EXHIBIT 10.19
PARTICIPATION AGREEMENT
▇▇▇▇▇ ▇▇▇▇▇ Extension Prospect
THIS AGREEMENT, made and entered into this 5th day of September, 2000,
by and between Oceanic Exploration Company, whose address is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as
"Oceanic"), and Mariah Energy, L.L.C., whose address is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as "Mariah"), and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, whose address is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ (hereinafter referred to as "▇▇▇▇▇▇"). Oceanic, Mariah and ▇▇▇▇▇▇ may
sometimes be collectively referred to as the "Parties".
WITNESSETH:
WHEREAS, Mariah and ▇▇▇▇▇▇ represent that they have entered into a
certain Farmout Contract dated March 14, 2000, as amended, with Presco Western,
L.L.C. (hereinafter referred to as "Presco") covering Presco's rights in the
following lands in ▇▇▇▇▇▇ County, Kansas (hereinafter the "Farmout Contract"):
Township 23 South, Range 34 West
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Section 3: S/2
Section 4: ▇▇▇▇ ▇, ▇, ▇, ▇, ▇/▇▇/▇, S/2 (All)
Section 10: N/2
A copy of the Farmout Contract and all amendments thereto is attached hereto and
made a part hereof as Exhibit "A"; and
WHEREAS, Oceanic desires to acquire an interest in the Farmout
Contract, and the lands covered thereby, and participate in the drilling of an
exploration test well; and Mariah desires to sell Oceanic an interest in the
Farmout Contract, and allow Oceanic to participate in the drilling of the
exploration test well, all subject to the terms of this agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions hereinafter set forth and other good and valuable consideration, the
Parties agree as follows:
1 Oceanic agrees to purchase a 75% interest in the Farmout Contract for a
consideration payable to Mariah Energy, L.L.C. in the amount of $35.00
per net acre covered by the Farmout Contract, or an amount of
$33,600.00 (1,280.00 net acres X $35.00 per acre X 75%). The above
consideration shall be paid to Mariah within five days after execution
of this agreement.
2 Obligation Test Well.
a) As a further consideration of this
Participation Agreement,
Oceanic hereby agrees to participate in the drilling and
testing of an exploration test well to be drilled at a legal
location in the SE/4SE/4 Section 4, Township 23 South, Range
34 West, ▇▇▇▇▇▇ County, Kansas (hereinafter the "Obligation
Test Well") to the full extent of Oceanic's working interest
in the Farmout Contract. Such Obligation Test Well shall be
commenced on or before December 15, 2000, and thereafter
drilled to a depth of 4,900 feet, or to a depth sufficient to
adequately test (in Presco's opinion), the St. Louis
formation, whichever is the lesser depth (hereinafter
"Contract Depth"). Oceanic agrees and covenants to pay and
discharge 75% share of the costs incurred in the Obligation
Test Well. The Parties hereby agree that all operations
conducted in the drilling of the Obligation Test Well, will be
conducted pursuant to the terms of the Operating Agreement
attached as Exhibit "D" to the Farmout Contract, including
each Parties right to make a casing point election.
b) In the event the Operator is unable to drill the Obligation
Test Well to the Contract Depth, due to mechanical or other
difficulties beyond the reasonable control of Operator, then
Operator shall plug and abandon such well in accordance with
all applicable State regulations and shall, within fifteen
(15) days thereafter commence a substitute test well within
the same governmental quarter-quarter section or at such other
location mutually acceptable to all Parties (hereinafter
"Substitute Test Well") and thereafter drill such Substitute
Test Well to the Contract Depth pursuant to the Farmout
Contract such that the Substitute Test Well is deemed to be
the Obligation Test Well.
3 Optional Test ▇▇▇▇▇.
a) Following the drilling of the Obligation Test Well, any Party
hereto may propose the drilling of an additional test well or
▇▇▇▇▇ on the lands covered by the Farmout Contract
(hereinafter an "Optional Test Well"). Any Party proposing to
drill an Optional Test Well shall (i) make such proposal
subject to the terms of the Farmout Contract, and (ii) shall
submit a written proposal to the all other Parties, specifying
the work to be performed, the location of the proposed well,
the proposed depth, objective zone, and the
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estimated cost of the operation. A proposal to drill an
Optional Test Well shall be made, and elections by the Parties
governed, pursuant to Article VI of the applicable Operating
Agreement. Notwithstanding anything contained to the contrary
in the applicable Operating Agreement, in the event Oceanic
elects not to participate in any such proposal it shall be
deemed to have relinquished to the participating Party(ies),
upon commencement of the Optional Test Well:
(i) in the event such Test Well is completed as a well
capable of producing oil and casinghead gas and has a
gas-oil ratio of less than 15,000 to 1, all of such
non-participating Party's right, title and interest
in and to a stand up or lay down contiguous eighty
(80) acre tract of land, as designated by the
participating Party(ies), situated in the
governmental section upon which the Test Well is
drilled under the Farmout Contract, plus one
additional contiguous eighty (80) acre tract of land
as designated by the participating Party(ies); or
(ii) in the event such Test Well is completed as a well
capable of producing gas and associated liquid
hydrocarbons and has a gas-oil ratio equal to or
greater than 15,000 to 1, all of such
non-participating Party's right, title and interest
in and to a stand up or lay down contiguous three
hundred and twenty (320) acre tract of land, as
designated by the participating Party(ies), situated
in the governmental section upon which the Test Well
is drilled under the Farmout Contract.
(iii) in the event such Test Well is plugged and abandoned
as a dry hole there shall be no acreage
relinquishment by the non participating Party.
b) Without the written consent of all Parties hereto, no Party
may propose the drilling of a Optional Test Well if another
proposal to drill a well has been made by a Party covering
lands covered by the Farmout Contract, or if another well is
currently drilling or completing on lands covered by the
Farmout Contract.
4 Operating Agreement.
a) The Operating Agreement attached as Exhibit "D" to the Farmout
Contract (hereinafter referred to as the "Presco Operating
Agreement") shall govern joint operations as all lands subject
to the Farmout Contract. Upon the Parties execution of this
Participation Agreement such Presco Operating Agreement shall
become effective as between the Parties hereto and shall apply
to the lands described above on a Spacing Unit, as hereinafter
defined, by Spacing Unit basis. A separate Operating Agreement
will not be executed for each individual Spacing Unit unless
one of the Parties hereto so requests, however, prior to
commencement of each well drilled hereunder the Operator will
provide each Party with an Exhibit "A" to the Operating
Agreement for the Spacing Unit on which the well is situated.
A Spacing Unit shall mean the area of land earned by
completion of a producing Test Well under the Farmout
Contract. Mariah, or its designee, shall be designed as
Operator under the Presco Operating Agreement, and in such
capacity shall operate the drilling of all Test ▇▇▇▇▇ on lands
subject thereto.
b) In the event there is a conflict between the terms of this
Participation Agreement and the terms of the Operating
Agreement, Parties acknowledge and agree that the terms of
this
Participation Agreement shall control and prevail.
5 An Area of Mutual Interest (hereinafter referred to as "AMI") is hereby
established by the Parties which shall consist of the following lands:
Township 23 South, Range 34 West, ▇▇▇▇▇▇ County, Kansas
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Section 3: S/2
Section 4: ▇▇▇▇ ▇, ▇, ▇, ▇, ▇/▇▇/▇, ▇/▇
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The term of this AMI shall commence as of the date first
written above and extend for a period ending December 31,
2001, unless earlier terminated in writing by the Parties
hereto.
In the event a Party to this
Participation Agreement (the
"Acquiring Party") acquires an oil and/or gas interest within
this area, including, but not limited to, lease purchases,
royalty or mineral interests, farmouts, farmins, options to
farmout or farmin, acreage contributions, bottom hole purchase
agreements, or any other type of acreage acquisition or
support of any kind, the other Party(s) hereto ("Offeree")
shall be entitled to acquire an interest in such acquisition
in the same proportion as his or its ownership set forth
below, upon payment of its proportionate part of the actual
costs of acquiring same. The Acquiring Party shall notify
Offeree of the acquisition, and send all copies of pertinent
information, setting forth the bonus costs of such acquisition
and other significant costs and terms thereof. The Offeree
shall have a period of thirty (30) days after receipt of
notice within which to elect to participate in the
acquisition. If, however, a well is then being drilled on
lands subject to this Agreement, the Acquiring Party shall so
advise the Offeree and the election must be made within
forty-eight (48) hours of receipt of notice, inclusive of
Saturdays, Sundays, and holidays.
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A Party electing to acquire its share of the acquisition shall
also bear the direct actual associated costs of acquiring the
interest in the proportion that the interest it acquires bears
to the whole acquisition.
If the Acquiring Party has not received an Offeree's election
within the period provided for above, said Offeree shall be
deemed to have elected not to participate in the acquisition.
Each Offeree accepting the offer shall be entitled, but not
obligated, to participate in a non-participating Offeree's
interest in the proportion that each participating Offeree's
interest bears to the total interest of all participating
Parties, including the Acquiring Party. An Offeree who elects
not to participate, or is deemed to have elected same, shall
have no further rights to such acquired interest. The acquired
interest shall be subject to the terms of the
Participation
Agreement and the Operating Agreement (with appropriate
interest adjustments in the event less than all parties
elected to participate). In the event an interest acquired
hereunder is subject to the terms of a separate operating
agreement, such interest shall not be subject to the terms of
the Operating Agreement.
Notwithstanding anything to the contrary herein contained,
when any acreage contribution, as set forth under Article
VIII.C. of the Operating Agreement, is contingent upon the
completion of any one or more operations in which all of the
Parties hereto do not participate through the earning of such
contribution, the contribution shall belong solely to the
Party or Parties who participated in all steps of the
operation containing such condition precedent and any Party
not participating in all steps of such condition precedent
shall not receive any part of such contribution.
In the event there is a conflict between the ownership
percentages shown in the County records as to any Party's
interest in any leases within the AMI set forth above and the
interest set forth in this
Participation Agreement and/or the
applicable Operating Agreement, then all Parties involved will
execute such assignments, other instruments, or further
assurances as are necessary to establish the ownership in the
leases as set forth in this Agreement. The interest of the
Parties to this Agreement are as follows:
Mariah 12.50%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 6.25%
Oceanic 75.00%
Other parties 6.25%
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Total 100.00%
6 The liabilities of the Parties hereunder shall be several, not joint or
collective. It is not the intention of the Parties to create, nor shall
this Agreement be deemed as creating, a mining, tax or other
partnership or association or to render the Parties liable as partners.
Each Party shall be responsible only for its obligations hereunder and
nothing contained in this
Participation Agreement shall be deemed to
create a partnership or agency relationship between the Parties. No
Party hereto shall represent to third Parties or lead third parties to
believe that such Party is the agent of any other Party hereto.
7 Gas Marketing.
a) In the event that pursuant to the Presco or Amoco Operating
Agreements any Party markets any other Party's share of
production from any well subject to this Agreement, the Party
marketing such production, and subject to the marketing
Party's receipt of an executed indemnifying Division Order,
shall (i) prior to its receipt of a Division Order Title
Opinion, remit the estimated net revenue share to any Parties
for whom it is marketing production on the basis of an
estimated division order deck within thirty (30) days of its
receipt of proceeds; and (ii) following its receipt of a
Division Order Title Opinion, make distribution of the working
interest net revenue share, and the royalty, and overriding
royalty interest burdening such Party within thirty (30) days
of the marketing Party's receipt.
b) In the event that pursuant to the Operating Agreement any
Party hereto markets any other Party's share of production
from any test well drilled on lands subject to this
Participation Agreement to its ultimate parent company
("Parent") or an affiliate (An "affiliate" shall mean any
corporation, company or other entity in which a Party or its
Parent owns directly at least 50% of the issued shares
entitled to vote at a general meeting of shareholders), the
price received for such production shall not be less than the
prevailing price paid in the area for similar production by
third party purchasers, and fuel charges, compression,
transportation and gathering charges, if any apply, shall not
exceed the prevailing charges for such services in the area
offered by third party purchasers.
10 MISCELLANEOUS
a) Notices. All notices and other communications required or
permitted hereunder shall be deemed to have been properly
delivered if personally handed to an authorized representative
of the Party for whom intended, or sent by registered air
mail, or by Federal Express or DHL courier service, or by
facsimile to such Party at its address listed below. Notices
will be effective only upon receipt.
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Mariah Energy, L.L.C.
Oceanic Exploration Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
b) Oceanic represents and warrants that (i) Oceanic is an
experienced and knowledgeable investor in the oil and gas
industry, (ii) Oceanic has made such investigation of the
interest being offered and to be assigned and has been
furnished with such information in connection therewith as
Oceanic deems appropriate under the circumstances, and (iii)
the interest being offered to and to be assigned to Oceanic is
being acquired by Oceanic for Oceanic's own account for
investment purposes only and not with a view toward the
redistribution thereof. It is reliance upon such
representations and warranties that the interest is being
offered hereunder and that the interest purchased herein will
be made by Mariah to Oceanic without registration pursuant to
the Federal Securities Act of 1933, as amended.
c) Further Assurances. Following the execution of this
Participation Agreement the Parties agree to execute,
acknowledge and deliver any such further instruments, and
shall take such other action as may be necessary to carry out
the intent of the Parties under this Participation Agreement.
c. Amendments. The Participation Agreement may not be altered or
amended nor any rights hereunder be waived, except by an
instrument in writing, executed by the Party charged with such
amendment or waiver.
d. Binding Effect. This Participation Agreement shall be binding
upon and shall inure to the benefit of the Parties hereto and
their respective successors and assigns.
e. Governing Law and Jurisdiction. This Agreement shall be
governed by, construed and enforced in accordance with the
laws of the State of
Colorado.
EXECUTED to be effective for all purposes as of the date first written above.
MARIAH ENERGY, L.L.C.
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇
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J. ▇▇▇▇▇▇ ▇▇▇▇, Manager
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
OCEANIC EXPLORATION COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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