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EXHIBIT 10.15
ANADARKO BASIN
SEISMIC OPERATIONS AGREEMENT
This Anadarko Basin Seismic Operations Agreement (this "Agreement") is
dated effective as of the 15th day of February, 1996, and is by and between
▇▇▇▇▇▇▇ OIL & GAS, L.P. ("BOG") and VERITAS GEOPHYSICAL, LTD. ("Veritas") (BOG
and Veritas being sometimes individually referred to herein as a "Party" and
collectively referred to herein as the "Parties");
WHEREAS, BOG has identified a number of areas within the lands
described in Exhibit A which is attached hereto and incorporated herein for all
purposes (the lands described in Exhibit A being hereinafter referred to as the
"Alliance Area"), within which BOG desires to pursue oil and gas exploration
and/or development operations with project participants; and
WHEREAS, BOG desires to have Veritas conduct three-dimensional seismic
operations within the Alliance Area as provided in this Agreement; and
WHEREAS, Veritas desires to perform such three-dimensional seismic
operations within the Alliance Area pursuant to the terms set forth in this
Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE I.
RELATIONSHIP OF PARTIES
Section 1.1. No Partnership. The liabilities of the Parties
hereunder shall be several, not joint or collective. It is not the intention
of the Parties to create, nor shall this Agreement be deemed as creating, a
mining, tax or other partnership or association or to render the Parties liable
as partners. However, if for federal income tax purposes, this Agreement and
the operations hereunder are regarded as a partnership, each Party thereby
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 (hereinafter referred to as the "Code"), as permitted and authorized
by Section 761 of the Code and the regulations promulgated thereunder. Should
there be any requirement that each Party hereby affected 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 Service or as
may be necessary to evidence this election. No Party shall give any notice or
take any other action inconsistent with the election made hereby. In making
the foregoing election, each Party states that the income derived by such Party
from operations hereunder can be adequately determined without the computation
of partnership taxable income.
ARTICLE II.
CONDUCT OF SEISMIC OPERATIONS
Section 2.1. BOG Project Areas. The Parties recognize and
acknowledge that BOG will be designating geographic areas within the Alliance
Area (the separate geographic areas being herein referred to as "Project
Areas") for the conduct of three-dimensional seismic operations (hereinafter
referred to as "3-D Operations") hereunder for the benefit of BOG and its
participants. For purposes of this Agreement BOG's participants (hereinafter
referred to as "BOG Participants") shall mean (i) those parties that have
entered into an agreement with BOG providing for such parties' joint
participation with BOG in an entire Project Area, and (ii) those entities in
which BOG either owns more than fifty one percent (51%) of the ownership equity
in such entity or controls the day to day operations of such entity. The
Parties recognize and acknowledge that third parties that enter into agreements
with BOG under which such parties either assign or are assigned interests
covering less than an entire Project Area are not BOG Participants for purposes
of this Agreement. For example, in the event that BOG simply enters into a
farm-in agreement with the owner of an oil and gas leasehold estate covering
less than an entire Project Area, such party will not be considered a BOG
Participant for purposes of this Agreement.
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Section 2.2. BOG Commitment to ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
A. Subject to the terms and provisions which are contained in
this Agreement, within eighteen months of the effective date of this Agreement
BOG agrees to utilize a Veritas seismic crew (hereinafter referred to as the
"Alliance Seismic Crew") to conduct 3-D Operations within Project Areas
covering a total of at least five hundred square miles within the Alliance
Area; provided, however, that at BOG's option such eighteen month period shall
be extended for any days during which the Alliance Seismic Crew does not
conduct operations hereunder due to weather conditions or any other causes
which are not the fault of BOG. The Parties recognize and acknowledge that in
order to complete 3-D Operations across the entire final Project Area which is
to be shot pursuant to the terms of this Agreement, the total square miles
covered by 3-D Operations hereunder may exceed five hundred square miles;
provided, however, that the Parties agree that the total square miles covered
by the 3-D Operations will not exceed five hundred fifty square miles without
the consent of both Parties. In addition, the Parties recognize and
acknowledge that in the event that Terrain Excluded Project Areas (as defined
in Section 2.6 below) or Sand Tire Excluded Project Areas (as defined in
Section 2.7 below) are designated hereunder, such five hundred square mile
commitment shall be reduced by the number of square miles which are covered by
the Terrain Excluded Project Areas and Sand Tire Excluded Project Areas.
B. For purposes of this Agreement the number of square miles
which are covered by the 3-D Operations shall be determined by the total number
of source and receiver points which are shot as part of the 3-D Operation for
the Project Area.
(i) For the 1,320' receiver line spacing parameters one hundred
ninety two total source and receiver points shall be deemed to be one
square mile; provided, however, that in the event that the total
number of receiver points are greater than fifty-one percent of the
total source and receiver points for any Project Area, any receiver
points exceeding such fifty-one percent amount shall not be counted
for purposes of determining the number of square miles covered by the
3-D Operations, and in the event that the total number of source
points are greater than fifty-one percent of the total source and
receiver points for the Project Area, any source points exceeding such
fifty-one percent amount shall not be counted for purposes of
determining the number of square miles covered by the 3-D Operations.
However, in the event that the total number of receiver points exceed
fifty-one percent of the total source and receiver points for a
Project Area and BOG approves such excess receiver points, though
those excessive receiver points will not be counted for purposes of
determining the number of square miles which are covered by the 3-D
Operations, BOG shall be charged for the number of receiver points
exceeding such fifty-one percent of total points at a rate of
sixty-seven dollars ($67.00) per additional receiver point. In the
event that the total number of source points exceed fifty-one percent
of the total source and receiver points for a Project Area and BOG
approves such excessive source points, though those excessive source
points will not be counted for purposes of determining the number of
square miles which are covered by the 3-D Operations, BOG shall be
charged for the number of source points exceeding such fifty-one
percent of total points at a rate of one hundred twelve dollars
($112.00) per additional source point. In the event that Veritas must
cable around a tract that is to be excluded from the 3-D Operations
and the amount of cable which is utilized to cable around such tract
would normally have more than five receiver points on it, then the
number of receiver points along the cable length which is used to
cable around such tract shall be counted as receiver points for
purposes of determining the number of square miles which are covered
by the 3-D Operations.
(ii) For the 660' receiver line spacing parameters two hundred
eighty-eight total source and receiver points shall be deemed to be
one square mile; provided, however, that in the event that the total
number of receiver points are greater than sixty-seven and one-half
percent of the total source and receiver points for any Project Area,
any receiver points exceeding such sixty-seven and one-half percent
amount shall not be counted for purposes of determining the number of
square miles covered by the 3-D Operations, and
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in the event that the total number of source points are greater than
sixty-seven and one-half percent of the total points for the Project
Area, any source points exceeding such sixty-seven and one-half
percent amount shall not be counted for purposes of determining the
number of square miles covered by the 3-D Operations. However, in the
event that the total number of receiver points exceed sixty-seven and
one-half percent of the total source and receiver points for a Project
Area and BOG approves such excess receiver points, though those
excessive receiver points will not be counted for purposes of
determining the number of square miles which are covered by the 3-D
Operations, BOG shall be charged for the number of receiver points
exceeding such sixty- seven and one-half percent of total points at a
rate of seventy-nine dollars ($79.00) per additional receiver point.
In the event that the total number of source points exceed sixty-seven
and one-half percent of the total source and receiver points for a
Project Area and BOG approves such excessive source points, though
those excessive source points will not be counted for purposes of
determining the number of square miles which are covered by the 3-D
Operations, BOG shall be charged for the number of source points
exceeding such sixty-seven and one-half percent of total points at a
rate of one hundred thirty-two dollars ($132.00) per additional source
point. In the event that Veritas must cable around a tract that is to
be excluded from the 3-D Operations and the amount of cable which is
utilized to cable around such tract would normally have more than five
receiver points on it, then the number of receiver points along the
cable length which is used to cable around such tract shall be counted
as receiver points for purposes of determining the number of square
miles which are covered by the 3-D Operations, and
Section 2.3. Parameters and Equipment. For each Project Area BOG
shall select: 1) the seismic parameters that are to be utilized for the 3-D
Operations to be conducted within such Project Area from the parameters which
are set forth in Exhibit D; and 2) the equipment which is to be utilized for
the 3-D Operations to be conducted within such Project Area from the equipment
list which is set forth in Exhibit E. However, if for any Project Area BOG
desires to utilize parameters other than those which are set forth in Exhibit D
or equipment other than that which is listed in Exhibit E, BOG and Veritas
shall attempt to mutually agree upon the reasonable charges to be incurred for
such parameters or equipment. Should the Parties fail to reach agreement on
such charges, such Project Area shall be removed from this Agreement and shall
not be considered part of the five hundred square mile commitment which is set
forth in this Agreement; such five hundred square mile commitment shall not,
however, be reduced as the result of any such removal of a Project Area.
Section 2.4. Notification of Project Area Outline and Parameters
and Equipment. No less than twenty-one days prior to the expected commencement
of the field seismic acquisition operations for each of its Project Areas, BOG
will notify Veritas in writing of 1) the location and outline of the specific
Project Area, 2) the parameters to be utilized for the Project Area, 3) the
equipment to be utilized for the Project Area, and 3) the approximate patch to
be used for source and receiver lines within the Project Area.
Section 2.5. Veritas 3-D Seismic Crew Commitment. Commencing with
the effective date of this Agreement and continuing for a period of eighteen
months thereafter (as same may be extended as provided in Section 2.2 above),
Veritas hereby agrees to give BOG priority use of the Alliance Seismic Crew for
the continuous conduct of 3-D Operations covering approximately five hundred
square miles as provided in Section 2.2 above. BOG shall make a reasonable
effort to have Project Areas ready for surveying and field acquisition such
that the Alliance Seismic Crew may go directly from the completion of 3-D
Operations within one Project Area to the start of 3-D Operations for the next
Project Area. As long as BOG has a Project Area ready for surveying and field
seismic acquisition, Veritas agrees that the Alliance Seismic Crew will go from
Project Area to Project Area without interruption unless and until such time as
BOG does not have a Project Area ready for surveying and field seismic
acquisition. In the event that BOG notifies Veritas that BOG will not have a
Project Area ready for surveying in source and receiver points upon the
completion of the current Project Area, Veritas shall make every reasonable
effort to place the
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Alliance Seismic Crew on a third-party project area with as little stand-by
time as possible incurred prior to the commencement of the next BOG Project
Area. However, in the event that following the completion of 3-D Operations
for a BOG Project Area the Alliance Seismic Crew is moved to a third-party
project area as provided above, at BOG's request, Veritas will schedule the
Alliance Seismic Crew to move to a designated BOG Project Area as soon as
possible following the completion of the intervening third-party project areas
which have been scheduled by Veritas prior to its receipt of BOG's notice. In
the event that following the completion of 3-D Operations for a BOG Project
Area a subsequent BOG Project Area is not ready for surveying and, despite
Veritas' efforts to place the Alliance Seismic Crew on a third- party project
area, the Alliance Seismic Crew experiences stand-by time, unless BOG has given
Veritas at least sixty days advance notice, as provided below in this Section
2.5, that no Project Area will be ready, BOG shall compensate Veritas for
stand-by time incurred by the Alliance Seismic Crew as follows (a) for the
first three days of stand-by time BOG shall pay Veritas fifteen thousand
dollars per day, and (b) for any stand-by time incurred after three days, BOG
shall pay Veritas ten thousand dollars per day; provided, however, in no event
shall BOG be required to pay Veritas more than four hundred fifty thousand
dollars in total stand-by charges for stand-by time incurred between the
completion of any one BOG Project Area and the commencement of the next
succeeding BOG Project Area. Anything to the contrary contained herein
notwithstanding, in the event that BOG gives Veritas at least sixty days
advance notice that BOG will not have any Project Areas ready for surveying and
field seismic acquisition, anything to the contrary contained in this Section
2.5 notwithstanding, BOG shall not be required to pay any stand-by time charges
for any stand- by time that may be incurred by Veritas more than sixty days
after Veritas' receipt of such notice. In the event that BOG gives Veritas
sixty days notice that BOG will not have any Project Areas ready for surveying
and field seismic acquisition, after such sixty day time period BOG shall not
be responsible for stand-by charges, unless and until BOG gives Veritas written
notice of a date by which BOG will have a Project Area ready for 3-D Operations
and then BOG subsequently fails to have a Project Area ready for surveying
within the time frame BOG has given Veritas. Any stand-by charges incurred
pursuant to this Section 2.5 shall be invoiced by Veritas on a monthly basis
and paid in full by BOG within thirty days of its receipt of an invoice
correctly reflecting the amount of such charges.
Section 2.6. Terrain Exception. No less than sixty days prior to
the expected commencement of the field seismic acquisition operations for a
Project Area BOG shall notify Veritas in writing of the general outline of such
Project Area so that Veritas may evaluate the terrain and operating conditions
that may be expected within the Project Area. In the event that Veritas
believes, in its reasonable opinion, that the terrain or operating conditions
for a Project Area is unreasonable such that routine seismic acquisition
operations will be excessively affected, Veritas must notify BOG in writing of
such determination within fifteen days of its receipt of BOG's notice of the
general outline for the Project Area. In the event that the terrain or
operating conditions for a Project Area is deemed to be unreasonable in
Veritas' reasonable opinion as aforesaid, the Parties shall attempt to
negotiate a fair Turnkey Charge (as defined in Article III below) for such
Project Area. In the event that within five business days of BOG's receipt of
Veritas' notification the Parties have not reached agreement on a Turnkey
Charge for the Project Area, such Project Area shall be deemed to have been
excluded from this Agreement for all purposes (hereinafter referred to as a
"Terrain Excluded Project Area") and BOG's commitment to conduct 3-D Operations
within Project Areas covering a total of at least five hundred square miles
shall be reduced by the size of such Terrain Excluded Project Area. Anything
to the contrary contained in this Agreement notwithstanding, the Parties agree
that the terrain and operating conditions which exist within the lands which
are outlined on Exhibit G, are not unreasonable such that routine seismic
acquisition operations within such lands would be excessively affected. The
Parties also recognize and agree that for purposes of this Section 2.6, other
lands which have terrain and operating conditions which are similar to those
that exist within the lands which are outlined on Exhibit G shall not be deemed
to be unreasonable such that routine seismic acquisition operations within such
lands would be excessively affected.
Section 2.7. Sand Tire Exception. In the event that BOG desires
to have the Alliance Seismic Crew vibrators equipped with sand tires for a
Project Area, no less than sixty days prior to the expected commencement of the
field seismic acquisition operations for such Project Area BOG shall notify
Veritas of its desire to utilize sand tires for such Project Area. In the
event that Veritas' existing sand tires will not be available for such Project
Area Veritas must notify BOG in writing of such determination within five
business days of its receipt of BOG's notice. In the
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event that Veritas has notified BOG that Veritas' existing sand tires will not
be available for the scheduled Project Area as aforesaid, the Parties shall
attempt to negotiate a mutually agreeable arrangement for the provision of sand
tires for such Project Area. In the event that within five business days of
BOG's receipt of Veritas' notification the Parties have not reached agreement
on an arrangement for the provision of sand tires, BOG shall have the right to
exclude such Project Area from this Agreement for all purposes (hereinafter
referred to as a "Sand Tire Excluded Project Area") and BOG's commitment to
conduct 3-D Operations within Project Areas covering a total of at least five
hundred square miles shall be reduced by the size of such Sand Tire Excluded
Project Area.
Section 2.8. Excessive Weather Delays. Anything to the contrary
contained in Section 2.5 above notwithstanding, in the event that weather
problems prevent the Alliance Seismic Crew from conducting field seismic
acquisition operations within a Project Area for more than two continuous days
and it does not reasonably appear that the Alliance Seismic Crew will be able
to begin conducting field seismic acquisition operations for at least another
six days, unless BOG has oil and gas lease options, oil and gas leases or
farm-ins which are time sensitive, Veritas may move the Alliance Seismic Crew
off of such Project Area, provided that, unless BOG agrees otherwise, the
Alliance Seismic Crew shall return to the abandoned Project Area no later than
twenty days after it left such Project Area. In the event that Veritas
temporarily leaves a Project Area because of weather problems as provided in
this Section 2.8, Veritas shall pay any and all additional permitting,
surveying and damage costs or expenses which may be incurred as the result of
such temporary abandonment.
Section 2.9. General Terms and Provisions for 3-D Operations. All
3-D Operations provided for herein shall be conducted by Veritas in accordance
with the general terms and provisions which are set forth in Exhibit F which is
attached hereto and incorporated herein for all purposes. However, in the
event that there are any ambiguities or conflicts between the terms, provisions
and/or conditions which are set forth in the body of this Agreement and the
terms, provisions and/or conditions which are contained in Exhibit F, the
terms, provisions and conditions set forth in the body of this Agreement shall
control. Veritas covenants and warrants to BOG that during the term of this
Agreement the Alliance Seismic Crew shall use all reasonable efforts to keep
and maintain all of the equipment, supplies and personnel necessary to
efficiently perform the operations described in this Article II on a continuous
basis, including, without limitation, the equipment, supplies and personnel
described on Exhibit E which are selected by BOG for the applicable Project
Area.
Section 2.10. Veritas Failure to Perform. Anything to the contrary
contained herein notwithstanding, in the event that at any time the Alliance
Seismic Crew fails or is unable to perform seismic operations in full
compliance with all of the requirements set forth in this Agreement for more
than ten continuous days, in addition to and without limitation of any other
remedies which may be available to BOG at law or in equity, BOG shall have the
right to terminate this Agreement as to all future obligations to utilize the
Alliance Seismic Crew; provided, however, that if such failure to perform
seismic operations is due solely to weather or surface conditions which are
beyond Veritas' control or if BOG causes the nonperformance, BOG shall not have
the right to terminate this Agreement as provided herein.
Section 2.11. Definition of Completion of 3-D Operations. The
Parties agree that for all purposes of this Agreement, the 3-D Operations for
a Project Area shall be deemed to have been completed when BOG receives from
Veritas: 1) all of the final correlated field tapes resulting from all of the
3-D Operations conducted within the Project Area on 9-track tape or 3480
cartridges in a state that is suitable for processing; 2) all survey
information obtained within the Project Area in Seg-P1 format and on a hard
copy and digital format, including without limitation all shot and receiver
point locations and GPS stations located within the Project Area and all
non-seismic survey points obtained; and 3) all observor reports, field notes,
and any other survey and support data obtained. For each Project Area Veritas
agrees to provide all of the data and information which is described in this
Section 2.11 as soon as same is available and Veritas agrees to make every
reasonable effort to cause all of such data and information to be made
available as soon as is possible.
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ARTICLE III
CONSIDERATION DUE TO VERITAS
Section 3.1. Payment of One-Third Seismic Acquisition Costs. For
each Project Area for which Veritas conducts and completes 3-D Operations as
provided herein, BOG shall owe Veritas one-third of 1) the turnkey charge which
is calculated as provided in Section 3.2 below based on the parameters,
dimensions and size of the applicable Project Area which are selected by BOG
for the applicable Project Area (hereinafter referred to as the "Turnkey
Charge") for the number of square miles over which 3-D Operations are conducted
within such Prospect Area, 2) the mobilization fee which is set forth in
Exhibit B for the number of road miles between the Project Area and the
previous Project Area (hereinafter referred to as the "Mobilization Fee"), and
3) the reimbursable costs which are not included in the Turnkey Charge as
reflected in Exhibit B, save and except any permitting and surface damage
settlement costs (the Turnkey Rate, the Mobilization Fee and all of the
reimbursable costs described in Exhibit B, save and except any permitting and
surface damage settlement costs, being hereinafter collectively referred to as
"Seismic Acquisition Costs"). BOG shall pay such one-third share of the
Seismic Acquisition Costs within thirty days of BOG's receipt of an invoice
correctly indicating the costs which have been incurred.
Section 3.2. Determining the Turnkey Charge. The Turnkey Charge
for each Project Area shall be determined as follows:
A. The number of square miles which are covered by the 3-D
Operations within the Project Area are to be determined by the total number of
source and receiver points that are included within such Project Area as
provided in Section 2.2 above. The total number of square miles which are
covered by the 3-D Operations within the applicable Project Area being referred
to in this Section 3.2 as the "TA."
B. BOG shall determine the source and receiver line spacing
(either 1320' or 660'), the patch (10x96 or 8x120) and the source and receiver
line directions.
C. The various lengths of the receiver lines within the Project
Area shall be determined, each individual receiver line length being rounded to
the nearest one-half mile. Each receiver line length for the applicable
Project Area being referred to in this Section 3.2 as a "RLLN", with "N" being
the length of the applicable receiver line rounded to the nearest one-half
mile. For example, if a Project Area has receiver line lengths that are five
and one- tenth miles wide, such receiver lines would be RLL5s. The same
Project Area could also have receiver lines that are three miles in width, or
RLL3s, as well as other receiver line lengths of any variation.
D. The hypothetical source line length for each RLLN shall be
determined by dividing the receiver line length of a specific RLLN (rounded to
the nearest one-half mile) into the TA. Each individual hypothetical source
line length being rounded to the nearest one-half mile and being referred to in
this Section 3.2 as a "HSLN", with "N" being the length of the receiver line
rounded to the nearest one-half mile. For example, if the Project Area's TA
equals 16 square miles, the HSL5 would equal sixteen divided by five, or three
point two, which would then be rounded to three.
E. The Turnkey Charge per square mile shall be determined for
each RLLN utilizing the applicable Master Rate Table set forth in Exhibit B for
the parameters selected by BOG and the HSLN for such RLLN. The Turnkey Charge
per square mile for an RLLN being found at the intersection of the receiver
line length for the applicable RLLN and the HSLN for such RLLN on the
applicable Master Rate Table. Such per square mile Turnkey Charge for each
RLLN shall be referred to in this Section 3.2 as "RRLLN."
F. The total number of square miles covered by each RLLN shall be
determined. The total number of square miles covered by an RLLN being referred
to in this Section 3.2 as an "SMRLLN." For example, if five mile long receiver
lines cover a total of twenty-two square miles within the applicable Project
Area, SMRLL5 for the Project Area would be twenty-two
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square miles. It being understood that all of the SMRLLNs for a Project Area,
added together, total the TA for the Project Area.
G. The total Turnkey Charge for each RLLN shall then be
determined by multiplying the RRLLN for such RLLN times its SMRLLN. The total
Turnkey Charge for an RLLN being referred to in this Section 3.2 as "TCRLLN."
H. The sum of all of the TCRLLNs is then determined by adding
together all of the TCRLLNs for the Project Area. The sum of all of the
TCRLLNs for a Project Area being referred to in this Section 3.2 as the "SUM."
I. The average of all of the TCRLLNs for a Project Area is then
obtained by dividing the SUM by the TA for the Project Area. The average of
all of the TCRLLNs for a Project Area being referred to in this Section 3.2 as
the "AVG."
J. The Total Turnkey Charge per square mile for a Project Area is
then determined by adding twenty-five percent (25%) of the AVG to seventy-five
percent (75%) of the RRLLN for the longest receiver line in the Project Area.
The Total Turnkey Charge per square mile for a Project Area being referred to
in this Section 3.2 as the "TTCPM."
K. The Total Turnkey Charge for a Project Area is then determined
by multiplying the TTCPM for the Project Area times the TA for the Project
Area.
See Exhibit C for example determinations of the Turnkey Charges for
hypothetical Project Areas with different configurations.
Section 3.3. Right to Pay All Seismic Acquisition Costs and
Receive Full Ownership. Anything to the contrary contained herein
notwithstanding, prior to the commencement of field seismic acquisition for the
3-D Operations for a Project Area BOG shall have the right to designate in
writing all or any part of the Project Area for which it desires to pay one
hundred five percent of the Turnkey Charge for the applicable Project Area and
one hundred percent of all of the other Seismic Acquisition Costs related to
such selected lands (the lands for which BOG elects to pay one hundred five
percent of the Turnkey Charge and one hundred percent of other Seismic
Acquisition Costs as provided in this Section 3.3 being hereinafter referred to
as "Excluded Lands") in order to receive all of the ownership interest in the
seismic data obtained across the Excluded Lands. In the event that BOG
designates Excluded Lands covering all or part of a Project Area, BOG shall pay
one hundred five percent of the Turnkey Charge and one hundred percent of the
other Seismic Acquisition Costs related to such Excluded Lands within thirty
days of BOG's receipt of an invoice correctly indicating the costs which have
been incurred. The Parties recognize and acknowledge that with respect to the
Excluded Lands, BOG's obligation to pay one hundred five percent of the Turnkey
Charge and one hundred percent of the other Seismic Acquisition Costs related
to such Excluded Lands as provided in this Section 3.3 is in lieu of and
complete substitution for what would have otherwise been an obligation to pay
one-third of the Seismic Acquisition Costs as provided in Section 3.1 above and
the additional compensations set forth in Sections 3.4 and 3.5 below, and not
in addition to those obligations. The Parties also recognize and agree that in
the event that Excluded Lands are designated for a Project Area covering part,
but not all of the Project Area, the payment provided for in this Section 3.3
shall not include any part of the Mobilization Fee related to the applicable
Project Area as BOG shall still be required to pay such mobilization fee for
the Project Area in accordance with the terms and provisions of Sections 3.1
above and Sections 3.4 and 3.5 below. Anything to the contrary contained
herein notwithstanding, the Parties recognize and agree that if Excluded Lands
are designated hereunder such Excluded Lands shall not be counted as part of
BOG's commitment to utilize the Veritas Seismic Crew to conduct five hundred
square miles of 3-D Operations as set forth in Section 2.2 above and thus the
five hundred square mile commitment shall not be reduced by the number of
square miles which are included within Excluded Lands.
Section 3.4. Payment of 2/3rd Seismic Acquisition Cost Balance.
Until the earlier to occur of 1) the expiration of two years following the
completion of all of the 3-D Operations
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conducted for the last Project Area covered by this Agreement (the period of
time commencing with the effective date of this Agreement and continuing until
the expiration of two years following the completion of all of the 3-D
Operations conducted for the last Project Area covered by this Agreement being
hereinafter referred to as the "Exclusivity Period"), or 2) such time as BOG
has paid Veritas a total amount under this Section 3.4 equal to the remaining
two- thirds of all Seismic Acquisition Costs (determined in accordance with the
provisions of Exhibit B for each of the applicable Project Areas) incurred in
conducting 3-D Operations within BOG Project Areas less and except the Excluded
Lands (such amount being hereinafter referred to as the "First Payout Amount"
and such time as BOG has paid Veritas the First Payout Amount being hereinafter
referred to as the "First Payout"), BOG shall pay Veritas an amount equal to
twenty percent of: (a) all actual lease bonus costs paid by BOG and the BOG
Participants to mineral interest owners in order to lease mineral interests
within Project Areas (other than within Excluded Lands, Terrain Excluded
Project Areas or Sand Tire Excluded Project Areas) after 3-D Operations have
been completed within such Project Area; and (b) all costs incurred by BOG and
the BOG Participants in drilling and completing oil and/or gas ▇▇▇▇▇ within
Project Areas (other than within Excluded Lands, Terrain Excluded Project Areas
or Sand Tire Excluded Project Areas) after 3-D Operations have been completed
within such Project Area. For the costs described in (a) above, within ten
working days following the end of a calendar month, BOG shall pay Veritas the
twenty percent fee on all actual lease bonus costs which were paid out by BOG
and the BOG Participants during such calendar month. For the costs described
in (b) above, within ten days of reaching casing point in a well, BOG shall pay
Veritas the twenty percent fee on drilling (and completion if BOG elects to
participate in completing such well) costs for such well based upon the AFE
prepared for such well; provided, however, that on a calendar quarter basis BOG
shall review all drilling and completion fees which have been paid to Veritas
during the calendar quarter to reconcile Veritas' account based on actual
drilling and completion costs incurred in drilling and completing ▇▇▇▇▇ during
the calendar quarter.
Section 3.5. Payments Following the First Payout. Following the
occurrence of the First Payout and continuing until the earlier to occur of 1)
the expiration of the Exclusivity Period, or 2) such time as BOG has paid
Veritas a total amount under this Section 3.5 equal to one million dollars
(such one million dollar amount being hereinafter referred to as the "Final
Payout Amount" and such time as BOG has paid Veritas the Final Payout Amount
being hereinafter referred to as "Final Payout"), BOG shall pay Veritas an
amount equal to ten percent of (i) all actual lease bonus costs paid by BOG
and the BOG Participants to mineral interest owners in order to lease mineral
interests within Project Areas (other than within Excluded Lands, Terrain
Excluded Project Areas or Sand Tire Excluded Project Areas) after 3-D
Operations have been completed within such Project Area and (ii) all costs
incurred by BOG and the BOG Participants in drilling and completing oil and/or
gas ▇▇▇▇▇ within Project Areas (other than within Excluded Lands, Terrain
Excluded Project Areas or Sand Tire Excluded Project Areas) after 3-D
Operations have been completed within such Project Area. For the costs
described in (i) above, within ten working days following the end of a calendar
month, BOG shall pay Veritas the ten percent fee on all actual lease bonus
costs which were paid out by BOG and the BOG Participants during such calendar
month. For the costs described in (ii) above, within ten days of reaching
casing point in a well, BOG shall pay Veritas the ten percent fee on drilling
(and completion if BOG elects to participate in completing such well) costs for
such well based upon the AFE prepared for such well; provided, however, that on
a calendar quarter basis BOG shall review all drilling and completion fees
which have been paid to Veritas during the calendar quarter to reconcile
Veritas' account based on actual drilling and completion costs incurred in
drilling and completing ▇▇▇▇▇ during the calendar quarter. Anything to the
contrary contained herein notwithstanding, in the event that Excluded Lands
have been designated by BOG in accordance with Section 3.3 above, Terrain
Excluded Project Areas are designated in accordance with Section 2.6 above or
Sand Tire Excluded Project Areas are designated in accordance with Section 2.7
above, the Final Payout Amount shall be reduced by an amount equal to the
product obtained by multiplying 1) the number obtained by dividing (a) the
number of square miles included within the Excluded Lands, Terrain Excluded
Project Areas and Sand Tire Excluded Project Areas by (b) five hundred, times
2) one million dollars. For example, if five square miles have been designated
as Excluded Lands in accordance with the provisions of Section 3.3 above and a
Terrain Excluded Project Area covering ten square miles has been designated in
accordance with the provisions of Section 2.6 above, the Final Payout Amount
will
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be reduced by thirty thousand dollars (15/500 x $1,000,000 = $30,000).
However, if more than five hundred square miles are covered by the 3-D
Operations hereunder, the Final Payout Amount will be increased by an amount
equal to the product obtained by multiplying 1) the number obtained by dividing
(a) the total number of square miles covered by the 3-D Operations by (b) five
hundred, times 2) one million dollars. For example, if five hundred and thirty
square miles have been covered by the 3-D Operations, the Final Payout Amount
will be increased by sixty thousand dollars (530/500 x $1,000,000 = $60,000).
In addition, in the event that BOG's obligation to continue to use the Alliance
Seismic Crew is terminated prior to the completion of 3-D Operations covering
five hundred square miles as provided in Section 2.10, the Final Payout Amount
shall be reduced by an amount equal to the product obtained by multiplying 1)
the number obtained by dividing (a) the sum obtained by subtracting the number
of square miles covered by 3-D Operations which have been completed within
Project Areas prior to such termination from five hundred, by (b) five hundred,
times 2) one million dollars. For example, if 3-D Operations have been
completed covering three hundred square miles and BOG's obligation to continue
to utilize the Alliance Seismic Crew is subsequently terminated in accordance
with the terms of Section 2.10 above, then the Final Payout Amount shall be
reduced by four hundred thousand dollars ([500-300]/500 x $1,000,000 =
$400,000).
Section 3.6. Monthly Lease Bonus and Drilling and Completion Cost
Reports. Commencing with the completion of 3-D Operations for the first
Project Area hereunder and continuing until such time as the Final Payout has
occurred, within thirty days of the end of each calendar month BOG shall
provide Veritas with a report setting forth the amount of lease bonus costs and
drilling and completion costs which have been incurred by BOG within each
Project Area following the completion of 3-D Operations for such Project Area.
Section 3.7. Exclusion of Production Purchases. Anything to the
contrary contained in this Agreement notwithstanding, it is recognized and
agreed that in the event that subsequent to the date of this Agreement BOG or
any BOG Participant acquires an interest in oil and/or gas leasehold, mineral
or royalty interests that are already producing oil and/or gas, or that are
held by production which was in existence prior to the completion of 3-D
Operations covering such lands, BOG shall not be required to pay any
consideration to Veritas under the terms of Section 3.4 or 3.5 above as the
result of such acquisition with respect to the consideration paid for the
acquisition. However, in the event that following the completion of 3-D
Operations on the lands which are the subject of the acquisition, BOG or any
BOG Participant subsequently participates in the drilling of a well involving
the interests that were acquired in the acquisition, the terms and provisions
of Sections 3.4 or 3.5 (whichever is the applicable) shall apply with respect
to any drilling and completion costs incurred with respect to the drilling of
such well.
Section 3.8. Reimbursement for Permitting and Surveying Costs.
Veritas shall pay all BOG approved permitting costs and surface damage
settlement payments. Veritas shall submit to BOG an invoice on a monthly basis
for all permit and surface damage settlement payments incurred during the month
and BOG shall reimburse Veritas for one hundred percent of all of such costs
within ten days of BOG's receipt of the invoice.
Section 3.9. Compensation for BOG Failure to Shoot ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇. In the event that BOG fails, for any reason, to make sufficient Project
Areas ready for 3-D Operations in order to cause 3-D Operations to be conducted
by the Alliance Seismic Crew covering at least five hundred square miles within
the Alliance Area within eighteen months (as same may be extended as provided
in Section 2.2 above) of the effective date of this Agreement as provided in
Sections 2.2 and 2.5 above, BOG shall pay Veritas an amount (hereinafter
referred to as the "Pay Off Amount") equal to the sum obtained by subtracting
1) all amounts already paid by BOG to Veritas pursuant to the terms of Sections
3.1, 3.4 and 3.5 above, from 2) the sum of (A) all Seismic Acquisition Costs
(determined in accordance with the provisions of Exhibit B for each of the
applicable Project Areas) incurred in conducting the 3-D Operations during such
eighteen month period within BOG Project Areas, less and except any Seismic
Acquisition Costs related to the Excluded Lands, and (B) an amount equal to the
product obtained by multiplying (i) the number obtained by dividing (a) the
number of square miles which were covered by 3-D Operations that were conducted
hereunder during such eighteen month period by (b) five hundred, times (ii) one
million dollars. In such event, such payment shall be made to Veritas
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within thirty (30) days of the expiration of such eighteen month period and
shall be in full and complete settlement and satisfaction of all obligations
hereunder. Upon making the payment described in this Section 3.9, BOG shall
own all interest in the Program Data (as defined below) which has resulted from
the 3-D Operations conducted within the Alliance Area. The payment by BOG to
Veritas hereunder of the Pay Off Amount shall be the sole and exclusive remedy
of Veritas for the failure of BOG to make sufficient Project Areas ready for
3-D Operations hereunder, and Veritas hereby waives any other remedy, damages
and/or cause of action it may otherwise have had against BOG, whether in law or
in equity. The Parties recognize and agree that BOG's payment of the Pay Off
Amount will not extinguish BOG's responsibility to reimburse Veritas for all
actual permit and damage settlement payments incurred prior to the termination
of this Agreement as set forth in Section 3.8 above and BOG shall remain
responsible for such payments in accordance with the terms of Section 3.8
above.
ARTICLE IV
OWNERSHIP AND USE OF SEISMIC DATA
Section 4.1. Ownership of the Program Data. Except as provided
above in Section 3.9 and below with respect to seismic data that covers
Excluded Lands, Terrain Excluded Project Areas and Sand Tire Excluded Project
Areas, and subject to the other terms of this Article IV, Veritas shall own one
hundred percent of the ownership interest in the seismic data that results from
the 3-D Operations (hereinafter referred to as "Program Data") conducted within
Project Areas hereunder until such time as the First Payout occurs. Once the
First Payout occurs BOG and Veritas shall each own an undivided fifty percent
interest in all of the Program Data. Then, if Final Payout occurs prior to the
expiration of the Exclusivity Period, upon the occurrence of Final Payout BOG
shall own one hundred percent of the ownership interest in all of the Program
Data. Anything to the contrary contained in this Agreement notwithstanding, in
the event that BOG designates Excluded Lands and pays for the costs described
in Section 3.3 above, BOG shall own one hundred percent of the ownership
interest in the Program Data covering such Excluded Lands. The Parties also
recognize and agree that in no event shall Veritas own any interest in any
Program Data which BOG may obtain within Terrain Excluded Project Areas or Sand
Tire Excluded Project Areas. In addition, anything to the contrary contained
in this Agreement notwithstanding, in the event that BOG is required to make
the payment which is described in Section 3.9 above, BOG shall own one hundred
percent of the ownership interest in the Program Data which has resulted from
all of the 3-D Operations conducted hereunder.
Section 4.2. BOG Right to Contribute Toward Final Payout. In the
event that Final Payout has not been reached prior to the expiration of the
Exclusivity Period, BOG shall nonetheless have the option to acquire one
hundred percent of the ownership interest in the Program Data by paying Veritas
the amount which is necessary to cause Veritas to have received the Final
Payout Amount. To exercise such option, BOG must notify Veritas in writing
that it is exercising such option prior to the expiration of the Exclusivity
Period. In the event that BOG exercises the option to acquire all interest in
the Program Data as provided herein, BOG shall remit payment for the amount
necessary to cause Veritas to have received the Final Payout Amount within
thirty days of the expiration of the Exclusivity Period.
Section 4.3. Program Data to Remain Clear of Liens and
Encumbrances. Anything to the contrary contained herein notwithstanding,
Veritas shall not allow its interest in the Program Data to be burdened or
encumbered with any liens, mortgages or other burdens of any kind unless, until
and to the extent that Veritas has retained ownership interest in the Program
Data after the expiration of the Exclusivity Period. Anything to the contrary
contained herein notwithstanding, BOG shall not burden or encumber the Program
Data with any liens, mortgages or other burdens of any kind unless and until
BOG has received an ownership interest in the Program Data. The Parties agree
that in exercising their rights to have liens, mortgages or other burdens
attached to the Program Data as allowed in this Section 4.3, neither Party
shall have the right to burden or encumber the other Party's ownership interest
in the Program Data.
Section 4.4. Veritas' Rights to Sale, Exchange and/or Disclose the
Program Data. Anything to the contrary contained herein notwithstanding,
Veritas agrees that it will not sell, license, trade, exchange or in any way
disclose the Program Data (or any part thereof) or any
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information related to the Program Data, in any format or manner, or negotiate
or advertise for the potential sale, license, trade, exchange or other
disclosure of the Program Data (or any part thereof), prior to the expiration
of the Exclusivity Period. In addition, in the event that BOG ends up owning
one hundred percent of the ownership interest in all or part of the Program
Data as provided herein, Veritas shall not ever have the right to sell,
license, trade, exchange or otherwise disclose the Program Data or any
information related to the Program Data.
Section 4.5. Proceeds resulting from Sale or Licensing of Program
Data. In the event that after the expiration of the Exclusivity Period BOG and
Veritas each own an undivided fifty percent interest in the Program Data, if
either BOG or Veritas subsequently sells or licenses the Program Data for cash
consideration, the Parties shall each receive fifty percent of the cash
consideration received as the result of such sale or licensing; provided,
however, that the Party that licenses or sales the Program Data as aforesaid
shall have the right to deduct from the other Party's share of the cash
consideration fifty percent of the reasonable costs and expenses which have
been incurred in licensing or selling such Program Data. In the event that
either Party hereto trades, exchanges or licenses the Program Data in
conformance with the other terms that are contained in this Article IV, as long
as such exchange, trade or licensing does not involve the payment of cash
consideration, the trading, exchanging or licensing Party will not owe any
consideration of any kind to the other Party hereto as a result of such
transaction, even though such other Party may own part of the ownership
interest in the Program Data.
Section 4.6. BOG's and BOG Participants' Right to Utilize the
Program Data. Whether or not BOG owns any ownership interest in the Program
Data, at all times BOG and the BOG Participants shall have all rights to
utilize, copy, trade, exchange and disclose the Program Data in pursuit of
their oil and gas exploration and/or development operations within the
applicable Project Areas. In the event that Veritas owns an interest in the
Program Data following the expiration of the Exclusivity Period as provided
herein, BOG shall provide Veritas with a list of the names of the companies
with whom BOG has traded or exchanged all or parts of the Program Data as
allowed hereunder, together with a description of the Program Data which has
been traded or exchanged with each such company.
ARTICLE V.
VERITAS NON-COMPETE
Section 5.1. Veritas Agreement Not to Compete. Veritas hereby
agrees that for a period of six years from the date of this Agreement neither
Veritas, its successors or assigns or any of their affiliated companies
(hereinafter referred to as the "Veritas Group") shall compete with BOG or any
of the BOG Participants within one mile of the outside perimeter of any Project
Areas which are designated by BOG hereunder, by owning or acquiring any
leasehold, mineral or royalty interest within such area, either directly or
indirectly, through any agents, nominees, or representatives, unless purchased
or acquired from BOG or a BOG Participant. In the event that any member of the
Veritas Group breaches the non-compete provisions contained in this Section
5.1, in addition to any other remedies that may be available to BOG and each
BOG Participant at law or in equity, upon BOG's or any BOG Participant's
request, Veritas shall cause the interests that have been acquired in breach of
the provisions contained in this Section 5.1, to be assigned to BOG or such BOG
Participant without reimbursement for any costs incurred in obtaining such
interests. The Parties agree that for purposes of this Section 5.1 the
"outside perimeter of each Project Area" shall include all lands that are
located within the outside perimeter of the area that is depicted on the final
bin/fold map resulting from the 3-D Operations which is provided by the seismic
processor. Following the completion of final processing of the Program Data
resulting from a Project Area BOG shall prepare a legal description of the
acreage which is located within the outside perimeter depicted on the final
bin/fold map for such Project Area and the Parties agree that such legal
description shall constitute the outside perimeter of the Project Area for
purposes of this Section 5.1. BOG shall use reasonable efforts to cause the
legal description to depict the outside perimeter of the area that is depicted
on the final bin/fold map which is provided by the seismic processor; however,
the Parties recognize that in order to provide a legal description of such area
BOG shall not be required to have a survey conducted on the ground and may
approximate, in its sole and reasonable discretion, the location of the outside
perimeter depicted on the final bin/fold map for purposes of aiding BOG in the
preparation of the legal
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description. Anything to the contrary contained in this Section 5.1
notwithstanding, in the event that following the expiration of the Exclusivity
Period Veritas owns an interest in the Program Data as provided herein, the
terms and provisions of this Section 5.1 shall not be construed to impede
Veritas' ability to sell, license, trade or exchange the Program Data in
accordance with the provisions of Article IV above.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. Assignments. BOG shall have the right to assign or
convey all or any part of its rights, obligations or interests under this
Agreement provided that such assignment is made subject to all of the terms and
provisions of this Agreement; provided, however, that prior to the expiration
of the Exclusivity Period BOG shall not assign or convey all of its interests
under this Agreement. Veritas shall not have the right to assign or convey all
or any part of its rights, obligations or interests under this Agreement.
Section 6.2. Merger. This Agreement supersedes any and all prior
and existing agreements, whether oral or in writing, between any of the Parties
hereto with respect to the subject matter hereof and contains all of the
covenants and agreements between the Parties with respect to the subject matter
hereof.
Section 6.3. Notices. All notices and other communications
required or permitted under this Agreement shall be in writing, and shall be
delivered personally, or by telecopier or delivery service, to the addresses
set forth opposite the signatures of the Parties below, and shall be considered
delivered upon the date of receipt. Each Party may specify its proper address
or any other address by giving notice to other Parties, in the manner provided
in this section, at least ten days prior to the effective date of such change
of address.
Section 6.4. Right to Specific Performance. Each Party
acknowledges 1) that its obligations under this Agreement are unique and 2)
that the other Parties would be irreparably damaged and would not have an
adequate remedy at law for damages if such Party defaults in its obligations
hereunder. Each Party expressly waives the defense that a remedy in damages
will be adequate. If any Party should default in its obligations hereunder,
each non-defaulting Party, in addition to any other available rights or
remedies, may ▇▇▇ in equity for specific performance or injunctive relief.
Section 6.5. Governing Law. THIS AGREEMENT AND ALL MATTERS
PERTAINING THERETO, INCLUDING, BUT NOT LIMITED TO, MATTERS OF PERFORMANCE,
NON-PERFORMANCE, BREACH, REMEDIES, PROCEDURES, RIGHTS, DUTIES, AND
INTERPRETATIONS OR CONSTRUCTION, SHALL, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW, BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS. THE PARTIES
AGREE THAT THE EXCLUSIVE VENUE FOR ANY DISPUTES OR CLAIMS ARISING HEREUNDER OR
IN ANY WAY RELATED HERETO SHALL BE IN DALLAS COUNTY, TEXAS.
Section 6.6. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be binding upon the signing Party or
Parties thereto as fully as if all Parties had executed one instrument, and all
of such counterparts shall constitute one and the same instrument. If
counterparts of this Agreement are executed, the signatures of the Parties, as
affixed hereto, may be combined in and treated and given effect for all
purposes as a single instrument.
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IN WITNESS WHEREOF this Agreement is executed by the Parties on the
dates set forth opposite their respective signatures below but is effective for
all purposes as of the date first set forth above.
Address: VERITAS GEOPHYSICAL, LTD.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Dated: 4/5/96 By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------- --------------------------------
(name printed) ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------
Its: Operation Manager
------------------------------
Address: ▇▇▇▇▇▇▇ OIL & GAS, L.P.,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ by ▇▇▇▇▇▇▇ Exploration Company,
Suite 1616 its Managing General Partner
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Dated: 4/5/96
--------------------- By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇, President/CEO
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