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EXHIBIT 10.19
FIRST AMENDMENT TO EXPLORATION AGREEMENT
This First Amendment to Exploration Agreement ("Amendment") is made
and entered into this the third day of November 1999, between THE HOUSTON
EXPLORATION COMPANY, a Delaware corporation, of 0000 Xxxxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxx 00000 ("THEC") and KEYSPAN EXPLORATION AND PRODUCTION,
L.L.C., a Delaware limited liability company, of Xxx Xxxxx Xxxx Xxxxxx, 00xx
Xxxxx, Xxxxxxxx, Xxx Xxxx 00000 ("KE&P").
W I T N E S S E T H:
A. THEC and KE&P have entered into that certain Exploration
Agreement dated the 15th day of March 1999 between The Houston Exploration
Company and KeySpan Exploration and Production, L.L.C. ("Exploration
Agreement"); and
B. THEC and KE&P desire to amend the Exploration Agreement as
set forth in this Amendment.
NOW, THEREFORE, for valuable consideration, THEC and KE&P agree as
follows:
I.
Section 1.15 of the Exploration Agreement is amended so that the
existing language becomes Section 1.15(a) and the following is inserted as
Section 1.15(b):
1.15(b) KE&P's Quarterly Commitment. The sum of (a) 25 million dollars
per calendar quarter during the Primary Term plus (b) that portion of prior
quarters' Quarterly Commitments that have not been expended or committed for
expenditure under this Agreement which sum shall be used to pay all costs
attributable to to KE&P under this Agreement, including G and A Costs, during
the relevant quarter.
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II.
Section 1.28 of the Agreement is deleted and the following new Section
1.28 is substituted therefor:
1.28 Program Year. Each calendar year (or portion of a calendar year
if the Primary Term ends at the end of any calendar quarter during such year
other than December 31 of such year) during the Primary Term of this Agreement.
A cost under this Agreement for purposes of Payout shall be attributable to the
Program Year in which the first Exploratory Well is spudded on the Lease to
which such cost relates. If an Exploratory Well is not spudded on a Lease
during the Primary Term of this Agreement, the costs relating to such Lease
shall be used in the calculation of Payout for the Program Year in which they
were incurred. Net Proceeds shall be attributable to the Program Year in which
the first Exploratory Well is spudded on the Lease to which such proceeds
relate.
III.
Section 2.1 of the Agreement is deleted and the following new Section
2.1 is substituted therefor:
2.1 Primary Term. This Agreement shall be for a primary term
(the "Primary Term") commencing on January 1, 1999 ("Commencement Date") and
ending on the earliest to occur of the following:
(a) December 31, 2001;
(b) the end of any calendar quarter if either party notifies
the other party in writing on or before thirty (30) days before the end of such
quarter of its election to terminate the Primary Term at the end of such
quarter; or
(c) the mutual agreement of the parties.
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IV.
Section 5.1 of the Agreement is deleted and the following new Section
5.1 is substituted therefor:
5.1 Allocation of IDCs. Subject to Section 5.4, during each year of
the Primary Term, KE&P shall pay one hundred percent (100%) of all Intangible
Costs attributable to THEC's Original Working Interests in the Leases until
KE&P has paid Intangible Costs for such year totaling 20.725 million dollars
and, thereafter during such year KE&P shall pay fifty one and seventy five one
hundredths percent (51.75%) of all Intangible Costs attributable to THEC's
Original Working Interests in the Leases and THEC shall pay forty eight and
twenty five one hundredths percent (48.25%) of all Intangible Costs
attributable to THEC's Original Working Interest in the Leases. If during any
of such years, one hundred percent (100%) of the Intangible Costs attributable
to THEC's Original Working Interests in the Leases are less than 20.725 million
dollars, the shortage shall be added to the following year and KE&P shall pay
during such following year one hundred percent (100%) of all Intangible Costs
attributable to THEC's Original Working Interests in the Leases until KE&P has
paid Intangible Costs for such year totaling 20.725 million dollars plus the
shortage from the preceding year(s); provided that, during the first calendar
quarter of the 2000 Program Year, KE&P's obligation to pay one hundred percent
(100%) of such Intangible Costs shall be limited to 5.18 million dollars and,
further provided, if the Primary Term ends on March 31, 2000 KE&P's obligation
to pay one hundred percent (100%) of Intangible Costs shall terminate. Subject
to the preceding sentence, during the Secondary Term, KE&P shall pay all
Intangible Costs attributable to THEC's Original Working Interest in the Leases
until such shortage from the Primary Term, if any, is
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expended and thereafter shall pay fifty one and seventy five one hundredths
percent (51.75%) of all Intangible Costs attributable to THEC's Original
Working Interest in the Leases and THEC shall pay forty eight and twenty five
one hundredths percent (48.25%) of all Intangible Costs attributable to THEC's
Original Working Interest in the Leases; provided that, KE&P shall have no
obligation to pay Intangible Costs to the extent such costs relate to a Lease
reassigned to THEC under Section 6.5 and such costs accrue after such
reassignment.
V.
Section 5.3 of the Agreement is deleted and the following new Section
5.3 is substituted therefor:
5.3 Allocation of Remaining Costs. Subject to Section 5.4 and 5.8,
during the Primary Term and the Secondary Term, KE&P shall pay forty five
percent (45%) of all Drilling Costs, Development Costs, Seismic Costs,
Leasehold Costs, Abandonment Costs and Operating Costs attributable to THEC's
Original Working Interest in the Leases and THEC shall pay fifty five percent
(55%) of all Drilling Costs, Development Costs, Seismic Costs, Leasehold Costs,
Abandonment Costs and Operating Costs attributable to THEC's Original Working
Interest in the Leases; provided that, KE&P shall have no obligation to pay
any of such costs to the extent such costs relate to a Lease reassigned to THEC
under Section 6.5 and such costs accrue after such reassignment.
VI.
Section 5.4 of the Agreement is amended so that the existing language
becomes Section 5.4A and the following is inserted as 5.4B:
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5.4B Primary Term Commitment. Notwithstanding the foregoing Section
5.4A, for the period commencing January 1, 2000, this Section 5.4B shall apply
prospectively in lieu of Section 5.4A. KE&P's obligation to pay the costs
specified in Sections 5.1 to 5.3 incurred during any quarter of the Primary
Term is limited to KE&P's Quarterly Commitment subject to the following:
(a) If THEC determines that the allocation to KE&P of its share of the
Drilling Costs and Intangible Costs of the first Exploratory Well on a Lease
will result in KE&P's Quarterly Commitment being exceeded, THEC shall notify
KE&P in writing of such fact prior to commencing such Well. Within fifteen (15)
days (or such lesser period specified in the notice if the proposed spud date
of such Well is less than thirty (30) days from the date of such notice) after
receiving such notice, KE&P shall notify THEC in writing whether or not it
approves such Well. If KE&P approves such Well, KE&P's share of the Drilling
Costs and Intangible Costs of such Well shall be deemed "Excess
Costs" and, to the extent the Excess Costs result in KE&P's Quarterly
Commitment being exceeded, such commitment shall be increased accordingly for
such quarter. If KE&P does not approve such Well or fails to notify THEC of its
decision, KE&P shall forfeit its interests in such Well and the Lease on which
it is located.
(b) Except as provided in Section 5.4(a), if KE&P is not obligated to
pay a portion of its share of the costs specified in Sections 5.1 to 5.3 during
any quarter of the Primary Term, because its share exceeds in whole or in part
KE&P's Quarterly Commitment, and THEC pays such costs, KE&P shall reimburse
THEC for such costs out of KE&P's Quarterly Commitment for the following
quarter on or before thirty days after the end of the
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quarter in which THEC paid such costs or, if the Primary Term has ended, THEC
shall receive KE&P's share of Net Proceeds from all Xxxxx drilled under this
Agreement until such time as THEC has received a sum of money (exclusive of all
Burdens, Marketing Costs and Taxes) out of such share equal to KE&P's share of
costs which were paid by THEC, provided, however, that the amount to be paid by
KE&P as contemplated above shall not exceed twenty percent (20%) of KE&P's
Quarterly Commitment without its written consent.
(c) KE&P's Quarterly Commitment shall first be applied to G and A
Costs, Seismic Costs, Leasehold Costs and Operating Costs and the remainder to
the Intangible Costs, Drilling Costs, Development Costs and Abandonment Costs.
(d) All Drilling Costs, Intangible Costs and Development Costs for
purposes of applying the limitations of KE&P's Quarterly Commitment shall, at
the election of THEC, be deemed to have been incurred entirely on the date THEC
submits to KE&P the information set forth in Section 7.3 relating to the
applicable operation or the date of the AFE relating to the expenditure of such
costs, rather than on the dates such costs are actually incurred.
(e) Such portion of KE&P's Yearly Commitment for the year 1999 not
expended or committed for expenditure by December 31, 1999 shall be available
for use during the Primary Term only for Development Costs and Intangible Costs
related to Development Operations on Leases on which the first Exploratory Well
was spudded during the 1999 Program Year.
(f) Such portion of KE&P's Quarterly Commitment, for any calendar
quarter, not
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expended or committed for expenditure by the last day of such quarter shall be
available for use in subsequent quarters during the Primary Term only for
Development Costs and Intangible Costs related to Development Operations on
Leases on which the first Exploratory Well was spudded during the quarter to
which the unused portion of the quarterly Commitment relates, or any previous
quarter, including the 1999 Program Year.
VII.
Section 10.4 of the Exploration Agreement is amended so that the
existing language becomes Section 10.4(a) and the following is inserted as
Section 10.4(b):
10.4(b) Budgets. Notwithstanding the foregoing Section 10.4(a), for
the period commencing January 1, 2000, this Section 10.4(b) shall apply
prospectively in lieu of Section 10.4(a). THEC shall submit quarterly to the
Management Committee THEC's Program Budget and a quarterly budget setting forth
the anticipated financial
requirements of KE&P under this Agreement. Such budgets for the first quarter
of the year 2000 shall be submitted on or before January 1, 2000 and the
budgets for the following quarters during the terms on or before the first day
of such quarters.
Except as herein amended, the parties do hereby ratify and confirm the
Exploration Agreement.
Executed on the day set forth above, but to be effective as of
January 1, 2000.
THE HOUSTON EXPLORATION COMPANY
By: /s/ Xxxxx Xxxxxxxxxxxx
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Xxxxx Xxxxxxxxxxxx, Vice President
KEYSPAN EXPLORATION AND
PRODUCTION, L.L.C.
By: /s/ Zain Mirza
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Zain Mirza, Vice President
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