91
EXHIBIT 99.3
JOINT VENTURE OPERATING
AGREEMENT
PEP 38256
BETWEEN:
INDO-PACIFIC ENERGY (NZ) LTD
And
TRANS-ORIENT PETROLEUM (NZ) LIMITED
92
OPERATING AGREEMENT
PEP 38256
TABLE OF CONTENTS
Clause Description Page
OPERATIVE PROVISIONS 7
1 DEFINITIONS AND INTERPRETATIONS 7
1.1 Definitions 7
1.2 Interpretation 12
1.3 Headings 13
2 JOINT VENTURE 13
2.1 Establishment of Joint Venture 13
2.2 Term of Joint Venture 13
2.3 Participating Interests 13
2.4 Tenants in Common 13
2.5 Separate Joint Ventures 14
3 MUTUAL OBLIGATIONS 14
3.1 Covenants by the Parties 14
3.2 Rights and Obligations Several 15
3.3 No Partnership 15
3.4 No Joint Liability 15
4 OPERATOR 15
4.1 Operator 15
4.2 Removal of Operator 15
4.3 Non-Operators' Power to Nullify or Suspend Removal 16
4.4 Replacement of Operator 16
4.5 Resignation of Operator 16
4.6 Appointment of New Operator 16
4.7 Consent to Appointment as Operator 17
4.8 No Appointment of Removed Operator 17
4.9 Effective Date of Appointment 17
4.10 Delivery of Property on Change of Operator 17
4.11 Consequences of Change and Delivery of Property 18
4.12 Audit of Accounts on Change of Operator 18
5 FUNCTIONS AND DUTIES OF OPERATOR 18
5.1 Control and Management of Joint Operations 18
5.2 Independent Status of Operator 18
5.3 Proper Practices in Joint Operations 18
5.4 Books and Records 19
5.5 Protection from Liens 19
5.6 Non-Operator's Rights of Access 19
5.7 Compliance with Terms of Permit 19
5.8 Taxes and Fees 19
5.9 Budget Expenditures by Operator 20
5.10 Operator to Hold Property 20
5.11 Operator's General Duties 20
5.12 Operator to Let for Bid Certain Contracts 21
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6 OPERATOR LIABILITY AND INDEMNITY 21
6.1 Liability. of Operator 21
6.2 Indemnity of Operator 22
7 OPERATING COMMITTEE 22
7.1 Composition of Operating Committee 22
7.2 Formation of Operating Committee 22
7.3 Vote Required for Decisions of Operating Committee 23
7.4 Quorum for Meetings of Operating Committee 23
7.5 Meetings of Operating Committee 23
7.6 Resolution in Absence of Meeting 24
7.7 Sub-Committees 25
7.8 Place of Meetings 25
7.9 Operator's Duties Concerning Meetings 25
7.10 Operating Committee's Functions 26
7.11 Minimum Participating Interest for Representation 26
8 PROGRAMS AND BUDGETS 26
8.1 Submission of Programs and Budgets 26
8.2 Adoption of Programs and Budgets 27
8.3 Minimum Programs Budgets and Work
Obligation Determination 27
8.4 Review of Programs and Budgets 28
8.5 Authorities for Expenditure (AFEs) 28
8.6 When Expenditure in Excess of Approved
AFE is Authorised 28
8.7 Approved Well Plan 29
8.8 AFEs for ▇▇▇▇▇ 29
8.9 Casing Point Decision 29
8.10 Rights of Party Voting Against
Operating Programs and Budget 30
8.11 Consenting Parties' Premium 30
8.12 Notice to Operator 31
9 COSTS AND EXPENSES 31
9.1 Allocation of Expenditure 31
9.2 Accounting Procedure as Basis 31
9.3 Payment by Operator and Reimbursement 31
9.4 Calls by Operator 32
9.5 Banking of Funds 32
9.6 Investment of Funds 32
9.7 Withdrawal of Funds 32
10 INFORMATION ON JOINT OPERATIONS 32
10.1 Information as to Petroleum Production 32
10.2 Access to Records and Information 32
10.3 Drilling Information and Privileges of Non-Operators 33
10.4 Testing and Information to Non- Operators 33
10.5 Logging Information to Non-Operators 34
10.6 Test Following Logging 34
10.7 Seismic and Other Reports 34
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11 INSURANCE AND LITIGATION 34
11.1 Operator to Maintain Insurance 34
11.2 Contractors Insurance 35
11.3 Review of Insurances 35
11.4 Naming of Parties as Co-insured 35
11.5 Advice to Non-Operators of Current Insurance 36
11.6 Party's Right to Increase Insurance 36
11.7 Cost of Insurance and Charging of Losses 36
11.8 Litigation 36
12 SOLE RISK OPERATIONS 37
12.1 Sole Risk Operation 37
12.2 Proposal of Sole Risk Operation 38
12.3 Operating Committee to Consider Sole
Risk Operation Notice 38
12.4 Sole Risk Operation Notice for Existing Well 38
12.5 Sole Risk Operation Notice for Exploration Well 38
12.6 Sole Risk Operation Notice for Appraisal Well 38
12.7 Election to Participate 39
12.8 Sole Risk Interest 40
12.9 Time for Commencing Operations 40
12.10 Conduct of Sole Risk Operation 40
12-11 Operator for Sole Risk Operations 40
12.12 Sole Risk Parties May Complete and Equip 40
12.13 Premiums Accruing to Sole Risk
Parties - Exploration ▇▇▇▇▇ 41
12.14 Premiums Accruing to Sole Risk
Parties - Appraisal ▇▇▇▇▇ 41
12.15 Deepening, Plugging Back, Reworking,
Recompleting, Sidetracking 41
12.16 Premiums Accruing to Sole Risk Parties - Completing 42
12.17 Premiums Accruing to Sole Risk Parties - Equipping 42
12.18 Multiple Reservoirs 42
12.19 Sole Risk Operation Notice When Rig is on Site 43
12.20 Deepening or Sidetracking of Sole Risk Well 44
12.21 Priority of Recovery of Premium 44
12.22 Abandonment of Sole Risk
Operation - Salvable Material 44
12.23 Accounts During Sole Risk Operations
and Premium Recovery 45
12.24 Sole Risk Parties' Relationship 45
12.25 Indemnification of Non-Sole Risk Parties 45
12.26 Use of Joint Property 46
12.27 Non-Sole Risk Parties to Receive Information 46
12.28 Net Proceeds of Sale of Petroleum 46
12.29 Early Re-Entry by Non-Sole Risk Parties 47
12.30 Conclusion of Sole Risk Operation 47
13 DISPOSAL OF PRODUCTION 47
13.1 Ownership 47
13.2 Royalties 48
13.3 Production Reports 48
13.4 Delivery 48
13.5 Risk 48
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14 OFFTAKE AGREEMENT 48
14.1 Crude Oil 48
14.2 Natural Gas 49
15 DEFAULTS 49
15.1 Notice of Default 49
15.2 Defaulting Party Liable for Interest 49
15.3 Payment by Operator 49
15.4 Defaulting Party may be Sued 50
15.5 Non-Defaulting Parties to Contribute 50
15.6 Rights of Paying Parties 50
15.7 Defaulting Party's Petroleum 50
15.8 Suspension of Rights of Defaulting Party 51
15.9 Default of Operator in Payment 51
15.10 Application of Defaulting Party's Funds 51
15.11 Valuation of Defaulting Party's Interest 51
15.12 Option to Purchase Defaulting Party's Interest 52
16 WITHDRAWAL AND SURRENDER 54
16.1 Any Party May Withdraw 54
16.2 Notice of Withdrawal 54
16.3 Other Parties may Join in Withdrawal 54
16.4 Other Parties may Accept Assignment 54
16.5 Prompt Execution of Documents 55
16.6 Withdrawing Party's Obligations 55
16.7 Costs of Assignment 55
16.8 Assignment to all Parties 55
16.9 Selection of Area Required to be Surrendered 56
16.10 Voluntary Surrender of Area 56
17 ASSIGNMENTS AND MORTGAGES 56
17.1 Restriction on Right to Assign and Mortgage 56
17.2 Assignment to Related Companies 57
17.3 Assignment to Third Parities 57
17.4 Assumption by Assignee 58
17.5 Consequences of Assignment 58
17.6 Charge of Participating Interest 58
18 CONFIDENTIALITY 59
18.1 Information Confidential 59
18.2 Related Companies 60
18.3 Compliance with Stock Exchange Requirements 60
18.4 Obligations to Continue 60
18.5 Termination 60
19 FORCE MAJEURE 60
19.1 Obligations Suspended by Event of Force Majeure 60
19.2 Certain Actions not Required 61
19.3 Meaning of Force Majeure 61
20 LAWS AND REGULATIONS 61
20.1 Subject to Applicable Laws 61
20.2 Governing Law 61
20.3 Submission to Jurisdiction 61
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21 NOTICES 62
21.1 Notice in Willing 62
21.2 Effective Date 62
21.3 Time of Receipt 62
21.4 Address for Service 62
21.5 Authorised Officer 63
22 GENERAL 63
22.1 Remedies not Exclusive 63
22.2 Mutual Indemnity 63
22.3 Limited Invalidity 63
22.4 Waiver 63
22.5 How Moneys Paid 63
22.6 Successors Bound 63
22.7 Further Assurance 64
22.8 Entire Agreement 64
22.9 Amendment 64
22.10 No Partition 64
22.11 Counterparts 64
22.12 Time of Essence
SCHEDULE I 66
ACCOUNTING PROCEDURE 66
ARTICLE I - GENERAL PROVISIONS 66
1.1 Definitions 66
1.2 Statements, ▇▇▇▇▇▇▇▇ and Adjustments
1.3 Advances and Payments
1.4 Audits 69
ARTICLE 2 - CHARGEABLE COSTS AND EXPENDITURES 69
2.1 Joint Account (Direct Charges) 69
2.1.1 Labour and Related Costs 69
2.1.2 Material 70
2.1.3 Transportation and Employee Relocation Costs 70
2.1.4 Services 71
2.1.5 Damage and Losses of Joint Property 71
2.1.6 Insurance 71
2.1.7 Legal Expense 72
2.1.8 Duties and Taxes 72
2.1.9 Offices, Camps and Miscellaneous Facilities 72
2.1.10 Payments to Government 72
2.1.11 Other Charges 72
2.2 Joint Account (Indirect Charges) 72
2.2.1 Administrative Overhead 72
2.3 Joint Account (Excluded Charges)
ARTICLE 3 - MATERIAL 73
3.1 Acquisitions 73
3.2 Disposals 73
3.3 Inventories 74
SCHEDULE 2 - DESCRIPTION OF THE PERMIT AREA 75
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THIS AGREEMENT is made on the 25th day of June, 1998.
BETWEEN INDO-PACIFIC ENERGY (NZ) LTD of Indo ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇. ("Indo")
AND TRANS-ORIENT PETROLEUM (NZ) LIMITED of Indo ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇.. ("Trans")
RECITALS
The Parties wish to enter into this Agreement to record the terms and
conditions upon which they will conduct Joint Operations on the Area.
OPERATIVE PROVISIONS
1 DEFINITIONS AND INTERPRETATIONS
1.1 Definitions
In this Agreement, except where the context otherwise requires,
the following terms and expressions shall have the following
meanings:
"Accounting Procedure" means the method of accounting to be
applied in recording debits and credits to the Joint Account as
set out in Schedule 1;
"Act" means the Crown Minerals Act 1991 (New Zealand)
"AFE means an authority for expenditure setting out details of the
estimated expenditure in respect of a specific project which, when
approved in accordance with this Agreement, constitutes
authorisation for the Operator to incur such expenditure.
"Agreement" means this Agreement and the Annexures and Schedules
to this Agreement.
"Appraisal Well" means a well drilled or proposed to be drilled
for the purpose of evaluating the quantities of Petroleum in a
Reservoir discovered by an Exploration Well.
"Approved Well Plan" has the meaning given to that term in Clause
8.7.
"Area" means the area for the time being enclosed by the external
boundaries of the Permit which boundaries are, as at the Effective
Date, for the purposes of identification only, shown on the map
attached as Schedule 2, and any other area, whether or not
contiguous to that area, which the Parties unanimously agree shall
form part of the Area.
"Authorised Expenditure" has the meaning given to that term in
Clause 9. 1.
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"Business Day" means a day, other than a Saturday, Sunday or
public holiday, on which trading banks are open for business in
Wellington, New Zealand.
"Casing Point" means the time at which a well drilled under this
Agreement has reached its projected depth or such lesser depth as
the Operating Committee may have decided upon and all logs and
tests necessary to enable a decision as to whether to plug and
abandon the well or attempt to complete it as a producer have been
carried out and communicated to the Parties.
"Chargee" has the meaning given to that term in Clause 17.6.
"Chargor" has the meaning given to that term in Clause 17.6.
"Complete" means with respect to a well the completion of the well
as a producer of Petroleum, which operations shall include
(without limitation);
(a) to acquire, install and perforate production casing;
(b) to run tubing;
(c) to install equipment in the well up to and including the wing
valve of the Christmas tree (in the case of an oil well) and
to the well head (in the case of a gas well);
(d) to conduct such tests as are necessary to demonstrate that
the well is capable of production;
(e) to swab the well;
(f) to install such artificial lift equipment including
subsurface pumps, pump rods, power cables and surface pump
equipment as is necessary to initiate or promote the
production of Petroleum to the surface,
and "Completing", "Completed" and "Completion" have corresponding
meanings.
"Completion Costs" means all costs directly incurred in respect of
Completion;
"Consenting Parties" has the meaning given to that term in Clause
8. 10;
"Default Interest Rate" means in respect of any day the rate per
annum which is the aggregate of 5% per annurn and the rate of
interest from time to time charged by the ASB Bank Ltd on
corporate overdraft accounts in excess of $100,000.00 as advised
by the said ASB Bank Ltd to the Operator;
"Default Notice" has the meaning given to that term in Clause 15.
1;
"Defaulting Party" has the meaning given to that term in Clause
15.1;
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"Delivery Costs" has the meaning given to that term in Clause
12.28;
"Delivery Point" means the point or points determined by the
Operating Committee from time to time as the point or points at
which the Parties shall take delivery of their respective shares
of Petroleum produced from the Area.
"Development Well" means a well (other than an Exploration Well or
an Appraisal Well) drilled, proposed to be drilled or which is
used or is capable of being used, for the production of Petroleum
from a previously discovered Reservoir, which is less than 1000m
from a well which is capable of producing Petroleum in Payable
Quantities from that Reservoir.
"Drill" includes, where the context permits, to deepen, rework,
fracc, plug back, run logs, velocity survey, carry out testing on,
recomplete or sidetrack a well;
"Drilling Costs" means all costs and expenses directly incurred in
drilling, deepening, reworking, plugging back, recompleting or
sidetracking a well, including without limitation, rig
mobilisation and demobilisation, conducting tests, obtaining core
and other samples, running logs and conducting a velocity survey;
"Effective Date" means the 25h June 1998.
"Effective Date of Assignment" has the meaning given to that term
in Clause 17.5;
"Effective Date of Withdrawal" has the meaning given to that term
in Clause 16.2;
"Electing Party" has the meaning given to that term in Clause
12.8;
"Entitlement" has the meaning given to that term in Clause 14. 1;
"Equip" means (with respect to a well which has been Completed) to
acquire and install all such equipment as is necessary to place
the well in production, and to handle, treat and bring Petroleum
from such well to the Delivery Point including flow lines,
treatment and separation facilities and stock tanks; and
"Equipping" and "Equipped" have corresponding meanings;
"Equipping Costs" means all costs directly incurred in Equipping
a well;
"Exploration Well" means any well whose purpose at the time of the
commencement of drilling is to explore for an accumulation of
Petroleum whose existence was at that time unproven by drilling;
"Force Majeure" has the meaning given to that term in Clause 19.3;
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"Government" means the government of New Zealand;
"Gross Negligence" means such wanton and reckless conduct as
constitutes, or raises the reasonable belief that it constitutes,
an utter disregard for the harmful foreseeable and avoidable
consequences which result from it;
"Information" has the meaning given to that term in Clause 18. 1;
"Joint Account" means the accounts established and maintained by
the: Operator in accordance with this Agreement to record all
charges, expenditures, credits and receipts in respect of Joint
Operations which are chargeable or to be credited to each of the
individual Parties as provided for in this Agreement; and "for the
Joint Account" means for the account expense, risk or benefit of
the Parties in accordance with their Participating Interests;
"Joint Operations" means all activities of the Joint Venture
conducted on behalf of the Parties pursuant to this Agreement
(including without limitation, abandonment activities) but
excludes those activities which are related to Sole Risk
Operations;
"Joint Property" means:
a) all other property of any nature or kind, whether real or
personal, (including without limitation, any extraction,
transportation, processing, treatment storage or other
facility or chose in action and any estate or interest
therein) acquired by the Parties in the conduct, or for the
purposes of, Joint Operations, and
b) all other estate, right, title or interest of the Parties
arising under or by virtue of this Agreement;
"Joint Venture" means the joint venture between the Parties in
accordance with and constituted by the terms of this Agreement;
"Net Abandonment Costs" has the meaning given to that term in
Clause 16.6;
"Net Proceeds of Sale" has the meaning given to that term in
Clause 12.28;
"Non-Consenting Party" has the meaning given to that term in
Clause 8.10;
"Non-Defaulting Parties" has the meaning given to that term in
Clause 15.1;
"Non-Operator" means a Party other than the Operator;
"Non-Sole Risk Parties" means the Parties which do not participate
in a Sole Risk-Operation;
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"Notice of Withdrawal" has the meaning given to that term in
Clause 16.2;
"Operating Committee" means the operating committee established
pursuant to Clause 7 of this Agreement;
"Operating Costs" means all costs directly incurred in producing,
handling, transporting and treating Petroleum from a well,
exclusive of Drilling Costs, Completion Costs and Equipping Costs,
up to the Delivery Point;
"Operator" means the party from time to time appointed pursuant to
this Agreement to carry out the management of the Joint Venture
and Joint Operations;
"Option" has the meaning given to that term in Clause 15.12;
"Option Commencement Date" has the meaning given to that term in
Clause 15.12;,
"Participating Interest" means the following obligations, benefits
and rights of a. Party, expressed as a percentage and determined
in accordance with this Agreement:
a) the obligation, subject to this Agreement, to contribute that
percentage of all expenditure and all other obligations
arising under or by virtue of this Agreement;
b) the ownership of, and the right and benefit as a tenant in
common to receive in kind and to dispose of for its own
account, that percentage of Petroleum, and
c) the beneficial ownership as a tenant in common of an
undivided share in the percentage of all Joint Property.
"Party" means a party to this Agreement, its successors and
permitted assigns;
"Payable Quantities" means:
(a) in the case of a well not Completed and Equipped for
production, the anticipated output from that well of that
quantity of Petroleum which, considering the Completion
Costs, Equipping Costs, Operating Costs and other costs
related to any of the foregoing, the kind and quality of
Petroleum to be produced, the price to be received therefor
and the royalties and other burdens payable in respect
thereof, would in the opinion of the Operating Committee
warrant incurring the Completion Costs and Equipping Costs of
the well; and
(b) in the case of a well Completed and Equipped for production,
the output from that well of that quantity of Petroleum
which, considering the factors referred to in paragraph (a)
above (other than Completion Costs and Equipping Costs),
would in the opinion of the Operating Committee wan-ant
continuing production from the well;
102
"Paying Party" has the meaning given to that term in Clause 15.6;
"Payment Date" has the meaning given to that term in Clause 15.5;
"Permit" means Petroleum Exploration Permit 38256 granted under
the Act copy of which is set out in Schedule 2; and any permits or
leases granted pursuant thereto together with any extensions,
renewals, conversions, substitutions, modifications or variations
thereof;
"Permit Year" means a year beginning on 25th August and ending on
24th August.
"Petroleum" has the meaning given to that term in the Act;
"Proceeds of Sale" has the meaning given to that term in Clause
12.28;
"Proposing Party" means a Party giving notice of its intention to
drill, Complete or Equip a well as a Sole Risk Operation;
"Purchaser" or "Purchasers" has the meaning given to that term in
Clause 15.12;
"Receiving Parties" means the Parties other than the Proposing
Party;
"Related Company" shall have the meaning given in section 2(3) of
the Companies ▇▇▇ ▇▇▇▇ of New Zealand, and for the purposes of
paragraph (d) of that section specifically includes companies
which have substantially common, actual (although not necessarily
legal) management and control;
"Reservoir" means that part of a geological formation which
contains a single pool or accumulation of Petroleum separate from
any other such pool or accumulation in the same or another
geological formation, in a single pressure system so that
production of Petroleum from any part affects the remainder;
"Sole Risk Interest" has the meaning given to that term in Clause
12.8;
"Sole Risk Operation" means any or all of the drilling, Completing
and Equipping of a well proposed by one or more of the Parties but
in which less than all Parties participate;
"Sole Risk Operation Notice" means the notice of intention to
drill, Complete or Equip a well given by a Proposing Party in
respect of a proposed Sole Risk Operation;
"Sole Risk Operator" means a Party appointed as operator for a
Sole Risk Operation pursuant to Clause 12.11;
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"Sole Risk Party" means a Party which participates in a Sole Risk
Operation;
"Unpaid Amount" has the meaning given to that ter m in Clause 15.
1;
"Wilful Misconduct" means intentional acts and omissions done or
omitted to be done, which raise the reasonable belief that they
were the result of a conscious indifference to the right or
welfare of those who are or may be affected by them;
"Withdrawing Party" has the meaning given to that term in Clause
16.2; and
"Work Obligation" means the minimum work or expenditure required
to be performed or made by the registered holders of the Permit as
a condition of the Permit;
1.2 Interpretation
Unless expressed to the contrary:
(a) words importing:
(1) the singular include the plural and vice versa; and
(2) any gender includes the other genders;
(b) if a word or phrase is defined cognate words and phrases have
corresponding definitions;
(c) a reference to:
(1) a person includes a firm, unincorporated association,
corporation and a government or statutory body or
authority;
(2) a person includes the legal personal representatives,
successors and assigns of that person;
(3) a statute, ordinance, code or other law includes
regulations and other statutory instruments under it and
consolidations, amendments, re-enactments or
replacements of any of them;
(4) a right includes a benefit, remedy, discretion,
authority or power;
(5) an obligation includes a warranty or representation and
a reference to a failure to observe or perform an
obligation includes a breach of warranty or
representation;
(d) provisions or terms of this document or another document,
agreement, understanding or arrangement include a reference
to both express and implied provisions and terms;
(e) "$", "NZ$" or "dollars" is a reference to the lawful currency
of New Zealand;
104
(f) this or any other document includes the document as varied or
replaced and notwithstanding any change in the identity of
the parties;
(g) writing includes any mode of representing or reproducing
words in a tangible and permanently visible form, and
includes facsimile transmission; and
(h) a reference to any thing (including, without limitation, any
amount) is a reference to the whole or any part of it and a
reference to a group of things or persons is a reference to
any one or more of them.
1.3 Headings
The clause headings used herein are for convenience only and shall
not be used in construing or interpreting any provision of this
Agreement.
2 JOINT VENTURE
2.1 Establishment of Joint Venture
On and from the Effective Date the Parties associate themselves in
an unincorporated joint venture for the purpose of exploration for
Petroleum in the Area and if commercially viable the production,
processing, transportation and sale of Petroleum from the Area and
all things necessary and incidental thereto.
2.2 Term of Joint Venture
This Agreement shall continue in effect for so long as the Permit
remains in force and until all Joint Property which relates to the
Area has been disposed of and final settlement has been made
between the Parties in relation thereto in accordance with their
respective rights and obligations under this Agreement.
2.3 Participating Interests
At the date of this Agreement the Parties acknowledge and agree
that the Participating Interests in this Permit are as follows:
Indo - 50.0%
Trans - 50.0%
-------
100.00%
2.4 Tenants in Common
Subject to this Agreement, all Joint Property shall be
beneficially owned by the Parties as tenants in common in shares
equal to their respective Participating Interests.
105
2.5 Separate Joint Ventures
This Agreement shall apply separately in relation to each permit
lease, title or other instrument granted under the Act in relation
to the Area or any part of it so as to constitute separate joint
ventures in respect of the area comprised within such permit,
lease, title or other instrument on the same terms and conditions,
mutatis mutandis, as this Agreement.
3 MUTUAL OBLIGATIONS
3.1 Covenants by the Parties
Each Party covenants with each of the other Parties as follows:
(a) to do, to the extent of its Participating Interest, all
things on its part necessary to ensure that:
(1) the Work Obligation is diligently observed and
performed;
(2) the Permit is kept in good standing and the Joint
Property in a safe and operable condition;
(3) the Permit and all other titles necessary for the Joint
Operations hereunder are duly renewed or extended unless
the Parties shall unanimously agree otherwise;
(b) to be just and faithful to each other Party in all things
relating to this Agreement; and
(c) not to engage (either alone or in association with others) in
any activity in relation to the Area or the Joint Property
except as authorised by this Agreement.
(d) that it has full right power and authority to enter into this
Agreement and to engage in Joint Operations
(e) that it has obtained all requisite consents and approvals to
enter into this Agreement
(f) to attend diligently to the conduct of all Joint Operations
in which the Party is involved
(g) to pay punctually its separate debts and to indemnify the
other Parties and the Joint Property against the same and all
expenses on account thereof.
(h) to account promptly for all moneys, cheques and negotiable
instruments received by it for (i) and on behalf of the other
Parties;
(i) to afford, when called upon to do so, all reasonable
assistance in the conduct of Joint Operations for the mutual
advantage of all Parties
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(j) to observe and perform its obligations, express and implied,
under this Agreement the Licence and the Act; and
(k) to make full, ▇▇▇▇▇ and prompt disclosures and give truthful
explanations to the other Parties of all material matters
coming to its attention in respect of Joint Operations and
Joint Property.
3.2 Rights and Obligations Several
The rights, duties, obligations and liabilities of the Parties
shall be several and not joint nor joint and several. It is the
express purpose and intention of the Parties that their ownership
of the Permit and the Joint Property and their liabilities shall
be as tenants-in-common.
3.3 No Partnership
Nothing contained in this Agreement shall be construed as creating
or evidencing a partnership between the Parties or any of them or
as to lead to the joint receipt of income by the Parties or any of
them.
4 OPERATOR
4.1 Operator
Indo is hereby appointed Operator and agrees to act as such in
accordance with the terms and conditions of this Agreement.
4.2 Removal of Operator
Notwithstanding that the Operator may have given notice of
intention to resign pursuant to Clause 4.5, the Operator shall
cease to be Operator and shall be deemed to be removed if.
(a) a controller (as defined in the Companies ▇▇▇ ▇▇▇▇ of New
Zealand) is appointed in respect of the whole or any part of
the property of the Operator;
(b) an order is made that the Operator be wound up;
(c) a liquidator or provisional liquidator is appointed in
respect of the Operator;
(d) there is a resolution for the winding up of the Operator
except to reconstruct or amalgamate while solvent and on
terms approved by the Operating Committee, such approval not
to be unreasonably withheld;
(e) an administrator is appointed to the Operator;
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(f) the Operator assigns or purports to assign, all or any of its
general powers and responsibilities of supervision and
management as Operator under this Agreement otherwise than to
a Related Company with the prior written consent of the other
Parties;
(g) the Operator becomes a Defaulting Party pursuant to Clause
15; or
(h) the Operator commits any breach of this Agreement (other than
a default in payment for which provision is made in Clause
15, in which case, Clause 4.2
(g) shall apply) which places the whole or any part of the Permit
or Joint Property in jeopardy and continues such breach for
a period of not less than twenty (20) Business Days after
notice requiring the same to be remedied shall have been
given to the Operator by one or more of the Parties.
(i) the Operator and its Related Companies cease to hold an
aggregate Participating Interest of 20% or greater, unless no
other Party holds a greater Participating Interest.
4.3 Non-Operators' Power to Nullify or Suspend Removal
Notwithstanding the provisions of Clause 4.2 and until the
appointment of a new Operator pursuant to the provisions of Clause
4.6(a), the Parties, other than the former Operator, may by
unanimous resolution, subject to such conditions, if any, as are
specified in such resolution:
(a) nullify the removal of the Operator; and
(b) suspend or postpone the removal of the Operator either for a
specified period or for an unspecified period to be
specified by a subsequent unanimous resolution of the Non
Operators.
4.4 Replacement of Operator
The Operator shall be replaced if at least two Parties being
holders of not less than seventy-five percent (75%) of the
Participating Interests held by all the Parties so resolve and
upon such resolution the Operating Committee shall appoint a
successor Operators as provided in Clause 4.6(b).
4.5 Resignation of Operator
The Operator may resign by giving each of the Parties ninety (90)
Business Days' written notice (or such lesser period of notice as
the Operating Committee may resolve to accept) of its intention to
do so.
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4.6 Appointment of New Operator
If an Operator:
(a) is deemed to have been removed pursuant to Clause 4.2 a
successor Operator shall be appointed by a vote carried by
such number of the Parties, other than the removed Operator
and any Related Company of the removed Operator, the total of
whose Participating Interests constitutes a majority of the
total of the Participating Interests of the Parties other
than the removed Operator and any Related Company of the
removed Operator; or
(b) is replaced pursuant to Clause 4.4 a successor Operator shall
be appointed by the Operating Committee provided that in the
event that a decision of the Operating Committee is not
promptly reached pursuant to Clause 7.3, then a successor
Operator may be appointed by a vote carried by such number of
the Parties, other than the former Operator and any Related
Company of a former Operator, the total of whose
Participating Interests constitutes a majority of the total
of the Participating Interests of the Parties other than the
former Operator and any Related Company of the former
Operator; or
(c) resigns pursuant to Clause 4.5, the Operating Committee shall
appoint a new Operator.
4.7 Consent to Appointment as Operator
Except as provided in this Clause 4.7, no Party shall be appointed
Operator unless it has given written consent to the appointment.
If by reason of failure to appoint a new or replacement Operator,
no Operator is functioning at any time, then until the appointment
of an Operator the Party having the greatest Participating
Interest (excluding the Party or Related Company of that Party
removed or replaced as Operator or which has resigned as Operator)
shall act as Operator for the time being. If two or more of such
Non-Operators have equal Participating Interests then the Operator
for the time being shall be selected by Parties (excluding the
Party or Related Company of that Party removed or replaced as
Operator or which has resigned as Operator) holding a simple
majority of Participating Interests and in the event that there
are no other such Parties then the selection shall be made by lot.
4.8 No Appointment of Removed Operator
An Operator which is deemed to have been removed under Clause 4.2
shall not be re-appointed as its. own immediate successor
Operator, except with the unanimous consent of the Parties.
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4.9 Effective Date of Appointment
The appointment of a successor Operator shall take effect in
accordance with the following provisions:
(a) in the case of the deemed removal of an Operator pursuant to
Clause 4.2, the appointment of a successor Operator pursuant
to Clause 4.6(a) or Operator for the time being pursuant to
Clause 4.7 shall take effect forthwith upon such appointment;
(b) in the case of the replacement of an Operator pursuant to
Clause 4.4, the appointment of the outgoing Operator shall
cease at a time to be agreed upon by the Operating Committee
and the outgoing Operator or in the absence of agreement at
8.00 am on the first Business Day of the month following the
month in which it is resolved to replace the Operator
pursuant to Clause 4.4, and the appointment of a successor
Operator pursuant to Clause 4.6(b) or Operator for the time
being under Clause 4.7 shall take effect in each case at such
time; and
(c) in the case of the resignation of an Operator pursuant to
Clause 4.5, the appointment of a successor Operator pursuant
to Clause 4.6(c) or Operator for the time being under Clause
4.7 shall take effect at 8.00 am on the first day following
the expiration of ninety (90) Business Days (or such lesser
period of notice as is accepted by the Operating Committee)
after the date upon which notice of resignation was given
pursuant to Clause 4.5.
4.10 Delivery of Property on Change of Operator
At the effective date of the resignation, removal or replacement
of the Operator as herein provided, the outgoing Operator shall
deliver to the successor Operator custody of all Joint Operations
for the Joint Account or otherwise operated by the outgoing
Operator, the Joint Property, and all other facilities held for
the Joint Account or due to Sole Risk Operations, all books of
account and records kept for the Joint Account or due to Sole Risk
Operations and all documents, agreements and other, papers
relating thereto and all other things held by the Operator, as
Operator.
4.11 Consequences of Change and Delivery of Property
Upon delivery of the property, books and records referred to in
Clause 4. 10, the outgoing Operator shall be released and
discharged from, and the successor Operator shall assume, all
duties and obligations of the Operator, except the unsatisfied
duties and obligations of the outgoing Operator accrued prior to
the effective date of the change of Operator and for which such
outgoing Operator shall, notwithstanding its release or discharge,
continue to remain liable. In order to give effect. to the
potential application of the provisions of this Clause, each
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Operator shall use its best endeavours to ensure that all
contracts and engagements entered into by such outgoing Operator
for the Joint Account enure for the benefit of and are, if
applicable, assignable to a successor Operator without penalty or
premium upon such assignment.
4.12 Audit of Accounts on Change of Operator
Upon every change of Operator and not later than eighty (80)
Business Days after the successor Operator commences to act as
Operator, the Parties (other than the outgoing Operator) shall
cause an audit to be made of the books of account and records kept
for the Joint Account. 'Me cost of the audit shall be for the
Joint Account unless the Operator has been replaced pursuant to
Clause 4.4 in which case the cost of the audit shall be charged to
those Parties who have voted to replace the Operator.
5 FUNCTIONS AND DUTIES OF OPERATOR
5.1 Control and Management of Joint Operations
Subject to the terms of this Agreement and to the control and
direction of the Operating Committee under this Agreement, the
Operator shall have the exclusive control and management of, and
shall be obligated to conduct, Joint Operations.
5.2 Independent Status of Operator
The Operator shall furnish or cause to be furnished all material,
labour and services necessary for Joint Operations, consistent
with approved programs and budgets. Subject to Clause 5.3, the
Operator shall determine the number of employees, their selection
and the hours of labour and the compensation for services to be
paid to them in connection with Joint Operations. All employees,
agents and contractors used in Joint Operations shall be the
employees, agents and contractors of the Operator or a Related
Company of the Operator.
In all dealings with contractors, suppliers and other third parties
in accordance with this Agreement the Operator shall act and
contract as agent for the Parties.
5.3 Proper Practices in Joint Operations
The Operator shall carry on all Joint Operations in a proper,
efficient economical and safe manner in accordance with good
oilfield practices and conservation principles, with all
reasonable skill and effort in the circumstances, with good and
sufficient equipment and in accordance with the terms and
.conditions of the Permit and the Act.
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5.4 Books and Records
The Operator shall, with respect to all Joint Operations conducted
by it, keep and maintain at its principal office for the Joint
Account, as required by the Act and in accordance with generally
accepted accounting principles in New Zealand, true and correct
books, records and accounts showing the development and progress
made, drilling done, other Joint Operations carried out, the
quantity of Petroleum produced from each well and the disposition
thereof.
5.5 Protection from Liens
Subject to the Operator holding sufficient funds in the Joint
Account from time to time, the Operator shall pay, or cause to be
paid, as and when they become due and payable, all -accounts of
contractors and claims for wages and salaries for services
rendered or performed and insofar as it may be within its control
for materials supplied in respect of any Joint Operations, and
keep the Permit and any property acquired for the Joint Account
free from liens and encumbrances resulting from such Joint
Operations save to the extent only that the same may arise from a
bona fide dispute with respect to any such account or claims and
shall not suffer any claims of or dues to or on behalf of any
Government Governmental Board or Authority to remain unsatisfied
or become in arrears.
5.6 Non-Operator's Rights of Access
Subject to:
(1) the giving of 24 hours' prior notice to the Operator (except
in the case of testing, coring, logging, measurement of total
depth, plugging and abandoning); and
(2) not causing any unreasonable interference with the conduct of
the Joint Operations, each Non-Operator shall have the right
at the Non-Operator's sole risk, cost and expense for persons
authorised and nominated by it and advised to the Operator to
have full and free access at all reasonable times for the
purposes of inspection and observation of all Joint
Operations and the records of Joint Operations and any
information obtained as a result of Joint Operations.
5.7 Compliance with Terms of Permit
The Parties acknowledge and agree that, when the Operator enters
into any contract for the Joint Account it contracts solely as
agent for each Party severally in proportion to its Participating
Interest and not as principal, and notwithstanding that the names
of the non-operators do not appear on any such contract or that
the Operator does not disclose the existence or identity of any
Party as principal or the capacity of the Operator as agent.
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5.8 Taxes and Fees
The Operator shall pay for the Joint Account, all taxes (exclusive
of any taxes measured by the income of any Party or receipt by any
of them of Petroleum), fees and other payments pertaining to the
Permit and Joint Operations required to be paid to the Government
in a manner which will discharge the Parties' obligations with
respect thereto.
5.9 Budget Expenditures by Operator
The Operator shall conduct each program of Joint Operations
approved by the Operating Committee and shall not undertake any
Joint Operations not included in any approved program or incur
expenditures in excess of the expenditures authorised by an AFE
approved pursuant to Clause 8.5 or otherwise authorised in this
Agreement.
5.10 Operator to Hold Property
The Operator shall have and hold full and exclusive possession,
custody and control on behalf of the Parties of all Joint Property
and the title documents to the Permit.
5.11 Operator's General Duties
In the conduct of Joint Operations, the Operator shall:
(a) confer freely with the Non-Operators and keep them currently
advised of all significant matters arising in connection with
Joint Operations;
(b) acquire and maintain custody of all such premises, furniture,
fixtures, fittings, materials, supplies, plant, machinery,
equipment and services as are necessary or desirable for such
Joint Operations;
(c) obtain from outside experts and consultants such technical,
legal, accounting and other professional advice and services
as are necessary or desirable for Joint Operations;
(d) prepare and file reports and returns (other than those based
upon or measured by income) required by law or this Agreement
and furnish the Non-Operators promptly with copies thereof;
(e) keep books, accounts and records of Joint Operations and
prepare and furnish to the Non Operators reports, including
but not limited to, exploration progress reports, geological
and geophysical reports, daily drilling reports, well logs,
production reports and, reports furnished by the Operator to
the Government relating to Joint Operations;
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(f) subject to their availability, make available to any Non-
Operator requesting the same samples of rocks, cores and
formation fluids taken from any ▇▇▇▇▇ drilled under this
Agreement;
(g) prepare and present to the Non-Operators proposed work
programs, corresponding budgets and AFEs as provided in
Clause 8;
(h) subject to the provisions of Clause 12, carry out all Sole
Risk Operations;
(i) procure and maintain insurance and adjust losses and claims
arising out of such insurance as provided in this Agreement;
(j) provide the Non-Operators, upon request with a copy of all or
any contract entered into by the Operator pursuant to this
Agreement;
(k) do all such other acts and things as may be necessary or
desirable under this Agreement for the efficient and
economical conduct of Joint Operations;
(l) provide on a timely basis and at the cost of the Non-Operator
concerned, such data additional to that distributed pursuant
to this Agreement as is required to enable each of the
Non-Operators to make, to the extent that any such Non-
Operator legally is required so to do, public statements or
announcements to any governmental agency or official stock
exchange;
(m) within twenty (20) Business Days after the end of each month,
furnish to each Non-Operator a summary report on Joint
Operations conducted during such month;
(n) negotiate with the Government on behalf of all of the Parties
in respect of those matters which the Operating Committee
considers necessary or desirable; and
(o) provide on a timely basis and at the cost of the Non-Operator
concerned such data additional to that distributed pursuant
to this Agreement as that Non-Operator may reasonably
require.
5.12 Operator to Let for Bid Certain Contracts
Unless the Operating Committee decides otherwise, the Operator
will comply with the following provisions in relation to entering
into contracts:
(a) the Operator shall invite competitive tenders in respect of
contracts for materials or services for the Joint Account the
cost of which is likely to exceed $75,000 for any one item or
series of related items.
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(b) In addition to any other approvals required under this
Agreement, the Operator shall obtain Operating Committee
approval to the principal terms of contracts for materials or
services for the Joint Account, the cost of which, in the
opinion of the Operator, is likely to exceed, for any one
item or series of related items:
1) in the case of contracts for drilling rigs - $500,000
2) in the case of contracts for the acquisition and/or
processing of seismic - $250,000
3) in the case of contracts incorporated in a program and
budget other than contracts for drilling rigs and
seismic - $150,000
(c) where bids are required under this Clause 5.12, each Party
and any-Related Company of a Party shall have the right to
submit a bid.
6 OPERATOR LIABILITY AND INDEMNITY
6.1 Liability of Operator
The Operator and its directors, officers, employees, shall not be
responsible for any costs, losses, claims, damages or liabilities
suffered or incurred by any Party arising out of or in the course
of the discharge of its duties as Operator hereunder except for:
(a) any costs, losses, claims, damages and liabilities arising,
directly or indirectly, from Wilful Misconduct or Gross
Negligence of the Operator; and
(b) those amounts which the Operator is liable to expend or
contribute in the discharge of its obligations as a Party in
terms of this Agreement.
The Operator shall not be liable in any circumstances for any loss
of profits or other consequential losses whatsoever or howsoever
occurring.
6.2 Indemnity of Operator
Each of the Non-Operators, severally to the extent of its
Participating Interest, shall at all times indemnify and keep
indemnified the Operator and its directors, officers and employees
against all liabilities, losses, damages, costs and expenses
suffered or incurred by the Operator and its directors, officers
and employees in relation to Joint Operations other than those
liabilities, losses, damages, costs or expenses arising directly
from the Wilful Misconduct or Gross Negligence of the Operator.
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7 OPERATING COMMITTEE
7.1 Composition of Operating Committee
To provide for the orderly selection, control and direction of
Joint Operations there shall be established promptly an Operating
Committee. Subject to Clause 7.11, the Operating Committee shall
be comprised of a representative of each of the Parties and each
Party shall appoint one representative and one alternate
representative to serve on the Operating Committee. The Operators
representative shall be the chairman of the Operating Committee.
7.2 Formation of Operating Committee
Subject to clause 7.11, within twenty (20) Business Days after the
Effective Date, each Party shall notify each of the other Parties
of the names and addresses of its representative and alternate
representative who shall represent such Party and is deemed
authorised to bind such Party with respect to all matters in
connection with Joint Operations. Each alternate representative
shall be entitled to attend all Operating Committee meetings but
shall have no vote at such meetings except in the absence or
disability of the representative for whom he is the alternate.
Each Party shall have the right to change its representative
and/or alternate at any time by giving notice to such effect to
the Other Parties.
In addition to the representative and alternate representative,
each Party may bring to all such meetings such technical and other
advisers as it may deem appropriate. The Parties shall pay the
expenses of attendance at Operating Committee meetings of their
own representative and/or alternative representative and advisers.
7.3 Vote Required for Decisions of Operating Committee
Except as otherwise provided in this Agreement, all decisions of
the operating Committee on all matters coming before it shall be
made by the affirmative vote of two or more Parties having
collectively not less than seventy five percent (75%) of the
aggregate of the Participating Interests of the parties entitled
to vote thereon. The Operating Committee shall have no power to
make a decision:
(a) to assign or (except with the unanimous approval of the
Parties) voluntarily surrender any part or parts of the
Permit; or
(b) to enter into, amend or vary this Agreement or any agreement
between the Parties and a Government; or
(c) upon any matter in respect of which specific provision is
made in this Agreement for a decision to be made in a
different fashion.
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Except as otherwise specifically provided in this Agreement, the
decisions of the Operating Committee shall be binding on the
Parties.
7.4 Quorum for Meetings of Operating Committee
(a) No meeting of the Operating Committee shall transact any
business unless a quorum is present.
(b) A quorum for the purposes of a meeting of the Operating
Committee shall be constituted by the representatives of not
less than two Parties present and entitled to vote holding
Participating Interests aggregating at least seventy five
percent (75%) of the Participating Interests of the Parties
entitled to vote.
(c) If a quorum is not present within an hour from the time
appointed for a meeting of the Operating Committee (or such
longer period as the Parties then present unanimously agree
to remain), the meeting shall stand adjourned for five (5)
Business Days to the same time and place.
7.5 Meetings of Operating Committee
(a) The Operating Committee may meet, either personally or by
telephone, video conference or any other form of
instantaneous communication by which all participants can
properly communicate with each other, for the dispatch of
business and, subject to this Agreement adjourn and otherwise
regulate its meetings as it thinks fit One of such meetings
shall be the annual meeting of the Operating Committee and
shall take place no later than 1 month prior to the
commencement of the next succeeding Permit Year.
(b) The Operating Committee shall meet whenever requested by the
giving of fifteen (15) Business Days' written notice by the
Operator and shall meet at least once each year to consider
the program and budget referred to in Clause 8. A notice
given pursuant to this Clause shall include the agenda for
the meeting. The Operating Committee may meet at such other
times as the Parties entitled to vote unanimously agree.
(c) Any Party requesting the Operator to give a notice requesting
a meeting shall provide the Operator with sufficient
information concerning the matters to be considered thereat
to enable the Operator to comply with its obligations
pursuant to Clause 7.9(a).
(d) Any Party requesting the Operator in the manner provided in
Clause 7.5(b) to give a notice requesting a meeting shall be
entitled to give such notice in lieu of the Operator if the
Operator fails to give such notice within five (5) Business
Days of receiving the request from such Party in which case
the meeting shall be held at the time and place as specified
by such Party in the said notice.
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(e) Meetings of the Operating Committee shall resolve only such
matters as are specified in the notice of meeting provided
however that the Operating Committee may by the unanimous
vote of the representatives of all Parties amend any notice
of meeting to include additional matters.
(f) The failure by a Party to vote on any resolution put for
decision by the Operating Committee shall be deemed to be a
vote against such resolution.
7.6 Resolution in Absence of Meeting
(a) In lieu of a meeting, the Operator may and shall promptly at
the request in writing of any Non-Operator submit any matter
which is proper for consideration by the Operating Committee
to the representatives of the Parties by giving each
representative notice by mail or facsimile adequately
describing the matter so submitted. Each representative of a
Party entitled to vote shall communicate its vote thereon to
the Operator and to the other Parties by mail or facsimile
within such period as may be designated in the notice given
by the Operator, which period shall not except as otherwise
provided in this Agreement, be less than six (6) Business
Days after receipt of such notice.
(b) Where the Parties are requested to vote on any proposal in
circumstances other than those described in Clause 7.6(c) or
Clause 12.19 and where the matter presented for consideration
by its nature requires determination in less than six (6)
Business Days and such fact and lesser period (which shall
not be less than forty-eight (48) hours after receipt of such
notice) are so stated in the notice submitting the proposal,
the Parties shall cast their vote within such lesser period.
The Operator shall use all reasonable endeavours to ensure
that each Party is aware of the proposal. Failure by a Party
to cast its vote within the relevant period shall be regarded
as a vote by that Party against the proposal.
(c) Where the Parties are requested to vote in circumstances
other than those described in Clause 12.19 on any proposal in
respect of a well on which drilling equipment is then
located:
(1) any request made or response given may be made or given
by telephone and shall be confirmed by facsimile the
same day or, if outside normal business hours, on the
next Business Day. Any time periods provided in this
Clause 7.6(c) shall begin to run from the time of such
request and
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(2) each Party shall cast its vote within twenty-four (24)
hours of the receipt of such request or within such
longer period as is stated in the request. Failure of a
Party to cast its vote within the relevant period shall
be regarded as a vote by that Party against the
proposal.
(d) If the proposal is not one to which Clause 7.6(b), Clause
7.6(c) or Clause 12.19 applies and within six (6) Business
Days after receipt of such notice, a request by any Party is
made for a meeting to consider such matter, it shall be
considered at a meeting duly called for that purpose. If a
meeting is not requested, then at the expiration of the
period designated in the notice given by the Operator, the
Operator shall give to each representative written notice
stating the tabulation and results of the vote. The absence
of a response by any representative shall be deemed to be a
negative vote.
(e) Decisions of the Parties made pursuant to Clause 7.6 shall be
made by the same vote as is provided for in Clause 7.3 and
shall have the same effect as decisions made at a meeting of
the Operating Committee pursuant to Clause 7.3.
7.7 Sub-Committees
The Operating Committee may establish such sub-committees,
including a technical sub-committee, consisting of a nominee of
each Party, as the Operating Committee may deem appropriate. The
functions of such sub-committees shall be determined by the
Operating Committee. Such subcommittees shall meet whenever
requested by the giving of ten (10) Business Days' written notice
by the Operator (which shall give such notice within five (5)
Business Days after it is requested to do so by any Party). Such
sub-committees shall be advisory only and shall have no power to
direct the Operator or the Operating Committee.
7.8 Place of Meetings
Except as provided for in Clause 7.5(c), all meetings of the
Operating Committee shall be held at an office nominated by the
Operator or such other place as may be decided by the Operating
Committee.
7.9 Operator's Duties Concerning Meetings
With respect to meetings of the Operating Committee, the
Operator's duties shall include, but not be limited to:
(a) preparation and distribution of an agenda together with
reasonably adequate supporting information;
(b) organization and conduct of the meeting;
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(c) preparation of a written record of decisions taken at each
meeting for signature by all Parties prior to the end of the
meeting;
(d) preparation of minutes of each meeting with copies thereof
delivered to the representatives of the Parties as soon
thereafter as possible (but no later than ten (10) Business
Days) for approval as to the accuracy thereof provided always
that if none of the representatives of the Parties to whom
copies of any such minutes are required to be sent shall
object thereto by writing to the Operator within fifteen (15)
Business Days of receipt of the copy then such minutes are
deemed to have been approved provided further that the
failure by the representatives to approve such minutes shall
not invalidate any decision taken at such operating Committee
meeting; and
(e) maintenance of a permanent file of all Operating Committee
decisions.
7.10 Operating Committees Functions
The functions of the Operating Committee shall include, but not be
limited to:
(a) review and approval of programs and budgets and of AFEs;
(b) determining policies with respect to all Joint Operations;
(c) consideration of the necessity or otherwise of feasibility
studies and terms of reference thereof in relation to Joint
Operations on the Area;
(d) approval of the locations and well plans of all proposed
▇▇▇▇▇;
(e) approval of well spacing patterns;
(f) approval of production profiles;
(g) determining applications for the renewal of the Permit; and
(h) deciding such other matters pertaining to Joint Operations
and proposed Joint Operations as may arise from time to time
and are required to be submitted to the Operating Committee
by the terms of this Agreement and to make decisions in
respect of all other matters pertaining to this Agreement not
assigned to the Operator or the Parties hereunder.
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7.11 Minimum Participating Interest for Representation
A Party whose Participating Interest is less than five percent
(5%) or becomes less than five percent (5%), shall not be entitled
to appoint or retain a representative or alternate pursuant to
Clause 7.2, nor to have a vote proportionate to its Participating
Interest in connection with any decision of the Operating
Committee, except as hereinafter provided.
Two or more Parties, having Participating Interests the sum of
which is five percent (5%) or more, may combine to appoint a
representative and alternate pursuant to Clause 7.2, which
representative shall represent and be deemed authorised to bind
such Parties in every way as though such Parties were one Party
having a Participating Interest equal to the sum of such Parties'
Participating Interests, and such Parties shall be entitled to
cast a vote in connection with any decision of the Operating
Committee as though such Parties were one Party having a single
vote proportionate to the sum of such Parties' Participating
Interests.
8 PROGRAMS AND BUDGETS
8.1 Submission of Programs and Budgets
During the term of this Agreement and unless otherwise agreed by
the Operating Committee the Operator shall submit to each Party's
representative on the Operating Committee by no later than
three(3) months before the commencement of each Permit Year a
recommended program and budget for such Permit Year.
8.2 Adoption of Programs and Budgets
Unless otherwise agreed by the Operating Committee, by no later
than one (1) month before the commencement of each Permit Year the
Operating Committee shall meet to decide upon the program and
budget for such Permit Year. Subject to the provisions of Clauses
8.4, 8.5 and 8.10 to 8.12 inclusive, such decision shall oblige
the Parties to bear and pay their respective Participating
Interest shares of all liabilities, costs and expenses arising or
incurred under the program and budget so approved.
8.3 Minimum Programs, Budgets and Work Obligation Determination
(a) If by fifteen days before the commencement of any Permit Year
the Operating Committee having used all reasonable endeavours
has been unable to decide on the program and budget for that
Permit Year the Operating Committee shall attempt to
determine a programme and budget sufficient to meet the Work
Obligation for such Permit Year by the affirmative vote of
Parties the aggregate of whose Participating Interests
exceeds fifty percent (50%). If the Parties at any time from
time to time, fail to approve an AFE necessary to meet that
program and budget, then the Operating Committee shall be
121
deemed to have approved all AFEs necessary for the Operator to
carry out Joint Operations sufficient to meet all of the Work
Obligation relating to that Permit Year, which has not by that
date, been satisfied.
(b) If the Operating Committee is still unable to decide upon a
program and budget within ten (10) Business Days after the
commencement of such Permit Year, the Operator shall prepare
and dispatch without delay and in any event by not later than
thirty (30) Business Days after the commencement of the
Permit Year to each of the Parties a program and budget
sufficient to meet the Work Obligation for such Permit Year.
The Operating Committee shall be deemed to have approved such
program and budget and all AFEs necessary to give effect
thereto and each of the Parties shall be liable to the extent
of its Participating Interest for all costs and expenses
incurred by the Operator in carrying out the Work Obligation
in accordance with the AFEs.
(c) Not less than two(2) months prior to any date on which a Work
Obligation is to be agreed with the Minister for a new period
of the Permit, the Operating Committee shall meet to vote
upon the program to be submitted as the proposed Work
Obligation.
(d) Any Party voting against a program agreed under paragraph c)
shall despite clause 16.2 (a) have the right to withdraw from
the Permit by giving notice of its intention to do so within
10 days of the vote being taken. Such a withdrawn party must
be notified of any modified programme submitted under 8.3 (e)
and is deemed not to have withdrawn, unless anew notice under
(e) is received.
(e) If the Minister withholds approval of the program submitted
in accordance with paragraph c) above and invites submittal
of a modified program in accordance with the Act then the
Operating Committee shall meet and vote on a modified
program; and the right for a Party to withdraw, having voted
against the modified program will apply in the same manner as
in paragraph d) above.
8.4 Review of Programs and Budgets
Each approved program and budget shall be reviewed by the
Operating Committee at such times as the Operating Committee may
decide. If upon any such review the program and budget is amended,
the amended program and budget shall become the approved program
and budget provided always that any such amendment shall not
invalidate any authorised commitment or expenditure made by the
Operator prior thereto.
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8.5 Authorities for Expenditure (AFEs)
Subject to the provisions of Clauses 8.3, 8.6, 11.7 and 11.8, the
Operator shall not enter into any commitment or incur any
expenditure whether under an approved program and budget or
otherwise except in accordance with an AFE approved in accordance
with the following provisions of this Clause 8.5:
(a) The Operator shall after the Operating Committee has approved
a program and budget prepare an AFE in respect of each
seismic program, well or other major division of work in the
approved program and submit each such AFE to the Parties in
a timely fashion having regard to the Joint Operations to be
carried out under the approved program and the provisions of
this Clause 8.5.
(b) The Parties shall consider and unless a meeting of the
Operating Committee is called for such purpose vote upon each
AFE in accordance with the procedures provided for in Clause
7.6 except that such vote must be communicated not later than
ten (10) Business Days after its submission to the Parties.
A Party who fails to vote on such AFE within such ten (10)
Business Day period shall be deemed to have voted not to
approve the AFE.
(c) When the Operating Committee approves an AFE the Operator
shall be authorised and obliged to proceed with the
expenditure or commitment provided for therein and each Party
shall be obliged to bear and pay its respective Participating
Interest share of all liabilities, costs and expenses arising
or incurred under the AFE so approved.
(d) Each AFE submitted to the Parties and each approved AFE shall
be divided into individual meaningful categories, each of
which shall describe the operational and financial
requirements thereof in sufficient detail to identify its
scope and set out particulars of the best estimate of the
funds required to complete the work.
8.6 When Expenditure in Excess of Approved AFE is Authorised
Notwithstanding the provisions in Clause 8.5:
(a) if at any time it becomes apparent to the Operator that the
expenditure which will be incurred in respect of Joint
Operations covered by an approved AFE will exceed by more
than ten percent (10%) the amount allowed in the approved
AFE, the Operator shall forthwith prepare and submit to the
Parties for approval by the Operating Committee a
supplementary AFE relating to such excess expenditure. The
Operator shall use all reasonable efforts to prepare and
submit such supplementary AFE to the parties before any part
of such excess expenditure is incurred. If the Operating
Committee does not approve the supplementary AFE, the
Operator shall take all steps reasonably necessary to
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conclude, as expeditiously as possible, and with minimum cost
to the Parties, the Joint Operations in respect of which the
excess expenditure has been or is about to be incurred; and
(b) in the case of emergency, the Operator may take such action
as may in its judgment be necessary for the protection of
life or property and may incur all reasonable expenditure on
behalf of the Parties in so doing. In the event of so doing,
the Operator shall report promptly to the Parties the amount
of such expenditures and the circumstances in which they were
made.
Expenditure in excess of an approved AFE properly incurred by
the Operator pursuant to the provisions of paragraph (a) or
(b) above is deemed to be Authorised Expenditure within the
meaning of Clause 9. 1.
8.7 Approved Well Plan
Prior to the commencement of drilling of any well, the Operating
Committee shall have approved a well plan ("Approved Well Plan')
for that well which shall provide the detail relating to the
drilling of the well to its agreed total depth, including but not
limited to the casing program, mud program and proposed coring,
testing and wireline logging operations.
8.8 AFEs for ▇▇▇▇▇
The Operator shall compile an AFE for the drilling of a well on a
dry hole basis, but to include provision for such coring or open
hole testing as is in accordance with the Approved Well Plan for
that well.
8.9 Casing Point Decision
(a) Any decision by the Operating Committee pursuant to Clause 8
regarding the drilling, deepening, reworking, fraccing, side-
tracking or plugging back of a well shall not be deemed an
agreement or decision regarding the setting of casing and the
making of a Completion attempt for production.
(b) After any well drilled, deepened, reworked, fracced, side-
tracked or plugged back has reached Casing Point the Operator
shall give immediate notice pursuant to Clause 7.6(c) to all
Parties.
(c) The notice given by the Operator pursuant to the preceding
Clause 8.9(b) shall contain the Operator's recommendation
either:
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(1) to plug and abandon the well; or
(2) to Complete the well as a producer in which case the
notice shall include the appropriate Completion
procedures and the estimated cost of Completion and
Parties voting for the recommended Completion shall be
deemed to have voted in favour of a formal AFE to be
submitted as soon as practicable in the sum of such
estimated Completion costs.
(d) Each Party shall vote on the proposal in accordance with
Clause 7.6(c).
(e) If such number of Parties the aggregate of whose
Participating Interests-equals or exceeds the percentage
required for an affirmative vote of the Operating Committee
pursuant to Clause 7.3 approves the Completion of such well,
the Operator shall proceed to attempt the Completion of such
well as if such Completion had been approved at a meeting of
the Operating Committee.
(f) If there is a lesser percentage of approval for Completion
than that referred to in Clause 8.9(e) or if less than all
Parties have voted to plug and abandon the well, then the
Operator shall advise all Parties of the result of the vote
and any Party which voted for the Completion of the well may
thereupon immediately request that the operation to plug and
abandon the well be delayed (at such Partys expense) for a
period of up to 24 hours to enable Sole Risk Operations to be
considered. If no such request is made or if at the end of
the said 24 hours no Sole Risk Operation Notice has been
given, the Operator shall plug and abandon the well.
(g) Any notice to be given or election to be made pursuant to
this Clause 8.9 may be given or made by telephone and shall
be confirmed by facsimile as soon as practicable following
such telephone call. Any time periods provided in this Clause
8.9 shall begin to run from the time of such telephone call.
8. 10 Rights of Party Voting Against Operating Programs and Budget
(a) Subject to Clause 8.3, if any Party through its
representative at a meeting of the Operating Committee held
to approve a programme and budget votes against the carrying
out of any Joint Operations consisting of the drilling of one
or more ▇▇▇▇▇ which are not required to meet the work
Obligation for the relevant Permit Year ("Additional Joint
Operations") but which is included within a program and
budget for that Permit Year approved or deemed to be approved
by the Operating Committee, then such Party may notify the
Operator within the relevant time limits specified in Clause
8.12, that it will not participate in the Additional Joint
Operations ("Non-Consenting Party").
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(b) Subject to Clause 8.11, all the Parties which have approved
the program and budget containing the Additional Joint
Operations ("Consenting Parties") will thereafter share in
all costs, risks, liabilities, expenses and benefits arising
or incurred with respect to the Additional Joint Operations
in the proportion that each of their respective Participating
Interests bears to the total of the Participating Interests
of all the Consenting Parties.
8.11 Consenting Parties' Premium
(a) Where a Non-Consenting Party notifies the Operator that it
will not participate in the Additional Joint Operations, the
Operator shall notify the other Parties within 7 days of
receipt of such notice. If any Party which voted for the
program and budget containing the Additional Joint Operations
then notifies the Operator within 7 days of receipt of the
Operator's notice that it does not wish to participate in the
Additional Joint Operations, the Party shall be deemed to be
a Non-Consenting Party under this clause and thereafter shall
not be responsible for any costs, risks or expenses
attributable to the Additional Joint Operations. In this
event, the remaining Parties will be given immediate notice
of their projected readjusted contribution to costs, and have
an extra 48 hours to advise Operator of their consenting or
non-consenting status. Notwithstanding the above, such 7-day
notice period shall be shortened to 48 hours if the
Additional Joint Operations are currently in progress.
(b) The Consenting Parties' rights, interests and benefits in
respect of the results of the Additional Joint Operations
shall be determined in accordance with those sub-clauses of
Clause 12 applicable to the nature of the Additional Joint
Operations as if the Additional Joint Operations were Sole
Risk Operations and the Consenting Parties were Sole Risk
Parties in such Sole Risk Operations.
8.12 Notice to Operator
Notice to be given to the Operator by a Non-Consenting Party
pursuant to Clause 8. 1 0(a) shall be given within the following
periods:
(a) if the Additional Joint Operations are to be commenced within
30 days after the close of the meeting of the Operating
Committee at which the program and budget containing the
Additional Joint Operations was approved, within 7 days after
the date of that meeting;
(b) if the Additional Joint Operations are to be commenced more
than 30 days after the close of the meeting of the Operating
Committee at which the program and budget containing the
Additional Joint Operations was approved, within IS days
after the date of that meeting.
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(c) if the Additional Joint Operations are currently in progress,
within 48 hours after the receipt of notice from the Operator
thereof.
9 COSTS AND EXPENSES
9.1 Allocation of Expenditure
Subject to the provisions of this Agreement, all expenditure
relating to Joint Operations, including without limitation the
handling, treating, storing and transporting to the Delivery Point
of Petroleum produced from the Area shall, except as otherwise
specifically provided herein, be borne by the Parties in
proportion to their respective Participating Interests. All
liabilities of the Joint Venture shall be borne in the same
proportions. To the extent that any such expenditure is included
in an approved AFE or is otherwise authorised pursuant to this
Agreement, such expenditure shall be deemed to be authorised and
shall be referred to as "Authorised Expenditure".
9.2 Accounting Procedure as Basis
The Accounting Procedure shall be the basis for all charges and
credits to the Joint Account except as the Accounting Procedure
may be in direct conflict with this Agreement in which event the
provisions of this Agreement shall prevail, and the Operator shall
keep its records of costs and expenditure in accordance with such
Accounting Procedure. The Operator must charge on the basis that
it is intended to neither gain nor lose in performing the
functions and duties of the Operator under this Agreement.
9.3 Payment by Operator and Reimbursement
The Operator shall initially pay all Authorised Expenditure and
shall debit the Parties for their respective shares thereof.
Unless the Operator shall have received advances for such purposes
as provided for in this Agreement each Party shall forthwith
reimburse the Operator for its share of such Authorised
Expenditure in accordance with the provisions of this Agreement.
9.4 Calls by Operator
The Operator may require the Non-Operators to advance their
respective proportions of Authorised Expenditure in which event
the provisions of Article 1.2.1 of the Accounting Procedure shall
apply.
9.5 Banking of Funds
All funds received by the Operator under the provisions of this
Agreement (other than funds received for the purpose of a Sole
Risk Operation) shall be lodged by the Operator in a separate bank
account in the name of the Joint Venture maintained by the
Operator and styled as directed by the Operating Committee. The
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Operator shall deposit to such account its own share of Authorised
Expenditure or of advances to meet Authorised Expenditure due by
it within the same time limits within which the NonOperators are
required to pay their shares to the Operator. Pending the
expenditure thereof, the funds advanced by any Party shall be held
by the Operator in trust for the respective Party, subject to the
terms of this Agreement.
9.6 Investment of Funds
Each Party hereby authorises the Operator to invest the funds
lodged in the bank account referred to in Clause 9.5 from time to
time in interest bearing deposits with such bank or in such other
forms of investment as are from time to time approved by the
unanimous resolution of the Parties. Each Party shall be entitled
to receive or be credited with the interest earned upon the
investment of its funds.
9.7 Withdrawal of Funds
The Operator is hereby authorised to withdraw funds from the bank
account or interest bearing deposit or other investments as they
are required by the Operator to pay Authorised Expenditure.
10 INFORMATION ON JOINT OPERATIONS
10.1 Information as to Petroleum Production
The Operator shall furnish to each Party each month a statement of
the amount of Petroleum produced (including any Petroleum used,
flared or lost), gathered, treated, processed, transported, stored
and delivered during the preceding month and in stock at the end
of that month within the scope of such Operator's responsibility.
10.2 Access to Records and Information
Unless otherwise specifically provided for in this Agreement and
subject to Clause 15.8 and upon reasonable notice to the Operator
each of the Parties shall have access at all reasonable times for
the purpose of examination and, at its own expense, copying of all
tapes, data, reports, accounts, contracts, books, records and all
other information kept by the Operator in compliance with its
obligations hereunder including but not limited to those relating
to geological and geophysical surveys, drilling, exploration,
production and gathering, those relating to amounts of Petroleum
Produced, gathered, treated, processed, transported, stored and
delivered and those relating to plant and Pipeline design,
construction and costs.
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10.3 Drilling Information and Privileges of Non-Operators
Prior to the commencement of any well for the Joint Account the
Operator shall provide to each Party a copy of the Approved Well
Plan. With respect to any well drilled for the Joint Account, and
subject to Clause 15.8, the Operator shall furnish to each Party,
provided that weather or communication conditions do not prevent
the Operator from so doing:
(a) prompt notice by facsimile of the date of spudding in of the
well;
(b) daily drilling and geological reports; (c) immediate advice
by facsimile or telephone of:
(1) the encountering of any porous zone with showings of
hydrocarbons;
(2) any other occurrence not specified in the Approved Well
Plan which might justify the testing or evaluation of
the zone in question; or
(3) any material occurrence which the Operator considers
might justify a change from the Approved Well Plan,
together with a recommendation from the Operator of any
material departure from the Approved Well Plan which the
Operator thinks appropriate in the circumstances;
(d) on request, at the expense of the requesting Party, a
complete set of washed samples of the cuttings of the
formations penetrated if practicable;
(e) access to all cores taken; and (f) at the expense and risk of
each Party and upon reasonable notice to the Operator, access
to the drilling rig to such persons as that Party shall
nominate for the purposes of viewing any or all Joint
Operations provided that such access does not unreasonably
interfere with Joint Operations and that such persons comply
with all applicable safety requirements and directions.
10.4 Testing and Information to Non-Operators
With respect to any well drilled, the Operator shall:
(a) be ready to receive the comments of and discuss with the Non-
Operators any advice given by the Operator pursuant to Clause
10.3(c);
(b) proceed in all material respects in accordance with the
Approved Well Plan unless or until such time as the Operating
Committee directs otherwise;
(c) proceed with any variation of the Approved Well Plan directed
by the Operating Committee;
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(d) take representative samples and drill stem test fluid samples
and supply each Non-Operator with all information relative
thereto; and
(e) supply each Non-Operator with copies of the test and service
report on each test run, including copies of pressure charts
provided that each Non-Operator shall be entitled to no more
than two copies of each such report and related data.
10.5 Logging Information to Non-Operators
During the drilling of the well and upon the well reaching the
total depth, the Operator shall run all log surveys as are
approved by the Operating Committee and shall as soon as
practicable supply each Non-Operator with a copy of each log so
run.
10.6 Test Following Logging
At any time prior to any Operating Committee decision which would
negate such a request if a Party requests (which request may be
made by telephone or facsimile) that the Operator tests an
interval in the well, the Operator shall promptly request the
Parties to vote on the proposal pursuant to the provisions of
Clause 7.6(c).
10.7 Seismic and Other Reports
The Operator shall supply each Party at the expense of the Joint
Account with:
(a) a copy of all seismic sections;
(b) a copy of the final report on all seismic surveys;
(c) a copy of the well completion report for each well; and
(d) a copy of any other reports prepared on behalf of the Joint
Venture in connection with Joint Operations.
11 INSURANCE AND LITIGATION
11.1 Operator to Maintain Insurance
The Operator shall at all times while conducting Joint Operations
purchase and maintain for the Joint Account for the protection and
indemnification of the Parties:
(a) all such insurances as are required by the terms of the
Permit;
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(b) personal injury insurance and property damage insurance in
respect of motor vehicles of all kinds engaged in Joint
Operations for a minimum of $5,000,000.00 or such greater
amount as the Operating Committee may from time to time
determine;
(c) workers compensation (including unlimited common law risk),
employer's liability and other insurance of a similar or
dissimilar nature as may be required by law;
(d) public liability insurance for a minimum of $ 10,000,000.00
or such greater amount as the Operating Committee may from
time to time determine;
(e) industrial special risks insurance in respect of all Joint
Property for such amount as the Operating Committee may from
time to time determine;
(f) well control, pollution, seepage, clean up and redrilling
insurance (including underground blowout and
redrilling/recompletion) for a minimum of $ 10,000,000.00 or
such greater amount as the Operating Committee may from time
to time determine;
(g) insurance in respect of stocks of Petroleum held prior to
arrival at the Delivery Point in such amount as the Operating
Committee shall from time to time determine; and
(h) such other insurances or indemnities as the Operating
Committee may from time to time determine.
11.2 Contractors Insurance
The Operator shall in addition, require all contractors and sub-
contractors performing work for the Joint Venture to purchase and
maintain for the protection and indemnification of the Parties
insurances of the kind referred to in paragraphs (b), (c) and (d)
of Clause 11. 1 insofar as relates to such work of such
contractors or sub-contractors provided that the Operator may
(unless otherwise directed by the Operating Committee) dispense
with any such insurance in any case in which the Operator
determines that in all the circumstances it is appropriate to do
so and may determine such lower limit for any such insurance as
the Operator deems appropriate.
11.3 Review of Insurances
The Operator will when requested by the Operating Committee carry
out such review of the insurance effected pursuant to Clause 11.1
as the Operating Committee may require.
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11.4 Naming of Parties as Co-insured
The Operator and the other Parties and other persons for whose
benefit any policy of insurance is effected pursuant to Clauses
11.1 or 11.2 shall be named as co-insureds therein. The Operator
shall ensure that each such policy of insurance shall contain:
(a) a waiver of the right of subrogation by the insurer in favour
of the Parties; and
(b) a cross liabilities Clause to the effect that for the
purposes of the policy each Party and other person comprising
the insured shall be considered as a separate unit and the
policy shall apply to each such Party or other person in the
same manner as if a separate policy had been issued to each
of them in its name alone and the insurer waives all rights
of subrogation or action which it may have or acquire against
any such Party or other person.
11.5 Advice to Non-Operators of Current Insurance
The Operator will advise the Parties promptly of any additional
insurance effected or of any insurances cancelled, altered or
lapsed.
11.6 Partys Right to Increase Insurance
Any Party may at its own cost effect or increase any such
insurance so far as it relates to the interest of such Party under
this Agreement
11.7 Cost of Insurance and Charging of Losses
The actual costs of the insurance effected by the Operator
pursuant to Clause 11. 1 shall be charged to the Joint Account.
Any liability, loss, damage, claim or expense relating to Joint
Operations, whether in respect of an event which has been insured
or not shall be charged to the Joint Account and shall be borne
and paid by the Parties (without prejudice to any right of
indemnity or action which any Party may have) in proportion to
their Participating Interests at the time of the liability, loss,
damage, claim or expense in question.
Any Party may elect not to participate in any insurance if.
(a) it gives prompt notice of its non-participation to the
Operator (at least prior to the time at which the Operator
has entered into a contract for such insurance);
(b) its non-participation does not interfere, directly or
indirectly, with the Operator's negotiations for such
insurance and the other Parties participating in such
insurance or prejudice such insurance once obtained;
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(c) it produces to the Operating Committee such evidence of
insurance or financial responsibility, to cover its
Participating Interest share of the risks to be insured
against as the Operating Committee determines to be
acceptable; and
(d) any policy it effects to cover the risks to be insured
against includes waivers of subrogation by the insurer in
favour of the other Parties with respect to Joint Operations
and Joint Property and is subject to a condition that it
cannot be cancelled or varied, or permitted to expire,
without in each instance, the insurer having given to the
other Parties at least 14 days notice of that intent
11.8 Litigation
(a) Subject to the provisions of this Clause 11.8, all matters
relating to the enforcement or defence of rights in respect
of or arising out of Joint Operations shall be determined by
decisions of the Operating Committee.
(b) All actions taken by the Operator pursuant to this Clause
11.8 and all liabilities incurred pursuant thereto shall be
for the Joint Account and the payment of such liabilities
shall constitute Authorised Expenditure.
(c) All the provisions of this Agreement shall apply in relation
to matters referred to in this Clause 11.8 including without
limitation the provisions of Clauses 8.5 and 8.6 relating to
AFEs, the provisions of Clause 9.4 relating to calls by the
Operator and the provisions of Clause IS relating to defaults
in payment.
(d) The Operator shall promptly notify the Parties of any claim,
litigation, lien, demand or judgment relating to Joint
Operations.
(e) The Operator shall have the authority to prosecute, pursue,
defend or settle any claim, litigation, lien, demand or
judgment relating to Joint-Operations where the total amount
in dispute and/or the then total amount of damages together
with any costs is estimated by the Operator to be less than
$20,000.00 or such other amount as may from time to time be
specified by the Operating Committee.
(f) The Operator shall not except at the direction of the
Operating Committee prosecute, pursue, defend or settle any
claim, litigation, lien, demand or judgment relating to Joint
Operations where the then estimated total amount in dispute
and/or the total amount of damages together with any costs is
$20,000.00 (or such other amount as may from time to time be
specified by the Operating Committee) or greater.
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(g) Each Party shall promptly notify the other Parties of any
claim, litigation, lien, demand or judgment relating to Joint
Operations and shall use all reasonable endeavours not to
conduct such proceedings in such a way as to prejudice,
affect or vitiate any insurance effected pursuant to this
Clause 11.
(h) Notwithstanding the provisions of Clause 11.8(e), each Party
shall have the right to participate in any prosecution,
defence or settlement of any proceedings conducted in
accordance with Clauses 11.8(e) and 11.8(f) at its sole cost
and expense provided however that a Party exercising such a
right shall remain liable for its share of Joint Venture
costs.
(i) Any Party participating in the prosecution, defence or
settlement of any proceedings shall at all times take all
reasonable steps to ensure that it does so in such manner as
does not prejudice the rights of any of the other Parties.
(j) The provisions of this Clause 11.8 shall not apply to claims,
litigation, liens, demands or judgments made, brought or
obtained by a Party against another Party.
12 SOLE RISK OPERATIONS
12.1 Sole Risk Operation
The Parties shall propose and conduct Sole Risk Operations in
accordance with this Clause 12. A Party shall not give an Sole
Risk Operation Notice for a Sole Risk Operation (other than a Sole
Risk Operation where there is a rig on site as provided in Clause
12.19) unless the operation described in the Sole Risk Operation
Notice has been proposed in the Operating Committee in complete
form as contemplated in Clause 12.2 and has been rejected or after
the, next ensuing meeting of the Operating Committee it has failed
to gain approval.
12.2 Proposal of Sole Risk Operation
A Proposing Party may at any time give to the Receiving Parties an
Sole Risk Operation Notice, in which the Proposing Party shall
state the proposed location, purpose, program, estimated
commencement date and estimated cost (set out in the form of an
AFE) of the Sole Risk Operation and which shall be accompanied by
all relevant technical information (other than that already in the
hands of the Parties) and interpretations upon which the proposal
is based.
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12.3 Operating Committee to Consider Sole Risk Operation Notice
The Operator shall convene a meeting of the Operating Committee to
be held not less than twenty (20) Business Days and not more than
thirty (30) Business Days after the giving of an Sole Risk
Operation Notice. Unless all Receiving Parties shall prior to the
date of such meeting give notice to all Parties that the Sole Risk
Operation may proceed the Operating Committee shall meet and
consider the Sole Risk Operation Notice.
12.4 Sole Risk Operation Notice for Existing Well
If the Sole Risk Operation Notice relates to a well which is
suspended or is then being drilled other than a well which is
being or is about to be plugged and abandoned then the Sole Risk
Operation may proceed only if the Operating Committee approves the
same proceeding and in such event subject to such conditions, if
any, as the Operating Committee may impose on such Sole Risk
Operations.
12.5 Sole Risk Operation Notice for Exploration Well
If the Sole Risk Operation Notice relates to an Exploration Well
(which term includes an operation classified as an Exploration
Well pursuant to Clause. 12.15) then the Operating Committee shall
either:
(a) decide that the Joint Venture shall drill a well or conduct
an operation having the same purpose as the well or operation
described in the Sole Risk Operation Notice, to be commenced
(which in the case of the drilling of a well means spudded)
not later than six (6) months after service of the Sole Risk
Operation Notice; or
(b) make no such decision, whereupon the Proposing Party may
proceed with the Sole Risk Operation, subject to the
remaining provisions of this Agreement.
If the Operating Committee decides in accordance with paragraph
(a) above and the Joint Venture fails to commence to conduct the
operations within the six (6) months period provided for in that
paragraph, then the limitation period of six (6) months referred
to in Clause 12.9 is extended by the period of six (6) months and
the Proposing Party may proceed with the Sole Risk Operation,
subject to the remaining provisions of this Agreement.
12.6 Sole Risk Operation Notice for Appraisal Well
If the Sole Risk Operation Notice relates to an Appraisal Well
(which term includes without limitation, operations respectively
classified as Appraisal ▇▇▇▇▇ pursuant to Clause 12.15 or Clause
12.18) then:
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(a) if at the time of service of the Sole Risk Operation Notice
Petroleum is not being produced from the Reservoir in respect
of which the operation described in the Sole Risk Operation
Notice is to be conducted, the Operating Committee shall:
(1) decide that the Joint Venture shall produce Petroleum
from such Reservoir within twelve (12) months after the
service of the Sole Risk Operation Notice; or
(2) decide that the Joint Venture shall drill a well or
conduct an operation having the same purpose as the well
or operation described in the Sole Risk Operation
Notice, to be commenced (which in the case of the
drilling of a well means spudded) not later than twelve
(12) months after the service of the Sole Risk Operation
Notice; or
(3) make no such decision, whereupon the Proposing Party may
proceed with the Sole Risk Operation, subject to the
remaining provisions of this Agreement; or
(b) if at the time of service of the Sole Risk Operation Notice
Petroleum is being produced from the Reservoir in respect of
which the operation described in the Sole Risk Operation
Notice is to be conducted, the Operating Committee shall
decide either:
(1) that the Joint Venture shall drill a well or conduct an
operation having the same purpose as the well or
operation described in the Sole Risk Operation Notice to
be commenced (which in the case of a well means spudded)
not later than six (6) months after service of the Sole
Risk Operation Notice; or
(2) make no such decisions whereupon the Proposing Party may
proceed with the Sole Risk Operation subject to the
remaining provisions of this Agreement.
If the Operating Committee decides in accordance with paragraph
(a)(i) or (a)(ii) above and the Joint Venture fails to produce
Petroleum or commence to conduct the operations within the twelve
(12) month period respectively provided for in those paragraphs,
then the limitation period of six (6) months referred to in Clause
12.9 is extended by the period of twelve (12) months, and the
Proposing Party may proceed with the Sole Risk Operation, subject
to the remaining provisions of this Agreement.
If the Operating Committee decides in accordance with paragraph
(b)(i) above and the Joint Venture fails to commence to conduct
the operations within the six (6) month period provided for in
that paragraph, then the limitation period of six (6) months
referred to in Clause 12.9 is extended by the period of six (6)
months, and the Proposing Party may proceed with the Sole Risk
Operation subject to the provisions of this Agreement.
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12.7 Election to Participate
If in consequence of the operation of Clauses 12.3, 12.4, 12.5 or
12.6 the Proposing Party may proceed with the relevant Sole Risk
Operation then the Proposing Party may give notice to each
Receiving Party that it has become entitled to and intends to
proceed with the Sole Risk Operation and each Receiving Party
shall within ten (10) Business Days of receipt of such notice give
notice to each other Party stating whether that Receiving Party
will participate in the Sole Risk Operation and, if so, the
maximum interest (being not less than its Participating Interest)
it will take in such Sole Risk Operation, failing which that
Receiving Party is deemed to have given notice to each other Party
that it will not participate in the Sole Risk Operation.
12.8 Sole Risk Interest
A Sole Risk Party shall participate in a Sole Risk Operation and
bear the costs, risks and liabilities thereof in the proportion
that its Participating Interest bears to the aggregate of the
Participating Interests of the Sole Risk Parties (such proportion
being hereinafter called its "Sole Risk Interest") unless
otherwise agreed among the Sole Risk Parties. When each Receiving
Party has given notice pursuant to Clause 12.7, the Proposing
Party shall forthwith notify each Party which elects pursuant to
Clause 12.7 to participate in the Sole Risk Operation ("Electing
Party") of its then Sole Risk Interest. If the then Sole Risk
Interest of any Electing Party exceeds the maximum interest
specified in its notice pursuant to Clause 12.7, then that
Electing Party may withdraw from the Sole Risk Operation by notice
to the remaining Electing Parties and the Proposing Party given
within five (5) Business Days after receipt of notice of its then
Sole Risk Interest, where-upon the remaining Electing Parties and
the Proposing Party shall agree the Sole Risk Interests. If the
remaining Electing Parties and the Proposing Party are unable to
agree the Sole Risk Interests within ten (10) Business Days after
the Proposing Party notifies the Electing Parties of their then
Sole Risk Interests, then the Proposing Party may proceed with the
Sole Risk Operation alone and thereafter no other Party may
participate in the Sole Risk Operation except with the unanimous
consent of the Sole Risk Parties.
12.9 Time for Commencing Operations
The Proposing Party may begin the Sole Risk Operation after the
Sole Risk Interests have been settled in accordance with Clause
12.8. A Sole Risk Party shall not commence a Sole Risk Operation
more than six (6) months after giving the relevant Sole Risk
Operation Notice. Another Sole Risk Operation Notice may be given
for the same Sole Risk Operation after the expiration of the said
six (6) month period. A Sole Risk Operation, once commenced, shall
be diligently prosecuted or abandoned by the Sole Risk Parties.
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12.10 Conduct of Sole Risk Operation
If less than such Parties as would be able to make a decision of
the Operating Committee pursuant to Clause 7.3, elect to
participate in a proposed Sole Risk Operation then the operation
shall continue to be a Sole Risk Operation and the provisions of
Clauses 12.11 to 12.30 shall apply and the Sole Risk Parties shall
promptly commence (subject to Clause 12.9), carry out and complete
the Sole Risk Operation diligently in accordance with good oil
field practice.
12.11 Operator for Sole Risk Operations
If the Operator is a Sole Risk Party, it shall carry out the Sole
Risk Operation. If the Operator is not a Sole Risk Party, the Sole
Risk Parties may appoint the Operator, if the Operator agrees to
accept such appointment, or one of their number as Sole Risk
Operator. All the provisions of this Agreement relating to the
conduct of Joint Operations shall (to the extent they have
application) apply mutatis mutandis, to the Sole Risk Operator and
to the Sole Risk Operation.
12.12 Sole Risk Parties May Complete and Equip
The Sole Risk Parties which drill a well as a Sole Risk Operation
are entitled, but are not obliged, to Complete such well, or
Complete and Equip such well as part of such Sole Risk Operation
at their sole risk and expense. Sole Risk Parties which Complete
a well as a Sole Risk Operation are entitled, but are not obliged,
to Equip such well as part of such Sole Risk operation at their
sole risk and expense. Sole Risk Parties Equipping a well as a
Sole Risk Operation or as part of a Sole Risk Operation shall not
Equip such well so as to handle production greater than that
reasonably expected from such well, unless the Operating Committee
decides otherwise,
12.13 Premiums Accruing to Sole Risk Parties - Exploration ▇▇▇▇▇
If the Sole Risk Operation is the drilling of an Exploration Well,
and the operation results in the discovery of a Reservoir from
which Petroleum is subsequently produced, the Sole Risk Parties
are entitled as follows:
(a) the Sole Risk Parties may take all Petroleum produced from
such Reservoir by all ▇▇▇▇▇ which are drilled and Completed
for production from such Reservoir until the Net Proceeds of
Sale thereof equals the sum of the Drilling Costs, Completion
Costs and Equipping Costs (if any) incurred by the Sole Risk
Parties as part of such Sole Risk Operation; and
(b) in addition to such entitlements, the Sole Risk Parties may
take all Petroleum produced from such Reservoir and all
subsequent ▇▇▇▇▇ which are drilled and Completed for
production from such Reservoir until the Net Proceeds of Sale
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thereof is an amount equal to one thousand per centum (1000%)
of the Drilling Costs of such well or, if such well is
Completed for production by the Sole Risk Parties as part of
such Sole Risk Operation, an amount equal to one thousand per
centurn (1000%) of such of the Drilling Costs and Completion
Costs as the Sole Risk Parties incur as part of such Sole
Risk Operation.
12.14 Premiums Accruing to Sole Risk Parties - Appraisal ▇▇▇▇▇
If the Sole Risk Operation is the drilling of an Appraisal Well
and such well is Completed for production from a Reservoir which
it was the purpose of the well to intersect, the Sole Risk Parties
are entitled as follows:
(a) the Sole Risk Parties may take all Petroleum produced from
such well from such Reservoir until the Net Proceeds of Sale
thereof equals the sum of the Drilling Costs, Completion
Costs and Equipping Costs (if any) incurred as part of the
relevant Sole Risk Operation; and
(b) in addition to such entitlement, the Sole Risk Parties may
take all Petroleum produced from such well until the Net
Proceeds of Sale thereof is an amount equal to five hundred
per centum (500%) of such Drilling Costs, Completion Costs
and Equipping Costs (if any).
12.15 Deepening, Plugging Back, Reworking, Recompleting, Sidetracking
If the Sole Risk Operation is the deepening, plugging back reworking,
recompleting or sidetracking of a well, and such operation results in:
(a) the discovery of a Reservoir from which Petroleum is
subsequently produced; or
(b) production from that section of the well deepened, plugged
back, recompleted or reworked; or
(c) production from a Reservoir intersected by the sidetracked
portion of the well; or
(d) production for the first time from a Reservoir intersected by
the well plugged back recompleted or reworked,
then for the purpose of dealing pursuant to Clause 12.13 or Clause
12.14 with Petroleum produced as a result of such operation, it is
classified as an Exploration Well or an Appraisal Well by
reference to the definitions of those terms in this Agreement and
to the purposes as stated in the Sole Risk Operation Notice for
which such deepening, plugging back, reworking, recompleting or
sidetracking is conducted.
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12.16 Premiums Accruing to Sole Risk Parties - Completing
If the Sole Risk Operation Notice is solely for the Completing or
the Completing and Equipping of a well from which Petroleum is
subsequently produced, the Sole Risk Parties are entitled (in
addition to any entitlement they may have pursuant to Clause
12.17) as follows:
(a) the Sole Risk Parties may take all Petroleum produced from
such well until the Net Proceeds of Sale thereof equals the
Completion Costs; and
(b) in addition to such entitlement, the Sole Risk Parties may
take all Petroleum produced from such well until the Net
Proceeds of Sale thereof is an amount equal to five hundred
per centum (500%) of the Completion Costs.
12.17 Premiums Accruing to Sole Risk Parties - Equipping
If the Sole Risk Operation Notice is solely for the Equipping or
the Completing and Equipping of a well or ▇▇▇▇▇, the Sole Risk
Parties are entitled (in addition to any entitlement they may have
pursuant to Clause 12.16) as follows:
(a) the Sole Risk Parties may take all Petroleum from such well
or ▇▇▇▇▇ until the Net Proceeds of Sale thereof equals the
Equipping Costs of such well or ▇▇▇▇▇; and
(b) in addition to such entitlement the Sole Risk Parties may
take all Petroleum produced from such well or ▇▇▇▇▇ until the
Net Proceeds of Sale thereof is an amount equal to five
hundred per centum (500%) of the Equipping Costs.
12.18 Multiple Reservoirs
(a) If a well intersects more than one Reservoir, then in respect
of each such Reservoir it may be classified as an Exploration
Well or an Appraisal Well by reference to the purpose, as
stated in the Sole Risk Operation Notice, for which the well
was drilled. A well-is classified as an Exploration Well in
respect of a Reservoir which is discovered by that well,
irrespective of the purpose for which the well was drilled.
(b) If a well intersects more than one Reservoir, and in respect
of all such Reservoirs it is classified as either an
Exploration Well, an Appraisal Well, then for the purposes of
dealing pursuant to Clauses 12.13 to 12.17 with Petroleum
produced from such well, Drilling Costs are the Drilling
Costs of the well to its total depth, Completion Costs are
equal to the sum of the Completion Costs for all Reservoirs,
and Equipping Costs are equal to the total Equipping Costs
for the well, and (without prejudice to any further
140
entitlements which the Sole Risk Parties may have pursuant to
the remaining provisions of Clause 12) the Sole Risk Parties
may take Petroleum from all such Reservoirs until their total
entitlements in respect of the well have been satisfied.
(c) If a well intersects more than one Reservoir, and in respect
of any of such Reservoirs it is classified differently from
another of such Reservoirs, then for the purposes of dealing
pursuant to Clauses 12.13 to 12.17, with Petroleum produced
from such well, Completion Costs are equal to the sum of the
Completion Costs for all Reservoirs, and Equipping Costs' are
equal to the total Equipping Costs for the well. Drilling
Costs are:
(1) for a Reservoir or Reservoirs in respect of which the
well is an Exploration Well, such Drilling Costs as
would have been incurred if the intersection of that
Reservoir or the deepest of such Reservoirs was the only
purpose for which the well was drilled;
(2) for a Reservoir or Reservoirs in respect of which the
well is an Appraisal Well intersected below the deepest
Reservoir in respect of which the well is an Exploration
Well, the difference between the Drilling Costs as
ascertained for paragraph 12.18(c)(i) and such Drilling
Costs as would have been incurred if the intersection of
the Reservoir or the deepest of such Reservoirs in
respect of which the well is an Appraisal Well were the
only purpose for which the well was drilled;
(3) for a Reservoir or Reservoirs in respect of which the
well is an Appraisal Well, and such well does not
intersect a Reservoir in respect of which the well is an
Exploration Well, such Drilling Costs as would have been
incurred if the intersection of the Reservoir or the
deepest of such Reservoirs in respect of which the well
is an Appraisal Well were the only purpose for which the
well was drilled; and
(without prejudice to any further entitlements which the Sole Risk
Parties may have pursuant to the remaining provisions of Clause
12) the Sole Risk Parties may take Petroleum from all such
Reservoirs until their total entitlements in respect of the well
have been satisfied.
12.19 Sole Risk Operation Notice When Rig is on Site
Notwithstanding the other provisions of this Clause 12:
(a) if a drilling rig is on the location of the well when a Party
gives an Sole Risk Operation Notice proposing the deepening,
plugging back, testing, reworking, recompleting, sidetracking
or Completing of a well, the time within which the Operating
Committee shall decide in accordance with Clause 12.4, 12.5
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or 12.6 as the case may be (such decision being made by
facsimile vote of the Parties addressed to the Operator and
each other) and within which each Receiving Party shall give
notice to the Proposing Party pursuant to Clause 12.7 of its
election to participate in the Sole Risk Operation shall be
reduced to twenty-four (24) hours from receipt of the Sole
Risk Operation Notice, or to such longer time as the
Proposing Party may stipulate in the Sole Risk Operation
Notice. Unless the Operating Committee decides otherwise, if
the Sole Risk Parties do not commence the Sole Risk Operation
within five (5) Business Days after service of the Sole Risk
Operation Notice, the Sole Risk Operator shall abandon the
Sole Risk Operation; and
(b) if the Sole Risk Operation proceeds, the Sole Risk Parties
shall pay all costs accruing from the commencement of such
twenty-four (24) hour period. If the Sole Risk Operation does
not then proceed, the Proposing Party shall pay such extra
costs as may be occasioned by delay (including without
limitation, any delay to Joint Operations during the twenty-
four (24) hour period) associated with the giving of the Sole
Risk Operation Notice.
12.20 Deepening or Sidetracking of Sole Risk Well
(a) Any Party may participate in a Sole Risk Operation which is
the deepening or sidetracking of a well to a depth greater
than the depth of that well as at the commencement of the
relevant Sole Risk Operation, which well was previously the
subject of a Sole Risk Operation, whether or not such Party
participated in such prior Sole Risk Operation.
(b) If Petroleum is not produced from the well as a result of the
deepening or sidetracking operation, then:
(1) the Sole Risk Parties in respect of the drilling of the
well as originally programmed will be responsible for
the costs of abandoning that section of the well
resulting from that drilling; and
(2) the Sole Risk Parties in the deepening or sidetracking
will be responsible for the costs of abandoning that
section of the well resulting from that deepening or
sidetracking operation
(c) If Petroleum is produced from the well as a result of the
deepening or sidetracking operation, then the Sole Risk
Parties shall apply the Net Proceeds of Sale of such
Petroleum first in reimbursement to the Parties participating
in the well as originally programmed of their Drilling Costs
of the well to the depth from which the deepening or
sidetracking Sole Risk Operation commenced.
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12.21 Priority of Recovery of Premium
If more than one Sole Risk Operation is conducted in a well, then
each group of Parties to a Sole Risk Operation may take Petroleum
from the well and apply the Net Proceeds of Sale in reduction of
costs and premium pursuant to Clauses 12.13 to 12.17, in the order
of priority which is the same as the order in which each Sole Risk
Operation commenced.
12.22 Abandonment of Sole Risk Operation - Salvageable Material
(a) If a well in respect of which a deepening, plugging back,
reworking, recompleting or sidetracking operation has been
conducted as a Sole Risk Operation is abandoned, without any
production being taken from it, then the proceeds of sale of
salvageable equipment supplied at the cost of the Sole Risk
Parties accrue to the Sole Risk Parties. The proceeds of sale
of other salvageable equipment are for the Joint Account or,
if the well in respect of which the deepening, plugging back,
reworking, recompleting or sidetracking operation was
conducted was itself drilled as a Sole Risk Operation, such
proceeds accrue to the Sole Risk Parties in such Sole Risk
Operation.
(b) If the Sole Risk Parties abandon a well which has been the
subject of a Sole Risk Operation before production from it,
if any, has been sufficient to meet all costs and premiums
payable to the Sole Risk Parties, the proceeds of sale of all
salvageable equipment in and about the well, the initial cost
of which was included in the Drilling Costs, Completion Costs
or Equipping Costs of the well, are deemed to be part of Net
Proceeds of Sale of Petroleum produced from the well, for the
purpose of accounting between the Sole Risk Parties and the
Non-Sole Risk Parties.
12.23 Accounts During Sole Risk Operations and Premium Recovery
(a) The computation of costs and expenses relating to Sole Risk
Operations shall be made in accordance with this Agreement
and the Accounting Procedure. While carrying out Sole Risk
Operations, the Sole Risk Operator shall maintain separate
books, records and accounts for Sole Risk Operations which
shall be subject to the same examination and audit as are
applicable to the books maintained for the Joint Account.
(b) During the period that production of Petroleum from a well is
being applied in reduction of costs and premiums payable to
Sole Risk Parties in a Sole Risk Operation the Sole Risk
Operator for such well shall supply all Parties each month
with a statement on which shall appear:
(1) the names and Sole Risk Interests of the Sole Risk
Parties;
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(2) the quantity and Proceeds of Sale of Petroleum produced
from such well (and where necessary for the purposes of
Clause 12.18, from each Reservoir in such well and where
applicable other ▇▇▇▇▇ drilled into the same Reservoir)
for the preceding month;
(3) the Net Proceeds of Sale for the preceding month and the
manner of calculation thereof; and
(4) the sum of costs and premiums remaining outstanding and
the manner of calculation thereof
(c) The Sole Risk Parties shall promptly furnish to the Sole Risk
Operator each month information necessary for the Sole Risk
Operator to prepare such statement.
12.24 Sole Risk Parties' Relationship
Unless the Sole Risk Parties otherwise agree concerning their
relationship with each other and the relationship of the Sole Risk
Parties and the Sole Risk Operator, then subject to the specific
provisions of this Clause 12 the provisions of this Agreement
shall (to the extent that they may have application) apply mutatis
mutandis both generally and to such relationship during the
conduct of a Sole Risk Operation and until all Sole Risk Parties'
entitlements pursuant to this Clause 12 have been satisfied. No
agreement between the Sole Risk Parties inter se shall affect any
of the rights of any Non-Sole Risk Party under this Agreement.
12.25 Indemnification of Non-Sole Risk Parties
Each Sole Risk Party to the extent of its Sole Risk Interest
hereby indemnifies and holds harmless the Non-Sole Risk Parties
against all actions, claims, demands and proceedings whatsoever
brought by any third party (including without limitation any
employee of the Sole Risk Party) arising out of or in connection
with the Sole Risk Operation and shall insofar as it may be within
its control keep the Permit free from all liens, charges and
encumbrances which might arise by reason of the conduct of the
Sole Risk Operation. The approval of the Non-Sole Risk Parties to
the conduct of a Sole Risk Operation (whether or not such approval
is required) shall not constitute a waiver of these provisions.
12.26 Use of Joint Property
(a) The Sole Risk Parties may use Joint Property in connection
with Petroleum produced as a result of a Sole Risk Operation,
to the extent of such of the capacity of such Joint Property
from time to time as is not required for Joint Operations for
the Joint Account.
(b) Any costs and expenses incurred by reason of such use of
Joint Property shall be paid by the Sole Risk Parties.
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12.27 Non-Sole Risk Parties may Receive Information
The Sole Risk Operator may provide to the Non-Sole Risk Parties
all such information in respect of the Sole Risk Operation.
12.28 Net Proceeds of Sale of Petroleum
In this Clause 12 the following expressions shall have the
following meanings:
(a) "Net Proceeds of Sale" of the relevant Petroleum means the
Proceeds of Sale less the sum of
(1) Government royalty and all other royalties, excise and
other levies calculated specifically in relation to the
relevant Petroleum as may be applied from time to time;
and
(2) Operating Costs, payable by the Sole Risk Parties in
respect of such Petroleum.
(b) "Proceeds of Sale" of Petroleum means:
(1) where it is sold at arms length, the monetary value of
the consideration received for the sale of such
Petroleum less Delivery Costs; and
(2) where it is not sold at arms length, or where it is sold
prior to further processing by the Sole Risk Party which
owns it, a monetary value which such Sole Risk Party and
the Non-Sole Risk Parties agree to be the actual
consideration which would be obtainable for such
Petroleum upon a sale at arms length less an agreed
amount as the equivalent of Delivery Costs provided
that:
(A) if such Parties are unable to agree within one (1)
month of the first occasion upon which Petroleum
is taken by the Sole Risk Party which does not
intend to sell such Petroleum at arms length, then
such Parties shall agree upon a qualified person
who shall determine such monetary value; and
(B) if such Parties are unable to agree upon a
qualified person within a further month, any such
Party may request the Chairman or the next most
senior Councillor (not being an officer of any
Party) of the Petroleum Association of New Zealand
to nominate a qualified person to determine such
monetary value. In making such determination such
person shall be acting as an expert and not as an
arbitrator and his decision shall be final and
binding on the Parties. The costs of the
determination shall be borne by the Parties in
proportion to their Participating interests.
145
(c) "Delivery Costs" means all costs incurred in marketing the
relevant Petroleum and in transporting it from the Delivery
Point to the point of sale.
12.29 Early Re-Entry by Non-Sole Risk Parties
(a) At any time within one hundred and twenty (120) Business Days
following the date upon which a Sole Risk Operation was
completed each Non-Sole Risk Party may, at its option, elect
to discharge its share of the total amount or amounts to
which each Sole Risk Party is entitled under Clauses 12.13,
12.14, 12.16 or 12.17 by paying in cash to the Sole Risk
Parties within the said period of one hundred and twenty
(120) Business Days an amount equal to fifty percent (50%) of
the total of amounts which the Sole Risk Parties would
otherwise have been entitled to receive under the relevant
Clause.
(b) Upon making such cash payment such Non-Sole Risk Party shall
be restored to its full rights hereunder as if the Non-Sole
Risk Party had participated in such Sole Risk Operation.
(c) For the purpose of facilitating a payment pursuant to this
Clause the Operator shall, within eighty (80) Business Days
after the completion of each Sole Risk Operation, advise all
Parties of the cost of such Operation.
(d) Within forty (40) Business Days of the date of the cash
payment by a Non-Sole Risk Party there shall be an accounting
and a cash settlement between such Non-Sole Risk Party and
the Sole Risk Parties for the Net Proceeds of Sale (whether
a positive or negative amount) calculated from the date of
completion of the Sole Risk Operation to the date of the cash
payment.
(e) A Non-Sole Risk Party exercising this option shall not
thereby become entitled to share in payments received in
respect of any other Non-Sole Risk Party pursuant to any of
Clauses 12.13, 12.14, 12.16 or 12.17.
12.30 Conclusion of Sole Risk Operation
As soon as sufficient Petroleum has been produced to satisfy all
costs and premiums due to the Sole Risk Parties, the well with all
associated equipment shall thereupon become Joint Property.
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13 DISPOSAL OF PRODUCTION
13.1 Ownership
Subject to the provisions of this Agreement each Party shall have
the right and obligation to receive and take in kind as its own
property at the Delivery Point and to sell or otherwise dispose of
its Participating Interest share of all Petroleum produced from
the Area excepting so much thereof as may be required by the
Operator in connection with idle conduct of Joint Operations or is
unavoidably lost
13.2 Royalties
All royalties, levies, duties and taxes payable to the Government
and all those payable to third parties shall be delivered or paid
whether in cash or in kind, by each Party in respect of production
taken by it and each Party hereby agrees to indemnify and hold
harmless all other Parties against all claims, liabilities, costs
and expenses arising out of its failure to make such deliveries or
payments.
13.3 Production Reports
The Operator shall maintain full and accurate records of Petroleum
production inventories and deliveries to the Parties.
13.4 Delivery
All Petroleum shall be delivered to the Parties by the Operator at
the Delivery Point.
13.5 Risk
The risk attaching to Petroleum delivered to each Party shall pass
to that Party at the Delivery Point.
14 OFFTAKE AGREEMENT
14.1 Crude Oil
If crude oil is to be produced from the Area the Parties shall in
good faith and not less than three (3) months, or such lesser
period as the Parties may agree, prior to the scheduled date of
first delivery of crude oil, negotiate and conclude the terms of
an agreement to cover the offtake of crude oil produced from the
Area. Such offtake agreement shall include, without limitation,
provision for:
(a) the Operator to provide regular periodic advice to the
Parties of estimates of total available production broken
down by succeeding periods, and grades of crude oil, for as
far ahead as is necessary for the Operator and the Parties to
plan offtake arrangements. Such advice shall also cover for
each grade of crude oil, total available production and
147
deliveries for the preceding period, inventory, overlifts and
underlifts and each Party's Participating Interest share of
available production after adjustment for overlifts and underlifts
("Entitlement")
(b) elimination of overlifts and underlifts;
(c) the rights of the Parties if a Party fails in any relevant
period to take the whole or part of its Entitlement for that
period;
(d) delivery to the Parties of Entitlements to ensure, to the
extent Parties take delivery of their Entitlements rateably
to their accrual, that each Party shall receive current
Entitlements in like grade, gravity and quality to that
received by each other Party and, to the extent that delivery
on such basis is impracticable because of availability of
facilities and minimum cargo sizes, a method of making
periodic adjustments.
14.2 Natural Gas
The Parties recognise that, in the event of any discovery of
Natural Gas, it may or will be or become desirable for them to
enter into special arrangements for the disposal of the same and
they agree that, in such event and upon the request of any of
them, their respective representatives shall meet together as
necessary to consider their entry into such arrangements and that,
if and to the extent that any such arrangements are agreed, they
will adopt and undertake the same.
15 DEFAULTS
15.1 Notice of Default
(a) If any Party fails to make any payment as required by this
Agreement by the due date for payment, the Operator shall
upon becoming aware of such failure give notice of such
failure to such Party giving particulars of the alleged
failure and of the amount thereof ("Unpaid Amount").
(b) If at the expiration of ten (10) Business Days after receipt
of such notice such Party or any of their respective
Participating Interests or other person (not being a Party)
on its behalf has not paid in full the amount due by it and
all amounts subsequently due to the Operator pursuant to this
Agreement by such Party, such Party ("Defaulting Party")
shall be in default pursuant to this Agreement. The Operator
shall promptly give notice of all such defaults to all
Parties.
(c) Each such notice ("Default Notice") shall set out particulars
of the Unpaid Amount. For the purpose of this Clause 15 all
Parties other than any Defaulting Party are referred to as
the "Non-Defaulting Parties".
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15.2 Defaulting Party Liable for Interest
(a) Any amount payable by a Defaulting Party which remains unpaid
shall bear interest and the Defaulting Party shall pay
interest at the Default Interest Rate (which is applicable on
the due date for payment of such amount) from the due date of
payment of such amount until the actual date of payment.
(b) Such interest shall accrue to the Non-Defaulting Parties in
proportion to their respective Participating Interests or if
one or more of the Non-Defaulting Parties become Paying
Parties within the meaning of Clause 15.6, then thereafter to
the Paying Parties as is provided in Clause 15.6.
15.3 Payment by Operator
In the event that the payment which a Party that is or becomes a
Defaulting Party has failed to make is a payment due under this
Agreement to a person who is not a Party, the Operator may and
shall if so directed by the Operating Committee, by a vote of Non-
Defaulting Parties whose Participating Interests aggregate a
simple majority of the total Participating Interests of the Non-
Defaulting Parties, pay the same to such person. Any amount so
paid shall constitute a debt immediately due and payable by such
Party to the Operator.
15.4 Defaulting Party may be Sued
Without prejudice to any other remedy for or consequence of
default provided for in this Agreement the Operator shall if so
directed by the Operating Committee by a vote of Non-Defaulting
Parties whose Participating Interests aggregate a simple majority
of the total Participating Interests of the Non-Defaulting Parties
▇▇▇ in any Court of competent jurisdiction a Defaulting Party
(which term shall without limitation include any Party removed
from the position of Operator for failing to pay or contribute or
advance its proportionate share of Authorised Expenditure) for the
recovery of any moneys due and payable to the Operator or the
Paying Parties (as defined in Clause 15.6) or any of them by that
Defaulting Party which remain unpaid by the Defaulting Party at
the expiration of ten (10) Business Days after the receipt of the
Default Notice by the Defaulting Party.
15.5 Non-Defaulting Parties to Contribute
If at any time after the end of the ten (10) Business Days period
referred to in Clause 15.4 the Operator shall not then have
received in full from the Defaulting Party or any other person
(not being a Party) on its behalf the then aggregate of the Unpaid
Amount of such Defaulting Party plus interest thereon at the
Default Interest Rate the Operator may and shall if so directed by
the Operating Committee by a vote taken in accordance with Clause
15.4, require by notice in writing each of the Non-Defaulting
Parties to pay to the Operator the amount of its proportion of
149
such Unpaid Amounts on a date ("Payment Date") not less than five
(5) Business Days after receipt of such notice. Such proportion
shall be that proportion which the relevant Non-Defaulting Party's
Participating Interest bears to the aggregate of the Participating
Interests of all the Non-Defaulting Parties. A Party which does
not pay each amount due by it under this Clause 15.5 within ten
(10) Business Days of receipt of a request for payment of such
moneys shall be regarded as a Defaulting Party and all the
provisions of this Clause 15 shall apply to such Party in respect
of any amount not so paid.
15.6 Rights of Paying Parties
A Non-Defaulting Party (including without limitation the Operator
in its capacity as a Party) which pays to the Operator or bears
any amount payable by it under Clause 15.5 is herein called a
"Paying Party" and is deemed to have advanced such amount to the
Defaulting Party on the terms that it is immediately repayable and
may ▇▇▇ the Defaulting Party to recover the same but without
prejudice to any other rights and remedies.
The amount owing by a Defaulting Party to a Paying Party shall
bear interest at the Default Interest Rate from the date the
Paying Party made the payment under Clause 15.5 to the date it has
recovered such amount in full.
15.7 Defaulting Party's Petroleum
For so long as any Unpaid Amount is not paid in full the
Defaulting Party forfeits its rights to take any Petroleum
produced from the Area and the Operator shall be entitled to take
and receive all of the Defaulting Party's share of Petroleum
produced from the Area and to sell and dispose of the same until
such time as the net proceeds of sale of such Petroleum exceeds
the Unpaid Amount plus interest on the Unpaid Amount at the
Default Interest Rate. Such net proceeds of sale shall be
distributed to the Paying Parties in proportion to the amounts
paid by them pursuant to Clause 15.5 until all amounts owing by
the Defaulting Party to the Paying Parties plus interest thereon
at the Default Interest Rate has been paid in full and any
remaining surplus of such net proceeds of sale will be distributed
to the Defaulting Party. The receipt of any amounts by the Non-
Defaulting Parties under this Clause 15.7 shall be without
prejudice to any other rights or remedies of such Non-Defaulting
Parties.
15.8 Suspension of Rights of Defaulting Party
A Defaulting Party shall not be entitled either to attend or to
vote at any meeting of the Operating Committee or the Parties or
to have access to Joint Operations or to records of Joint
Operations or information pursuant to Clauses 5.6 and 10 or to
receive information or be consulted with respect to Joint
Operations unless and until all amounts then due and payable by
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that Defaulting Party in accordance with the terms of this
Agreement shall have been received in full or the default is
otherwise rectified or is waived by each Non-Defaulting Party.
Except that the Defaulting Party should have access to information
as reasonably necessary to remedy the default or to dispute the
call made.
15.9 Default of Operator in Payment
In the event that the Operator fails to make any payment as
required by this Agreement in its capacity as a Party thereto,
then unless and until a replacement Operator is, appointed the
rights and responsibilities prescribed for the Operator under this
Clause 15 shall be exercised for and on behalf of the Non-
Defaulting Parties by the Party other than the Operator having the
greatest Participating Interest and such Party shall be deemed to
be the Operator for the purpose of exercising the rights and
duties of the Operator under this Clause 15.
15.10 Application of Defaulting Party's Funds
Upon default by any Party in the payment of any moneys payable
under this Agreement and without limiting Clause 15.7, the
Operator shall (notwithstanding anything contained herein to the
contrary, and without prejudice to other rights and remedies),
retain any moneys which may be held for such Defaulting Party or
which come to the hands of the Operator on behalf of such
Defaulting Party, and apply such moneys until the amount owed by
such Defaulting Party in accordance with this Agreement has been
paid in full.
15.11 Valuation of Defaulting Party's Interest
(a) If at the end of twenty (20) Business Days from the date of
receipt by a Defaulting Party of a Default Notice the
relevant Unpaid Amount and interest thereon have not been
paid in full, then unless:
(1) the Defaulting Party has reached agreement with the
Operator on behalf of all the Non Defaulting Parties as
to the value of its Participating Interest; or
(2) all Non-Defaulting Parties have agreed that a valuation
should not be obtained, the Operator shall request the
Chairman or the next most senior Councillor (not being
an officer of any Party) of the Petroleum Association of
New Zealand to nominate a person to determine the value
of the Participating Interest of the Defaulting Party.
(b) The person so nominated shall value the Defaulting Party's
Participating Interest on the basis that the Joint Venture is
a going concern and the price payable is that which would be
payable by a willing but not anxious buyer to a willing but
not anxious seller dealing at arms' length. In making such
determination such person shall be acting as an expert and
not as an arbitrator and his decision shall be final and
binding on all Parties.
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(c) The costs of obtaining such valuation shall in the first
instance be paid out of the Joint Account but shall be
charged to and recoverable from the Defaulting Party as
though it were part of the Unpaid Amount.
(d) Upon receipt of the valuation of the Participating Interest
of the Defaulting Party the Operator shall promptly forward
a copy of the same to each Party including the Defaulting
Party.
(e) The value of the Participating Interest of the Defaulting
Party as agreed pursuant to Clause 15.11 (a) or as determined
pursuant to Clause 15.11 (b) shall be and be deemed to be the
value of such interest for the purposes of Clause 15.12.
15.12 Option to Purchase Defaulting Party's Interest
If at the end of forty (40) Business Days from the date of receipt
by a Defaulting Party of a Default Notice the relevant Unpaid
Amount and interest thereon have not been paid in full ("Option
Commencement Date"), then each of the Non-Defaulting Parties shall
have an option and such Defaulting Party hereby grants to each of
the Non-Defaulting Parties the option ("Option") to purchase its
Participating Interest (and if more than one Non-Defaulting Party
exercises such option, in the proportions which the respective
Participating Interests of such Non-Defaulting Parties bear to the
total of their Participating Interests, or in such other
proportions as such Non-Defaulting Parties shall agree upon) and
upon the following terms and conditions:
(a) A Non-Defaulting Party may exercise or join in the exercise
of the Option at any time on or after the Option Commencement
Date provided that the Option shall cease to be exercisable
at the expiration of twenty (20) Business Days after the
earliest exercise of the Option by a NonDefaulting Party or
in the event that on such earliest date of exercise the
valuation of the Defaulting Party's Participating Interest
pursuant to Clause 15.11 (b) has not been received then at
the expiration of twenty (20) Business Days after the receipt
of such valuation by all the Non-Defaulting Parties.
(b) A Non-Defaulting Party exercising the Option shall do so by
giving a notice in writing to the Defaulting Party and at the
same time giving a copy of such notice to all other Parties.
(c) In the event of the exercise of this Option, the Option
Exercise Date shall be the earlier of the date upon which all
Non-Defaulting Parties have notified such exercise or twenty
(20) Business Days after notification by the first Non-
Defaulting Party to exercise such Option. (The Non-Defaulting
Party or Parties exercising the Option are hereinafter
referred to as the "Purchaser" or "Purchasers").
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(d) The purchase price payable by the Purchasers for the
Defaulting Party's Participating Interest shall be a sum
equal to ninety percent (90%) of the value of such
Participating Interest as determined pursuant to Clause
15.11. Such purchase price shall be payable to the Defaulting
Party by each Purchaser in proportion to the percentage of
such Participating Interest it has acquired. Each Party
hereby agrees that the difference between the full value of
the Participating Interest of the Defaulting Party and the
selling price under this Clause constitutes a pre-estimate of
the liquidated damages which will be sustained by the Non-
Defaulting Parties by reason of breach of this Agreement by
the Defaulting Party.
(e) The completion of the purchase shall be effected at whichever
is the latest date of thirty (30) Business Days after the
Option Exercise Date or ten (10) Business Days after the
receipt of all necessary approvals to the purchase or ten
(10) Business Days after the receipt by the Purchasers of the
valuation of the Participating Interest of the Defaulting
Party pursuant to Clause 15.11 (b).
(f) Upon such completion the Purchasers shall be at liberty to
deduct from the purchase price the following amounts and to
apply the amount deducted in paying or reimbursing such
amounts:
(1) the amount required to discharge or satisfy liabilities
secured by any charge or encumbrance over the
Participating Interest of the Defaulting Party;
(2) the amount required to discharge the several liabilities
of the Defaulting Party at the date of completion under
this Agreement including all Unpaid Amounts; and
(3) the amount of any stamp duty payable on any transfer or
other instrument arising from the exercise of the
option.
(g) Upon and in exchange for the payment to it of the balance (if
any) of the purchase price pursuant to the preceding Clause
15.12(f) or, if such be the case, upon the determination that
there is no such balance payable, the Defaulting Party shall
forthwith do all such acts and things and execute and deliver
to the Purchasers all such transfers, deeds and other
documents as arc necessary to give effect to and complete the
sale pursuant to this Clause 15.12.
(h) If the Defaulting Party fails to act in any manner provided
for in Clause 15.12(g) within twenty (20) Business Days of a
request so to do made by the Operator or other Party
nominated by the purchaser, then the Operator or other Party
nominated by the purchaser shall be and be deemed to be the
agent and attorney of the Defaulting Party for all purposes
necessary to give effect to the sale pursuant to this Clause
15.12.
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(i) Any sale pursuant to this Clause 15.12 shall be subject to
all Governmental consents and approvals required by law. If
any such consent or approval is refused any contract
constituted by an exercise of the Option hereunder shall
cease to have further force or effect.
(j) The remedying of the default in whole or in part after the
date of the exercise of the Option by the first Non-
Defaulting Party to exercise the same shall not derogate from
the rights of any of the Non-Defaulting Parties in respect of
this Option which rights shall remain in full force and
effect.
16 WITHDRAWAL AND SURRENDER
16.1 Any Party May Withdraw
Any of the Parties hereto may withdraw from the Joint Venture
constituted hereby, by giving notice in accordance with the term
of this Agreement but providing that no Party may withdraw if it
is participating in an approved programs and budget or a Work
Obligation which has commenced unless one or more of the Non
Withdrawing Parties agrees to accept a transfer of the whole of
the Withdrawing Party's Participating Interest.
16.2 Notice of Withdrawal
(a) Subject to Clauses 8.3 and 16.3 any Party desiring to
withdraw ("Withdrawing Party") shall give to the other
Parties notice of its withdrawal ("Notice of Withdrawal") not
less am sixty (60) days prior to the end of a Work Obligation
stage.
(b) Such Notice of Withdrawal shall take effect on the last day
of the Work Obligation stage in which the Notice of
Withdrawal is given ("Effective Date of Withdrawal") provided
that the Withdrawing Party has complied with all of its
obligations in respect of the -program and budget for that
Work Obligation stage and the then current Work Obligation.
(c) Such Notice shall constitute an offer of assignment for a
consideration of $1.00 to the other Parties of the whole of
the Withdrawing Parties Participating Interest The Notice of
Withdrawal shall not be revocable except with the unanimous
consent of all other Parties.
16.3 Other Parties may Join in Withdrawal
Each of the other Parties may within twenty (20) Business Days of
receipt of a notice given pursuant to Clause 16.2 give notice to
the other Parties that it elects to join in such withdrawal to
take effect on the Effective Date of Withdrawal whereupon it will
become a Withdrawing Party for the purposes of this Clause 16.
Such notice shall constitute an offer of assignment for a
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consideration of $ 1.00 to the other Parties of the whole of the
Withdrawing Parties Participating Interest The election of a Party
to join in withdrawal shall not be revocable except with the
unanimous consent of all non-withdrawing Parties.
16.4 Other Parties may Accept Assignment
The other Parties shall have forty (40) Business Days from the
latest date of receipt of notice given pursuant to Clauses 16.2 or
16.3 to notify the Withdrawing Party whether they accept the offer
and elect to receive an assignment of the Withdrawing Partys
Participating Interest in the proportions that their respective
Participating Interests bear to the aggregate of their
Participating Interests. If some only of such Parties accept such
offer or if the acceptance of any accepting Party is limited in
percentage, then the interest of the Withdrawing Party or the
portion of such interest remaining after the allocation of any
limited percentages accepted shall be distributed amongst the
other accepting Parties wishing to receive the same in the
proportions that their respective Participating Interests bear to
the aggregate of the Participating Interests of such Parties or in
such other proportions as such Parties agree among themselves.
16.5 Prompt Execution of Documents
If some or all of the other Parties give notice pursuant to Clause
16.4 of acceptance and election to receive such assignment all
Parties concerned shall promptly execute and deliver all documents
and do and perform all acts and things necessary and appropriate
to validly effect such assignment.
16.6 Withdrawing Party's Obligations
(a) In the event of an assignment under this Clause 16 the
Withdrawing Party shall remain liable to meet its
proportionate share of:
(1) all Authorised Expenditure and liabilities incurred or
accrued by the Operator on or before the Effective Date
of Withdrawal; and
(2) all other liabilities of the Parties for anything done
or omitted to be done in the course of Joint Operations
on or before the Effective Date of Withdrawal.
The Withdrawing Party shall remain responsible for such
obligations (including without limitation, payments of
amounts to the Operator) although the extent of such
obligations may not be ascertainable until after the
Effective Date of Withdrawal provided that the Withdrawing
Party shall not be liable for any obligation accruing after
the date of Notice of Withdrawal given pursuant to Clause
16.2 or the date of a notice given pursuant to Clause 16.3 in
consequence of a decision by the Operating Committee after
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such date either to renew the Permit or any other title of
the Joint Venture or to adopt a program and budget to the
extent that it exceeds a minimum program and budget pursuant
to Clause 8.3 or to increase any such program and budget.
(b) Notwithstanding the provisions of Clause 16.6(a), in the
event that within one (1) year after the Effective Date of
Withdrawal of a Withdrawing Party the remaining members of
the Joint Venture resolve to abandon or determine the Joint
Venture, the Withdrawing Party shall remain liable for and
shall pay its proportionate share of the Net Abandonment
Costs incurred consequent upon that resolution determined on
the basis that such Withdrawing Party had not withdrawn from
the Joint Venture until the end of such year.
(c) For the purposes of Clause 16.6(b), "Net Abandonment Costs"
shall mean the rehabilitation costs, well abandonment costs
and any other costs of the abandonment of the Joint Venture
net of the salvage value of all Joint Property.
16.7 Costs of Assignment
All costs incurred by a Party in connection with any assignment
under this Clause 16 including stamp duty, registration fees and
legal fees shall be paid by the Withdrawing Party.
16.8 Assignment to all Parties
In the event that by the expiration of forty (40) Business Days
from the latest date of receipt of the notice from a Withdrawing
Party pursuant to Clauses 16.2 or 16.3 the interest of the
Withdrawing Party or any portion of such interest remains
unallocated or undistributed to other Parties pursuant to Clause
16.4 then the Withdrawing Party shall assign its interest or the
portion thereof remaining unallocated or undistributed to all of
the other Parties not being Withdrawing Parties in the proportions
agreed between them or in the absence of agreement in the
proportions that their respective Participating Interests bear to
the aggregate of their Participating Interests. In the event that
there are then no Parties willing to accept an assignment of an
unallocated or undistributed interest, all Parties shall be deemed
to have abandoned the Joint Venture constituted hereby and shall
forthwith co-operate with each other to bring the Joint Venture to
an end and effect a final settlement between them.
16.9 Selection of Area Required to be Surrendered
(a) If at any time relinquishment or surrender of any portion of
the area subject to the Permit is required by operation of
law or the terms and provisions of the Permit the Operator
shall give timely written notice to the Operating Committee,
setting forth in detail the reasons for such relinquishment
or surrender and a description of the areas which the
Operator suggests be .relinquished or surrendered in
compliance with such requirement.
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(b) The Operating Committee shall consider all matters relevant
to the question of such relinquishment or surrender, and
shall, within one (1) month (or such shorter period of time
as may be required by the Permit or by law), determine and
notify the Operator of the decision to be carried out
provided that any determination of the areas which are to be
relinquished or surrendered must be in accordance with the
decision of the Parties whose Participating Interests are in
aggregate not less than ninety percent (90%). Failure of any
Party to notify the Operator of its decision within such
period of time shall be deemed to be a decision and
notification by such Joint Venturer in accordance with the
Operators suggestion. If the Parties holding in aggregate
Participating Interests not less than ninety percent (90%)
cannot agree on the areas to be relinquished or surrendered
then the matter shall be determined by the Operator.
16.10 Voluntary Surrender of Area
Any Party may at any time propose to the other Parties that one or
more portions of the Area be surrendered, which proposal shall,
subject to the granting of any necessary Government consents, be
given effect to if approved by all Parties.
17 ASSIGNMENTS AND MORTGAGES
17.1 Restriction
(a) Except as permitted in this Article 17 or with the prior
written consent of all the other Parties, a Party shall not
directly nor indirectly, without the prior written consent of
each other Party, sell, assign, transfer, mortgage, pledge,
charge, encumber, lease, sublease, license or otherwise
dispose of (but expressly excluding including by way of
change in the ownership, management, trusteeship or control
of any corporation or trust estate holding a Percentage
Interest but expressly excluding or by way of sale of all of
the shares in the capital of a Party or any bona fide merger
or amalgamation of the whole of a Party's assets and
undertaking with that of another person, which may occur
without such prior written consent of all the other Parties)
or create or suffer to exist a royalty (except a governmental
royalty) or other interest, lien, charge or other encumbrance
over, or trust in respect of, the whole or any part of its
right title interest, obligations or liabilities (including,
without limitation, any Percentage Interest) in, under and
pursuant to this Agreement whether by conditional or
unconditional act, deed, agreement, arrangement
understanding, conduct, or by merger, consolidation or
reconstruction or operation of law or otherwise (hereinafter
in this Article I! called an "assignment", and the words
"assign", "assignor" and "assignee" and their derivatives
shall have a corresponding meaning).
157
(b) No assignment shall be made by a Party if as a result thereof
the Percentage Interest of the assignor or assignee would be
less than 5%.
No assignment shall be made by a Party if as a result the
assignor or its Related Company affiliate or the assignee or
its Related Company affiliate would retain or acquire a
Percentage Interest in part but not all of the area of any
Permit Licence.
17.2 Assignment to Related Company - Affiliate - Right
Subject to Sections 17.1 and 17.2, each Party may, subject to any
necessary approval of and registration by the Minister Authority
and any other government consent and to the provisions of this
Article 17, at any time upon prior written notice to each other
Party, assign the whole or any part of its Percentage Interest to
a Related Company.
(a) If, within a period of I year after the effective date of any
assignment pursuant to Section 17.3. 1, the Related Company
Affiliate of the assignor to which the assignment was made
ceases to be a Related Company an Affiliate of the assignor,
then the provisions of Section 17.4 shall apply, mutatis
mutandis, and the Related Company Affiliate shall forthwith
give such notice pursuant to Section 17.4.1 specifying the
then current fair and reasonable arms length terms and
conditions and each Party (other than the assignor) shall
have the right to require the assignment to it (upon such
then current fair and reasonable arm's length terms and
conditions) of a share of the Percentage Interest previously
assigned to such Related Company Affiliate pursuant to
Section 17.3. 1, such share being in the proportion which its
Percentage Interest bears to the aggregate Percentage
Interests of all Parties so entitled, or as otherwise agreed
by such Parties. If a Party, within 28 days of receipt of
notice pursuant to this Section 17.3.2, as herein required
gives notice to each other Party that it considers the said
terms and conditions to be other than the then current fair
and reasonable arm's length terms and conditions, then the
matter shall promptly be referred to a person appointed in
accordance with clause 15. 11 (a) an Independent Expert, who
shall determine for all Parties what will be the said then
current fair and reasonable arm's length terms and
conditions, acting as an independent expert and not as an
arbitrator.
17.3 Assignment to Non Related Company Non-Affiliate - Right
(a) Subject to Sections 17.1 and 17.2, each Party may, subject to
any necessary approval of and registration by the Minister
and any other government consent and to the provisions of
this Article 17, at any time assign the whole or any part of
its Percentage Interest to any other Party or person to which
158
it is not a Related Company and which, in either case, has
demonstrated to each other Party both that it has, or has
access to, adequate financial capability to meet its
prospective obligations and liabilities under this Agreement
and that it has adequate petroleum industry experience. If a
Party wishes to make such an assignment it shall first give
notice to each other Party and Operator specifying the name,
address and qualifications of the proposed assignee and the
terms and conditions of the proposed assignment.
(b) Thereafter, any of the other Parties may within sixty (60)
days after receipt of such notice, request by notice to all
other Parties the assignment of such whole or part Percentage
Interest to it in which event the assignment shall be made to
it on the same or commercially equivalent terms as the said
proposed assignment or, if more than one Party so requests by
notice, to them in the proportion (unless otherwise agreed
between themselves) which their respective Percentage
Interest bear to each other; provided that if the proposed
assignment is to another Party and one or more of the other
Parties gives notice then the firstnamed Party shall be
deemed to have likewise given notice hereunder; and
(c) if none of the other Parties so requests the assignment of
such whole or part Percentage Interest the relevant Party may
assign it to the proposed assignee on the proposed terms and
conditions; provided that the instrument evidencing the
assignment shall be executed by the parties thereto and
submitted for the approval of, and registration by, the
Minister Authority within one hundred and twenty (120) days
of the expiry of the sixty (60) day period referred to in the
preceding sub-paragraph 17.4.1.1.
17.4 Assumption by Assignee
Any assignment by a Party of the whole or any part of its
Participating Interest or of such Participating Interest or part
by any person exercising power of sale pursuant to any mortgage or
charge otherwise permitted pursuant to this Agreement shall be
made expressly subject to the terms and provisions of this
Agreement and shall be made expressly conditional upon:
(a) the obtaining of all necessary consents and approvals to the
assignment; and
(b) the execution and delivery by the assignee to the Operator as
agent for the Parties of a deed of assumption and covenant in
such form as the non-assigning Parties shall approve (which
approval shall not be unreasonably withheld) whereby the
assignee assumes the obligations and is conferred with the
rights of a Party under the documents relating to the Joint
Venture Documents to the extent of the Participating Interest
assigned.
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17.5 Consequences of Assignment
(a) Subject to Clause 17.4 with effect on and from a date agreed
by the assigning Party and the assignee to be the effective
date of the assignment of a Participating Interest or part
thereof ("Effective Date of Assignment"), the assignee shall,
to the extent of the assignment, become a Party in the place
of the Party whose Participating Interest or part thereof has
been assigned provided that the assigning Party shall
indemnify and keep indemnified the other Parties against all
liabilities accruing in respect of the Participating Interest
of the assigning Party up to the Effective Date of Assignment
(b) The assigning Party shall, in addition, remain liable to and
shall indemnify and keep indemnified the other Parties
against all liabilities accruing in respect of the
Participating Interest of the assignee on and after the
Effective Date of Assignment, unless and until the Parties
shall have resolved or shall resolve by unanimous vote, are
you sure? that the assignee or proposed assignee is a
respectable and financially responsible person for the
purposes of the Joint Venture. Upon the later of such
unanimous resolution and the Effective Date of Assignment,
the assigning Party shall (as between the assigning Party and
the other Parties) be relieved and discharged from all such
liabilities of the assignee accruing thereafter and any
obligation to indemnify the other Parties in respect thereof.
(c) The onus of proving to the satisfaction of the Parties that
the assignee or proposed assignee is a respectable and
financially responsible person for the purposes of the Joint
Venture shall rest upon the assigning Party. Upon proof that
a proposed assignee is such a respectable and financially
responsible person, no Party shall unreasonably withhold its
vote to a resolution on that matter.
(d) Each Party shall, when required by any such assignee,
perform, execute, acknowledge and deliver all such further
acts, deeds and assurances as may be reasonably required of
it to perfect the assignment of a Participating Interest or
part thereof to, or the assumption of rights or obligations
thereunder by, such assignee.
17.6 Charge of Participating Interest
Without prejudice to its right to charge any of its property or
assets other than its Participating Interest any Party ("Chargor")
may, without the consent of the other Parties (but subject to all
other necessary consents and approvals), charge in favour of any
person ("Chargee") the whole of its Participating Interest
provided that such charge shall be made subject to the Joint
Venture Documents.
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18 CONFIDENTIALITY
18.1 Information Confidential
This Agreement and all of its provisions, and all records, reports
and other data information and studies made in the course of or
resulting from Joint Operations except any of the same which is at
the relevant time, in the public domain (collectively,
"Information") shall be and remain confidential between the
Parties and shall not be disclosed to any third party without the
prior consent of all of them (which consent provided that an
undertaking as to confidentiality by the third party in a form
reasonably satisfactory to the Parties is first obtained, shall
not be unreasonably withheld and shall be deemed to have been
given if Parties whose Participating Interests aggregate in excess
of seventy-five percent (75%) have consented) provided always that
any of the Parties shall be at liberty without such consent to
disclose or make a public statement or announcement regarding the
Information:
(a) to the extent that such Party (or in the case of statements
or announcements to be made by the Operator, any Party) is
legally required so to do, to any governmental agency or
instrumentality or by an official stock exchange on which the
shares of such Party or a Related Company are quoted, in
which case all reasonable efforts shall be made to
communicate the statement or announcement to the other
Parties prior to the disclosure announcement or publication;
(b) to any chargee, bank or other financial institution in
connection with the organisation of the Parties' financial
affairs or a bona fide prospective purchaser of part or all
of a Party's Participating Interest (including without
limitation, a corporation with whom a Party is conducting
bona fide negotiations directed toward a merger or
consolidation) provided that the chargee, bank, financial
institution or prospective purchaser agrees previously in
writing to keep the same confidential;
(c) to any of such Party's employees, directors, consultants,
legal counsel, auditors and other persons for the purposes of
all matters pertaining to such person's duties provided that
each of the persons to whom disclosure is made then owes to
the Party a duty to keep the same confidential (the
observance of which duty, the Party hereby undertakes to the
other Parties to use its best efforts, to enforce).
18.2 Related Companies
The Information may be disclosed to Related Companies without the
prior consent of the other Parties provided that:
161
(a) each recipient shall prior to the disclosure of the
Information have executed and deposited with the Operator an
undertaking as to confidentiality in favour of all Parties;
(b) breach by a recipient in terms of this Clause 18.2 shall be
deemed to be a breach by the Party of its obligations in
terms of Clause 18. 1; and
(c) the provisions of Clauses 18.1 and 18.5 apply, mutatis
mutandis, to each recipient as if it was a Party.
18.3 Compliance with Stock Exchange Requirements
To ensure compliance by any Party or Related Company of a Party,
the securities of which are listed on a stock exchange or quoted
on a quotation system ("listed company"), with the listing
requirements of that stock exchange or other applicable securities
disclosure laws the Operator shall disclose immediately to all
Parties any significant discovery of hydrocarbons or
mineralisation within the Permit. Any such listed company shall
have the right to make all or part of such information available
to such stock exchange or other public disclosure system. A Party
shall provide to each other Party, for approval, a copy of each
announcement report or advice, if reasonably practicable, prior to
providing it to such stock exchange, containing or referring to
such information, made by it or a Related Company.
18.4 Obligations to Continue
The obligations enumerated in Clauses 18.1 and 18.2 shall be
continuing obligations and shall be complied with notwithstanding
that a Party has ceased to be a party to this Agreement a
corporation has ceased to be a Related Company or this Agreement
has been terminated.
18.5 Termination
The obligations described in this Clause 18 shall continue to
apply for a period of five (5) years after the date of termination
of this Agreement.
19 FORCE MAJEURE
19.1 Obligations Suspended by Event of Force Majeure
If any Party is rendered unable wholly or in part by Force Majeure
to carry out its obligations under this Agreement (other than any
obligation to make money payments) that Party shall give to all
other Parties prompt written notice of the Force Majeure with
reasonably full particulars concerning it. The obligations of the
Party giving the notice so far as they are affected by the Force
Majeure shall be suspended during but not longer than the
continuance of the effects of the Force Majeure. The affected
Party shall use all reasonable efforts to overcome the effects of
the Force Majeure as quickly as possible.
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19.2 Certain Actions not Required
The provisions of Clause 19.1 shall not require the settlement of
strikes, boycotts, lockouts or other labour difficulty by the
Party involved contrary to its wishes and such matters shall be
handled entirely within the discretion of the Party concerned.
19.3 Meaning of Force Majeure
In this Clause 19 the term "Force Majeure" means any event or
circumstance beyond the reasonable control of a Party which
renders that Party unable in whole or in part to carry out its
obligations under this Agreement including without limitation,
strike, lockout, fire, flood, tornado,, hurricane, lightning,
explosion, collision, radiation, act of God or the public enemy,
war, blockade, governmental regulation, order or decree,
uncontrollable delay in transportation, inability to obtain
adequate labour, contractors or necessary materials or equipment
in the open market inadequate facilities for the transportation of
necessary materials or equipment or any other cause, whether
similar or dissimilar to the causes herein specifically
enumerated, beyond the reasonable control of such Party and which
such Party is unable to overcome by the exercise of reasonable
diligence and at a reasonable cost provided however, the lack of
finances or inability to borrow the same shall in no event be
deemed a cause beyond the reasonable control of a Party.
20 LAWS AND REGULATIONS
20.1 Subject to Applicable Laws
This Agreement and the respective rights and obligations of the
Parties hereto shall be subject to all valid and applicable laws,
rules, ordinances, regulations and orders of New Zealand, and in
the event that this Agreement or any provision thereof is or the
Joint Operations contemplated hereunder are found to be
inconsistent with or contrary to any such law, rule, ordinance,
regulation or order the latter shall be deemed to control the
former and this Agreement shall be regarded as modified
accordingly and as so modified shall continue in full force and
effect.
20.2 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of New Zealand.
20.3 Submission to Jurisdiction
Each of the Parties hereby submits unconditionally and exclusively
to the jurisdictions of the Courts in New Zealand holding
jurisdiction in relation to matters relating to this Agreement.
163
21 NOTICES
21.1 Notice in Writing
A notice, demand, waiver, approval, consent communication or other
document in connection with this document ("Notice"):
(a) may be given by an Authorised Officer of the relevant party;
and
(b) must be in writing; and
(c) must be left at the address of the addressee, or sent by
prepaid ordinary post (airmail if outside New Zealand) to the
address of the addressee or by facsimile to the facsimile
number of the addressee which is specified below or if the
addressee notifies in writing another address or facsimile
number then to that address or facsimile number.
21.2 Effective Date
Unless a later time is specified in it a Notice takes effect from
the time it is actually received or taken to be received.
21.3 Time of Receipt
A Notice sent by post or facsimile is taken to be received:
(a) in the case of a letter, on the 5th (10th, if outside New
Zealand) day after posting; and
(b) in the case of a facsimile, on production of a transmission
report by the machine from which the facsimile was sent which
indicates that the facsimile was sent in its entirety to the
facsimile number of the recipient notified for the purpose of
this clause if produced before 5 pm on a business day
otherwise on the next business day.
21.4 Address for Service
The address for service of a Notice shall be as follows:
INDO-PACIFIC ENERGY (NZ) LTD
of ▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇. ("Indo")
TRANS-ORIENT PETROLEUM (NZ) LIMITED
of ▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇.. ("Trans")
164
21.5 Authorised Officer
For the purposes of Clause 21.1, an Authorised Officer of a party
includes a director, secretary or other governing officer of the
party.
22 GENERAL
22.1 Remedies not Exclusive
Each and every power and remedy herein specifically given to a
Party affected by the default of another Party shall be in
addition to every other power and remedy now or hereafter existing
at law or in equity, and each and every power and remedy may be
exercised from time to time and simultaneously and as often and in
such order as may be deemed expedient. All such powers and
remedies shall be cumulative and the exercise of one shall not be
deemed a waiver of the right to exercise any other or others.
22.2 Mutual Indemnity
Subject to the provisions of this Agreement each Party
("Indemnifying Party") will indemnify and keep indemnified each of
the other Parties from every claim, demand, action or liability or
loss resulting from each and every breach or default by the
Indemnifying Party of any of its obligations -under any of the
documents relating to the Joint Venture.
22.3 Limited Invalidity
If any Clause or part thereof of this Agreement shall be, or shall
be deemed to be, invalid for any reason whatsoever such invalidity
shall not affect the validity or operation of the remainder of
that Clause or any other Clause of this Agreement except only so
far as may be necessary to give effect to such invalidity.
22.4 Waiver
No waiver by any Party of a right or a default hereunder or any
delay or omission in the exercise of any right, remedy or power,
shall constitute a waiver by such Party of any subsequent right,
power, remedy or default whether of a like nature or otherwise.
22.5 How Moneys Paid
Any sum of money paid or tendered by the Parties hereto shall be
validly and effectually paid or tendered if such payment is given,
delivered or made in legal currency or by bank cheque or by the
party's own cheque after presentment and clearance.
22.6 Successors Bound
This Agreement shall enure for the benefit of and bind the Parties
and their assigns and successors in title.
165
22.7 Further Assurance
Each Party agrees that it will perform, execute, acknowledge and
deliver all such further acts, deeds, assurances and instruments
as shall be reasonably required for the purposes of this Agreement
or otherwise to carry out the agreements made herein.
22.8 Entire Agreement
This Agreement is the entire agreement between the Parties hereto
in relation to its subject matter and supersedes all prior
agreements in connection therewith, and each Party covenants that
it has full right title and power to enter into this Agreement.
22.9 Amendment
This Agreement may not be amended except by one or more written
instruments executed by all the Parties hereto.
22.10 No Partition
No Party shall institute any action or proceedings for partition
or sale in lieu of partition of the Permit, the Area or any of the
Joint Property.
22.11 Counterparts
This Agreement may be executed in any number of counterparts each
of which shall be deemed an original but all of which shall
constitute one and the same instrument.
EXECUTED AS AN AGREEMENT
Signed for Indo Pacific Energy (NZ) Limited
by its duly authorised representative
/s/ ▇. ▇. ▇▇▇▇▇▇▇
Signature of representative
Office Held: President
Name of Representative: ▇. ▇. ▇▇▇▇▇▇▇
Signed for Trans-Orient Petroleum (NZ) Limited
by its duly authorised representative
/s/ ▇. ▇. ▇▇▇▇▇▇▇
Signature of representative
Office Held: President
Name of Representative: ▇. ▇. ▇▇▇▇▇▇▇
166
SCHEDULE 1
ACCOUNTING PROCEDURE
The purpose of this Accounting Procedure is to establish equitable
methods for determining charges and credits applicable to Joint
Operations under the Operating Agreement to which this Accounting
Procedure is a Schedule ("Operating Agreement!') in respect of the
Permit The Parties agree that if any of such methods prove unfair or
inequitable to the Operator or the Non-Operators, the Parties will
subject to Article 2.2.3 meet and in good faith endeavour to agree on
changes in methods deemed necessary to correct any unfairness or
inequity.
The purpose of this Accounting Procedure is to ensure that subject to
Article 2.2.3 the Operator neither gains nor loses by performing the
activities of Operator.
In the event of any conflict between the provisions of this Accounting
Procedure and the provisions of the Operating Agreement the provisions
of the Operating Agreement shall apply.
ARTICLE I - GENERAL PROVISIONS
1.1 Definitions
1.1.1 "Administrative Overhead" means the charge made to the Joint
Account pursuant to Article 2.2, which charge shall be in
lieu of and shall be deemed to cover all indirect costs
incurred by the Operator in respect of Joint Operations which
are not otherwise provided for in the Operating Agreement or
this Accounting Procedure.
1.1.2 "Advances" has the meaning given in clause 1.2
1.1.3 "Agreement of Non-Operators" means the agreement or action of
a majority in Participating Interests of the Non-Operators.
1.1.4 "Annual Base Expenditure" means in respect of any Permit
Year, the Authorised Expenditure charged to the Joint Account
in that Permit Year in respect of Joint Operations PROVIDED
THAT Base Expenditure shall:
(a) exclude, without limitation, any charge to the Joint Account
in respect of Administrative Overhead;
(b) exclude, without limitation, any royalty, taxes, duties and
the like, levied on production or in respect of income from
production;
(c) include, without limitation, Authorised Expenditure in
respect of the construction and maintenance of field access
roads;
167
(d) include, without limitation, Materials only when such
Materials are utilised and charged to an approved AFE; and
(e) be reduced by any credits received other than any credits or
receipts from sales of Material, insurance claims or any
other credits agreed by the Operating Committee.
1.1.5 "Cash Calls" has the meaning given in clause 1.2
1.1.6 "Controllable Material" shall mean material which the
Operator subjects to record control and inventory. A list of
types of such materials shall be furnished to the Non-
Operators upon request.
1.1.7 "Material" means movable property, including supplies and
equipment acquired and held for use in Joint Operations.
1.1.8 Unless the provisions of this Accounting Procedure require
otherwise, all words and phrases contained herein shall have
the same meaning as in the Operating Agreement.
1.2 Advances and Payment by the Joint Venture Parties
1.2.1 If the Operator so requests, each of the Parties shall
advance to the Operator their share of the estimated cash
requirements for approved AFEs or Budget line items for the
succeeding month for the Joint Operations and in accordance
with the provisions of clause 1.2. . Such estimates shall be
based on the latest information available to the Operator at
the time the request is sent as to the actual cash
requirements for the month. No less than fifteen (15) days
prior to the beginning of each month, the Operator shall
furnish the Parties with its estimate of the cash
requirements by AFE or Budget line item for that month. This
estimate shall specifically identify the particular approved
AFE or Budget line item giving rise to such cash requirements
and shall constitute a request for an Advance (a Cash Call).
Appended to the Cash Call the Operator shall provide a
revised forecast of future cash requirements for the
following three (3) months, analysed by AFE or Budget line
item for each approved Budget. The cash forecast for the
first month will be the Cash Call for that month as provided
under this clause 1.2.1
Except as otherwise provided in this agreement Cash Calls
shall not be made for expenditures which require an AFE
unless such AFE has been approved or deemed approved as
required under this Agreement Cash Calls may be made for
certain licence maintenance costs, required to keep the
licence in good standing, and Administrative Overhead costs
as defined and determined in clause 2.2.1 without prior
approval of such costs by way of AFE. Not withstanding the
above, Cash Calls on AFEs of less than $20,000 and on
Administrative Overheads will only be made quarterly, on the
basis of forecast quarterly expenditure, rather than monthly.
168
In any the Operator at all times provide estimates of
forecast expenditure monthly. Adjustments to reflect
Administrative Overhead to be charged on actual expenditures
shall be made at the end of the year, and such adjustment
shall be separately identified in Cash Calls and billing
statements.
1.2.2 Cash Calls made by the Operator under 1.2.1 shall be paid by
each Party according to its proportionate share in the
currency (or currencies) requested by the Operator, to the
appropriate bank account (or bank accounts) maintained by the
Operator for the Joint Account by the fifteenth (I 5th) day
of the month for which the Advances are requested.
1.2.3 Should the Operator be required to pay any sums of money
which were unforeseen at the time of preparing the monthly
estimates of expenditure, under clause 1.2.1 and/or are
required to be paid before the Operator would receive the
Parties payments, under clause 1.2.2, the Operator may make
a written request to the Parties for special Advances
covering their share of such expenditures. A Special Cash
Call made under this clause 1.2.3 shall be paid by each Party
in its proportionate share, in the currency (or currencies)
requested within fourteen (14) days after receipt of such
Cash Call.
1.2.4 If it is determined that a Party's Advances for a certain
month exceed its share of cash disbursements for that month,
the Operator may reduce that Party's share of the next
succeeding Cash Call, after such determination, or , at the
Operator's discretion, the Operator shall deposit such excess
Advances as soon as possible in either a short term interest
bearing bank account with a New Zealand trading bank or in a
Government backed interest earing deposit or such other
financial institutions as agreed by the Operating Committee,
until they are required for disbursement However, if the
excess funds are unlikely to be required for future
disbursements, a Party may request that such excess Advances
be refunded and the Operator shall make such refund within
fifteen (15) days after the receipt of such request.
1.2.5 If a Party's Advances for a certain month are less than its
share of cash disbursements for the same month, at the
Operator's discretion, the deficiency shall either:
1.2.5.1 Be added to a subsequent request for Advances, or
1.2.5.2 Be paid by such Party in the currency requested by the
Operator, within fifteen (15) days following the receipt
of the Operator's billing showing such deficiency.
169
1.2.6 If the Operator chooses not to request Advances from Non-
Operators as provided under clauses 1.2.1 and 1.2.3, payment
to the Operator by each Non-Operator shall be made within
twenty (20) days after receipt of the Joint Operations
billing statement as rendered under clause 1.3
1.2.7 If payment of the amount of any Cash Call or statement
provided for in this clause 1.2 is not made when due:
1.2.7.1 The Operator shall immediately notify the Party from
whom such payment has not been received that it has not
received payment and such Party shall within two (2)
Business Days of receipt of such notice remedy such
failure to make payment; and
1.2.7.2 The unpaid balance thereof shall bear interest at the
Default Interest Rate from the due date for payment to
the date of actual payment.
1.2.8 Adjustments between estimated and actual costs and expenses
shall be made by the Operator at the close of each month and
the account of the respective Parties adjusted accordingly.
1.3 Statements and ▇▇▇▇▇▇▇▇
1.3.1 Following the end of each month, the accumulated charges and
credits in the Joint Account will be determined and the
Operator will issue a statement recording actual cash
expenditure against Advances made for that month. Such
statement shall be accompanied by a Joint Operations billing
statement summarising all charges and credits accrued to the
Joint Account by appropriate classifications indicative of
the nature thereof and adjusted back to a cash basis in
relation to the amounts shown on the statement. All such
statements shall identify all expenditure by reference to the
relevant budget and AFE pursuant to which such expenditure
was incurred. The Operator shall provide each such statement
to the Non-Operators within twenty-five (25) days of the
expiry of the relevant month.
1.4 Audits
1.4.1 A Non-Operator, upon at least twenty (20) Business Days
advance written notice to the Operator and other Non-
Operators, shall have the right at its sole expense to audit
the Joint Account and records relating to Joint Operations
for any Permit Year or portion thereof within the twenty-four
(24) month period following the end of such Permit Year;
Where there are two or more Non-Operators, the Non-Operators
shall make every reasonable effort to conduct joint or
simultaneous audits in a manner which will result in a
minimum of inconvenience to the Operator.
170
1.4.2 Subject to prior approval of all of the Parties, the cost of
any audit or verification of the Joint Account, other than
the audit provided for in Article 1.4. 1, shall be chargeable
to the Joint Account.
1.4.3 In respect of charges made to the Joint Account for
Administrative Overhead pursuant to Article 2.2, the Non-
Operators right of audit shall include, without limitation,
verification of Annual Base Expenditure and the calculation
of Administrative Overhead thereon, but shall exclude,
without limitation, verification of the Operator's indirect
costs which such Administrative Overhead is deemed to cover.
ARTICLE 2 - CHARGEABLE COSTS AND EXPENDITURES
The Operator shall charge the Joint Account for all costs incurred
pursuant to an approved AFE on the basis herein provided. Such Joint
Account costs shall include, but are not necessarily limited to, items
referred to below:
2.1 Joint Account (Direct Charges)
The Operator shall charge the Joint Account with all direct costs and
expenses incurred in connection with the Operating Agreement, the
Permit and the Joint Property. Without in any way limiting the
generality of the foregoing, chargeable direct costs and expenditures
shall include:
2.1.1 Labour and Related Costs
All personnel, other than those described in Article 2. 1. 1.(1)
who are employed by the Operator and who work on Joint Operations
under the direct control of the Operator, will maintain monthly
time sheets for the purpose of charging salary and related
benefits direct to the Joint Account. Time sheets will record time
spent on Joint Operations whether such personnel (including
without limitation, managers, supervisors and technical employees
such as geologists, geophysicists, engineers, drilling, production
and construction supervisors and operators, field co-ordinators,
drafting staff and technical assistants and non-technical
employees such as landmen, purchasing officers and such accounting
staff as are specifically responsible for the account of the Joint
Venture) are engaged full-time or part-time on Joint Operations
and will show the time worked on the various projects and other
classifications of cost to enable personnel costs to be allocated
to such classifications for budget and cost control purposes.
(1) Time sheets will not be maintained for such purposes by the
following personnel:
(1) Administrative support personnel, including without
limitation, secretaries, typists, filing clerks,
messengers, commissionaries, telephone and facsimile
operators;
171
(2) Accounts personnel, including without limitation,
cashiers handling joint funds, employees handling the
salaries of personnel employed on Joint Operations and
employees handling invoices and accounts for payment but
excluding such accounting staff as are specifically
responsible for the accounting of the Joint Venture.
(2) The amount to be charged to the Joint Account for each person
who is employed by the Operator (other than any such person
who is described in Article 2. 1. 1 (1)) and who is working
on Joint Operations under the direct control of the Operator,
shall be the proportion of the Operator's actual cost of
salaries and related benefits for each such person that the
time worked by such person on Joint Operations bears to the
total time worked by such person in respect of which such
cost is incurred. For the purpose of this Article, the
Operator's actual cost of salaries and related benefits shall
include salaries, wages, overtime pay, rest day pay, holiday
pay, long service pay, living and housing allowances,
accident and illness compensation, group life insurance,
pension, superannuation, retirement and other benefit plans
of a like nature and all payroll expenses incurred by reason
of any governmental regulations or laws.
(3) The cost of personnel described in Article 2.1.1(1) which is
applicable to Joint Operations shall be deemed to be covered
by the percentage charge for Administrative Overheads in
Article 2.2.1.
(4) Personnel Seconded to the Operator from a Non-Operator. The
amount to be charged to the Joint Account for each person who
is working on Joint Operations under the direct control of
the Operator (other than any such person who is described in
Article 2.1.1(1)) and who is seconded to the Operator from a
Non-Oprator shall (subject to agreement to the contrary) be
the proportion of the Non-Operator's actual cost of salaries
and related benefits for each such person that the time
worked on Joint Operations by such person bears to the total
time worked by such person in respect of which such cost is
incurred. Tune sheets must be kept by such persons in the
same form as those kept by the employees of the Operator.
(5) For the purposes of Article 2.1.1(4) the Non-Operator's
actual cost of salaries and related benefits shall be as
defined in Article 2.1.1(2).
2.1.2 Material
Material purchased or furnished for use in Joint Operations as
provided under Article 3 herein.
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2.1.3 Transportation and Employee Relocation Costs
(1) Transportation of Material and other related costs such as
expediting, crating, dock charges, inland and ocean freight
and unloading at destination.
(2) Transportation of employees as necessary or desirable for the
conduct of Joint Operations.
(3) Relocation costs of employees permanently or temporarily
assigned to the Joint Operations except that relocation costs
from New Zealand shall only be charged if the employee is
returned to the country from which he was relocated. Such
costs shall include transportation of employees' families and
their personal and household effects and all other relocation
costs in accordance with the Operators usual practice
including without limitation, an allocation of such costs on
an equitable basis, having regard to the amount of time each
employee was engaged in other areas of operation. The budget
shall include an estimate of the relocation costs likely to
be incurred in the current budget.
2.1.4 Services
(1) Contract services, professional consultants and other
services procured from outside sources other than services
covered by Article 2.1.7.
(2) Technical services, such as, but not limited to, laboratory
analysis, drafting, geophysical and geological
interpretation, engineering and related data processing,
performed by the Operator, the Non-Operators and their
Related Companies for the direct benefit of the Joint
Operations, provided such costs shall not exceed those
currently prevailing if performed by outside technical
service companies.
(3) Use of equipment and facilities furnished by the Operator,
the Non-Operator and their Related Companies at rates
commensurate with the cost of the ownership and operation
thereof, but such rates shall not exceed those currently
prevailing in the general vicinity of the Permit.
2.1.5 Damage and Losses of Joint Property
All costs or expenses necessary for the repair or replacement of
any Joint Property resulting from damage or losses incurred by
fire, flood, storm, theft, accident or any other cause. The
Operator shall furnish the Non-Operators with written notice of
damages or losses incurred in excess of $50,000.00 as soon as
practicable.
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2.1.6 Insurance
(1) Premiums for insurance required by the Joint Property or any
law or regulation and insurance acquired for the benefit of
all Parties as approved by the Operating Committee.
(2) Credits for settlements received from the insurance carrier
and others and attributable to the Joint Account.
(3) Actual expenditure incurred in the settlement of all losses,
claims, damages, judgments and other expenses for the benefit
of Joint Operations.
2.1.7 Legal Expense
(1) All costs or expenses of handling, investigating and settling
litigation or claims arising by reason of Joint Operations or
necessary to protect or recover the Permit or the Joint
Property, including but not limited to, attorney fees, court
costs, cost of investigation or procuring evidence and
amounts paid in settlement; however, no charge shall be made
for the services of the Operator and any Related Companys
legal staff unless by prior agreement of the Non-Operators.
(2) All other solicitors or barristers or legal costs necessary
for Joint Operations, except no charge shall be made for the
services of the Operator's and any Related Company's legal
staff unless by prior agreement of the Non-Operators.
2.1.8 Duties and Taxes
All duties and taxes (except taxes based on income), fees and
governmental assessments of every land and nature including,
without limitation, goods and services tax. The Operator shall, in
respect of Joint Operations, be responsible for compliance with
the New Zealand Tax ▇▇▇ ▇▇▇▇ Amendment ▇▇▇ ▇▇▇▇ including, without
limitation, the filing of returns and other related matters.
2.1.9 Offices, Camps and Miscellaneous Facilities
Net cost of maintaining, equipping, furnishing and operating any
offices, sub-offices, camps, warehousing, housing and other
facilities directly serving the Joint Operations and approved by
the Operating Committee, shall be charged to the Joint Account. If
such facilities serve Joint Operations in addition to the Joint
Operations, the net cost shall be allocated to the properties
served on an equitable basis.
2.1.10 Payments to Government
Expenditure necessary to acquire and maintain rights under the
Permit.
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2.1.11 Other Charges
All other costs and expenses incurred by the Operator which are
not mentioned above and which are necessary and proper for the
conduct of Joint Operations.
2.2 Joint Account (Indirect Charges)
All indirect costs incurred in respect of Joint Operations shall
be deemed to be covered by the following charges which the
Operator may charge to the Joint Account.
2.2.1 Administrative Overhead
Subject to the provisions of this Article 2.2, the Operator shall
charge to the Joint Account an Administrative Overhead which shall
be calculated by applying percentages to tranches of Annual Base
Expenditure as follows:
On the first $ 1,000,000 4%
On the next $4,000,000 3%
On the next $5,000,000 2%
Above $ 10,000,000 1%
However the minimum Administrative Overhead chargeable to the
Joint Account will be thirty thousand dollars (NZ$30,000.00) per
Permit Year chargeable on a pro rata monthly basis.
2.2.2 Subject to the charging of the minimum Administrative
Overhead referred to in Article 2.2. 1, Administrative
Overhead shall be charged to the Joint Account quarterly:
(a) based on that quarter's cumulative current year to date
Annual Base Expenditure; and
(b) reduced by the cumulative current year to date Administrative
Overhead charged to the previous quarter.
2.2.3 The charges to be made pursuant to Article 2.2.1 shall be
reviewed annually by the Operator in order to verify that the
charge equitably compensates the Operator for the costs they
are intended to cover and appropriate adjustment either
upward or downward will be made subject to approval by the
Committee.
2.3 Joint Account (Excluded Charges)
Depreciation, amortisation and restoration provisions of
facilities and other capital assets comprising the Joint Property
will not be recorded as operating costs in the Joint Account.
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ARTICLE 3 - MATERIAL
3.1 Acquisitions
3.1.1 Material purchases shall be charged at net cost incurred by
the Operator. Net cost shall include, but shall not be
limited to, such items as transportation, duties, licence
fees and applicable taxes.
3.1.2 New Material (Condition "I") transferred from the Operator's
stock or other properties, shall be priced at new purchase
net cost determined in accordance with Article 3. 1.1 above.
Good used Material (Condition "2") being used Material in
sound and serviceable condition, suitable for re-use without
reconditioning, shall be priced at seventy-five percent (75%)
of such new purchase net cost. Used Material which cannot be
classified at Condition "2" shall be priced at a value
commensurate with its use.
3.2 Disposals
3.2.1 The Operator shall be under no obligation to purchase the
interest of Non-Operators in new or used surplus Material.
3.2.2 The Operator shall have the right to dispose of surplus
Material to a bona fide purchaser but shall advise and secure
prior agreement of the Non-Operators for each proposed
disposition of Materials costing in the aggregate of $
10,000.00 or more.
3.2.3 Proceeds from all sales shall be credited to the Joint
Account at the net amount actually collected.
3.3 Inventories
3.3.1 Inventories shall be taken annually by the Operator of all
Controllable Material unless otherwise agreed by the Parties.
The Operator shall give ninety (90) days written notice of
intention to take such inventories to allow the Non-Operators
to be represented when any inventory is taken. Failure of any
Non-Operator to be represented shall bind such NonOperator to
accept the inventory taken by the Operator.
3.3.2 Reconciliation of inventory with the Joint Account shall be
made and a list of overages and shortages shall be furnished
to the Non-Operators. Inventory adjustments shall be made to
the Joint Account if required by the Parties.
3.3.3 Whenever there is a sale or change of Participating Interest
a special inventory may be taken by the Operator, provided
the seller and/or purchaser of such Participating Interest
agree to bear all the expenses thereof. In such cases, the
seller, the purchaser and any other Party shall be entitled
to be represented and shall be bound by the inventory so
taken.
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SCHEDULE 2 - Description of the Permit Area
Having an area of 11,183.17 sq km
Coastline at 171 00E
North along 171 00E to
171 00E 4500S
170 45E 4500S
170 45E 4445S
171 00E 4445S
171 00E 4400S
171 13E 4400S
171 13E 4340S
171 30E 4340S
171 30E 4330S
172 00E 4330S
172 00E 43 15S
172 15E 4315S
172 15E 4310S
172 30E 4310S
East along 172 30E to coast
South along coast to 43 33S
West along 42 33S around coastline to
172 33E 4333S
172 33E 4345S
172 38E 4345S
South along 172 38E to coast
South and west along coast to 17100 to join