Re: Earning Agreement and Option Relinquishment Agreement
June 1st, 2007
Park Place Energy Inc.
0000 – 000 Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. V6C 2X8
Attention: Xx. Xxxxx Xxxxxxx, President,
Great Northern Oilsands Inc.
000 – 000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X. V6C 2E8
Attention: Mr. Xxxxx Xxxx, President
Tidewater Resources Inc.
Suite 1200, 000 –
0xx Xxxxxx X.X.
Calgary, Alberta T2P 3H6
Attention: Mr. Xx Xxx, President
Gentlemen:
| Re: | Earning Agreement and Option Relinquishment Agreement |
| N ½ Sec 22, SW ¼ & LSDs 11 & 12 Sec 26 Twp 12 Rge 5 W4M | |
| Medicine Hat Area, Alberta |
Whereas Park Place Energy Inc. (Park Place), Great Northern Oilsands Inc. (Great Northern), and Tidewater Resources Inc. (Tidewater), collectively, the “Farmees”, have entered into an agreement (dated September 25th, 2006) and an amendment (dated November 2nd, 2006) with Pine Petroleum Limited (Pine) to drill a well at 14-22-12-5W4M in the Medicine Hat area of southern Alberta; and
Whereas the “Farmout Lands” and the “Option Lands” are defined in Schedule A of the original agreement and appended hereto as Schedule A and the “Area of Mutual Interest” means Sections 22, 23, 26 and 27-12-5 W4M;
Whereas completion or abandonment of the well is necessary in order to complete the last portion of the Earning Provision; and
Whereas the Farmees and Pine have agreed that the well will not be completed or abandoned at this time; and
Whereas Tidewater, as Operator, has provided a Detailed Estimate of Completion Costs (which is appended hereto as Schedule B), which total Twenty-six ($26,000.00) Thousand Dollars; and
Whereas Farmees and Pine have agreed that the Farmees will instead make a lump sum payment equal to 90% of the estimated completion cost for the well; and
Whereas the Farmees have paid to Pine a total of $23,400.00, (the “Pre-Payment”) receipt of which is hereby acknowledged by Xxxx;
It is Hereby Agreed that
1. Farmees have completed the Earning Requirements and, as a consequence, will hold an Undivided Forty (45%) Percent Working Interest in the Farmout Lands (N ½ -22-12-5W4), allocated as follows: Park Place 20%, Patch 20% and Tidewater 5%.
2. If it is decided to proceed with the Completion of the 14-22 Well, further costs (i.e. equipping etc.) shall be shared as follows:
- Park Place - 20%
- Great Northern – 20 %
- Tidewater - 5%
- Pine/Participant - 55%
3. If it is decided the 14-22 Well is to be abandoned, the Pre-Payment shall be applied against Abandonment Costs proportionate to the Farmees' Interest. In the event the Pre-payment is not fully expended, then any remaining funds shall be remitted to the Farmees. Any cost recovery of tangibles existing after abandonment shall also be refunded proportionately to the Farmees. In the event that the Pre-payment is fully expended, then any further requirements for the abandonment will be borne by the Working Interest Partners at their Working Interest levels.
4. If it is decided the 14-22 Well is to be sold to an outside party and Completion has not been pursued, the Pre-Payment, in its entirety, shall be promptly remitted by Pine to the Farmees, together with any additional consideration that may have formed part of the purchase price proportional to the Interest of the Farmees.
5. Farmees have elected not to exercise their Option to drill a well in Section 26-12-5W4M and Farmees acknowledge they have no further Right to Earn an Interest in the "Option Lands" falling within Section 26-12-5W4 nor in the other AMI lands which are the remainder of Sections 22, 23, 26 and 27 of Township 5 Range 12, W4M after deleting the Farmout Lands and the Option Lands. (All as defined in the original Agreement).
6. Farmees acknowledge and accept that in the event Pine is successful in acquiring a Partner to drill the "Option Well" Farmees are prepared to give favorable consideration to a Pooling Arrangement, if necessary, in order to support the drilling of such Well. As a result, Farmees would reduce their Interest in the Farmout Lands and proportionately acquire an Interest in the Option Lands.
7. This agreement shall be effective as of June 1st, 2007.
It is recognized by all Parties that during the first quarter of 2008, both Farmout and Option Lands will expire unless continued pursuant to the appropriate Governmental Regulations. This Agreement has been proposed to avoid any undue delay and, further, to maximize the potential of the Project.
Please indicate your agreement with the foregoing by signing in the appropriate place below before June 27th, 2007.
Yours truly,
Xxxx Xxxxxxx, Director,
Pine Petroleum Limited
Accepted and agreed to this 26th day of June, 2007
/s/ Xxxxx
Xxxxxxx
Park Place Energy Inc.
Accepted and agreed to this 26th day of June, 2007
/s/ Xxxxx
Xxxx
Great
Northern Oilsands Inc.
Accepted and agreed to this 27th day of June, 2007
/s/ Al
Gal
Tidewater
Resources Inc.
Accepted and agreed to this 27th day of June, 2007
/s/ Xxxx
Xxxxxxx
Pine Petroleum Limited
Cc: Xxxxx Xxxxxx,
Land Consultant.
SCHEDULE “A"
This is Schedule "A" to Earning Agreement and Option Relinquishment Agreement dated June 1st, 2007 between Park Place Energy Inc., Great Northern Oilsands Inc., Tidewater Resources Inc. and Pine Petroleum Limited (originally attached to and made part of a Farmout and Option Agreement dated the 25th day of September, 2006 between Park Place Energy Inc., Patch Energy Inc. and Pine Petroleum Limited).
| FARMOUT LANDS | TITLE DOCUMENTS |
| Twp 12, Rge 5 W4M: N ½ Section 22 | Crown P&NG Lease # 0403050008 |
| all P&NG below base Medicine Hat | Lessor Royalty: Crown |
| to base Mannville |
Farmor’s Interest – an undivided 90% working interest
| OPTION LANDS | TITLE DOCUMENTS |
| Twp 12, Rge 5 W4M: SW ¼ & Lsds 11 & 12 Section 26 | Crown P&NG Lease # 0403030044 |
| all Petroleum to base Mannville | Lessor Royalty: Crown |
Farmor’s Interest – an undivided 90% working interest
ENCUMBRANCES on the FARMOUT LANDS and the OPTION LANDS
0.5% non-convertible gross overriding royalty payable to Covenant Resources Ltd. as described in Schedule “A1”.
SCHEDULE “B"
This is Schedule "B" to Earning Agreement and Option Relinquishment Agreement dated June 1st, 2007 between Park Place Energy Inc., Great Northern Oilsands Inc., Tidewater Resources Inc. and Pine Petroleum Limited.
