DRILLING AND OPERATING AGREEMENT
FOR
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
BRADFORD FORMATION
FAYETTE, ARMSTRONG, MCKEAN, INDIANA, GREEN COUNTIES, PA
DATED OCTOBER 18, 2003
INDEX
Section Page
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1. Assignment of Well Locations; Representations; Designation of Additional Well Locations;
Outside Activities Are Not Restricted.......................................................................1
2. Drilling of ▇▇▇▇▇; Timing; Depth; Interest of Developer; Right to Substitute Well Locations.................2
3. Operator - Responsibilities in General; Covenants; Term.....................................................3
4. Operator's Charges for Drilling and Completing ▇▇▇▇▇; Payment; Completion Determination;
Dry Hole Determination; Excess Funds and Cost Overruns - Intangible Drilling Costs; Excess
Funds and Cost Overruns - Tangible Costs....................................................................4
5. Title Examination of Well Locations; Developer's Acceptance and Liability; Additional Well
Locations...................................................................................................7
6. Operations Subsequent to Completion of the ▇▇▇▇▇; Fee Adjustments;
Extraordinary Costs;
Pipelines; Price Determinations; Plugging and Abandonment...................................................7
7. Billing and Payment Procedure with Respect to Operation of ▇▇▇▇▇; Disbursements; Separate
Account for Sale Proceeds; Records and Reports; Additional Information......................................9
8. Operator's Lien; Right to Collect From Gas Purchaser.......................................................11
9. Successors and Assigns; Transfers; Appointment of Agent....................................................11
10. Operator's Insurance; Subcontractors' Insurance; Operator's Liability......................................12
11. Internal Revenue Code Election; Relationship of Parties; Right to Take Production in Kind..................13
12. Effect of Force Majeure; Definition of Force Majeure; Limitation...........................................14
13. Term.......................................................................................................14
14. Governing Law; Invalidity..................................................................................14
15. Integration; Written Amendment.............................................................................15
16. Waiver of Default or Breach................................................................................15
17. Notices....................................................................................................15
18. Interpretation.............................................................................................15
19. Counterparts...............................................................................................15
Signature Page.............................................................................................16
Exhibit A Description of Leases and Initial Well Locations
Exhibits A-l through A-___ Maps of Initial Well Locations
Exhibit B Form of Assignment
Exhibit C Form of Addendum
DRILLING AND OPERATING AGREEMENT
THIS AGREEMENT made this 18th day of October, 2003, by and between ATLAS
RESOURCES, INC., a Pennsylvania corporation (hereinafter referred to as "Atlas"
or "Operator"),
and
ATLAS AMERICA PUBLIC #12-2003 Limited Partnership, a Delaware limited
partnership, (hereinafter referred to as the "Developer").
WITNESSETH THAT:
WHEREAS, the Operator, by virtue of the Oil and Gas Leases (the "Leases")
described on Exhibit A attached to and made a part of this Agreement, has
certain rights to develop the five (5) initial well locations (the "Initial
Well Locations") identified on the maps attached to and made a part of this
Agreement as Exhibits A-l through A-5;
WHEREAS, the Developer, subject to the terms and conditions of this Agreement,
desires to acquire certain of the Operator's rights to develop the Initial Well
Locations and to provide for the development on the terms and conditions set
forth in this Agreement of additional well locations ("Additional Well
Locations") which the parties may from time to time designate; and
WHEREAS, the Operator is in the oil and gas exploration and development
business, and the Developer desires that Operator, as its independent
contractor, perform certain services in connection with its efforts to develop
the aforesaid Initial and Additional Well Locations (collectively the "Well
Locations") and to operate the ▇▇▇▇▇ completed on the Well Locations, on the
terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants herein contained and
subject to the terms and conditions hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Assignment of Well Locations; Representations; Designation of
Additional Well Locations; Outside Activities Are Not Restricted.
(a) Assignment of Well Locations. The Operator shall execute an
assignment of an undivided percentage of Working Interest in
the Well Location acreage for each well to the Developer as
shown on Exhibit A attached hereto, which assignment shall be
limited to a depth from the surface to the base of the
Bradford geological formation in Pennsylvania where the
primary objective is the Bradford geological formation. In the
event that hydrocarbons are encountered in quantities that
Operator believes to be in paying quantities and drilling
ceases before the Bradford geological formation is penetrated,
then Operator shall execute an assignment limited to a depth
from the surface to the deepest depth penetrated at the
cessation of drilling operations.
The assignment shall be substantially in the form of Exhibit B
attached to and made a part of this Agreement. The amount of
acreage included in each Initial Well Location and the
configuration of the Initial Well Location are indicated on
the maps attached as Exhibits A-l through A-5. The amount of
acreage included in each Additional Well Location and the
configuration of the Additional Well Location shall be
indicated on the maps to be attached as exhibits to the
applicable addendum to this Agreement as provided in
sub-section (c) below.
(b) Representations. The Operator represents and warrants to the
Developer that:
(i) the Operator is the lawful owner of the Lease and rights
and interest under the Lease and of the personal
property on the Lease or used in connection with the
Lease;
(ii) the Operator has good right and authority to sell and
convey the rights, interest, and property;
(iii) the rights, interest, and property are free and clear
from all liens and encumbrances; and
(iv) all rentals and royalties due and payable under the
Lease have been duly paid.
1
These representations and warranties shall also be included in
each recorded assignment of the acreage included in each
Initial Well Location and Additional Well Location designated
pursuant to sub-section (c) below, substantially in the manner
set forth in Exhibit B.
The Operator agrees to indemnify, protect and hold the
Developer and its successors and assigns harmless from and
against all costs (including but not limited to reasonable
attorneys' fees), liabilities, claims, penalties, losses,
suits, actions, causes of action, judgments or decrees
resulting from the breach of any of the above representations
and warranties. It is understood and agreed that, except as
specifically set forth above, the Operator makes no warranty
or representation, express or implied, as to its title or the
title of the lessors in and to the lands or oil and gas
interests covered by said Leases.
(c) Designation of Additional Well Locations. If the parties
hereto desire to designate Additional Well Locations to be
developed in accordance with the terms and conditions of this
Agreement, then the parties shall execute an addendum
substantially in the form of Exhibit C attached to and made a
part of this Agreement (Exhibit "C") specifying:
(i) the undivided percentage of Working Interest and the Oil
and Gas Leases to be included as Leases under this
Agreement;
(ii) the amount and configuration of acreage included in each
Additional Well Location on maps attached as exhibits to
the addendum; and
(iii) their agreement that the Additional Well Locations shall
be developed in accordance with the terms and conditions
of this Agreement.
(d) Outside Activities Are Not Restricted. It is understood and
agreed that the assignment of rights under the Leases and the
oil and gas development activities contemplated by this
Agreement relate only to the Initial Well Locations and the
Additional Well Locations. Nothing contained in this Agreement
shall be interpreted to restrict in any manner the right of
each of the parties to conduct without the participation of
the other party any additional activities relating to
exploration, development, drilling, production, or delivery of
oil and gas on lands adjacent to or in the immediate vicinity
of the Well Locations or elsewhere.
2. Drilling of ▇▇▇▇▇; Timing; Depth; Interest of Developer; Right to
Substitute Well Locations.
(a) Drilling of ▇▇▇▇▇. Operator, as Developer's independent
contractor, agrees to drill, complete (or plug) and operate
five (5) natural gas ▇▇▇▇▇ on the five (5) Initial Well
Locations in accordance with the terms and conditions of this
Agreement. Developer, as a minimum commitment, agrees to
participate in and pay the Operator's charges for drilling and
completing the ▇▇▇▇▇ and any extra costs pursuant to Section 4
in proportion to the share of the Working Interest owned by
the Developer in the ▇▇▇▇▇ with respect to all initial ▇▇▇▇▇.
It is understood and agreed that, subject to sub-section (e)
below, Developer does not reserve the right to decline
participation in the drilling of any of the initial ▇▇▇▇▇ to
be drilled under this Agreement.
(b) Timing. Operator will use its best efforts to begin drilling
the first well within thirty (30) days after the date of this
Agreement, and will use its best efforts to begin drilling
each of the other initial ▇▇▇▇▇ for which payment is made
pursuant to Section 4(b) of this Agreement before the close of
the 90th day after the close of the calendar year in which
this Agreement is entered into by Operator and the Developer.
Subject to the foregoing time limits, Operator shall determine
the timing of and the order of drilling the Initial Well
Locations.
(c) Depth. All of the ▇▇▇▇▇ to be drilled under this Agreement (c)
shall be:
(i) drilled and completed (or plugged) in accordance with
the generally accepted and customary oil and gas field
practices and techniques then prevailing in the
geographical area of the Well Locations; and
(ii) drilled to a depth sufficient to test thoroughly the
objective formation or the deepest assigned depth,
whichever is less.
(d) Interest of Developer. Except as otherwise provided in this
Agreement, all costs, expenses, and liabilities incurred in
connection with the drilling and other operations and
activities contemplated by this Agreement shall be borne and
2
paid, and all ▇▇▇▇▇, gathering lines of up to approximately
2,500 feet on the Well Location, equipment, materials, and
facilities acquired, constructed or installed under this
Agreement shall be owned, by the Developer in proportion to
the share of the Working Interest owned by the Developer in
the ▇▇▇▇▇. Subject to the payment of lessor's royalties and
other royalties and overriding royalties, if any, production
of oil and gas from the ▇▇▇▇▇ to be drilled under this
Agreement shall be owned by the Developer in proportion to the
share of the Working Interest owned by the Developer in the
▇▇▇▇▇.
(e) Right to Substitute Well Locations. Notwithstanding the
provisions of sub-section (a) above, if the Operator or
Developer determines in good faith, with respect to any Well
Location, before operations begin under this Agreement on the
Well Location, that it would not be in the best interest of
the parties to drill a well on the Well Location, then the
party making the determination shall notify the other party of
its determination and its basis for its determination and,
unless otherwise instructed by Developer, the well shall not
be drilled. This determination may be based on:
(i) the production or failure of production of any other
▇▇▇▇▇ which may have been recently drilled in the
immediate area of the Well Location;
(ii) newly discovered title defects; or
(iii) any other evidence with respect to the Well Location as
may be obtained.
If the well is not drilled, then Operator shall promptly
propose a new well location (including all information for the
Well Location as Developer may reasonably request) within
Pennsylvania, Ohio, or other areas of the United States to be
substituted for the original Well Location. Developer shall
then have seven (7) business days to either reject or accept
the proposed new well location. If the new well location is
rejected, then Operator shall promptly propose another
substitute well location pursuant to the provisions of this
sub-section.
Once the Developer accepts a substitute well location or does
not reject it within said seven (7) day period, this Agreement
shall terminate as to the original Well Location and the
substitute well location shall become subject to the terms and
conditions of this Agreement.
3. Operator - Responsibilities in General; Covenants; Term.
(a) Operator - Responsibilities in General. Atlas shall be the
Operator of the ▇▇▇▇▇ and Well Locations subject to this
Agreement and, as the Developer's independent contractor,
shall, in addition to its other obligations under this
Agreement do the following:
(i) arrange for drilling and completing the ▇▇▇▇▇ and
installing the necessary gas gathering line systems and
connection facilities;
(ii) make the technical decisions required in drilling,
testing, completing, and operating the ▇▇▇▇▇;
(iii) manage and conduct all field operations in connection
with the drilling, testing, completing, equipping,
operating, and producing the ▇▇▇▇▇;
(iv) maintain all ▇▇▇▇▇, equipment, gathering lines, and
facilities in good working order during their useful
lives; and
(v) perform the necessary administrative and accounting
functions.
In performing the work contemplated by this Agreement,
Operator is an independent contractor with authority to
control and direct the performance of the details of the work.
(b) Covenants. Operator covenants and agrees that under this
Agreement:
(i) it shall perform and carry on (or cause to be performed
and carried on) its duties and obligations in a good,
prudent, diligent, and workmanlike manner using
technically sound, acceptable oil and gas field
practices then prevailing in the geographical area of
the Well Locations;
3
(ii) all drilling and other operations conducted by, for and
under the control of Operator shall conform in all
respects to federal, state and local laws, statutes,
ordinances, regulations, and requirements;
(iii) unless otherwise agreed in writing by the Developer, all
work performed pursuant to a written estimate shall
conform to the technical specifications set forth in the
written estimate and all equipment and materials
installed or incorporated in the ▇▇▇▇▇ and facilities
shall be new or used and of good quality;
(iv) in the course of conducting operations, it shall comply
with all terms and conditions, other than any minimum
drilling commitments, of the Leases (and any related
assignments, amendments, subleases, modifications and
supplements);
(v) it shall keep the Well Locations and all ▇▇▇▇▇,
equipment and facilities located on the Well Locations
free and clear of all labor, materials and other liens
or encumbrances arising out of operations;
(vi) it shall file all reports and obtain all permits and
bonds required to be filed with or obtained from any
governmental authority or agency in connection with the
drilling or other operations and activities; and
(vii) it will provide competent and experienced personnel to
supervise drilling, completing (or plugging), and
operating the ▇▇▇▇▇ and use the services of competent
and experienced service companies to provide any third
party services necessary or appropriate in order to
perform its duties.
(c) Term. Atlas shall serve as Operator under this Agreement until
the earliest of:
(i) the termination of this Agreement pursuant to Section
13;
(ii) the termination of Atlas as Operator by the Developer at
any time in the Developer's discretion, with or without
cause on sixty (60) days' advance written notice to the
Operator; or
(iii) the resignation of Atlas as Operator under this
Agreement which may occur on ninety (90) days' written
notice to the Developer at any time after five (5) years
from the date of this Agreement, it being expressly
understood and agreed that Atlas shall have no right to
resign as Operator before the expiration of the
five-year period.
Any successor Operator shall be selected by the Developer.
Nothing contained in this sub-section shall relieve or release
Atlas or the Developer from any liability or obligation under
this Agreement which accrued or occurred before Atlas' removal
or resignation as Operator under this Agreement. On any change
in Operator under this provision, the then present Operator
shall deliver to the successor Operator possession of all
records, equipment, materials and appurtenances used or
obtained for use in connection with operations under this
Agreement and owned by the Developer.
4. Operator's Charges for Drilling and Completing ▇▇▇▇▇; Payment;
Completion Determination; Dry Hole Determination; Excess Funds and Cost
Overruns-Intangible Drilling Costs; Excess Funds and Cost
Overruns-Tangible Costs.
(a) Operator's Charges for Drilling and Completing ▇▇▇▇▇. All
natural gas ▇▇▇▇▇ which are drilled and completed under this
Agreement shall be drilled and completed on a Cost plus 15%
basis. "Cost," when used with respect to services, shall mean
the reasonable, necessary, and actual expenses incurred by
Operator on behalf of Developer in providing the services
under this Agreement, determined in accordance with generally
accepted accounting principles. As used elsewhere, "Cost"
shall mean the price paid by Operator in an arm's-length
transaction.
The estimated price for each of the ▇▇▇▇▇ shall be set forth
in an Authority for Expenditure ("AFE") which shall be
attached to this Agreement as an Exhibit, and shall cover all
ordinary costs which may be incurred in drilling and
completing each well for production of natural gas. This
includes without limitation, site preparation, permits and
bonds, roadways, surface damages, power at the site, water,
Operator's overhead and profit, rights-of-way, drilling rigs,
equipment and materials, logging, cementing, fracturing,
casing, meters (other than utility purchase meters),
connection facilities, salt water collection tanks,
4
separators, siphon string, rabbit, tubing, an average of 2,500
feet of gathering line per well, geological and engineering
services and completing two (2) zones. The estimated price
shall not include the cost of:
(i) completing more than two (2) zones;
(ii) completion procedures, equipment, or any facilities
necessary or appropriate for the production and sale of
oil and/or natural gas liquids; and
(iii) equipment or materials necessary or appropriate to
collect, lift, or dispose of liquids for efficient gas
production, except that the cost of saltwater collection
tanks, separators, siphon string and tubing shall be
included in the estimated price.
These extra costs, if any, shall be billed to Developer in
proportion to the share of the Working Interest owned by the
Developer in the ▇▇▇▇▇ on a Cost plus 15% basis.
(b) Payment. The Developer shall pay to Operator, in proportion to
the share of the Working Interest owned by the Developer in
the ▇▇▇▇▇, one hundred percent (100%) of the estimated
Intangible Drilling Costs and Tangible Costs as those terms
are defined below, for drilling and completing all initial
▇▇▇▇▇ on execution of this Agreement. Notwithstanding, Atlas'
payments for its share of the estimated Tangible Costs as that
term is defined below of drilling and completing all initial
▇▇▇▇▇ as the Managing General Partner of the Developer shall
be paid within five (5) business days of notice from Operator
that the costs have been incurred. The Developer's payment
shall be nonrefundable in all events in order to enable
Operator to do the following:
(i) commence site preparation for the initial ▇▇▇▇▇;
(ii) obtain suitable subcontractors for drilling and
completing the ▇▇▇▇▇ at currently prevailing prices; and
(iii) insure the availability of equipment and materials.
For purposes of this Agreement, "Intangible Drilling Costs"
shall mean those expenditures associated with property
acquisition and the drilling and completion of oil and gas
▇▇▇▇▇ that under present law are generally accepted as fully
deductible currently for federal income tax purposes. This
includes all expenditures made with respect to any well before
the establishment of production in commercial quantities for
wages, fuel, repairs, hauling, supplies and other costs and
expenses incident to and necessary for the drilling of the
well and the preparation of the well for the production of oil
or gas, that are currently deductible pursuant to Section
263(c) of the Internal Revenue Code of 1986, as amended, (the
"Code"), and Treasury Reg. Section 1.612-4, which are
generally termed "intangible drilling and development costs,"
including the expense of plugging and abandoning any well
before a completion attempt. "Tangible Costs" shall mean those
costs associated with the drilling and completion of oil and
gas ▇▇▇▇▇ which are generally accepted as capital expenditures
pursuant to the provisions of the Code. This includes all
costs of equipment, parts and items of hardware used in
drilling and completing a well, and those items necessary to
deliver acceptable oil and gas production to purchasers to the
extent installed downstream from the wellhead of any well and
which are required to be capitalized under the Code and its
regulations.
With respect to each additional well drilled on the Additional
Well Locations, if any, Developer shall pay Operator, in
proportion to the share of the Working Interest owned by the
Developer in the ▇▇▇▇▇, one hundred percent (100%) of the
estimated Intangible Drilling Costs and Tangible Costs for the
well on execution of the applicable addendum pursuant to
Section l(c) above. Notwithstanding, Atlas' payments for its
share of the estimated Tangible Costs of drilling and
completing all additional ▇▇▇▇▇ as the Managing General
Partner of the Developer shall be paid within five (5)
business days of notice from Operator that the costs have been
incurred. The Developer's payment shall be nonrefundable in
all events in order to enable Operator to do the following:
(i) commence site preparation;
5
(ii) obtain suitable subcontractors for drilling and
completing the ▇▇▇▇▇ at currently prevailing prices; and
(iii) insure the availability of equipment and materials.
Developer shall pay, in proportion to the share of the Working
Interest owned by the Developer in the ▇▇▇▇▇, any extra costs
incurred for each well pursuant to sub-section (a) above
within ten (10) business days of its receipt of Operator's
statement for the extra costs.
(c) Completion Determination. Operator shall determine whether or
not to run the production casing for an attempted completion
or to plug and abandon any well drilled under this Agreement.
However, a well shall be completed only if Operator has made a
good faith determination that there is a reasonable
possibility of obtaining commercial quantities of oil and/or
gas.
(d) Dry Hole Determination. If Operator determines at any time
during the drilling or attempted completion of any well under
this Agreement, in accordance with the generally accepted and
customary oil and gas field practices and techniques then
prevailing in the geographic area of the Well Location that
the well should not be completed, then it shall promptly and
properly plug and abandon the well.
(e) Excess Funds and Cost Overruns-Intangible Drilling Costs. Any
estimated Intangible Drilling Costs paid by Developer with
respect to any well which exceed Operator's price specified in
sub-section (a) above for the Intangible Drilling Costs of the
well shall be retained by Operator and shall be applied to:
(i) the Intangible Drilling Costs for an additional well or
▇▇▇▇▇ to be drilled on the Additional Well Locations; or
(ii) any cost overruns owed by the Developer to Operator for
Intangible Drilling Costs on one or more of the other
▇▇▇▇▇ on the Well Locations;
in proportion to the share of the Working Interest owned by
the Developer in the ▇▇▇▇▇.
Conversely, if Operator's price specified in sub-section (a)
above for the Intangible Drilling Costs of any well exceeds
the estimated Intangible Drilling Costs paid by Developer for
the well, then:
(i) Developer shall pay the additional price to Operator
within five (5) business days after notice from Operator
that the additional amount is due and owing; or
(ii) Developer and Operator may agree to delete or reduce
Developer's Working Interest in one or more ▇▇▇▇▇ which
have not yet been spudded to provide funds to pay the
additional amounts to Operator. If doing so results in
any excess prepaid Intangible Drilling Costs, then these
funds shall be applied to:
(a) the Intangible Drilling Costs for an additional well
or ▇▇▇▇▇ to be drilled on the Additional Well
Locations; or
(b) any cost overruns owed by Developer to Operator for
Intangible Drilling Costs on one or more of the
other ▇▇▇▇▇ on the Well Locations;
in proportion to the share of the Working Interest owned
by the Developer in the ▇▇▇▇▇.
The Exhibits to this Agreement with respect to the affected
▇▇▇▇▇ shall be amended as appropriate.
(f) Excess Funds and Cost Overruns - Tangible Costs. Any estimated
Tangible Costs paid by Developer with respect to any well
which exceed Operator's price specified in sub-section (a)
above for the Tangible Costs of the well shall be retained by
Operator and shall be applied to:
6
(i) the Intangible Drilling Costs or Tangible Costs for an
additional well or ▇▇▇▇▇ to be drilled on the Additional
Well Locations; or
(ii) any cost overruns owed by Developer to Operator for
Intangible Drilling Costs or Tangible Costs on one or
more of the other ▇▇▇▇▇ on the Well Locations;
in proportion to the share of the Working Interest owned by
the Developer in the ▇▇▇▇▇.
Conversely, if Operator's price specified in sub-section (a)
above for the Tangible Costs of any well exceeds the estimated
Tangible Costs paid by Developer for the well, then:
(i) Developer shall pay the additional price to Operator
within ten (10) business days after notice from Operator
that the additional price is due and owing; or
(ii) Developer and Operator may agree to delete or reduce
Developer's Working Interest in one or more ▇▇▇▇▇ which
have not yet been spudded to provide funds to pay the
additional price to Operator. If doing so results in any
excess prepaid Tangible Costs, then these funds shall be
applied to:
(a) the Intangible Drilling Costs or Tangible Costs for
an additional well or ▇▇▇▇▇ to be drilled on the
Additional Well Locations; or
(b) any cost overruns owed by Developer to Operator for
Intangible Drilling Costs or Tangible Costs on one
or more of the other ▇▇▇▇▇ on the Well Locations;
in proportion to the share of the Working Interest
owed by the Developer in the ▇▇▇▇▇.
The Exhibits to this Agreement with respect to the affected
▇▇▇▇▇ shall be amended as appropriate.
5. Title Examination of Well Locations, Developer's Acceptance and
Liability; Additional Well Locations.
(a) Title Examination of Well Locations, Developer's Acceptance
and Liability. The Developer acknowledges that Operator has
furnished Developer with the title opinions identified on
Exhibit A, and other documents and information which Developer
or its counsel has requested in order to determine the
adequacy of the title to the Initial Well Locations and leased
premises subject to this Agreement. The Developer accepts the
title to the Initial Well Locations and leased premises and
acknowledges and agrees that, except for any loss, expense,
cost, or liability caused by the breach of any of the
warranties and representations made by the Operator in Section
l (b), any loss, expense, cost or liability whatsoever caused
by or related to any defect or failure of the title shall be
the sole responsibility of and shall be borne entirely by the
Developer.
(b) Additional Well Locations. Before beginning drilling of any
well on any Additional Well Location, Operator shall conduct,
or cause to be conducted, a title examination of the
Additional Well Location, in order to obtain appropriate
abstracts, opinions and certificates and other information
necessary to determine the adequacy of title to both the
applicable Lease and the fee title of the lessor to the
premises covered by the Lease. The results of the title
examination and such other information as is necessary to
determine the adequacy of title for drilling purposes shall be
submitted to the Developer for its review and acceptance. No
drilling on the Additional Well Locations shall begin until
the title has been accepted in writing by the Developer. After
any title has been accepted by the Developer, any loss,
expense, cost, or liability whatsoever, caused by or related
to any defect or failure of the title shall be the sole
responsibility of and shall be borne entirely by the
Developer, unless such loss, expense, cost, or liability was
caused by the breach of any of the warranties and
representations made by the Operator in Section l (b).
6. Operations Subsequent to Completion of the ▇▇▇▇▇; Fee Adjustments;
Extraordinary Costs; Pipelines; Price Determinations; Plugging and
Abandonment.
(a) Operations Subsequent to Completion of the ▇▇▇▇▇. Beginning
with the month in which a well drilled under this Agreement
begins to produce, Operator shall be entitled to an operating
fee of $275 per month for each well being operated under this
7
Agreement, proportionately reduced to the extent the Developer
owns less than 100% of the Working Interest in the ▇▇▇▇▇. This
fee shall be in lieu of any direct charges by Operator for its
services or the provision by Operator of its equipment for
normal superintendence and maintenance of the ▇▇▇▇▇ and
related pipelines and facilities.
If a third-party serves as the actual operator of the well,
then this fee shall be $25 above the actual third-party
operator's monthly charges. The $25 will be retained by
Operator each month for reviewing the costs and expenses
charged by the third-party operator and monitoring the
third-party operator's accounting and production records for
the well on behalf of the Developer.
The operating fees shall cover all normal, regularly recurring
operating expenses for the production, delivery and sale of
natural gas, including without limitation:
(i) well tending, routine maintenance and adjustment;
(ii) reading meters, recording production, pumping,
maintaining appropriate books and records;
(iii) preparing reports to the Developer and government
agencies; and
(iv) collecting and disbursing revenues.
The operating fees shall not cover costs and expenses related
to the following:
(i) the production and sale of oil;
(ii) the collection and disposal of salt water or other
liquids produced by the ▇▇▇▇▇;
(iii) the rebuilding of access roads; and
(iv) the purchase of equipment, materials or third party
services;
which, subject to the provisions of sub-section (c) of this
Section 6, shall be paid by the Developer in proportion to the
share of the Working Interest owned by the Developer in the
▇▇▇▇▇.
Any well which is temporarily abandoned or shut-in
continuously for the entire month shall not be considered a
producing well for purposes of determining the number of ▇▇▇▇▇
in the month subject to the operating fee.
(b) Fee Adjustments. The monthly operating fee set forth in
sub-section (a) above may in the following manner be adjusted
annually as of the first day of January (the "Adjustment
Date") each year beginning January l, 2005. Such adjustment,
if any, shall not exceed the percentage increase in the
average weekly earnings of "Crude Petroleum, Natural Gas, and
Natural Gas Liquids" workers, as published by the U.S.
Department of Labor, Bureau of Labor Statistics, and shown in
Employment and Earnings Publication, Monthly Establishment
Data, Hours and Earning Statistical Table C-2, Index Average
Weekly Earnings of "Crude Petroleum, Natural Gas, and Natural
Gas Liquids" workers, SIC Code #131-2, or any successor index
thereto, since January l, 2002, in the case of the first
adjustment, and since the previous Adjustment Date, in the
case of each subsequent adjustment.
(c) Extraordinary Costs. Without the prior written consent of the
Developer, pursuant to a written estimate submitted by
Operator, Operator shall not undertake any single project or
incur any extraordinary cost with respect to any well being
produced under this Agreement reasonably estimated to result
in an expenditure of more than $5,000, unless the project or
extraordinary cost is necessary for the following:
(i) to safeguard persons or property; or
(ii) to protect the well or related facilities in the event
of a sudden emergency.
8
In no event, however, shall the Developer be required to pay
for any project or extraordinary cost arising from the
negligence or misconduct of Operator, its agents, servants,
employees, contractors, licensees, or invitees.
All extraordinary costs incurred and the cost of projects
undertaken with respect to a well being produced shall be
billed at the invoice cost of third-party services performed
or materials purchased together with a reasonable charge by
Operator for services performed directly by it, in proportion
to the share of the Working Interest owned by the Developer in
the ▇▇▇▇▇. Operator shall have the right to require the
Developer to pay in advance of undertaking any project all or
a portion of the estimated costs of the project in proportion
to the share of the Working Interest owned by the Developer in
the ▇▇▇▇▇.
(d) Pipelines. Developer shall have no interest in the pipeline
gathering system, which gathering system shall remain the sole
property of Operator or its Affiliates and shall be maintained
at their sole cost and expense.
(e) Price Determinations. Notwithstanding anything herein to the
contrary, the Developer shall have full responsibility for and
bear all costs in proportion to the share of the Working
Interest owned by the Developer in the ▇▇▇▇▇ with respect to
obtaining price determinations under and otherwise complying
with the Natural Gas Policy Act of 1978 and the implementing
state regulations. This responsibility shall include, without
limitation, preparing, filing, and executing all applications,
affidavits, interim collection notices, reports and other
documents necessary or appropriate to obtain price
certification, to effect sales of natural gas, or otherwise to
comply with the Act and the implementing state regulations.
Operator agrees to furnish the information and render the
assistance as the Developer may reasonably request in order to
comply with the Act and the implementing state regulations
without charge for services performed by its employees.
(f) Plugging and Abandonment. The Developer shall have the right
to direct Operator to plug and abandon any well that has been
completed under this Agreement as a producer. In addition,
Operator shall not plug and abandon any well that has been
drilled and completed as a producer before obtaining the
written consent of the Developer. However, if the Operator in
accordance with the generally accepted and customary oil and
gas field practices and techniques then prevailing in the
geographic area of the well location, determines that any well
should be plugged and abandoned and makes a written request to
the Developer for authority to plug and abandon the well and
the Developer fails to respond in writing to the request
within forty-five (45) days following the date of the request,
then the Developer shall be deemed to have consented to the
plugging and abandonment of the well.
All costs and expenses related to plugging and abandoning the
▇▇▇▇▇ which have been drilled and completed as producing ▇▇▇▇▇
shall be borne and paid by the Developer in proportion to the
share of the Working Interest owned by the Developer in the
▇▇▇▇▇. Also, at any time after one (1) year from the date each
well drilled and completed is placed into production, Operator
shall have the right to deduct each month from the proceeds of
the sale of the production from the well up to $200, in
proportion to the share of the Working Interest owned by the
Developer in the ▇▇▇▇▇, for the purpose of establishing a fund
to cover the estimated costs of plugging and abandoning the
well. All these funds shall be deposited in a separate
interest bearing escrow account for the account of the
Developer, and the total amount so retained and deposited
shall not exceed Operator's reasonable estimate of the costs.
7. Billing and Payment Procedure with Respect to Operation of ▇▇▇▇▇;
Disbursements; Separate Account for Sale Proceeds; Records and Reports;
Additional Information.
(a) Billing and Payment Procedure with Respect to Operation of
▇▇▇▇▇. Operator shall promptly and timely pay and discharge on
behalf of the Developer, in proportion to the share of the
Working Interest owned by the Developer in the ▇▇▇▇▇ the
following:
(i) all expenses and liabilities payable and incurred by
reason of its operation of the ▇▇▇▇▇ in accordance with
this Agreement, such as severance taxes, royalties,
overriding royalties, operating fees, and pipeline
gathering charges; and
9
(ii) any third-party invoices rendered to Operator with
respect to costs and expenses incurred in connection
with the operation of the ▇▇▇▇▇.
Operator, however, shall not be required to pay and discharge
any of the above costs and expenses which are being contested
in good faith by Operator.
Operator shall:
(i) deduct the foregoing costs and expenses from the
Developer's share of the proceeds of the oil and/or gas
sold from the ▇▇▇▇▇; and
(ii) keep an accurate record of the Developer's account,
showing expenses incurred and charges and credits made
and received with respect to each well.
If the proceeds are insufficient to pay the costs and
expenses, then Operator shall promptly and timely pay and
discharge the costs and expenses, in proportion to the share
of the Working Interest owned by the Developer in the ▇▇▇▇▇,
and prepare and submit an invoice to the Developer each month
for the costs and expenses. The invoice shall be accompanied
by the form of statement specified in sub-section (b) below,
and shall be paid by the Developer within ten (10) business
days of its receipt.
(b) Disbursements. Operator shall disburse to the Developer, on a
monthly basis, the Developer's share of the proceeds received
from the sale of oil and/or gas sold from the ▇▇▇▇▇ operated
under this Agreement, less:
(i) the amounts charged to the Developer under sub-section
(a); and
(ii) the amount, if any, withheld by Operator for future
plugging costs pursuant to sub-section (f) of Section 6.
Each disbursement made and/or invoice submitted pursuant to
sub-section (a) above shall be accompanied by a statement
itemizing with respect to each well:
(i) the total production of oil and/or gas since the date of
the last disbursement or invoice billing period, as the
case may be, and the Developer's share of the
production;
(ii) the total proceeds received from any sale of the
production, and the Developer's share of the proceeds;
(iii) the costs and expenses deducted from the proceeds and/or
being billed to the Developer pursuant to sub-section
(a) above;
(iv) the amount withheld for future plugging costs; and
(v) any other information as Developer may reasonably
request, including without limitation copies of all
third-party invoices listed on the statement for the
period.
(c) Separate Account for Sale Proceeds. Operator agrees to deposit
all proceeds from the sale of oil and/or gas sold from the
▇▇▇▇▇ operated under this Agreement in a separate checking
account maintained by Operator. This account shall be used
solely for the purpose of collecting and disbursing funds
constituting proceeds from the sale of production under this
Agreement.
(d) Records and Reports. In addition to the statements required
under sub-section (b) above, Operator, within seventy-five
(75) days after the completion of each well drilled, shall
furnish the Developer with a detailed statement itemizing with
respect to the well the total costs and charges under Section
4(a) and the Developer's share of the costs and charges, and
any information as is necessary to enable the Developer:
(i) to allocate any extra costs incurred with respect to the
well between Tangible Costs and Intangible Drilling
Costs; and
(ii) to determine the amount of investment tax credit, if
applicable.
10
(e) Additional Information. On request, Operator shall promptly
furnish the Developer with any additional information as it
may reasonably request, including without limitation
geological, technical, and financial information, in the form
as may reasonably be requested, pertaining to any phase of the
operations and activities governed by this Agreement. The
Developer and its authorized employees, agents and
consultants, including independent accountants shall, at
Developer's sole cost and expense:
(i) on at least ten (10) days' written notice have access
during normal business hours to all of Operator's
records pertaining to operations, including without
limitation, the right to audit the books of account of
Operator relating to all receipts, costs, charges,
expenses and disbursements under this Agreement
(including information regarding the separate account
required under sub-section (c)); and
(ii) have access, at its sole risk, to any ▇▇▇▇▇ drilled by
Operator under this Agreement at all times to inspect
and observe any machinery, equipment and operations.
8. Operator's Lien; Right to Collect From Gas Purchaser.
(a) Operator's Lien. To secure the payment of all sums due from
Developer to Operator under the provisions of this Agreement
the Developer grants Operator a first and preferred lien on
and security interest in the following:
(i) the Developer's interest in the Leases covered by this
Agreement;
(ii) the Developer's interest in oil and gas produced under
this Agreement and its proceeds from the sale of the oil
and gas; and
(iii) the Developer's interest in materials and equipment
under this Agreement.
(b) Right to Collect From Gas Purchaser. If the Developer fails to
timely pay any amount owing under this Agreement by it to the
Operator, then Operator, without prejudice to other existing
remedies, may collect and retain from any purchaser or
purchasers of oil or gas the Developer's share of the proceeds
from the sale of the oil and gas until the amount owed by the
Developer, plus twelve percent (12%) interest on a per annum
basis, and any additional costs (including without limitation
actual attorneys' fees and costs) resulting from the
delinquency, has been paid. Each purchaser of oil or gas shall
be entitled to rely on Operator's written statement concerning
the amount of any default.
9. Successors and Assigns; Transfers; Appointment of Agent.
(a) Successors and Assigns. This Agreement shall be binding on and
inure to the benefit of the undersigned parties and their
respective successors and permitted assigns. However, without
the prior written consent of the Developer, the Operator may
not assign, transfer, pledge, mortgage, hypothecate, sell or
otherwise dispose of any of its interest in this Agreement, or
any of the rights or obligations under this Agreement.
Notwithstanding, this consent shall not be required in
connection with:
(i) the assignment of work to be performed for Operator by
subcontractors, it being understood and agreed, however,
that any assignment to Operator's subcontractors shall
not in any manner relieve or release Operator from any
of its obligations and responsibilities under this
Agreement;
(ii) any lien, assignment, security interest, pledge or
mortgage arising under Operator's present or future
financing arrangements; or
(iii) the liquidation, merger, consolidation, or other
corporate reorganization or sale of substantially all of
the assets of Operator.
Further, in order to maintain uniformity of ownership in the
▇▇▇▇▇, production, equipment, and leasehold interests covered
by this Agreement, and notwithstanding any other provisions to
the contrary, the Developer shall not, without the prior
written consent of Operator, sell, assign, transfer, encumber,
11
mortgage or otherwise dispose of any of its interest in the
▇▇▇▇▇, production, equipment or leasehold interests covered by
this Agreement unless the disposition encompasses either:
(i) the entire interest of the Developer in all ▇▇▇▇▇,
production, equipment and leasehold interests subject to
this Agreement; or
(ii) an equal undivided interest in all such ▇▇▇▇▇,
production, equipment, and leasehold interests.
(b) Transfers. Subject to the provisions of sub-section (a) above,
any sale, encumbrance, transfer or other disposition made by
the Developer of its interests in the ▇▇▇▇▇, production,
equipment, and/or leasehold interests covered by this
Agreement shall be made:
(i) expressly subject to this Agreement;
(ii) without prejudice to the rights of the Operator; and
(iii) in accordance with and subject to the provisions of the
Lease.
(c) Appointment of Agent. If at any time the interest of the
Developer is divided among or owned by co-owners, Operator
may, at its discretion, require the co-owners to appoint a
single trustee or agent with full authority to do the
following:
(i) receive notices, reports and distributions of the
proceeds from production;
(ii) approve expenditures;
(iii) receive ▇▇▇▇▇▇▇▇ for and approve and pay all costs,
expenses and liabilities incurred under this Agreement;
(iv) exercise any rights granted to the co-owners under this
Agreement;
(v) grant any approvals or authorizations required or
contemplated by this Agreement;
(vi) sign, execute, certify, acknowledge, file and/or record
any agreements, contracts, instruments, reports, or
documents whatsoever in connection with this Agreement
or the activities contemplated by this Agreement; and
(vii) deal generally with, and with power to bind, the
co-owners with respect to all activities and operations
contemplated by this Agreement.
However, all the co-owners shall continue to have the right to
enter into and execute all contracts or agreements for their
respective shares of the oil and gas produced from the ▇▇▇▇▇
drilled under this Agreement in accordance with sub-section
(c) of Section 11.
10. Operator's Insurance; Subcontractors' Insurance; Operator's Liability.
(a) Operator's Insurance. Operator shall obtain and maintain at
its own expense so long as it is Operator under this Agreement
all required Workmen's Compensation Insurance and
comprehensive general public liability insurance in amounts
and coverage not less than $1,000,000 per person per
occurrence for personal injury or death and $1,000,000 for
property damage per occurrence, which shall include coverage
for blow-outs and total liability coverage of not less than
$10,000,000.
Subject to the above limits, the Operator's general public
liability insurance shall be in all respects comparable to
that generally maintained in the industry with respect to
services of the type to be rendered and activities of the type
to be conducted under this Agreement. Operator's general
public liability insurance shall, if permitted by Operator's
insurance carrier:
12
(i) name the Developer as an additional insured party; and
(ii) provide that at least thirty (30) days' prior notice of
cancellation and any other adverse material change in
the policy shall be given to the Developer.
However, the Developer shall reimburse Operator for the
additional cost, if any, of including it as an additional
insured party under the Operator's insurance.
Current copies of all policies or certificates of the
Operator's insurance coverage shall be delivered to the
Developer on request. It is understood and agreed that
Operator's insurance coverage may not adequately protect the
interests of the Developer and that the Developer shall carry
at its expense the excess or additional general public
liability, property damage, and other insurance, if any, as
the Developer deems appropriate.
(b) Subcontractors' Insurance. Operator shall require all of its
subcontractors to carry all required Workmen's Compensation
Insurance and to maintain such other insurance, if any, as
Operator in its discretion may require.
(c) Operator's Liability. Operator's liability to the Developer as
Operator under this Agreement shall be limited to, and
Operator shall indemnify the Developer and hold it harmless
from, claims, penalties, liabilities, obligations, charges,
losses, costs, damages, or expenses (including but not limited
to reasonable attorneys' fees) relating to, caused by or
arising out of:
(i) the noncompliance with or violation by Operator, its
employees, agents, or subcontractors of any local, state
or federal law, statute, regulation, or ordinance;
(ii) the negligence or misconduct of Operator, its employees,
agents or subcontractors; or
(iii) the breach of or failure to comply with any provisions
of this Agreement.
11. Internal Revenue Code Election; Relationship of Parties; Right to Take
Production in Kind.
(a) Internal Revenue Code Election. With respect to this
Agreement, each of the parties elects under Section 761(a) of
the Internal Revenue Code of 1986, as amended, to be excluded
from the provisions of Subchapter K of Chapter 1 of Sub Title
A of the Internal Revenue Code of 1986, as amended. If the
income tax laws of the state or states in which the property
covered by this Agreement is located contain, or may
subsequently contain, a similar election, each of the parties
agrees that the election shall be exercised.
Beginning with the first taxable year of operations under this
Agreement, each party agrees that the deemed election provided
by Section 1.761-2(b)(2)(ii) of the Regulations under the
Internal Revenue Code of 1986, as amended, will apply; and no
party will file an application under Section 1.761-2 (b)(3)(i)
and (ii) of the Regulations to revoke the election. Each party
agrees to execute the documents and make the filings with the
appropriate governmental authorities as may be necessary to
effect the election.
(b) Relationship of Parties. It is not the intention of the
parties to create, nor shall this Agreement be construed as
creating, a mining or other partnership or association or to
render the parties liable as partners or joint venturers for
any purpose. Operator shall be deemed to be an independent
contractor and shall perform its obligations as set forth in
this Agreement or as otherwise directed by the Developer.
(c) Right to Take Production in Kind. Subject to the provisions of
Section 8 above, the Developer shall have the exclusive right
to sell or dispose of its proportionate share of all oil and
gas produced from the ▇▇▇▇▇ to be drilled under this
Agreement, exclusive of production:
(i) that may be used in development and producing
operations;
(ii) unavoidably lost; and
13
(iii) used to fulfill any free gas obligations under the terms
of the applicable Lease or Leases.
Operator shall not have any right to sell or otherwise dispose
of the oil and gas. The Developer shall have the exclusive
right to execute all contracts relating to the sale or
disposition of its proportionate share of the production from
the ▇▇▇▇▇ drilled under this Agreement.
Developer shall have no interest in any gas supply agreements
of Operator, except the right to receive Developer's share of
the proceeds received from the sale of any gas or oil from
▇▇▇▇▇ developed under this Agreement. The Developer agrees to
designate Operator or Operator's designated bank agent as the
Developer's collection agent in any contracts. On request,
Operator shall assist Developer in arranging the sale or
disposition of Developer's oil and gas under this Agreement
and shall promptly provide the Developer with all relevant
information which comes to Operator's attention regarding
opportunities for sale of production.
If Developer fails to take in kind or separately dispose of
its proportionate share of the oil and gas produced under this
Agreement, then Operator shall have the right, subject to the
revocation at will by the Developer, but not the obligation,
to purchase the oil and gas or sell it to others at any time
and from time to time, for the account of the Developer at the
best price obtainable in the area for the production.
Notwithstanding, Operator shall have no liability to Developer
should Operator fail to market the production.
Any purchase or sale by Operator shall be subject always to
the right of the Developer to exercise at any time its right
to take in-kind, or separately dispose of, its share of oil
and gas not previously delivered to a purchaser. Any purchase
or sale by Operator of any other party's share of oil and gas
shall be only for reasonable periods of time as are consistent
with the minimum needs of the oil and gas industry under the
particular circumstances, but in no event for a period in
excess of one (1) year.
12. Effect of Force Majeure; Definition of Force Majeure; Limitation.
(a) Effect of Force Majeure. If Operator is rendered unable,
wholly or in part, by force majeure (as defined below) to
carry out its obligations under this Agreement, the Operator
shall give to the Developer prompt written notice of the force
majeure with reasonably full particulars concerning it. After
the notice is given, the obligations of the Operator, so far
as it is affected by the force majeure, shall be suspended
during but no longer than, the continuance of the force
majeure. Operator shall use all reasonable diligence to remove
the force majeure as quickly as possible to the extent the
same is within reasonable control.
(b) Definition of Force Majeure. The term "force majeure" shall
mean an act of God, strike, lockout, or other industrial
disturbance, act of the public enemy, war, blockade, public
riot, lightning, fire, storm, flood, explosion, governmental
restraint, unavailability of equipment or materials, plant
shut-downs, curtailments by purchasers and any other causes
whether of the kind specifically enumerated above or
otherwise, which directly precludes Operator's performance
under this Agreement and is not reasonably within the control
of the Operator.
(c) Limitation. The requirement that any force majeure shall be
remedied with all reasonable dispatch shall not require the
settlement of strikes, lockouts, or other labor difficulty
affecting the Operator, contrary to its wishes. The method of
handling these difficulties shall be entirely within the
discretion of the Operator.
13. Term.
This Agreement shall become effective when executed by Operator and the
Developer. Except as provided in sub-section (c) of Section 3, this
Agreement shall continue and remain in full force and effect for the
productive lives of the ▇▇▇▇▇ being operated under this Agreement.
14. Governing Law; Invalidity.
(a) Governing Law. This Agreement shall be governed by, construed
and interpreted in accordance with the laws of the
Commonwealth of Pennsylvania.
14
(b) Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the
other provisions of this Agreement, and this Agreement shall
be construed in all respects as if the invalid or
unenforceable provision were omitted.
15. Integration; Written Amendment.
(a) Integration. This Agreement, including the Exhibits to this
Agreement, constitutes and represents the entire understanding
and agreement of the parties with respect to the subject
matter of this Agreement and supersedes all prior
negotiations, understandings, agreements, and representations
relating to the subject matter of this Agreement.
(b) Written Amendment. No change, waiver, modification, or
amendment of this Agreement shall be binding or of any effect
unless in writing duly signed by the party against which the
change, waiver, modification, or amendment is sought to be
enforced.
16. Waiver of Default or Breach.
No waiver by any party to any default of or breach by any other party
under this Agreement shall operate as a waiver of any future default or
breach, whether of like or different character or nature.
17. Notices.
Unless otherwise provided in this Agreement, all notices, statements,
requests, or demands which are required or contemplated by this
Agreement shall be in writing and shall be hand-delivered or sent by
registered or certified mail, postage prepaid, to the following
addresses until changed by certified or registered letter so addressed
to the other party:
(i) If to the Operator, to:
Atlas Resources, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
(ii) If to Developer, to:
Atlas America Public #12-2003 Limited Partnership
c/o Atlas Resources, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Notices which are served by registered or certified mail on the parties
in the manner provided in this Section shall be deemed sufficiently
served or given for all purposes under this Agreement at the time the
notice is mailed in any post office or branch post office regularly
maintained by the United States Postal Service or any successor. All
payments shall be hand-delivered or sent by United States mail, postage
prepaid to the addresses set forth above until changed by certified or
registered letter so addressed to the other party.
18. Interpretation.
The titles of the Sections in this Agreement are for convenience of
reference only and shall not control or affect the meaning or
construction of any of the terms and provisions of this Agreement. As
used in this Agreement, the plural shall include the singular and the
singular shall include the plural whenever appropriate.
19. Counterparts.
The parties may execute this Agreement in any number of separate
counterparts, each of which, when executed and delivered by the
parties, shall have the force and effect of an original; but all such
counterparts shall be deemed to constitute one and the same instrument.
15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ATLAS RESOURCES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
By its Managing General Partner:
ATLAS RESOURCES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
16
EXHIBIT A
DRILLING AND OPERATING AGREEMENT DATED OCTOBER 18, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ PUBLIC #12-2003 LIMITED PARTNERSHIP
ATLAS RESOURCES, INC.
BRADFORD FORMATION
WELL STATE COUNTY TOWNSHIP
----------------------------------------------------------------------------------------
▇▇▇▇▇ #3 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇▇▇ #7 PA FAYETTE LUZERNE
▇▇▇▇▇▇▇ #4 PA FAYETTE REDSTONE
E & N LAND #2 PA FAYETTE REDSTONE
BOSCH #7 PA INDIANA YOUNG
Exhibit C
(Page 1)
ADDENDUM NO. One
TO DRILLING AND OPERATING AGREEMENT
DATED October 18, 2003
THIS ADDENDUM NO. One made and entered into this 31st day of December, 2003, by
and between ATLAS RESOURCES, INC., a Pennsylvania corporation (hereinafter
referred to as "Operator"),
and
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP, a Delaware limited
partnership, (hereinafter referred to as the Developer).
WITNESSETH THAT:
WHEREAS, Operator and the Developer have entered into a Drilling and Operating
Agreement dated October 18, 2003, (the "Agreement"), which relates to the
drilling and operating of five (5) ▇▇▇▇▇ on the five (5) Initial Well
Locations identified on the maps attached as Exhibits A-l through A-5 to the
Agreement, and provides for the development on the terms and conditions set
forth in the Agreement of Additional Well Locations as the parties may from time
to time designate; and
WHEREAS, pursuant to Section l(c) of the Agreement, Operator and Developer
presently desire to designate one hundred ninety three (193) Additional Well
Locations described below to be developed in accordance with the terms and
conditions of the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Addendum and intending to be legally bound, the parties agree as follows:
1. Pursuant to Section l(c) of the Agreement, the Developer hereby authorizes
Operator to drill, complete (or plug) and operate, on the terms and conditions
set forth in the Agreement and this Addendum No. One, 193 additional ▇▇▇▇▇ on
the 193 Additional Well Locations described on Exhibit A to this Addendum and on
the maps attached to this Addendum as Exhibits A-1 through A-193.
2. Operator, as Developer's independent contractor, agrees to drill, complete
(or plug) and operate the additional ▇▇▇▇▇ on the Additional Well Locations in
accordance with the terms and conditions of the Agreement and further agrees to
use its best efforts to begin drilling the first additional well within thirty
(30) days after the date of this Addendum and to begin drilling all the
additional ▇▇▇▇▇ on or before March 31, 2004.
3. Developer acknowledges that:
(a) Operator has furnished Developer with the title opinions identified on
Exhibit A to this Addendum; and
(b) such other documents and information which Developer or its counsel has
requested in order to determine the adequacy of the title to the above
Additional Well Locations.
The Developer accepts the title to the Additional Well Locations and leased
premises in accordance with the provisions of Section 5 of the Agreement.
4. The drilling and operation of the additional ▇▇▇▇▇ on the Additional Well
Locations shall be in accordance with and subject to the terms and conditions
set forth in the Agreement as supplemented by this Addendum No. One and except
as previously supplemented, all terms and conditions of the Agreement shall
remain in full force and effect as originally written.
5. This Addendum No. One shall be legally binding on, and shall inure to the
benefit of, the parties and their respective successors and permitted assigns.
Exhibit C
(Page 2)
WITNESS the due execution of this Addendum on the day and year first above
written.
ATLAS RESOURCES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
By its Managing General Partner:
ATLAS RESOURCES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
Exhibit C
(Page 3)
EXHIBIT A
DRILLING AND OPERATING AGREEMENT DATED OCTOBER 18, 2003
ADDENDUM ONE
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
ATLAS RESOURCES, INC.
BRADFORD FORMATION
▇▇▇▇▇ STATE COUNTY TOWNSHIP
------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ #6 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇▇▇▇▇ #3 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇▇▇ #1 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇ #2 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇▇▇ #2 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇▇ #7 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇▇ #11 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
ALLSHOUSE #2 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇▇▇▇▇ #5 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
KISKI SPORTSMEN #8 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇▇▇ #4 PA ▇▇▇▇▇▇▇▇▇ KISKIMINETAS
▇▇▇▇▇ #5 PA ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LINK UNIT #1 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇/USX #9 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇/USX #7 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇ #1 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ #1 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇/USX #1 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ #2 PA ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
KRUKIWSKI #1 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇/USX #3 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #2 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #3 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇ #5 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇/USX #4 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇/USX #8 PA ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
WORK #3 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #6 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ #2 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ #3 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #2 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇ #2 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇ #10 PA FAYETTE GERMAN
WOLF #12 PA FAYETTE GERMAN
▇▇▇▇▇ #8 PA FAYETTE GERMAN
▇▇▇▇▇▇▇ #20 PA FAYETTE GERMAN
▇▇▇▇▇▇▇▇ #3 PA FAYETTE GERMAN
▇▇▇▇▇▇▇ #3 PA FAYETTE GERMAN
▇▇▇▇▇▇ #2 PA FAYETTE GERMAN
Exhibit C
(Page 4)
DRILLING & OPERATING AGREEMENT - EXHIBIT A - ADDENDUM ONE
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
▇▇▇▇▇ STATE COUNTY TOWNSHIP
------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ #2 PA FAYETTE GERMAN
▇▇▇▇▇ #9 PA FAYETTE GERMAN
▇▇▇▇▇▇ #2 PA FAYETTE GERMAN
BURDEN #1 PA FAYETTE GERMAN
▇▇▇▇▇▇▇/USX #3 PA FAYETTE GERMAN
▇▇▇▇▇▇ #3 PA FAYETTE GERMAN
▇▇▇▇▇ #11 PA FAYETTE GERMAN
▇▇▇▇▇▇ #2 PA FAYETTE GERMAN
▇▇▇▇▇▇▇ #3 PA FAYETTE GERMAN
CFR/USX #6 PA FAYETTE GERMAN
▇▇▇▇▇▇▇ #1 PA FAYETTE GERMAN
DIAMOND #2 PA FAYETTE GERMAN
PONTERERO #1 PA FAYETTE GERMAN
▇▇▇▇▇ #7 PA FAYETTE GERMAN
▇▇▇▇▇▇▇ #2 PA FAYETTE GERMAN
▇▇▇▇▇▇▇ #3 PA FAYETTE GERMAN
▇▇▇▇▇▇▇ #1 PA FAYETTE GERMAN
▇▇▇▇▇▇ #7 PA FAYETTE GERMAN
▇▇▇▇▇▇▇ #6 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #1 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ #4 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ #1 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ #8 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ #2 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ #3 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #3 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ #4 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ #1 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ #1 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ #1 PA FAYETTE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ #4 PA FAYETTE LUZERNE
▇▇▇▇▇ #24A PA FAYETTE LUZERNE
▇▇▇▇▇▇ #11 PA FAYETTE LUZERNE
▇▇▇▇▇▇ #10 PA FAYETTE LUZERNE
▇▇▇▇▇ #8 PA FAYETTE LUZERNE
▇▇▇▇▇▇▇▇▇▇ #1 PA FAYETTE LUZERNE
▇▇▇▇▇ #9 PA FAYETTE LUZERNE
▇▇▇▇▇ #11 PA FAYETTE LUZERNE
▇▇▇▇▇▇▇ #8 PA FAYETTE LUZERNE
▇▇▇▇▇▇ #3 PA FAYETTE LUZERNE
▇▇▇▇▇▇ #2 PA FAYETTE LUZERNE
▇▇▇▇▇▇▇▇▇ #3 PA FAYETTE LUZERNE
CANESTRALE #1 PA FAYETTE LUZERNE
▇▇▇▇▇▇ #6 PA FAYETTE LUZERNE
▇▇▇▇▇ #10 PA FAYETTE LUZERNE
▇▇▇▇▇▇ #3 PA FAYETTE LUZERNE
▇▇▇▇ #3 PA FAYETTE LUZERNE
NATIONAL MINES #21 PA FAYETTE LUZERNE
▇▇▇▇▇▇▇ #9 PA FAYETTE LUZERNE
▇▇▇▇▇▇ #1 PA FAYETTE LUZERNE
▇▇▇▇▇▇▇▇▇ #4 PA FAYETTE MENALLEN
Exhibit C
(Page 5)
DRILLING & OPERATING AGREEMENT - EXHIBIT A - ADDENDUM ONE
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
▇▇▇▇▇ STATE COUNTY TOWNSHIP
------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ #3 PA FAYETTE MENALLEN
▇▇▇▇▇▇▇ #12 PA FAYETTE MENALLEN
▇▇▇▇▇▇▇▇▇/NATIONAL CITY #8 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇▇ #2 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇▇▇ #5 PA FAYETTE REDSTONE
E & N LAND #1 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇▇▇▇ #7 PA FAYETTE REDSTONE
GETSIE #2 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇/▇▇▇▇▇▇▇ #6 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇▇ #1A PA FAYETTE REDSTONE
BARBABELLA #1 PA FAYETTE REDSTONE
TESLOVICH #2 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ #1 PA FAYETTE REDSTONE
LUCKASEVIC #3 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ #2 PA FAYETTE REDSTONE
GETSIE #1 PA FAYETTE REDSTONE
▇▇▇▇▇ #2 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇▇ #23 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇ FARMS #17 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇/NATIONAL CITY #2 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇▇▇ #7 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇ FARMS #8 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇ FARMS #15 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇ #12 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇ FARMS #22 PA FAYETTE REDSTONE
STEWART #11 PA FAYETTE REDSTONE
NOVSEK #1 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇ FARMS #5 PA FAYETTE REDSTONE
GAGGIANI #2 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇ #13 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇▇▇▇ #4 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇▇▇▇ #5 PA FAYETTE REDSTONE
PENTON/HOGSETT #2 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇▇▇▇ #4 PA FAYETTE REDSTONE
LINT #6 PA FAYETTE REDSTONE
▇▇▇▇▇▇▇ #2 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇/HOGSETT #5 PA FAYETTE REDSTONE
▇▇▇▇▇▇/▇▇▇▇▇ #3 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ #2 PA FAYETTE REDSTONE
YOWONSKE/HOGSETT #1 PA FAYETTE ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ #3 PA FAYETTE REDSTONE
▇▇▇▇▇▇/▇▇▇▇▇ #1 PA FAYETTE REDSTONE
YOWONSKE/HOGSETT #3 PA FAYETTE REDSTONE
▇▇▇▇▇▇/▇▇▇▇▇ #2 PA FAYETTE REDSTONE
GRENA #2 PA FAYETTE REDSTONE
YOWONSKE/HOGSETT #2 PA FAYETTE REDSTONE
KING #8 PA FAYETTE REDSTONE
▇▇▇▇▇▇ #5 PA ▇▇▇▇▇▇ CUMBERLAND
DEFORNO #1 PA INDIANA CONEMAUGH
DEFORNO #2 PA INDIANA CONEMAUGH
▇▇▇▇ #4 PA INDIANA CONEMAUGH
Exhibit C
(Page 6)
DRILLING & OPERATING AGREEMENT - EXHIBIT A - ADDENDUM ONE
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
▇▇▇▇▇ STATE COUNTY TOWNSHIP
------------------------------------------------------------------------------------------------------------
▇▇▇▇ #3 PA INDIANA CONEMAUGH
▇▇▇▇▇▇▇ #2 PA INDIANA CONEMAUGH
▇▇▇▇▇▇▇ #3 PA INDIANA CONEMAUGH
▇▇▇▇▇▇▇ #4 PA INDIANA CONEMAUGH
CUP #1 PA INDIANA CONEMAUGH
CUP #4 PA INDIANA CONEMAUGH
▇▇▇▇▇▇▇ #5 PA INDIANA CONEMAUGH
▇▇▇▇ #2 PA INDIANA CONEMAUGH
▇▇▇▇ #3 PA INDIANA CONEMAUGH
▇▇▇▇ #5 PA INDIANA CONEMAUGH
▇▇▇▇▇▇▇▇ #9 PA INDIANA CONEMAUGH
▇▇▇▇▇▇▇▇ #4 PA INDIANA YOUNG
EHENGER #4 PA INDIANA YOUNG
EHENGER #3 PA INDIANA YOUNG
▇▇▇▇▇▇▇▇ #6 PA INDIANA YOUNG
▇▇▇▇▇▇▇▇ #5 PA INDIANA ▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #21 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #22 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #23 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #24 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #25 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #18 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #1 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #19 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #2 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #20 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #3 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #16 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #4 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ AIRPORT #17 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #5 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #26 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #28 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #24 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #23 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #25 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #27 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
BIG SHANTY EAST #14 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
BIG SHANTY EAST #15 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
BIG SHANTY EAST #16 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
BIG SHANTY EAST #17 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #6 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
BIG SHANTY EAST #18 PA ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #7 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #8 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #9 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #10 PA MCKEAN ▇▇▇▇▇▇▇▇▇
▇▇▇▇ #2 PA ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ #2A PA ▇▇▇▇▇▇▇▇▇▇▇▇ HEMPFIELD
▇▇▇▇ #1 PA ▇▇▇▇▇▇▇▇▇▇▇▇ HEMPFIELD
▇▇▇▇▇▇▇▇▇▇ #1 PA ▇▇▇▇▇▇▇▇▇▇▇▇ HEMPFIELD
▇▇▇▇▇ #1 PA ▇▇▇▇▇▇▇▇▇▇▇▇ UNITY
Exhibit C
(Page 7)
DRILLING AND OPERATING AGREEMENT
FOR
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ FORMATION - PA
DATED OCTOBER 18, 2003
INDEX
Section Page
------- ----
1. Assignment of Well Locations; Representations; Designation of Additional Well Locations;
Outside Activities Are Not Restricted.......................................................................1
2. Drilling of ▇▇▇▇▇; Timing; Depth; Interest of Developer; Right to Substitute Well Locations.................2
3. Operator - Responsibilities in General; Covenants; Term.....................................................3
4. Operator's Charges for Drilling and Completing ▇▇▇▇▇; Payment; Completion Determination;
Dry Hole Determination; Excess Funds and Cost Overruns - Intangible Drilling Costs; Excess
Funds and Cost Overruns - Tangible Costs....................................................................4
5. Title Examination of Well Locations; Developer's Acceptance and Liability; Additional Well Locations........7
6. Operations Subsequent to Completion of the ▇▇▇▇▇; Fee Adjustments;
Extraordinary Costs;
Pipelines; Price Determinations; Plugging and Abandonment...................................................7
7. Billing and Payment Procedure with Respect to Operation of ▇▇▇▇▇; Disbursements; Separate Account for
Sale Proceeds; Records and Reports; Additional Information..................................................9
8. Operator's Lien; Right to Collect From Gas Purchaser.......................................................11
9. Successors and Assigns; Transfers; Appointment of Agent....................................................11
10. Operator's Insurance; Subcontractors' Insurance; Operator's Liability......................................12
11. Internal Revenue Code Election; Relationship of Parties; Right to Take Production in Kind..................13
12. Effect of Force Majeure; Definition of Force Majeure; Limitation...........................................14
13. Term.......................................................................................................14
14. Governing Law; Invalidity..................................................................................14
15. Integration; Written Amendment.............................................................................15
16. Waiver of Default or Breach................................................................................15
17. Notices....................................................................................................15
18. Interpretation.............................................................................................15
19. Counterparts...............................................................................................15
Signature Page.............................................................................................16
Exhibit A Description of Leases and Initial Well Locations
Exhibits A-l through A-___ Maps of Initial Well Locations
Exhibit B Form of Assignment
Exhibit C Form of Addendum
DRILLING AND OPERATING AGREEMENT
THIS AGREEMENT made this 18th day of October, 2003, by and between ATLAS
RESOURCES, INC., a Pennsylvania corporation (hereinafter referred to as "Atlas"
or "Operator"),
and
ATLAS AMERICA PUBLIC #12-2003 Limited Partnership, a Delaware limited
partnership, (hereinafter referred to as the "Developer").
WITNESSETH THAT:
WHEREAS, the Operator, by virtue of the Oil and Gas Leases (the "Leases")
described on Exhibit A attached to and made a part of this Agreement, has
certain rights to develop the one ( 1 ) initial well locations (the "Initial
Well Locations") identified on the maps attached to and made a part of this
Agreement as Exhibits A-l through A-1;
WHEREAS, the Developer, subject to the terms and conditions of this Agreement,
desires to acquire certain of the Operator's rights to develop the Initial Well
Locations and to provide for the development on the terms and conditions set
forth in this Agreement of additional well locations ("Additional Well
Locations") which the parties may from time to time designate; and
WHEREAS, the Operator is in the oil and gas exploration and development
business, and the Developer desires that Operator, as its independent
contractor, perform certain services in connection with its efforts to develop
the aforesaid Initial and Additional Well Locations (collectively the "Well
Locations") and to operate the ▇▇▇▇▇ completed on the Well Locations, on the
terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants herein contained and
subject to the terms and conditions hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Assignment of Well Locations; Representations; Designation of
Additional Well Locations; Outside Activities Are Not Restricted.
(a) Assignment of Well Locations. The Operator shall execute an
assignment of an undivided percentage of Working Interest in
the Well Location acreage for each well to the Developer as
shown on Exhibit A attached hereto, which assignment shall be
limited to a depth from the surface to the top of the
Queenston formation in Pennsylvania and Ohio when the primary
objective is the Clinton/Medina geological formation. In the
event that hydrocarbons are encountered in quantities that
Operator believes to be in paying quantities and drilling
ceases before the Clinton/▇▇▇▇▇▇ geological formation is
penetrated, then Operator shall execute an assignment limited
to a depth from the surface to the deepest depth penetrated at
the cessation of drilling operations.
The assignment shall be substantially in the form of Exhibit B
attached to and made a part of this Agreement. The amount of
acreage included in each Initial Well Location and the
configuration of the Initial Well Location are indicated on
the maps attached as Exhibits A-l through A-1. The amount of
acreage included in each Additional Well Location and the
configuration of the Additional Well Location shall be
indicated on the maps to be attached as exhibits to the
applicable addendum to this Agreement as provided in
sub-section (c) below.
(b) Representations. The Operator represents and warrants to the
Developer that:
(i) the Operator is the lawful owner of the Lease and rights
and interest under the Lease and of the personal
property on the Lease or used in connection with the
Lease;
(ii) the Operator has good right and authority to sell and
convey the rights, interest, and property;
(iii) the rights, interest, and property are free and clear
from all liens and encumbrances; and
(iv) all rentals and royalties due and payable under the
Lease have been duly paid.
1
These representations and warranties shall also be included in
each recorded assignment of the acreage included in each
Initial Well Location and Additional Well Location designated
pursuant to sub-section (c) below, substantially in the manner
set forth in Exhibit B.
The Operator agrees to indemnify, protect and hold the
Developer and its successors and assigns harmless from and
against all costs (including but not limited to reasonable
attorneys' fees), liabilities, claims, penalties, losses,
suits, actions, causes of action, judgments or decrees
resulting from the breach of any of the above representations
and warranties. It is understood and agreed that, except as
specifically set forth above, the Operator makes no warranty
or representation, express or implied, as to its title or the
title of the lessors in and to the lands or oil and gas
interests covered by said Leases.
(c) Designation of Additional Well Locations. If the parties
hereto desire to designate Additional Well Locations to be
developed in accordance with the terms and conditions of this
Agreement, then the parties shall execute an addendum
substantially in the form of Exhibit C attached to and made a
part of this Agreement (Exhibit "C") specifying:
(i) the undivided percentage of Working Interest and the Oil
and Gas Leases to be included as Leases under this
Agreement;
(ii) the amount and configuration of acreage included in each
Additional Well Location on maps attached as exhibits to
the addendum; and
(iii) their agreement that the Additional Well Locations shall
be developed in accordance with the terms and conditions
of this Agreement.
(d) Outside Activities Are Not Restricted. It is understood and
agreed that the assignment of rights under the Leases and the
oil and gas development activities contemplated by this
Agreement relate only to the Initial Well Locations and the
Additional Well Locations. Nothing contained in this Agreement
shall be interpreted to restrict in any manner the right of
each of the parties to conduct without the participation of
the other party any additional activities relating to
exploration, development, drilling, production, or delivery of
oil and gas on lands adjacent to or in the immediate vicinity
of the Well Locations or elsewhere.
2. Drilling of ▇▇▇▇▇; Timing; Depth; Interest of Developer; Right to
Substitute Well Locations.
(a) Drilling of ▇▇▇▇▇. Operator, as Developer's independent
contractor, agrees to drill, complete (or plug) and operate
one ( 1 ) natural gas ▇▇▇▇▇ on the one ( 1 ) Initial Well
Locations in accordance with the terms and conditions of this
Agreement. Developer, as a minimum commitment, agrees to
participate in and pay the Operator's charges for drilling and
completing the ▇▇▇▇▇ and any extra costs pursuant to Section 4
in proportion to the share of the Working Interest owned by
the Developer in the ▇▇▇▇▇ with respect to all initial ▇▇▇▇▇.
It is understood and agreed that, subject to sub-section (e)
below, Developer does not reserve the right to decline
participation in the drilling of any of the initial ▇▇▇▇▇ to
be drilled under this Agreement.
(b) Timing. Operator will use its best efforts to begin drilling
the first well within thirty (30) days after the date of this
Agreement, and will use its best efforts to begin drilling
each of the other initial ▇▇▇▇▇ for which payment is made
pursuant to Section 4(b) of this Agreement before the close of
the 90th day after the close of the calendar year in which
this Agreement is entered into by Operator and the Developer.
Subject to the foregoing time limits, Operator shall determine
the timing of and the order of drilling the Initial Well
Locations.
(c) Depth. All of the ▇▇▇▇▇ to be drilled under this Agreement (c)
shall be:
(i) drilled and completed (or plugged) in accordance with
the generally accepted and customary oil and gas field
practices and techniques then prevailing in the
geographical area of the Well Locations; and
(ii) drilled to a depth sufficient to test thoroughly the
objective formation or the deepest assigned depth,
whichever is less.
(d) Interest of Developer. Except as otherwise provided in this
Agreement, all costs, expenses, and liabilities incurred in
connection with the drilling and other operations and
activities contemplated by this Agreement shall be borne and
2
paid, and all ▇▇▇▇▇, gathering lines of up to approximately
2,500 feet on the Well Location, equipment, materials, and
facilities acquired, constructed or installed under this
Agreement shall be owned, by the Developer in proportion to
the share of the Working Interest owned by the Developer in
the ▇▇▇▇▇. Subject to the payment of lessor's royalties and
other royalties and overriding royalties, if any, production
of oil and gas from the ▇▇▇▇▇ to be drilled under this
Agreement shall be owned by the Developer in proportion to the
share of the Working Interest owned by the Developer in the
▇▇▇▇▇.
(e) Right to Substitute Well Locations. Notwithstanding the
provisions of sub-section (a) above, if the Operator or
Developer determines in good faith, with respect to any Well
Location, before operations begin under this Agreement on the
Well Location, that it would not be in the best interest of
the parties to drill a well on the Well Location, then the
party making the determination shall notify the other party of
its determination and its basis for its determination and,
unless otherwise instructed by Developer, the well shall not
be drilled. This determination may be based on:
(i) the production or failure of production of any other
▇▇▇▇▇ which may have been recently drilled in the
immediate area of the Well Location;
(ii) newly discovered title defects; or
(iii) any other evidence with respect to the Well Location as
may be obtained.
If the well is not drilled, then Operator shall promptly
propose a new well location (including all information for the
Well Location as Developer may reasonably request) within
Pennsylvania, Ohio, or other areas of the United States to be
substituted for the original Well Location. Developer shall
then have seven (7) business days to either reject or accept
the proposed new well location. If the new well location is
rejected, then Operator shall promptly propose another
substitute well location pursuant to the provisions of this
sub-section.
Once the Developer accepts a substitute well location or does
not reject it within said seven (7) day period, this Agreement
shall terminate as to the original Well Location and the
substitute well location shall become subject to the terms and
conditions of this Agreement.
3. Operator - Responsibilities in General; Covenants; Term.
(a) Operator - Responsibilities in General. Atlas shall be the
Operator of the ▇▇▇▇▇ and Well Locations subject to this
Agreement and, as the Developer's independent contractor,
shall, in addition to its other obligations under this
Agreement do the following:
(i) arrange for drilling and completing the ▇▇▇▇▇ and
installing the necessary gas gathering line systems and
connection facilities;
(ii) make the technical decisions required in drilling,
testing, completing, and operating the ▇▇▇▇▇;
(iii) manage and conduct all field operations in connection
with the drilling, testing, completing, equipping,
operating, and producing the ▇▇▇▇▇;
(iv) maintain all ▇▇▇▇▇, equipment, gathering lines, and
facilities in good working order during their useful
lives; and
(v) perform the necessary administrative and accounting
functions.
In performing the work contemplated by this Agreement,
Operator is an independent contractor with authority to
control and direct the performance of the details of the work.
(b) Covenants. Operator covenants and agrees that under this
Agreement:
(i) it shall perform and carry on (or cause to be performed
and carried on) its duties and obligations in a good,
prudent, diligent, and workmanlike manner using
technically sound, acceptable oil and gas field
practices then prevailing in the geographical area of
the Well Locations;
3
(ii) all drilling and other operations conducted by, for and
under the control of Operator shall conform in all
respects to federal, state and local laws, statutes,
ordinances, regulations, and requirements;
(iii) unless otherwise agreed in writing by the Developer, all
work performed pursuant to a written estimate shall
conform to the technical specifications set forth in the
written estimate and all equipment and materials
installed or incorporated in the ▇▇▇▇▇ and facilities
shall be new or used and of good quality;
(iv) in the course of conducting operations, it shall comply
with all terms and conditions, other than any minimum
drilling commitments, of the Leases (and any related
assignments, amendments, subleases, modifications and
supplements);
(v) it shall keep the Well Locations and all ▇▇▇▇▇,
equipment and facilities located on the Well Locations
free and clear of all labor, materials and other liens
or encumbrances arising out of operations;
(vi) it shall file all reports and obtain all permits and
bonds required to be filed with or obtained from any
governmental authority or agency in connection with the
drilling or other operations and activities; and
(vii) it will provide competent and experienced personnel to
supervise drilling, completing (or plugging), and
operating the ▇▇▇▇▇ and use the services of competent
and experienced service companies to provide any third
party services necessary or appropriate in order to
perform its duties.
(c) Term. Atlas shall serve as Operator under this Agreement until
the earliest of:
(i) the termination of this Agreement pursuant to Section
13;
(ii) the termination of Atlas as Operator by the Developer at
any time in the Developer's discretion, with or without
cause on sixty (60) days' advance written notice to the
Operator; or
(iii) the resignation of Atlas as Operator under this
Agreement which may occur on ninety (90) days' written
notice to the Developer at any time after five (5) years
from the date of this Agreement, it being expressly
understood and agreed that Atlas shall have no right to
resign as Operator before the expiration of the
five-year period.
Any successor Operator shall be selected by the Developer.
Nothing contained in this sub-section shall relieve or release
Atlas or the Developer from any liability or obligation under
this Agreement which accrued or occurred before Atlas' removal
or resignation as Operator under this Agreement. On any change
in Operator under this provision, the then present Operator
shall deliver to the successor Operator possession of all
records, equipment, materials and appurtenances used or
obtained for use in connection with operations under this
Agreement and owned by the Developer.
4. Operator's Charges for Drilling and Completing ▇▇▇▇▇; Payment;
Completion Determination; Dry Hole Determination; Excess Funds and Cost
Overruns-Intangible Drilling Costs; Excess Funds and Cost
Overruns-Tangible Costs.
(a) Operator's Charges for Drilling and Completing ▇▇▇▇▇. All
natural gas ▇▇▇▇▇ which are drilled and completed under this
Agreement shall be drilled and completed on a Cost plus 15%
basis. "Cost," when used with respect to services, shall mean
the reasonable, necessary, and actual expenses incurred by
Operator on behalf of Developer in providing the services
under this Agreement, determined in accordance with generally
accepted accounting principles. As used elsewhere, "Cost"
shall mean the price paid by Operator in an arm's-length
transaction.
The estimated price for each of the ▇▇▇▇▇ shall be set forth
in an Authority for Expenditure ("AFE") which shall be
attached to this Agreement as an Exhibit, and shall cover all
ordinary costs which may be incurred in drilling and
completing each well for production of natural gas. This
includes without limitation, site preparation, permits and
bonds, roadways, surface damages, power at the site, water,
Operator's overhead and profit, rights-of-way, drilling rigs,
equipment and materials, logging, cementing, fracturing,
casing, meters (other than utility purchase meters),
connection facilities, salt water collection tanks,
4
separators, siphon string, rabbit, tubing, an average of 2,500
feet of gathering line per well, geological and engineering
services and completing two (2) zones. The estimated price
shall not include the cost of:
(i) completing more than two (2) zones;
(ii) completion procedures, equipment, or any facilities
necessary or appropriate for the production and sale of
oil and/or natural gas liquids; and
(iii) equipment or materials necessary or appropriate to
collect, lift, or dispose of liquids for efficient gas
production, except that the cost of saltwater collection
tanks, separators, siphon string and tubing shall be
included in the estimated price.
These extra costs, if any, shall be billed to Developer in
proportion to the share of the Working Interest owned by the
Developer in the ▇▇▇▇▇ on a Cost plus 15% basis.
(b) Payment. The Developer shall pay to Operator, in proportion to
the share of the Working Interest owned by the Developer in
the ▇▇▇▇▇, one hundred percent (100%) of the estimated
Intangible Drilling Costs and Tangible Costs as those terms
are defined below, for drilling and completing all initial
▇▇▇▇▇ on execution of this Agreement. Notwithstanding, Atlas'
payments for its share of the estimated Tangible Costs as that
term is defined below of drilling and completing all initial
▇▇▇▇▇ as the Managing General Partner of the Developer shall
be paid within five (5) business days of notice from Operator
that the costs have been incurred. The Developer's payment
shall be nonrefundable in all events in order to enable
Operator to do the following:
(i) commence site preparation for the initial ▇▇▇▇▇;
(ii) obtain suitable subcontractors for drilling and
completing the ▇▇▇▇▇ at currently prevailing prices; and
(iii) insure the availability of equipment and materials.
For purposes of this Agreement, "Intangible Drilling Costs"
shall mean those expenditures associated with property
acquisition and the drilling and completion of oil and gas
▇▇▇▇▇ that under present law are generally accepted as fully
deductible currently for federal income tax purposes. This
includes all expenditures made with respect to any well before
the establishment of production in commercial quantities for
wages, fuel, repairs, hauling, supplies and other costs and
expenses incident to and necessary for the drilling of the
well and the preparation of the well for the production of oil
or gas, that are currently deductible pursuant to Section
263(c) of the Internal Revenue Code of 1986, as amended, (the
"Code"), and Treasury Reg. Section 1.612-4, which are
generally termed "intangible drilling and development costs,"
including the expense of plugging and abandoning any well
before a completion attempt. "Tangible Costs" shall mean those
costs associated with the drilling and completion of oil and
gas ▇▇▇▇▇ which are generally accepted as capital expenditures
pursuant to the provisions of the Code. This includes all
costs of equipment, parts and items of hardware used in
drilling and completing a well, and those items necessary to
deliver acceptable oil and gas production to purchasers to the
extent installed downstream from the wellhead of any well and
which are required to be capitalized under the Code and its
regulations.
With respect to each additional well drilled on the Additional
Well Locations, if any, Developer shall pay Operator, in
proportion to the share of the Working Interest owned by the
Developer in the ▇▇▇▇▇, one hundred percent (100%) of the
estimated Intangible Drilling Costs and Tangible Costs for the
well on execution of the applicable addendum pursuant to
Section l(c) above. Notwithstanding, Atlas' payments for its
share of the estimated Tangible Costs of drilling and
completing all additional ▇▇▇▇▇ as the Managing General
Partner of the Developer shall be paid within five (5)
business days of notice from Operator that the costs have been
incurred. The Developer's payment shall be nonrefundable in
all events in order to enable Operator to do the following:
(i) commence site preparation;
5
(ii) obtain suitable subcontractors for drilling and
completing the ▇▇▇▇▇ at currently prevailing prices; and
(iii) insure the availability of equipment and materials.
Developer shall pay, in proportion to the share of the Working
Interest owned by the Developer in the ▇▇▇▇▇, any extra costs
incurred for each well pursuant to sub-section (a) above
within ten (10) business days of its receipt of Operator's
statement for the extra costs.
(c) Completion Determination. Operator shall determine whether or
not to run the production casing for an attempted completion
or to plug and abandon any well drilled under this Agreement.
However, a well shall be completed only if Operator has made a
good faith determination that there is a reasonable
possibility of obtaining commercial quantities of oil and/or
gas.
(d) Dry Hole Determination. If Operator determines at any time
during the drilling or attempted completion of any well under
this Agreement, in accordance with the generally accepted and
customary oil and gas field practices and techniques then
prevailing in the geographic area of the Well Location that
the well should not be completed, then it shall promptly and
properly plug and abandon the well.
(e) Excess Funds and Cost Overruns-Intangible Drilling Costs. Any
estimated Intangible Drilling Costs paid by Developer with
respect to any well which exceed Operator's price specified in
sub-section (a) above for the Intangible Drilling Costs of the
well shall be retained by Operator and shall be applied to:
(i) the Intangible Drilling Costs for an additional well or
▇▇▇▇▇ to be drilled on the Additional Well Locations; or
(ii) any cost overruns owed by the Developer to Operator for
Intangible Drilling Costs on one or more of the other
▇▇▇▇▇ on the Well Locations;
in proportion to the share of the Working Interest owned by
the Developer in the ▇▇▇▇▇.
Conversely, if Operator's price specified in sub-section (a)
above for the Intangible Drilling Costs of any well exceeds
the estimated Intangible Drilling Costs paid by Developer for
the well, then:
(i) Developer shall pay the additional price to Operator
within five (5) business days after notice from Operator
that the additional amount is due and owing; or
(ii) Developer and Operator may agree to delete or reduce
Developer's Working Interest in one or more ▇▇▇▇▇ which
have not yet been spudded to provide funds to pay the
additional amounts to Operator. If doing so results in
any excess prepaid Intangible Drilling Costs, then these
funds shall be applied to:
(a) the Intangible Drilling Costs for an additional well
or ▇▇▇▇▇ to be drilled on the Additional Well
Locations; or
(b) any cost overruns owed by Developer to Operator for
Intangible Drilling Costs on one or more of the
other ▇▇▇▇▇ on the Well Locations;
in proportion to the share of the Working Interest owned
by the Developer in the ▇▇▇▇▇.
The Exhibits to this Agreement with respect to the affected
▇▇▇▇▇ shall be amended as appropriate.
(f) Excess Funds and Cost Overruns - Tangible Costs. Any estimated
Tangible Costs paid by Developer with respect to any well
which exceed Operator's price specified in sub-section (a)
above for the Tangible Costs of the well shall be retained by
Operator and shall be applied to:
6
(i) the Intangible Drilling Costs or Tangible Costs for an
additional well or ▇▇▇▇▇ to be drilled on the Additional
Well Locations; or
(ii) any cost overruns owed by Developer to Operator for
Intangible Drilling Costs or Tangible Costs on one or
more of the other ▇▇▇▇▇ on the Well Locations;
in proportion to the share of the Working Interest owned by
the Developer in the ▇▇▇▇▇.
Conversely, if Operator's price specified in sub-section (a)
above for the Tangible Costs of any well exceeds the estimated
Tangible Costs paid by Developer for the well, then:
(i) Developer shall pay the additional price to Operator
within ten (10) business days after notice from Operator
that the additional price is due and owing; or
(ii) Developer and Operator may agree to delete or reduce
Developer's Working Interest in one or more ▇▇▇▇▇ which
have not yet been spudded to provide funds to pay the
additional price to Operator. If doing so results in any
excess prepaid Tangible Costs, then these funds shall be
applied to:
(a) the Intangible Drilling Costs or Tangible Costs for
an additional well or ▇▇▇▇▇ to be drilled on the
Additional Well Locations; or
(b) any cost overruns owed by Developer to Operator for
Intangible Drilling Costs or Tangible Costs on one
or more of the other ▇▇▇▇▇ on the Well Locations;
in proportion to the share of the Working Interest owed
by the Developer in the ▇▇▇▇▇.
The Exhibits to this Agreement with respect to the affected
▇▇▇▇▇ shall be amended as appropriate.
5. Title Examination of Well Locations, Developer's Acceptance and
Liability; Additional Well Locations.
(a) Title Examination of Well Locations, Developer's Acceptance
and Liability. The Developer acknowledges that Operator has
furnished Developer with the title opinions identified on
Exhibit A, and other documents and information which Developer
or its counsel has requested in order to determine the
adequacy of the title to the Initial Well Locations and leased
premises subject to this Agreement. The Developer accepts the
title to the Initial Well Locations and leased premises and
acknowledges and agrees that, except for any loss, expense,
cost, or liability caused by the breach of any of the
warranties and representations made by the Operator in Section
l(b), any loss, expense, cost or liability whatsoever caused
by or related to any defect or failure of the title shall be
the sole responsibility of and shall be borne entirely by the
Developer.
(b) Additional Well Locations. Before beginning drilling of any
well on any Additional Well Location, Operator shall conduct,
or cause to be conducted, a title examination of the
Additional Well Location, in order to obtain appropriate
abstracts, opinions and certificates and other information
necessary to determine the adequacy of title to both the
applicable Lease and the fee title of the lessor to the
premises covered by the Lease. The results of the title
examination and such other information as is necessary to
determine the adequacy of title for drilling purposes shall be
submitted to the Developer for its review and acceptance. No
drilling on the Additional Well Locations shall begin until
the title has been accepted in writing by the Developer. After
any title has been accepted by the Developer, any loss,
expense, cost, or liability whatsoever, caused by or related
to any defect or failure of the title shall be the sole
responsibility of and shall be borne entirely by the
Developer, unless such loss, expense, cost, or liability was
caused by the breach of any of the warranties and
representations made by the Operator in Section l(b).
6. Operations Subsequent to Completion of the ▇▇▇▇▇; Fee Adjustments;
Extraordinary Costs; Pipelines; Price Determinations; Plugging and
Abandonment.
(a) Operations Subsequent to Completion of the ▇▇▇▇▇. Beginning
with the month in which a well drilled under this Agreement
begins to produce, Operator shall be entitled to an operating
fee of $275 per month for each well being operated under this
7
Agreement, proportionately reduced to the extent the Developer
owns less than 100% of the Working Interest in the ▇▇▇▇▇. This
fee shall be in lieu of any direct charges by Operator for its
services or the provision by Operator of its equipment for
normal superintendence and maintenance of the ▇▇▇▇▇ and
related pipelines and facilities.
If a third-party serves as the actual operator of the well,
then this fee shall be $25 above the actual third-party
operator's monthly charges. The $25 will be retained by
Operator each month for reviewing the costs and expenses
charged by the third-party operator and monitoring the
third-party operator's accounting and production records for
the well on behalf of the Developer.
The operating fees shall cover all normal, regularly recurring
operating expenses for the production, delivery and sale of
natural gas, including without limitation:
(i) well tending, routine maintenance and adjustment;
(ii) reading meters, recording production, pumping,
maintaining appropriate books and records;
(iii) preparing reports to the Developer and government
agencies; and
(iv) collecting and disbursing revenues.
The operating fees shall not cover costs and expenses related
to the following:
(i) the production and sale of oil;
(ii) the collection and disposal of salt water or other
liquids produced by the ▇▇▇▇▇;
(iii) the rebuilding of access roads; and
(iv) the purchase of equipment, materials or third party
services;
which, subject to the provisions of sub-section (c) of this
Section 6, shall be paid by the Developer in proportion to the
share of the Working Interest owned by the Developer in the
▇▇▇▇▇.
Any well which is temporarily abandoned or shut-in
continuously for the entire month shall not be considered a
producing well for purposes of determining the number of ▇▇▇▇▇
in the month subject to the operating fee.
(b) Fee Adjustments. The monthly operating fee set forth in
sub-section (a) above may in the following manner be adjusted
annually as of the first day of January (the "Adjustment
Date") each year beginning January l, 2005. Such adjustment,
if any, shall not exceed the percentage increase in the
average weekly earnings of "Crude Petroleum, Natural Gas, and
Natural Gas Liquids" workers, as published by the U.S.
Department of Labor, Bureau of Labor Statistics, and shown in
Employment and Earnings Publication, Monthly Establishment
Data, Hours and Earning Statistical Table C-2, Index Average
Weekly Earnings of "Crude Petroleum, Natural Gas, and Natural
Gas Liquids" workers, SIC Code #131-2, or any successor index
thereto, since January l, 2002, in the case of the first
adjustment, and since the previous Adjustment Date, in the
case of each subsequent adjustment.
(c) Extraordinary Costs. Without the prior written consent of the
Developer, pursuant to a written estimate submitted by
Operator, Operator shall not undertake any single project or
incur any extraordinary cost with respect to any well being
produced under this Agreement reasonably estimated to result
in an expenditure of more than $5,000, unless the project or
extraordinary cost is necessary for the following:
(i) to safeguard persons or property; or
(ii) to protect the well or related facilities in the event
of a sudden emergency.
8
In no event, however, shall the Developer be required to pay
for any project or extraordinary cost arising from the
negligence or misconduct of Operator, its agents, servants,
employees, contractors, licensees, or invitees.
All extraordinary costs incurred and the cost of projects
undertaken with respect to a well being produced shall be
billed at the invoice cost of third-party services performed
or materials purchased together with a reasonable charge by
Operator for services performed directly by it, in proportion
to the share of the Working Interest owned by the Developer in
the ▇▇▇▇▇. Operator shall have the right to require the
Developer to pay in advance of undertaking any project all or
a portion of the estimated costs of the project in proportion
to the share of the Working Interest owned by the Developer in
the ▇▇▇▇▇.
(d) Pipelines. Developer shall have no interest in the pipeline
gathering system, which gathering system shall remain the sole
property of Operator or its Affiliates and shall be maintained
at their sole cost and expense.
(e) Price Determinations. Notwithstanding anything herein to the
contrary, the Developer shall have full responsibility for and
bear all costs in proportion to the share of the Working
Interest owned by the Developer in the ▇▇▇▇▇ with respect to
obtaining price determinations under and otherwise complying
with the Natural Gas Policy Act of 1978 and the implementing
state regulations. This responsibility shall include, without
limitation, preparing, filing, and executing all applications,
affidavits, interim collection notices, reports and other
documents necessary or appropriate to obtain price
certification, to effect sales of natural gas, or otherwise to
comply with the Act and the implementing state regulations.
Operator agrees to furnish the information and render the
assistance as the Developer may reasonably request in order to
comply with the Act and the implementing state regulations
without charge for services performed by its employees.
(f) Plugging and Abandonment. The Developer shall have the right
to direct Operator to plug and abandon any well that has been
completed under this Agreement as a producer. In addition,
Operator shall not plug and abandon any well that has been
drilled and completed as a producer before obtaining the
written consent of the Developer. However, if the Operator in
accordance with the generally accepted and customary oil and
gas field practices and techniques then prevailing in the
geographic area of the well location, determines that any well
should be plugged and abandoned and makes a written request to
the Developer for authority to plug and abandon the well and
the Developer fails to respond in writing to the request
within forty-five (45) days following the date of the request,
then the Developer shall be deemed to have consented to the
plugging and abandonment of the well.
All costs and expenses related to plugging and abandoning the
▇▇▇▇▇ which have been drilled and completed as producing ▇▇▇▇▇
shall be borne and paid by the Developer in proportion to the
share of the Working Interest owned by the Developer in the
▇▇▇▇▇. Also, at any time after one (1) year from the date each
well drilled and completed is placed into production, Operator
shall have the right to deduct each month from the proceeds of
the sale of the production from the well up to $200, in
proportion to the share of the Working Interest owned by the
Developer in the ▇▇▇▇▇, for the purpose of establishing a fund
to cover the estimated costs of plugging and abandoning the
well. All these funds shall be deposited in a separate
interest bearing escrow account for the account of the
Developer, and the total amount so retained and deposited
shall not exceed Operator's reasonable estimate of the costs.
7. Billing and Payment Procedure with Respect to Operation of ▇▇▇▇▇;
Disbursements; Separate Account for Sale Proceeds; Records and Reports;
Additional Information.
(a) Billing and Payment Procedure with Respect to Operation of
▇▇▇▇▇. Operator shall promptly and timely pay and discharge on
behalf of the Developer, in proportion to the share of the
Working Interest owned by the Developer in the ▇▇▇▇▇ the
following:
(i) all expenses and liabilities payable and incurred by
reason of its operation of the ▇▇▇▇▇ in accordance with
this Agreement, such as severance taxes, royalties,
overriding royalties, operating fees, and pipeline
gathering charges; and
9
(ii) any third-party invoices rendered to Operator with
respect to costs and expenses incurred in connection
with the operation of the ▇▇▇▇▇.
Operator, however, shall not be required to pay and discharge
any of the above costs and expenses which are being contested
in good faith by Operator.
Operator shall:
(i) deduct the foregoing costs and expenses from the
Developer's share of the proceeds of the oil and/or gas
sold from the ▇▇▇▇▇; and
(ii) keep an accurate record of the Developer's account,
showing expenses incurred and charges and credits made
and received with respect to each well.
If the proceeds are insufficient to pay the costs and
expenses, then Operator shall promptly and timely pay and
discharge the costs and expenses, in proportion to the share
of the Working Interest owned by the Developer in the ▇▇▇▇▇,
and prepare and submit an invoice to the Developer each month
for the costs and expenses. The invoice shall be accompanied
by the form of statement specified in sub-section (b) below,
and shall be paid by the Developer within ten (10) business
days of its receipt.
(b) Disbursements. Operator shall disburse to the Developer, on a
monthly basis, the Developer's share of the proceeds received
from the sale of oil and/or gas sold from the ▇▇▇▇▇ operated
under this Agreement, less:
(i) the amounts charged to the Developer under sub-section
(a); and
(ii) the amount, if any, withheld by Operator for future
plugging costs pursuant to sub-section (f) of Section 6.
Each disbursement made and/or invoice submitted pursuant to
sub-section (a) above shall be accompanied by a statement
itemizing with respect to each well:
(i) the total production of oil and/or gas since the date of
the last disbursement or invoice billing period, as the
case may be, and the Developer's share of the
production;
(ii) the total proceeds received from any sale of the
production, and the Developer's share of the proceeds;
(iii) the costs and expenses deducted from the proceeds and/or
being billed to the Developer pursuant to sub-section
(a) above;
(iv) the amount withheld for future plugging costs; and
(v) any other information as Developer may reasonably
request, including without limitation copies of all
third-party invoices listed on the statement for the
period.
(c) Separate Account for Sale Proceeds. Operator agrees to deposit
all proceeds from the sale of oil and/or gas sold from the
▇▇▇▇▇ operated under this Agreement in a separate checking
account maintained by Operator. This account shall be used
solely for the purpose of collecting and disbursing funds
constituting proceeds from the sale of production under this
Agreement.
(d) Records and Reports. In addition to the statements required
under sub-section (b) above, Operator, within seventy-five
(75) days after the completion of each well drilled, shall
furnish the Developer with a detailed statement itemizing with
respect to the well the total costs and charges under Section
4(a) and the Developer's share of the costs and charges, and
any information as is necessary to enable the Developer:
(i) to allocate any extra costs incurred with respect to the
well between Tangible Costs and Intangible Drilling
Costs; and
(ii) to determine the amount of investment tax credit, if
applicable.
10
(e) Additional Information. On request, Operator shall promptly
furnish the Developer with any additional information as it
may reasonably request, including without limitation
geological, technical, and financial information, in the form
as may reasonably be requested, pertaining to any phase of the
operations and activities governed by this Agreement. The
Developer and its authorized employees, agents and
consultants, including independent accountants shall, at
Developer's sole cost and expense:
(i) on at least ten (10) days' written notice have access
during normal business hours to all of Operator's
records pertaining to operations, including without
limitation, the right to audit the books of account of
Operator relating to all receipts, costs, charges,
expenses and disbursements under this Agreement
(including information regarding the separate account
required under sub-section (c)); and
(ii) have access, at its sole risk, to any ▇▇▇▇▇ drilled by
Operator under this Agreement at all times to inspect
and observe any machinery, equipment and operations.
8. Operator's Lien; Right to Collect From Gas Purchaser.
(a) Operator's Lien. To secure the payment of all sums due from
Developer to Operator under the provisions of this Agreement
the Developer grants Operator a first and preferred lien on
and security interest in the following:
(i) the Developer's interest in the Leases covered by this
Agreement;
(ii) the Developer's interest in oil and gas produced under
this Agreement and its proceeds from the sale of the oil
and gas; and
(iii) the Developer's interest in materials and equipment
under this Agreement.
(b) Right to Collect From Gas Purchaser. If the Developer fails to
timely pay any amount owing under this Agreement by it to the
Operator, then Operator, without prejudice to other existing
remedies, may collect and retain from any purchaser or
purchasers of oil or gas the Developer's share of the proceeds
from the sale of the oil and gas until the amount owed by the
Developer, plus twelve percent (12%) interest on a per annum
basis, and any additional costs (including without limitation
actual attorneys' fees and costs) resulting from the
delinquency, has been paid. Each purchaser of oil or gas shall
be entitled to rely on Operator's written statement concerning
the amount of any default.
9. Successors and Assigns; Transfers; Appointment of Agent.
(a) Successors and Assigns. This Agreement shall be binding on and
inure to the benefit of the undersigned parties and their
respective successors and permitted assigns. However, without
the prior written consent of the Developer, the Operator may
not assign, transfer, pledge, mortgage, hypothecate, sell or
otherwise dispose of any of its interest in this Agreement, or
any of the rights or obligations under this Agreement.
Notwithstanding, this consent shall not be required in
connection with:
(i) the assignment of work to be performed for Operator by
subcontractors, it being understood and agreed, however,
that any assignment to Operator's subcontractors shall
not in any manner relieve or release Operator from any
of its obligations and responsibilities under this
Agreement;
(ii) any lien, assignment, security interest, pledge or
mortgage arising under Operator's present or future
financing arrangements; or
(iii) the liquidation, merger, consolidation, or other
corporate reorganization or sale of substantially all of
the assets of Operator.
Further, in order to maintain uniformity of ownership in the
▇▇▇▇▇, production, equipment, and leasehold interests covered
by this Agreement, and notwithstanding any other provisions to
the contrary, the Developer shall not, without the prior
written consent of Operator, sell, assign, transfer, encumber,
11
mortgage or otherwise dispose of any of its interest in the
▇▇▇▇▇, production, equipment or leasehold interests covered by
this Agreement unless the disposition encompasses either:
(i) the entire interest of the Developer in all ▇▇▇▇▇,
production, equipment and leasehold interests subject to
this Agreement; or
(ii) an equal undivided interest in all such ▇▇▇▇▇,
production, equipment, and leasehold interests.
(b) Transfers. Subject to the provisions of sub-section (a) above,
any sale, encumbrance, transfer or other disposition made by
the Developer of its interests in the ▇▇▇▇▇, production,
equipment, and/or leasehold interests covered by this
Agreement shall be made:
(i) expressly subject to this Agreement;
(ii) without prejudice to the rights of the Operator; and
(iii) in accordance with and subject to the provisions of the
Lease.
(c) Appointment of Agent. If at any time the interest of the
Developer is divided among or owned by co-owners, Operator
may, at its discretion, require the co-owners to appoint a
single trustee or agent with full authority to do the
following:
(i) receive notices, reports and distributions of the
proceeds from production;
(ii) approve expenditures;
(iii) receive ▇▇▇▇▇▇▇▇ for and approve and pay all costs,
expenses and liabilities incurred under this Agreement;
(iv) exercise any rights granted to the co-owners under this
Agreement;
(v) grant any approvals or authorizations required or
contemplated by this Agreement;
(vi) sign, execute, certify, acknowledge, file and/or record
any agreements, contracts, instruments, reports, or
documents whatsoever in connection with this Agreement
or the activities contemplated by this Agreement; and
(vii) deal generally with, and with power to bind, the
co-owners with respect to all activities and operations
contemplated by this Agreement.
However, all the co-owners shall continue to have the right to
enter into and execute all contracts or agreements for their
respective shares of the oil and gas produced from the ▇▇▇▇▇
drilled under this Agreement in accordance with sub-section
(c) of Section 11.
10. Operator's Insurance; Subcontractors' Insurance; Operator's Liability.
(a) Operator's Insurance. Operator shall obtain and maintain at
its own expense so long as it is Operator under this Agreement
all required Workmen's Compensation Insurance and
comprehensive general public liability insurance in amounts
and coverage not less than $1,000,000 per person per
occurrence for personal injury or death and $1,000,000 for
property damage per occurrence, which shall include coverage
for blow-outs and total liability coverage of not less than
$10,000,000.
Subject to the above limits, the Operator's general public
liability insurance shall be in all respects comparable to
that generally maintained in the industry with respect to
services of the type to be rendered and activities of the type
to be conducted under this Agreement. Operator's general
public liability insurance shall, if permitted by Operator's
insurance carrier:
12
(ii) name the Developer as an additional insured party; and
(iii) provide that at least thirty (30) days' prior notice of
cancellation and any other adverse material change in
the policy shall be given to the Developer.
However, the Developer shall reimburse Operator for the
additional cost, if any, of including it as an additional
insured party under the Operator's insurance.
Current copies of all policies or certificates of the
Operator's insurance coverage shall be delivered to the
Developer on request. It is understood and agreed that
Operator's insurance coverage may not adequately protect the
interests of the Developer and that the Developer shall carry
at its expense the excess or additional general public
liability, property damage, and other insurance, if any, as
the Developer deems appropriate.
(b) Subcontractors' Insurance. Operator shall require all of its
subcontractors to carry all required Workmen's Compensation
Insurance and to maintain such other insurance, if any, as
Operator in its discretion may require.
(c) Operator's Liability. Operator's liability to the Developer as
Operator under this Agreement shall be limited to, and
Operator shall indemnify the Developer and hold it harmless
from, claims, penalties, liabilities, obligations, charges,
losses, costs, damages, or expenses (including but not limited
to reasonable attorneys' fees) relating to, caused by or
arising out of:
(i) the noncompliance with or violation by Operator, its
employees, agents, or subcontractors of any local, state
or federal law, statute, regulation, or ordinance;
(ii) the negligence or misconduct of Operator, its employees,
agents or subcontractors; or
(iii) the breach of or failure to comply with any provisions
of this Agreement.
11. Internal Revenue Code Election; Relationship of Parties; Right to Take
Production in Kind.
(a) Internal Revenue Code Election. With respect to this
Agreement, each of the parties elects under Section 761(a) of
the Internal Revenue Code of 1986, as amended, to be excluded
from the provisions of Subchapter K of Chapter 1 of Sub Title
A of the Internal Revenue Code of 1986, as amended. If the
income tax laws of the state or states in which the property
covered by this Agreement is located contain, or may
subsequently contain, a similar election, each of the parties
agrees that the election shall be exercised.
Beginning with the first taxable year of operations under this
Agreement, each party agrees that the deemed election provided
by Section 1.761-2(b)(2)(ii) of the Regulations under the
Internal Revenue Code of 1986, as amended, will apply; and no
party will file an application under Section 1.761-2 (b)(3)(i)
and (ii) of the Regulations to revoke the election. Each party
agrees to execute the documents and make the filings with the
appropriate governmental authorities as may be necessary to
effect the election.
(b) Relationship of Parties. It is not the intention of the
parties to create, nor shall this Agreement be construed as
creating, a mining or other partnership or association or to
render the parties liable as partners or joint venturers for
any purpose. Operator shall be deemed to be an independent
contractor and shall perform its obligations as set forth in
this Agreement or as otherwise directed by the Developer.
(c) Right to Take Production in Kind. Subject to the provisions of
Section 8 above, the Developer shall have the exclusive right
to sell or dispose of its proportionate share of all oil and
gas produced from the ▇▇▇▇▇ to be drilled under this
Agreement, exclusive of production:
(i) that may be used in development and producing
operations;
(ii) unavoidably lost; and
13
(iii) used to fulfill any free gas obligations under the terms
of the applicable Lease or Leases.
Operator shall not have any right to sell or otherwise dispose
of the oil and gas. The Developer shall have the exclusive
right to execute all contracts relating to the sale or
disposition of its proportionate share of the production from
the ▇▇▇▇▇ drilled under this Agreement.
Developer shall have no interest in any gas supply agreements
of Operator, except the right to receive Developer's share of
the proceeds received from the sale of any gas or oil from
▇▇▇▇▇ developed under this Agreement. The Developer agrees to
designate Operator or Operator's designated bank agent as the
Developer's collection agent in any contracts. On request,
Operator shall assist Developer in arranging the sale or
disposition of Developer's oil and gas under this Agreement
and shall promptly provide the Developer with all relevant
information which comes to Operator's attention regarding
opportunities for sale of production.
If Developer fails to take in kind or separately dispose of
its proportionate share of the oil and gas produced under this
Agreement, then Operator shall have the right, subject to the
revocation at will by the Developer, but not the obligation,
to purchase the oil and gas or sell it to others at any time
and from time to time, for the account of the Developer at the
best price obtainable in the area for the production.
Notwithstanding, Operator shall have no liability to Developer
should Operator fail to market the production.
Any purchase or sale by Operator shall be subject always to
the right of the Developer to exercise at any time its right
to take in-kind, or separately dispose of, its share of oil
and gas not previously delivered to a purchaser. Any purchase
or sale by Operator of any other party's share of oil and gas
shall be only for reasonable periods of time as are consistent
with the minimum needs of the oil and gas industry under the
particular circumstances, but in no event for a period in
excess of one (1) year.
12. Effect of Force Majeure; Definition of Force Majeure; Limitation.
(a) Effect of Force Majeure. If Operator is rendered unable,
wholly or in part, by force majeure (as defined below) to
carry out its obligations under this Agreement, the Operator
shall give to the Developer prompt written notice of the force
majeure with reasonably full particulars concerning it. After
the notice is given, the obligations of the Operator, so far
as it is affected by the force majeure, shall be suspended
during but no longer than, the continuance of the force
majeure. Operator shall use all reasonable diligence to remove
the force majeure as quickly as possible to the extent the
same is within reasonable control.
(b) Definition of Force Majeure. The term "force majeure" shall
mean an act of God, strike, lockout, or other industrial
disturbance, act of the public enemy, war, blockade, public
riot, lightning, fire, storm, flood, explosion, governmental
restraint, unavailability of equipment or materials, plant
shut-downs, curtailments by purchasers and any other causes
whether of the kind specifically enumerated above or
otherwise, which directly precludes Operator's performance
under this Agreement and is not reasonably within the control
of the Operator.
(c) Limitation. The requirement that any force majeure shall be
remedied with all reasonable dispatch shall not require the
settlement of strikes, lockouts, or other labor difficulty
affecting the Operator, contrary to its wishes. The method of
handling these difficulties shall be entirely within the
discretion of the Operator.
13. Term.
This Agreement shall become effective when executed by Operator and the
Developer. Except as provided in sub-section (c) of Section 3, this
Agreement shall continue and remain in full force and effect for the
productive lives of the ▇▇▇▇▇ being operated under this Agreement.
14. Governing Law; Invalidity.
(a) Governing Law. This Agreement shall be governed by, construed
and interpreted in accordance with the laws of the
Commonwealth of Pennsylvania.
14
(b) Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the
other provisions of this Agreement, and this Agreement shall
be construed in all respects as if the invalid or
unenforceable provision were omitted.
15. Integration; Written Amendment.
(a) Integration. This Agreement, including the Exhibits to this
Agreement, constitutes and represents the entire understanding
and agreement of the parties with respect to the subject
matter of this Agreement and supersedes all prior
negotiations, understandings, agreements, and representations
relating to the subject matter of this Agreement.
(b) Written Amendment. No change, waiver, modification, or
amendment of this Agreement shall be binding or of any effect
unless in writing duly signed by the party against which the
change, waiver, modification, or amendment is sought to be
enforced.
16. Waiver of Default or Breach.
No waiver by any party to any default of or breach by any other party
under this Agreement shall operate as a waiver of any future default or
breach, whether of like or different character or nature.
17. Notices.
Unless otherwise provided in this Agreement, all notices, statements,
requests, or demands which are required or contemplated by this
Agreement shall be in writing and shall be hand-delivered or sent by
registered or certified mail, postage prepaid, to the following
addresses until changed by certified or registered letter so addressed
to the other party:
(i) If to the Operator, to:
Atlas Resources, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
(ii) If to Developer, to:
Atlas America Public #12-2003 Limited Partnership
c/o Atlas Resources, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Notices which are served by registered or certified mail on the parties
in the manner provided in this Section shall be deemed sufficiently
served or given for all purposes under this Agreement at the time the
notice is mailed in any post office or branch post office regularly
maintained by the United States Postal Service or any successor. All
payments shall be hand-delivered or sent by United States mail, postage
prepaid to the addresses set forth above until changed by certified or
registered letter so addressed to the other party.
18. Interpretation.
The titles of the Sections in this Agreement are for convenience of
reference only and shall not control or affect the meaning or
construction of any of the terms and provisions of this Agreement. As
used in this Agreement, the plural shall include the singular and the
singular shall include the plural whenever appropriate.
19. Counterparts.
The parties may execute this Agreement in any number of separate
counterparts, each of which, when executed and delivered by the
parties, shall have the force and effect of an original; but all such
counterparts shall be deemed to constitute one and the same instrument.
15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ATLAS RESOURCES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
By its Managing General Partner:
ATLAS RESOURCES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
16
EXHIBIT A
DRILLING AND OPERATING AGREEMENT DATED OCTOBER 18, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ PUBLIC #12-2003 LIMITED PARTNERSHIP
ATLAS RESOURCES, INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ FORMATION
▇▇▇▇▇ STATE COUNTY TOWNSHIP
--------------------------------------------------------------------------------
Funk #3 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Exhibit C
(Page 1)
ADDENDUM NO. ONE
TO DRILLING AND OPERATING AGREEMENT
DATED OCTOBER 18, 2003
THIS ADDENDUM NO. One made and entered into this 31st day of December, 2003, by
and between ATLAS RESOURCES, INC., a Pennsylvania corporation (hereinafter
referred to as "Operator"),
and
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP, a Delaware limited
partnership, (hereinafter referred to as the Developer).
WITNESSETH THAT:
WHEREAS, Operator and the Developer have entered into a Drilling and Operating
Agreement dated October 18, 2003, (the "Agreement"), which relates to the
drilling and operating of one (1) ▇▇▇▇▇ on the one (1) Initial Well
Locations identified on the maps attached as Exhibits A-l through A-1 to the
Agreement, and provides for the development on the terms and conditions set
forth in the Agreement of Additional Well Locations as the parties may from time
to time designate; and
WHEREAS, pursuant to Section l(c) of the Agreement, Operator and Developer
presently desire to designate (28) Additional Well Locations described below
to be developed in accordance with the terms and conditions of the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Addendum and intending to be legally bound, the parties agree as follows:
1. Pursuant to Section l(c) of the Agreement, the Developer hereby authorizes
Operator to drill, complete (or plug) and operate, on the terms and conditions
set forth in the Agreement and this Addendum No. One, twenty-eight (28)
additional ▇▇▇▇▇ on the twenty-eight (28) Additional Well Locations described
on Exhibit A to this Addendum and on the maps attached to this Addendum as
Exhibits A-1 through A-28.
2. Operator, as Developer's independent contractor, agrees to drill, complete
(or plug) and operate the additional ▇▇▇▇▇ on the Additional Well Locations in
accordance with the terms and conditions of the Agreement and further agrees to
use its best efforts to begin drilling the first additional well within thirty
(30) days after the date of this Addendum and to begin drilling all the
additional ▇▇▇▇▇ on or before March 30, 2004 [March 31, 2005].
3. Developer acknowledges that:
(a) Operator has furnished Developer with the title opinions identified on
Exhibit A to this Addendum; and
(b) such other documents and information which Developer or its counsel has
requested in order to determine the adequacy of the title to the above
Additional Well Locations.
The Developer accepts the title to the Additional Well Locations and leased
premises in accordance with the provisions of Section 5 of the Agreement.
4. The drilling and operation of the additional ▇▇▇▇▇ on the Additional Well
Locations shall be in accordance with and subject to the terms and conditions
set forth in the Agreement as supplemented by this Addendum No. One and except
as previously supplemented, all terms and conditions of the Agreement shall
remain in full force and effect as originally written.
5. This Addendum No. One shall be legally binding on, and shall inure to the
benefit of, the parties and their respective successors and permitted assigns.
Exhibit C
(Page 2)
WITNESS the due execution of this Addendum on the day and year first above
written.
ATLAS RESOURCES, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
By its Managing General Partner:
ATLAS RESOURCES, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
Exhibit C
(Page 3)
EXHIBIT A
DRILLING AND OPERATING AGREEMENT DATED OCTOBER 18, 2003
ADDENDUM ONE
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
ATLAS RESOURCES, INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ FORMATION
▇▇▇▇▇ STATE COUNTY TOWNSHIP
---------------------------------------------------------------------------------------------------
FUNK #2 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ #3 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #2 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ #4 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #1 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #4 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ UNIT #2 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ #1 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ #96 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ #2 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #2 PA ▇▇▇▇▇▇▇▇ E. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #3 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ UNIT #2 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
GRUDOSKI #1 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
WHITE #9 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ #1 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ UNIT #1 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ #5 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ #5 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ #4 PA ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ #3 PA ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ #14 PA ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ #2 PA ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ #2 PA ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ UNIT #1 PA ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
BALLUT UNIT #1 PA ▇▇▇▇▇▇▇▇ SADSBURY
▇▇▇▇▇▇▇ #1 PA ▇▇▇▇▇▇▇▇ SADSBURY
MERLIN ENTERPRISES #3 PA ▇▇▇▇▇▇▇▇ SADSBURY
Exhibit C
(Page 4)
