JOINT EXPLORATION AGREEMENT BURR”C” PROJECT MAVERICK COUNTY, TEXAS
Exhibit
10.1
▇▇▇▇”C”
PROJECT
MAVERICK
COUNTY, TEXAS
This
Joint Exploration Agreement, hereinafter referred to as (“the Agreement”), is
made and effective December 30, 2008, by and between TXCO ENERGY CORP., whose
address is ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
hereinafter called “TXCO” and MILLENIUM E&P RESOURCE FUND I,
LLC whose address is ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ,
▇▇▇▇▇▇▇ ▇▇▇▇▇ hereinafter called “Millenium”.
WITNESSETH:
WHEREAS,
TXCO is the owner of that certain oil and gas lease dated January 15, 2003 from
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Lessor and The Exploration Company, as Lessee, a
Memorandum of Oil and Gas Lease being recorded in Book 717, Page 351, of the
Official Public Records of Maverick County, Texas, covering lands in Maverick
County, Texas (the “Lease”). The following described lands which are included in
the Lease are hereinafter referred to as the ‘Project Area”, to
wit:
|
|
a)
|
All
of Survey ▇▇, ▇-▇▇▇, ▇.&▇.▇.▇.▇. ▇▇. ▇▇▇. No. 4;
and
|
|
|
b)
|
All
of Survey ▇▇, ▇-▇▇▇, ▇.&▇.▇.▇.▇. ▇▇. ▇▇▇. No. 4;
and
|
|
|
c)
|
All
of Survey ▇▇, ▇-▇▇▇, ▇.&▇.▇.▇.▇. ▇▇. ▇▇▇. No. 4;
and
|
|
|
d)
|
All
of Survey 231½, A-1143, S.R. ▇▇▇▇▇▇▇▇ original
grantee
|
WHEREAS,
Millenium desires to participate in the drilling of an “Initial Well” to be spud
before January 31, 2009, with the option to participate in two (2) additional
▇▇▇▇▇ (Option Well), to test the Georgetown formation on the Project Area and
earn an assignment(s) of certain leasehold rights in and to the
Lease.
NOW
THEREFORE, for Ten and No/100 dollars ($10.00) and other good and
valuable consideration including but not limited to the premises and the mutual
covenants herein contained, the receipt and sufficiency of which are mutually
acknowledged, the parties hereto agree as follows:
TERMS OF THE
AGREEMENT
1. Consideration. On
or before December 31, 2008, Millenium will pay to TXCO Energy Corp in
immediately available funds, by wire transfer to the account designated by TXCO,
the sum of $825,000.00 (“Initial Funds”) being comprised of a prospect fee of
$75,000.00 and the estimated cost of $750,000.00 to drill and complete the
Initial Well to the point of first sales.
2. Joint
Operating
Agreement. TXCO and
Millenium shall enter into a Joint Operating Agreement in the form attached
hereto as Exhibit “A”, designating TXCO Resources Inc. as
Operator. Said operating agreement will separately cover all
operations on each proration area around the earning well. To the
extent, if any, the terms of the Joint Operating Agreement differ from the terms
of this Agreement, this Agreement shall control.
3. Option
▇▇▇▇▇.
(a)
Within 30 days following the completion of the Initial Well, TXCO shall select a
drillsite location within the Project Area for the drilling of the First Option
Well and issue an Authority for Expenditure (“AFE”) to Millenium for the
estimated cost of the drilling and completing the First Option Well. Should
Millenium elect to participate in the First Option Well such election shall
be
confirmed
by the payment to TXCO, in advance, of One Hundred Percent (100%) of the
estimated cost to drill and complete the First Option Well (“Election Payment”).
The Election Payment shall be due to TXCO within fifteen (15) days of
Millenium’s receipt of the proposal and AFE for the First Option
Well.
(b)
Should Millenium have elected to participate in the First Option Well and
completed payment of all costs to drill and complete such well to the point of
first sales, then Millenium shall have the option to participate in the Second
Option Well at a location selected by TXCO, with the presentation to and
election by, Millenium in the same manner as the First Option Well.
4. Assignment. Upon
the participation by Millenium in the Initial Well (or Option well as provided
in Paragraph 3.) (or substitute well or ▇▇▇▇▇, as provided for in Paragraph 5),
and Millenium’s payment of 100% of the cost to drill and complete the respective
well to the point of first sales, TXCO agrees to execute and deliver to
Millenium, an Assignment in the form attached hereto as Exhibit “B”, covering an
undivided Fifty percent (50.00%) of the leasehold estate and working interest in
and to the Lease limited to the acreage assigned to each well for proration
purposes, including such additional acreage as is allowed by Rule 86 of the
Railroad Commission of Texas for horizontal ▇▇▇▇▇ “Earned Acreage”, and further
limited to the depths from the surface to the base of the Georgetown
Formation. The assignment shall be subject to the terms of this
agreement, the lessor’s royalty and overriding royalties or other burdens on The
Lease of record on the date of this Agreement which total twenty-six percent
(26%).
5. Substitute
Well. If before the
total depth is reached in the Initial Well or Option Well, the Operator
encounters any condition, including, but not limited to, loss or partial loss of
circulation, water flow, domal formation, abnormal pressures, heaving shale or
other similar conditions or impenetrable substances or mechanical difficulties
which preclude further drilling using normal procedures, the Operator shall have
the right, but not the obligation, to commence, or cause to be commenced,
operations for the drilling of a substitute well, hereinafter referred to
as “Substitute Well”, within 60 days after drilling
has ceased, at a location selected by TXCO in the Project Area, and the drilling
of such Substitute Well or ▇▇▇▇▇ shall be deemed to be a continuation of the
drilling operations on such Well. The drilling of further substitute
▇▇▇▇▇, if necessary, shall be a continuing option under the terms of this
Agreement.
6. Reserved
Depths and
Acreage. Millenium
recognizes and acknowledges that TXCO reserves all depths below the Georgetown
Formation in and to the Lease and Project Area (and any lands not
included in the Earned Acreage) from the terms of this agreement, together with
the right to drill, explore, develop and produce oil, gas and other minerals
from the reserved depths. The term “Georgetown Formation” being
defined as that certain correlative interval between the depths of 2,300 feet
and 2,977 feet as seen on the electric log of the TXCO ▇▇▇▇ “C” #1-53 well (API
No. 42-323-32749), located in Maverick County, Texas.
7. Partnership
Status. This Agreement shall not
constitute any mining partnership, commercial partnership, or other partnership
or relation or joint venture, and the liabilities of each of the parties hereto
shall be several and not joint.
8. Controlling
State Law. This
Agreement is entered into in the State of Texas, and all matters relating to the
validity, construction, interpretation, and performance hereunder shall be
determined in accordance with the laws of the State of Texas. It is
further understood and agreed between the Parties hereto
that all
sums due and payable to TXCO hereunder, are due and payable to TXCO at TXCO’s
office in San Antonio, Bexar County, Texas.
9. Further
Assurance. Millenium and
TXCO shall execute and deliver any and all such other and additional instruments
and to any and all further actions as may be reasonably necessary to fully and
effectively carry out the purposes of this Agreement.
10. Headings
for Convenience. The paragraph
headings used in this Agreement are inserted for convenience only, and shall be
disregarded in construing this Agreement.
11. Warranties. TXCO
makes no warranty, either expressed or implied with respect to its ownership of
the leasehold mineral estates or net revenue interests contributed hereto,
except to claims made by, through and under TXCO, but not
otherwise.
12. Time. The
parties hereto stipulate and agree that time is of the essence of the
performance of all terms, duties, obligations and provisions of this
Agreement.
13. Binding
Effect. The terms and
provisions of this Agreement shall be covenants running with the land affected
hereby and shall inure to the benefit of and be binding upon the parties hereto,
their respective heirs, devisees, personal representatives, successors, and
assigns.
14. Entire
Agreement. The
foregoing sets forth the entire agreement between the parties hereto, and there
are no verbal or oral agreements between the parties, in connection with the
Assigned Premises, not set out herein in writing. All written or oral
agreements or representations of either party which were made prior to the date
this Agreement is executed by both parties are hereby superseded and replaced by
this Agreement.
15. Execution. Millenium
shall indicate Millenium’s approval and acceptance of the terms and conditions
herein set forth by signing this Agreement in the space provided below, and
returning one (1) fully executed original of this Agreement to TXCO at its San
Antonio offices, at which time, subject to the receipt by TXCO of the Initial
Funds, this Agreement shall become effective and binding upon the parties
hereto. Facsimile signatures to this Agreement shall be deemed to
have the same binding effect as original signatures.
IN WITNESS
WHEREOF, the Agreement is executed effective this 30th day of
December 2008.
TXCO
RESOURCES, INC.
TXCO
ENERGY CORP.
By: /s/ ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇,
President
MILLENIUM
E & P RESOURCES FUND I, LLC
By: /s/ ▇▇▇▇▇▇
Pick
▇▇▇▇▇▇ Pick, CFO