EXHIBIT (10) (a)
Form of Drilling and Operating Agreement
DRILLING AND OPERATING AGREEMENT
This Agreement is entered into by and between PDC 1997-
Limited Partnership, hereinafter designated and referred to as the
"Partnership", and Petroleum Development Corporation, hereinafter referred
to and designated as "PDC".
Whereas, the parties to this agreement desire to enter into an
agreement to explore and develop certain Prospects for the production of
oil and gas as hereinafter provided,
It is agreed as follows:
ARTICLE I
DEFINITIONS
As used in this agreement, the following words and terms shall be
defined as follows:
A. The term "oil and gas" shall mean oil, gas, casinghead gas, gas
condensate, and all other liquid or gaseous hydrocarbons and other
marketable substances produced therewith, unless an intent to limit the
inclusiveness of this term is specifically stated.
B. The term "Prospect" shall mean a spacing unit established
according to state regulatory guidelines on which the Partnership proposes to
drill a well. Generally spacing units for shallow gas xxxxx cover
approximately 25 acres, and spacing units for deep gas xxxxx cover
approximately 640 acres.
C. "Royalty" shall mean a payment from gross revenues made to the
owner of the oil and gas mineral rights of a Prospect.
D. "Overriding royalty" shall mean a payment from gross revenues to
a party other than the owner of oil and gas mineral rights of a Prospect.
E. "Proportionate Working Interest" shall mean an interest in a well
or Prospect of less than 100% which bears that same percentage of costs of
development and production as it receives in production revenues after
deducting for royalty and overriding royalties.
F. "Non-operators" shall mean all parties holding a proportionate
working interest in a Prospect, including the Additional General Partners
and the Limited Partners, but excluding PDC if it is also serving as
Operator.
ARTICLE II
EXHIBITS
The following exhibits are incorporated in and made a part of this
agreement:
A. Exhibit "A", Prospects.
1. Identification of each Prospect to be drilled.
2. Target formation.
3. The Partnership fractional interest therein.
B. Exhibit "B", Insurance.
C. Exhibit "C", Additional Prospects.
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1. Identification of additional Prospects added or substituted
after the original date of this agreement, and if substituted, identification
of the Prospect which is replaced.
2. Target formation.
3. The Partnership fractional interest therein.
4. Approval by the Partnership and PDC.
ARTICLE III
OPERATOR
A. Designation and Responsibilities of Operator:
PDC shall be the Operator of the Prospects, and shall conduct and
direct and have full control of all operations on the Prospects as
permitted and required by, and within the limits of this agreement. It
shall conduct all such operations in a good workmanlike manner, but it
shall have no liability as Operator to the Partnership for losses
sustained or liabilities incurred, except such as may result from
negligence or misconduct. The Managing General Partner may subcontractor
with another operator or operators to perform some of all of the duties of
the operator, on Terms and conditions substantially the same as those discussed
herein. The Managing General Partner will supervise operations by other non-
affiliated drilling contractors and subcontractors.
B. Resignation or Removal of Operator and Selection of Successor:
1. Resignation or Removal of Operator: PDC may resign as Operator
at any time by giving written notice thereof to the Partnership. If PDC
terminates its legal existence, no longer owns an interest in the
Prospects, has filed a petition under the Federal bankruptcy laws or any
state insolvency law or a receiver, fiscal agent, or similar officer has
been appointed by a court for the business or property of PDC, or is
otherwise no longer capable of serving as Operator, PDC shall be deemed to
have resigned without any action by the Partnership, except the selection
of a successor. PDC may be removed by the affirmative vote of Non-
Operators owning a majority working interest in each Prospect after
excluding the voting interest of Operator. Such resignation or removal
shall not become effective until 7:00 o'clock A.M., Eastern time, on the
first day of calendar month following the expiration of ninety (90) days
after the giving of notice of resignation of PDC or action by the Non-
Operators to remove PDC as Operator, unless a successor Operator has been
selected and assumes the duties of PDC at an earlier date. PDC, after
effective date of resignation or removal, shall be bound by the terms
hereof as a Non-Operator. A change of a corporate name or structure of
PDC or transfer of PDC's interest to any single subsidiary, parent or
successor corporation shall not be the basis for removal of PDC as
Operator.
2. Selection of Successor Operator: Upon the resignation or
removal of PDC, a successor Operator shall be selected by the parties. The
successor Operator shall be selected by the affirmative vote of parties
owning a majority working interest in each Prospect; provided, however, if
an Operator which has been removed fails to vote or votes only to succeed
itself, the successor Operator shall be selected by the affirmative vote
of parties owning a majority interest after excluding the voting interest
of the Operator that was removed.
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C. Employees:
The number of employees used by PDC in conducting operations
hereunder, their selection, and the hours of labor and the compensation
for services performed shall be determined by PDC.
ARTICLE IV
DRILLING PROSPECTS
A. Prospects:
Exhibit "A" lists Prospects initially to be acquired by the
Partnership, and its proportionate working interest in each Prospect.
Most xxxxx to be drilled by the Partnerships will be offsets to producing
xxxxx. Therefore, it is unlikely that a well drilled on a Prospect will
prove up any additional acreage outside the Prospect. If a Partnership
well does prove up additional acreage, PDC will assign the Partnership a
proportionate interest in such spacing units.
B. Cost:
The Partnership shall reimburse PDC for its proportionate share of the
lesser of:
1) The fair market value of the Prospect, or
2) The "Cost" of acquisition of the Prospect including: (a) the price
paid by PDC for such property; (b) title examination, abstracting,
brokers commissions, filing fees, recording costs, transfer taxes,
and other charges incurred in connection with the acquisition of
the property; (c) bonuses, rentals and ad valorem taxes paid by
PDC with respect to the Prospect to the date of its transfer to
the Partnership, interest on funds used to acquire or maintain
such property, and such portion of PDC's expenses for geological,
drafting, accounting, legal and other like services allocated to
the Prospect in accordance with generally accepted accounting
principles, not including for expenses incurred in the prior
drilling of xxxxx, and provided such expenses shall have been
incurred not more than 36 months prior to the purchase by the
program.
C. Substitution:
As drilling progresses other, more desirable Prospects may become
available, or conversely, one or more of the Partnership Prospects may
become less desirable as a result of additional information not available
as of the date of this agreement. For any undrilled Prospect, the
Partnership may request that PDC substitute another Prospect, in which
case the entire acquisition cost paid for the Prospect or a substitute
thereof will be applied against the cost of the substituted Prospect, and
against other costs of this contract if and to the extent the cost of the
substitute Prospect is less than the cost of the original Prospect it
replaces. An amendment to this agreement in the form of Exhibit "C" shall
be used for the addition or substitution of a Prospect.
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D. Title Examination and Opinion:
Title examination shall be made by outside attorneys on the drillsite
of any proposed well prior to commencement of drilling operations. The
opinion will include ownership of the working interest, mineral, royalty,
overriding royalty, and production payments under the applicable leases.
A copy of the opinion will be furnished to the Partnership.
PDC shall take such steps as are necessary in its best judgment to
render title to the leases assigned to the Partnership acceptable for the
purposes of the Partnership. No operation shall be commenced on leases
acquired by the Partnership unless the Partnership Manager is satisfied that
necessary title requirements have been satisfied by PDC and that the
undertaking of such operation would be in the interest of the Partnership.
PDC shall be free, however, to use their own best judgment in waiving title
requirements and shall not be liable to the Partnership, or Participants for
any mistakes of judgment; nor shall PDC be deemed to be making any warranties
or representations, express or implied, as to the validity or merchantability
of the title to any lease assigned to the Partnership or the extent of the
interest covered thereby.
ARTICLE V
INTEREST IN COSTS AND PRODUCTION
A. Royalties and Overriding Royalties:
The Partnership interest in production from drilling Prospects will be
subject to the payment to non-affiliated parties of royalties and
overriding royalties which may range from 12.5% to 20.00% of gross
revenues, provided the weighted average for all Partnership Prospects
drilled shall not exceed 16.125% gross revenues. No such royalty or
overriding royalty will be paid to PDC or its affiliates.
B. Proportionate Working Interest:
The Partnership may acquire 100% of the working interest in a Prospect
or a proportionate interest of less than 100%. In the event the
Partnership acquires a proportionate interest, the respective obligations
and benefits acquired by the Partnership will be proportionately the same
as the working interest acquired. PDC and its affiliates may not retain
any overrides or other burdens on the interest conveyed to the
Partnership. The Partnership will pay a proportionate share of the total
of lease, development, and operating costs, and will be entitled to
receive a proportionate share of production subject only to royalties and
overriding royalties discussed in Article V, A.
C. Joint Venture Activities:
PDC may retain an interest or convey interests in undrilled Prospects
to other Joint Venturers, retaining for its own account a profit or
promotional interest on the interest conveyed. PDC shall require any
party acquiring such an interest to acquire a proportionate working
interest and to assume and bear alone all obligation associated with such
an interest, and to bear alone and hold the Partnership and other Joint
Venturers harmless from all costs, claims, and burdens associated with the
interest acquired.
D. Adjustments:
Payment of any xxxx shall not prejudice the right of Partnership to
protest or question the correctness thereof: provided, however, all bills
and statements rendered to Partnership by PDC during any calendar year
shall conclusively be presumed to be true and correct after a twenty-four
(24) month period unless the Partnership takes written exception thereto
and makes claim on PDC for adjustment. No adjustment favorable to PDC
shall be made unless it is made within the same prescribed period. The
provisions of this paragraph shall not prevent adjustments resulting from
a physical inventory of controllable material.
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E. Audits:
The Partnership, upon notice in writing to PDC and all other Non-
Operators, shall have the right to audit PDC's accounts and records
relating to the Partnership xxxxx for any calendar year within the twenty-
four (24) month period following the end of such calendar year; provided,
however the making of an audit shall not extend the time for the taking of
written exception to and the adjustments of account. Where there are two
or more Non-Operators, the Non-Operators shall make every reasonable
effort to conduct a joint audit in a manner which will result in a minimum
of inconvenience to PDC. PDC shall bear no portion of the Non-Operators
audit cost incurred under this paragraph unless agreed to by PDC. The
audits shall not be conducted more than once each year without prior
approval of PDC, except upon the resignation or removal of PDC as
operator, and shall be made at the expense of those Non-Operators
requesting such audit.
PDC shall reply in writing to an audit report within 75 days after
receipt of such report.
ARTICLE VI
DRILLING AND DEVELOPMENT
A. Agreement To Drill and Complete:
PDC shall commence drilling of a well or xxxxx on each Prospect
within
180 days of the date of the initial formation of the Partnerships, but in
no case later than March 30, 1997 with respect to the partnerships
designated "PDC 1996- Limited Partnership" and March 30, 1998 with
respect to the partnerships designated "PDC 1997- Limited Partnership"
and shall continue drilling thereafter with due diligence to the Target
formation unless a condition which renders further drilling impractical is
encountered at a lesser depth, or unless the Partnership agrees to
complete or abandon the well at a lesser depth.
PDC shall make reasonable tests of all formations encountered during
drilling which give indication of containing economic quantities of oil
and/or gas. If such tests indicate the presence of economic quantities of
oil and/or gas, PDC shall complete the well and install such surface and
well equipment, gathering pipelines, heaters, separators, etc., as are
necessary and normal in the area in which the Prospect is located. If it
is determined that the well is not likely to produce oil and/or gas in
commercial quantities PDC shall plug and abandon the well in accordance
with applicable regulations.
B. Cost of Drilling and Completion:
The Partnership shall bear its proportionate share of the cost of
drilling and completing or drilling and abandoning each Appalachian
Basin Partnership well as follows:
1) The Cost of the Prospect as defined in Article IV, B, and:
2) For intangible well costs, for each well completed and placed
in
production an amount equal to the depth of the well in feet at
its
deepest penetration as recorded by the drilling contractor
multiplied times $60.00 per foot to a depth of 2,200 feet plus
$16.00 per foot in excess of 2,200 feet, plus the actual extra
intangible completion cost of zones completed in excess of the
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cost of the first zone and the actual extra intangible cost of
running a mine string if an underground mine is encountered by
the wellbore plus the actual cots for directional drilling
services, if required.
For each well in which the Partnership elects not to complete, an
amount equal to $33.00 per foot multiplied times the depth of the
well to 2,200 feet plus $9.00 per foot for each additional foot
below 2,200 feet as specified above plus the actual costs for
directional drilling services, if required.
3) The cost of tangible well equipment and gathering pipeline
necessary to connect the well to the nearest appropriate sales
point or delivery point.
In the event to foregoing rates exceed competitive rates available from
other persons in the area engaged in the business of rendering comparable
services or equipment, the foregoing rates will be adjusted to an amount
equal to that competitive rate, but not less than the cost of providing
such services or equipment. With respect to Michigan Basin xxxxx, the
partnership will pay its share of third party drilling costs, plus the Managing
General Partners costs of supervision, engineering, geology, accounting, other
services provided and fixed rate overhead charges where a third party operator
is used manage the drilling process, or a competitive rate in the event the
Managing General Partner serves as operator.
C. Completion By Less Than All Parties:
In the event not all Participants in a well wish to participate in a
completion attempt, the parties desiring to do so may pay all costs of the
completion attempt including the cost of necessary well equipment and a
gathering pipeline, and such parties shall receive all income and pay all
operating costs from the well until they have received an amount equal to
300% of the completion and connection costs, after which time the non-
consenting parties shall have the right to receive their original interest
in further revenues and expenses.
D. Prepayment:
The Partnership agrees to pay PDC the Prospect cost for each planned
well prior to the spud date. The Partnership shall pay drilling and
completion costs of the Operator as incurred. Notwithstanding the
foregoing, PDC may require full prepayment by December 31, 1996 for any
xxxxx to be spudded after December 31, 199 in order to assure the
Partnership of the rates quoted in Article VI, B, to arrange for the
drilling equipment for the xxxxx through subcontractors and to provide PDC
with working capital for the drilling of the xxxxx.
E. Refunds:
In no event shall PDC be obligated to refund any moneys paid to it by
the Partnership under this Agreement. In the event any amounts paid under
Article VI, D exceed costs due under Article VI, B, such excess shall be
credited to the Partnership and shall be expended for additional drilling.
ARTICLE VII
PRODUCTION AND SUBSEQUENT OPERATIONS
A. Commencement of Production:
For purposes of this agreement, production will commence:
1) In the case of gas xxxxx when gas is first delivered from the well
through a pipeline or other delivery system to a purchaser;
2) In the case of oil xxxxx when the well has produced 100 barrels;
or
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3) In the case of combination xxxxx when either of criteria have been
satisfied.
A well will be deemed to be "in production" in any month thereafter in
which oil or gas are produced in commercial quantities.
B. Production Operations:
PDC shall provide all necessary labor, vehicles, supervision,
management, accounting, and overhead services for normal production
operations, and lease accounting, and shall be entitled to deduct from
Partnership revenues a monthly operating charge of $225 per well and a
monthly accounting and management charge of $75 per well. Nonroutine
operations will be billed to the Partnership at their proportionate cost.
Any nonroutine operation with an estimated cost exceeding $2,000 will be
authorized for expenditure ("AFE" or "AFE'd") and submitted to the Non-
Operators for approval. Approval of a majority of the working interest
owners will be required to authorize such operations. If the Partnership
authorized such operations PDC shall have the right to deduct payment for
the cost from Partnership revenues.
C. Abandonment of Xxxxx That Have Produced:
Any well which has been completed as a producer shall not be plugged
and abandoned without the consent of all Non-operators. If all parties
consent to such abandonment, the well shall be plugged and abandoned in
accordance with applicable regulations and at the cost, risk of expense of
all owners. If, within (30) days after receipt of the notice of the
proposed abandonment of any well, all parties do not agree to the
abandonment of such well, those wishing to continue its operations from
the interval(s) of the formation(s) then open to production shall tender
to each of the other parties its proportionate shale of the value of the
xxxxx salvable material and equipment, less the estimated cost of
salvaging and assign the non-abandoning parties, without warranty, express
or implied, as to title or as to quantity, or fitness for use of the
equipment and material, all of its interest in the well and related
equipment, together with its interest in leasehold estate as to, but only
as to, the interval or intervals of the formation or formations then open
to production.
D. Marketing of Production:
The Partnership shall have the right to take in kind and separately
dispose of its share of all oil and gas produced from the Prospects,
excluding its proportionate share of production required for lease
operations and production unavoidably lost. Initially the Partnership
designates PDC as its agent to market such production and authorizes PDC
to enter into and bind the Partnership in such agreements as it deems in
the best interest of the Partnership for the sale of such oil and/or gas.
The Partnership may rescind the designation of PDC as its agent with
regard to all subsequent marketing agreements by written notice at any
time, but agrees to be bound by such agreements as may then be in effect
during their terms. The Partnership shall bear its proportionate share of
all marketing costs, if any. In the event PDC provides marketing
services, its charge shall be no greater than those charges made by
unaffiliated marketers. If pipelines which have been built by PDC are
used in the delivery of natural gas to market, PDC may charge a gathering
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fee not to exceed that which would be charged by a nonaffiliated third
party for a similar service.
E. Escalation in the Event of Rising Costs:
The production and accounting charges provided in Article VII, B, may
be adjusted annually beginning January 1, 1996, to an amount equal to the
rates from Article VII, B, multiplied by the ratio of the then current
average weekly earnings of Crude Petroleum and Gas Production workers for
1996, as published by the United States Department of Labor, Bureau of
Labor Statistics, provided that the charge may not exceed the rate which
would be charged by other comparable operators in the area of operations.
ARTICLE VIII
LIABILITY OF PARTIES
A. Liability of Parties:
If the Partnership participates in a well with third parties the
liability of the parties shall be several, not joint or collective. The
Partnership shall be responsible only for its obligations, and shall be
liable only for its proportionate share of the costs of developing and
operating the Prospects. It is not the intention of the parties to
create, nor shall this agreement be construed as creating, a mining or
other partnership or association, or to render the parties liable as
partners.
B. Liens and Payment Defaults:
The Partnership grants to PDC a lien upon its oil and gas rights in
the
Contract Area, and a security interest in its share of oil and/or gas when
extracted and its interest in all equipment, to secure payment of its
share of expense, together with interest thereon. To the extent that PDC
has a security interest under the Uniform Commercial code of the state,
PDC shall be entitled to exercise the rights and remedies of a secured
party under the Code. The bringing of a suit and the obtaining of
judgment by PDC for the secured indebtedness shall not be deemed an
election of remedies or otherwise affect the lien rights or security
interest as security for the payment thereof. In addition, upon default
by the Partnership in the payment of its share of expense, PDC shall have
the right, without prejudice to other rights or remedies, to collect from
the purchaser the proceeds from the sale of the Partnership's share of oil
and/or gas until the amount owed by the Partnership, plus interest, has
been paid. Each purchaser shall be entitled to rely upon PDC's written
statement concerning the amount of any default. PDC grants a like lien
and security interest to the Partnership to secure payment of PDC's
proportionate share of expenses.
If any party fails or is unable to pay its share of expense within
sixty (60) days after rendition of a statement therefor by PDC, PDC shall
pay the unpaid amount in the proportion that the interest of each such
party bears to the interest of all such parties.
C. Payments and Accounting:
Except as herein otherwise specifically provided, PDC shall promptly
pay and discharge expenses incurred in the development and
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operation of the Contract Area pursuant to this agreement. PDC shall keep
an accurate record of the account hereunder, showing expenses incurred and
charges and credits made and received.
Regardless of which party has contributed the lease(s) and/or oil and
gas interest(s) hereto on which royalty is due and payable, PDC shall pay
or deliver or cause to be paid or delivered the royalty and overriding
royalty payments due under the terms associated with the acquisition of
each Prospect, and shall deduct such payments from the revenue of the
Partnership.
D. Taxes:
Unless Partnership elects to take production in kind, PDC shall pay or
cause to be paid all production, severance, excise, gathering and other
taxes imposed upon or with respect to the production or handling of such
party's share of oil and/or gas produced under the terms of this
agreement, and shall be entitled to reimbursement for such taxes from
partnership revenue.
E. Insurance:
At all times while operations are conducted hereunder, PDC shall
comply
with the workmen's compensation laws of the state of West Virginia. PDC
shall also carry or provide insurance as outlined in Exhibit "B", attached
to and made a part hereof. PDC shall require all contractors engaged in
work on or for the Contract Area to comply with the workmen's compensation
law of the state where the operations are being conducted and to maintain
such other insurance as PDC may require.
No additional charge will be made for such insurance during drilling
and completion operations. When xxxxx have been placed in production PDC
may xxxx for the cost of providing such insurance, allocated among xxxxx
and operations in accordance with generally accepted accounting
principles.
ARTICLE IX
INTERNAL REVENUE CODE ELECTION
This agreement is not intended to create, and shall not be construed
to create, a relationship of partnership or an association for profit
between or among the parties hereto. Notwithstanding any provision herein
that the rights and liabilities hereunder are several and not joint or
collective, or that this agreement and operations hereunder shall not
constitute a partnership, if, for federal income tax purposes, this
agreement and the operations hereunder are regarded as a partnership, each
party hereby affected elects to be excluded from the application of all of
the provisions of Subchapter "K", Chapter 1, Subtitle "A", of the Internal
Revenue Code of 1986, as amended (the"Code") as permitted and authorized
by Code Section 761 and the regulations promulgated thereunder. PDC is
authorized and directed to execute on behalf of the Partnership such
evidence of this election as may be required by the Secretary of the
Treasury of the United States or the Federal Internal Revenue Service,
including specifically, but not by way of limitation, all of the returns,
statements, and the data required by Regulations 1.761. Should there be
any requirement that each party hereby affected to give further evidence
of this election, each such party shall execute such documents and furnish
such other evidence as may be required by the Federal Internal Revenue
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Service or as may be necessary to evidence this election. No such party
shall give any notices or take any other action inconsistent with the
election made hereby. If any present or future income tax laws of the
state or states in which the Contract Area is located or any future income
tax laws of the United States contain provisions similar to those in
Subchapter "K", Chapter l, Subtitle "A", of the Code, under which an
election similar to that provided by Section 761 of the Code is permitted,
each party hereby affected shall make such election as may be permitted or
required by such laws. In making the foregoing election, each such party
states that the income derived by such party from operations hereunder can
be adequately determined without the computation of partnership taxable
income.
ARTICLE X
CLAIMS AND LAWSUITS
PDC may settle any single uninsured third party damage claim or suit
arising from operations hereunder if the expenditure does not exceed One
Thousand Dollars ($1,000.00) and if the payment is in complete settlement
of such claim or suit. If the amount required for settlement exceeds the
above amount, the Partnership shall assume and take over the further
handling of its interest in the claim suit, unless such authority is
delegated to PDC. All costs and expenses of handling, settling,or
otherwise discharging such claim or suit shall be at the joint expenses of
the parties participating in the operation from which the claim or suit
arises. If a claim is made against any party or if any party is sued on
account of any matter arising from operations hereunder over which such
individual has no control because of the rights given Operator by this
agreement, such party shall immediately notify all other parties, and the
claim or suit shall be treated as any other claim or suit involving
operations hereunder all claims and suits involving title to any interest
subject to this Agreement shall be treated as a claim or suit against all
parties participating in the Prospect so affected.
ARTICLE XI
FORCE MAJEURE
If either party is rendered unable, wholly or in part, by force
majeure
to carry out its obligations under this agreement, other than the
obligation to make money payments, that party shall give to the other
party prompt written notice of the force majeure with reasonably full
particulars concerning its; thereupon, the obligations of the party giving
the notice, so far as they are affected by the force majeure, shall be
suspended during, but no longer than, the continuance of the force
majeure. The affected party shall use all reasonable diligence to remove
the force majeure situation as quickly as practicable.
The requirement that any force majeure shall be remedied with all
reasonable dispatch shall not require the settlement of strikes, lockouts,
or other labor difficulty by the party involved, contrary to its wishes;
how all such difficulties shall be handled shall be entirely within the
discretion of the party concerned.
The term "force majeure", as here employed, shall mean act of God,
strike, lockout, or other industrial disturbance act of the public enemy,
war, blockade, public riot, lightning, fire, storm, flood, explosion,
governmental action, governmental delay, restraint or inaction,
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unavailability of equipment or market for oil and/or gas, and any other
cause, whether of the kind specifically enumerated above or otherwise,
which is not reasonably within the control of the party claiming
suspension.
ARTICLE XII
NOTICES
All notices required by this agreement shall be given in writing
addressed to the parties as follows:
1) For the Partnership:
Petroleum Development Corporation, Managing General Partner
PDC 1996- [1997- ] Limited Partnership
X.X. Xxx 00
Xxxxxxxxxx, XX 00000
2) For PDC:
Petroleum Development Corporation
X.X. Xxx 00
Xxxxxxxxxx, XX 00000
Each party shall have the right to change its address at any time, by
giving written notice to all other parties.
ARTICLE XIII
TERM OF AGREEMENT
In the event a well drilled under any provision of this agreement,
results in production of oil and/or gas in paying quantities, this
agreement shall continue in force so long as any such well or xxxxx
produce, or are capable of production, and for an additional period of 180
days from cessation of all production; provided, however, if, prior to the
expiration of such additional period, one or more of the parties hereto
are engaged in drilling, reworking, deepening, plugging back, testing or
attempting to complete a well or xxxxx
hereunder, this agreement shall continue in force until such operations
have been completed and if production results therefrom, this agreement
shall continue in force as provided herein.
It is agreed, however, that the termination of this agreement shall
not
relieve any party hereto from any liability which has accrued or attached
prior to the date of such termination.
ARTICLE XIV
COMPLIANCE WITH LAWS AND REGULATIONS
A. Laws, Regulations and Order:
This agreement shall be subject to the conservation laws of the state
in which the Prospects are located, to the valid rules, regulations, and
orders of any duly constituted regulatory body of said state; and to all
other applicable federal, state, and local laws, ordinances, rules,
regulations, and orders.
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B. Governing Law:
This agreement and all matters pertaining hereto, including, but not
limited to, matters of performance, non-performance, breach, remedies,
procedures, rights, duties and interpretation or construction, shall be
governed and determined by the law of the state in which the Prospect is
located.
C. Regulatory Agencies:
Nothing herein contained shall grant, or be construed to grant, PDC
the
right or authority to waive or release any rights, privileges, or
obligations which Partnership may have federal or state laws or under
rules, regulations or orders promulgated under such laws in reference to
oil, gas and mineral operations, including the location, operation, or
production of xxxxx, on tracts offsetting or adjacent to the Contract
Area.
With respect to operations hereunder, the Partnership agrees to
release
PDC from any and all losses, damages, injuries, claims and causes of
action arising out of, incident to or resulting directly or indirectly
from Operator's interpretation or application of rules, rulings,
regulations, or orders of the Department of Energy or predecessor or
successor agencies to the extent such interpretation or application was
made in good faith. The Partnership further agrees to reimburse PDC for
any amounts applicable to Partnerships share of production that PDC may be
required to refund, rebate or pay as a result of such an incorrect
interpretation or application.
ARTICLE XV
MISCELLANEOUS
This agreement shall be binding upon and shall inure to the benefit of
the parties hereto and to their respective heirs, devisees, legal
representative, successors and assigns.
This instrument may be executed in any number of counterparts, each of
which shall be considered an original for all purposes.
IN WITNESS WHEREOF, this agreement shall be effective as of
day
of 19 .
Xxxx X. Xxxxxxxxx,
Executive V.P.
Petroleum Development Corp.
Xxxxxx X. Xxxxxxxx, President
Petroleum Development Corp.,
Managing General Partner
PDC 199 - Limited Partnership
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