Common use of Cost Recovery and Production Sharing Clause in Contracts

Cost Recovery and Production Sharing. 10.1 For purposes of Cost Recovery and Production Sharing, ring fencing around each Contract Area shall apply. In the event that a Licensee has more than one Contract Area, the calculations shall be done on a contract by contract basis. There shall be no consolidation. 10.2 All exploration, development, production and operating expenditures, as defined in Annex C, incurred by the Licensee shall be recovered from 50% of gross oil production after deduction of the Royalty specified in paragraph 9. 1. Cost recovery in respect of gas production will be negotiated upon the discovery of gas. 10.3 After the cost recovery specified in paragraph 10.2 the following Government/Licensee split will apply on the remaining total daily production (profit oil), Production BOPD Government Production Share Licensee Production Share (i) Where production does not exceed 5.000 50% 50% (ii) Where production is higher than 5000 but does not exceed 10,000 55% 45% (iii) Where production is higher than 10,000 but does not exceed 20,000 60% 40% (iv) Where production is higher than 20.000 but does not exceed 30.000 65% 35% (v) Where production is higher than 30.000 but does not exceed 40.000 75% 25% (vi) Where production is higher than 40,000 85% 15% 10.4 The Government/Licensee profit oil split is based on total production and not on incremental production. 10.5 The calculation for the Government/Licensee split shall be based on monthly production. 10.6 The Government shall receive its share of profit oil in kind or in cash depending on its (Government) preference. The valuation shall be in accordance with Article 12. 10.7 The Licensee shall carry forward to subsequent years all unrecovered costs until full recovery is completed 10.8 Not less than thirty (30) days. prior to the beginning of each Calendar Year, Licensee shall prepare and furnish to the Government for approval, which approval shall not be unreasonably withheld, an estimate by Quarters for the forthcoming Calendar Year of (i) all Contract Revenues and Contract Expenses to be incurred, (ii) Income Tax of Licensee (or each entity comprising Licensee, as the case may be) in respect of taxable income derived from Petroleum Operations carried out hereunder, for such Calendar Year. Such estimate shall be consistent with the forecast statement furnished pursuant to paragraph 7.8 and the annual Work Programme Budget approved by the Advisory Committee pursuant to Article 5. and shall set forth the other assumptions and projections upon which it is based. Quarterly updates of such estimate shall be submitted by Licensee to the Government for approval (which approval shall not be unreasonably withheld) within thirty (30) days after the end of each Quarter.