Exhibit 10.2
JOINT OPERATING CONTRACT
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THIS MEMORANDUM OF AGREEMENT made and entered into this --9TH day of--- JULY, ,
2006, TIDELANDS EXPLORATION AND PRODUCTION, INC., 0000 X.XXXXXXX - XXXX. #0, XXX
XXXXXXX, XXXXX 00000 hereinafter called Non - Operator and REGENCY ENERGY, INC.,
0000 XX XXX #00, XXXXXXX XXXX, XXXXX 00000 (hereinafter called Non-Operator
whether one or more and (hereinafter called Operator).
WITNESSETH:
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WHEREAS, Operator and Non-operators respectively are the owners of the oil,
gas and mineral lease or leases, or of the undivided interest therein, described
in Exhibit "A" hereto attached and made a part hereof for all purposes insofar
as such lease or leases cover the land described in Exhibit "A" hereto attached,
which lease or leases insofar as the described land is covered thereby are
hereinafter refereed to as "Joint Leases"; and it is the desire of the parties
hereto that Operator shall be in charge of development operations under said
Joint Leases in accordance with agreements and provisions hereinafter contained:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. GENERAL DUTIES OF OPERATOR: Operator shall have, subject to the terms,
provisions and limitations hereinafter expressed, exclusive charge,
control and supervision of all operations of every kind to be
conducted on the Joint Leases for the development, minerals there from
as well as the payment of all rentals, royalties, taxes and other
charges which may arise or become due or payable in connection with
such operations.
2. CHARGES TO JOINT ACCOUNT: Operator shall charge the Joint Account with
all costs and expenses incurred in connection with the operation of
the Joint Leases as herein contemplated, charges to be made in
accordance with the "Accounting Procedure" hereto attached as Exhibit
"B" and made a part hereof for all purposes. The charges made to the
Joint Account as provided herein shall be borne by the parties hereto
in the proportion that the interest of each of the parties in the
Joint Leases bears to the total of the interests in the Joint Leases
of the parties hereto.
3. RECORDS: Operator shall keep an accurate record of the Joint Account
hereunder showing the cost and expenses incurred and charges made and
all credits and returns made and received, which record shall be
available at all reasonable times for the consideration, examination
and inspection of each of Non-operators and its duly authorized
representatives.
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4. YEARLY STATEMENTS: On or before the last day of January each year,
Operator shall furnish to each of the Non-operators a detailed
statement of investments made and costs and expenses incurred against
and credits and receipts made and received for the Joint Account
during the preceding calendar year. Said statement to properly reflect
all items of tangible and intangible nature. Any exceptions to the
statement as rendered by Operator must be made by Non-operators within
one (1) month from receipt thereof, and if no exception is made within
that time, the statement shall be conclusively considered as correct;
but this provision shall not prevent adjustments of physical property
to inventory as provided for in Exhibit "B". Each of Non-operators
agrees to pay to Operator at X.X. Xxx 000000, Xxxxxx Xxxxxxx, Xxxxx
00000-0000, its proportionate part of all expenditures made for the
Joint Account by Operator in connection with investments on account of
said Joint Leases hereunder, based upon such Non-operators interest
from time to time in the leases described in Exhibit "A" hereto
attached. Currently within fifteen (15) days after receipt of the
yearly statements herein provided to be rendered by Operator each
Non-operator agrees to pay its proportionate part of any unpaid amount
due Operator as shown by such statements. The amount properly
chargeable in each statement and due to Operator shall be due and
payable at the expiration of fifteen (15) days from receipt of each
statement and shall bear interest thereafter until paid at the rate of
ten percent (10%) per annum, which interest on its delinquencies each
Non-operator hereto severally agrees to pay Operator at the place
above designated. Each Non-operator grants to Operator a lien on its
interest in the Joint Leases, the production there from and all
fixtures, improvements and personal property now or hereafter located
thereon to secure the payment of its proportionate part of all
investments made for and costs and expenses against the Joint Account
hereunder developing the Joint Leases hereunder which lien may be
enforced as any other mortgage lien. Should any Non-operator fail to
pay its proportionate part of any statement rendered by us as herein
provided within the fifteen (15) days herein above stipulated,
Operator shall have the right at foreclosure said lien upon the
interests of the Non-operator in default.
5. DRILLING AND DEVELOPMENT OF LEASES: Operator is authorized to drill at
the expense of the Joint Account any well on the Joint Leases required
to meet the offset and reasonable development obligations, and all
express obligations under the Joint Leases, and any well necessary in
order to prevent the expiration of any Joint Lease, without first
securing the authority and approval of Non-operators.
Operator shall secure the written approval of Non-operators before
incurring against the Joint Account any item of expense, which item
itself is in excess of $10,000.00, except in the drilling, equipping
and completion of a well covered by the preceding paragraph or in the
drilling, equipping and completion of a well as to which notice has
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been given as provided in the next succeeding paragraph and with
respect to which well no Non-Operator has given notice that it does
not desire to participate in the cost and expense of drilling or
reworking.
Before Operator commences operations at the cost of the Joint Account
for the drilling and/or reworking of any well on the Joint Leases it
shall give 30 days written notice of its intention to commence
operations for the drilling and/or reworking of the well for each of
the Non-operators and furnish with said notice a statement reflecting
the total estimated cost to be incurred for the drilling and/or
reworking, evaluating, completion and equipping said well. Said
statement shall reflect the amount due from each Non-operator for
their proportionate interest of ownership and after receipt of said
notice and estimated cost Non-operator shall have Twenty (20) days to
elect to participate or not to participate in the drilling and/or
reworking of said well. If Non-operator desires to participate in the
drilling and/or reworking of said well he or they shall notify
Operator of that desire and remit the requested amount representing
their proportionate share within the time period of Twenty (20) days
after receipt of notification. If Non-operator elects not to
participate in the drilling and/or reworking of said well then he or
they shall make that desire known to Operator within the time period
of Twenty (20) days after receipt of notification of Operators intent
to commence drilling and/or reworking operations. If after being given
notice any Non-operator notifies Operator, that it or they do not
desire to participate in the cost and expense of drilling and/or
reworking said well, the costs and expenses thereof shall be borne by
the Operator and Non-operator, if any, not giving consent to the
notice, each bearing that portion of the cost which its interest in
the Joint Leases bears to the total of the interest therein of
Operator and Non-operators participating the drilling and/or reworking
of said well; and if all Non-Operators give such notice, Operator may
drill and rework said well at Operator's cost and expense; provided,
however, before any Non-Operator who elects not to participate in the
drilling and/or reworking of said well shall be entitled to receive
any portion of the production revenue there from Operator and
Non-operators, if any, who have participated in the cost of drilling
and/or reworking said well shall have the right to receive out of the
net proceeds from the sale of the portion of the production from said
well belonging to each Non- operator who does not participate in the
cost and expense of drilling and/or reworking said well five (5) times
the amount (500%) the amount of that portion of costs which would have
been borne by the non-participating Non-operator, under the provisions
hereof, had it participated in such cost and expense. The proceeds of
the sale of the specified portion of the production shall be allocated
between Operator and NonOperators, if any, who participate in the
drilling of the well in proportion to their interest in the Joint
Leases. The cost of operating such well or of the reworking same shall
be borne by the Joint Account. If the well is a dry hole and reworking
operations are not successful, the salvage there from shall be owned
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by Operator and Non-operator and Non-operators, if any, participating
in the drilling and/or reworking thereof in proportion to their
several interest in the Joint Leases.
All work performed by Operator shall be "at cost" plus fifteen percent
(15%) to the Joint Account and a full and complete detailed statement
of such cost shall be furnished each Non-operator upon conclusion and
completing of the drilling and/or reworking of each well or xxxxx. Any
funds remaining from the amounts paid by Non-operator based on the
estimated cost originally submitted will be refunded or credited to
that Non-operators account. Any funds expended in excess of the amount
originally paid by Non-operator shall be chargeable to each
Non-operator in proportion to their interest as it appears and shall
be due and payable to Operator upon receipt by Non-operator of the
statement reflecting such amount due. Each of the Non-operators agrees
to pay to Operator at 0000 Xxxxx Xxxxxxx 00, Xxxxxxx Xxxx, XX 00000,
its proportionate share as reflected by statement. The amount properly
chargeable in each statement and due to Operator shall be due and
payable on or before fifteen (15) days from receipt of each statement
and shall bear interest thereafter until paid at the rate of ten per
cent (10%) per annum, which interest on its delinquencies each
Non-operator hereto severally agrees to pay to Operator at the place
above designated.
Each Non-operator grants to Operator a lien on its interest in the
Joint Leases, the production there from and all fixtures, improvements
and personal property now or hereinafter located thereon to secure the
payment of its proportionate part of all investments made for and cost
and expenses against the Joint Account hereunder in developing and
operating the Joint Leases. This lien may be enforced as any other
mortgage lien. Should any Non-operator fail to pay its proportionate
part of all statements rendered as herein provided within fifteen (15)
days herein above stipulated, Operator shall have the right at any
time thereafter, such default continuing, to withhold all revenues due
Non-operator who is in default and apply such proceeds to the unpaid
amounts and past due interest or at Operators option to foreclose said
lien upon the interest of the Non-operator in default.
Operator shall bear the right itself to drill any or all xxxxx drilled
at the expense of the Joint Account, or to let the drilling thereof to
a responsible contractor. Should Operator elect to drill any well
itself, it may either charge the Joint Account with the actual cost of
drilling and equipping the well, in accordance with the provisions of
Exhibit "B", or may itself pay the actual cost of drilling the well
and charge to the Joint Account, as the cost of drilling, an amount
equal to the contract price per foot and for work for drilling the
well on the basis of the contract price per foot and for work for
drilling the well on the basis of the contract price per foot and for
the day work prevailing in the immediate area, or which may be
obtained from a responsible drilling contractor, at the time the well
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shall be on the basis provided in Exhibit "B", hereto attached.
Operator shall notify Non-operators, in writing prior to commencement
of operations on any well drilled at the expense of the Joint Account,
which Operator drills itself, as to whether Operator will drill the
well on the basis of actual cost or on a contract basis, and if on a
contract basis, the notice shall state the price per foot and for day
work. If the Non operators do not object in writing to the Operator
within five (5) days of the notice, it will be conclusively considered
that the price per foot and for day work stated in the notice is
satisfactory. Should Non-operators, or any of them, object in writing
within (5) days to such price per foot and for day work, then, if
Operator and Non-operators cannot agree upon a price to be charged,
such price shall be determined by arbitration in accordance with the
provisions of Section 15 hereof. When cost of the well drilled by
Operator is charged on the contract basis, Operator assumes all risk
in connection with the drilling of the well which would customarily be
assumed by an independent contractor had the drilling of the well been
let to an independent contractor, except the Operator shall not assume
any loss, risk, damage or liability resulting from the well blowing
out, cratering, or running wild, except injury to Operator's equipment
and to Operator's agents, servants and employees; but all loss, risk,
damage or liability not assumed by Operator shall be borne by the
Joint Account. Where the cost of the well drilled by Operator is not
charged on a contract basis, but on their basis of actual cost,
Operator assumes none of the risks shall be borne by the Joint
Account.
6. MARKETING OF PRODUCTS - MONTHLY STATEMENTS: Subject to the provision
of Section 7 hereof, Operator is given authority to market all oil,
gas and other minerals produced from the Joint Leases and accruing to
the parties hereto; and, upon the sale of gross proceeds of such
sales, and Operator is to hold purchaser harmless from any and all
claims of Operator and Non-operators relating to final distribution of
the proceeds to royalty owners, production payments, severance tax,
and any and all other parties having an interest and/or claim in such
proceeds, Operator shall pay all charges for operations, maintaining
and managing the Joint Leases within a minimum of ten (10)days and
furnish to Non-operators a detailed statement reflecting gross sales,
gross value, royalty interest, overriding royalty interest and all
charges including charges of operation, maintaining and managing the
lease or leases for the Joint Account for that particular month and
remit a check for the net funds after all deductions as reflected by
said statement of each Non-operator in proportion of his or their
interest as it appears, provided, however, should any Non-operator
hereunder be in arrears in its payments to Operator as herein
provided, for drill, workover, and/or capital cost, Operator shall
have the right to withhold any amounts due such Non-operator for his
or its portion of the proceeds, and apply the proceeds on amounts in
arrears. In this connection, it is specifically understood that each
of the parties hereto will sign the usual customary division order or
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orders covering its respective portion of the production and
warranting its title thereto. Subject to the provisions of Section 7
hereof, Operator, if it desires to do so, but without any obligation
to do so, may take all the oil, gas and other minerals produced from
the Joint Leases and in such event it shall credit or pay each
Non-operator for its interest therein as follows:
a) On oil, the current posted field price of Operator, per barrel of
42 U.S. gallons each, for crude oil of like grade and quality
prevailing for the field where produced on the date of respective
runs to pipe line; provided, however, should Operator not post a
price for oil produced in said field, then the average of the
current barrel, of 42 U.S. gallons each, posted for crude oil of
like grade and quality for said field prevailing on the
respective dates on which runs are made to the designated
purchaser or their successors, or such ones of said companies or
their successors as may be purchasing oil in the field where the
premises are located and posting field prices therefore.
b) For natural gas or other gaseous or vaporous substance produced
from the Joint Leases and used by Operator for the extraction of
gasoline or other products, the current market value at the xxxxx
of such Non-operator's interest therein, the natural gas or other
gaseous or vaporous substance to be measured and the market value
to be determined in a manner then prevailing in the industry.
c) For gas of any kind when not used for the extraction of gasoline
or other product by Operator, each Non-operator's proportionate
part of the market value thereof at the well.
d) For other minerals, each Non-operator's proportionate part of the
reasonable market value thereof at the well or mine.
Operator may apply the proceeds accruing to any Non-operator from the
sale of its interest in the production from the Joint Leases on its
indebtedness to Operator incurred under the provisions hereof
7. TAKING PRODUCTS IN KIND: Despite the provision of Section 6 above,
each Non-operator, at its election, after giving Operator written
notice of its intention to do so, shall have the right and privilege
of receiving at any time in kind its portion of the oil, gas and other
minerals produced and saved from the Joint Leases. Such production
shall be delivered to the Non-operator involved into the pipe line or
lines to which the well or xxxxx on the Joint Leases may be connected
or into storage tanks furnished by the Non-operator. Each Non-operator
shall bear any extra expense incurred by Operator in delivering in
kind Non-operator's portion of the production from the Joint Leases.
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8. INSURANCE-COMPLIANCE WITH LAWS AND REGULATIONS: Operator shall carry
Workmen's Compensation Insurance on its employees engaged in the joint
operations, and in conducting operations hereunder shall comply with
Fair Labor Standards Act and all other applicable Federal and State
Laws, and applicable rules and regulations of Federal and State
agencies having jurisdiction.
9. NON-OPERATORS' RIGHTS AND PRIVILEGES: Each Non-operator shall have the
following specified rights and privileges:
a) Access to the Joint Leases at all reasonable times to inspect the
operations hereunder.
b) The right to inspect the logs, samples, and cuttings from any and
all xxxxx drilled hereunder and to receive copies of the logs.
c) The right to inspect and audit at all reasonable times the
Operator's books, records and invoices pertaining to any matter
of accounting arising hereunder.
10. LIABILITY OF PARTIES: The Joint Leases shall not be operated hereunder
as a partnership venture, and the liability of the parties hereunder
shall be several and not joint or collective. Each party shall be
responsible only for its obligations as set out herein and shall be
liable only for its proportionate share of the cost of operation
hereunder. Nothing herein shall be construed as an assignment or
transfer of the leases or an interest therein as between the parties
hereto. Operator shall use reasonable diligence to pay all rentals
payable under the leases which Operator is required to pay hereunder,
but Operator shall not be liable in damages to Non-operators for
failure to pay promptly and properly any rental payable under such
leases.
11. RIGHT OF PARTIES TO WITHDRAW OR ASSIGN: Any party hereto shall have
the right, at any time when it is not indebted in any amount to the
Operator under the provisions hereof and when there is not existing to
any lessor or lessors or their successors in interest any obligation
to do any further drilling upon the leases affected by this contract,
to be relieved of all unaccrued obligation under this agreement by
assigning to the other parties hereto in proportion to the interest of
the party desiring to be relieved of unaccrued obligations in and to
the Joint Leases, free and clear of all liens and encumbrances and
relinquishing all of its rights hereunder. Should the other parties
desire not to accept an assignment, they shall join with the party
desiring to relieve itself of unaccrued obligations in release of the
Joint Leases. If the other parties desire to accept an assignment,
they shall have the right at their election either to:
a) Purchase the interest of the withdrawing party in all
casing, material, equipment, fixtures and personal property
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belonging to the Joint Account at its fair secondhand value, less
the cost of salvaging same; or
b) Retain such casing, material, equipment, fixtures and
personal property and pay to the withdrawing party ten percent
(10%) per annum on the value of the casing, material, equipment,
fixtures & personal property, which shall be the depreciated
value from year to year, less the estimated cost of recovering
the casing, material, equipment, fixtures & personal property,
and when the leases are finally abandoned, deliver to the
withdrawing party its part of the material, casing, equipment,
fixtures & personal property; or
c) Deliver to the withdrawing party an amount of casing,
material, equipment, fixtures & personal property of like kind as
that retained and of a value equivalent to the interest of the
withdrawing party in the casing, material, equipment & personal
property involved less the cost of salvaging them.
Each party hereto owning an undivided interest in the Joint Leases
waives any and all rights it may have to partition the Joint Leases
and have set aside to it in severalty its undivided interest therein.
12. RESIGNATION OF OPERATOR & APPOINTMENT OF SUCCESSOR: Should Operator or
any successor Operator hereunder dissolve, liquidate or terminate its
corporate existence or sell or otherwise dispose of its interest in
the Joint Lease it shall thereupon cease to be Operator here under.
Operator or any successor Operator may resign its duties as Operator
hereunder without the majority in interest of the parties hereto.
Should Operator or any successor Operator for any cause cease to be
Operator hereunder, the parties hereto (including the successor or
successors in interest of Operator) by vote of the majority in
interest of the parties shall elect and designate another Operator
from among the parties hereto to act as Operator hereunder, provided
if there are only two parties to this contract and their interests are
equal the Non-Operator shall have the right and option to become
Operator. Should Operator or any successor Operator hereunder resign
as Operator, its rights, titles and interests in the Joint Lease shall
be unaffected by such resignation and that party shall thereupon
become one of the Non-Operators hereunder and shall thenceforth be
bound by the terms and provisions hereof as a NonOperator. Any party
hereto designated as Operator to succeed the Operator herein named
shall thereupon succeed to all the duties, powers, obligations, rights
and authority given to the Operator herein named with respect to all
operations of ever kind thereafter conducted on the Joint Leases for
developing and managing the leases and producing, treating, handling
and market of oil, gas and other minerals there from, as well as
payment of rentals, royalties, taxes and other charges which may arise
or become due in connection with operations.
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13. FORCE MAJEURE: In the event of any party hereto being rendered unable,
wholly or in part, by force majeure to carry out its obligations under
this contract, other than the obligation to make payments of amounts
due hereunder, it is agreed that upon such party's giving notice and
reasonably full particulars of force majeure in writing or by
telegraph to the other parties hereto within a reasonable time after
the occurrence of the cause relied upon, then obligations of the party
giving the notice, so far as they are affected by force majeure shall
be suspended during the continuance of nay inability so caused, but
for no longer period; and the cause of the force majeure shall so far
as possible be remedied with all reasonable dispatch. The term "force
majeure" as employed herein shall mean acts of God, strikes, lockouts
or other industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightening,
earthquakes, fires, storms, floods, washouts, arrests and restrains of
government and people, civil disturbances, explosions, breakage and
accident to machinery or lines of pipe, freezing of xxxxx or lines of
pipe, partial or entire failure of natural gas xxxxx and any other
causes, whether the kind herein enumerated or otherwise, not
reasonably within the control of the party claiming suspension. The
tem shall likewise include (a) in those instances where any party
hereto is required to obtain servitudes, right of way grants, permits
or license to enable it to fulfill its obligations hereunder, the
inability of the party to acquire or the delays on the part of the
party in acquiring, at reasonable cost and after the exercise of
reasonable diligence, the servitudes, right of way grants, permits or
licenses; and (b) in those instances where any party hereto is
required to furnish materials and supplies for the purpose of
construction or maintaining facilities to enable the party to fulfill
its obligations hereunder, the inability of the party to acquire, or
the delays on the part of the party in acquiring, at reasonable cost
and after the exercising of reasonable diligence, permission from any
governmental agency to use materials and supplies which the party may
have in its possession.
It is understood and agreed that the settlement of strikes and
lockouts shall be entirely within the discretion of the party having
the difficulty, and that the above mentioned requirement that any
force majeure shall be remedied with all reasonable dispatch shall not
require the settlement of strikes or lockouts by acceding to the
demands of the opposing party when such course is inadvisable in the
discretion of the party having the difficulty.
14. NOTICES: All notices herein provided for shall be mailed or sent to
Operator at 0000 Xxxxx Xxxxxxx 00, Xxxxxxx Xxxx, XX 00000 and to
Nonoperators as follows:
0000 X. Xxxxxxx - Xxxx. Xx. 0, Xxx Xxxxxxx, Xxxxx 00000
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15. ARBITRATION: In cases of disagreement as to any matter relating to
operations hereunder which cannot be settled amicable, then, upon five
(5) days written notice given by one or more parties hereto to the
others, the matter in disagreement shall be submitted to a board of
three arbitrators. Non-operators agree to appoint one arbitrator. Such
appointments shall be made within ten (10) days after the notice is
given. Shall either operator or non-operators fail or refuse to
appoint an arbitrator within the time specified, the party or parties
hereto appointing an arbitrator, upon (5) days written notice to the
party or parties failing or refusing to appoint an arbitrator, may
apply to the person who is the judge then senior in office of the
District Court of the United States of America having jurisdiction for
the appointment of such second arbitrator, and in such case the person
so appointed shall act as a second arbitrator. The third arbitrator
shall be chosen promptly by the two so appointed. All three
arbitrators shall be disinterested practical oil operators. Pending a
decision of the board of arbitrators, the parties hereto shall remain
bound by the express terms hereof Any and all decisions rendered by a
majority of the board of arbitrators shall by final and binding upon
the parties hereto, and adjustments shall be made in conformity with
their award.
16. TERM: Unless terminated by agreement of all parties hereto, this
contract shall continue in force and effect as long as the Joint
Leases, or any of them, remain in force and effect.
17. PARTIES BOUND: This contract shall be binding upon the parties and
their heirs, successors and assigns. All parties hereto are referred
to in the neuter gender.
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EXECUTED in duplicate originals this the 9th day of July, 2006 A.D.
TIDELANDS EXPLORATION AND PRODUCTION, INC.
BY: /S/ Xxxxxxx Xxxx
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Xxxxxxx Xxxx - President
NON-OPERATOR
REGENCY ENERGY, INC.
BY: /S/ Xxxxx Xxxx
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Xxxxx Xxxx - President
OPERATOR
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