EXHIBIT 10.6
PARTICIPATION AGREEMENT
▇▇▇▇▇▇ ISLAND ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
This Participation Agreement ("Agreement") is made and entered into
effective as of the 1st day of July, 2005 by and between ▇▇▇▇▇▇ Oil & Gas
Corporation ("▇▇▇▇▇▇"), and Ridgewood Energy Corporation ("Ridgewood").
RECITALS
WHEREAS, ▇▇▇▇▇▇ has identified a prospect on ▇▇▇▇▇▇ Island block 357 and
has acquired Oil & Gas Lease OCS-G 23884 dated June 1, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America; and,
WHEREAS, ▇▇▇▇▇▇ plans to drill or participate in the drilling of an initial
test well on ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇-▇ ▇▇▇▇▇; and,
WHEREAS, ▇▇▇▇▇▇ has offered to Ridgewood the opportunity to participate in
the drilling of the initial test well and to acquire a 25% working interest in
block 357, OCS-G23884, less and except the NE/4 of the lease from the surface to
11,500' subsea (hereafter "Lease"), and Ridgewood has accepted Walter's offer
all in accordance with the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreement
herein contained, the parties hereto agree as follows:
SECTION I
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Initial Costs
1.01 Within ten (10) days of Ridgewood's execution of this Agreement, Ridgewood
agrees to pay ▇▇▇▇▇▇ $141,203.00 (which represents Ridgewood's 25% share of
the Lease bonus, rental and shallow hazard survey costs incurred by
▇▇▇▇▇▇).
SECTION II
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Initial Test Well
2.01 ▇▇▇▇▇▇ plans to participate in the drilling of an initial test well on the
Lease. The initial test well will be drilled from a surface location of
approximately 5,625' FSL and 6,610' FEL of the Lease and drilled to a depth
of 15,800' TVD (hereinafter "Initial Test Well"). As consideration for the
opportunity to earn a twenty-five percent (25%) working interest in the
Lease, Ridgewood shall bear Thirty-Three and One-Third percent (33.33%) of
the costs to drill the Initial Test Well to casing point and through
plugging and abandonment, if the Initial Test Well is not saved for
production. This disproportionate cost sharing obligation shall be referred
to as the "Promote." The Promote will be applicable to the dry hole costs
of the Initial Test Well and will be limited to 110% of the Initial Test
Well's estimated dry hole cost as noted in the attached AFE. The Promote
will also apply to any substitute well or sidetrack of the Initial Test
Well until ▇▇▇▇▇▇ has received 110% of the original AFE dry hole costs.
Concurrent with Ridgewood's execution of this Agreement, Ridgewood will be
deemed to have approved the attached AFE and well plan.
2.02 Subject only to rig availability and the ability to obtain the required
governmental permits, ▇▇▇▇▇▇ and Ridgewood agree that if the Initial Test
Well is not spudded on or before December 1, 2005 ("Commencement Date"),
and such date has not been extended by Ridgewood, then this Agreement shall
ipso facto terminate. Within 10 days of such termination, ▇▇▇▇▇▇ shall
reimburse Ridgewood for any payments it received in accordance with
Paragraph 1.01 of this Agreement and Ridgewood shall submit assignments to
▇▇▇▇▇▇ re-conveying Ridgewood's 25% working interest in the Lease
previously received from ▇▇▇▇▇▇, which assignment shall be free and clear
of any liens, charges, or lease burdens, overriding royalty interest, or
any other encumbrance created by Ridgewood. For clarification purposes
only, there shall be no other penalty(ies) assessable to either party
hereto for failure of the Initial Test Well to be spudded on or before the
Commencement Date.
2.03 It is understood and agreed that Newfield Exploration Company ("Newfield")
will have a 50% working interest in the Lease and Initial Test Well and
will be the designated operator.
SECTION III
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Assignment and Assumption of Rights
3.01 Within ten (10) days from receipt of Ridgewood's payment described in 1.01
above, ▇▇▇▇▇▇ shall assign to Ridgewood Twenty Five percent (25%) operating
rights interest in the Lease. The interest assigned to Ridgewood in the
Lease shall be subject to the existing royalty burden and a 2.25% of 8/8ths
overriding royalty interest ("ORRI") to be reserved by ▇▇▇▇▇▇, all
proportionately reduced to Ridgewood's assigned interest. ▇▇▇▇▇▇ represents
to Ridgewood that total Lease burdens created by, through and under ▇▇▇▇▇▇
as of the effective date of this Agreement, including lessor's royalty, are
no greater than 18.917% (of 8/8ths). The form of Assignment is attached
hereto as Exhibit "A."
SECTION IV
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Operating Agreement
4.01 Contemporaneous with the execution of this Agreement, the parties hereto
agree to execute a mutually agreeable operating agreement ("JOA"), naming
Newfield operator of the Lease. Both parties hereto acknowledge that the
JOA is a three-party agreement also requiring Newfield's signature. All
operations on the Initial Test Well and any and all subsequent operations
on the Lease shall be conducted in accordance with the terms and provisions
of the JOA. If there are any conflicts between this Agreement and the JOA,
the terms and provisions of this Agreement shall prevail and govern.
SECTION V
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Notices
5.01 All notices, requests or demands to be given under this Agreement shall be
in writing and governed and directed to the representatives as specified
below:
Ridgewood Energy Corporation ▇▇▇▇▇▇ Oil & Gas Corporation
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. W. ▇▇▇▇ ▇▇▇▇▇ Attn: Mr. ▇▇▇ ▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇ Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
SECTION VI
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GOVERNING LAW AND BREACH OF CONTRACT
6.01 This Agreement shall be governed by the laws of the State of Texas except
where the Maritime Laws of the United States of America are applicable. In
the event that any dispute results in formal legal action, venue shall be
appropriate in the federal or state courts of ▇▇▇▇▇▇ County, Texas.
6.02 In the event of a breach of this Agreement by any party hereto, the non
breaching party shall be entitled to all remedies available at law or
equity, including but not limited to, specific performance, monetary
damages and injunctive relief.
SECTION VII
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MISCELLANEOUS
7.01 ▇▇▇▇▇▇ shall provide Ridgewood with full and complete access to Walter's
files, records and data, so that Ridgewood may perform its due diligence
review of Walter's acquisition, ownership and obligations associated with
the Lease. Additionally, ▇▇▇▇▇▇ shall provide Ridgewood with access to its
technical data associated with the Lease, including seismic, maps, well
data and geological data, subject however, to all confidentiality and data
licensing restrictions.
7.02 A term, provision, covenant, representation, warranty, or condition of this
Agreement may be waived only by written instrument executed by the party
waiving compliance. The failure or delay of any party in the enforcement or
exercise of the rights granted under this Agreement shall not constitute a
waiver of said rights nor shall it be considered as a basis for estoppel.
7.03 This Agreement, together with all of its exhibits, is intended by the
parties to be a complete and final statement of the agreement of the
parties with respect to the subject matter hereof, and supersedes any prior
oral or written statements or agreements between the parties hereto.
7.04 The terms and provisions hereof shall be binding upon and inure to the
benefit of ▇▇▇▇▇▇ and Ridgewood, and their respective heirs, legal
representatives, successors and assigns, and shall be covenants running
with the Lease.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
WITNESSES
▇▇▇▇▇▇ OIL & GAS CORPORATION
/s/
------------------------------ /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------ Vice President
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
RIDGEWOOD ENERGY CORPORATION
/s/ ▇▇▇ ▇▇▇▇
------------------------------ /s/ W. ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ------------------------------
W. ▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ Executive Vice President
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
EXHIBIT "A"
Attached to and made a part of that certain Participation Agreement
dated July 1, 2005 between ▇▇▇▇▇▇ Oil & Gas Corporation and Ridgewood
Energy Corporation.
ASSIGNMENT OF OPERATING RIGHTS TO OIL AND GAS LEASE
OCS-G ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ss.
OUTER CONTINENTAL SHELF ss.
OFFSHORE LOUISIANA ss.
For and in consideration of the sum of One Hundred Dollars ($100.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, ▇▇▇▇▇▇ Oil & Gas Corporation, a Texas Corporation, whose
mailing address is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (hereinafter
called "Assignor"), does SELL, TRANSFER, ASSIGN, SET OVER AND CONVEY unto
Ridgewood Energy Corporation, a_________________________________ Company, whose
mailing address is ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
(hereinafter called "Assignee"), a 25.0000% operating rights interest in and to
the following federal oil and gas Lease ("Lease"):
Oil and Gas Lease No. OCS-G 23884 dated June 1, 2002 from the United States
of America, as Lessor, to ▇▇▇▇▇▇ Oil & Gas Corporation, as Lessee,
covering ▇▇▇▇▇▇ Island Area, Block 357, OCS Leasing Map, Louisiana Map No.
4A, containing 4999.88 acres;
LESS AND EXCEPT the Northeast Quarter (NE/4) of the Lease from the surface
down to 11,500' subsea (hereinafter referred to as ("Assigned Interest").
Subject to the matters set forth herein, this Assignment is made without
warranty of title, express, implied or statutory, even for return of any
consideration paid therefor; provided only that Assignor warrants that it has
not heretofore granted or conveyed to any other party any interest in or any
lien or encumbrance on the interest being assigned hereunder in the Lease except
as described herein.
WITH RESPECT TO ANY PERSONALTY OR CHATTELS CONVEYED HEREBY, ASSIGNOR HEREBY
NEGATES AND DISCLAIMS THE IMPLIED WARRANTY OF MERCHANTABILITY AND THE IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND ANY IMPLIED WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MODELS. ASSIGNEE AND ASSIGNOR AGREE THAT, TO
THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF
CERTAIN WARRANTIES CONTAINED IN THIS INSTRUMENT ARE "CONSPICUOUS" DISCLAIMERS.
TO HAVE AND TO HOLD the Assigned Interests hereby conveyed, together with
all and singular rights and appurtenances thereto in anyway belonging unto
Assignee, its successors and assigns.
This Assignment is made by Assignor and accepted by Assignee subject to the
following:
1} the terms, provisions and conditions of the Lease and any limitation on or
contained in the Lease;
2) That certain Participation Agreement dated July 1, 2005 by and between
Assignor and Assignee and covering the Assigned Interest;
3) That certain Offshore Operating Agreement dated July 1, 2005 by and between
Newfield Exploration Company, as Operator, and Assignor and Assignee, as
Non-Operators, and covering the Assigned Interest;
4) Assignor reserves unto itself, and retains an overriding royalty interest
equal to 2.25% of eight-eights (8/8ths) in and to all hydrocarbons that are
produced, saved, and sold from the Lease. Said overriding royalty shall be
free of all costs of any kind whatsoever including but not limited to costs
associated with exploration, development, production or operating, but
shall bear its proportionate share of severance and production taxes unless
provided otherwise in the Lease. Said overriding royalty shall be
calculated and paid or delivered to Assignee in the same manner as provided
in the Lease affected thereby for the calculation and payment or delivery
of royalties therein reserved to the Lessor.
a) It is understood that the overriding royalty interest reserved
hereinabove is an 8/8ths number and that Assignee shall bear its
proportionate share of such overriding royalty interest based on the
Assigned Interest herein.
4) The terms and conditions of this Assignment shall extend to and be binding
upon the successors and assigns of the parties.
IN WITNESS WHEREOF, this Assignment of Operating Rights Interest is
executed and effective this ____ day of _________, 2005.
WITNESSES: ASSIGNOR:
▇▇▇▇▇▇ Oil & Gas Corporation
______________________________
______________________________
By:______________________________
▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
WITNESSES: ASSIGNEE:
Ridgewood Energy Corporation
______________________________
______________________________
By:______________________________
W. ▇▇▇▇ ▇▇▇▇▇
Executive Vice President
STATE OF TEXAS
COUNTY OF ▇▇▇▇▇▇
On this _____ day of _________, 2005 before me appeared W. ▇▇▇▇ ▇▇▇▇▇, to
me personally known, who, being by me duly sworn, did say that he is the
Executive Vice President of Ridgewood Energy Corporation, and that the foregoing
instrument was signed on behalf of said company, and said W. ▇▇▇▇ ▇▇▇▇▇
acknowledged said instrument to be the free act and deed of said corporation.
______________________________
NOTARY PUBLIC
My Commission Expires __________________.
STATE OF TEXAS
COUNTY OF ▇▇▇▇▇▇
On this _____ day of ________, 2005 before me appeared ▇▇▇ ▇. ▇▇▇▇▇▇, to me
personally known, who, being by me duly sworn, did say that he is the Vice
President of ▇▇▇▇▇▇ Oil & Gas Corporation, and that the foregoing instrument was
signed on behalf of said partnership, and said ▇▇▇ ▇. ▇▇▇▇▇▇ acknowledged said
instrument to be the free act and deed of said corporation.
______________________________
NOTARY PUBLIC
My Commission Expires __________________.
