FARMOUT AGREEMENT
THIES BLOCK, REPUBLIC OF SENEGAL
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THIS AGREEMENT is made and entered into effective December 17, 1997, by
and among each of Societe des Petroles du Senegal ("Petrosen"), the national oil
and gas company of the Republic of Senegal ("Senegal"), ▇▇▇▇▇▇ Oil and Gas
Company ("▇▇▇▇▇▇"), a Delaware USA corporation (or its designated affiliate),
and Fortesa Corporation ("Fortesa"), a Texas USA corporation (or its designated
affiliate).
Petrosen is a party to a Convention (the "Convention") issued by the
Government of Senegal, dated effective February 26, 1993, granted by the Decree
No. 93-155 of February 26, 1993, regarding the exploration, development and
production of oil and/or gas from the Thies Block (the "Block"), which covers
certain lands onshore in Senegal as described therein.
In consideration of the mutual benefits to be derived by each of them,
the parties to this Agreement (collectively, the "Parties," and individually, a
"Party") agree to the following terms and provisions regarding their acquisition
of their respective interests in the Block:
1. ONSHORE WORK PROGRAM. ▇▇▇▇▇▇ and Fortesa (collectively, the "▇▇▇▇▇▇
Group") shall conduct, over the twenty-four (24) month period commencing on
February 26, 1998, the following operations (collectively, the "Onshore Work
Program") on the Thies Block:
i. The drilling, testing and (if warranted) completion of two
additional ▇▇▇▇▇ on the Thies Block at locations selected by the
▇▇▇▇▇▇ Group. The ▇▇▇▇▇▇ Group shall have the right to produce and
market the production from all existing and future productive ▇▇▇▇▇
on the Thies Block;
ii. The construction of a 4 1/2" or larger diameter pipeline from
the Gadiaga No. 2 well, and other ▇▇▇▇▇ subsequently located near it
to the vicinity of the Diam Niadio field;
iii. The evaluation and, if necessary, reprocessing of existing
geophysical data covering the Block and the acquisition, if necessary
of additional new geophysical data for the development of new
drilling prospects on the Block.
In case of the non-completion of the Onshore Work Program within the
twenty-four month period contemplated above, Petrosen agrees to join with the
▇▇▇▇▇▇ Group in seeking a one year extension to the exploration period which
begins on or about February 26, 1998, under the Convention.
The Onshore Work Program shall include a budget of not less than
$5,400,000 to be expended by the ▇▇▇▇▇▇ Group, after the expenditure of which
the ▇▇▇▇▇▇ Group may elect to terminate their participation in the exploration
and development of the Block. With satisfactory initial results, the ▇▇▇▇▇▇
Group may spend an additional $5,400,000 on the Block.
2. OWNERSHIP SHARES. The ownership of the Block, the obligation to bear
expenses (except as otherwise provided below in this Section), and the
allocation of revenues from the sale of production from the Block shall be in
the following shares:
Petrosen 30%
▇▇▇▇▇▇ 45%
Fortesa 15%
Third party 10%
The interest of Petrosen will be free of the obligation to bear any
expense (I.E. will be "carried") until the ▇▇▇▇▇▇ Group has expended an
aggregate of $10,800,000 in the exploration and development of the Thies Block.
After the ▇▇▇▇▇▇ Group has expended the sum of $10,800,000, Petrosen shall join
in bearing its share of all costs and expenses of conducting further operations
on the Block. All owners of the Block shall bear their respective shares of the
applicable royalty and other fiscal obligations imposed by the Convention and
shall pay their respective shares of all income taxes attributable to the
production and sale of hydrocarbons.
Except for the carried interest of Petrosen, all owners of the Block
shall bear their respective shares of all costs and expenses of conducting
operations on the Block.
In the event that any owner of the Block fails to bear its share of the
expenses of the Onshore Work Program, its ownership interest shall be allocated
to the ▇▇▇▇▇▇ Group, unless otherwise agreed among the Parties.
Except for the fiscal obligations imposed by the Convention, including
the royalty payable to Senegal, there are no other burdens measured by or
payable out of production.
3. JOINT OPERATING AGREEMENT. The owners of the Block shall enter into a
mutually acceptable form of joint operating agreement, based upon the statutory
model form of joint operating agreement included in the petroleum legislation of
Senegal, governing operations on the Thies Block. The Parties shall negotiate
and conclude such agreement prior to the commencement of operations on the
Onshore Work Program. ▇▇▇▇▇▇ shall be the initial operator designated under the
joint operating agreement.
4. GAS DISPOSITION PROJECTS. The ▇▇▇▇▇▇ Group shall have the right, but
not the obligation, to participate as to the same shares set forth in
Section 2, above, in any project facilities concerning the disposition or
utilization of any natural gas produced from the Thies Block. In the event
that any other party elects not to participate in any such project, the
Parties shall have the right to acquire their pro rata shares of any such
unclaimed interest. In addition, any equity funding of any such project
facilities provided by the ▇▇▇▇▇▇ Group shall be credited against the
$10,800,000 carry provided for above.
5. MISCELLANEOUS.
a. Currency. References in this Agreement to money shall be deemed to
mean US dollars.
b. Notices. Any notice required to be given pursuant to this Agreement
shall be in writing and shall be delivered in person, or by private
courier service, or by telecopier to each of the Parties at the address,
or at the telecopier number, set forth below. The agent for receipt of
any notice shall be the individual whose name is set forth below.
To Petrosen:
Societe des Petroles du Senegal
19, rue Parchappe Immueble ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
Telephone: 221/▇▇ ▇▇ ▇▇▇ or 221/82 20 595
Telecopier: 221/ 82 28 340 or 221/ 83 21 899
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Director General
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To ▇▇▇▇▇▇:
▇▇▇▇▇▇ Oil and Gas Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Telephone: 805/▇▇▇-▇▇▇▇
Telecopier: 805/566-5610
Attention: ▇▇▇▇ ▇▇▇▇▇, Senior Vice President
To Fortesa:
Fortesa Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Telephone: 281/▇▇▇-▇▇▇▇
Telecopier: 281/556-6543
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
c. GOVERNING LAW. This Agreement and all issues of interpretation or
performance shall be governed by and construed under the Petroleum Code
86-13 of April 14, 1986 of Senegal.
d. SUCCESSORS AND ASSIGNS. This Agreement shall be deemed binding upon
the Parties and their respective successors and assigns, subject to the
statutory limitations on assignments of interests in the Block.
e. DISPUTE RESOLUTION. In the event of any dispute between or among
the Parties, the arbitration provisions of the joint operating agreement
shall govern and control.
f. FORCE MAJEURE. In the event that the ▇▇▇▇▇▇ Group is unable to carry
out its duties and obligations as set forth in this Agreement as the
result of any condition of force majeure, as such term is used in
international oil and as transactions, the ▇▇▇▇▇▇ Group shall be excused
from such performance for as long as such condition continues, and the
time lost as the result of such condition shall not be charged against
the ▇▇▇▇▇▇ Group in any manner.
g. AMENDMENTS. No amendment or modification of this Agreement shall be
deemed effective unless and until executed in writing by all of the
Parties.
h. PRIOR AGREEMENTS SUPERSEDED. This Agreement replaces and supersedes
all agreements or understandings dated prior to the date hereof
pertaining to the Thies Block between Fortesa and Petrosen or among all
of the Parties.
Societe des Petroles du SENEGAL
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 12/17/97
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Director General Date
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▇▇▇▇▇▇ OIL AND GAS COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ Date: 12/17/97
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
FORTESA CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ Date: 12/17/97
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▇▇▇▇▇▇ ▇▇▇▇▇
President
FOR APPROBATION BY:
The Minister of Energy, Mines and Industry
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ Date: 24 DEC. 1997
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[SEAL]
