parties inter se
shall affect any of the rights of any Non-Sole Risk Party under
this Agreement.
12.25 Indemnification of Non-Sole Risk Parties
Each Sole Risk Party to the extent of its Sole Risk Interest
hereby indemnifies and holds harmless the Non-Sole Risk Parties
against all actions, claims, demands and proceedings whatsoever
brought by any third party (including without limitation any
employee of the Sole Risk Party) arising out of or in connection
with the Sole Risk Operation and shall insofar as it may be
within its control keep the Permit free from all liens, charges
and encumbrances which might arise by reason of the conduct of
the Sole Risk Operation. The approval of the Non-Sole Risk
Parties to the conduct of a Sole Risk Operation (whether or not
such approval is required) shall not constitute a waiver of these
provisions.
12.26 Use of Joint Property
(a) The Sole Risk Parties may use Joint Property in
connection with Petroleum produced as a result of a Sole
Risk Operation, to the extent of such of the capacity of
such Joint Property from time to time as is not required for
Joint Operations for the Joint Account.
(b) Any costs and expenses incurred by reason of such use
of Joint Property shall be paid by the Sole Risk Parties.
12.27 Non-Sole Risk Parties may Receive Information
The Sole Risk Operator may provide to the Non-Sole Risk
Parties all such information in respect of the Sole Risk
Operation.
12.28 Net Proceeds of Sale of Petroleum
In this Clause 12 the following expressions shall have the
following meanings:
(a) "Net Proceeds of Sale" of the relevant Petroleum means
the Proceeds of Sale less the sum of:
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(i) Government royalty and all other royalties, excise
and other levies calculated specifically in relation to
the relevant Petroleum as may be applied from time to
time; and
(ii) Operating Costs,
payable by the Sole Risk Parties in respect of such
Petroleum.
(b) "Proceeds of Sale" of Petroleum means:
(i) where it is sold at arms length, the monetary
value of the consideration received for the sale of
such Petroleum less Delivery Costs; and
(ii) where it is not sold at arms length, or where it
is sold prior to further processing by the Sole Risk
Party which owns it, a monetary value which such Sole
Risk Party and the Non-Sole Risk Parties agree to be
the actual consideration which would be obtainable for
such Petroleum upon a sale at arms length less an
agreed amount as the equivalent of Delivery Costs
provided that:
(A) if such Parties are unable to agree within
one (1) month of the first occasion upon which
Petroleum is taken by the Sole Risk Party which
does not intend to sell such Petroleum at arms
length, then such Parties shall agree upon a
qualified person who shall determine such monetary
value; and
(B) if such Parties are unable to agree upon a
qualified person within a further month, any such
Party may request the Chairman or the next most
senior Councillor (not being an officer of any
Party) of the Petroleum Association of New Zealand
to nominate a qualified person to determine such
monetary value. In making such determination such
person shall be acting as an expert and not as an
arbitrator and his decision shall be final and
binding on the Parties. The costs of the
determination shall be borne by the Parties in
proportion to their Participating Interests.
(c) "Delivery Costs" means all costs incurred in marketing
the relevant Petroleum and in transporting it from the
Delivery Point to the point of sale.
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12.29 Early Re-Entry by Non-Sole Risk Parties
(a) At any time within one hundred and twenty (120)
Business Days following the date upon which a Sole Risk
Operation was completed each Non-Sole Risk Party may, at its
option, elect to discharge its share of the total amount or
amounts to which each Sole Risk Party is entitled under
Clauses 12.13, 12.14, 12.16 or 12.17 by paying in cash to
the Sole Risk Parties within the said period of one hundred
and twenty (120) Business Days an amount equal to fifty
percent (50%) of the total of amounts which the Sole Risk
Parties would otherwise have been entitled to receive under
the relevant Clause.
(b) Upon making such cash payment such Non-Sole Risk Party
shall be restored to its full rights hereunder as if the
Non-Sole Risk Party had participated in such Sole Risk
Operation.
(c) For the purpose of facilitating a payment pursuant to
this Clause the Operator shall, within eighty (80) Business
Days after the completion of each Sole Risk Operation,
advise all Parties of the cost of such Operation.
(d) Within forty (40) Business Days of the date of the cash
payment by a Non-Sole Risk Party there shall be an
accounting and a cash settlement between such Non-Sole Risk
Party and the Sole Risk Parties for the Net Proceeds of Sale
(whether a positive or negative amount) calculated from the
date of completion of the Sole Risk Operation to the date of
the cash payment.
(e) A Non-Sole Risk Party exercising this option shall not
thereby become entitled to share in payments received in
respect of any other Non-Sole Risk Party pursuant to any of
Clauses 12.13, 12.14, 12.16 or 12.17.
12.30 Conclusion of Sole Risk Operation
As soon as sufficient Petroleum has been produced to satisfy
all costs and premiums due to the Sole Risk Parties, the well
with all associated equipment shall thereupon become Joint
Property.
13 DISPOSAL OF PRODUCTION
13.1 Ownership
Subject to the provisions of this Agreement each Party shall
have the right and obligation to receive and take in kind as its
own property at the Delivery Point and to sell or otherwise
dispose of its Participating Interest share of all Petroleum
86
produced from the Area excepting so much thereof as may be
required by the Operator in connection with the conduct of Joint
Operations or is unavoidably lost.
13.2 Royalties
All royalties, levies, duties and taxes payable to the
Government and all those payable to third parties shall be
delivered or paid whether in cash or in kind, by each Party in
respect of production taken by it and each Party hereby agrees to
indemnify and hold harmless all other Parties against all claims,
liabilities, costs and expenses arising out of its failure to
make such deliveries or payments.
13.3 Production Reports
The Operator shall maintain full and accurate records of
Petroleum production inventories and deliveries to the Parties.
13.4 Delivery
All Petroleum shall be delivered to the Parties by the
Operator at the Delivery Point.
13.5 Risk
The risk attaching to Petroleum delivered to each Party
shall pass to that Party at the Delivery Point.
14 OFFTAKE AGREEMENT
14.1 Crude Oil
If crude oil is to be produced from the Area the Parties
shall in good faith and not less than three (3) months, or such
lesser period as the Parties may agree, prior to the scheduled
date of first delivery of crude oil, negotiate and conclude the
terms of an agreement to cover the offtake of crude oil produced
from the Area. Such offtake agreement shall include, without
limitation, provision for:
(a) the Operator to provide regular periodic advice to the
Parties of estimates of total available production broken
down by succeeding periods, and grades of crude oil, for as
far ahead as is necessary for the Operator and the Parties
to plan offtake arrangements. Such advice shall also cover
for each grade of crude oil, total available production and
deliveries for the preceding period, inventory, overlifts
and underlifts and each Party's Participating Interest share
of available production after adjustment for overlifts and
underlifts ("Entitlement");
87
(b) elimination of overlifts and underlifts;
(c) the rights of the Parties if a Party fails in any
relevant period to take the whole or part of its Entitlement
for that period;
(d) delivery to the Parties of Entitlements to ensure, to
the extent Parties take delivery of their Entitlements
rateably to their accrual, that each Party shall receive
current Entitlements in like grade, gravity and quality to
that received by each other Party and, to the extent that
delivery on such basis is impracticable because of
availability of facilities and minimum cargo sizes, a method
of making periodic adjustments.
14.2 Natural Gas
The Parties recognise that, in the event of any discovery of
Natural Gas, it may or will be or become desirable for them to
enter into special arrangements for the disposal of the same and
they agree that, in such event and upon the request of any of
them, their respective representatives shall meet together as
necessary to consider their entry into such arrangements and
that, if and to the extent that any such arrangements are agreed,
they will adopt and undertake the same.
15 DEFAULTS
15.1 Notice of Default
(a) If any Party fails to make any payment as required by
this Agreement by the due date for payment, the Operator
shall upon becoming aware of such failure give notice of
such failure to such Party giving particulars of the alleged
failure and of the amount thereof ("Unpaid Amount").
(b) If at the expiration of ten (10) Business Days after
receipt of such notice such Party or any of their respective
Participating Interests or other person (not being a Party)
on its behalf has not paid in full the amount due by it and
all amounts subsequently due to the Operator pursuant to
this Agreement by such Party, such Party ("Defaulting
Party") shall be in default pursuant to this Agreement. The
Operator shall promptly give notice of all such defaults to
all Parties.
(c) Each such notice ("Default Notice") shall set out
particulars of the Unpaid Amount. For the purpose of this
Clause 15 all Parties other than any Defaulting Party are
referred to as the "Non-Defaulting Parties".
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15.2 Defaulting Party Liable for Interest
(a) Any amount payable by a Defaulting Party which remains
unpaid shall bear interest and the Defaulting Party shall
pay interest at the Default Interest Rate (which is
applicable on the due date for payment of such amount) from
the due date of payment of such amount until the actual date
of payment.
(b) Such interest shall accrue to the Non-Defaulting
Parties in proportion to their respective Participating
Interests or if one or more of the Non-Defaulting Parties
become Paying Parties within the meaning of Clause 15.6,
then thereafter to the Paying Parties as is provided in
Clause 15.6.
15.3 Payment by Operator
In the event that the payment which a Party that is or
becomes a Defaulting Party has failed to make is a payment due
under this Agreement to a person who is not a Party, the Operator
may and shall if so directed by the Operating Committee, by a
vote of Non-Defaulting Parties whose Participating Interests
aggregate a simple majority of the total Participating Interests
of the Non-Defaulting Parties, pay the same to such person. Any
amount so paid shall constitute a debt immediately due and
payable by such Party to the Operator.
15.4 Defaulting Party may be Sued
Without prejudice to any other remedy for or consequence of
default provided for in this Agreement, the Operator shall if so
directed by the Operating Committee by a vote of Non-Defaulting
Parties whose Participating Interests aggregate a simple majority
of the total Participating Interests of the Non-Defaulting
Parties xxx in any Court of competent jurisdiction a Defaulting
Party (which term shall without limitation include any Party
removed from the position of Operator for failing to pay or
contribute or advance its proportionate share of Authorised
Expenditure) for the recovery of any moneys due and payable to
the Operator or the Paying Parties (as defined in Clause 15.6) or
any of them by that Defaulting Party which remain unpaid by the
Defaulting Party at the expiration of ten (10) Business Days
after the receipt of the Default Notice by the Defaulting Party.
15.5 Non-Defaulting Parties to Contribute
If at any time after the end of the ten (10) Business Days
period referred to in Clause 15.4 the Operator shall not then
have received in full from the Defaulting Party or any other
person (not being a Party) on its behalf the then aggregate of
the Unpaid Amount of such Defaulting Party plus interest thereon
89
at the Default Interest Rate the Operator may and shall if so
directed by the Operating Committee by a vote taken in accordance
with Clause 15.4, require by notice in writing each of the Non-
Defaulting Parties to pay to the Operator the amount of its
proportion of such Unpaid Amounts on a date ("Payment Date") not
less than five (5) Business Days after receipt of such notice.
Such proportion shall be that proportion which the relevant Non-
Defaulting Party's Participating Interest bears to the aggregate
of the Participating Interests of all the Non-Defaulting Parties.
A Party which does not pay each amount due by it under this
Clause 15.5 within ten (10) Business Days of receipt of a
request for payment of such moneys shall be regarded as a
Defaulting Party and all the provisions of this Clause 15 shall
apply to such Party in respect of any amount not so paid.
15.6 Rights of Paying Parties
A Non-Defaulting Party (including without limitation the
Operator in its capacity as a Party) which pays to the Operator
or bears any amount payable by it under Clause 15.5 is herein
called a "Paying Party" and is deemed to have advanced such
amount to the Defaulting Party on the terms that it is
immediately repayable and may xxx the Defaulting Party to recover
the same but without prejudice to any other rights and remedies.
The amount owing by a Defaulting Party to a Paying Party
shall bear interest at the Default Interest Rate from the date
the Paying Party made the payment under Clause 15.5 to the date
it has recovered such amount in full.
15.7 Defaulting Party's Petroleum
For so long as any Unpaid Amount is not paid in full the
Defaulting Party forfeits its rights to take any Petroleum
produced from the Area and the Operator shall be entitled to take
and receive all of the Defaulting Party's share of Petroleum
produced from the Area and to sell and dispose of the same until
such time as the net proceeds of sale of such Petroleum exceeds
the Unpaid Amount plus interest on the Unpaid Amount at the
Default Interest Rate. Such net proceeds of sale shall be
distributed to the Paying Parties in proportion to the amounts
paid by them pursuant to Clause 15.5 until all amounts owing by
the Defaulting Party to the Paying Parties plus interest thereon
at the Default Interest Rate has been paid in full and any
remaining surplus of such net proceeds of sale will be
distributed to the Defaulting Party. The receipt of any amounts
by the Non-Defaulting Parties under this Clause 15.7 shall be
without prejudice to any other rights or remedies of such Non-
Defaulting Parties.
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15.8 Suspension of Rights of Defaulting Party
A Defaulting Party shall not be entitled either to attend or
to vote at any meeting of the Operating Committee or the Parties
or to have access to Joint Operations or to records of Joint
Operations or information pursuant to Clauses 5.6 and 10 or to
receive information or be consulted with respect to Joint
Operations unless and until all amounts then due and payable by
that Defaulting Party in accordance with the terms of this
Agreement shall have been received in full or the default is
otherwise rectified or is waived by each Non-Defaulting Party.
Except that the Defaulting Party should have access to
information as reasonably necessary to remedy the default or to
dispute the call made.
15.9 Default of Operator in Payment
In the event that the Operator fails to make any payment as
required by this Agreement in its capacity as a Party thereto,
then unless and until a replacement Operator is appointed the
rights and responsibilities prescribed for the Operator under
this Clause 15 shall be exercised for and on behalf of the Non-
Defaulting Parties by the Party other than the Operator having
the greatest Participating Interest and such Party shall be
deemed to be the Operator for the purpose of exercising the
rights and duties of the Operator under this Clause 15.
15.10 Application of Defaulting Party's Funds
Upon default by any Party in the payment of any moneys
payable under this Agreement and without limiting Clause 15.7,
the Operator shall (notwithstanding anything contained herein to
the contrary, and without prejudice to other rights and
remedies), retain any moneys which may be held for such
Defaulting Party or which come to the hands of the Operator on
behalf of such Defaulting Party, and apply such moneys until the
amount owed by such Defaulting Party in accordance with this
Agreement has been paid in full.
15.11 Valuation of Defaulting Party's Interest
(a) If at the end of twenty (20) Business Days from the
date of receipt by a Defaulting Party of a Default Notice
the relevant Unpaid Amount and interest thereon have not
been paid in full, then unless:
(i) the Defaulting Party has reached agreement with
the Operator on behalf of all the Non-Defaulting
Parties as to the value of its Participating Interest;
or
(ii) all Non-Defaulting Parties have agreed that a
valuation should not be obtained,
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the Operator shall request the Chairman or the next most
senior Councillor (not being an officer of any Party) of the
Petroleum Association of New Zealand to nominate a person to
determine the value of the Participating Interest of the
Defaulting Party.
(b) The person so nominated shall value the Defaulting
Party's Participating Interest on the basis that the Joint
Venture is a going concern and the price payable is that
which would be payable by a willing but not anxious buyer to
a willing but not anxious seller dealing at arms' length.
In making such determination such person shall be acting as
an expert and not as an arbitrator and his decision shall be
final and binding on all Parties.
(c) The costs of obtaining such valuation shall in the
first instance be paid out of the Joint Account but shall be
charged to and recoverable from the Defaulting Party as
though it were part of the Unpaid Amount.
(d) Upon receipt of the valuation of the Participating
Interest of the Defaulting Party the Operator shall promptly
forward a copy of the same to each Party including the
Defaulting Party.
(e) The value of the Participating Interest of the
Defaulting Party as agreed pursuant to Clause 15.11(a) or as
determined pursuant to Clause 15.11(b) shall be and be
deemed to be the value of such interest for the purposes of
Clause 15.12.
15.12 Option to Purchase Defaulting Party's Interest
If at the end of forty (40) Business Days from the date of
receipt by a Defaulting Party of a Default Notice the relevant
Unpaid Amount and interest thereon have not been paid in full
("Option Commencement Date"), then each of the Non-Defaulting
Parties shall have an option and such Defaulting Party hereby
grants to each of the Non-Defaulting Parties the option
("Option") to purchase its Participating Interest (and if more
than one Non-Defaulting Party exercises such option, in the
proportions which the respective Participating Interests of such
Non-Defaulting Parties bear to the total of their Participating
Interests, or in such other proportions as such Non-Defaulting
Parties shall agree upon) and upon the following terms and
conditions:
(a) A Non-Defaulting Party may exercise or join in the
exercise of the Option at any time on or after the Option
Commencement Date provided that the Option shall cease to be
exercisable at the expiration of twenty (20) Business Days
after the earliest exercise of the Option by a Non-
Defaulting Party or in the event that on such earliest date
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of exercise the valuation of the Defaulting Party's
Participating Interest pursuant to Clause 15.11(b) has not
been received then at the expiration of twenty (20) Business
Days after the receipt of such valuation by all the Non-Defaulting Parties.
(b) A Non-Defaulting Party exercising the Option shall do
so by giving a notice in writing to the Defaulting Party and
at the same time giving a copy of such notice to all other
Parties.
(c) In the event of the exercise of this Option, the Option
Exercise Date shall be the earlier of the date upon which
all Non-Defaulting Parties have notified such exercise or
twenty (20) Business Days after notification by the first
Non-Defaulting Party to exercise such Option. (The Non-
Defaulting Party or Parties exercising the Option are
hereinafter referred to as the "Purchaser" or "Purchasers").
(d) The purchase price payable by the Purchasers for the
Defaulting Party's Participating Interest shall be a sum
equal to ninety percent (90%) of the value of such
Participating Interest as determined pursuant to Clause
15.11. Such purchase price shall be payable to the
Defaulting Party by each Purchaser in proportion to the
percentage of such Participating Interest it has acquired.
Each Party hereby agrees that the difference between the
full value of the Participating Interest of the Defaulting
Party and the selling price under this Clause constitutes a
pre-estimate of the liquidated damages which will be
sustained by the Non-Defaulting Parties by reason of breach
of this Agreement by the Defaulting Party.
(e) The completion of the purchase shall be effected at
whichever is the latest date of thirty (30) Business Days
after the Option Exercise Date or ten (10) Business Days
after the receipt of all necessary approvals to the purchase
or ten (10) Business Days after the receipt by the
Purchasers of the valuation of the Participating Interest of
the Defaulting Party pursuant to Clause 15.11(b).
(f) Upon such completion the Purchasers shall be at liberty
to deduct from the purchase price the following amounts and
to apply the amount deducted in paying or reimbursing such
amounts:
(i) the amount required to discharge or satisfy
liabilities secured by any charge or encumbrance over
the Participating Interest of the Defaulting Party;
(ii) the amount required to discharge the several
liabilities of the Defaulting Party at the date of
completion under this Agreement including all Unpaid
Amounts; and
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(iii) the amount of any stamp duty payable on any
transfer or other instrument arising from the exercise
of the option.
(g) Upon and in exchange for the payment to it of the
balance (if any) of the purchase price pursuant to the
preceding Clause 15.12(f) or, if such be the case, upon the
determination that there is no such balance payable, the
Defaulting Party shall forthwith do all such acts and things
and execute and deliver to the Purchasers all such
transfers, deeds and other documents as are necessary to
give effect to and complete the sale pursuant to this Clause
15.12.
(h) If the Defaulting Party fails to act in any manner
provided for in Clause 15.12(g) within twenty (20) Business
Days of a request so to do made by the Operator or other
Party nominated by the purchaser, then the Operator or other
Party nominated by the purchaser shall be and be deemed to
be the agent and attorney of the Defaulting Party for all
purposes necessary to give effect to the sale pursuant to
this Clause 15.12.
(i) Any sale pursuant to this Clause 15.12 shall be subject
to all Governmental consents and approvals required by law.
If any such consent or approval is refused any contract
constituted by an exercise of the Option hereunder shall
cease to have further force or effect.
(j) The remedying of the default in whole or in part after
the date of the exercise of the Option by the first Non-
Defaulting Party to exercise the same shall not derogate
from the rights of any of the Non-Defaulting Parties in
respect of this Option which rights shall remain in full
force and effect.
16 WITHDRAWAL AND SURRENDER
16.1 Any Party May Withdraw
Any of the Parties hereto may withdraw from the Joint
Venture constituted hereby, by giving notice in accordance with
the terms of this Agreement, but providing that no Party may
withdraw if it is participating in an approved programme and
budget or a Work Obligation which has commenced unless one or
more of the Non Withdrawing Parties agrees to accept a transfer
of the whole of the Withdrawing Party's Participating Interest.
16.2 Notice of Withdrawal
(a) Subject to Clauses 8.3 and 16.3 any Party desiring to
withdraw ("Withdrawing Party") shall give to the other
Parties notice of its withdrawal ("Notice of Withdrawal")
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not less than sixty (60) days prior to the end of a Work
Obligation stage.
(b) Such Notice of Withdrawal shall take effect on the last
day of the Work Obligation stage in which the Notice of
Withdrawal is given ("Effective Date of Withdrawal")
provided that the Withdrawing Party has complied with all of
its obligations in respect of the program and budget for
that Work Obligation stage and the then current Work
Obligation.
(c) Such Notice shall constitute an offer of assignment for
a consideration of $1.00 to the other Parties of the whole
of the Withdrawing Party's Participating Interest. The
Notice of Withdrawal shall not be revocable except with the
unanimous consent of all other Parties.
16.3 Other Parties may Join in Withdrawal
Each of the other Parties may within twenty (20) Business
Days of receipt of a notice given pursuant to Clause 16.2 give
notice to the other Parties that it elects to join in such
withdrawal to take effect on the Effective Date of Withdrawal
whereupon it will become a Withdrawing Party for the purposes of
this Clause 16. Such notice shall constitute an offer of
assignment for a consideration of $1.00 to the other Parties of
the whole of the Withdrawing Party's Participating Interest. The
election of a Party to join in withdrawal shall not be revocable
except with the unanimous consent of all non-withdrawing Parties.
16.4 Other Parties may Accept Assignment
The other Parties shall have forty (40) Business Days from
the latest date of receipt of notice given pursuant to Clauses
16.2 or 16.3 to notify the Withdrawing Party whether they accept
the offer and elect to receive an assignment of the Withdrawing
Party's Participating Interest in the proportions that their
respective Participating Interests bear to the aggregate of their
Participating Interests. If some only of such Parties accept
such offer or if the acceptance of any accepting Party is limited
in percentage, then the interest of the Withdrawing Party or the
portion of such interest remaining after the allocation of any
limited percentages accepted shall be distributed amongst the
other accepting Parties wishing to receive the same in the
proportions that their respective Participating Interests bear to
the aggregate of the Participating Interests of such Parties or
in such other proportions as such Parties agree among themselves.
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16.5 Prompt Execution of Documents
If some or all of the other Parties give notice pursuant to
Clause 16.4 of acceptance and election to receive such assignment
all Parties concerned shall promptly execute and deliver all
documents and do and perform all acts and things necessary and
appropriate to validly effect such assignment.
16.6 Withdrawing Party's Obligations
(a) In the event of an assignment under this Clause 16 the
Withdrawing Party shall remain liable to meet its
proportionate share of:
(i) all Authorised Expenditure and liabilities
incurred or accrued by the Operator on or before the
Effective Date of Withdrawal; and
(ii) all other liabilities of the Parties for anything
done or omitted to be done in the course of Joint
Operations on or before the Effective Date of
Withdrawal.
The Withdrawing Party shall remain responsible for such
obligations (including without limitation, payments of
amounts to the Operator) although the extent of such
obligations may not be ascertainable until after the
Effective Date of Withdrawal provided that the Withdrawing
Party shall not be liable for any obligation accruing after
the date of Notice of Withdrawal given pursuant to Clause
16.2 or the date of a notice given pursuant to Clause 16.3
in consequence of a decision by the Operating Committee
after such date either to renew the Permit or any other
title of the Joint Venture or to adopt a program and budget
to the extent that it exceeds a minimum program and budget
pursuant to Clause 8.3 or to increase any such program and
budget.
(b) Notwithstanding the provisions of Clause 16.6(a), in
the event that within one (1) year after the Effective Date
of Withdrawal of a Withdrawing Party the remaining members
of the Joint Venture resolve to abandon or determine the
Joint Venture, the Withdrawing Party shall remain liable for
and shall pay its proportionate share of the Net Abandonment
Costs incurred consequent upon that resolution determined on
the basis that such Withdrawing Party had not withdrawn from
the Joint Venture until the end of such year.
(c) For the purposes of Clause 16.6(b), "Net Abandonment
Costs" shall mean the rehabilitation costs, well abandonment
costs and any other costs of the abandonment of the Joint
Venture net of the salvage value of all Joint Property.
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16.7 Costs of Assignment
All costs incurred by a Party in connection with any
assignment under this Clause 16 including stamp duty,
registration fees and legal fees shall be paid by the Withdrawing
Party.
16.8 Assignment to all Parties
In the event that by the expiration of forty (40) Business
Days from the latest date of receipt of the notice from a
Withdrawing Party pursuant to Clauses 16.2 or 16.3 the interest
of the Withdrawing Party or any portion of such interest remains
unallocated or undistributed to other Parties pursuant to Clause
16.4 then the Withdrawing Party shall assign its interest or the
portion thereof remaining unallocated or undistributed to all of
the other Parties not being Withdrawing Parties in the
proportions agreed between them or in the absence of agreement in
the proportions that their respective Participating Interests
bear to the aggregate of their Participating Interests. In the
event that there are then no Parties willing to accept an
assignment of an unallocated or undistributed interest, all
Parties shall be deemed to have abandoned the Joint Venture
constituted hereby and shall forthwith co-operate with each other
to bring the Joint Venture to an end and effect a final
settlement between them.
16.9 Selection of Area Required to be Surrendered
(a) If at any time relinquishment or surrender of any
portion of the area subject to the Permit is required by
operation of law or the terms and provisions of the Permit,
the Operator shall give timely written notice to the
Operating Committee, setting forth in detail the reasons for
such relinquishment or surrender and a description of the
areas which the Operator suggests be relinquished or
surrendered in compliance with such requirement.
(b) The Operating Committee shall consider all matters
relevant to the question of such relinquishment or
surrender, and shall, within one (1) month (or such shorter
period of time as may be required by the Permit or by law),
determine and notify the Operator of the decision to be
carried out provided that any determination of the areas
which are to be relinquished or surrendered must be in
accordance with the decision of the Parties whose
Participating Interests are in aggregate not less than
ninety percent (90%). Failure of any Party to notify the
Operator of its decision within such period of time shall be
deemed to be a decision and notification by such Joint
Venturer in accordance with the Operator's suggestion. If
the Parties holding in aggregate Participating Interests not
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less than ninety percent (90%) cannot agree on the areas to
be relinquished or surrendered then the matter shall be
determined by the Operator.
16.10 Voluntary Surrender of Area
Any Party may at any time propose to the other Parties that
one or more portions of the Area be surrendered, which proposal
shall, subject to the granting of any necessary Government
consents, be given effect to if approved by all Parties.
17 ASSIGNMENTS AND MORTGAGES
17.1 Restriction
Except as permitted in this Article 17 or with the prior
written consent of all the other Parties, a Party shall not
directly nor indirectly, without the prior written consent of
each other Party, sell, assign, transfer, mortgage, pledge,
charge, encumber, lease, sublease, license or otherwise dispose
of (but expressly excluding including by way of change in the
ownership, management, trusteeship or control of any corporation
or trust estate holding a Percentage Interest but expressly
excluding or by way of sale of all of the shares in the capital
of a Party or any bona fide merger or amalgamation of the whole
of a Party's assets and undertaking with that of another person,
which may occur without such prior written consent of all the
other Parties) or create or suffer to exist a royalty (except a
governmental royalty) or other interest, lien, charge or other
encumbrance over, or trust in respect of, the whole or any part
of its right, title, interest, obligations or liabilities
(including, without limitation, any Percentage Interest) in,
under and pursuant to this Agreement whether by conditional or
unconditional act, deed, agreement, arrangement, understanding,
conduct, or by merger, consolidation or reconstruction or
operation of law or otherwise (hereinafter in this Article 17
called an "assignment", and the words "assign", "assignor" and
"assignee" and their derivatives shall have a corresponding
meaning).
No assignment shall be made by a Party if as a result
thereof the Percentage Interest of the assignor or assignee would
be less than 5%.
No assignment shall be made by a Party if as a result the
assignor or its Related Company affiliate or the assignee or its
Related Company affiliate would retain or acquire a Percentage
Interest in part but not all of the area of any Permit Licence.
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17.2 Assignment to Related Company - Affiliate Right
Subject to Sections 17.1 and 17.2, each Party may, subject
to any necessary approval of and registration by the Minister
Authority and any other government consent and to the provisions
of this Article 17, at any time upon prior written notice to each
other Party, assign the whole or any part of its Percentage
Interest to a Related Company.
If, within a period of 1 year after the effective date of
any assignment pursuant to Section 17.3.1, the Related Company
Affiliate of the assignor to which the assignment was made ceases
to be a Related Company an Affiliate of the assignor, then the
provisions of Section 17.4 shall apply, mutatis mutandis, and the
Related Company Affiliate shall forthwith give such notice
pursuant to Section 17.4.1 specifying the then current fair and
reasonable arm's length terms and conditions and each Party
(other than the assignor) shall have the right to require the
assignment to it (upon such then current fair and reasonable
arm's length terms and conditions) of a share of the Percentage
Interest previously assigned to such Related Company Affiliate
pursuant to Section 17.3.1, such share being in the proportion
which its Percentage Interest bears to the aggregate Percentage
Interests of all Parties so entitled, or as otherwise agreed by
such Parties. If a Party, within 28 days of receipt of notice
pursuant to this Section 17.3.2, as herein required gives notice
to each other Party that it considers the said terms and
conditions to be other than the then current fair and reasonable
arm's length terms and conditions, then the matter shall promptly
be referred to a person appointed in accordance with clause 15.
11(a) an Independent Expert, who shall determine for all Parties
what will be the said then current fair and reasonable arm's
length terms and conditions, acting as an independent expert and
not as an arbitrator.
17.3 Assignment to Non Related Company Non-Affiliate Right
Subject to Sections 17.1 and 17.2, each Party may, subject
to any necessary approval of and registration by the Minister and
any other government consent, and to the provisions of this
Article 17, at any time assign the whole or any part of its
Percentage Interest to any other Party or person to which it is
not a Related Company and which, in either case, has demonstrated
to each other Party both that it has, or has access to, adequate
financial capability to meet its prospective obligations and
liabilities under this Agreement and that it has adequate
petroleum industry experience. If a Party wishes to make such an
assignment, it shall first give notice to each other Party and
Operator specifying the name, address and qualifications of the
proposed assignee and the terms and conditions of the proposed
assignment.
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Thereafter, any of the other Parties may within sixty (60)
days after receipt of such notice, request by notice to all other
Parties the assignment of such whole or part Percentage Interest
to it in which event the assignment shall be made to it on the
same or commercially equivalent terms as the said proposed
assignment or, if more than one Party so requests by notice, to
them in the proportion (unless otherwise agreed between
themselves) which their respective Percentage Interest bear to
each other; provided that if the proposed assignment is to
another Party and one or more of the other Parties gives notice
then the firstnamed Party shall be deemed to have likewise given
notice hereunder; and
if none of the other Parties so requests the assignment of
such whole or part Percentage Interest, the relevant Party may
assign it to the proposed assignee on the proposed terms and
conditions; provided that the instrument evidencing the
assignment shall be executed by the parties thereto and submitted
for the approval of, and registration by, the Minister Authority
within one hundred and twenty (120) days of the expiry of the
sixty (60) day period referred to in the preceding sub-paragraph
17.4.1.1.
17.2 Assumption by Assignee
Any assignment by a Party of the whole or any part of its
Participating Interest or of such Participating Interest or part
by any person exercising power of sale pursuant to any mortgage
or charge otherwise permitted pursuant to this Agreement, shall
be made expressly subject to the terms and provisions of this
Agreement and shall be made expressly conditional upon:
the obtaining of all necessary consents and approvals to the
assignment; and
the execution and delivery by the assignee to the Operator
as agent for the Parties of a deed of assumption and
covenant in such form as the non-assigning Parties shall
approve (which approval shall not be unreasonably withheld)
whereby the assignee assumes the obligations and is
conferred with the rights of a Party under the documents
relating to the Joint Venture Documents to the extent of the
Participating Interest assigned.
17.3 Consequences of Assignment
(a) Subject to Clause 17.4 with effect on and from a date
agreed by the assigning Party and the assignee to be the
effective date of the assignment of a Participating Interest
or part thereof ("Effective Date of Assignment"), the
assignee shall, to the extent of the assignment, become a
Party in the place of the Party whose Participating Interest
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or part thereof has been assigned provided that the
assigning Party shall indemnify and keep indemnified the
other Parties against all liabilities accruing in respect of
the Participating Interest of the assigning Party up to the
Effective Date of Assignment.
(b) The assigning Party shall, in addition, remain liable to
and shall indemnify and keep indemnified the other Parties
against all liabilities accruing in respect of the
Participating Interest of the assignee on and after the
Effective Date of Assignment, unless and until the Parties
shall have resolved or shall resolve by unanimous vote, -
are you sure? that the assignee or proposed assignee is a
respectable and financially responsible person for the
purposes of the Joint Venture. Upon the later of such
unanimous resolution and the Effective Date of Assignment,
the assigning Party shall (as between the assigning Party
and the other Parties) be relieved and discharged from all
such liabilities of the assignee accruing thereafter and any
obligation to indemnify the other Parties in respect
thereof.
(c) The onus of proving to the satisfaction of the Parties
that the assignee or proposed assignee is a respectable and
financially responsible person for the purposes of the Joint
Venture shall rest upon the assigning Party. Upon proof that
a proposed assignee is such a respectable and financially
responsible person, no Party shall unreasonably withhold its
vote to a resolution on that matter.
(d) Each Party shall, when required by any such assignee,
perform, execute, acknowledge and deliver all such further
acts, deeds and assurances as may be reasonably required of
it to perfect the assignment of a Participating Interest or
part thereof to, or the assumption of rights or obligations
thereunder by, such assignee.
17.6 Charge of Participating Interest
Without prejudice to its right to charge any of its
property or assets other than its Participating Interest any
Party ("Chargor") may, without the consent of the other Parties
(but subject to all other necessary consents and approvals),
charge in favour of any person ("Chargee") the whole of its
Participating Interest provided that such charge shall be made
subject to the Joint Venture Documents.
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18 CONFIDENTIALITY
18.1 Information Confidential
This Agreement and all of its provisions, and all records,
reports and other data information and studies made in the course
of or resulting from Joint Operations except any of the same
which is at the relevant time, in the public domain
(collectively, "Information") shall be and remain confidential
between the Parties and shall not be disclosed to any third party
without the prior consent of all of them (which consent, provided
that an undertaking as to confidentiality by the third party in a
form reasonably satisfactory to the Parties is first obtained,
shall not be unreasonably withheld and shall be deemed to have
been given if Parties whose Participating Interests aggregate in
excess of seventy-five percent (75%) have consented) provided
always that any of the Parties shall be at liberty without such
consent to disclose or make a public statement or announcement
regarding the Information:
(a) to the extent that such Party (or in the case of
statements or announcements to be made by the Operator, any
Party) is legally required so to do, to any governmental
agency or instrumentality or by an official stock exchange
on which the shares of such Party or a Related Company are
quoted, in which case all reasonable efforts shall be made
to communicate the statement or announcement to the other
Parties prior to the disclosure announcement or publication;
(b) to any chargee, bank or other financial institution in
connection with the organisation of the Parties' financial
affairs or a bona fide prospective purchaser of part or all
of a Party's Participating Interest (including without
limitation, a corporation with whom a Party is conducting
bona fide negotiations directed toward a merger or
consolidation) provided that the chargee, bank, financial
institution or prospective purchaser agrees previously in
writing to keep the same confidential;
(c) to any of such Party's employees, directors,
consultants, legal counsel, auditors and other persons for
the purposes of all matters pertaining to such person's
duties provided that each of the persons to whom disclosure
is made then owes to the Party a duty to keep the same
confidential (the observance of which duty, the Party hereby
undertakes to the other Parties to use its best efforts, to
enforce).
18.2 Related Companies
The Information may be disclosed to Related Companies
without the prior consent of the other Parties provided that:
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(a) each recipient shall prior to the disclosure of the
Information have executed and deposited with the Operator an
undertaking as to confidentiality in favour of all Parties;
(b) breach by a recipient in terms of this Clause 18.2
shall be deemed to be a breach by the Party of its
obligations in terms of Clause 18.1; and
(c) the provisions of Clauses 18.1 and 18.5 apply, mutatis
mutandis, to each recipient as if it was a Party.
18.3 Compliance with Stock Exchange Requirements
To ensure compliance by any Party or Related Company of a
Party, the securities of which are listed on a stock exchange or
quoted on a quotation system ("listed company"), with the
listing requirements of that stock exchange or other applicable
securities disclosure laws the Operator shall disclose
immediately to all Parties any significant discovery of
hydrocarbons or mineralisation within the Permit. Any such
listed company shall have the right to make all or part of such
information available to such stock exchange or other public
disclosure system. A Party shall provide to each other Party,
for approval, a copy of each announcement, report or advice, if
reasonably practicable, prior to providing it to such stock
exchange, containing or referring to such information, made by it
or a Related Company.
18.4 Obligations to Continue
The obligations enumerated in Clauses 18.1 and 18.2 shall be
continuing obligations and shall be complied with notwithstanding
that a Party has ceased to be a party to this Agreement, a
corporation has ceased to be a Related Company or this Agreement
has been terminated.
18.5 Termination
The obligations described in this Clause 18 shall continue
to apply for a period of five (5) years after the date of
termination of this Agreement.
19 FORCE MAJEURE
19.1 Obligations Suspended by Event of Force Majeure
If any Party is rendered unable wholly or in part by Force
Majeure to carry out its obligations under this Agreement (other
than any obligation to make money payments) that Party shall give
to all other Parties prompt written notice of the Force Majeure
with reasonably full particulars concerning it. The obligations
of the Party giving the notice so far as they are affected by the
Force Majeure shall be suspended during but not longer than the
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continuance of the effects of the Force Majeure. The affected
Party shall use all reasonable efforts to overcome the effects of
the Force Majeure as quickly as possible.
19.2 Certain Actions not Required
The provisions of Clause 19.1 shall not require the
settlement of strikes, boycotts, lockouts or other labour
difficulty by the Party involved contrary to its wishes and such
matters shall be handled entirely within the discretion of the
Party concerned.
19.3 Meaning of Force Majeure
In this Clause 19 the term "Force Majeure" means any event
or circumstance beyond the reasonable control of a Party which
renders that Party unable in whole or in part to carry out its
obligations under this Agreement including without limitation,
strike, lockout, fire, flood, tornado, hurricane, lightning,
explosion, collision, radiation, act of God or the public enemy,
war, blockade, governmental regulation, order or decree,
uncontrollable delay in transportation, inability to obtain
adequate labour, contractors or necessary materials or equipment
in the open market, inadequate facilities for the transportation
of necessary materials or equipment, or any other cause, whether
similar or dissimilar to the causes herein specifically
enumerated, beyond the reasonable control of such Party and which
such Party is unable to overcome by the exercise of reasonable
diligence and at a reasonable cost, provided however, the lack of
finances or inability to borrow the same shall in no event be
deemed a cause beyond the reasonable control of a Party.
20 LAWS AND REGULATIONS
20.1 Subject to Applicable Laws
This Agreement and the respective rights and obligations of
the Parties hereto shall be subject to all valid and applicable
laws, rules, ordinances, regulations and orders of New Zealand,
and in the event that this Agreement or any provision thereof is
or the Joint Operations contemplated hereunder are found to be
inconsistent with or contrary to any such law, rule, ordinance,
regulation or order the latter shall be deemed to control the
former and this Agreement shall be regarded as modified
accordingly and as so modified shall continue in full force and
effect.
20.2 Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of New Zealand.
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20.3 Submission to Jurisdiction
Each of the Parties hereby submits unconditionally and
exclusively to the jurisdictions of the Courts in New Zealand
holding jurisdiction in relation to matters relating to this
Agreement.
21 NOTICES
21.1 Notice in Writing
A notice, demand, waiver, approval, consent, communication
or other document in connection with this document ("Notice"):
(a) may be given by an Authorised Officer of the relevant
party; and
(b) must be in writing; and
(c) must be left at the address of the addressee, or sent
by prepaid ordinary post (airmail if outside New Zealand) to
the address of the addressee or by facsimile to the
facsimile number of the addressee which is specified below
or if the addressee notifies in writing another address or
facsimile number then to that address or facsimile number.
21.2 Effective Date
Unless a later time is specified in it a Notice takes effect
from the time it is actually received or taken to be received.
21.3 Time of Receipt
A Notice sent by post or facsimile is taken to be received:
(a) in the case of a letter, on the 5th (10th, if outside
New Zealand) day after posting; and
(b) in the case of a facsimile, on production of a
transmission report by the machine from which the facsimile
was sent which indicates that the facsimile was sent in its
entirety to the facsimile number of the recipient notified
for the purpose of this clause if produced before 5 pm on a
business day otherwise on the next business day.
21.4 Address for Service
The address for service of a Notice shall be as follows:
INDO-PACIFIC ENERGY (NZ) LTD
of Xxxx-Xxxxxxx Xxxxx, 000 Xxxxxx Xx, Xxxxxx, Xxxxxxxxxx,
Xxx Xxxxxxx. ("Indo")
105
TRANS-ORIENT PETROLEUM (NZ) LIMITED
of Xxxx-Xxxxxxx Xxxxx, 000 Xxxxxx Xx, Xxxxxx, Xxxxxxxxxx,
Xxx Xxxxxxx. ("Trans")
21.5 Authorised Officer
For the purposes of Clause 21.1, an Authorised Officer of a
party includes a director, secretary or other governing officer
of the party.
22 GENERAL
22.1 Remedies not Exclusive
Each and every power and remedy herein specifically given to
a Party affected by the default of another Party shall be in
addition to every other power and remedy now or hereafter
existing at law or in equity, and each and every power and remedy
may be exercised from time to time and simultaneously and as
often and in such order as may be deemed expedient. All such
powers and remedies shall be cumulative and the exercise of one
shall not be deemed a waiver of the right to exercise any other
or others.
22.2 Mutual Indemnity
Subject to the provisions of this Agreement each Party
("Indemnifying Party") will indemnify and keep indemnified each
of the other Parties from every claim, demand, action or
liability or loss resulting from each and every breach or default
by the Indemnifying Party of any of its obligations under any of
the documents relating to the Joint Venture.
22.3 Limited Invalidity
If any Clause or part thereof of this Agreement shall be, or
shall be deemed to be, invalid for any reason whatsoever such
invalidity shall not affect the validity or operation of the
remainder of that Clause or any other Clause of this Agreement
except only so far as may be necessary to give effect to such
invalidity.
22.4 Waiver
No waiver by any Party of a right or a default hereunder or
any delay or omission in the exercise of any right, remedy or
power, shall constitute a waiver by such Party of any subsequent
right, power, remedy or default whether of a like nature or
otherwise.
106
22.5 How Moneys Paid
Any sum of money paid or tendered by the Parties hereto
shall be validly and effectually paid or tendered if such payment
is given, delivered or made in legal currency or by bank cheque
or by the party's own cheque after presentment and clearance.
22.6 Successors Bound
This Agreement shall enure for the benefit of and bind the
Parties and their assigns and successors in title.
22.7 Further Assurance
Each Party agrees that it will perform, execute, acknowledge
and deliver all such further acts, deeds, assurances and
instruments as shall be reasonably required for the purposes of
this Agreement or otherwise to carry out the agreements made
herein.
22.8 Entire Agreement
This Agreement is the entire agreement between the Parties
hereto in relation to its subject matter and supersedes all prior
agreements in connection therewith, and each Party covenants that
it has full right title and power to enter into this Agreement.
22.9 Amendment
This Agreement may not be amended except by one or more
written instruments executed by all the Parties hereto.
22.10 No Partition
No Party shall institute any action or proceedings for
partition or sale in lieu of partition of the Permit, the Area or
any of the Joint Property.
22.11 Counterparts
This Agreement may be executed in any number of counterparts
each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
EXECUTED AS AN AGREEMENT
Signed for Indo Pacific Energy (NZ) Limited
by its duly authorised representative
/s/ Xxxxx Xxxxxxx
Signature of representative
Office Held: President
Name of Representative: X. X. Xxxxxxx
107
Signed for Trans-Orient Petroleum (NZ) Limited
by its duly authorised representative
/s/ Xxxxx Xxxxxxx
Signature of representative
Office Held: President
Name of Representative: X. X. Xxxxxxx
108
SCHEDULE 1
ACCOUNTING PROCEDURE
The purpose of this Accounting Procedure is to establish
equitable methods for determining charges and credits applicable
to Joint Operations under the Operating Agreement to which this
Accounting Procedure is a Schedule ("Operating Agreement") in
respect of the Permit. The Parties agree that if any of such
methods prove unfair or inequitable to the Operator or the Non-
Operators, the Parties will subject to Article 2.2.3 meet and in
good faith endeavour to agree on changes in methods deemed
necessary to correct any unfairness or inequity.
The purpose of this Accounting Procedure is to ensure that
subject to Article 2.2.3 the Operator neither gains nor loses by
performing the activities of Operator.
In the event of any conflict between the provisions of this
Accounting Procedure and the provisions of the Operating
Agreement, the provisions of the Operating Agreement shall apply.
ARTICLE 1 - GENERAL PROVISIONS
1.1 Definitions
1.1.1 "Administrative Overhead" means the charge made to
the Joint Account pursuant to Article 2.2, which charge
shall be in lieu of and shall be deemed to cover all
indirect costs incurred by the Operator in respect of Joint
Operations which are not otherwise provided for in the
Operating Agreement or this Accounting Procedure.
1.1.2 "Advances" has the meaning given in clause 1.2
1.1.3 "Agreement of Non-Operators" means the agreement
or action of a majority in Participating Interests of the
Non-Operators.
1.1.4 "Annual Base Expenditure" means in respect of any
Permit Year, the Authorised Expenditure charged to the Joint
Account in that Permit Year in respect of Joint Operations
PROVIDED THAT Base Expenditure shall:
(a) exclude, without limitation, any charge to the
Joint Account in respect of Administrative Overhead;
(b) exclude, without limitation, any royalty, taxes,
duties and the like, levied on production or in respect
of income from production;
109
(c) include, without limitation, Authorised
Expenditure in respect of the construction and
maintenance of field access roads;
(d) include, without limitation, Materials only when
such Materials are utilised and charged to an approved
AFE; and
(e) be reduced by any credits received other than any
credits or receipts from sales of Material, insurance
claims or any other credits agreed by the Operating
Committee.
1.1.5 "Cash Calls" has the meaning given in clause 1.2
1.1.6 "Controllable Material" shall mean material which
the Operator subjects to record control and inventory. A
list of types of such materials shall be furnished to the
Non-Operators upon request.
1.1.7 "Material" means movable property, including
supplies and equipment, acquired and held for use in Joint
Operations.
1.1.8 Unless the provisions of this Accounting Procedure
require otherwise, all words and phrases contained herein
shall have the same meaning as in the Operating Agreement.
1.2 Advances and Payment by the Joint Venture Parties
1.2.1 If the Operator so requests, each of the Parties
shall advance to the Operator their share of the estimated
cash requirements for approved AFEs or Budget line items for
the succeeding month for the Joint Operations and in
accordance with the provisions of clause 1.2. . Such
estimates shall be based on the latest information available
to the Operator at the time the request is sent as to the
actual cash requirements for the month. No less than
fifteen (15) days prior to the beginning of each month, the
Operator shall furnish the Parties with its estimate of the
cash requirements by AFE or Budget line item for that month.
This estimate shall specifically identify the particular
approved AFE or Budget line item giving rise to such cash
requirements and shall constitute a request for an Advance
(a Cash Call). Appended to the Cash Call the Operator shall
provide a revised forecast of future cash requirements for
the following three (3) months, analysed by AFE or Budget
line item for each approved Budget. The cash forecast for
the first month will be the Cash Call for that month as
provided under this clause 1.2.1 Except as otherwise
provided in this agreement, Cash Calls shall not be made for
expenditures which require an AFE unless such AFE has been
approved or deemed approved as required under this
110
Agreement. Cash Calls may be made for certain licence
maintenance costs, required to keep the licence in good
standing, and Administrative Overhead costs as defined and
determined in clause 2.2.1 without prior approval of such
costs by way of AFE. Not withstanding the above, Cash Calls
on AFEs of less than $20,000 and on Administrative Overheads
will only be made quarterly, on the basis of forecast
quarterly expenditure, rather than monthly. In any the
Operator at all times provide estimates of forecast
expenditure monthly. Adjustments to reflect Administrative
Overhead to be charged on actual expenditures shall be made
at the end of the year, and such adjustment shall be
separately identified in Cash Calls and billing statements.
1.2.2 Cash Calls made by the Operator under 1.2.1 shall
be paid by each Party according to its proportionate share
in the currency (or currencies) requested by the Operator,
to the appropriate bank account (or bank accounts)
maintained by the Operator for the Joint Account, by the
fifteenth (15th) day of the month for which the Advances are
requested.
1.2.3 Should the Operator be required to pay any sums of
money which were unforeseen at the time of preparing the
monthly estimates of expenditure, under clause 1.2.1 and/or
are required to be paid before the Operator would receive
the Parties payments, under clause 1.2.2, the Operator may
make a written request to the Parties for special Advances
covering their share of such expenditures. A Special Cash
Call made under this clause 1.2.3 shall be paid by each
Party in its proportionate share, in the currency (or
currencies) requested within fourteen (14) days after
receipt of such Cash Call.
1.2.4 If it is determined that a Party's Advances for a
certain month exceed its share of cash disbursements for
that month, the Operator may reduce that Party's share of
the next succeeding Cash Call, after such determination, or
, at the Operator's discretion, the Operator shall deposit
such excess Advances as soon as possible in either a short
term interest bearing bank account with a New Zealand
trading bank or in a Government backed interest earing
deposit or such other financial institutions as agreed by
the Operating Committee, until they are required for
disbursement. However, if the excess funds are unlikely to
be required for future disbursements, a Party may request
that such excess Advances be refunded and the Operator shall
make such refund within fifteen (15) days after the receipt
of such request.
1.2.5 If a Party's Advances for a certain month are less
than its share of cash disbursements for the same month, at
the Operator's discretion, the deficiency shall either:
111
1.2.5.1 Be added to a subsequent request for
Advances, or
1.2.5.2 Be paid by such Party in the currency
requested by the Operator, within fifteen (15) days
following the receipt of the Operator's billing showing
such deficiency.
1.2.6 If the Operator chooses not to request Advances
from Non-Operators as provided under clauses 1.2.1 and
1.2.3, payment to the Operator by each Non-Operator shall be
made within twenty (20) days after receipt of the Joint
Operations billing statement as rendered under clause 1.3
1.2.7 If payment of the amount of any Cash Call or
statement provided for in this clause 1.2 is not made when
due:
1.2.7.1 The Operator shall immediately notify the
Party from whom such payment has not been received that
it has not received payment and such Party shall within
two (2) Business Days of receipt of such notice remedy
such failure to make payment; and
1.2.7.2 The unpaid balance thereof shall bear
interest at the Default Interest Rate from the due date
for payment to the date of actual payment.
1.2.8 Adjustments between estimated and actual costs and
expenses shall be made by the Operator at the close of each
month and the account of the respective Parties adjusted
accordingly.
1.3 Statements and Xxxxxxxx
1.3.1 Following the end of each month, the accumulated
charges and credits in the Joint Account will be determined
and the Operator will issue a statement recording actual
cash expenditure against Advances made for that month. Such
statement shall be accompanied by a Joint Operations billing
statement summarising all charges and credits accrued to the
Joint Account by appropriate classifications indicative of
the nature thereof and adjusted back to a cash basis in
relation to the amounts shown on the statement. All such
statements shall identify all expenditure by reference to
the relevant budget and AFE pursuant to which such
expenditure was incurred. The Operator shall provide each
such statement to the Non-Operators within twenty-five (25)
days of the expiry of the relevant month.
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1.4 Audits
1.4.1 A Non-Operator, upon at least twenty (20) Business
Days advance written notice to the Operator and other Non-
Operators, shall have the right at its sole expense to audit
the Joint Account and records relating to Joint Operations
for any Permit Year or portion thereof within the twenty-
four (24) month period following the end of such Permit
Year; Where there are two or more Non-Operators, the Non-
Operators shall make every reasonable effort to conduct
joint or simultaneous audits in a manner which will result
in a minimum of inconvenience to the Operator.
1.4.2 Subject to prior approval of all of the Parties,
the cost of any audit or verification of the Joint Account,
other than the audit provided for in Article 1.4.1, shall be
chargeable to the Joint Account.
1.4.3 In respect of charges made to the Joint Account
for Administrative Overhead pursuant to Article 2.2, the
Non-Operators right of audit shall include, without
limitation, verification of Annual Base Expenditure and the
calculation of Administrative Overhead thereon, but shall
exclude, without limitation, verification of the Operator's
indirect costs which such Administrative Overhead is deemed
to cover.
ARTICLE 2 - CHARGEABLE COSTS AND EXPENDITURES
The Operator shall charge the Joint Account for all costs
incurred pursuant to an approved AFE on the basis herein
provided. Such Joint Account costs shall include, but are not
necessarily limited to, items referred to below:
2.1 Joint Account (Direct Charges)
The Operator shall charge the Joint Account with all direct
costs and expenses incurred in connection with the Operating
Agreement, the Permit and the Joint Property. Without in any way
limiting the generality of the foregoing, chargeable direct costs
and expenditures shall include:
2.1.1 Labour and Related Costs
All personnel, other than those described in Article
2.1.1.(1) who are employed by the Operator and who work on Joint
Operations under the direct control of the Operator, will
maintain monthly time sheets for the purpose of charging salary
and related benefits direct to the Joint Account. Time sheets
will record time spent on Joint Operations whether such personnel
(including without limitation, managers, supervisors and
technical employees such as geologists, geophysicists, engineers,
drilling, production and construction supervisors and operators,
113
field co-ordinators, drafting staff and technical assistants and
non-technical employees such as landmen, purchasing officers and
such accounting staff as are specifically responsible for the
account of the Joint Venture) are engaged full-time or part-time
on Joint Operations and will show the time worked on the various
projects and other classifications of cost to enable personnel
costs to be allocated to such classifications for budget and cost
control purposes.
(1) Time sheets will not be maintained for such purposes by
the following personnel:
(i) Administrative support personnel, including
without limitation, secretaries, typists, filing
clerks, messengers, commissionaries, telephone and
facsimile operators;
(ii) Accounts personnel, including without
limitation, cashiers handling joint funds, employees
handling the salaries of personnel employed on Joint
Operations and employees handling invoices and accounts
for payment, but excluding such accounting staff as are
specifically responsible for the accounting of the
Joint Venture.
(2) The amount to be charged to the Joint Account for each
person who is employed by the Operator (other than any such
person who is described in Article 2.1.1(1)) and who is
working on Joint Operations under the direct control of the
Operator, shall be the proportion of the Operator's actual
cost of salaries and related benefits for each such person
that the time worked by such person on Joint Operations
bears to the total time worked by such person in respect of
which such cost is incurred. For the purpose of this
Article, the Operator's actual cost of salaries and related
benefits shall include salaries, wages, overtime pay, rest
day pay, holiday pay, long service pay, living and housing
allowances, accident and illness compensation, group life
insurance, pension, superannuation, retirement and other
benefit plans of a like nature and all payroll expenses
incurred by reason of any governmental regulations or laws.
(3) The cost of personnel described in Article 2.1.1(1)
which is applicable to Joint Operations shall be deemed to
be covered by the percentage charge for Administrative
Overheads in Article 2.2.1.
(4) Personnel Seconded to the Operator from a Non-Operator.
The amount to be charged to the Joint Account for each
person who is working on Joint Operations under the direct
control of the Operator (other than any such person who is
described in Article 2.1.1(1)) and who is seconded to the
114
Operator from a Non-Operator shall (subject to agreement to
the contrary) be the proportion of the Non-Operator's actual
cost of salaries and related benefits for each such person
that the time worked on Joint Operations by such person
bears to the total time worked by such person in respect of
which such cost is incurred. Time sheets must be kept by
such persons in the same form as those kept by the employees
of the Operator.
(5) For the purposes of Article 2.1.1(4) the Non-Operator's
actual cost of salaries and related benefits shall be as
defined in Article 2.1.1(2).
2.1.2 Material
Material purchased or furnished for use in Joint Operations
as provided under Article 3 herein.
2.1.3 Transportation and Employee Relocation Costs
(1) Transportation of Material and other related costs such
as expediting, crating, dock charges, inland and ocean
freight and unloading at destination.
(2) Transportation of employees as necessary or desirable
for the conduct of Joint Operations.
(3) Relocation costs of employees permanently or
temporarily assigned to the Joint Operations except that
relocation costs from New Zealand shall only be charged if
the employee is returned to the country from which he was
relocated. Such costs shall include transportation of
employees' families and their personal and household effects
and all other relocation costs in accordance with the
Operator's usual practice including without limitation, an
allocation of such costs on an equitable basis, having
regard to the amount of time each employee was engaged in
other areas of operation. The budget shall include an
estimate of the relocation costs likely to be incurred in
the current budget.
2.1.4 Services
(1) Contract services, professional consultants and other
services procured from outside sources other than services
covered by Article 2.1.7.
(2) Technical services, such as, but not limited to,
laboratory analysis, drafting, geophysical and geological
interpretation, engineering and related data processing,
performed by the Operator, the Non-Operators and their
Related Companies for the direct benefit of the Joint
115
Operations, provided such costs shall not exceed those
currently prevailing if performed by outside technical
service companies.
(3) Use of equipment and facilities furnished by the
Operator, the Non-Operator and their Related Companies at
rates commensurate with the cost of the ownership and
operation thereof, but such rates shall not exceed those
currently prevailing in the general vicinity of the Permit.
2.1.5 Damage and Losses of Joint Property
All costs or expenses necessary for the repair or
replacement of any Joint Property resulting from damage or losses
incurred by fire, flood, storm, theft, accident or any other
cause. The Operator shall furnish the Non-Operators with written
notice of damages or losses incurred in excess of $50,000.00 as
soon as practicable.
2.1.6 Insurance
(1) Premiums for insurance required by the Joint Property
or any law or regulation and insurance acquired for the
benefit of all Parties as approved by the Operating
Committee.
(2) Credits for settlements received from the insurance
carrier and others and attributable to the Joint Account.
(3) Actual expenditure incurred in the settlement of all
losses, claims, damages, judgments and other expenses for
the benefit of Joint Operations.
2.1.7 Legal Expense
(1) All costs or expenses of handling, investigating and
settling litigation or claims arising by reason of Joint
Operations or necessary to protect or recover the Permit or
the Joint Property, including but not limited to, attorney
fees, court costs, cost of investigation or procuring
evidence and amounts paid in settlement; however, no charge
shall be made for the services of the Operator and any
Related Company's legal staff unless by prior agreement of
the Non-Operators.
(2) All other solicitors or barristers or legal costs
necessary for Joint Operations, except no charge shall be
made for the services of the Operator's and any Related
Company's legal staff unless by prior agreement of the Non-Operators.
116
2.1.8 Duties and Taxes
All duties and taxes (except taxes based on income), fees
and governmental assessments of every kind and nature including,
without limitation, goods and services tax. The Operator shall,
in respect of Joint Operations, be responsible for compliance
with the New Zealand Tax Xxx 0000 Amendment Xxx 0000 including,
without limitation, the filing of returns and other related
matters.
2.1.9 Offices, Camps and Miscellaneous Facilities
Net cost of maintaining, equipping, furnishing and operating
any offices, sub-offices, camps, warehousing, housing and other
facilities directly serving the Joint Operations and approved by
the Operating Committee, shall be charged to the Joint Account.
If such facilities serve Joint Operations in addition to the
Joint Operations, the net cost shall be allocated to the
properties served on an equitable basis.
2.1.10 Payments to Government
Expenditure necessary to acquire and maintain rights under
the Permit.
2.1.11 Other Charges
All other costs and expenses incurred by the Operator which
are not mentioned above and which are necessary and proper for
the conduct of Joint Operations.
2.2 Joint Account (Indirect Charges)
All indirect costs incurred in respect of Joint Operations
shall be deemed to be covered by the following charges which the
Operator may charge to the Joint Account.
2.2.1 Administrative Overhead
Subject to the provisions of this Article 2.2, the Operator
shall charge to the Joint Account an Administrative Overhead
which shall be calculated by applying percentages to tranches of
Annual Base Expenditure as follows:
On the first $1,000,000 4%
On the next $4,000,000 3%
On the next $5,000,000 2%
Above $10,000,000 1%
However the minimum Administrative Overhead chargeable to
the Joint Account will be thirty thousand dollars (NZ$30,000.00)
per Permit Year chargeable on a pro rata monthly basis.
117
2.2.2 Subject to the charging of the minimum
Administrative Overhead referred to in Article 2.2.1,
Administrative Overhead shall be charged to the Joint
Account quarterly:
(a) based on that quarter's cumulative current year to
date Annual Base Expenditure; and
(b) reduced by the cumulative current year to date
Administrative Overhead charged to the previous
quarter.
2.2.3 The charges to be made pursuant to Article 2.2.1
shall be reviewed annually by the Operator in order to
verify that the charge equitably compensates the Operator
for the costs they are intended to cover and appropriate
adjustment either upward or downward will be made subject to
approval by the Committee.
2.3 Joint Account (Excluded Charges)
Depreciation, amortisation and restoration provisions of
facilities and other capital assets comprising the Joint Property
will not be recorded as operating costs in the Joint Account.
ARTICLE 3 - MATERIAL
3.1 Acquisitions
3.1.1 Material purchases shall be charged at net cost
incurred by the Operator. Net cost shall include, but shall
not be limited to, such items as transportation, duties,
licence fees and applicable taxes.
3.1.2 New Material (Condition "1") transferred from the
Operator's stock or other properties, shall be priced at new
purchase net cost determined in accordance with Article
3.1.1 above. Good used Material (Condition "2") being used
Material in sound and serviceable condition, suitable for
re-use without reconditioning, shall be priced at seventy-
five percent (75%) of such new purchase net cost. Used
Material which cannot be classified at Condition "2" shall
be priced at a value commensurate with its use.
3.2 Disposals
3.2.1 The Operator shall be under no obligation to
purchase the interest of Non-Operators in new or used
surplus Material.
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3.2.2 The Operator shall have the right to dispose of
surplus Material to a bona fide purchaser but shall advise
and secure prior agreement of the Non-Operators for each
proposed disposition of Materials costing in the aggregate
of $10,000.00 or more.
3.2.3 Proceeds from all sales shall be credited to the
Joint Account at the net amount actually collected.
3.3 Inventories
3.3.1 Inventories shall be taken annually by the
Operator of all Controllable Material unless otherwise
agreed by the Parties. The Operator shall give ninety (90)
days written notice of intention to take such inventories to
allow the Non-Operators to be represented when any inventory
is taken. Failure of any Non-Operator to be represented
shall bind such Non-Operator to accept the inventory taken
by the Operator.
3.3.2 Reconciliation of inventory with the Joint Account
shall be made and a list of overages and shortages shall be
furnished to the Non-Operators. Inventory adjustments shall
be made to the Joint Account, if required by the Parties.
3.3.3 Whenever there is a sale or change of
Participating Interest, a special inventory may be taken by
the Operator, provided the seller and/or purchaser of such
Participating Interest agree to bear all the expenses
thereof. In such cases, the seller, the purchaser and any
other Party shall be entitled to be represented and shall be
bound by the inventory so taken.
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SCHEDULE 2 - Description of the Permit Area
Having an area of 11,183.17 sq km
Coastline at 171 00E
North along 171 00E to
171 00E 45 00S
170 45E 45 00S
170 45E 44 45S
171 00E 44 45S
171 00E 44 00S
171 13E 44 00S
171 13E 43 40S
171 30E 43 40S
171 30E 43 30S
172 00E 43 30S
172 00E 43 15S
172 15E 43 15S
172 15E 43 10S
172 30E 43 10S
East along 172 30E to coast
South along coast to 43 33S
West along 42 33S around coastline to
172 33E 43 33S
172 33E 43 45S
172 38E 43 45S
South along 172 38E to coast
South and west along coast to 171 00 to join
