Common use of Drilling Commitment Clause in Contracts

Drilling Commitment. a. Subject to the occurrence of Closing, MHR and NGAS agree that they shall cause MHR, NPC and their respective Affiliates, to spend, in the aggregate, a minimum of $20 million (net of general, administrative, and supervision costs) during the remainder of calendar year 2011 subsequent to Closing and a minimum of $20 million (net of general, administrative, and supervision costs) during calendar year 2012 on commencing drilling and the actual completing of new horizontal gas ▇▇▇▇▇ during each such calendar year, on the Committed Reserve Area, as defined in the NAESB Purchase Agreement (including operations to rework, sidetrack, deepen, recomplete or plug back such new horizontal gas ▇▇▇▇▇) (“New Well Drilling Expenditures”). In the event drilling commences on a new horizontal gas well in either calendar year 2011 or calendar year 2012 and such well is actually completed in the first sixty (60) days of calendar year 2012 or the first forty-five (45) days of calendar year 2013, the costs of the actual drilling and completing of such well shall be credited to the minimum of the applicable calendar year and captured in the applicable Annual Statement described below. Further, credit against the 2011 minimum will also be provided for the cost of the actual drilling and completing of new horizontal gas ▇▇▇▇▇ by MHR, NPC and their respective Affiliates during calendar year 2011, but prior to Closing, where the drilling activity on a well commenced on or after January 1, 2011 and where prior to Closing SES receives a schedule and supporting documentation (including, but not limited to third party invoices), together with a certification by an authorized officer, of the actual out of pocket costs for drilling and completing of such new horizontal gas as of Closing. For the avoidance of doubt and notwithstanding the completion date, in no event shall such new horizontal gas ▇▇▇▇▇ be considered “Existing ▇▇▇▇▇” as such term defined in the Gathering Agreement. b. Within ninety (90) days after the end of calendar year 2011 and seventy-five (75) days after the end of calendar year 2012, MHR shall provide SES with a statement of the total New Well Drilling Expenditures by MHR, NPC and its Affiliates during such year (“Annual Statement”). For each year in which such New Well Drilling Expenditures are less than $20 million, within ninety (90) days after the end of calendar year 2011 and seventy-five (75) days after the end of calendar year 2012, MHR shall pay to SES, by wire transfer of immediately available funds, as the Seminole Parties’ sole and exclusive remedy, an amount equal to the product of (i) the difference between $20 million and actual New Well Drilling Expenditures during such year and (ii) fifteen percent (15.0%). c. MHR shall, for two (2) years after the end of each such calendar year, maintain records and other evidence sufficient to accurately and properly reflect the New Well Drilling Expenditures. Upon not less than five (5) business days’ prior notice to MHR, SES and its representative shall have access to such records in the applicable offices of MHR or its affiliates during MHR’s normal business hours, including the right to make copies thereof at SES’s expense, for the purpose of auditing and verifying the accuracy of any Annual Statement. Any such audits performed by or on behalf of SES shall be at SES’s sole cost and expense.