EXHIBIT 10.1
MASTER OPERATING AGREEMENT
This MASTER OPERATING AGREEMENT (hereinafter the "Contract") is made and
entered into effective this 1st day of May,2008
BETWEEN:
Mainland Resources, Inc., a Nevada Corporation with its business offices located
at 0000 X. Xxxxxxxxx Xxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000
AND
OPS Group Limited, a Texas Corporation with its business offices at 0000
Xxxxxxxx Xxxx Xxxxx, Xxxxxxx, XX 00000
WHEREAS:
A. MRI is engaged in the business of exploring for, investing in, and
producing oil, gas and other hydrocarbons, including related operations and
work.
B. OPS is engaged in the business of drilling oil and gas xxxxx, operating
related facilities and carrying out production-related duties in connection with
such facilities.
C. OPS is, has, or routinely acquires, as is necessary; adequate equipment
and fully trained, competent personnel for the purpose of efficiently operating
its business and all xxxxx or attempted xxxxx on which it works.
D. MRI is in the position to undertake various activities involving the
finance, exploration, development, promotion, operation, drilling, overseeing or
undertaking production of and for, existing and new, oil and gas xxxxx (herein
generally described as "Xxxxx") and hydrocarbon production facilities (herein
generally described as "Facilities") and (where Xxxxx and Facilities are
referred to collectively they will hereafter be generally described as "Oil and
Gas Projects"), for itself and on behalf of other entities.
E. MRI desires to designate a third party to carry out certain of the
activities described under recital D, including the drilling and production
duties on various Oil and Gas Projects which may include either Xxxxx or
Facilities or both, as the case may be, in relation to Oil and Gas Projects, for
which MRI has obtained the right and/or the obligation to conduct general
operations, including drilling and production duties (hereinafter generally
described as "Operations").
F. OPS has offered to undertake full and direct responsibility for
Operations in relation to MRI's Oil and Gas Projects, when designated or
requested by MRI to do so in connection with MRI's projects as to which MRI has
such rights.
G. MRI and OPS (in combination the "Parties") desire to enter into this
single, master agreement, (hereinafter called the "Contract") to govern their
respective ongoing relationship in connection with all circumstances occurring
from this date forward whereby MRI designates or requests OPS to operate, drill
or otherwise carry out any operating or production related duties, obligations
or tasks on Xxxxx or related Facilities under or pursuant to any related
operating agreement (where any Well, Facility or Oil and Gas Project is covered
by an operating agreement, which MRI has entered into and is thereby binding on
OPS as MRI's Operator, it will be delivered to OPS and attached hereto under
Schedule "A," by the Parties) or if an operating agreement is required by the
laws of any state in which any work or services are provided (the "Work") under
this Contract such operating agreement will be attached hereto under Schedule
"A".
H. The Parties desire and OPS agrees, that OPS shall become and be deemed
to the extent shown herein for all purposes the operator of record (herein
described as "MRI's Operator") for all Xxxxx, Facilities and Oil and Gas
Projects generally that the Parties expressly designate and agree in writing
that OPS undertake the Work in regard to under this Agreement.
NOW THEREFORE IN CONSIDERATION of the mutual promises, conditions and
agreements herein contained, the sufficiency of which is hereby acknowledged,
and the specifications and special provisions set forth in any exhibits attached
and hereby incorporated, MRI and OPS mutually agree as follows:
1.0 NATURE AND TERM OF THIS CONTRACT
1.1 This Contract shall control and govern all Work, and related issues;
assumed, undertaken or performed by OPS in connection with any
designation or request by MRI regarding its Oil and Gas Projects. All
such designations or requests will not be binding on OPS until made in
writing and formally accepted in writing by OPS as provided herein.
1.2 The "Work" and the particular obligations of MRI and OPS, as
contemplated and governed by this Contract, shall be further defined
and divided as shown in Schedule "C" hereto. No waiver of or deviation
from any terms, provisions or conditions stated herein shall be
effective unless in writing and signed by an authorized officer of
both MRI and OPS.
1.3 The geographical area to which this Contract applies includes the
state of Texas unless expressly modified by the Parties in writing.
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1.4 The initial term of this Contract shall be for one (1) year beginning
on May 1, 2008 (the "Effective Date"), unless sooner terminated in
accordance with the provisions hereof.
1.5 This Contract shall automatically renew for consecutive one (1) year
terms after the expiration of the initial term, unless and until the
Contract is terminated in accordance with the provisions of this
agreement.
1.6 Either Party may prevent the renewal of this Contract or any
successive term by giving notice of termination to the other Party not
less than sixty (60) days preceding the end of the pending term. After
such notice has been properly given, this Contract will terminate at
the end of such pending term. After termination of the Contract, all
of the terms and conditions stated in the Contract and any attachments
or amendments thereto will remain in effect for and over any remaining
Work or Operations initiated under this Contract, for the full
duration of such Work or Operations.
1.7 In addition to the rights and obligations expressed in this Contract,
OPS may also be bound by a further agreement in the form of a separate
operating agreement (the "Operating Agreement") which will be appended
to this Contract under Schedule "A", the form of which will be
agreeable to by Parties. The Operating Agreement will be executed by
the Parties and contain the specific terms and conditions applicable
to any particular Well, Facility or Oil and Gas Project where the
Parties agree it is necessary or advisable to provide more specific
terms and conditions to guide the Work or Operations of such Well,
Facility or Oil and Gas Project then are generally provided for
herein.
1.7.1 The Contract and the Operating Agreement whether actually
attached hereto or deemed attached hereto as Schedule "A", will
be read together as one general agreement executed by the Parties
together at the same time on the Effective Date of this Contract.
1.7.2 Provided however, where there is a conflict between the
language, provisions or intent of the Contract and the Operating
Agreement in regard to a particular Well, Facility or Oil and Gas
Project to which that Operating Agreement is applicable and the
conflict or inconsistency cannot be reasonably resolved by giving
such large and liberal interpretation to the overall intention
and purposes of the Parties in entering into this Contract; then
the specific language of the Operating Agreement entered into
after this Contract is applicable to only to the Parties
relations, activities, duties and obligations in relation to that
Well, Facility or Oil and Gas Project to which the Operating
Agreement in dispute applies and its language will take
precedence over the general language of this Contract, but
limited strictly in relation to resolving such conflict or
inconsistency under dispute as it applies to that specific Well,
Facility or Oil and Gas Project.
1.8 OPS may also be bound by a further agreement in the form of a separate
sub-operating agreement (the "Sub-Operating Agreement" or "SOA") which
will be appended to this Contract under Schedule "B", the form of
which will be agreeable to the Parties. The SOA will be executed by
and between OPS and all other relevant interest holders in any Well,
Facility or Oil and Gas Project or prospect of such and for which OPS
provides any Operations, including materials or services of any kind
in connection with the subject matter of this Contract pursuant to any
written designation or request for Work made by MRI to OPS hereunder.
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1.9 The execution of this Contract by MRI and OPS does not obligate MRI to
offer any Work or services to OPS. The Parties will only be bound to
the terms and conditions of this Contract in the event that MRI
provides a written designation or request for Work from or by OPS
under the terms of this Contract or any addendums, modifications or
extensions hereto. Each instance of Work designated or requested by
MRI hereunder may be subject to an Operating Agreement, SOA and any
other contracts or agreements agreed to by the Parties hereto
(hereinafter in combination generally described as the "Collateral
Agreements"), as may be necessary pursuant to particular circumstances
of the Work at issue.
1.10 The terms and conditions of this Contract and of any Operating
Agreement, SOA, related agreement or other Collateral Agreement in
connection with such Work will supplement the terms of this Contract.
It is intended that the terms of the Contract and those of any
Collateral Agreement will be read together to give affect to all the
terms of each agreement. Provided however, the Parties agree that the
general principle governing interpretation in the presence of an
irreconcilable conflict or inconsistency will be the same as provided
in 1.7 above, which is the specific and the later take precedence over
the former and the general language clauses in regard to the same
specific subject matter under disputes between the Parties to this
Contract. This principle of interpretation is agreed by the Parties to
apply to any Schedule or Exhibit attached to this Master Contract.
1.11 MRI may, at any time in its sole discretion; terminate or otherwise
cancel any Work designated or requested hereunder by providing at
least ninety (90) days written notice to OPS of such termination. On
notice of such termination, OPS shall cooperate with MRI or its
designee to ensure an orderly and expeditious transition of the Work
to MRI or to any other designee or assignee thereof. In order to
recoup any costs incurred during or related to such transition and not
otherwise recoverable under this Contract, the Operating Agreement,
the SOA or other Collateral Agreement, OPS will be entitled to recover
such costs by way of making an additional charge of one month drilling
overhead for each property or Well which has a rig operation ongoing
at the time of termination (the "Transition Charge"). The Transition
Charge will be restricted to the actual termination of the Contract by
MRI in toto, and will not apply to a termination of any Collateral
Agreement where the Contract remains in force.
1.12 OPS may, at any time in its sole discretion, terminate or otherwise
cancel any Work designated or requested hereunder in compliance with
the procedures, terms and deadlines stated in the Contract or any
Collateral Agreement hereto. OPS will provide MRI with at least ninety
(90) days written notice of such termination. OPS shall cooperate with
MRI or its designee to ensure an orderly and expeditious transition of
the Work to MRI or to any designee or assignee thereof. A failure of
OPS to provide MRI with at least ninety (90) days written notice of
such termination will preclude OPS from entitlement of the Transition
Fee as described under 1.11.
2.0 WORK, SERVICES, LABOR, EQUIPMENT, MATERIALS, AND SUPPLIES
2.1 Each time MRI designates or requests Work from or by OPS by written
notice, OPS must accept or reject such designation or request by
written response within ten (10) days from the date they are deemed to
have first received such written notice that such designation or
request has been made. All rejections by OPS must be made in writing.
Acceptances by OPS may be made verbally followed by written acceptance
before the earlier of: (i) the ten (10) day notice requirement; or,
(ii) by commencement of the requested work. Each time OPS accepts any
Work, it shall commence such Work in a timely and expeditious manner,
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provided that OPS shall not be required by way of this Contract to
undertake any Work until such Work is 100% funded by way of advance
payments as allowed and contemplated by the applicable Operating
Agreement, SOA or any other Collateral Agreement. OPS shall make a
diligent effort to obtain such advanced funding for the Work, but
shall have no additional liability to MRI under this Contract if such
funding is not obtained as to any particular Work or Operation
2.2 MRI shall have the right, but not the obligation, to fund any Work or
Operation for which OPS has not been able to obtain advance funds from
any working interest owners or other obligated third parties, with any
such advanced dollars to be refunded to MRI from any later collection
of such funds from the persons primarily obligated therefore. To the
extent that MRI advances any funds owed by other persons, MRI shall be
immediately subrogated to any rights that OPS has or obtains to demand
or collect such amounts. OPS will provide MRI and all obligated third
parties with written notice acknowledging MRI's surrogated right to
demand and receive the direct assignment of all such advances of funds
from the obligated third parties.
2.3 Once OPS has accepted or commenced providing materials and services in
regard to any Work or Operation hereunder, OPS may resign from or
otherwise terminate such Work, operations, or services in connection
with a particular Well, Facility or Oil and Gas Project upon providing
ninety (90) days notice thereof to MRI. However, no such resignation
or termination shall occur at any point in time during which a Well is
unstable or otherwise out of control, except by written consent of
both Parties.
2.4 If OPS rejects or resigns from any Work designated to or requested by
MRI pursuant to the terms and conditions of this Contract for any
reason other than the fact that the particular instance of Work at
issue; (i) involves services or operations that are outside the
geographic areas described herein; or, (ii) are outside the scope of
OPS' abilities and expertise, such that OPS has never before
successfully undertaken such services; then, MRI shall have the right,
but not the obligation, to terminate this Contract or any Collateral
Agreement which is affected by OPS's rejection or resignation, in
MRI's sole discretion. Any resignation or rejection of Work is hereby
deemed to be termination or cancellation of this Contract by OPS of
this Contract without written notice, and will not be subject to the
payment of a Transfer Charge by MRI where MRI accepts the rejection or
resignation by OPS as immediately terminating the Contract.
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2.5 When MRI designates or requests Work from or by OPS and OPS either
does not have a right to reject such Work or OPS otherwise accepts
such Work, OPS will commence furnishing such materials and services as
required to undertake the Work at the agreed upon time, and continue
such operations diligently and without delay in conformity with the
specifications and requirements contained herein and in all Collateral
Agreements.
2.6 All materials or services rendered or performed by OPS for any Work or
Operation pursuant to this Contract and all Collateral Agreements will
be carried out by OPS as a prudent operator. As a prudent operator,
OPS shall perform its duties and obligations with due diligence, in a
good faith and in a workmanlike manner, using skilled, competent and
experienced workmen and supervisors, all in accordance with good
oilfield servicing practices. Accordingly, in the performance of any
Work and in overseeing any Operation hereunder, OPS will furnish at
its own expense and cost, or as provided under any relevant Operating
Agreement, any and all necessary labor, machinery, equipment, tools,
transportation and whatever else is necessary in the performance and
completion of the Work as contemplated in this Contract and any
Collateral Agreement. All materials, equipment, supplies or
manufactured articles furnished by OPS in the performance of the Work
will be selected and used in a matter consistent with good oilfield
practice, for their intended purposes and each will be free from
defects. Any portion of the materials or services forming Work which
is found defective, deficient or unsuitable ill be removed, replaced
or corrected by OPS without additional cost or risk to MRI. Upon
completion of the Work, OPS will remove its materials and equipment
from the Work location; will clean up the premises and leave them in a
good condition and workmanlike manner.
2.7 MRI will not furnish any labor, machinery, equipment, tools,
transportation or other items in connection with any Work or Operation
unless expressly provided for herein or in a separate, written
Collateral Agreement hereto.
3. PAYMENT
3.1 OPS will be paid for any and all Work at the rate and terms stated for
the payment of the Operator contained in the appropriate Operating
Agreement or as otherwise agreed upon by the Parties.
3.2 Any overhead fees collected by OPS from the Working Interest Group on
a Well, Facility or Oil and Gas Project in excess of overhead fees as
defined in Exhibit ___ entitled "SERVICES INCLUDED IN OVERHEAD FEE
SCHEDULE" shall accrue to and be credited to MRI.
4. REPORTS TO BE FURNISHED BY CONTRACTOR
4.1 OPS shall maintain a true and correct set of records pertaining to the
Work and provide written reports as required by the Operating
Agreement or any other Collateral Agreement. MRI may, upon request,
audit any and all records of OPS relating to the Work.
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5. INDEPENDENT CONTRACTOR RELATIONSHIP
5.1 In the performance of any Work by OPS pursuant to this Contract or any
Collateral Agreement, OPS shall be deemed to be the operator of record
and an independent contractor, with the authority and right to direct
and control all of the details of the Work. It is the understanding
and intention of the Parties hereto that no relationship of master and
servant, principal and agent or employer and employee shall exist
between MRI and OPS, its employees, agents, or representatives. As
such, OPS is solely responsible for the Work and all related risks,
costs and liabilities. MRI shall retain direct responsibility only for
those items shown, described and allotted to MRI in Exhibit "C'
attached hereto. MRI shall retain or incur no other duties in
connection with such Operating Agreements.
5.2 In the performance of Work and services hereunder, OPS agrees that it
will undertake those obligations, duties and responsibilities shown,
described and allotted on Exhibit "C' attached hereto, and that OPS:
5.2.1 acts as the employer of any employee of OPS by paying wages,
directing activities, performing other similar functions
characteristic of an employer-employee relationship;
5.2.2 is free to determine the manner in which any materials are
rendered and services are performed in regard to any Work or
Operation, including the hours of labor of or method of payment
to any employee or the tasks assigned to any subcontractors,
material suppliers, service companies or other contractors;
5.2.3 is required to furnish or have its own employees, if any,
furnish necessary tools, supplies, or materials to perform the
Work and Operations;
5.2.4 possesses the skills, resources and contactors required for any
specific Work or Operation;
5.2.5 agrees to file all required tax reports and pay all income taxes
due on payments to OPS hereunder;
5.2.6 where necessary, will contact and retain subcontractors,
material suppliers, service companies, contract laborers or other
contract providers required for the Work and verify that such
persons are duly qualified and maintain adequate insurance for
all Work, and the supply of services or materials by OPS in
connection with any Work or Operation under this Contract or any
Collateral Agreement hereto.
5.2.7 agrees that neither OPS nor OPS' employees, agents or
subcontractors will be covered by MRI's Workers' Compensation.
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6. INSURANCE
6.1 As a separate and independent obligation, OPS shall at its expense or
as provided in any relevant Operating Agreement; maintain, with an
insurance company or companies authorized to do business in the state
where the Work is to be undertaken or through a self-insurance
program, provide insurance coverage of the kind and in the minimum
amounts described in the particular Operating Agreement related to any
designated or requested Work, and such insurance coverage will at
least meet the requirements defined and described in Exhibit "D"
hereto.
6.2 All required insurance shall be maintained in full force and effect
during the term of this Contract.
6.3 Special Insurance Provisions
The indemnity obligations set forth in Section 7 will be effective
only to the maximum extent permitted by the applicable law or to the
amount of any insurance in place and any chargebacks. In particular,
but without limiting the generality of the foregoing, if any federal
or state statute dictates or it is judicially determined that the
monetary limits of insurance required or the indemnities voluntarily
assumed hereunder exceed the maximum limits permitted under applicable
law, the Parties hereby agree that said indemnities or insurance
requirement shall automatically be amended to conform to the maximum
extent permitted by law.
7. RESPONSIBILITIES, INDEMNITIES, RELEASES OF LIABILITY AND ALLOCATION OF RISK
7.1 Unless otherwise stated in any applicable Operating Agreement or
Collateral Agreement signed by the Parties, OPS assumes full
responsibility for all materials and services provided by it in regard
to any Work or Operation, including all duties, obligations and
commitments undertaken or assumed pursuant to this Master Contract and
any Collateral Agreement made pursuant hereto, as the MRI's Operator
under this Master Contract and any Collateral Agreement. Without
limiting the generality of the forgoing scope of responsibility and
liability of OPS hereunder; in particular, OPS assumes full
responsibility and liability for all materials and services provided
by it or its employees, sub-contractors and agents which are acting
under OPS's authority and Control as MRI's Operator hereunder in
regard to any Work or Operation, including all duties, obligations and
commitments undertaken or assumed by OPS as may also be described and
allocated to OPS generally under this Master Contract and any
Collateral Contract or which is specifically designated to OPS within
Exhibit "C" hereto.
7.2 MRI will retain direct responsibility and liability for the
performance and payment of those obligations, duties and tasks shown,
described and allocated to MRI as being within the exclusive
responsibility and control of MRI under Exhibit "C' hereto. MRI will
not be obligated for any other duties, obligations and commitments
whether as an Owner or Operator in connection with this Master
Contract or, except where stated by express written agreement of the
Parties. Provided however, MRI will retain all duties, obligations and
rights as working interest owner under any relevant Sub-Operating
Agreement or other Collateral Agreements.
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7.3 OPS, as the indemnitor, hereby fully releases MRI, as the indemnitee,
from any responsibility or liability for, and will protect, defend,
save harmless and indemnify MRI, its subcontractors, consultants,
subsidiaries, and affiliates and all officers, directors, employees,
and owners from and against all claims, demands, actions and causes of
action of every kind and nature, without limit and without regard to
the cause or causes thereof, or the negligence of any third party or
third parties, arising from those obligations, duties and tasks
associated with all materials rendered and services provided in regard
to a Work or Operation under the responsibility or control of OPS as
MRI's Operator pursuant to this Master Contract or any Collateral
Agreement. Without in anyway limiting the generality of the forgoing
OPS's indemnity of MRI hereunder extends to and includes all claims,
demands, actions and causes of action of every kind and nature,
without limit and without regard to the cause or causes thereof, or
the negligence of any third party or third parties, arising in
connection with any obligations, duties and tasks associated with all
materials rendered and services provided in regard to a Work or
Operation which is shown, described and allocated to OPS as provided
in Exhibit "C" hereto. Such indemnity by OPS of MRI also extends to
include without limit and without regard to the cause or causes
thereof or the negligence of any third party or third parties, all
claims, demands, and causes of actions arising in favor of any of
OPS's employees (including leased employees) or OPS' sub-contractors
or their employees, or OPS' invitees, and whether on account of bodily
injury, death, or damage to property related to any Work or Operation,
unless agreed otherwise the express written agreement of the Parties.
7.4 MRI, as the indemnitor, hereby fully releases OPS, as the indemnitee,
from any responsibility or liability for, and will protect, defend,
save harmless and indemnify OPS, its subcontractors, consultants,
subsidiaries, and affiliates and all officers, directors, employees,
and as working interest owners from and against all claims, demands,
actions and causes of action of every kind and nature, without limit
and without regard to the cause or causes thereof, or the negligence
of any third party or third parties, arising from those obligations,
duties and tasks shown, described and allocated solely and exclusively
to MRI under Exhibit "C" hereto. Such indemnity by MRI of OPS also
extends to include all claims, demands, actions and causes of action
of every kind and nature arising in favor of any of MRI's employees
(including leased employees) or MRI's sub-contractors or their
employees, or MRI's invitees, and whether on account of bodily injury,
death, or damage to subcontractors, consultants, subsidiaries, and
affiliates and all officers, directors, employees, and working
interest owner s of property related to any Work or Operation ,
related to those obligations, duties and tasks shown, described and
allocated solely and exclusively to MRI under Exhibit "C" hereto.
7.5 OPS shall assume full and exclusive responsibility and liability at
all times for damage, loss or destruction to, by, or as a result of
OPS's equipment, machinery or property related to or occurring in
connection with any Work or Operation hereunder, and OPS hereby agrees
to release, save harmless and indemnify MRI of and from any
responsibility and liability for all such damage, loss or destruction
sustained by the Parties under this Master Contract or any Collateral
Agreement, except as otherwise expressly stated in writing to the
contrary in any applicable Operating Agreement or Collateral Agreement
duly executed by the Parties.
7.6 Notwithstanding anything to the contrary contained in this Master
Contract, it is understood and agreed by and between OPS and MRI that
unless otherwise provided herein or in any applicable Operating
Agreement or other Collateral Agreement signed by the Parties, OPS
shall assume full and complete liability and responsibility for any
and all pollution or contamination arising out of any Work or
Operation related hereto, including the installation, construction,
assembly, maintenance, control, disassembly and removal of all
equipment, materials, structures, waste materials, debris, refuse,
contaminants, production residuals and byproducts of every kind and
nature associated with any Work or Operation on any Well, Facility or
Oil and Gas Project pursuant to this Master Contract, any Operating
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Agreement or other Collateral Agreement hereunder. OPS as indemnitor
will protect, defend, save harmless and indemnify MRI, as indemnitee,
from and against all claims, demands, actions and causes of action of
every kind and nature arising from any form of pollution or
contamination (including Naturally Occurring Radioactive Material)
associated with OPS undertaking all Work and Operations hereunder,
including any and all machinery, equipment or materials provided and
services rendered in regard to any Work or Operation undertaken by OPS
pursuant to or in connection with this Master Contract or Collateral
Agreement. The obligations hereinbefore describe whereby OPS agrees to
protect, defend, save harmless and indemnify MRI, shall not be limited
to the amount of any insurance in place and any insurance funds
available after chargebacks.
7.7 All liability and indemnity provisions of this Master Contract or any
Collateral Agreement shall be without limit and shall include
reasonable attorneys' fees and costs incurred by the Party receiving
indemnification. The indemnitor shall have the right to provide a
defense to the indemnitee at the indemnitor's own expense, and through
counsel of indemnitor's own choosing, for any claim made or suit
brought to which these indemnity provisions apply. The indemnitor may
investigate and settle any claim or suit up to and including the
amount of the indemnitor's obligation pursuant to the indemnity
provisions contained in this Master Contract or any Collateral
Agreement made pursuant hereto. Provided however, the indemnitor may
not settle any claim without the indemnitee's written consent unless
the indemnitor can reasonably establish that such settlement
constitutes a full, absolute and final discharge of all liability of
the indemnitee on the terms and conditions of the settlement proposed
to be entered into by the indemnitor for the settlement of such cause,
action or claim. In addition, reasonable attorney's fees and costs
incurred shall be recoverable by the prevailing Party in any action to
enforce these indemnification provisions. However, it is understood
and agreed that any punitive damage award shall not be subject to the
indemnity provisions under this Article 7.. Any punitive damage award
shall be the sole and exclusive obligation of the Party against whom
the award is granted and issued.
7.8 The indemnities, releases and assumptions of liability extended by the
Parties under the provisions of this Article 7 shall inure to the
benefit of the Parties, and will extend to and include their parent or
affiliated companies and their respective shareholders, officers,
directors, members, authorized agents and representatives, and
employees and any legal entity having a provable property title
interest in a Well, Facility, Oil and Gas Project including any lease
or similar tenure (all such persons, individuals or entities will be
deemed and agreed by the Parties to be or form a part of the Parties
for the purposes of the indemnification provisions contained herein).
The terms and conditions for indemnification of the Parties provided
for in this Article7 will have no application to any claims or causes
of action asserted against MRI or OPS by reason of any agreement of
indemnity with any person or entity not a party to this Master
Contract and as such a third party which is outside the Parties
express intention to indemnify hereunder.
7.9 Each of the Parties' respective indemnity obligations under this
Master Contract will be without regard to and without any right to
contribution from any insurance policy or insurance funding source
independently maintained by the other Party. If it is judicially
determined that the monetary limits of contractually required
insurance or of the indemnities assumed under this Master Contract
(which OPS and MRI hereby agree will be supported either by available
liability insurance or voluntarily self-insurance, or in some
combination thereof) exceed the maximum limits permitted under
applicable law, it is agreed that said insurance requirements or
indemnities shall automatically be amended to conform to the monetary
limits permitted by law.
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7.10 Except as may be otherwise provided in this Master Contract, OPS will
notify MRI immediately of any claim, demand, or suit that may be
presented to or served upon OPS by any individual, person, entity or
third party arising out of or as a result of any Work or Operation
which is the subject matter of this Master Contract. MRI will
immediately notify OPS of any claim, demand, or suit that may be
presented to or served upon MRI in connection with MRI's
administration of any Work, Facility or Oil and Gas Project pursuant
to this Master Contract, and without limiting the generality of the
forgoing any claim, demand, or suit that may be brought in regard to
any underlying mineral leases and related payments of royalty or by
the overriding royalty interest owners for existing revenues, as
allowed or required by the applicable Operating Agreement, SOA or
other Collateral Agreement.
7.11 Notwithstanding any other provision herein, it is expressly understood
and agreed that each Party's gross negligence or willful misconduct
shall be the sole and exclusive liability and responsibility of that
offending actor.
8. TAXES AND CLAIMS
8.1 Except as otherwise governed by the terms of the SOA as a legitimate
charge to the working interest owners, OPS agrees to pay all taxes,
licensing fees and other fees or fines levied or assessed on OPS in
connection with its business incidental to its performance as the
MRI's Operator on all the Work and Operation under this Master
Contract or Collateral Agreement, by any governmental agency
including: income taxes, unemployment compensation insurance, old age
benefits, social security, or any other taxes, charges, fees, fines or
other assessments levied upon OPS, its agents, employees, and
representatives (hereinafter called "Tax Contributions and Remittance
Obligations"). OPS further covenants and agrees to require the same
covenants and agreement to be complied with regarding all Tax
Contributions and Remittance Obligations and be liable for any breach
of such obligations by any of its subcontractors.
8.2 OPS agrees to reimburse MRI on demand for all such taxes, fees, fines
or governmental charges shown in Section 8.1 above, whether Federal,
State, Regional, Municipal or otherwise, that MRI may be required to
pay or deem it necessary to pay. OPS agrees to furnish MRI with the
information required by MRI to enable it to make the necessary reports
and to pay such taxes or charges if necessary. However, MRI does not
assume any duty or obligation to pay any such taxes, charges fees,
fines or other assessments; and, any payment by MRI of such amounts
will give rise to an immediate right of MRI to obtain reimbursement
for all such amounts from OPS by way of withholding payments otherwise
owed to OPS hereunder or alternatively by way of a subrogated
interests in the manner described in 2.2 herein.
8.3 OPS agrees to pay all claims for labor, materials, services, and
supplies incurred by OPS and agrees to allow no lien or charge to be
fixed upon the rig, the lease, the Well, Facilities, the land on which
any Oil and Gas Project pursuant to this Master Contract is located,
except as may be provided otherwise in any SOA governing a particular
Work or Operation. OPS agrees to indemnify, protect, defend, and hold
MRI harmless from and against all such claims, charges, and liens. If
OPS shall fail or refuse to pay any claims or indebtedness incurred by
OPS in connection with any Work or Operation as provided hereunder, it
is agreed that MRI shall have the right to pay any such claims or
indebtedness out of any money due or to become due to OPS hereunder.
Notwithstanding the foregoing, MRI agrees that it will not pay any
such claim or indebtedness as long as same is being actively contested
by OPS and OPS has taken all actions necessary (including the posting
of a bond where required by MRI or when otherwise appropriate under
the circumstances) to protect the property interests of MRI and any
other person, individual or third party affected by such claim or
indebtedness.
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9. LAWS, RULES AND REGULATIONS
9.1 OPS agrees to comply with all laws, rules, regulations, licensing
requirements and permitting required which are now or may become
applicable to operations covered by this Contract or arising out of
the performance of any Work or Operation hereunder. If MRI is required
to pay any fine or penalty resulting from OPS' failure to comply with
such laws, rules or regulations, OPS shall immediately reimburse MRI
for any such payment together with any other interest, penalty,
expense, cost or outlay including reasonable attorney's fee which have
been paid or incurred by MRI in regard to OPS' non-compliance.
9.2 OPS agrees to make, file or otherwise provide for all filings or
recordings required or made necessary or advisable by any relevant or
applicable by federal, state, regional or municipal laws, regulations,
codes, rules or directives (in combination herein called the "Laws")
for which OPS is responsible as MRI's Operator in connection with the
Work or Operation pursuant to this Master Contract or any Collateral
Agreement hereto.
9.3 In the event any provision of this Master Contract is found to be
inconsistent with or contrary to any applicable Laws such offending
provision will be deemed to be modified or deleted only to the extent
required to comply with said Law and this Master Contract, as so
modified, shall remain in full force and effect.
9.4 The Laws of the state, region and municipality encompassing the Well,
Facility or Oil and Gas Project's site for the particular Work or
Operation at issue shall govern the validity of this Master Contract
(and any particular Collateral Agreements so affected), its
interpretation and performance, and remedies for contractual breach or
any claims relate to this Master Contract, without regard to its
choice of law provisions, unless the Parties expressly agree in
writing to a contrary arrangement regarding the applicable law
governing this Master Contract.. Any litigation arising out of or
pertaining to this Master Contract, or any Collateral Agreement, shall
be filed and prosecuted in the appropriate court, tribunal or other
judicial authority within the location of the particular Work or
Operation involving the disputed matter or issue or such other venue
as either Party to the Contract commences such action provided the
court or tribunal accepts such jurisdiction as being a FORUM
CONVENIENS for the commencement of such litigation, arbitration or
proceeding or the Parties mutually consent in writing or otherwise
attorn to that jurisdiction.
10 FORCE MAJEURE
Except for the duty to make payments, if any, when due and the
indemnification provisions under this Master Contract, neither MRI nor OPS
shall be responsible to the other for any delay, damage or failure caused by
or occasioned by a Force Majeure Event. As used in this Master Contract,
"Force Majeure Event" includes acts of God, hurricanes, weather, action of
the elements, warlike action, insurrection, revolution or civil strife,
piracy, civil war or hostile action, strikes, differences with workers, acts
of public enemies, federal or state laws, rules and regulations of any
governmental authorities having jurisdiction in the premises or any other
group, organization or informal association (whether or not formally
recognized as a government), inability to procure material, equipment or
necessary labor in the open market, acute and unusual labor, material or
equipment shortages, or any other causes (except financial) beyond the
control of either party. Delays due to the above causes or any of them shall
not be deemed to be a breach of or failure to perform under this Master
Contract.
11 CONFIDENTIAL INFORMATION, PATENTS, COPYRIGHT AND INTELLECTUAL PROPERTY
11.1 OPS shall treat as confidential and shall not disclose to others, any
information or documents (including without limitation any technical
information, data, seismic data, logs, electric log data, mud logs, or
core data) regarding MRI's plans, programs, processes, products,
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costs, equipment, files, logs, reports, data, permits, certificates,
operations or customers (the "Confidential Information") that may come
within the knowledge of OPS, its officers, employees, agents,
sub-contractors in the performance of this Master Contract. All of
such Confidential Information must be delivered to MRI by OPS
immediately upon the termination of this Master Contract, unless
otherwise directed by MRI. However, OPS shall be allowed to keep, but
not use or disseminate, one copy of the Confidential Information for
archival purposes for a one (1) year period after the termination of
this Master Contract. Nothing contained herein, shall prevent OPS from
disclosing to others or using in any manner any documents, data or
information that it can prove has been published or has otherwise
become part of the public domain, except where such information was
published or made public by the act, omissions or fault of OPS, its
employees, agents or subcontractors. Confidential Information shall
not be construed to include any information independently in OPS'
knowledge or possession or that has been independently developed by
OPS without use of any Confidential Information.
11.2 MRI shall treat as confidential and shall not disclose to others, any
information or documents (including without limitation any technical
information, data, seismic data, logs, electric log data, mud logs, or
core data) regarding OPS's plans, programs, processes, products,
costs, equipment, files, logs, reports, data, permits, certificates,
operations or customers (included in the definition of "Confidential
Information") that may come within the knowledge of MRI, its officers,
employees, agents, or sub-contractors in connection with OPS'
performance of or under this Master Contract. All of such Confidential
Information must be delivered to OPS by MRI immediately upon the
termination of this Master Contract, unless otherwise directed by OPS.
11.3 Where either party has archived or maintained records, whether paper,
electronic or otherwise, related to any Work or Operation designated,
assigned or undertaken hereunder, such Party agrees to allow the other
party reasonable access to such records and data where necessary to
respond to any proper and timely request for such information by any
third party who makes such request under relevant law or rules of
judicial procedure. The Parties respectively agree to maintain any
such records for use in any lawsuits or third party actions, as may be
commercially and legally reasonably under the circumstances.
11.4 OPS shall defend, indemnify and hold harmless MRI or any affiliate or
subsidiary companies, and their respective directors, employees and
agents (the "Indemnified Parties") from and against any and all loss,
damage, injury, liability and claims thereof for any trade secret
misappropriation, patent, copyright or trademark infringement
("Technology") resulting from OPS' performance regarding any Work or
Operation hereunder, which Technology is not provided by or
specifically required by MRI in connection with that Work or
Operation. OPS shall reimburse Indemnified Parties fully for any
royalties, damages, or other payments that the Indemnified Parties
shall be obligated to pay. Indemnified Parties shall have the right to
be present and represented by counsel, at their own expense, at all
times during litigation and/or other discussions relating to claims of
patent, copyright or trademark infringement trade secret
misappropriation. Neither OPS nor Indemnified Parties shall settle or
compromise any such litigation without the consent of the other if
such settlement or compromise obligates the other to make any payment
or part with any property or assume any obligation or grant any
license or other rights or be subject to any injunction by reason of
such settlement or compromise.
12 ASSIGNMENTS AND RIGHTS AFTER PARTIAL TERMINATION
12.1 MRI and OPS agree that neither will assign nor delegate this Master
Contract without prior written consent of the other Party. Such
consent will not be unreasonably withheld by OPS.
12.2 However, MRI has the right to withhold its consent to the assignment
of all or any part of this Master Agreement or and Collateral
Agreement, without any reason in its absolute and unfettered
discretion.
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12.3 Provided that nothing herein should be construed as obligating MRI to
engage OPS on any particular project, well, site, refinery, facility
or other operation which MRI may now or at any future time be owner or
operator of.
12.4 Provided further, where this Master Contract or any Collateral
Agreement is terminated or cancelled, in whole or in part in regard to
a particular Well, Facility or Oil and Gas Project for which OPS
ceases to be MRI's Operator, thereafter MRI will have the full right
and authority to either assign those rights, duties, obligations,
responsibilities, tasks and activities of OPS previously had hereunder
to such other third party operator or enter into a new agreement with
such third party operator as MRI in its absolute and unfettered
discretion deems advisable.
13 SCHEDULES AND EXHIBITS
The following schedules, exhibits and the rider provided in Exhibit "B",
which is attached hereto, forms made a part of this Master Contract for all
intents and purposes: SCHEDULES
Schedule "A" - Operating Agreements
Schedule "B" - Sub-Operating Agreements ("SOA")
EXHIBITS
Exhibit A - Accounting Procedures for Joint Operations Exhibit B - Indemnity
provisions for specific States (including Louisiana) Exhibit C - Obligations
of the Parties Exhibit D - Insurance Exhibit E - Services Included In
Overhead Fee Schedule
14 NOTICES AND DEEMED DELIVERY
14.1 All notices to be given with respect to this Contract, unless
otherwise provided for, shall be given to MRI and OPS respectively at
the addresses, fax numbers and email addresses shown herein or
otherwise communicated by the Parties to each other for such notice
and service matters during the currency of this Contract.
14.2 All notices, requests, demands or other communications made by a Party
will be deemed to have been duly delivered on the date of personal
delivery utilizing a process server, courier or other means of
physical delivery to the intended recipient ("Personal Service"), or
on the date of facsimile transmission (the "Fax") on proof of receipt
of the Fax, or on the date of electronic mail (the "email") with
verifiable proof of receipt of such email, or on the seventh (7th) day
after mailing by registered mail with postage prepaid ("Registered
Mail"), to the Party's address, Fax number, email address set out in
this Agreement or such other addresses Fax numbers or email address as
the Parties or their Representatives may have from time to time during
the currency of this Agreement or thereafter and communicated to the
other Parties for the purposes of this Agreement.
15 TIME IS OF THE ESSENCE
Time is of the essence in this Contract and all Collateral Agreements hereto.
A waiver of the strict performance requirements hereunder in on instance will
not constitute a waiver for any other instance where time for performance is
specified this Contract and all Collateral Agreements hereto.
15 GENERAL PROVISIONS
15.1 The Terms and Conditions in the Attached Schedules "A" and "B" and
Exhibit "B" are adopted and incorporated by reference herein. All
Schedules and Exhibits form part of this Master Contract and are
deemed by the Parties to have been duly executed as at the time of
execution of these presents and effective from and after the date of
this Master Contract unless the Parties expressly agree that such
Schedule or Exhibit take effect from and after such other time as they
specify therein. The Parties confirm, consent and agree that subject
to the provisions in 1.10 herein regarding interpretation of conflicts
and inconsistencies between the terms and conditions of this Master
Contract and any Schedules or Exhibits hereto.
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15.2 This Master Contract or any Collateral Agreement made pursuant hereto
will inure to and be binding upon the Parties hereto as well as to
their heirs, successors and assigns.
15.3 No delegation or designation of any kind by OPS to any third parties
to conduct, undertake, be responsible for or control any Work or
Operation hereunder, or any portion thereof, shall relieve OPS of it's
duties, responsibilities and obligations under this Master Contract
and any related Operating Agreements, SOA or other Collateral
Agreements, unless expressly agreed in writing by the Parties hereto.
15.4 No waiver, modification, amendment or addition of any term, condition
or provision of this Master Contract or any Collateral Agreement shall
be valid or of any force or effect unless made in writing, signed by
the parties hereto, or their duly authorized representatives, and
specifying with particularity the nature and expense of such waiver,
modification, amendment or addition.
15.5 Except as required by law, no public announcement or press release
concerning the Master Contract or any Collateral Agreement are
permitted without the prior review and written consent of MRI.
15.6 Any demand, notice or other communication to be given in connection
with this Master Contract or any Collateral Agreement in writing and
will be given by regular mail, facsimile transmission or by electronic
means of communication addressed to the recipient Party at the
addresses, facsimile numbers or email addresses provided above or to
such other street address, individual or electronic communication
number or electronic mail address as may be designated by notice given
by either Party to the other. Any demand, notice or other
communication given by personal delivery will be conclusively deemed
to have been given on the day of actual delivery and if given by
registered mail on the 3rd Business Day following the deposit thereof
in the mail and if given by electronic communication will be
conclusively deemed to have been given on the day of transmittal
thereof if given during the normal business hours of the recipient and
on the following Business Day during such normal business hours if not
given during such normal Business hours on the day of such electronic
delivery.
15.7 This Master Contract or any Collateral Agreement may be executed in
any number of counterparts, each of which will be deemed to be an
original and all of which taken together will be deemed to constitute
one and the same instrument
15.7 In case any provision in this Master Contract or any Collateral
Agreement should be invalid, illegal or unenforceable, such provision
shall be severable from the rest of this Master Contract or any
Collateral Agreement, and the validity, legality and enforceability of
the reaming provision of this Master Contract or any Collateral
Agreement will not in any way be affected or impaired by severance of
any invalid, illegal or unenforceable provision.
15.8 Delivery of an executed signature page to this Master Contract or any
Collateral Agreement by any Party by electronic transmission will be
as effective as delivery of a manually executed copy of this Master
Contract or any Collateral Agreement by such Party.
THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the Parties hereto or their authorized signatories have
signed, sealed and duly executed this Contract effective the date first
appearing above.
SIGNED, SEAL AND DELIVEDED by the
Authorized Signatory for ) MAINLAND RESOURCES,
INC.,: )
)
/s/ XXXXXXX X. NEWPORT )
______________________________________________ )
Authorized Signatory )
) C/S
Print Name: Xxxxxxx X. Newport )
)
Print Title: President )
)
Address: 11314 )
SIGNED, SEAL AND DELIVEDED by the
Authorized Signatory for OPS GROUP LIMITED )
)
/s/ XXXXX X. XXXX )
______________________________________________ )
Authorized Signatory )
)
Print Name: Xxxxx X. Xxxx )
) C/S
Print Title: President )
)
Address: 0000 Xxxxxxxx Xxxx Xx. )
Xxxxxxx, XX 00000 )
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SCHEDULE "A"
OPERATING AGREEMENTS
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EXHIBIT "A"
ACCOUNTING PROCEDURES FOR JOINT OPERATIONS
Attached to and made a part of Master Operating Agreement the ("Master
Contract") dated May 1, 2008 by and between Mainland Resources, Inc. ("MRI") as
Working Interest Owner and OPS Group Limited ("OPS") as Operator.
I. GENERAL PROVISIONS
1. DEFINITIONS
"Controllable Material" shall mean Material which at the time is so
classified in the Material Classification Manual as most recently recommended by
the Council or Petroleum Accountants Societies.
"First Level Supervisors" shall mean those employees whose primary function
in Joint Operations is the direct supervision of other employees and/or contract
labor directly employed on the Joint Property in a field operating capacity.
"Joint Property" means and includes the real and personal property subject
to the agreement to which this Accounting Procedure is attached.
"Joint Operations" means and includes all operations necessary or proper
for the development, operation, protection and maintenance of the Joint
Property.
"Joint Account" means the account showing the charges paid and credits
received in the conduct of the Joint Operations and which are to be shared by
the Parties.
"Material" shall mean personal property, equipment or supplies acquired or
held for use on the Joint Property.
"Non-Operators" mean the Parties to this Master Contract or any Collateral
Agreements other than the Operator and MRI, as Project Owner. "Operator" shall
mean the party designated by MRI (being the MRI Designatee) to conduct,
undertake, be responsible for and operate the Joint Operations.
"Operator" shall mean the party designated to conduct, undertake, be
responsible for and operate the Joint Properties.
"Parties" shall mean the Project Owner, Operator and Non-Operators.
"Personal Expenses" shall mean travel and other reasonable reimbursable
expenses of Operator's employees.
"Technical Employees" shall mean those employees having special and
specific engineering, geological or other professional skills, and whose primary
function in Joint Operations is the handling of specific operating conditions
and problems for the benefit of the Joint Property.
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2. STATEMENT AND XXXXXXXX
Operator shall xxxx Non-Operators in advance, or in its sole discretion, on
or before the last day of each month for their proportionate share of the Joint
Account for the preceding month. Such bills will be accompanied by statements
which identify the authority for expenditure, lease or facility, and all charges
and credits summarized by appropriate classifications of investment and expense,
except that items of Controllable Material and unusual charges and credits shall
be separately identified and fully described in detail.
3. ADVANCES AND PAYMENTS BY NON-OPERATORS
A. Unless otherwise provided for in the agreement, the Operator may require
the Non-Operators to advance their share of estimated cash outlay for the
succeeding month's operation within fifteen (15) days after receipt of the
billing or by the first day of the month for which the advance is required,
whichever is later. Operator shall adjust each monthly billing to reflect
advances received from the Non-Operators.
B. Each Non-Operator will pay its proportion of all bills within fifteen
(15) days after receipt. If payment is not made within such time, the unpaid
balance shall bear interest monthly at the rate of Twelve percent (12%) on the
first day of the month in which delinquency occurs plus 1% or the maximum
contract rate permitted by the applicable usury laws in the state in which the
Joint Property is located, whichever is the lesser, plus attorney's fees, court
costs, and other costs in connection with the collection of unpaid amounts.
4. ADJUSTMENTS
Payment of any such bills will not prejudice the right of any Non-Operator
to protest or question the correctness thereof; provided, however, all bills and
statements rendered to Non-Operators by Operator during any calendar year will
conclusively be presumed to be true and correct after twenty-four (24) months
following the end of any such calendar year, unless within the said twenty-four
(24) month period a Non-Operator takes written exception thereto and makes claim
on Operator for adjustment. No adjustment favorable to Operator 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 as provided for in Section V.
5. AUDITS
A. A Non-Operator, upon notice in writing to Operator and all other
Non-Operators, will have the right to audit Operator's accounts and records
relating to the Joint Account 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 will not extend the time for the taking of written exception
to and the adjustments of accounts as provided for in Paragraph 4 of this
Section I. Where there are two or more Non-Operators, the Non-Operators will
make every reasonable effort to conduct a joint audit in a manner which will
result in a minimum of inconvenience to the Operator. The Operator will bear no
portion of the Non-Operators' audit cost incurred under this paragraph unless
agreed to by the Operator. The audits shall not be conducted more than once each
year without prior approval of Operator, except upon the resignation or removal
of the Operator, and shall be made at the expense of those Non-Operators
approving such audit.
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B. The Operator shall reply in writing to an audit report within 180 days
after receipt of such report.
6. APPROVAL BY NON-OPERATORS
Where an approval or other agreement of the Parties or Non-Operators is
expressly required under other sections of this Accounting Procedure and if the
agreement to which this Accounting Procedure is attached contains no contrary
provisions in regard thereto, the Operator will notify all Non-Operators of the
Operator's proposal, and the agreement or approval of a majority in interest of
the Non-Operators will be binding on and controlling of all Non-Operators as if
each such Non-Operator consented to the Operator's proposal in the form approved
by the majority of Non-Operators.
II. DIRECT CHARGES
Operator shall charge the Joint Account as shown in Exhibit "E" to the
Master Contract, or as follows, in the Operator's sole discretion.
1. ECOLOGICAL AND ENVIRONMENTAL
Costs incurred for the benefit of the Joint Property as a result of
governmental or regulatory requirements to satisfy environmental considerations
applicable to the Joint Operations. Such costs may include surveys of an
ecological or archaeological nature and pollution control procedures as required
by applicable laws and regulations.
2. RENTALS AND ROYALTIES
Lease rentals and royalties paid by Operator for the Joint Operations.
3. LABOUR
A. 1. Salaries and wages of Operator's field employees directly
employed on the Joint Property in the conduct of Joint
Operations.
2. Salaries of First level Supervisors in the field.
3. Salaries and wages of Technical Employees directly employed
on the Joint Property if such charges are excluded from the
overhead rates.
4. Salaries and wages of Technical Employees either temporarily
or permanently assigned to and directly employed in the
operation or the Joint Property if such charges are excluded
from the overhead rates.
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B. Operator's cost of holiday, vacation, sickness and disability
benefits and other customary allowances paid to employees whose
salaries and wages are chargeable to the Joint Account under
Paragraph 3A of this Section II. Such costs under this Paragraph
3B may be charged on a "when and as paid basis" or by "percentage
assessment" on the amount of salaries and wages chargeable to the
Joint Account under Paragraph 3A of this Section II. If a
percentage assessment is used, the rate shall be based on the
Operator's cost experience.
C. Expenditures or contributions made pursuant to assessments
imposed by governmental authority which are applicable to
Operator's costs chargeable to the Joint Account under Paragraphs
3A and 3B of this Section II.
D. Personal Expenses of those employees whose salaries and wages are
chargeable to the Joint Account under Paragraphs 3A and 3B of
this Section II.
4. EMPLOYEE BENEFITS
Operator's current costs or established plans for employees' group life
insurance, hospitalization, pension, retirement, stock purchase, thrift, bonus,
and other benefit plans of a like nature, applicable to Operator's labor cost
chargeable to the Joint Account under Paragraphs 3A and 3B of this Section II
shall be Operator's actual cost not to exceed the percent most recently
recommended by the Council of Petroleum Accountants Societies.
5. MATERIAL
Material purchased or furnished by Operator for use on the Joint Property
as
provided under Section IV. Such Material will only be purchased for or
transferred to the Joint Property as may be required for immediate use and as is
reasonably practical and consistent with efficient and economical operations.
The accumulation of surplus stocks of such Material will be avoided.
6. TRANSPORTATION
Transportation of employees and Material necessary for the Joint
Operations, but subject to the following limitations:
A. If Material is moved to the Joint Property from the Operator's
warehouse or other properties, no charge shall be made to the
Joint Account for a distance greater than the distance from the
nearest reliable supply store where like material is normally
available or a railway receiving point nearest the Joint Property
unless agreed to by the Parties.
B. If surplus Material is moved to Operator's warehouse or other
storage point, no charge shall be made to the Joint Account for a
distance greater than the distance to the nearest reliable supply
store where like material is normally available, or a railway
receiving point nearest the Joint Property unless expressly
agreed to in writing by the Parties. No charge shall be made to
the Joint Account for moving Material to other properties
belonging to Operator, unless agreed to by the Parties in
writing.
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C. In the application of subparagraphs A and B above, the option to
equalize or charge actual trucking cost is available when the
actual charge is $400 or less excluding accessorial charges. The
$400 will be adjusted to the amount most recently recommended by
the Council of Petroleum Accountants Societies.
7. SERVICES
The cost of contract services, equipment and utilities provided by outside
sources, except services excluded by Paragraph 10 of Section II and Paragraph
(i), (ii) and (iii), of Section III. The cost of professional consultant
services and contract services of technical personnel directly engaged on the
Joint Property if such charges are excluded from the overhead rates. The cost of
professional consultant services or contract services of technical personnel not
directly engaged on the Joint Property shall not be charged to the Joint Account
unless previously agreed to in writing by the Parties.
8. EQUIPMENT AND FACILITIES FURNISHED BY THE OPERATOR
A. The Operator shall charge the Joint Account for use of Operator
owned equipment and facilities at rates commensurate with costs
of ownership and operation. Such rates shall include costs of
maintenance, repairs, other operating expense, insurance, taxes,
depreciation, and interest on gross investment less accumulated
depreciation not to exceed Twelve (12%) percent per annum. Such
rates shall not exceed average commercial rates currently
prevailing in the immediate area of the Joint Property.
B. In lieu of charges in Paragraph 8A above, Operator generally will
may elect to use average commercial rates prevailing in the
immediate area of the Joint Property less twenty (20%) percent
per annum. For automotive equipment, the Operator may elect to
use rates published by the Petroleum Motor Transport Association.
9. DAMAGES AND LOSSES TO JOINT PROPERTY
All costs or expenses necessary for the repair or replacement of Joint
Property made necessary because of damages or losses incurred by fire, flood,
storm, theft, accident, or other cause, except those resulting from Operator's
gross negligence or willful misconduct. Operator shall furnish Non-Operator
written notice of damages or losses incurred as soon as practicable after a
report thereof has been received by Operator.
10. LEGAL EXPENSE
Expense of handling, investigating and settling litigation or claims,
discharging of liens, payment of judgments and amounts paid for settlement of
claims incurred in or resulting from Work and Operations under the Master
Contract or any Collateral Agreement, or which are necessary to protect or
recover the Joint Property, except that no charge for services of Operator's
legal staff or fees or expense of outside attorneys will be made unless
previously agreed to in writing by the Parties. All other legal expenses are
considered to be covered by the overhead provisions of Section III unless
otherwise agreed to in writing by the Parties, except as provided in Section I,
Paragraph 3.
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11. TAXES
All taxes of every kind and nature assessed or levied upon or in connection
with the Joint Property, the operation thereof, or the production therefrom, and
which taxes have been paid by the Operator for the benefit of the Parties. If
the ad valorem taxes are based in whole or in part upon separate valuations of
each party's working interest, then notwithstanding anything to the contrary
herein, charges to the Joint Account shall be made and paid by the Parties
hereto in accordance with the tax value generated by each party's working
interest.
12. INSURANCE
Net premiums paid for insurance are required to be carried for the Joint
Operations for the protection of the Parties.
In the event Joint Operations are conducted in a state in which Operator
may act as self-insurer for Worker's Compensation and/or Employers Liability
under the respective state's laws, the Operator may, at its election, include
the risk under its self-insurance program and in that event, Operator shall
include a charge at Operator's cost not to exceed manual rates.
13. ABANDONMENT AND RECLAMATION
Costs incurred for abandonment of the Joint Property, including costs
required by governmental or other regulatory authority.
14. COMMUNICATIONS
Cost of acquiring, leasing, installing, operating, repairing and
maintaining communication systems, including radio and microwave facilities
directly serving the Joint Property. In the event communication
facilities/systems serving the Joint Property are Operator owned, charges to the
Joint Account will be made as provided in Paragraph 8 of this Section II.
15. OTHER EXPENDITURES
Any other expenditure not covered or dealt with in the foregoing provisions
of this Section II, or in Section III and which is of direct benefit to the
Joint Property and is incurred by the Operator in the necessary and proper
conduct of the Joint Operations.
III. OVERHEAD
1. OVERHEAD - DRILLING AND PRODUCING OPERATIONS
Operator shall charge the Joint Account as shown in Exhibit "E" to the
Master Contract, or as follows, in the Operator's sole discretion.
(i) As compensation for administrative, supervision, office services
and warehousing costs, Operator will charge drilling and
producing operations on either:
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(X) Fixed Rate Basis, pursuant to Paragraph l A of this Section
III, or
(__) Percentage Basis, Basis, pursuant to Paragraph l B of this
Section III.
Unless otherwise agreed to by the Parties, such charge shall be
in lieu of costs and expenses of all offices and salaries or wages
plus applicable burdens and expenses of all personnel, except those
directly chargeable under Paragraph 3A, Section II. The cost and
expense of services from outside sources in connection with matters of
taxation, traffic, accounting or matters before or involving
governmental agencies shall be considered as included in the overhead
rates provided for in the above selected Paragraph 1(i) of this
Section III unless such cost and expense are agreed to by the Parties
as a direct charge to the Joint Account.
(ii) The salaries, wages and Personal Expenses of Technical Employees
and/or the cost of professional consultant services and contract
services of technical personnel directly employed on the Joint
Property:
(__) will be covered by the overhead rates, or
(X) will not be covered by the overhead rates.
(iii) The salaries, wages and Personal Expenses of Technical Employees
and/or costs of professional consultant services and contract
services of technical personnel either temporarily or permanently
assigned to and directly employed in the operation of the Joint
Property:
(__) will be covered by the overhead rates, or
(X) will not be covered by the overhead rates.
A. Overhead - Fixed Rate Basis
1. Operator shall charge the Joint Account at the following
rates per well per month:
Drilling Well Rate See Exhibit "E" (Prorated for less than a
full month)
Producing Well Rate See Exhibit "E"
2. Application of Overhead - Fixed Rate Basis shall be as
follows:
(a) Drilling Well Rate
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(1) Charges for drilling xxxxx shall begin on the date the well
is spudded and terminate on the date the drilling rig,
completion rig, or other units used in completion of the
well is released, whichever is later, except that no charge
shall be made during suspension of drilling or completion
operations for fifteen (15) or more consecutive calendar
days.
(2) Charges for xxxxx undergoing any type of workover or
recompletion for a period of five (5) consecutive work days
or more shall be made at the drilling well rate. Such
charges shall be applied for the period from date workover
operations, with rig or other units used in workover,
commence through date of rig or other unit release, except
that no charge shall be made during suspension of operations
for fifteen (15) or more consecutive calendar days.
(b) Producing Well Rates
(1) An active well either produced or injected into for any
portion of the month shall be considered as a one-well
charge for the entire month.
(2) Each active completion in a multi-completed well in which
production is not commingled down hole shall be considered
as a one-well charge providing each completion is considered
a separate well by the governing regulatory authority.
(3) An inactive gas well shut in because of overproduction or
failure of purchaser to take the production shall be
considered as a one-well charge providing the gas well is
directly connected to a permanent sales.
(4) A one-well charge shall be made for the month in which
plugging and abandonment operations are completed on any
well. This one-well charge shall be made whether or not the
well has produced except when drilling well rate applies.
(5) All other inactive xxxxx (including but not limited to
inactive xxxxx covered by unit allowable, lease allowable,
transferred allowable, etc.) shall not qualify for an
overhead charge.
3. The well rates shall be adjusted as of the first day of
April each year following the effective date of the Master
Contract to which this Accounting Procedure is attached. The
adjustment shall be computed by multiplying the rate
currently in use by the percentage increase or decrease in
the average weekly earnings of Crude Petroleum and Gas
Production Workers for the last calendar year compared to
the calendar year preceding as shown by the index of average
weekly earnings of Crude Petroleum and Gas Production
Workers as published by the United States Department of
Labor, Bureau of Labor Statistics, or the equivalent
Canadian index as published by Statistics Canada, as
applicable. The adjusted rates shall be the rates currently
in use, plus or minus the computed adjustment.
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B. Overhead - Percentage Basis
1. Operator shall charge the Joint Account at the following
rates:
(a) Development ________ Percent (__ %) of the cost of
development of the Joint Property exclusive of costs
provided under Paragraph 10 of Section II and all
salvage credits.
(b) Operating ________ Percent (__ %) of the cost of
operating the Joint Property exclusive of costs
provided under Paragraphs 2 and 10 of Section II, all
salvage credits, the value of injected substances
purchased for secondary recovery and all taxes and
assessments which are levied, assessed and paid upon
the mineral interest in and to the Joint Property.
2. Application of Overhead - Percentage Basis shall be as
follows:
For the purpose of determining charges on a percentage basis
under Paragraph 1B of this Section III, development shall
include all costs in connection with drilling, redrilling,
deepening, or any remedial operations on any or all xxxxx
involving the use of drilling rig and crew capable of
drilling to the producing interval on the Joint Property;
also, preliminary expenditures necessary in preparation for
drilling and expenditures incurred in abandoning when the
well is not completed as a producer, and original cost of
construction or installation of fixed assets, the expansion
of fixed assets and any other project clearly discernible as
a fixed asset, except Major Construction as defined in
Paragraph 2 of this Section III. All other costs shall be
considered as operating.
2. OVERHEAD - MAJOR CONSTRUCTION
To compensate the Operator for overhead costs incurred in the construction
and installation of fixed assets, the expansion of fixed assets, and any other
project clearly discernible as a fixed asset required for the development and
operation of the Joint Property, Operator shall either negotiate a rate prior to
the beginning of construction, or shall charge the Joint Account for overhead
based on the following rates for any Major Construction project in excess of
$25,000.00:
A. Five (5 %) percent of the first $100,000 or total cost if less,
plus
B. Two (2 %) percent of the costs in excess of $100,000 but less
than $1,000,000, plus
C. One and one half (1.5 %) percent of the costs in excess of
$1,000,000.
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Total cost shall mean the gross cost of any one project. For the purpose of
this paragraph, the component parts of a single project will not be treated
separately and the cost of drilling and workover xxxxx and artificial lift
equipment will be excluded.
3. CATASTROPHE OVERHEAD
To compensate the Operator for overhead costs incurred in the event of
expenditures resulting from a single occurrence due to oil spill, blowout,
explosion, fire, storm, hurricane, or other catastrophes as agreed to by the
Parties, which are necessary to restore the Joint Property to the equivalent
condition that existed prior to the event causing the expenditures, Operator
shall either negotiate a rate prior to charging the Joint Account or shall
charge the Joint Account for overhead based on the following rates:
A. Five (5 %) percent of total costs through $100,000; plus
B. Two (2 %) percent of total costs in excess of $100,000 but less
than $1,000,000; plus
C. One and one half (1.5 %) percent of total costs in excess of
$1,000,000.
Expenditures subject to the overheads above will not be reduced by
insurance recoveries, and no other overhead provisions of this Section III shall
apply
4. AMENDMENT OF RATES
The overhead rates provided for in this Section III may be amended from
time to time, but only by mutual written agreement between the Parties hereto
if, in practice, the rates are found to be insufficient or excessive.
IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS
The Operator is responsible for Joint Account Material and shall make
proper and timely charges and credits for all Material movements affecting the
Joint Property. The Operator will provide all Material for use on the Joint
Property; however, at the Operator's option, such Material may be supplied by
the Non-Operator, provided such material meets API standards. The Operator will
make timely disposition of idle and/or surplus Material, such disposal being
made either through sale to Operator or Non-Operator, division in kind, or sale
to outsiders. The Operator may purchase, but is under no obligation to purchase,
any interest of Non-Operators in surplus condition A or B Material. The disposal
of surplus Controllable Material not purchased by the Operator shall be agreed
to by the Parties.
1. PURCHASES
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Material purchased shall be charged at the price paid by Operator after
deduction of all discounts received. In case of Material found to be defective
or returned to vendor for any other reasons, credit shall be passed to the Joint
Account when adjustment has been received by the Operator.
2. TRANSFERS AND DISPOSITIONS
Material furnished to the Joint Property and Material transferred from the
Joint Property or disposed of by the Operator, unless otherwise agreed to by the
Parties, shall be priced on the following basis exclusive of cash discounts:
A. New Material (Condition A)
1. Tubular Goods Other than Line Pipe
(a) Tubular goods, sized 2 3/8 inches OD and larger, except
line pipe, shall be priced at Eastern mill published
carload base prices effective as of date of movement
plus transportation cost using the 80,000 pound carload
weight basis to the railway receiving point nearest the
Joint Property for which published rail rates for
tubular goods exist. If the 80,000 pound rail rate is
not offered, the 70,000 pound or 90,000 pound rail rate
may be used. Freight charges for tubing will be
calculated from Lorain, Ohio and casing from
Youngstown, Ohio.
(b) For grades which are special to one mill only, prices
shall be computed at the mill base of that mill plus
transportation cost from that mill to the railway
receiving point nearest the Joint Property as provided
above in Paragraph 2.A.(1)(a). For transportation cost
from points other than Eastern xxxxx, the 30,000 pound
Oil Field Haulers Association interstate truck rate
shall be used.
(c) Special end finish tubular goods shall be priced at the
lowest published out-of-stock price, f.o.b. Houston,
Texas, plus transportation cost, using Oil Field
Haulers Association interstate 30,000 pound truck rate,
to the railway receiving point nearest the Joint
Property.
(d) Macaroni tubing (size less than 2 3/8 inch OD) shall be
priced at the lowest published out-of-stock prices
f.o.b. the supplier plus transportation costs, using
the Oil Field Haulers Association interstate truck rate
per weight of tubing transferred, to the railway
receiving point nearest the Joint Property.
2. Line Pipe
(a) Line pipe movements (except size 24 inch OD and larger
with walls 3/4 inch and over) 30,000 pounds or more
shall be priced under provisions of tubular goods
pricing in Paragraph A.(l)(a) as provided above.
Freight charges shall be calculated from Lorain, Ohio.
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(b) Line Pipe movements (except size 24 inch OD) and larger
with walls 3/4 inch and over) less than 30,000 pounds
shall be priced at Eastern mill published carload base
prices effective as of date of shipment, plus 20
percent, plus transportation costs based on freight
rates as set forth under provisions of tubular goods
pricing in Paragraph A.(1)(a) as provided above.
Freight charges shall be calculated from Lorain, Ohio.
(c) Line pipe 24 inch OD and over and 3/4 inch wall and
larger shall be priced f.o.b. the point of manufacture
at current new published prices plus transportation
cost to the railway receiving point nearest the Joint
Property.
(d) Line pipe, including fabricated line pipe, drive pipe
and conduit not listed on published price lists shall
be priced at quoted prices plus freight to the railway
receiving point nearest the Joint Property or at prices
agreed to by the Parties.
3. Other Material shall be priced at the current new price, in
effect at date of movement, as listed by a reliable supply
store nearest the Joint Property, or point of manufacture,
plus transportation costs, if applicable, to the railway
receiving point nearest the Joint Property.
4. Unused new Material, except tubular goods, moved from the
Joint Property shall be priced at the current new price, in
effect on date of movement, as listed by a reliable supply
store nearest the Joint Property, or point of manufacture,
plus transportation costs, if applicable, to the railway
receiving point nearest the Joint Property. Unused new
tubulars will be priced as provided above in Paragraph 2.A1
and A 2.
B. Good Used Material (Condition B)
Material in sound and serviceable condition and suitable for reuse
without reconditioning:
1. Material moved to the Joint Property
At seventy-five percent (75%) of current new price, as determined
by Paragraph A.
2. Material used on and moved from the Joint Property
(a) At seventy-five percent (75%) of current new price, as
determined by Paragraph A, if Material was originally
charged to the Joint Account as new Material or
(b) At sixty-five percent (65%) of current new price, as
determined by Paragraph A, if Material was originally
charged to the Joint Account as used Material
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3. Material not used on and moved from the Joint Property
At seventy-five percent (75%) of current new price as determined
by Paragraph A.
The cost of reconditioning, if any, shall be absorbed by the
transferring property.
C. Other Used Material
1. Condition C
Material which is not in sound and serviceable condition and
not suitable for its original function until after reconditioning
shall be priced at fifty percent (50%) of current new price as
determined by Paragraph A. The cost of reconditioning shall be
charged to the receiving property, provided Condition C value
plus cost of reconditioning does not exceed Condition B value.
2. Condition D
Material, excluding junk, no longer suitable for its
original purpose, but usable for some other purpose will be
priced on a basis commensurate with its use. The Operator may
dispose of Condition D Material under procedures normally used by
Operator without prior approval of Non-Operators.
(a) Casing, tubing, or drill pipe used as line pipe shall
be priced as Grade A and B seamless line pipe of
comparable size and weight. Used casing, tubing or
drill pipe utilized as line pipe shall be priced at
used line pipe prices.
(b) Casing, tubing or drill pipe used as higher pressure
service lines than standard line pipe, e.g. power oil
lines, shall be priced under normal pricing procedures
for casing, tubing, or drill pipe. Upset tubular goods
shall be priced on a non upset basis.
3. Condition E
Junk shall be priced at prevailing prices. Operator may
dispose of Condition E Material under procedures normally
utilized by Operator without prior approval of Non-Operators.
D. Obsolete Material
Material which is serviceable and usable for its original
function but condition and/or value of such Material is not equivalent
to that which would justify a price as provided above may be specially
priced as agreed to by the Parties. Such price should result in the
Joint Account being charged with the value of the service rendered by
such Material.
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E. Pricing Conditions
1. Loading or unloading costs may be charged to the Joint
Account at the rate of twenty-five cents (25(cent)) per
hundred weight on all tubular goods movements, in lieu of
actual loading or unloading costs sustained at the stocking
point. The above rate shall be adjusted as of the first day
of April each year following January 1, 1985 by the same
percentage increase or decrease used to adjust overhead
rates in Section III, Paragraph 1.A.3. Each year, the rate
calculated shall be rounded to the nearest cent and will be
the rate in effect until the first day of April next year.
Such rate shall be published each year by the Council of
Petroleum Accountants Societies.
2. Material involving erection costs shall be charged at
applicable percentage of the current knocked-down price of
new Material.
3. PREMIUM PRICES
Whenever Material is not readily obtainable at published or listed
prices because of national emergencies. strikes or other unusual causes
over which the Operator has no control, the Operator may charge the Joint
Account for the required Material at the Operator's actual cost incurred in
providing such Material, in making it suitable for use, and in moving it to
the Joint Property; provided notice in writing is furnished to
Non-Operators of the proposed charge prior to billing Non-Operators for
such Material. Each Non-Operator shall have the right, by so electing and
notifying the Operator within ten (10) days after receiving notice from the
Operator, to furnish in kind all or part of his share of such Material
suitable for use and acceptable to the Operator.
4. WARRANTY OF MATERIAL FURNISHED BY OPERATOR
The Operator does not warrant the Material furnished. In the case of
defective Material, credit shall not be passed to the Joint Account until
adjustment has been received by the Operator from the manufacturers or
their agents.
V. INVENTORIES
The Operator shall maintain detailed records of Controllable Material.
1. PERIODIC INVENTORIES, NOTICE AND REPRESENTATION
At reasonable intervals, inventories shall be taken by the Operator of
the Joint Account Controllable Material. Written notice of intention to
take inventory shall be given by the Operator at least thirty (30) days
before any inventory is to begin so that Non-Operators may be represented
when any inventory is taken. Failure of Non-Operators to be represented at
an inventory will be deemed to be an admission of consent to the accuracy
of the inventory count and thereby be binding on the Non-Operators who will
thereby be deemed to have accepted the inventory taken by Operator.
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2. RECONCILIATION AND ADJUSTMENT OF INVENTORIES
Adjustments to the Joint Account resulting from the reconciliation of
a physical inventory shall be made within six months following the taking
of the inventory. Inventory adjustments shall be made by Operator to the
Joint Account for overages and shortages, but, Operator shall be held
accountable only for shortages due to lack of reasonable diligence.
3. SPECIAL INVENTORIES
Special inventories may be taken whenever there is any sale, change of
interest, or change of the Operator in the Joint Property. It shall be the
duty of the party selling to notify all other Parties as quickly as
possible after the transfer of interest takes place. In such cases, both
the seller and the purchaser shall be governed by such inventory. In cases
involving a change of the Operator, all Parties shall be governed by such
inventory.
4. EXPENSE OF CONDUCTING INVENTORIES
A. The expense of conducting periodic inventories shall not be
charged to the Joint Account unless agreed to by the Parties.
B. The expense of conducting special inventories shall be charged to
the Parties requesting such inventories, except inventories
required due to change of Operator shall be charged to the Joint
Account
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EXHIBIT "B"
STATUTORY INDEMNITY LIMITATIONS WHERE APPLICABLE
In the event this Master Contract Operating Agreement is subject to the
indemnity limitations of any applicable State law, and so long as that law is in
force, then it is agreed that the above obligations to indemnify are limited to
the extent allowed by law and by the amount of insurance in place. Additionally,
the parties agree that:
1. In the event that this Master Contract is subject to the indemnity
limitations of Act 427 of the 1981 Louisiana Legislature (R.S. 9:2780),
and so long as that act is in force, each Party agrees to defend,
indemnify, save and hold the other party harmless from and against all
claims and causes of action to the extent such arise out of the
indemnifying party's negligence, gross negligence, strict liability or
breach of contract.
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EXHIBIT "C"
ACCOUNTING PROCEDURES FOR JOINT OPERATIONS
Obligations, duties responsibilities, activities and tasks assigned to, and
assumed by, MRI and OPS, respectively, as contemplated or addressed in any
Operating Agreement related to any Work designated, assigned and accepted under
the Contract:
I. OPS GROUP LIMITED
a. All drilling operations, and related obligations and tasks, related to
any Work or well site, including the initial drilling and all
subsequent drilling operations.
b. All completion operations and activities, and all related obligations
and tasks.
c. All production operations and activities, and all related obligations
and tasks, including without limitation the following:
i. Maintaining online production database.
ii. All necessary maintenance and operations for production.
iii. All necessary field supervision. iv. All necessary pumping
services.
v. Calculating, reporting and paying revenue based production taxes.
vi. Resolving tax agency inquiries for reporting or payment
issues related to production. vii. Host all tax audits related to
production and related taxes.
d. Day to day operation and maintenance of any xxxxx and related
facilities, including without limitation all operational cost
accounting and other general accounting functions.
e. All workover operations and activities, and all related obligations
and tasks.
f. Acquiring or constructing, and maintaining, all facilities and
equipment necessary for all Work and obligations hereunder g.
Acquiring and maintaining all materials and supplies necessary for all
Work and obligations hereunder h. Collection of all moneys for
operations, with timely notice to MRI of any shortfalls i.
Distribution of revenues and payments according to all division orders
and related instructions communicated to OPS by MRI j. Making all
joint interest xxxxxxxx according to all division orders and related
instructions communicated to OPS by MRI k. Notifying MRI, in a timely
manner, of any shut-in situations or similar issues that affect any
revenue distributions or joint interest xxxxxxxx.
l. All regulatory work and all necessary filings and notices with
relevant governmental bodies in connection with the Work, including
without limitation:
i. Preparing and filing monthly reports.
ii. Preparing and overseeing preparation of other required regulatory
reports and filings.
II. MRI
a. All initial, pre-drilling geological, land, legal and promotional work
related to a prospect, including any participation agreements, the
operating agreement and any initial drilling AFE
34
b. Sales and marketing of any produced or anticipated product, including
midstream work, as well as all related activities and tasks, unless
such duties are assigned to and assumed by OPS by the express mutual
consent of the parties
c. Acquisition and Administration of mineral leases, including land work,
title work, curative work, legal analysis, responsibility for
unitization, division orders and related calculations, making lease
rentals and payments, making shut-in or similar payments, and all
other landowner relations-type obligations and tasks
d. Making timely and accurate notification to OPS of all division orders,
property interest information and other related information as may be
necessary for OPS to make accurate and timely distributions of money
and royalties
e. Making timely and accurate notification to OPS of all information
necessary for OPS to make timely and accurate joint interest xxxxxxxx
f. Establishing and maintaining appropriate contact with, and flow of
information to, working interest owners, except for the actual payment
of distributions, the collection of money for operations, the making
of joint interest xxxxxxxx, and other such tasks expressly assigned to
and assumed by OPS
35
EXHIBIT "D"
INSURANCE MATTERS
1. The Operator shall carry at least the following insurance with a
proportionate part of the premiums on such insurance determined on an
equitable basis consistent with Operator's accounting practice, to be
charged to the Joint Account:
A. Worker's Compensation and Employer's Liability Insurance - unless
waived in accordance with applicable law.
Coverage A - Statutory in accordance with the laws of the State of
_______________ and every other State or jurisdiction where the
Operator is providing materials and services to any Work or Operation
pursuant to this Master Contract.
Coverage B - Employer's Liability Insurance - $5,000,000.00 each
accident.
B. Business Auto Policy - $5,000,000 Combined Single Limit for Bodily
Injury Liability and/or Property Damage Liability.
C. Comprehensive General Liability Policy - $5,000,000 each occurrence
limit.
D. Umbrella Liability Insurance and/or Excess Liability Insurance -
$19,000,000 excess of the applicable underlying limits.
E. Energy Exploration and Development Insurance
Section A - Control of Well Insurance
Section B - Redrilling/Extra Expense Insurance
Section C - Seepage and Pollution, clean up and Contamination
Insurance
$20,000,000 combined Single Limit of Liability in respect of 100%
interest any one occurrence.
In lieu of participating in the Energy Exploration and Development
Insurance purchased by Operator, any party hereto shall have the
option to furnish its own insurance with coverage limits equal to or
exceeding the limits set out above. Prior to commencement of
operations, Operator shall notify Non-Operators of the intended
commencement date and they shall have the opportunity to provide
evidence of insurance to Operator. Operator shall purchase insurance
for those parties not electing to furnish their own insurance and
shall xxxx costs of such insurance proportionately based on the
interests of the parties participating in same.
2. Operator shall not carry physical damage insurance for the benefit of the
Joint Account covering loss of or damage to the jointly owned property or
production therefrom caused by fire, theft, explosion, windstorm, tornado,
flood, vandalism, malicious mischief, or other extended perils, and the
Joint Account shall be charged with all loss and expenditures caused or
incurred as the result thereof or as the result of any other casualty for
which Operator is not required to carry insurance hereunder. Operator shall
not be liable to non-operator for any loss suffered on account of any
errors, omissions, and the insufficiency of the insurance carried nor of
the insurers with whom carried.
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EXHIBIT "E"
SERVICES INCLUDED IN OVERHEAD FEE SCHEDULE
I. REGULATORY
o Prepare and file monthly production reports.
II. PRODUCTION
o Maintain online production database
o Provide pumping services
III. ENGINEERING
o Provide engineering production review and monitoring on each well
IV. ACCOUNTING
A. REVENUE
1. REVENUE BOOKINGS/DISTRIBUTIONS
o Verify payments from purchasers in accordance with marketing
arrangements.
o Reconciliation of bookings to cash receipts.
o Maintain revenue allocation schedules and record actual
revenues.
o Process monthly payments to owners.
o Maintain revenue & royalty suspense records. o Image
appropriate system generated reports.
2. PRODUCTION TAXES
o Calculate, report, and pay revenue-based production taxes.
o Resolve tax agency inquiries for reporting or payment issues
(after contract date).
o Host tax audits.
B. OPERATIONAL COST ACCOUNTING
o Identify and book billable charges.
o Process material transfers prepared by field personnel.
o Approval and coding of invoices
o Process invoices and payments including check printing and
mailing.
o Process ad valorem tax payments.
o Host and respond to Joint Interest audits.
37
o Identify and record JIB corrections.
o Perform month-end AP processing and joint interest billing.
o Complete 1099 forms and distribute as required.
o Enter Revenue and Working Interest changes per Company's
written instructions.
C. GENERAL ACCOUNTING
o Generate Monthly System Financial Statements.
V. INSURANCE
o Liability insurance as required in Xxxxxxx X 0.X, X, X, and
D.
Items not included in Overhead Fees are billed separate at prevailing rates as
they occur
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EXHIBIT E (CONTINUED)
OPS GROUP LIMITED
OPERATING OVERHEAD FEE SCHEDULE
There will be a one time set up fee of $400.00 per well. Thereafter a flat rate
per month per well will be charged for all services as described above related
to the ongoing operation of the well based on its operational status as follows:
1. Producing Rate Land $ 1800 + Pumper Cost
2. Producing Rate Inland Waters $ 2600 + Pumper Cost
3. Artificial Lift Add $25 per month
4. Horizontal Add $25 per month
5. Extreme Conditions Add $25 per month
6. Hazardous Conditions Add $50 per month
7. Each 10 Owners Add $25 per month
8. Shut-In $ 800 + Pumper Cost
9. Compressor on location Add $100 per month
10. Compressor Station At Producing Well Rate
11. Central Tank Battery or Facility At Producing Well Rate
12. Drilling, Completion, Recompletion, Workover, Total Producing Rate times
or other rigless well work and Major 10 (does not include pumper
Construction cost)
13. Pipeline To be Determined
Extreme conditions are defined as deeper than 10,000' MD or HTHP.
Hazardous Conditions include H2S and excessive XX0 (x0%) and other hazardous
environments.
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