1
EXHIBIT 10.7
NOTE: This form contract is a suggested guide only and use of this form or any
variation thereof shall be at the sole discretion and risk of the user parties.
Users of the form contract or any portion or variation thereof are encouraged
to seek the advice of counsel to ensure that the contract reflects the complete
agreement of the parties and applicable law. The International Association of
Drilling Contractors disclaims any liability whatsoever for loss or damages
which may result from use of the form contract or portions or variations
thereof.
Revised June, 1994
[LOGO] INTERNATIONAL ASSOCIATION OF DRILLING CONTRACTORS
DRILLING BID PROPOSAL
AND
DAYWORK DRILLING CONTRACT - U.S.
TO:
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Please submit bid on this drilling contract form for performing the work
outlined below, upon the terms and for the consideration set forth, with the
understanding that if the bid is accepted by
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this instrument will constitute a contract between us. Your bid should be
mailed or delivered not later than _______________ P.M. on _______________,
19_____ to the following address:
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* * * * * *
THIS AGREEMENT CONTAINS PROVISIONS RELATING TO INDEMNITY,
RELEASE OF LIABILITY, AND ALLOCATION OF RISK
THIS AGREEMENT (The "Contract") is made and entered into on the date
hereinafter set forth by and between the parties herein designated as
"Operator" and "Contractor".
OPERATOR: Chesapeake Operating, Inc.
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ADDRESS: P.O. Box 18496
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Oklahoma City, Oklahoma 73154-0496
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CONTRACTOR Bayard Drilling Technologies, Inc.
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ADDRESS: 4005 N.W. Expressway, Suite 400E
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Oklahoma City, Oklahoma 73116
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IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained and the specifications and special provisions set forth in Exhibit
"A" and Exhibit "B" attached hereto and made a part hereof. Operator engages
Contractor as an independent Contractor to drill the hereinafter designated
well or xxxxx in search of oil or gas on a daywork basis.
For purposes hereof, the term "daywork basis" means Contractor shall furnish
equipment, labor and perform services as herein provided, for a specified sum
per day under the direction, supervision and control of Operator (inclusive of
any employee, agent, consultant or subcontractor engaged by Operator to direct
drilling operations). When operating on a daywork basis, Contractor shall be
fully paid at the applicable rates of payment and assumes only the obligations
and liabilities stated herein. Except for such obligations and liabilities
specifically assumed by Contractor, Operator shall be solely responsible and
assumes liability for all consequences of operations by both parties while on a
daywork basis, including results and all other risks or liabilities incurred in
or incident to such operations.
1. LOCATION OF WELL:
Well Name
and Number: To be determined.
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Parish/ Field
County: State: Name:
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Well location and
land description: Initial well shall be the first well spudded
after December 10, 1996 (Bayard closing date.)
1.1 ADDITIONAL WELL LOCATIONS OR AREAS: Additional xxxxx that fall
under the jurisdiction of this contract are to be identified by letter
agreement between Operator and Contractor.
Locations described above are for well and Contract identification only and
Contractor assumes no liability whatsoever for a proper survey or location
stake on Operator's lease.
2. COMMENCEMENT DATE:
Contractor agrees to use reasonable efforts to commence operations for
the drilling of the well by the N/A day of N/A , 19____, or This is a
term contract as described in Paragraph 6 below beginning on the spud date of
the initial well described in Paragraph 1 above.
3. DEPTH:
3.1 WELL DEPTH: The well(s) shall be drilled to a depth of approximately
_______ feet, or to the Per Operator's Specification formation, whichever is
deeper, but the Contractor shall not be required hereunder to drill said
well(s) below a maximum depth of ___________ feet, unless Contractor and
Operator mutually agree to drill to a greater depth.
4. DAYWORK RATES:
Contractor shall be paid at the following rates for the work performed
hereunder.
4.1 MOBILIZATION: Operator shall pay Contractor a mobilization fee of
$ N/A or a mobilization day rate of $ See 4.3 per day. This sum shall be
due and payable in full at the time the rig is rigged up or positioned at the
well site ready to spud. Mobilization shall include: Trucks and cranes provided
by Operator to move and rig up Contractor's equipment between xxxxx covered by
this contract.
4.2 DEMOBILIZATION: Operator shall pay Contractor a demobilization fee
of $ 10,000 or a demobilization day rate during tear down of $ N/A per day,
provided however that no demobilization fee shall be payable if the Contract is
terminated due to the total loss or destruction of the rig. Demobilization
shall include: Lump sum demobilization for rig down and move out after last well
at end of the contract.
4.3 MOVING RATE: During the time the rig is in transit to or from a
drill site, or between drill sites, commencing on ______________, Operator
shall pay Contractor a sum of $ 2,500 per twenty-four (24) hour day.
4.4 OPERATING DAY RATE: For work performed per twenty-four (24) hour day
with 5 man crew the operating day rate shall be:
DEPTH INTERVALS See 23.2
FROM TO WITHOUT DRILL PIPE WITH DRILL PIPE
$ per day per day
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$ per day per day
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$ per day per day
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Using Operator's drill pipe $ per day
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(U.S. Daywork Contract - Page 1)
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Revised June, 1994
If under the above column "With Drill Pipe" no day rates are specified, the
daywork rate per twenty-four hour day when drill pipe is in use shall be the
applicable daywork rate specified in the column "Without Drill Pipe" plus
compensation for any drill pipe actually used at the rates specified below,
computed on the basis of the maximum drill pipe in use at any time during each
twenty-four hour day.
DRILL PIPE RATES PER 24-HOUR DAY
DIRECTIONAL OR
STRAIGHT HOLE SIZE GRADE UNCONTROLLABLE DEVIATED HOLE SIZE GRADE
$ per ft. $ per ft.
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$ per ft. $ per ft.
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$ per ft. $ per ft.
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Directional or uncontrolled deviated hole will be deemed to exist when
deviation exceeds __________ degrees or when the change of angle exceeds
__________ degrees per one hundred feet.
Drill pipe shall be considered in use not only when in actual use but
also while it is being picked up or laid down. When drill pipe is standing in
the xxxxxxx, it shall not be considered in use, provided, however, that if
Contractor furnishes special strings of drill pipe, drill collars, and handling
tools as provided for in Exhibit "A", the same shall be considered in use at all
times when on location or until released by Operator. In no event shall
fractions of an hour be considered in computing the amount of time drill pipe is
in use but such time shall be computed to the nearest hour, with thirty minutes
or more being considered a full hour and less than thirty minutes not to be
counted.
Operating rate will begin when the drilling unit is rigged up at the
drilling location, or positioned over the location during marine work, and ready
to commence operations; and will cease when the rig is ready to be moved off the
location.
4.5 REPAIR RATE: In the event it is necessary to shut down Contractor's
rig for repairs, excluding routine rig servicing, while Contractor is
performing daywork hereunder, Contractor shall be allowed compensation at the
applicable daywork rate for each period of shutdown time up to a maximum of 4**
hours for any one repair job and a total of 18** hours for each thirty (30) day
period. Thereafter, Contractor shall be compensated at a rate of $ 0
per twenty-four (24) hour day. Rig lubrication, cutting drilling line and
replacing mud pump expendables shall not be included in computing the number
of hours of shutdown time.
4.6 See Paragraph 7.15 in Exhibit A
4.7 FORCE MAJEURE RATE: $ 3,000 per twenty-four (24) hour day for any
continuous period that normal operations are suspended or cannot be carried on
due to conditions of force majeure as defined in Paragraph 17 hereof. It is,
however, understood that subject to Paragraph 6.3 below, Operator can release
the rig in accordance with Operator's right to direct stoppage of the work,
effective when conditions will permit the rig to be moved from the location.
4.8 REIMBURSABLE COSTS: Operator shall reimburse Contractor for the costs
of material, equipment, work or services which are to be furnished by Operator
as provided for herein but which for convenience are actually furnished by
Contractor at Operator's request, plus 10 percent for such cost of handling.
4.9 REVISION IN RATES: The rates and/or payments herein set forth due to
Contractor from Operator shall be revised to reflect the change in costs if the
costs of any of the items hereinafter listed shall vary by more than 5 percent
from the costs thereof on the date of this Contract or by the same percent
after the date of any revision pursuant to this paragraph:
(a) Labor costs, including all benefits, of Contractor's personnel;
(b) Contractor's cost of insurance premiums;
(c) Contractor's cost of fuel, including all taxes and fees; the cost per
gallon/MCF being $ N/A ;
(d) Contractor's cost of catering, when applicable;
(e) If Operator requires Contractor to increase or decrease the number of
Contractor's personnel;
(f) Contractor's cost of spare parts and supplies with the understanding
that such spare parts and supplies constitute 35 percent of the
Operating Rate and that the parties shall use the U.S. Bureau of Labor
Statistics Oilfield Drilling Machinery and Equipment Wholesale Price
Index (Code No. 1191-02) to determine to what extent a price variance
has occurred in said spare parts and supplies; Calculated after each
well
(g) If there is any change in legislation or regulations in the area in
which Contractor is working or other unforeseen, unusual event that
alters Contractor's financial burden.
5. TIME OF PAYMENT:
Payment is due by Operator to Contractor as follows:
5.1 Payment for mobilization, drilling and other work performed at
applicable day rates, and all other applicable charges shall be due, upon
presentation of invoice therefor, upon completion of mobilization, completion
of the well, or at the end of the month in which such work was performed or
other charges are incurred, whichever shall first occur. All invoices may be
mailed to Operator at the address hereinabove shown, unless Operator does
hereby designate that such invoices shall be mailed as follows:
P.O. Box 14880, Oklahoma City, Oklahoma 73113
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5.2 DISPUTED INVOICES AND LATE PAYMENT: Operator shall pay all invoices
within 60 days after receipt except that if Operator disputes an invoice or
any part thereof, Operator shall, within sixty days after receipt of the
invoice, notify Contractor of the item disputed, specifying the reason
therefor, and payment of the disputed item may be withheld until settlement of
the dispute, but timely payment shall be made of any undisputed portion. Any
sums (including amounts ultimately paid with respect to a disputed invoice) not
paid within the above specified days shall bear interest at the rate of _______
percent or the maximum legal rate, whichever is less, per month from the due
date until paid. If Operator does not pay undisputed items within the above
stated time, Contractor may terminate this Contract as specified under
Subparagraph 6.3. See attached Operator's Addendum.
5.3 ATTORNEY'S FEES: If this Contract is placed in the hands of an
attorney for collection lf any sums due hereunder, or suit is brought on same,
or sums due hereunder are collected through bankruptcy or probate proceedings,
then Operator agrees that there shall be added to the amount due reasonable
attorney's fees and costs.
6. TERM:
6.1 DURATION OF CONTRACT: This Contract shall remain in full force and
effect until drilling operations are completed on the well or xxxxx specified
in Paragraph 1 above, or for a term of 730 calendar days, commencing on the
date specified in Paragraph 2 above.*
6.2 EXTENSION OF TERM: Operator may extend the term of this Contract for
additional well(s) or for a period of 2 additional years by giving notice to
Contractor at least 45 days prior to completion of the well then being drilled
Contractor to provide written notice to operator approximately 60 days prior to
the end of the 2 year term.
6.3 EARLY TERMINATION:
(a) BY EITHER PARTY: Upon giving of written notice, either party may
terminate this Contract when total loss or destruction of the rig, or a major
breakdown with indefinite repair time necessitate stopping operations
hereunder.
(c) BY CONTRACTOR: Notwithstanding the provisions of Paragraph 3 with
respect to the depth to be drilled, in the event Operator shall become
insolvent, or be adjudicated as bankrupt, or file, by way of petition or
answer, a debtor's petition or other pleading seeking adjustment of Operator's
debts, under any bankruptcy or debtor's relief laws now or hereafter
prevailing, or if any such be filed against Operator, or in case a receiver be
appointed of Operator or Operator's property, or any part thereof, or
Operator's affairs be placed in the hands of a Creditor's Committee, or,
following ten days prior written notice to Operator if Operator does not pay
Contractor within the time specified in Subparagraph 5.2 all undisputed items
due and owing, Contractor may, at its option, elect to terminate further
performance of any work under this Contract and Contractor's right to
compensation shall be as set forth in Subparagraph 6.4 hereof. In addition to
Contractor's right to terminate performance hereunder. Operator hereby
expressly agrees to protect, defend and indemnify Contractor from and against
any claims, demands and causes of action, including all costs of defense, in
favor of Operator. Operator's joint venturers, or other parties arising out of
any drilling commitments or obligations contained in any lease, farmout
agreement or other agreement, which may be affected by such termination of
performance hereunder. *however commencement shall be no later than January 1,
1997, regardless of actual start date so that the original term shall not
extend beyond December 31, 1998
**See Paragraph 7.11 in Exhibit A
(U.S. Daywork Contract - Page 2)
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Revised June, 1994
7. CASING PROGRAM:
Operator shall have the right to designate the points at which casing will
be set and the manner of setting, cementing and testing. Operator may modify
the casing program, however, any such modification which materially increases
Contractor's hazards or costs can only be made by mutual consent of Operator
and Contractor and upon agreement as to the additional compensation to be paid
Contractor as a result thereof.
8. DRILLING METHODS AND PRACTICES:
8.1 Contractor shall maintain well control equipment in good condition at
all times and shall use all reasonable means to prevent and control fires and
blowouts and to protect the hole.
8.2 Subject to the terms hereof, and at Operator's cost, at all times
during the drilling of the well, Operator shall have the right to control the
mud program, and the drilling fluid must be of a type and have characteristics
and be maintained by Contractor in accordance with the specifications shown in
Exhibit "A".
8.3 Each party hereto agrees to comply with all laws, rules, and
regulations of any federal, state or local governmental authority which are now
or may become applicable to that party's operations covered by or arising out
of the performance of this Contract. When required by law, the terms of
Exhibit "B" shall apply to this Contract. In the event any provision of this
Contract is inconsistent with or contrary to any applicable federal, state or
local law, rule or regulation said provision shall be deemed to be modified to
the extent required to comply with said law, rule or regulation, and as so
modified said provision and this Contract shall continue in full force and
effect.
8.4 Contractor shall keep and furnish to Operator an accurate record of
the work performed and formations drilled on the IADC-API Daily Drilling Report
Form or other form acceptable to Operator. A legible copy of said form signed
by Contractor's representative shall be furnished by Contractor to Operator.
8.5 If requested by Operator, Contractor shall furnish Operator with a copy
of delivery tickets covering any material or supplies provided by Operator and
received by Contractor.
9. INGRESS, EGRESS, AND LOCATION:
Operator hereby assigns to Contractor all necessary rights of ingress and
egress with respect to the tract on which the well is to be located for the
performance by Contractor of all work contemplated by this Contract. Should
Contractor be denied free access to the location for any reason not reasonably
within Contractor's control, any time lost by Contractor as a result of such
denial shall be paid for at the applicable rate. Operator agrees at all times
to maintain the road and location in such condition that will allow free access
and movement to and from the drilling site in an ordinarily equipped highway
type vehicle. If Contractor is required to use bulldozers, tractors, four-
wheel drive vehicles, or any other specialized transportation equipment for the
movement of necessary personnel, machinery, or equipment over access roads or
on the drilling location, Operator shall furnish the same at its expense and
without cost to Contractor. The actual cost of repairs to any transportation
equipment furnished by Contractor or its personnel damaged as a result of
improperly maintained access roads or location will be charged to Operator.
Operator shall reimburse Contractor for all amounts reasonably expended by
Contractor for repairs and/or reinforcement of roads, bridges and related or
similar facilities (public and private) required as direct result of a rig move
pursuant to performance hereunder.
10. SOUND LOCATION:
Operator shall prepare a sound location adequate in size and capable of
properly supporting the drilling rig, and shall be responsible for a conductor
pipe program adequate to prevent soil and subsoil wash out. It is recognized
that Operator has superior knowledge of the location and access routes to the
location, and must advise Contractor of any subsurface conditions, or
obstructions (including, but not limited to, mines, caverns, sink holes,
streams, pipelines, power lines and telephone lines) which Contractor might
encounter while en route to the location or during operations hereunder. In
the event subsurface conditions cause a cratering or shifting of the location
surface, or if seabed conditions prove unsatisfactory to properly support the
rig during marine operations hereunder, and loss or damage to the rig or its
associated equipment results therefrom, Operator shall, without regard to other
provisions of this Contract, including Paragraph 14.1 hereof, reimburse
Contractor to the extent not covered by Contractor's insurance, for all such
loss or damage including payment of force majeure rate during repair and/or
demobilization if applicable.
11. EQUIPMENT CAPACITY:
If applicable hereunder, operations shall not be attempted where canal or
water depths are in excess of N/A feet, or under any other conditions which
exceed the capacity of the equipment specified to be used hereunder.
Contractor shall make final decision as to when an operation or attempted
operation would exceed the capacity of specified equipment.
12. TERMINATION OF LOCATION LIABILITY:
When Contractor has complied with all obligations of the Contract
regarding restoration of Operator's location, Operator shall thereafter be
liable for damage to property, personal injury or death of any person which
occurs as a result of conditions of the location and Contractor shall be
relieved of such liability; provided, however, if Contractor shall subsequently
reenter upon the location for any reason, including removal of the rig, any
term of the Contract relating to such reentry activity shall become applicable
during such period.
13. INSURANCE:
During the life of this Contract, Contractor shall at Contractor's expense
maintain, with an insurance company or companies authorized to do business in
the state where the work is to be performed or through a self-insurance
program, insurance coverages of the kind and in the amounts set forth in
Exhibit "A", insuring the liabilities specifically assumed by Contractor in
Paragraph 14 of this Contract. Contractor shall, if requested to do so by
Operator, procure from the company or companies writing said insurance a
certificate or certificates that said insurance is in full force and effect and
that the same shall not be canceled or materially changed without ten (10) days
prior written notice to Operator. For liabilities assumed hereunder by
Contractor, its insurance shall be endorsed to provide that the underwriters
waive their right of subrogation against Operator. Operator will, as well,
cause its insurer to waive subrogation against Contractor for liability it
assumes and shall maintain, at Operator's expense, or shall self insure,
insurance coverage of the same kind and in the same amount as is required of
Contractor, insuring the liabilities specifically assumed by Operator in
Paragraph 14 of this Contract.
(U.S. Daywork Contract - Page 3)
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14. RESPONSIBILITY FOR LOSS OR DAMAGE, INDEMNITY, RELEASE OF LIABILITY AND
ALLOCATION OF RISK:
14.1 CONTRACTOR'S SURFACE EQUIPMENT: Contractor shall assume
liability at all times for damage to or destruction of Contractor's surface
equipment, regardless of when or how such damage or destruction occurs, and
Contractor shall release Operator of any liability for any such loss, except
loss or damage under the provisions of Paragraphs 19 or 14.3.
14.2 CONTRACTOR'S IN-HOLE EQUIPMENT: Operator shall assume liability
at all times for damage to or destruction of Contractor's in-hole equipment,
including, but not limited to, drill pipe, drill collars, and tool joints, and
Operator shall reimburse Contractor for the value of any such loss or damage;
the value to be determined by agreement between Contractor and Operator as
current repair costs or replacement in kind and condition.
14.3 CONTRACTOR'S EQUIPMENT - ENVIRONMENTAL LOSS OR DAMAGE:
Notwithstanding the provisions of Paragraph 14.1 above, Operator shall assume
liability at all times for damage to or destruction of Contractor's equipment
caused by exposure to highly corrosive or otherwise destructive elements,
including those introduced into the drilling fluid.
14.4 OPERATOR'S EQUIPMENT: Operator shall assume liability at all
times for damage to or destruction of Operator's equipment, including, but not
limited to, casing, tubing, well head equipment, and platform if applicable,
regardless of when or how such damage or destruction occurs, and Operator shall
release Contractor of any liability for any such loss or damage.
14.5 THE HOLE: In the event the hole should be lost or damaged,
Operator shall be solely responsible for such damage to or loss of the hole,
including the casing therein. Operator shall release Contractor of any
liability for damage to or loss of the hole, and shall protect, defend and
indemnify Contractor from and against any and all claims, liability, and
expense relating to such damage to or loss of the hole.
14.6 UNDERGROUND DAMAGE: Operator shall release Contractor of any
liability for, and shall protect, defend and indemnify Contractor from and
against any and all claims, liability, and expense resulting from operations
under this Contract on account of injury to, destruction of, or loss or
impairment of any property right in or to oil, gas, or other mineral substance
or water, if at the time of the act or omission causing such injury,
destruction, loss, or impairment, said substance had not been reduced to
physical possession above the surface of the earth, and for any loss or damage
to any formation, strata, or reservoir beneath the surface of the earth.
14.7 INSPECTION OF MATERIALS FURNISHED BY OPERATOR: Contractor
agrees to visually inspect all materials furnished by Operator before using
same and to notify Operator of any apparent defects therein. Contractor shall
not be liable for any loss or damage resulting from the use of materials
furnished by Operator, and Operator shall release Contractor from, and shall
protect, defend and indemnify Contractor from and against, any such liability.
**
14.10 LIABILITY FOR WILD WELL: Operator shall be liable for the cost
of regaining control of any wild well, as well as for cost of removal of any
debris, and shall release Contractor of, and Operator shall protect, defend and
indemnify Contractor from and against any liability for such cost.
14.11 POLLUTION AND CONTAMINATION: Notwithstanding anything to the
contrary contained herein, except the provisions of Paragraphs 10 and 12, it is
understood and agreed by and between Contractor and Operator that the
responsibility for pollution and contamination shall be as follows:
(a) Unless otherwise provided herein, Contractor shall assume all
responsibility for, including control and removal of, and shall protect, defend
and indemnify Operator from and against all claims, demands and causes of action
of every kind and character arising from pollution or contamination, which
originates above the surface of the land or water from spills of fuels,
lubricants, motor oils, pipe dope, paints, solvents, ballast, bilge and garbage,
except unavoidable pollution from reserve pits, wholly in Contractor's
possession and control and directly associated with Contractor's equipment and
facilities.
(b) Operator shall assume all responsibility for, including control and
removal of, and shall protect, defend and indemnify Contractor from and against
all claims, demands, and causes of action of every kind and character arising
directly or indirectly from all other pollution or contamination which may
occur during the conduct of operations hereunder, including, but not limited
to, that which may result from fire, blowout, cratering, seepage or any other
uncontrolled flow of oil, gas, water or other substance, as well as the use or
disposition of all drilling fluids, including, but not limited to, oil
emulsion, oil base or chemically treated drilling fluids, contaminated cuttings
or cavings, lost circulation and fish recovery materials and fluids. Operator
shall release Contractor of any liability for the foregoing.
(c) In the event a third party commits an act or omission which results
in pollution or contamination for which either Contractor or Operator, for whom
such party is performing work, is held to be legally liable, the responsibility
therefor shall be considered, as between Contractor and Operator, to be the
same as if the party for whom the work was performed had performed the same and
all of the obligations respecting protection, defense, indemnity and limitation
of responsibility and liability, as set forth in (a) and (b) above, shall be
specifically applied.
14.12 CONSEQUENTIAL DAMAGES: Neither party shall be liable to the
other for special, indirect or consequential damages resulting from or arising
out of this Contract, including, without limitation, loss of profit or business
interruptions including loss or delay of production, however same may be caused.
14.13 INDEMNITY OBLIGATION: Except as otherwise expressly limited
herein, it is the intent of parties hereto that all indemnity obligations
and/or liabilities assumed by such parties under terms of this Contract,
including, without limitation, Paragraphs 14.1 through 14.12 hereof, be without
limit and without regard to the cause or causes thereof (including preexisting
conditions), the unseaworthiness of any vessel or vessels, strict liability, or
the negligence of any party or parties, whether such negligence be sole, joint
or concurrent, active or passive. The indemnities, and releases and assumptions
of liability extended by the parties hereto under the provisions of Paragraph
14 shall inure to the benefit of the parties, their parent, holding and
affiliated companies and their respective officers, directors, employees,
agents and servants. The terms and provisions of Paragraphs 14.1 through 14.12
shall have no application to claims or causes of action asserted against
Operator or Contractor by reason of any agreement of indemnity with a person or
entity not a party hereto.
15. AUDITS:
If any payment provided for hereunder is made on the basis of
Contractor's costs, Operator shall have the right to audit Contractor's books
and records relating to such costs. Contractor agrees to maintain such books
and records for a period of two (2) years from the date such costs were
incurred and to make such books and records available to Operator at any
reasonable time or times within the period.
16. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Contract shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Contract, or other duly
authorized agent or representative of the party.
17. FORCE MAJEURE:
Neither Operator nor Contractor shall be liable to the other for any
delays or damage or any failure to act due, occasioned or caused by reason of
any laws, rules, regulations or orders promulgated by any Federal, State, or
Local governmental body or the rules, regulations, or orders of any public body
or official purporting to exercise authority or control respecting the
operations covered hereby, including the procurance or use of tools and
equipment, or due, occasioned or caused by strikes, action of the elements,
water conditions, inability to obtain fuel or other critical materials, or
other causes beyond the control of the party affected thereby. In the event
that either party hereto is rendered unable, wholly or in part, by any of these
causes to carry out its obligation under this Contract, it is agreed that such
party shall give notice and details of Force Majeure in writing to the other
party as promptly as possible after its occurrence. In such cases, the
obligations of the party giving the notice shall be suspended during the
continuance of any inability so caused except that Operator shall be obligated
to pay to Contractor the Force Majeure Rate provided for in Paragraph 4.7 above.
** See attached Operator's addendum.
(U.S. Daywork Contract - Page 4)
5
Revised June, 1994
18. GOVERNING LAW:
This Contract shall be construed, governed, interpreted, enforced and
litigated, and the relations between the parties determined in accordance with
the laws of Oklahoma.
19. INFORMATION CONFIDENTIAL:
Upon written request by Operator, information obtained by Contractor in
the conduct of drilling operations on this well, including, but not limited to,
depth, formations penetrated, the results of coring, testing and surveying,
shall be considered confidential and shall not be divulged by Contractor or its
employees, to any person, firm, or corporation other than Operator's designated
representatives.
20. SUBCONTRACTS BY OPERATOR:
Operator may employ other contractors to perform any of the operations
or services to be provided or performed by it according to Exhibit "A".
21. ASSIGNMENT:
Neither party may assign this Contract without the prior written consent
of the other, and prompt notice of any such intent to assign shall be given to
the other party. In the event of such assignment, the assigning party shall
remain liable to the other party as a guarantor of the performance by the
assignee of the terms of this Contract. If any assignment is made that
materially alters Contractor's financial burden, Contractor's compensation
shall be adjusted to give effect to any increase or decrease in Contractor's
operating costs.
22. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Contract unless otherwise
provided for shall be given to the Contractor and to the Operator respectively
at the address hereinabove shown. All sums payable hereunder to Contractor
shall be payable at its address hereinabove shown unless otherwise specified
herein.
23. SPECIAL PROVISIONS:
23.1 Operator's and Contractor's acceptance of this contract includes
acceptance of the provisions of Exhibits A and B and Operator's
Addendum, all of which are attached hereto and made a part
hereof.
23.2 The Operating day rates with drill pipe, without drill pipe, and
using Operator's drill pipe shall be as follows:
Operations in Operations in
Rig Texas (b) Louisiana (b)
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11 $5,550 $5,750
12 5,550 5,750
14 5,550 5,750
15 5,550 (a) 5,750 (a)
16 5,650 (a) 5,850 (a)
22 5,650 (a) 5,850 (a)
(a) The day rates for rigs 15, 16, and 22 will be subject to a drill
pipe surcharge equal to $250 per day for each rig in which the
actual cost of drill pipe is in excess of $20 per foot.
This surcharge will cease if day rates are adjusted in accordance
with paragraph 7.7 in Exhibit A in excess of amount equal or
greater than the above day rates plus the surcharge.
(b) The Operating day rates of $5,650 per day in Texas and $5,850
per day in Louisiana for rigs 16 and 22 are $100 per day higher
than rates for rigs 11, 12, 14, and 15 since rigs 16 and 22 are
required to have 3 1600HP mud pumps and a mast and substructure
rated to at least 1,300,000 lb.
24. ACCEPTANCE OF CONTRACT:
The foregoing Contract is agreed to and accepted by Operator this ______
day of ___________, 19__.
Operator Chesapeake Operating, Inc.
------------------------------------
By /s/ XXX X. XXXX
------------------------------------
Title Xxx X. Xxxx, Chief Operating Officer
------------------------------------
The foregoing Contract is accepted by the undersigned as Contractor this
______ day of _____________, 19_____, which is the effective date of this
agreement, subject to rig availability, and subject to all of its terms and
provisions, with the understanding that unless said Contract is thus executed by
Operator within ___________ days of the above date, Contractor shall be in no
manner bound by its signature thereto.
Contractor Bayard Drilling Technologies, Inc.
-------------------------------------
By /s/ XXXXX X. XXXXX
-------------------------------------
Title Xxxxx X. Xxxxx, President
-------------------------------------
(U.S. Daywork Contract - Page 5)
6
Revised June, 1994
EXHIBIT "A"
To Daywork Contract dated , 1996
-------------------------------
Operator Chesapeake Operating, Inc. Contractor Bayard Drilling Technologies,
Inc.
Well Name and Number
-----------------------------------------
SPECIFICATIONS AND SPECIAL PROVISIONS
1. CASING PROGRAM (SEE PAR. 7) per Operator's Specifications
HOLE CASING APPROXIMATE WAIT ON
SIZE SIZE WEIGHT GRADE SETTING DEPTH CEMENT TIME
Conductor in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
Surface in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
Protection in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
Production in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
Liner in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
in. in. lbs/ft. ft. hrs.
-------------- ------------- ---------- ----------- --------- ---------------- -------------
2. MUD CONTROL PROGRAM (SEE PAR. 8.2)
DEPTH INTERVAL
(FT.) WEIGHT VISCOSITY WATER LOSS
FROM TO TYPE MUD (LBS./GAL.) (SECS) (CC)
Per Operator's Specifications
---------- ---------- ------------------- ------------------- ------------------- ---------------------
---------- ---------- ------------------- ------------------- ------------------- ---------------------
---------- ---------- ------------------- ------------------- ------------------- ---------------------
---------- ---------- ------------------- ------------------- ------------------- ---------------------
---------- ---------- ------------------- ------------------- ------------------- ---------------------
Other mud specifications: Operator agrees to furnish corrosion inhibitor to
maintain a corrosion rate of less than two (2) lbs. per cubic foot per year.
Contractor agrees to provide corrosion rings.
3. INSURANCE (SEE PAR. 13)
3.1 Adequate Workers' Compensation Insurance complying with State Laws
applicable or Employers' Liability Insurance with limits of $
covering all of Contractor's employees working under this Contract.
3.2 Comprehensive Public Liability Insurance or Public Liability Insurance
with limits of $ for the death or injury of any one person and $
for each accident.
3.3 Comprehensive Public Liability Property Damage Insurance or Public
Liability Property Damage Insurance with limits of $ for each
accident and $ aggregate per policy.
3.4 Automobile Public Liability Insurance with limits of $ for the death or
injury of each person and $ for each accident; and Automobile Public
Liability Property Damage Insurance with limits of $ for each
accident.
3.5 In the event operations are over water, Contractor shall carry in
addition to the Statutory Workers' Compensation Insurance, endorsements
covering liability under the Longshoremen's & Harbor Workers'
Compensation Act and Maritime liability including maintenance and cure
with limits of $ for each death or injury to one person and $ for
any one accident.
3.6 Other Insurance:
--------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4. EQUIPMENT, MATERIALS AND SERVICES TO BE FURNISHED BY CONTRACTOR:
The machinery, equipment, tools, materials, supplies, instruments, services
and labor hereinafter listed, including any transportation for such items shall
be provided at the well location at the expense of Contractor unless otherwise
noted by this Contract.
4.1 DRILLING RIG:
Complete drilling rig designated by Contractor as its Rig No. 11, the major
items of equipment being:
Drawworks: Make and Model Mid Continent 1220 EB 2000 input HP, Elmago 7838 brake
------------------------------------------------------
Engines: Make, Model, and H.P. 4-Caterpillar D-398, 1200 HP
-------------------------------------------------
No. on Rig Xxxx Xxxx SCR 4X4
-----------------------------------------------------------------
Pumps: No. 1 Make, Size, and Power PZ 10 1350 HP
----------------------------------------------
No. 2 Make, Size, and Power PZ 10 1350 HP
--------------------------------------------------
Mud Mixing Pump: Make, Size and Power
------------------------------------------
Boilers: Number, Make, H.P. and W.P.
-------------------------------------------
Xxxxxxx or Mast: Make, Size, and Capacity Pyramid 144' 1MM# Static Hook Load
--------------------------------------
Substructure: Size and Capacity 26' Self Elevating, 1 MM# Setback
------------------------------------------------
Rotary Drive: Type Mid Continent 27-1/2" Independent Drive
-------------------------------------------------------------
Drill Pipe: Size 5 in. 15,000 ft.; Size in. ft.
----- -------- ------------ -------------
Drill Collars: Number and Size
-------------------------------------------------
7
Revised June, 1994
Blowout Preventers:
-------------------------------------------------------------
SIZE SERIES OR TEST PR. MAKE & MODEL NUMBER
13-5/8 5,000 Annular
-------------------- --------------------------------- ------------------------------ ------------------------
13-5/8 10,000 Double
-------------------- --------------------------------- ------------------------------ ------------------------
13-5/8 10,000 Double
-------------------- --------------------------------- ------------------------------ ------------------------
-------------------- --------------------------------- ------------------------------ ------------------------
-------------------- --------------------------------- ------------------------------ ------------------------
-------------------- --------------------------------- ------------------------------ ------------------------
B.O.P. Closing Unit:
-----------------------------------------------------------------------------------------------
B.O.P. Accumulator:
-----------------------------------------------------------------------------------------------
4.2 Xxxxxxx Xxxxxxx
4.3 Normal Strings of drill pipe and drill collars specified above.
4.4 Conventional drift indicator.
4.5 Circulating mud pits.
4.6 Necessary pipe racks and rigging up material.
4.7 Normal storage for mud and chemicals.
4.8 Shale Shaker.
4.9
4.10
4.11 Pump No. 3 PZ 10 unitized with one Caterpillar D-399 (available for
use by
4.12 Operator on Contractor Rigs 11, 12, 14, or 15)
4.13
4.14
4.15
4.16
4.17
5. EQUIPMENT, MATERIALS AND SERVICES TO BE FURNISHED BY OPERATOR:
The machinery, equipment, tools, materials, supplies, instrument, services
and labor hereinafter listed, including any transportation required for such
items, shall be provided at the well location at the expense of Operator unless
otherwise noted by Contract.
5.1 Furnish and maintain adequate roadway and/or canal to location,
right-of-way, including rights-of-way for fuel and water lines,
river crossings, highway crossings, gates and cattle guards.
5.2 Stake location, clear and grade location, and provide turnaround,
including surfacing when necessary.
5.3 Test tanks with pipe and fittings.
5.4 Mud storage tanks with pipe and fittings.
5.5 Separator with pipe and fittings.
5.6 Labor to connect and disconnect mud tank, test tank, and
separator.
5.7 Labor to disconnect and clean test tanks and separator.
5.8 Drilling mud, chemicals, lost circulation materials and other
additives.
5.9 Pipe and connections for oil circulating lines.
5.10 Labor to lay, bury and recover oil circulating lines.
5.11 Drilling bits, reamers, reamer cutters, stabilizers and special
tools.
5.12 Contract fishing tool services and tool rental.
5.13 Wire line core bits or heads, core barrels and wire line core
catchers if required.
5.14 Conventional core bits, core catchers and core barrels.
5.15 Diamond core barrel with head.
5.16 Cement and cementing service.
5.17 Electrical wireline logging services.
5.18 Directional, caliper, or other special services.
5.19 Gun or jet perforating services.
5.20 Explosives and shooting devices.
5.21 Formation testing, hydraulic fracturing, acidizing and other
related services.
5.22 Equipment for drill stem testing.
5.23 Mud logging services.
5.24 Sidewall coring service.
5.25 Welding service for welding bottom joints of casing, guide shoe,
float shoe, float collar and in connection with installing of well
head equipment if required.
5.26 Casing, tubing, liners, screen, float collars, guide and float
shoes and associated equipment.
5.27 Casing scratchers and centralizers.
5.28 Well head connections and all equipment to be installed in or on
well or on the premises for use in connection with testing,
completion and operation of well.
5.29 Special or added storage for mud and chemicals.
5.30 Casinghead, API series, to conform to that shown for the blowout
preventers specified in Paragraph 4.1 above.
5.31 Blowout preventer testing packoff.
5.32 Casing Thread Protectors and Casing Lubricants.
5.33 H(2)S training and equipment as necessary or as required by law.
5.34 Company man telephone
5.35 PVT Equipment
5.36 Potable water for Operator and Operator's subcontractors only
5.37 Rotating Head (RBOP)
5.38 Pull trucks in and out of location if necessary
5.39
5.40
5.41
8
Revised June, 1994
0.XXXXXXXXX, MATERIALS AND SERVICES TO BE FURNISHED BY DESIGNATED PARTY:
The machinery, equipment, tools, materials, supplies, instruments, services,
and labor listed as the following numbered items, including any transportation
required for such items unless otherwise specified, shall be provided at the
well location and at the expense of the party hereto as designated by an X mark
in the appropriate column.
TO BE PROVIDED BY AND
AT THE EXPENSE OF
Item OPERATOR CONTRACTOR
6.1 Cellar and runways ................................................................... X
----------------- ----------------
6.2 Fuel (located at ) .................................................................. X
----------------- ----------------
6.3 Fuel Lines (length ) ................................................................. X
----------------- ----------------
6.4 Water at source, including required permits .......................................... X
----------------- ----------------
6.5 Water well, including required permits ............................................... X
----------------- ----------------
6.6 Water lines, including required permits .............................................. X
----------------- ----------------
6.7 Water storage tanks capacity ...................................... X
----------------- ----------------
6.8 Labor to operate water well or water pump ............................................ X
----------------- ----------------
6.9 Maintenance of water well, if required .........................(labor only).......... X
----------------- ----------------
6.10 Water Pump ........................................................................... X
----------------- ----------------
6.11 Fuel for water pump .................................................................. X
----------------- ----------------
6.12 Mats for engines and boilers, or motors and mud pumps ................................
----------------- ----------------
6.13 Transportation of Contractor's property:
Move in ..........................................................Expense of.......... X Furnished by X
----------------- ----------------
Move out .........................................................Expense of.......... X Furnished by X
----------------- ----------------
6.14 Materials for "boxing in" rig and xxxxxxx ............................................ X
----------------- ----------------
6.15 Special Strings of drill pipe and drill collars as follows:
X
----------------------------------------------------------------------------- ----------------- ----------------
----------------------------------------------------------------------------- ----------------- ----------------
----------------------------------------------------------------------------- ----------------- ----------------
6.16 Xxxxx joints, subs, elevators, tongs and slips for use with
special drill pipe ................................................................... X
----------------- ----------------
6.17 Drill pipe protectors for Xxxxx joint and each joint
of drill pipe running inside of Surface Casing as required,
for use with normal strings of drill pipe ............................................ X
----------------- ----------------
6.18 Drill pipe protectors for Xxxxx joint and drill pipe running
inside of Protection Casing .......................................................... X
----------------- ----------------
6.19 Rate of penetration recording device .............................(4 pen)............. X
----------------- ----------------
6.20 Extra labor for running and cementing casing (Casing crews) .......................... X
----------------- ----------------
6.21 Casing tools ......................................................................... X
----------------- ----------------
6.22 Power casing tongs ................................................................... X
----------------- ----------------
6.23 Laydown and pickup machine ........................................................... X
----------------- ----------------
6.24 Tubing Tools ......................................................................... X
----------------- ----------------
6.25 Power tubing tong .................................................................... X
----------------- ----------------
6.26 Crew Boats, Number ................................................................... NA
----------------- ----------------
6.27 Service Barge ........................................................................ NA
----------------- ----------------
6.28 Service Tug Boat ..................................................................... NA
----------------- ----------------
6.29 Rat Hole ............................................................................. X
----------------- ----------------
6.30 Mouse Hole ........................................................................... X
----------------- ----------------
6.31 Reserve Pits ......................................................................... X
----------------- ----------------
6.32 Upper Xxxxx Cock ..................................................................... X
----------------- ----------------
6.33 Lower Xxxxx Xxxxx .................................................................... X
----------------- ----------------
6.34 Drill Pipe Safety Valve .............................................................. X
----------------- ----------------
6.35 Inside Blowout Preventer ............................................................. X
----------------- ----------------
6.36 Drilling hole for or driving for conductor pipe ...................................... X
----------------- ----------------
6.37 Charges, cost of bonds for public roads ..........................Expense of.......... X Furnished by X
----------------- ----------------
6.38 Cost of all labor and material to clean rig after use of oil-base mud ................ X
----------------- ----------------
6.39 Portable Toilet ...................................................................... X
----------------- ----------------
6.40 Trash Receptacle ..................................................................... X
----------------- ----------------
6.41 Linear Motion Shale Shaker ........................................................... X
----------------- ----------------
6.42 Shale Shaker Screens ................................................................. X
----------------- ----------------
6.43 Mud Cleaner .......................................................................... X
----------------- ----------------
6.44 Mud/Gas Separator .................................................................... X
----------------- ----------------
6.45 Desander ............................................................................. X
----------------- ----------------
6.46 Desilter ............................................................................. X
----------------- ----------------
6.47 Degasser ............................................................................. X
----------------- ----------------
6.48 Centrifuge ........................................................................... X
----------------- ----------------
6.49 Rotating Head ........................................................................ X
----------------- ----------------
6.50 Rotating Head Rubbers ................................................................ X
----------------- ----------------
6.51 Hydraulic Adjustable Choke ........................................................... X
----------------- ----------------
6.52 Pit Volume Totalizer ................................................................. X
----------------- ----------------
6.53 Communications, type ................................................................. X
----------------- ----------------
6.54 Forklift, capacity ...............................................Expense of.......... X Furnished by X
----------------- ----------------
6.55 Corrosion Inhibitor for protecting drill string ...................................... X
----------------- ----------------
6.56 Corrosion Rings ...................................................................... X
----------------- ----------------
6.57 Rig Specific SPCC Plan ............................................................... X
----------------- ----------------
6.58
----------------------------------------------------------------------------- ----------------- ----------------
(U.S. Daywork Contract - Exhibit "A" Page 3)
9
7. OTHER PROVISIONS:
A. Drill String Inspection and Repair
Operator will pay for the original inspection of the 5" drill pipe and
components and periodic inspections during the term of the contract, and
Contractor will pay for the last inspection of the 5" drill pipe. It is
further agreed upon that the Operator will repair or replace in like
kind damaged drill pipe and collars, excluding normal wear and tear.
B. Performance Agreement
Notwithstanding anything to the contrary provided in Paragraph 6.3, if
Operator is dissatisfied with the quality or efficiency of Contractor's
work hereunder, Operator shall give Contractor written notice of any
such deficiencies. Contractor shall have fifteen (15) days from receipt
of such notice in which to remedy any such deficiencies. If at the end
of the fifteen (15) day period Contractor has not remedied such
deficiencies to the reasonable satisfaction of the Operator, Operator
may request Contractor to provide a replacement rig; if Contractor is
not able to provide a replacement rig to the reasonable satisfaction of
the Operator, Operator may terminate this contract at the end of the
current well without further liability, except as to payment for work
already performed, charges incurred prior to termination, any
demobilization payment and any indemnity owed.
7.2 Forklift
Contractor will provide and maintain a forklift at an additional cost of
$60.00 per day.
7.3 Oil Base Mud
a) While on oil base mud, Operator will reimburse Contractor $10.00 per day
per man for "oil base pay". Operator also agrees to pay for all rubber
goods that need replacing due to contact with oil base mud.
b) Upon completion of any well on which oil base mud is used, Operator will
supply and pay for the necessary steam cleaning equipment and solvents
to jet and clean the pits, and clean the rig, after it has been
released. Operator agrees to pay the Contractor $2,700.00 per day for
the labor.
7.4 Shale Shaker Maintenance and Screens
Operator will provide all shale shaker screens. Contractor will provide
necessary repairs and maintenance on both linear motion shakers to
minimize any abnormal screen usage.
7.5 Standby Rate
a) Full Crew For standby time while waiting on orders or equipment to be
furnished by the Operator, a standby rate of $5,000 per twenty-four (24)
hour day with full crew.
b) Guard Only Operator shall be permitted to order Contractor to standby
with guard only for 6 days between each well (45 cumulative days
maximum during the 2 year term and 45 cumulative days during the
extended term - if contract is extended under 6.2) without compensation
to Contractor; after 6 days between xxxxx and/or 45 cumulative standby
with guard only, Operator shall be required to pay $3,200 per
twenty-four (24) hour day.
10
7.6 Annual Dayrate Adjustment
The Daywork Rates described in Sections 4 and 23.2 and the Standby
Rates described in Section 7.5 shall be reviewed by Operator
and Contractor beginning November 1 each year this contract remains in
effect so as to cause the Rates to be adjusted to approximately $100
per day less than average current market Rates for the areas of
operation. Beginning on such dates, Operator and Contractor shall
mutually attempt in good faith, to negotiate appropriate revisions in
Rates (Rates may only be revised upward under this provision). If,
after ten days, Operator and Contractor have not been able to mutually
agree on appropriate revisions in Rates, Contractor shall give written
notice to Operator of Contractor's proposed Revised Rates. Upon receipt
of such notice, Operator shall have 10 days to reply in writing to
Contractor; Operator may accept the Revised Rates as proposed by
Contractor or propose alternate Rates (such revised Rates from Operator
must be greater or equal to Rates then in effect under this contract).
Contractor shall have 10 days to accept such Rates as proposed by
Operator or terminate this contract at the end of the current well
without further liability and shall not be entitled to further
compensation, except as to pay for work already performed, charges
incurred prior to termination plus demobilization as specified in
Paragraph 4.2. Any Rate revisions pursuant to this paragraph shall
apply to xxxxx spudded after each December 1 that the Contractor
remains in effect.
7.7 Rig Crew
A full crew shall consist of 5 members for each tour of duty.
a) Short Crew
If the rig is operating with a short crew, Contractor's day rate may be
reduced as follows:
Number of Crew Day Rate
Members Short Reduction
-------------- ---------
1 $ 20 per hour
2 $ 40 per hour
3 $125 per hour
4 or more Operations are considered
to be shut down
b) 6 Man Crew
Contractor may operate the rig with a crew consisting of 6 or more
members. In such event, Contractor will charge Operator $8 per
hour (limited to 12 hours per 24 hour period) for each hour the rig
crew consists of 6 or more members.
7.8 Equipment Operating Limits
Operator agrees to limit utilization of Contractor's equipment to 90%
of the manufacturer's specification and ratings.
7.9 BOP Installation
Operator will pay a maximum of 12 hours daywork (24 hours for initial)
for nipple up of Contractor provided BOP equipment, after the head has
cooled from welding, or after the B Section has been installed. This
excludes testing, mud/gas separator hook-ups, or manifold rig up.
7.10 Contractor will observe lock out/tag out policy while working on
electrical equipment.
11
7.11 The allowable shutdown time of four (4) hours per occurrence and 18
hours per month shall be increased to six (6) hours per occurrence and 24
hours per month if contractor provides a top-drive as part of the rig
inventory.
The allowable shutdown time of six (6) hours per occurrence and 24 hours
per month shall include repairs to the top-drive, and shall be prorated in
the event Contractor works less than a full calendar month while on
daywork.
During the first 30 days of operation for rigs 15, 16 and 22, the allowed
shutdown time will be zero (0) hours.
See Contract Page 5, paragraph 23.1
12
Revised June, 1994
EXHIBIT "B"
(See Paragraph 8.3)
The following clauses, when required by law, are incorporated in the Contract
by reference as if fully set out:
(1) The Equal Opportunity Clause prescribed in 41 CFR 60-1.4.
(2) The Affirmative Action Clause prescribed in 41 CFR 60-250.4 regarding
veterans and veterans of the Vietnam era.
(3) The Affirmative Action Clause for handicapped workers prescribed in
41 CFR 60-741.4.
(4) The Certification of Compliance With Environmental Laws prescribed in
40 CFR 15.20.
(U.S. Daywork Contract - Exhibit "B" Page 1)
13
OPERATOR'S ADDENDUM
CONTINUATION OF PARAGRAPH 5.2 OF THE CONTRACT
5.2 Notwithstanding anything to the contrary contained herein, payment of
any such bills shall not prejudice the right of Operator to protest or
question the correctness thereof.
Operator, upon notice in writing to Contractor, shall have the right to
audit Contractor's accounts and records relating to the Contract for
any calendar year within the twenty-four (24) month period following the
end of such calendar year; provided, however, the making of an audit
shall not extend the time for taking of written exception to and the
adjustments of accounts as provided above. The audits shall not be
conducted more than once each year without the prior approval of
Contractor, and shall be made at the expense of the Operator. The
Contractor shall reply in writing to an audit report within 180 days
after receipt of such report.
REPLACEMENT PARAGRAPHS 14.8 AND 14.9 OF THE CONTRACT
14.8 CONTRACTOR'S INDEMNIFICATION OF OPERATOR: Contractor shall release
Operator of any liability for, and shall protect, defend and indemnify
Operator, its officers, directors, employees and joint owners from and
against all claims, demands, and causes of action of every kind and
character, without limit and without regard to the cause or causes
thereof or the negligence of any party or parties, arising in
connection herewith in favor of Contractor's employees or Contractor's
subcontractors or their employees, or Contractor's invitees
(collectively the "Contractor's Parties"), on account of bodily injury,
death or damage to property. Contractor shall further release Operator
of any liability for, and protect, defend and indemnify Operator, it
officers, directors, employees and joint owners from and against all
claims, demands and causes of action of every kind and character,
without limit, arising in connection herewith in favor of any third
party or parties (excluding "Operator's Parties") on account of bodily
injury, death or damage to property caused by the negligent or willful
acts of Contractor's Parties. Likewise, Contractor shall be responsible
for and shall protect, defend and indemnify Operator, it officers,
directors, employees and joint owners from and against any fines or
sanctions imposed by any governmental agency or authority arising from
any unlawful act or acts committed by Contractor's Parties while in the
course of performance of this Contract. Contractor's indemnity under
this paragraph shall be without regard to and without any right to
contribution from any insurance maintained by Operator pursuant to
Paragraph 13. If it is judicially determined that the monetary limits
of insurance required hereunder or of the indemnities voluntarily
assumed under Paragraph 14.8 (which Contractor and Operator hereby
agree will be supported either by available liability insurance, under
which the insurer has no right of subrogation against the indemnities,
or voluntarily self-insured, in part or whole) exceed the maximum
limits permitted under applicable law, it is agreed that said insurance
requirements or indemnities shall automatically be amended to conform
to the maximum monetary limits permitted under such law. The provisions
of this paragraph shall be subject to those contained elsewhere in this
contract (including Paragraph 14.11); in case of conflict, the other
provisions of this contract shall govern.
14.9 OPERATOR'S INDEMNIFICATION OF CONTRACTOR: Operator shall release
Contractor of any liability for, and shall protect, defend and indemnify
Contractor, it officers, directors, employees and joint owners from and
against all claims, demands, and causes of action of every kind and
character, without limit and without regard to the cause or causes
thereof or the negligence of any party or parties, arising in connection
herewith in favor of Operator's employees or Operator's contractors or
their employees, or Operator's invitees, (collectively "Operator's
Parties") other than those parties identified in Paragraph 14.8 on
account of bodily injury, death or damage to property. Operator shall
further release Contractor of any liability for, and protect, defend and
indemnify Contractor, it officers, directors, employees and joint owners
from and against all claims, demands and causes of action of every kind
and character, without limit, arising in connection herewith in favor of
any third party or parties (excluding "Contractor's Parties") on account
of bodily injury, death or damage to property caused by the negligent or
willful acts of Operator's Parties. Likewise, Operator shall be
responsible for and shall protect, defend and indemnify Contractor, its
officers, directors, employees and joint owners from and against any
fines or sanctions imposed by any governmental agency or authority
arising from any unlawful act or acts committed by Operator's Parties
while in the course of performance of this contract. Operator's
indemnity under this paragraph shall be without regard to and without
any right to contribution from any insurance maintained by Contractor
pursuant to Paragraph 13. If it is judicially determined that the
monetary limits of insurance required hereunder or of the indemnities
voluntarily assumed under Paragraph 14.9 (which Contractor and Operator
hereby agree will be supported either by available liability insurance,
under which the insurer has no right of subrogation against the
indemnities, or voluntarily self-insured, in part or whole) exceed the
maximum limits permitted under applicable law, it is agreed that said
insurance requirements or indemnities shall automatically be amended to
conform to the maximum monetary limits permitted under such law. The
provisions of this paragraph shall be subject to those contained
elsewhere in this contract (Paragraph 14.11); in case of conflict, the
other provisions of this contract shall govern.
CHESAPEAKE OPERATING, INC.
FOR CONTRACTOR /s/ ILLEGIBLE
------------------------
FOR OPERATOR /s/ ILLEGIBLE
--------------------------
