EXHIBIT 10.4
September 20, 1994
3DX Technologies, Inc.
00000 Xxxx Xxx Xxxxx
Suite 200
Houston, Texas 77084-5120
Attention: Xx. Xxxxxx Xxxxxxxxxx, Vice President
Business Development
RE: Texoil Company's 1994 Seismic and
Exploration Joint Venture
Gentlemen:
When accepted by you, this letter shall evidence the agreement between you
("3DX" for purposes of this agreement) and Texoil Company ("Tcxoil" for purposes
of this agreement) regarding your participation with Texoil, in reviewing the
oil and gas prospects identified in Exhibit "A" (and outlined in Exhibits A-1
through A-6) of this agreement ("Subject Prospects") to determine which of
Subject Prospects are suitable for 3-D) seismic survey, designing the 3-D
seismic program for the prospects to be surveyed, providing field supervision
and quality control, processing the data, interpreting the data, and reviewing
the seismic data and reporting your findings to Texoil in consideration of a
portion of Texoil's position in Subject Prospects on an unpromoted basis, all in
accordance with this agreement:
1.
Texoil proposes to form a joint venture with oil and gas industry and
financial partners (parties other than you and Texoil) that in general terms
will provide as follows:
(a) Texoil will contribute to the joint venture its proprietary
position in maps, geological and geophysical information, and in-house
work defining and supporting the
geological concepts underlying Subject Prospects Texoil's current costs
and expenses in generating Subject Prospects is shown in Exhibit "B" of
this agreement.
(b) The joint venture will provide for the venture's business to be
conducted in five (5) stages, generally described as: (i) the initial
commitment for acquisition and review of available data; (ii) verification
and identification of the prospects that are suitable for 3-D seismic
survey; (iii) acquiring seismic permits on the suitable prosper,
conducting 3-D seismic surveys, and, evaluating the surveys made; (iv)
acquiring oil and gas leases and drilling the prospect selected for
drilling; and (v) developing the oil and gas prospects that prove to be
productive of oil or gas.
(c) Each industry and financial participant will have the option and
privilege of electing, on a prospect-by-prospect basis, to participate or
not participate in each of phases 2, 3, 4 and 5, as outlined above. Each
participant will agree to participate in phase 1 upon joining the venture.
(d) The joint venture will be structured and offered to industry and
financial participants on the basis that the industry and financial
participants will bear 75% of the costs and expenses incurred by the joint
venture for each prospect in phases 1, 2 and 3, and 50% of the costs and
expenses incurred by the joint venture for each prospect in phases 4 and
5, in consideration of and for an undivided 50% interest in each prospect,
subject, of course, to an option given each participant to elect not to
participate in the next ensuing phase as to any such prospect, and the
relinquishment of interest in that prospect to Texoil.
(e) The joint venture agreement will contain customary provisions
designating Texoil as Venture Manager; authorizing Texoil to engage
seismic services and acquire seismic permits and options; authorizing
Texoil to acquire oil arid gas leases, engage drilling contractors, and to
drill and complete exploratory xxxxx on oil and gas prospects selected for
drilling; and providing for an agreed form of operating agreement to
govern operations on each oil and gas prospect that is drilled.
2.
In consideration of your agreeing to perform seismic design, evaluation
and supervisory services for the joint venture in the manner outlined in Exhibit
"C" of this agreement and at no cost to the joint venture, and your agreeing to
bear certain of the costs and expenses attributable to the interest which you
elect to acquire or retain in Subject Prospects in accordance with this
agreement,
Xxxxxx agrees to assign and convey to you an undivided 12.5% interest in the
Subject Prospects, which assignment will be subject to this agreement and to the
joint venture agreement which Texoil will establish with industry and financial
partners covering Subject Prospects.
3.
During phases 1 and 2 of the joint venture, Texoil will bear 100% of the
costs and expenses attributable to your 12.5% interest in Subject Prospects. At
such time as Texoil 3DX Technologies, Inc. advises you that phase 3 of the joint
venture will be initiated, you will be obligated to elect, by notice in writing
to Texoil, the prospects that you will participate in, and reimburse Texoil for
100% of your 12.5% share of the generating costs for each such prospect as
outlined in Exhibit "B", and the phase 1 and phase 2 costs and expenses
attributable to those prospects which were borne for you by Texoil during those
phases of the joint venture. Thereafter, you will bear your prorata (12.5%) part
of the costs and expenses incurred in phases 3, 4 and 5 which are attributable
to the prospects which you elect to participate in at the commencement of phase
3 of the joint venture, subject also to the right after phase 3 to elect not to
continue your interest in any such prospect by notifying Texoil and
relinquishing your interest to Texoil. All costs and expenses which Texoil
receives from industry or financial participants in the joint venture will vest
in Texoil, and you will not share in those proceeds.
4.
In addition to other rights and options granted to you by this agreement,
Texoil grants to you, on a prospect-by-prospect basis, and in and only in the
prospects in which you have elected to continue to hold interest after phase 3,
the option, exercisable by you after and only after phase 3 has been completed,
to acquire from Texoil an additional undivided 1 % interest in each prospect
(out of Texoil's interest) for every 10% share of the industry and financial
participant's cost shares you have sold to an industry or financial participant
on the basis that industry and financial participants bear 75% of phase 1, 2 and
3 costs for a 50% interest in the prospect. Your cost for the additional
interest which you may acquire pursuant to this provision will be that
percentage (the interest you acquire) of Texoil's generating costs, as outlined
in Exhibit "B", plus that percentage of the phase 1, 2 and 3 costs attributable
to the prospects in which you acquire interest. It is agreed that you may
commence your sales efforts upon your execution of this agreement. This option
shall be on an "interest available" basis, such that if all or a portion of the
interest which Texoil is offering to industry and financial partners has been
sold by Texoil prior to your selling any such interest, this option will be null
and void, or at least reduced to the available interest. The sales you make will
be on the terms and conditions established by Texoil, and the agreements
evidencing such sales will he prepared and approved by Texoil.
5.
In addition to the oil and gas prospects described in Exhibit "A" of this
agreement, this agreement shall extend to, cover and encompass, as if described
in Exhibit "A" originally, any oil and gas prospect geological concept) covering
lands in South Louisiana which Texoil elects to acquire from sources outside of
Texoil as a potential 3-D seismic candidate during the period of time commencing
with the date of this letter agreement and ending at the end of a six (6) month
period to be provided for in the joint venture agreement referenced above,
during which Texoil will be obligated to offer any such prospect to the joint
venture.
6.
You agree to be bound by the terms and provisions of the joint venture
agreement which Texoil establishes in the manner contemplated by this agreement,
provided, however, where this agreement may conflict with the terms and
provisions of the joint venture agreement as to your rights and interests, this
agreement as between you and Texoil shall prevail.
If this letter agreement correctly expresses our agreement, please
evidence your agreement to be bound by the terms and provisions of this letter
agreement by executing this agreement in the space provided below for your
signature, and returning one fully executed copy to us at the address shown
above.
Yours very truly,
TEXOIL COMPANY
By:
Its:
Agreed to and accepted this 20 day of 1994.
3DX TECHNOLOGIES, INC.
By:/S/ XXXXXX XXXXXXXXXX
Its:/S/ VICE PRESIDENT
EXHIBIT "A"
(ATTACHED TO AND MADE A PART OF THAT CERTAIN LETTER AGREEMENT DATED SEPTEMBER
20, 1994, BY AND BETWEEN 3DX TECHNOLOGIES, INC. AND TEXOIL COMPANY.)
THE EXPLORATION PROSPECTS
The exploratory prospects in Texoil's inventory which presently comprise
the Exploration Joint Venture are described below, and summarized on the
following Exhibits "A-1" through "A-6".
CREOLE
This prospect is an upthrown closure on a large down to the south fault.
The 2-D seismic interpretation shows north and west dip which are confirmed by
the dip meter in a key well on the flank of the structure. East closure is
provided by a fault which has been confirmed by subsurface well cuts. A 3-D
seismic survey will confirm closure on the west side of the prospect as well as
the precise high point to drill a test well. As in the West Cameron Prospect,
the potential pay zones are in the Planulina and the Christelaria R zones which
have been prolific producers in the area.
WEST CAMERON
This prospect lies within the wedge situated between two downthrown faults
which converge into one fault to the East. The 2-D interpretation shows an
anticlinal feature with some 200 feet of closure which could trap the Planulina
suite of sands as well as possibly the Christelaria "R" sand, which are prolific
producers in the immediate area. A 3-D survey will confirm the location at which
to position a test well at the high point on the structure.
RACELAND
This prospect is an upthrown closure on a very large down to the south,
east-west trending fault. Good north and west dip have been established from the
interpretation of excellent quality recent 2-D seismic data. There are also
indications of east dip from older 2-D seismic. The 3-D survey would prove the
existence of the east dip and the exact location at which to position a test
well. The zones of interest in this prospect are the Rob 43 through Rob A
section which have been prolific producers in the Lake Boeuf and southwest Lake
Boeuf Fields which are in the area. Texas Meridian Resources has recently
discovered significant oil reserves in the Rob A sand in a new structure at
southwest Lake Boeuf.
DORCYVILLE DEEP
This prospect is a very large fault closure which has been identified by
seismic work done primarily by Texoil. The objective sand section lies deeper in
the section than any of the xxxxx in the area have to date penetrated. Detailed
stratigraphic interpretation of 3-D seismic will be required to attempt to
determine if reservoir quality sands are present at the objective depths.
XXXXXXXX DEEP
This prospect is a downthrown closure on s major fault which traps
production at shallower depths in the field. The Marg howei zone is a major
producer at a shallower depth in the Xxxxxxxx Field and also produces on trend
at a comparable depth at which it will be encountered in this prospect A 3-D
survey would confirm the exact placement of the north bounding fault as well as
the East West closure which has been indicated by the 2~D seismic
interpretation.
XXXXXXXX SHALLOW
This prospect consists of a satellite downthrown closure on a shallower
fault which has also trapped significant reserves in the siphonina davisi and
Amphistegina "B" zones. As interpreted now, a well to test the deeper Marg bowel
section in the Xxxxxxxx Deep Prospect would also test the potential pay zones in
this prospect. A 3-D survey would confirm this interpretation and locate a
position for the test well at the top of the structure. A 3-D survey over the
Xxxxxxxx Deep prospect would also cover this prospect. For this reason A 3-D
cost has been allocated to this prospect.
EXHIBIT "A-1"
PROSPECT: CREOLE
PARISH: CAMERON
AREA: 1,400 ACRES
OBJECTIVE: LOWER MIOCENE (PLANULINA AND CHRISTELARIA "R")
POTENTIAL RESERVES: 205 BCFE
POTENTIAL PAY ZONES: 3
EST. NET LEASEHOLD: 76% - 24% LEASE BURDENS
EST. COST TO VERIFY: $43.0K - 27 mi. 2-D seismic acquisition,
reprocessing & interpretation
EST. COST OF 3-D SURVEY: $700K 9 SQ. MILE SURVEY
-----------------
- survey design
- options, permits & damages
- acquisition & acq. QC
- processing
- interpretation
EST. COST OF ACREAGE: $280K - $270K bonus
- $10K brokerage
EST. COST TO DRILL TEST WELL: $1MM 11.500' TEST WELL
TOTAL EST. COSTS: $2,023,000
EXHIBIT "A"
PROSPECT: WEST CAMERON
PARISH: CAMERON
AREA: 1,000 ACRES
OBJECTIVES: MIDDLE AND LOWER MIOCENE
AMPHISTEGINA B AND XXXXXXXXX XXXXXX
POTENTIAL RESERVES: 190 BCFE
POTENTIAL PAY ZONES: 4
EST. NET LEASEHOLD: 76.00% - 25% lease burdens
EST. COST TO VERIFY: $43.4K - 27 mi. 2-D seismic acquisition,
reprocessing & interpretation
EST. COST OF 3-D SURVEY: $700K 9 SQ. MILE SURVEY
-----------------
- survey design
- options, permits & damages
- acquisition & acq. QC
- processing
- interpretation
EST. COST OF ACREAGE: $165K - $165K bonus
- $0 brokerage
EST. COST, DRILL TEST WELL: $1.75MM 14.000' TEST WELL
TOTAL EST. COSTS: $2,654,400
EXHIBIT "A-3"
PROSPECT: RACELAND
PARISH: LAFOURCHE
AREA: 3,000 ACRES
OBJECTIVES: MIDDLE MIOCENE (ROB 43 - XXX X)
POTENTIAL RESERVES: 280 BCFE
POTENTIAL PAY ZONES: 5
EST. NET LEASEHOLD: 77% - 23% lease burdens
EST. COST TO VERIFY: $56.2K - 2-D seismic acquisition,
reprocessing & interpretation
EST. COST OF 3-D SURVEY: $1.48MM 34.5 SQ. MILE SURVEY
--------------------
- survey design
- options, permits & damages
- acquisition & acq. QC
- processing
- interpretation
EST. COST OF ACREAGE: $320K - $300K bonus
- $20K brokerage
EST. COST TO DRILL TEST WELL $2.5MM 16.500' TEST WELL
TOTAL EST. COSTS: $4,365,200
EXHIBIT "A-4"
PROSPECT: DORCYVILLE DEEP
PARISH: IBERVILLE
AREA: 2,000 ACRES
OBJECTIVES:
POTENTIAL RESERVES: 400 BCFE
POTENTIAL PAY ZONES: 4
EST. NET LEASEHOLD: 74% - 26% lease burdens
EST. COST TO VERIFY: $47.5K - 27 mi. 2-D seismic acquisition,
reprocessing & interpretation
EST. COST OF 3-D SURVEY: $1.2MM 38 SQ. MILE SURVEY
------------------
- survey design
- options, permits & damages
- acquisition & acq. QC
- processing
- interpretation
EST. COST OF ACREAGE: $220K - $200K bonus
- $20K brokerage
EST. COST TO DRILL TEST WELL $3.25MM 18.500' TEST WELL
TOTAL EST. COSTS: $4,717,500
EXHIBIT "A---"
PROSPECT: DORCYVILLE DEEP
PARISH: IBERVILLE
AREA: 2,000 ACRES
OBJECTIVES:
POTENTIAL RESERVES: 400 BCFE
POTENTIAL PAY ZONES: 4
EST. NET LEASEHOLD: 74% - 26% lease burdens
EST. COST TO VERIFY: $47.5K - 27 mi. 2-D seismic acquisition,
reprocessing & interpretation
EST. COST OF 3-D SURVEY: $1.2MM 38 SQ. MILE SURVEY
------------------
- survey design
- options, permits & damages
- acquisition & acq. QC
- processing
- interpretation
EST. COST OF ACREAGE: $220K - $200K bonus
- $20K brokerage
EST. COST TO DRILL TEST WELL $3.25MM 18.500' TEST WELL
TOTAL EST. COSTS: $4,717,500
EXHIBIT "A-6"
PROSPECT: XXXXXXXX SHALLOW
PARISH: CAMERON
AREA: 600 ACRES
OBJECTIVES: MIDDLE AND LOWER MIOCENE (AMPHISTEGINA B AND
XXXXXXXXX XXXXXX)
POTENTIAL RESERVES: 35 BCFE
POTENTIAL PAY ZONES: 2
EST. NET LEASEHOLD: 74% - 26% lease burdens
EST. COST TO VERIFY: $0 - COVERED BY 40 MI. 2-D SEISMIC
-----------------------------
ACQUIRED, REPROCESSED AND
INTERPRETED FOR XXXXXXXX DOME
DEEP PROSPECT.
EST. COST OF 3-D SURVEY: $0 COVERED BY 18 SQ. MILE SURVEY
-----------------------------
SHOT OVER XXXXXXXX DOME DEEP
PROSPECT. NO INCREMENTAL COSTS
EST. COST OF ACREAGE: $50K ONLY IF XXXXXXXX DEEP PROSPECT
NOT PURSUED; OTHERWISE INCLUDED
IN XXXXXXXX DOME DEEP PROSPECT
LAND COSTS.
EST. COST TO DRILL TEST WELL $500K 10.00' TEST WELL
TOTAL EST. COSTS: $550 ONLY IF XXXXXXXX DEEP PROSPECT
------------------------------
NOT PURSUED.
ALTERNATE TOTAL COSTS: $500K LAND INCL., XXXXXXXX DEEP
EXHIBIT "B"
(ATTACHED TO AND MADE A PART OF THAT CERTAIN LETTER AGREEMENT DATED SEPTEMBER
20, 1994, BY AND BETWEEN 3DX TECHNOLOGIES, INC. AND TEXOIL COMPANY.)
CURRENT PROSPECT COSTS
GENERATING INITIAL
COSTS REVIEW TOTAL
---------------------------------------- -------------- -------------
1. CREOLE $15,800 $3,689.14 $19,489.14
2. X. XXXXXXX $20,200 $27,694.15 $47,894.15
3. RACELAND $15,000 $25,550.95 $40,550.95
4. DORCYVILLE DEEP $58,700 $11,611.18 $70,311.18
5. XXXXXXXX DEEP $21,700 $3,984.13 $25,684.13
6. XXXXXXXX SHALLOW* $0 $0 $0
GRAND TOTAL: $203,929.55
---------------------------------------- -------------
* All Xxxxxxxx Shallow costs have been allocated to Xxxxxxxx Deep in Texoil's
records, since the shallow play would probably not be pursued except in
conjunction with the deep play.
EXHIBIT "C"
3DX will provide the following services for Tcxoil and the joint venture:
(a) Review and evaluate the 2-d seismic data acquired by Texoil relative
to Subject Prospects and advise Texoil as to the aspects that are
suitable and appropriate for a 3-D seismic survey.
(b) Design the 3-D geophysical survey for each prospect selected for the
survey, including without limitation, the location of and other
specifications associated with seismic shot holes and lines;
(c) Provide Tcxoil with an estimate of the cost of the 3-D geophysical
prograin for each selected prospect and obtain Texoil's authority to
implement the proposed 3-D geophysical program;
(d) Contract with a reputable seismic contractor approved by Texoil to
conduct the seismic work, oversee the acquisition of seismic data,
and provide quality control services in regard thereto;
(e) Xxxxxx, record, analyze, process and interpret the seismic data for
each selected prospect utilizing computer-aided exploration
technologies ("CAEX"); and
(f) Prepare and deliver to Texoil a presentation of 3DX's findings and
interpretations.
3DX will provide Texoil with complete copies, either in documentary form or on
computer tape, of all information and data acquired pursuant to the 3-Dl
geophysical program. 3DX will not charge Texoil any fees or overhead costs in
connection with performing 3DX's functions as manager of the 3-D geophysical
program. All 3-Dl seismic information obtained pursuant to this agreement will
be the property of Texoil] and the joint venture.
