1
EXHIBIT 10.1.1
PARTICIPATION AGREEMENT:
COALINGA NOSE PROSPECT
A. Production Specialties Co. (Production) has entered into a farm out
agreement dated January 1, 2001 with Greka AM Inc. (Greka) and Production
has further farmed out to Brothers Oil and Gas Inc. (Brothers) a portion of
the Greka farm out.
Brothers hereby offers Xxxxx Xxxxxx or Assignee (Optionee) an option to
participate in a 5% working interest in the farm out set out in Exhibit A
attached on the following basis:
a) Payment to Brothers of $22,500 US as a non-refundable deposit on
signing this agreement
b) Payment of $49,560 US on May 24, 2001. This final payment completes
the exercise of the option and funds the estimated dry hole cost of
the initial test well on the project.
B. Brothers represents the following:
a) Production has entered into a heads of agreement and farm out with
Greka dated January 1, 2001
b) Production has entered into a farm out agreement with Brothers dated
March 19, 2001
c) Terms of farm out to Brothers:
1) Brothers pays $12,500 US to Production on signing
2) Brothers pays $112,500 US to Production on completion of
satisfactory due diligence
3) Brothers pays $495,600 US to Production prior to spudding the
initial test well
4) Farmees earn as follows:
i. Pool A:
Farmees pay 100% of the cost of the initial test well to
earn a 74% net revenue interest until payout of well. After
payout, Greka et al back in for a 25% working interest
leaving farmees with a 56.25% net revenue interest.
Subsequent xxxxx in Pool A will be drilled on a 75/25% heads
up basis.
ii. Pool B:
Greka et al has the option to participate as to a 50%
working interest and farmees have the option to participate
as to a 50% working interest in a 75% net revenue interest.
-1-
2
C. All parties agree:
a) To execute a mutually satisfactory 1982 AAPL Form 610 operating
agreement naming Production or its nominee as operator. This agreement
will contain "custom of the trade" provisions.
b) To execute such other agreements as are deemed reasonable and
necessary to implement the intent of these agreements.
D. Optionees represent:
a) They have received adequate information on which to base their
participation.
b) They agree that in the event of any failure to pay their share of the
non-refundable, or initial test well payment, Brothers may, at its
option, cancel these agreements and retain funds advanced as
liquidated damages.
Please execute one copy and mail to: Send payments to:
Brothers Oil and Gas Inc. Brothers Oil and Gas Inc.
Xxx 00 X/X #000- 000 Xxxx Xxxxxxxx Xx.
Xxxxxxx Xxxxxx, XX Xxxxxxxxx, X.X. , X0X 0X0
X0X 0X0
Fax an executed copy to 000-000-0000 Or wire to:
Bank of America, University Branch (7161)
0000 Xxxxx Xxxxxxxx Xxxxxxx
Xxx Xxxxx, Xxxxxx, 00000
(000) 000-0000
Transit # 000000000
Account #000081822066
Optionor
Brothers Oil and Gas Inc.
/s/ XX XXXXXX
------------------------------
Optionee
Xxxxx Xxxxxx or Assignee
/s/ Xxxxx Xxxxxx
------------------------------
Address: X/X #0000- 0000 Xxxx Xxxxxxx Xx., Xxx., X.X., X0X 0X0
Telephone: 000-000-0000
FAX: 000-000-0000
-2-
3
Exhibit A
Lessors: Greka AM and Nahama Energy
Acreage: 8000 acres+ located in Fresno County, California
Optionees: have full access to 3D seismic, conventional seismic, and other
geological data upon which to carry out due diligence.
Farm out terms (100%) interest
a) Non refundable deposit on signing agreement: $
50,000US
b) Payment for completion of satisfactory due diligence: $
300,000US
c) Estimated dry hole and lease payment due on May 25, 2001: $
991,200US
------------
$1,341,200US
============
Production Specialties or Nominee to be operator of this prospect.
Initial Test Well #1 (Pool A)
a) Optionees pay 100% working interest to earn 74% net revenue interest
before payout. After payout, Greka et al back in for a 25% working
interest and related net revenue interest.
b) On subsequent xxxxx, in Pool A, drilling and earning will be on a
heads up basis (75% working interest Optionees / 25% working interest
Greka et al). Optionees will earn 56.25% net revenue interest before
and after payout.
Initial Test Well #2 (Pool B)
a) 180 days after the completion of a successful test well on Pool A, a
second test well will be spudded with Optionees having a 50% working
interest and Greka et al a 50% working interest
b) All subsequent xxxxx on this pool will also be a 50/50 heads up basis
-3-
