COMMERCIAL AGREEMENT FOR THE TALORA BLOCK BETWEEN PETROLEUM EQUIPTMENT INTERNATIONAL PEI AND DAVID CRAVEN
COMMERCIAL
AGREEMENT FOR THE TALORA BLOCK BETWEEN PETROLEUM EQUIPTMENT INTERNATIONAL PEI
AND ▇▇▇▇▇ ▇▇▇▇▇▇
This
Talora Commercial Agreement, effective October 24, 2006 (“Effective
Date”), is executed between PETROLEUM EQUIPMENT INTERNATIONAL
LTDA (hereinafter “PEI”), a Colombian limited company,
duty incorporated under the laws of the Republic of Colombia, and ▇▇▇▇▇
▇▇▇▇▇▇ passport number ▇▇▇▇▇▇▇▇▇, (hereinafter THE
INVESTOR), PEI and THE INVESTOR are
hereinafter referred to individually as “Party” or collectively as
“Parties”.
WHEREAS,
the Parties entered into a Confidentiality Agreement dated November 16, 2006
whereby PEI provided geological, geophysical and engineering
data to THE INVESTOR concerning its oil and gas exploration and
exploitation Contract Talora with Agencia Nacional de Hidrocarburos
(▇▇▇).
WHEREAS,
THE INVESTOR made a formal offer to PEI for
their participation in the exploration and development of prospects in the
Talora Contract and has formally expressed an interest in entering the
project.
WHEREAS,
based on discussions that have taken place between the PEI
representative and THE INVESTOR the Parties agree that it would
be mutually beneficial to enter into an agreement for the purpose of exploring
and developing prospects in the Talora Contract; and
WHEREAS,
the purpose of this Talora Commercial Agreement is to set forth the
framework for entering into a binding Joint Operating
Agreement for the participation of THE INVESTOR
in the acquisition of the TWENTY PERCENT (20%) which consist of
43,841 hectares of the participation corresponding to PEI on
the TALORA BLOCK.
WHEREAS,
THE INVESTOR’S commit to incorporate a company and branch in
Colombia, that will hold the TWENTY PERCENT (20%) of the
participation in the Talora Block in the future.
WHEREAS,
PEI commit to begin the drilling of the first exploration well
the 14 of December of 2006. PEI have already initiate the activities
required to begin the drilling of the well, such us civil works and the
environmental licenses.
NOW
THEREFORE, the Parties agree as follows:
AGREEMENT
TO PARTICIPATE:
I.
AREA OF INTEREST
The
area
of interest covered by this Talora Commercial Agreement is the area
covered by the Talora Exploration and Exploitation Contract entered into by
and
between ▇▇▇ and ARGOSY dated September 16,
2004 and located in the Tolima and Cundinamarca Provinces of the middle
▇▇▇▇▇▇▇▇▇ River valley.
II.
INTENTION OF THE PARTIES
THE
INVESTOR proposes to contribute with the sum of US$2,000,000.00 to earn
TWENTY PERCENT (20%) of the participation of
PEI in the TALORA BLOCK.
THE
INVESTOR will commit to pay in advance $US 1,500,000 30 days after the
signing of the Agreement.
This
TWENTY PERCENT(20%) participation covers all
the works and expenses, until the drilling, and production testing are done
in
the ▇▇▇▇▇ 1 well, which coordinates are: X: 934.519 and Y:
993.287. The ▇▇▇▇▇ 1 well is going to be drill to a depth sufficient
to test the cretaceous formation, such depth estimated to be approximately
3,000
vertical feet.
For
all
the expenses that are cause after the drilling procedure PEI
will send a cash call to THE INVESTOR for the TWENTY
PERCENT (20%) of their participation.
To
execute this operation, PEI agrees to prepare and
–AFE- and send it with a letter the THE
INVESTOR requesting for the contribution of the TWENTY PERCENT
(20%) in order to initiate further activities.
III. SCHEDULE
FOR JOINT OPERATING AGREEMENT
The
Commercial Agreement will define the rights and obligations of the Parties
and
include a Joint Operating Agreement (JOA) to establish rules for future
operation of the TALORA BLOCK.
PEI
agrees to prepare and present the Joint Operating Agreement to
THE INVESTOR within ten (10) working days from the Effective
Date of this Talora Commercial Agreement.
Upon
receipt of the draft agreement, THE INVESTOR will have five (5)
working days to make comments and execute the Joint Operating
Agreement. In conjunction with the execution of the Commercial
Agreement, the Parties shall execute a binding JOA to govern the operation
of
the Contract.
IV. EXCHANGE
OF INFORMATION
PEI
agrees to provide all reasonably and necessary information for the Area of
Interest including: reprocessed seismic data, new seismic data and
existent well information. THE INVESTOR shall
provide to PEI with current financial statements and
appropriate bank and financial institution references customary in the course
of
business.
V.
FORMAL AGREEMENT
The
parties are under the obligation to continue with the
TaloraCommercial Agreement. Therefore, they agree
to enter into a JOA once PEI and THE INVESTOR
formally approve and execute the Talora Commercial
Agreement.
VI. OPERATORSHIP
AND ASSIGNMENT
PEI
will
be the operator during the development of the contract with ▇▇▇.
VII. CHOICE
OF LAW
The
Parties agree that the laws of the Republic of Colombia shall govern the
interpretation and execution of this Talora Commercial Agreement.
VIII. MISCELLANEOUS
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A.
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The
Parties heretofore agree that this Talora Commercial Agreement
and Exhibits hereto, supersede any other negotiations, understandings
and
agreements between the parties regarding the TALORA
BLOCK.
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B.
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This
Talora Commercial Agreement shall not create any partnership,
corporation, company or entity and the Parties shall maintain their
independent entity status.
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C.
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This
Talora Commercial Agreement shall not be modified, changed or
altered unless such modification is expressed in writing and signed
by an
authorized representative of each
Party.
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D.
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This
Talora Commercial Agreement encompasses the complete agreement
between the Parties and replaces all previous oral or written
considerations, agreements, communications, and representations concerning
the matters herein addressed.
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E.
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The
parties agrees to follow the binding arbitration and procedures set
forth
in the Joint Operating Agreement for any disputes arising out of
or in any
way related to this Talora Commercial
Agreement.
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F.
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PEI
recognizes that PETROLATINA is in the process or establishing its
Colombian Branch office and as a result of such process may need
to change
its name or assign its rights hereunder to another firm or any wholly
owned subsidiary at any time. PETROLATINA shall timely advise
of such change of name and/or assignment and PEI agrees to accept
the new
name or the assignee.
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G.
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Any
notice required or permitted to be given under this Talora Commercial
Agreement shall be delivered by fax or hand delivered by messenger to
the addresses set forth below:
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PETROLEUM
EQUIPTMENT INTERNATIONAL - PEI -
Calle
114# 9 - 01. Torre A, Teleport.
Oficina
711