EXHIBIT 4.12
THIS JOINT VENTURE AGREEMENT is made the 3rd day of February 2002
BETWEEN: Canneft Inc., a company incorporated and existing under the
Laws of Province of Alberta, Canada (hereinafter called
"CNI" which expression shall include the permitted
successors in title transferees and assigns of CNI)
OF THE ONE PART
AND: Tracer Petroleum Corporation, a federally-incorporated
company in Canada (hereinafter called "TPC" which expression
shall include the permitted successors in title transferees
and assigns of the TPC)
OF THE OTHER PART
WHEREAS:
(A) CNI has exclusive negotiation rights and has a protocol, signed
March 26, 2001, with Turkmengeological to complete a Joint Operating
Agreement and form a Joint Operating Company for the purposes of
securing a Production Sharing Agreement ("PSA") for the Adzhiyap
project in southwest Turkmenistan (the "Project").
(B) By an agreement dated the 3rd of February 2002 (the "Joint Venture
Agreement") made between CNI and TPC, the parties agree to form a
mutually-beneficial Joint Venture for the development of the
Project. This Joint Venture refers solely to the combined working
interests of CNI and TPC in the Project, as well as whatever
additional non-Turkmenistan parties join the Project.
(C) TPC agrees to advance to the Joint Venture US$30,000 per month for 5
months, starting on February 15, 2002, to cover the remaining
estimated costs to secure the PSA.
(D) TPC and CNI will use their best efforts to secure a competent
technical partner to join the Project as Operator. This Operator may
or may not wish to invest in the Project as a part of the Joint
Venture with CNI and TPC. If this Operator does not invest in the
Project, then it will act solely as a contracted Operator. The
involvement of a technically-competent Operator is crucial to
securing a PSA for the Project, and the choice of Operator will be
subject to approval of the Competent Body in Turkmenistan.
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(E) If the Operator chooses not to invest in the Project as a working
interest holder in the Joint Venture, then TPC will have the option
to earn a 60% interest in the Joint Venture by investing 100% of the
capital required to develop the Project. The amount of capital
required is subject to completion of a Joint Operating Agreement,
which will require approval of CNI and TPC. It is currently
estimated that up to US$25 million of outside capital (i.e. net of
cash flow) will be required for the Project. For providing 100% of
the capital, TPC will receive 90% of the distributable cash flow for
the Joint Venture until achievement of invested fund payout, and 60%
after payout.
(F) If the Operator chooses to invest in the Project as a partner in the
Joint Venture, TPC will have the option to earn a minimum 20% in the
Joint Venture by providing its pro-rata share of the required
capital for the Project (i.e. 20/60 equals 1/3 of the required
capital), and will earn its pro-rata share of distributable cash
flow as in (E) above. TPC will also have the option of earning
whatever remaining interest in the Joint Venture between 20% and 60%
that is not taken up by the Operator.
(G) CNI and TPC agree to use their best efforts to secure a PSA for the
Project as soon as is practicable.
(H) CNI and TPC will work on a timely-basis to complete the necessary
formal Joint Operating Agreement and other agreements that will
guide the Joint Venture between CNI and TPC.
(I) TPC's involvement in the Project may be subject to approval of the
Competent Body in Turkmenistan.
(J) This agreement is subject to the consent of the Board of Directors
of both, CNI and TPC, and shall be governed and construed solely
according to the Laws of the Province of Alberta, Canada.
IN WITNESS WHEREOF Canneft Inc. has caused its Common Seal to be hereunto
affixed by and this Joint Venture Agreement to be signed by its duly authorized
persons in that behalf the day and year first above written.
THE COMMON SEAL of
Canneft Inc. was hereunto
affixed by ▇▇▇▇ ▇▇▇▇▇▇ Per:_______________________
President and CEO
and by Per:_______________________
Director
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AND Tracer Petroleum Corporation has agreed to the terms of this Joint Venture
Agreement as signed by the duly authorized persons in that behalf the day and
year first above written.
Per: __________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President, CEO & Director
Per: __________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Corporate Secretary
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