EXHIBIT 10.8
EXHIBIT A
PARTICIPATION AGREEMENT
McMoRan 1997 Exploration Program
PAGE
I. DEFINITIONS 4
II. PURPOSE; OPERATIONS 8
2.1 Purpose 8
2.2 McMoRan's Efforts 9
2.3 Operator 9
III. INTERESTS OF THE PARTIES 9
3.1 Sharing of Exploration Expenditures 9
3.2 Ownership Interests 10
3.3 McMoRan Group Participation 10
IV. EXPLORATION EXPENDITURES 10
4.1 Exploration Expenditures 10
V. ACQUISITION OF LEASEHOLD INTERESTS 14
5.1 Acquisition of Additional Leasehold Interests 14
5.2 Excluded Areas 14
5.3 Obligation 15
VI. EXPLORATION FUND 15
6.1 General 15
6.2 Limitations on McMoRan's Authority to Commit
Exploration Fund 16
6.3 Budget Meetings and Reports 16
VII. SCIENTIFIC STUDIES AND INFORMATION 17
VIII. PROSPECTS 18
8.1 Prospects 18
8.2 Designation of Prospects After Program Term 20
IX. DRILLING OF EXPLORATORY ▇▇▇▇▇ 21
9.1 During Program Term 21
9.2 After Program Term 23
X. FARMOUT OR PARTICIPATION AGREEMENTS 23
10.1 Participation Agreements 23
10.2 Farmout Agreements 24
10.3 Trade Agreements 24
XI. BURDENS 25
XII. OPERATING AGREEMENT 26
XIII. AREA OF MUTUAL INTEREST 26
13.1 Third Party Area of Mutual Interest
Agreements 26
13.2 Program Area of Mutual Interest Agreement 27
XIV. ASSUMPTION OF INTEREST 30
XV. OWNERSHIP OF PRODUCTION; GAS BALANCING AGREEMENT 30
15.1 Ownership of Production 30
XVI. RELATIONSHIP OF THE PARTIES 31
16.1 Tax Partnerships 31
XVII. ▇▇▇▇▇▇▇▇; NOTICES 32
XVIII. SPECIAL NON-CONSENT ELECTIONS 32
18.1 Casing Point Election - Onshore Prospects 32
18.2 Elections Prior to Platform Installation - Offshore
Prospects 33
18.3 Time Period 33
18.4 Completion Attempt by Participant - Onshore 33
XIX. PROGRAM TERM 34
19.1 Program Term 34
19.2 Unfunded Prospects 34
XX. OPERATIONS AFTER PROGRAM TERM 35
20.1 General 35
20.2 Exploratory ▇▇▇▇▇ 35
20.3 Development Expenditures 35
20.4 Provisions Which Do Not Survive the End of
the Program Term 35
XXI. CONFIDENTIALITY 36
XXII. INSURANCE 37
22.1 Insurance for Program 37
XXIII. RECORD TITLE, ASSIGNMENT 39
23.1 Record Title 39
23.2 Assignment 41
XXIV. SUBSEQUENT INTERESTS 41
XXV. GENERAL 42
25.1 Records 42
25.2 Access 43
25.3 Claims & Litigation 43
25.4 Good Faith 44
25.5 Governing Law 44
25.6 Failure to Respond 44
25.7 Conflicts 45
25.8 Reciprocal Rights 45
25.9 Binding Effect 45
EXHIBITS
I) PROGRAM OPERATING AGREEMENT (OFFSHORE)
II) PROGRAM OPERATING AGREEMENT (ONSHORE)
III) CERTAIN EXCLUDED AREAS
IV) PROVISIONS CONCERNING TAXATION
V) INITIAL LEASEHOLD INVENTORY
PARTICIPATION AGREEMENT
McMoRan 1997 Exploration Program
This Participation Agreement ("the Agreement") is made as of the
15th day of December, 1997 between McMoRan Oil & Gas Co. ("McMoRan")
and Freeport-McMoRan Resource Partners, Limited Partnership ("FRP").
WITNESSETH:
I.
Definitions
As used in this Agreement, the following terms shall have the
meanings set forth below:
1.1 Affiliate means, with respect to any person, a person that directly
or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with the person specified.
With respect to a natural person, the term "Affiliate" shall also
include that person's spouse or anyone related to such person by
first or second degree of consanguinity or affinity and any trust or
partnership beneficially owned by such persons.
1.2 Area of Mutual Interest or AMI means, with respect to any Prospect,
the geographic area more particularly described in Article XIII.
1.3 Casing Point means the point at which determination is made either to
run production string of casing and attempt a completion, or to
abandon the well.
1.4 Committed List means the list described in Paragraph 19.1 hereof.
1.5 Development Expenditures means those charges applicable to each
Prospect which are not Exploration Expenditures.
1.6 Development Well means any well which is not an Exploratory Well.
1.7 Excluded Area means any of the areas described in Paragraph 5.2
hereof.
1.8 Exploration Expenditures means those charges described in Article IV.
1.9 Exploration Fund means the fund created by McMoRan, Participant and
the other members of the McMoRan Group for the acquisition and
exploration of Leasehold Interests and the other purposes of the
Exploration Program as more fully described in Article VI, together
with any cash contributions received by the Program from third
parties.
1.10 Exploration Program or Program means the McMoRan operated program
pursuant to which the McMoRan Group has or will acquire and explore
Prospects in the Program Area during the Program Term pursuant to
this Agreement and the agreement between McMoRan and the other
members of the McMoRan Group.
1.11 Exploratory Well means any well drilled by the Program on an Onshore
Prospect prior to the completion thereon by the Exploration Program
of a well capable of production in Paying Quantities or, as to an
Offshore Prospect, means the first and/or second well drilled on a
Prospect by the Program prior to the first installation thereon by
the Program of a drilling and/or production platform.
1.12 Initial Leasehold Inventory means those Leasehold Interests described
in Paragraph 2.1 hereof.
1.13 Leasehold Interests means any right, title or interest acquired in,
to and under any oil or gas lease or any other interest in oil or
gas, including, without limitation, contractual rights, which confer
on the holder thereof the right to share, or acquire the right to
share, in the production or the proceeds of production of oil or gas.
1.14 Leasehold Interests Costs means, with respect to a particular
Leasehold Interests, the actual cost incurred by the Program for
acquisition thereof, in each case including, without limitation, all
bonuses, delay rentals, brokerage fees, and outside attorney's fees.
1.15 McMoRan Group means McMoRan, Participant and those other parties
participating through McMoRan on a program type basis in a
significant portion of McMoRan's exploration activities in all or
part of the Program Area.
1.16 Non-Operator means, as to any Leasehold Interests or Prospect, a
working interest owner therein who is not designated to act as
Operator.
1.17 OCS means the outer continental shelf of the Gulf of Mexico under
Federal leasing jurisdiction.
1.18 Offshore Prospect means any Prospect located in the OCS, and/or in
that portion of the Gulf of Mexico under the leasing jurisdiction of
the adjacent states.
1.19 Onshore Prospect means a Prospect located in the Program Area which
is not an Offshore Prospect.
1.20 Operator means, as to any Leasehold Interests or Prospect, the party
hereto designated to manage and supervise the drilling and/or
completion and operation of oil or gas ▇▇▇▇▇ thereon.
1.21 Participant means Freeport-McMoRan Resource Partners, Limited
Partnership.
1.22 Paying Quantities means production of oil and/or gas in quantities
sufficient to yield a return in excess of operating cost.
1.23 Program Area means the OCS, and that portion of the Gulf of Mexico
under the leasing jurisdiction of the adjacent states and the balance
of the lower 48 states of the continental United States, except the
Excluded Areas.
1.24 Program Operating Agreement means the Joint Operating Agreement
(Offshore) or the Joint Operating Agreement (Onshore) attached hereto
as Exhibits I and II respectively, depending upon whether the
relevant operation is with respect to an Offshore Prospect or an
Onshore Prospect.
1.25 Program Term means the period beginning on the date hereof and ending
at the end of the Program Term as set forth in Article XIX.
1.26 Prospect means an area designated as such pursuant to Paragraph 8.1.
1.27 Technical Consultants means those geologists and geophysicists and
related personnel working therewith who are hired or retained by
McMoRan as independent consultants some portion of whose efforts are
to develop or evaluate Prospects hereunder.
II.
Purpose; Operations
2.1 Purpose. This Agreement has been entered into to provide
Participant along with other members of the McMoRan Group a means of
acquiring, exploring and developing oil and gas Prospects in the Program
Area, including but not limited to the acquisition of the Initial Leasehold
Inventory, during the Program Term.
Effective April 1, 1997, FRP and McMoRan established the McMoRan 1997
Exploration Program pursuant to the original Participation Agreement.
Prior to the effective date hereof, McMoRan and FRP evaluated by drilling
certain of the prospects subject to the original Exploration Program and,
effective as of the date hereof, McMoRan and FRP have agreed to expand said
Exploration Program for the remaining term of the Program by increasing the
budget for the Exploration Program and adding an additional participant.
McMoRan, FRP and the additional participant will participate in the
properties and rights of the Program, excluding only those properties and
assets associated with the properties which are located in the Excluded
Areas which exclusions include but are not limited to the prospects that
were evaluated prior to the effective date hereof ("Excluded Properties").
The Leasehold Interests of the Program as of the effective date hereof,
excluding those which are Excluded Properties, shall be the Initial
Leasehold Inventory hereunder, which are identified on Exhibit V hereto.
The Initial Leasehold Inventory shall be deemed to have an actual incurred
cost of $9,272,380. The cost of the Initial Leasehold Inventory set out
above is intended to encompass all of the McMoRan and FRP expenditures
associated with such Leasehold Interests and for cost of leads and other
evaluation activities which have not materialized into a Leasehold
Interests but which are not part of the cost of an Excluded Property, all
of which costs shall be adjusted upon final accounting of such costs.
2.2 McMoRan Efforts. McMoRan agrees to devote a substantial portion
of its oil and gas exploration effort to the operation and management of
the Program, which shall include all prospects, except those in the
Excluded Areas, acquired and to be acquired by McMoRan during the Program
Term within the Program Area, including but not limited to the Initial
Leasehold Inventory. McMoRan will at all times have a staff adequate in
number, experience and competence to perform its obligations hereunder and
accomplish the purposes of the Exploration Program.
2.3 Operator. McMoRan shall be the overall manager of the Program.
III.
Sharing of Exploration Expenditures
and Interest of the Parties
3.1 Sharing of Exploration Expenditures. Except as other-wise
provided in this Agreement, Exploration Expenditures shall be shared as
follows:
Participant McMoRan & All Other Members of
McMoRan Group excluding Participant
56.4% 43.6%
If more than one Exploratory Well is drilled on a particular Onshore
Prospect, Exploration Expenditures in connection with the drilling of any
second and subsequent Exploratory Well on such particular onshore Prospect
shall not be shared in the percentages set forth in this Paragraph 3.1 but
shall be shared in the percentages set forth in Paragraph 3.2 hereof;
provided, however, if the first Exploratory Well in such particular Onshore
Prospect fails to reach objective depth because it encounters impenetrable
substances, heaving shale, domal material, salt, excessive salt water flow
or other formation or conditions or develops mechanical difficulty which
would render further drilling impractical and McMoRan elects to drill a
substitute for such well, the cost involved in the drilling of such
substitute well shall be shared in the percentages set forth in this
Paragraph 3.1 in the same manner as if such substitute well were the first
Exploratory Well on the particular Onshore Prospect involved.
3.2 Ownership Interests. Except as otherwise provided in this
Agreement, the ownership of all Leasehold Interests and other properties
and production acquired by the Program shall be shared as follows:
Participant McMoRan & All Other Members of
McMoRan Group excluding Participant
47% 53%
3.3 McMoRan Group Participation. Percentages are based upon the total
McMoRan Group, which in many cases is less than the entire working
interest.
IV.
Exploration Expenditures
4.1 Exploration Expenditures. Subject to the limitations provided in
this Agreement, McMoRan shall be entitled to expend monies for Exploration
Expenditures of the Program on behalf of itself and Participant without the
prior approval of Participant. The term "Exploration Expenditures" means
all actual charges allocable to each Prospect established prior to the end
of the Program Term, determined in accordance with generally accepted
industry standards, which charges are incurred by the Program prior to (i)
the completion of the first Exploratory Well drilled by the Program on an
Onshore Prospect that is completed as a well capable of production in
Paying Quantities or (ii) the plugging, or the temporary abandonment if not
plugged, of the first two Exploratory ▇▇▇▇▇ drilled by the Program on an
Offshore Prospect, as applicable, and such other costs applicable to
exploration activities in the Program Area prior to the expiration of the
Program Term or with respect to Prospects established prior to the end of
the Program Term, which charges, among others, shall include the following:
(a) The cost of acquisition of all Leasehold Interests in the Program
Area, including but not limited to the Initial Leasehold Inventory and any
Leasehold Interests Costs paid by McMoRan to third party program operators
in connection therewith;
(b) The cost of any geological, geophysical or other scientific,
exploration or engineering work, services or data on the Prospect;
(c) The cost of copies of all seismic records, geological and
geophysical maps and other exploration data and information furnished to
Participant;
(d) Rental and other lease maintenance payments on the Leasehold
Interests;
(e) All necessary independent legal expenses and costs of title
searches and title investigation whether or not Leasehold Interests are
acquired, together with the costs of copies of title opinions and other
title reports furnished to Participant;
(f) The cost of drilling Exploratory ▇▇▇▇▇ in a Prospect, including
the cost of plugging and abandoning or capping same, if no completion
attempt is made;
(g) Any other expenditures properly chargeable as Exploration
Expenditures under this Agreement, or as may be specified in the accounting
procedure attached to the applicable Program Operating Agreement and which
are attributable to exploration activities, but excluding all overhead
provided for in such Program Operating Agreement until such time as the
Exploration Fund has been fully committed;
(h) Notwithstanding the foregoing, the cost of completing an
Exploratory Well shall not be considered an Exploration Expenditure; and
(i) In addition to the foregoing, McMoRan shall be entitled to charge
as Exploration Expenditures those expenditures that McMoRan incurs annually
for salaries of employees, including but not limited to costs of benefits
programs related thereto, cost of retained consultants, including but not
limited to its Technical Consultants, office rent, office supplies,
insurance and other general and administrative costs that McMoRan incurs
in the conduct of its activities, including but not limited to costs
allocated to MOXY from FM Services Company or its Affiliates, less a
reasonable portion of such costs that McMoRan allocates to the Excluded
Areas. Prior to committing to a material increase in the aggregate costs
contemplated by this subparagraph (i) McMoRan shall confer with Participant
and in good faith consider any comments or suggestions that Participant may
offer in regard to such contemplated material change. McMoRan shall not be
permitted to charge any items under this subparagraph (i) after the
expenditure of the Program Budget, but will thereafter be entitled to
receive such amounts as may be provided in the applicable Program Operating
Agreement.
The term Exploration Expenditures shall also include any of the
foregoing costs incurred by the Program in attempting to locate or acquire
Leasehold Interests in Prospects for the Program in the Program Area
whether or not the Program owns or acquires Leasehold Interests in such
area or subsequently designates a Prospect under Paragraph 8.1 for such
area.
Except as may be expressly provided to the contrary in this Agreement,
all Exploration Expenditures shall be invoiced and accounted for in
accordance with the accounting procedure attached to the Program Operating
Agreement, including the period of time set forth for joint interest
auditing and adjustment.
McMoRan shall further be entitled to reimbursement as an Exploration
Expenditure prior to the end of the Program Term, or as a proper
expenditure under the applicable Program Operating Agreement, as
appropriate, from Participant for its share of reasonable inventories of
pipe and equipment (it being the intention of the parties to keep such
inventories at a minimum level consistent with the needs of the Program).
McMoRan shall not have an obligation to spend a particular portion of
the Program Fund during any Program Year but rather McMoRan shall commit
Exploration Expenditures as the occasion arises to secure Prospects which
McMoRan deems would be appropriate for the Exploration Program, subject to
the provisions of Paragraph 6.1 hereof.
McMoRan agrees to make available its entire geological and geophysical
data base for use in operations under the Program at no cost to the
Participant, except to the extent setforth in the immediately following
sentence. The amounts expended in acquiring seismic data from Western
Geophysical pursuant to the Licensing Agreement between McMoRan and Western
Geophysical dated November 20, 1996 shall constitute proper charges to
Exploration Expenditures, notwithstanding the fact that some of the costs
incurred pursuant to such agreement were incurred prior to the beginning of
the Program Term, except to the extent that any of such seismic data so
acquired relates to Excluded Areas.
Participant agrees to bear its proportionate part of all Exploration
Expenditures of the Program, subject to the limitations hereinafter set
forth under Article VI.
V.
Acquisition of Leasehold Interests
5.1 Acquisition of Leasehold Interests. On behalf of the Program and
subject to the limitations and guidelines herein set forth, McMoRan shall
evaluate and acquire Leasehold Interests in the Program Area during the
Program Term which it believes to be potentially productive of oil or gas.
5.2 Excluded Areas. McMoRan and Participant agree that the following
areas ("Excluded Areas") shall not be subject to the terms of this
Agreement unless any such area, or portion thereof, has been recommended
for inclusion herein by McMoRan in writing and Participant has concurred in
writing in that recommendation:
(a) Any Leasehold Interests or prospect lying outside the Program
Area;
(b) Any Leasehold Interests or Prospect which at the time of
acquisition contains proven reserves unless (i) the then proven reserves do
not constitute a material consideration in the acquisition, and (ii) the
primary objective of the acquisition is to explore for oil and gas other
than the then proven reserves;
(c) Those areas identified on attached Exhibit III; and
(d) Any Leasehold Interests or prospect acquired through merger,
acquisition, corporate reorganization or consolidation with or purchase of
substantially all of the assets of an individual, a corporation or a
partnership, provided that the primary purpose of such merger, acquisition,
reorganization, consolidation or purchase is not to acquire a specific
Prospect or Leasehold Interests which otherwise would be subject to this
Agreement; provided, however, if in such an acquisition McMoRan acquires an
inventory of exploratory prospects not associated with any proven
production acquired in such acquisition, McMoRan shall meet with
Participant and, in good faith, attempt to have the exploratory prospects
transferred to the Exploration Program.
5.3 Obligation. Subject to the limitations otherwise provided in this
Agreement, Participant agrees to participate for its proportionate share of
Exploration Expenditures as to all Leasehold Interests acquired or
committed to by McMoRan in the Program Area during the Program Term.
Without limiting or altering the effect of the AMI provisions of Article
XIII hereof, from and after the end of the Program Term, McMoRan shall not
be obligated to search for and offer to Participant any interest in
Leasehold Interests within the Program Area.
VI.
Exploration Fund
6.1 General. The Program shall have a budget of $165,000,000 for
Exploration Expenditures to be incurred or committed during the Program
Term (the "Exploration Fund"). Notwithstanding that the Exploration Fund
is for the entire Program Term, unless McMoRan and Participant agree
otherwise in writing, McMoRan will schedule its activities so that
Exploration Expenditures are not likely to exceed on a cumulative basis one
hundred fifty percent (150%) of $40,000,000 per twelve months
period times the number of twelve months periods that have elapsed since
the Program Term commenced.
6.2 Limitations on McMoRan's Authority to Commit Exploration Fund. In
addition to the other limitations imposed upon McMoRan's authority to
commit Participant hereunder, once the actual and committed Exploration
Expenditures reach the budgeted total, it is understood and agreed that
McMoRan (i) will not undertake any additional drilling commitments on
behalf of the Exploration Program, and (ii) will not acquire any additional
Leasehold Interests on behalf of the Exploration Program. Additionally,
McMoRan shall not make any commitment on behalf of the Program for the
drilling of any well which is anticipated to commence more than six (6)
months after the end of the Program Term.
6.3 Budget Meetings and Reports.
(a) On a quarterly basis, McMoRan shall hold a meeting in McMoRan's
offices with Participant to discuss the contemplated activities of the
Program for the following period. In such meetings, McMoRan shall advise
Participant of the amounts of the Exploration Fund which have been
committed to Prospects on which an Exploratory Well has not yet commenced.
Such advise shall include the name of the Prospect, the amount of the
Exploration Fund anticipated to be spent thereon and the anticipated
commencement date of the Exploratory Well to be drilled thereon. On a
monthly basis, McMoRan shall provide Participant with an accounting of the
Exploration Expenditures of the prior month and Program Term to date
reconciling prior ▇▇▇▇▇▇▇▇ and advance ▇▇▇▇▇▇▇▇ with expenditures. McMoRan
will promptly advise Participant in writing when McMoRan reasonably
believes that actual and committed Exploration Expenditures of the Program
equal the Exploration Fund and will furnish reasonable data supporting such
conclusion. In addition to the foregoing, McMoRan will furnish Participant
on request and at Participant's expense any other data or information
needed by Participant to comply with any governmental laws, rules and
regulations, including those promulgated by the Securities and Exchange
Commission.
VII.
Scientific Studies and Information
7.1 Scientific Studies and Information. During the Program Term,
McMoRan shall conduct geological, geophysical, engineering and other
scientific studies with respect to the acquisition and/or exploration of
Leasehold Interests ("Scientific Studies") in the Program Area and the cost
thereof shall be Exploration Expenditures.
It is agreed that any seismic records, and other exploration data (not
including any interpretation thereof by McMoRan or its Technical
Consultants prior to the time a Prospect based thereon has been designated
by McMoRan hereunder) that may be acquired by McMoRan under the terms of
this Agreement shall become and remain the joint property of McMoRan,
Participant and other members of the McMoRan Group. If McMoRan designates
a Prospect under Paragraph 8.1 hereof affecting such acquired data, McMoRan
shall at such time furnish copies of all such data, upon written request of
Participant, including geological and geophysical maps, to Participant
unless McMoRan is prohibited from furnishing a copy or disclosing it to
Participant under the agreement by which McMoRan acquired such data.
Except as otherwise provided in this Agreement, Participant shall be
permitted full access to such data in McMoRan's offices unless prohibited
from doing so under the agreement by which McMoRan acquires such data.
McMoRan shall not be precluded from entering into data exchange agreements
which McMoRan in good faith believes will benefit the Program and all data
acquired pursuant to any such exchange agreement shall be the joint
property of McMoRan, Participant and other members of the McMoRan Group.
During and after the Program Term, McMoRan shall have the exclusive right
to sell any such data which McMoRan in good faith believes no longer must
be kept confidential for the purposes of the Program and the proceeds of
such sale shall be shared by the Participant, McMoRan and the other members
of the McMoRan Group on the same basis as the said parties own such data.
At the end of the Program Term, McMoRan shall identify seismic records and
other pertinent acquired data (not including any interpretation thereof by
McMoRan or its Technical Consultants) as to which Prospects have not been
designated during the Program Term and McMoRan shall, upon written request
by Participant, provide it copies of all or any part of such data, unless
prohibited from doing so under the agreement by which McMoRan acquired such
data. Notwithstanding anything herein to the contrary, Participant shall
not have or acquire any property interest in any interpretations by McMoRan
or its Technical Consultants of any seismic or other exploration data
unless and until a Prospect based thereon has been designated by McMoRan
hereunder.
VIII.
Prospects
8.1 Prospects. From time to time McMoRan will obtain information upon
which it can determine and define a particular portion of the Program Area
with sufficient specificity as to be identified as a Prospect. The term
"Prospect" means a contiguous area which can reasonably be interpreted from
geological and/or geophysical data as encompassing a geological structure,
stratigraphic trap or other common geologic feature which makes its
treatment as a single Prospect for oil and gas production purposes
reasonable and some portion of which is considered prospective for
commercial oil or gas production and is designated as such pursuant to this
Article VIII. Based on such information, McMoRan shall from time to time
designate an area as a Prospect of the Program. The size and configuration
of a Prospect, as well as all details incident thereto, shall be determined
by McMoRan. During the Program Term, McMoRan alone shall determine the
time when an area is designated as a Prospect, whether or not Leasehold
Interests have previously been acquired therein. After the Program Term
and in accordance with Paragraph 8.2 hereof, any member of the McMoRan
Group shall have the right to designate a Prospect which includes Leasehold
Interests theretofore acquired through the Program. Without the prior
consent of Participant, McMoRan shall not commit to the Program any
Prospects which (1) McMoRan's economic analysis indicates will not have at
least a before taxes rate of return of twenty-five (25) percent, or (2) the
water depth for the first expected platform location is greater than 1,000
feet.
At the time that McMoRan designates a Prospect it shall furnish to
Participant a land plat showing the approximate outline of the Prospect and
the proposed AMI therefor. Subject to Paragraph 5.2, McMoRan shall as soon
as possible thereafter, upon written request of Participant, furnish
Participant (to the extent not previously furnished) with all pertinent
data then available with respect to the evaluation of such Prospect for oil
or gas development excluding only such data as McMoRan is prohibited from
disclosing by reason of confidentiality agreements with third parties
respecting such data. Such data shall include a land and geophysical or
geological report on such Prospect, including with respect to the drillsite
for the first Exploratory Well proposed to be drilled thereon, a land plat,
farmin, farmout and other trade agreements, copies of leases, drilling
title opinions, assignments, unit designation agreements, operating
agreements and other documents necessary for Participant to maintain
adequate records relative to such Prospect and operations thereon, together
with such of the following, as and when available, which are applicable to
each such Prospect:
(a) An itemized list of all Exploration Expenditures charged to such
Prospect;
(b) An itemized estimate of probable additional costs which may have
to be incurred in connection with such Prospect;
(c) Any other information in McMoRan's possession relevant to an
evaluation of such Prospect, including geological data, including but not
limited to cross-sections, maps, key logs, and geophysical data, including
copies of proprietary reprocessed data, sepias of lines; and
(d) A description of the primary geologic objective and prospective
zone(s) for which the Prospect was acquired.
At the time each such Prospect is designated, McMoRan will separately
allocate to it all Exploration Expenditures thereto-fore incurred and
properly attributable to such Prospect, including but not limited to those
expenditures made pursuant to Paragraph 4.1 above.
8.2 Designation of Prospects After Program Term. To the extent any
Leasehold Interests acquired by the Program are not included in Prospects
designated by McMoRan on or prior to the end of the Program Term, then
after such date any member of the McMoRan Group or their respective
successors in interest shall have the right to propose a Prospect at the
time that it proposes an Exploratory Well thereon. The geographic limits
of such Prospect so designated shall meet the criteria set forth in
Paragraph 8.1 and the AMI therefor shall be subject to the provisions of
Article XIII hereof.
IX.
Drilling of Exploratory ▇▇▇▇▇
9.1 During Program Term. During the Program Term, at the same time as
McMoRan designates a Prospect under Paragraph 8.1 above or thereafter when
it commits the Exploration Fund to the drilling of an Exploratory Well
thereon or as soon as possible after McMoRan has received notice from a
third party joint interest owner that it proposes the drilling of a well
thereon, McMoRan shall provide to Participant (if not previously furnished
and requested in writing by Participant) the following information:
(a) An AFE for such well both as a dry hole and as a completed well;
(b) A land plat depicting the Prospect, the proposed AMI for such
Prospect and the Program's Leasehold Interests within the AMI for such
prospect;
(c) A schedule of the Program's Leasehold Interests in the Prospect
AMI;
(d) Maps depicting McMoRan's geological and geophysical
interpretations of the Prospect;
(e) McMoRan's economic analysis of the Prospect's potential and
timing and estimated costs to develop, including description of facilities
to be used, if then known;
(f) Information as to whether any other third party joint interest
owner has elected to join or not to join in the drilling of such well;
(g) The surface location, proposed bottom hole location, proposed
depth and well prognosis including casing program, mud program and logging
program for such well (to the extent available in those cases where a third
party is the operator of the well) and any other information in McMoRan's
possession relevant to an evaluation of such well; and
(h) Any acreage or cash contribution pledged in support of the
proposed operation.
Beginning with the permitting process for any Exploratory Well drilled
hereunder, and continuing through the drilling and completion, temporary
abandonment or plugging and abandonment for such well, McMoRan shall
provide the following information if requested in writing by Participant
(to the extent available to McMoRan and not previously furnished):
(a) name of well, name of Prospect, and identification number;
(b) drilling permits, plugging and abandonment permits and permission
to produce;
(c) all daily drilling reports, State completion reports, well
completion schematic diagram, stimulation reports and workover reports;
(d) all core analyses, fluid analyses, PVT. analyses, water sample
analyses;
(e) all pressure survey, DST reports, and pressure buildup or
drawdown data;
(f) all well logs.
9.2 After Program Term. Subject to Paragraph 19.2 hereof, after the
Program Term, McMoRan or Participant shall have the right to propose the
drilling of an Exploratory Well or a Development Well on any Prospect. The
terms and provisions of the applicable Program Operating Agreement shall
govern any such proposal.
X.
Farmout or Participation Agreements
10.1 Participation Agreements. During the Program Term, if in the
process of evaluation of a Prospect the data and information lead McMoRan
to the good faith determination that because of the large expenditures
required, the extraordinary risk involved or other facts deemed relevant by
McMoRan, an outside venturer should be obtained in such Prospect, McMoRan
shall have the right to undertake to negotiate an agreement with a third
party to join in the drilling of the Exploratory Well on the Prospect and
thereby acquire a portion of the Exploration Program's interest in such
Prospect; provided, however, that if any such agreement would reduce the
interest of the Exploration Program by more than fifty percent (50%),
McMoRan must obtain the prior approval of Participant. McMoRan shall give
notice to Participant of its intention to negotiate an agreement with an
outside venturer which would reduce the interest of the Exploration Program
by more than fifty percent (50%), stating the time within which the
circumstances require an expression of approval or disapproval by the
Participant. Failure of Participant to disapprove the proposed negotiation
within the stated period of time may be deemed by McMoRan to be approval by
Participant. Any agreement with an outside venturer shall be on the basis
of the outside venturer paying and bearing not less than the proportionate
part of all drilling costs and expenses of the Exploratory Well
attributable to the undivided interest transferred to such outside
venturer, and the interest in the Prospect transferred to or earned by such
outside venturer shall reduce the respective interests of McMoRan and
Participant proportionately. Any promotion or other consideration received
by McMoRan incident to such agreement with an outside venturer shall be
held for the benefit of the Exploration Program and the members of the
McMoRan Group shall be entitled to participate therein in proportion to
their interest in the Prospect. The foregoing provision shall not be
applicable to McMoRan's transaction with other members of the McMoRan Group
so long as the interest of Participant set forth in Article III is
maintained.
10.2 Farmout Agreements. During the Program Term McMoRan shall have
the right to enter into farmout agreements with unrelated third parties on
such terms as it deems appropriate respecting Leasehold Interests or
portions thereof which are not anticipated to be drilled or committed to be
drilled by the Exploration Program during the Program Term; provided,
however, McMoRan shall keep Participant advised as to any such farmout
proposals or plans and shall honor the request of Participant that its
interest in such Leasehold Interests or Prospect not be farmed out if
Participant advises McMoRan within ten (10) days, or forty-eight (48) hours
if a drilling rig is on location with stand-by rig charges accumulating, of
McMoRan's notice of intention to farmout that it will participate as to its
ownership interest in the drilling of the anticipated farmout well.
McMoRan shall not farmout any of Participant's Interest in a Prospect
on which the Program has a producing well without the prior consent of
Participant.
10.3 Trade Agreements. During the Program Term, in connection with the
drilling of an Exploratory Well on a Prospect, McMoRan shall have complete
authority to enter into unit agreements, acreage swap agreements, bottom
hole and dry hole contribution agreements and any similar agreements with
unrelated third parties. The cost or proceeds of any of the forgoing
agreements shall be credited or charged to the members of the McMoRan Group
(1) in the proportion that such parties participated in the drilling of the
affected Exploratory Well, or (2) if the costs relate to the payment by the
Exploratory Program of a dry hole or bottom hole contribution to a third
party, in the proportion that such parties bear Exploration Expenditures
hereunder, and any interest in leases or oil or gas thus acquired by
exchange shall constitute Leasehold Interests subject hereto and be owned
by the members of the McMoRan Group in proportion to their ownership
interest in such Prospect.
XI.
Burdens
11.1 Burdens. The Leasehold Interests to be acquired by the Program
shall be subject to and McMoRan and Participant each shall bear its
proportionate part of all third party overriding royalties and other
burdens on Leasehold Interests (including subsequently acquired Leasehold
Interests in the Prospect AMI) which McMoRan contracts for incidental to
the acquisition or evaluation of such Leasehold Interests. Participant
acknowledges that McMoRan has heretofore entered into a retainer agreement
with a Technical Consultant and may enter into similar agreements with
others during the Program Term. Without the consent of Participant,
McMoRan agrees not to subject any Leasehold Interests to overriding royalty
burdens to its Technical Consultants which exceed the amounts deliverable
to its current Technical Consultant, CLK Company, L.L.C.(CLK),under their
existing agreement as described in the letter to Participant dated the date
hereof. McMoRan has provided Participant with a copy of its current
consulting agreement with CLK and Participant agrees that it will bear its
proportionate part of the overriding royalties to which CLK is entitled
pursuant to the terms of said consulting agreement as to any Leasehold
Interests acquired hereunder as well as to any Leasehold Interests that
Participant may acquire pursuant to an AMI agreement subject hereto.
XII.
Operating Agreement
12.1 Operating Agreement. Except as otherwise provided in this
Agreement, all operations on each Prospect will be carried out in
accordance with the provisions of the Program Operating Agreement, Offshore
or Onshore as applicable, with charges and credits to the join account to
be made in accordance therewith, including all overhead as to the drilling
of Development ▇▇▇▇▇. In the event of conflict between the terms of the
Program Operating Agreement and the terms of this Agreement, this Agreement
shall control. A particular Leasehold Interests or Prospect may be subject
to a different form of operating agreement (third party) with one or more
third parties not related to McMoRan, which operating agreement (third
party) shall apply and control at the time it becomes effective in the
event of conflict therewith and the Program Operating Agreement. In the
event of conflict between such operating agreement (third party) and this
Agreement (other than the Program Operating Agreement), this Agreement
shall control as between McMoRan and Participant.
XIII.
Area of Mutual Interest
13.1 Third Party Area of Mutual Interest Agreements. McMoRan may be
obligated to enter into third party AMI agreements in connection with the
acquisition of additional Prospects for the Program. Participant agrees to
be bound by the provisions of such AMI agreements.
13.2 Program Area of Mutual Interest Agreement. At the time a Prospect
is identified by McMoRan pursuant to Paragraph 8.1 hereof, there shall be
created an Area of Mutual Interest among McMoRan, Participant and the other
members of the McMoRan Group. The lands within such Area of Mutual
Interest shall include the involved Prospect and shall be fixed and
determined in the following manner:
(a) McMoRan shall submit to Participant and the other members of the
McMoRan Group a plat delineating the area which it determines on a sound
geological basis should be considered as the area which, even though
outside the boundaries of the Prospect, should be considered an area of
mutual interest in connection with the Prospect.
(b) In the event that Participant does not accept the proposed area
of mutual interest, consultation shall be had between McMoRan and
Participant and the other members of the McMoRan Group in an effort to fix
and determine the area to constitute the area of mutual interest.
(c) If McMoRan and the other members of the McMoRan Group are able to
agree on such area, the area agreed upon shall constitute the Area of
Mutual Interest, or if agreement cannot be reached, the area of the
Leasehold Interests as to a Prospect all of which is under Federal leasing
jurisdiction, or as to any other Prospect the area within one-half (1/2)
mile surrounding the outer perimeter of the Prospect, shall constitute the
Area of Mutual Interest; provided however, any such AMI shall not include
any portion of an Excluded Area.
The AMI shall be effective so long as any Leasehold Interests in such
AMI is owned by any of the parties or is subject to this Agreement, but in
no event longer than the earlier of (i) December 31, 2006 or (ii) one (1)
year after the plugging and abandoning of an Exploratory Well thereon
unless another Exploratory Well has been commenced thereon or McMoRan
and/or another member(s) of the McMoRan Group have agreed to install a
drilling and production platform on such Prospect within such one (1) year
period.
Any acquisition of Leasehold Interests within such AMI after the
establishment thereof by McMoRan or Participant or any other member of the
McMoRan Group shall be made available to be shared by McMoRan, Participant
and the other members of the McMoRan Group. Subject to the rights of any
third party under third party AMI agreements as described in Paragraph
13.1, each party shall have the option to participate in any such
acquisition in the proportion as such party's then interest in such
Prospect as compared to the total interest of the McMoRan Group, which
option is to be exercised in the following manner: the acquiring party
shall notify each of the other parties of such acquisition, furnish a copy
thereof and such title information as the acquiring party has, stating the
cost of such acquisition and/or obligations that must be assumed in
connection therewith. Each of the other parties shall have a period of
fifteen (15) days with respect to the interests not related to a drilling
well, and forty-eight (48) hours (or such lesser period as required by the
circumstances and stated in the notice) with respect to interests related
to a drilling well, after receipt of such notice within which to elect and
notify the acquiring party whether or not such party desires to participate
in such acquisition. Failure to respond shall be deemed an election on the
part of such party not to participate in such acquisition. Upon election
and payment to the acquiring party of such other party's share of the cost
of such acquisition and assumption of its share of such obligations, such
other party shall be entitled to an assignment of its pro rata share of
such party's interest in such acquisition. The foregoing provision of this
paragraph shall not apply nor shall they alter Participant's obligation to
purchase its proportionate part of any Leasehold Interests acquired by
McMoRan hereunder in those cases where the costs of acquiring such
interests are Exploration Expenditures.
In the event any party does not elect to participate in an interest
tendered to it under this Paragraph 13.2 the participating parties may,
within twenty-four (24) hours after notice thereof, elect to take their
proportionate shares of the non-participating party's interest. Time
periods expressed in this Paragraph 13.2 are inclusive of Saturdays,
Sundays and legal holidays.
The provisions of this Paragraph 13.2 shall not be applicable to
acquisitions by any party hereto of an interest acquired from any other
member of the McMoRan Group or through merger, corporate reorganization or
consolidation with or purchase of all or substantially all of the assets of
a corporation, an individual or a partnership; provided, however, that the
primary purpose of such merger, corporate reorganization, consolidation or
purchase is not to acquire Leasehold Interests in a specific Prospect which
otherwise would be subject to this Agreement.
McMoRan agrees to furnish Participant with a list of names, addresses,
persons designated to receive notices and the proportional interest of each
of the other members of the McMoRan Group who have a right to participate
in acquisitions made by Participant within an AMI. Additionally, McMoRan
agrees to secure reciprocal obligations in favor of Participant from each
of the other members of the McMoRan Group.
XIV.
Assumption of Interest
14.1 Assumption of Interest. If any member of the McMoRan Group
exercises its right (where it has such right) to decline to participate in
an acquisition of Leasehold Interests, the members of the McMoRan Group
participating therein may, within five (5) days after notice thereof, elect
to take their proportionate share (i.e. in the proportion which the
ownership interest of each such participating party bears to the ownership
interest of all such participating parties) of the non-participating
party's interest. If the participating party(s) do not agree to assume all
of the interest which would have been assumed by the non-participating
party(s), then the acquisition shall not be carried out.
XV.
Ownership of Production
15.1 Ownership of Production. All the oil, gas and casinghead gas
produced for the account of the Leasehold Interests from any well shall be
owned by McMoRan, Participant and by the other members of the McMoRan Group
severally, in proportion to the respective interests of each therein as set
forth in Paragraph 3.2. above, except as otherwise provided in this
Agreement, and subject to the right, if any, that others may have under the
terms of this Agreement or any operating agreement relating to such well.
Anything to the contrary herein notwithstanding, each party shall at all
times have the right to take in kind or separately dispose of such party's
share of the production from any such well, subject to the provisions of
the applicable Program Operating Agreement. McMoRan shall, however,
attempt to give Participant at least seven (7) days advance written notice
of the anticipated date of first deliveries of any production from a
Prospect.
XVI.
Relationship of the Parties
16.1 Tax Partnership. This Agreement is not intended and shall not be
considered to create a partnership within the meaning of the federal common
law or under the applicable laws of any state or under the laws of the
state in which any party hereto is incorporated, organized or conducting
business or to create a relationship whereby any of the parties shall be
held liable for the acts, either of omission or commission, of any other
party thereto; provided, however, that in the event a party should suffer a
loss by reason of an unauthorized act of the other party hereto, the latter
shall indemnify and save harmless the former.
The parties expressly agree that no party hereto shall be responsible
for the obligations of any other party, each party being severally
responsible only for its obligations arising hereunder and liable only for
its allocated share of the costs and expenses incurred hereunder. It is
not the purpose or intention of this Agreement to create, and this
Agreement should never be construed as creating, a relationship whereby any
of the parties shall be held liable for acts, either of omission or
commission, of any other party hereto. Notwithstanding the foregoing, each
party hereto agrees that this Agreement creates a partnership for Federal
and State income tax reporting purposes only, which tax partnership shall
function and exist in accordance with the terms and provisions of Exhibit
IV attached hereto. McMoRan agrees to provide to the Participant on a best
efforts basis, by April 30th of each year, any information available to it
relating to operations conducted pursuant to the Program that is necessary
for Participant to prepare Schedule K-1 of its federal income tax return.
XVII.
▇▇▇▇▇▇▇▇; Notices
17.1 ▇▇▇▇▇▇▇▇; Notices. All ▇▇▇▇▇▇▇▇ and notices shall be as provided
in the applicable Program Operating Agreement.
XVIII.
Special Non-Consent Elections
18.1 Casing Point Election - Onshore Prospects. At such time as an
Exploratory Well has been drilled to the final total depth on an Onshore
Prospect, McMoRan shall notify Participant that the Casing Point has been
reached on such well, and whether or not McMoRan recommends that an attempt
be made to complete such well. McMoRan shall also furnish, if requested in
writing by Participant, the estimated costs of completing and equipping the
well and plugging and abandoning same if the completion is unsuccessful,
and all well logs, core analyses and other information in its possession
not theretofore furnished relevant to evaluation of a completion attempt.
Within forty-eight (48) hours (inclusive of Saturday, Sunday and legal
holidays) of receipt of such recommendation, Participant shall advise
McMoRan whether or not it desires to participate in the recommended
completion attempt. If McMoRan and Participant agree to attempt completion,
McMoRan shall thereupon be authorized to proceed with the completion
attempt and to charge the cost thereof as a Development Expenditure;
provided, however, the cost of plugging and abandoning the well shall be
charged as an Exploration Expenditure if the completion attempt is
unsuccessful. If Participant does not elect to participate in such
completion attempt, it shall have no further rights hereunder as to the
Prospect involved. If McMoRan recommends abandonment without a completion
attempt, McMoRan shall have the well plugged and abandoned, charging the
cost thereof as an Exploration Expenditure. Additionally, if Participant
does not elect to participate in a second or subsequent Exploratory Well in
a particular Prospect, Participant shall have no further rights hereunder
as to the Prospect involved.
18.2 Elections Prior to Platform Installation - Offshore Prospects. If
Participant does not elect to participate in (a) the drilling of any well
on an Offshore Prospect proposed by McMoRan to be drilled after the
drilling of the first two (2) Exploratory ▇▇▇▇▇ thereon and prior to the
installation of the first drilling and/or production platform on such
Prospect or (b) Participant does not elect to participate in the
installation of the first drilling and/or production platform on such
Prospect, the Participant shall have no further rights hereunder as to the
Prospect involved.
18.3 Time Periods. Whenever an election right is provided in the body
of this Agreement and no time period for response is stipulated then the
applicable time periods provided in the applicable Program Operating
Agreement shall apply.
18.4 Completion Attempt by Participant - Onshore. If McMoRan does not
recommend the completion of an Onshore Exploratory Well and Participant
advises McMoRan within forty-eight (48) hours (inclusive of Saturday,
Sunday and legal holidays) of the receipt by Participant of such
recommendation from McMoRan that Participant elects to attempt to complete
such well, McMoRan shall undertake the completion thereof, and any
subsequent plugging and abandoning thereof, for the account of Participant
and Participant shall bear all costs, risks and expenses of such completion
attempt and abandonment thereof and Participant agrees to indemnify and
hold McMoRan harmless therefrom. If such completion attempt is successful
McMoRan will assign Participant all of its interest in the borehole of such
well and any production therefrom, but such assignment shall not confer any
additional interest to the Participant in the balance of the particular
Prospect involved.
XIX.
Program Term
19.1 Program Term. The Program Term shall commence on December
15, 1997 and shall terminate, except for completion of operations which
were theretofore commenced or committed, on the earlier of March 31, 2002,
or the date that all of the Exploration Fund has been spent or committed.
At the end of the Program Term, McMoRan shall provide Participant with a
list (the "Committed List") of the undrilled ▇▇▇▇▇, Prospects and farmout
agreements as to which it has committed the Exploration Fund. Once such
Committed List has been provided to Participant, no substitution shall be
made by McMoRan without the consent of Participant.
19.2 Unfunded Prospects. At the same time as McMoRan submits the
Committed List, McMoRan shall also submit a listing of all Prospects which
would have been committed to the Exploration Program except for the fact
that the Exploration Fund had been fully expended and/or committed. Within
fifteen (15) days of receipt of such listing from McMoRan, Participant will
have the option to commit additional funds to the Exploration Fund for the
drilling of the first Exploratory Well on any such Prospect or Prospects or
to advise MOXY that it does not elect to so commit any such additional
funds. If the Participant does so commit, the drilling of such first
Exploratory Well on a Prospect where Participant commits such additional
funds shall be charged as Exploration Expenditures and shall be deemed
included in the Committed List. If the Participant does not commit such
addi-tional funds for a Prospect on such listing, MOXY shall have the right
to acquire Participant's interest in such Prospect, free of any liens,
burdens, or overriding royalties not provided for by Article XI hereof, by
reimbursing Participant for any direct costs incurred by Participant in
acquiring Leasehold Interests in such Prospect; if MOXY so reimburses
Participant, such Prospect shall be excluded from this Agreement and
Participant shall have no further right hereunder as to such Prospect.
XX.
Operations After Program Term
20.1 General. After the Program Term, all Leasehold Interests of the
Program will be subject to the provisions of the applicable Program
Operating Agreement and the provisions of this Agreement except as set
forth in Paragraph 19.2 and this Article XX. Any Leasehold Interests which
is included in a Prospect on which an Exploratory Well has been committed
as shown on the Committed List shall become subject to this Article XX
after the drilling of such committed well.
20.2 Exploratory ▇▇▇▇▇. After the Program Term, McMoRan and/or
Participant shall have the right to propose the drilling of an Exploratory
Well on a Prospect in accordance with Paragraph 9.2 hereof.
20.3 Development Expenditures. All Development Expenditures shall be
borne by the parties according to their interest and subject to the
provisions of the applicable Program Operating Agreement, whether incurred
before or after the Program Term.
20.4 Provisions Which Do Not Survive the End of the Program Term. From
and after the end of the Program Term, McMoRan shall have no right to
commit Participant to any expenditures except in accordance with the
applicable Program Operating Agreement and with respect to the conclusion
of then drilling or committed operations. McMoRan shall have no obligation
thereafter to offer Participant the right to acquire any Leasehold
Interests unless such acquisition is subject to an AMI agreement with
Participant. Further, McMoRan shall have no further right to bind
Participant's interest to any trade agreement except as may be expressly
authorized by Participant.
XXI.
Confidentiality.
21.1 Confidentiality. Except to the extent provided to the contrary
hereunder and subject to any agreements with third parties entered into
pursuant to the Program, each party agrees that at all times prior to, but
not after, December 31, 2007, it will take all reasonable steps to keep
secret and confidential and not disclose to any third party, geological or
geophysical data, progress reports or other information which it may
receive as a result of operations carried out under this Agreement;
provided, however, that these restrictions shall not apply to information
which (i) is in, or has entered into, the public domain without breach of
the provisions of this Paragraph 21.1; (ii) is in the possession of a party
receiving same as a result of prior receipt thereof from another party (not
a party to this Agreement) prior to the time of such receipt under this
Agreement, (iii) may lawfully be obtained as a matter of right by the party
receiving same from another source, (iv) is required to be disclosed by law
or the rules of any governmental agency or an applicable stock exchange, by
McMoRan or Participant, or (v) is furnished to Affiliates, or to bona fide
prospective purchasers, mortgagees, prospective mortgagees, lenders,
prospective lenders, prospective joint program participants and consultants
for evaluation purposes provided that any person furnished information
pursuant to this clause (v) agrees not to communicate such information to
any other party or to use it for their own benefit in a manner adverse to
the interests of the McMoRan Group. Notwithstanding the foregoing, the
parties recognize that from time to time information (such as logs) may be
acquired by the Program which should not be disclosed to anyone other than
those persons who must have such information. Each party shall take all
reasonable steps to require its employees and consultants to be bound by
the provisions of this paragraph in the same manner as it is bound
hereunder. News releases concerning discoveries or operations of the
Program shall only be made in accordance with guidelines attached to the
applicable Program Operating Agreement, subject to the requirements of
applicable laws and regulations and requirements of applicable stock
exchanges.
XXII.
Insurance
22.1 Insurance for Program. McMoRan shall, at the expense of the
Exploration Program, procure and maintain with responsible companies
insurance in the amounts and covering the risks set forth below:
(a) Worker's Compensation:
Such insurance shall be in full compliance with the law in the
state where the work is to take place and shall contain a
voluntary compensation endorsement and a waiver of subrogation as
to Participant. Where applicable, coverage shall also be
provided to comply with the:
(i) U.S. Longshoremen's and Harbor Worker'sCompensation Act, and
the
(ii) Outer Continental Shelf Lands Act.
(b) Employer's Liability:
Such insurance shall have a limit of liability of $500,000 per
accident and shall be endorsed, where applicable, to provide:
(i) Maritime (Amendment to Coverage B), to include
transportation, wages, maintenance and cure.
(ii) A claim "in rem" will be treated as a claim "in personam".
(iii)A waiver of subrogation as to Participant.
(c) Comprehensive General Liability Insurance:
Such insurance shall have a limit of $1,000,000 per occurrence
and shall be endorsed, where applicable, to provide:
(i) Deletion of the watercraft exclusion.
(ii) Contractual liability coverage.
(iii)That Participant be named as an additional insured.
(d) Control of Well Insurance in the minimum amount of
$50,000,000 for the total loss, endorsed to name
Participant as an additional insured.
(e) All vessels owned or chartered by McMoRan shall be adequately
covered by Hull and Protection and Indemnity Insurance.
(f) No insurance other than as specified above shall be provided by
McMoRan.
(g) McMoRan shall require contractors and subcontractors performing
work for the Program to provide such insurance as deemed reasonable by
McMoRan in relation to the work to be performed by said contractors or
subcontractors.
(h) Upon request, certificates of insurance evidencing the insurance
obtained by McMoRan hereunder shall be furnished to Participant.
(i)Unless otherwise agreed in writing, McMoRan and Participant shall
separately carry their own policies of the following insurance:
(i) Where applicable, Blanket Charters' Legal Liability and Cargo
Legal Liability with a limit of liability of $500,000.
(ii) Umbrella liability Insurance in the amount of$25,000,000
excess of all primary limits.
(iii) Above insurance coverages including, but not limited to, any
and all deductibles, self-insured retentions or primary layers,
shall contain waivers of subrogation as to McMoRan and
Participant.
XXIII.
Record Title, Assignment
23.1 Record Title. For convenience, McMoRan shall initially hold
record title to the Leasehold Interests acquired hereunder; provided
however, upon written request by Participant, McMoRan will, within 120 days
following the completion by the Program on an Onshore Prospect of a well
capable of producing in paying quantities, or within 120 days following the
installation of the first drilling and/or production platform on an
Offshore Prospect by the Program, as applicable, execute and deliver to
Participant a recordable assignment of Participant's interest in all
Leasehold Interests in such Prospect, unless Participant has no further
rights hereunder as to a particular Prospect as the result of a decision
not to participate pursuant to ▇▇▇▇▇▇▇▇▇ ▇▇.▇, ▇▇▇▇▇▇▇▇▇ 18.2 or Paragraph
19.2, as applicable. Notwithstanding the foregoing, if a Prospect involves
the acquisition of a Leasehold Interests from a third party, the period
hereinabove provided for the delivery of assignments shall be extended, if
required, until 60 days following the receipt of an assignment of interest
by McMoRan from such third party; provided however, in the event that such
an assignment requires the approval of a governmental authority then such
period will be extended for 60 days following the receipt by McMoRan of the
required approval from the governmental authority. In addition, at the end
of Program Term McMoRan shall execute and deliver to Participant a
recordable assignment of Participant's interest in any other Leasehold
Interests not previously conveyed to Participant during the Program Term
pursuant to any provision of this Agreement. Such assignment shall warrant
title against all parties claiming by, through or under McMoRan, but not
otherwise; but McMoRan shall assign to Participant, with full right of
subrogation, to the extent so transferable, the benefit of and the right to
enforce the covenants and warranties, if any, which McMoRan is entitled to
enforce with respect to the interest assigned or any part thereof. Each
assignment shall be subject to this Agreement and shall be charged with and
burdened by the proportionate part of the royalties provided for in each
lease covered thereby, any overriding royalty or similar interest with
which such Leasehold Interests are burdened as authorized by Paragraph 11.1
hereof and any other contracts or agreements with which such Leasehold
Interests are burdened by McMoRan as expressly authorized by other
provisions of this Agreement and which continue to burden such Leasehold
Interests at the time of such assignment. If, however, there are
restrictions on assignability with respect to a Prospect or Leasehold
Interests prohibiting McMoRan as nominee for the Program from transferring
interests in such Prospect or Leasehold Interests, McMoRan shall continue
to hold record title in its name on behalf of the parties owning interests
therein rather than for the Program, and at the request of such parties
will execute a mutually acceptable nominee agreement.
23.2 Assignment. Except as permitted below, without the prior written
consent of the other party, neither McMoRan nor Participant shall assign
any rights in this Agreement. Until the Program has completed a well
capable of production in Paying Quantities on an Onshore Prospect or prior
to the election provided in Paragraph XVIII hereof as to an Offshore
Prospect, or the end of the Program Term, whichever first occurs, no party
hereto may assign its interest in the Leasehold Interests within said
Prospect acquired pursuant to the Program without first obtaining the
consent of the other party hereto (which approval will not be unreasonable
withheld); provided that granting of a lien or security interest by any
party shall not require such consent. The assignees of any Leasehold
Interests acquired pursuant to the Program shall be bound by all of the
assignor's obligations with respect to such Leasehold Interests as to the
interest assigned. Notwithstanding the foregoing, either Participant or
McMoRan without the necessity of obtaining consent may transfer all or any
part of its interests and rights in this Agreement or in any Prospect to
any Affiliate provided that the assigning party shall remain liable
hereunder.
XXIV.
Subsequent Interests
24.1 Subsequent Interest. Except with respect to burdens described in
Paragraph 11.1, or as otherwise provided in this Agreement, a party who
creates any burden against such party's interest in any Leasehold Interests
shall be solely responsible for such burden; and in the event such party is
required, pursuant to other provisions of this Agreement including the
applicable Program Operating Agreement or a third party operating
agreement, to assign its interest in any Leasehold Interests to any other
party, such assignment shall convey and vest title to such interest in such
assignee free and clear of any such burden.
XXV.
General
25.1 Records. McMoRan shall maintain complete and accurate records of
all Leasehold Interests acquired and held hereunder, the acquisition and
disposition of all equipment hereunder, and of all expenditures made
hereunder in accordance with generally accepted industry standards.
McMoRan will maintain complete and accurate records of all correspondence
with any operator who may be operating properties in which the parties
hereto have an interest under this Agreement, and will retain a copy of all
statements, bills and other instruments furnished by any such operator in
accordance with generally accepted industry standards. Such records,
together with receipts, vouchers and other supporting evidence thereof in
McMoRan's possession and control, will be available for inspection, copying
and audit by Participant or its duly authorized representatives on
reasonable notice at McMoRan's office during regular business hours then in
effect. Participant's right to audit McMoRan's records for the purpose of
challenging the correctness of any charge made by McMoRan hereunder shall
terminate as provided in the accounting procedure attached to the Program
Operating Agreement. Participant shall be entitled to join McMoRan in any
audit made by McMoRan of the records of third party operators of properties
in which Participant acquired an interest under this Agreement. At the
request of Participant, McMoRan shall conduct or cause to be conducted an
audit of the records of any such third party operator hereunder, said audit
right to be as specified in such third party agreement including the
polling of other non-operators to determine if they desire to participate,
at which time McMoRan may decline to participate and therefore not bear any
cost related to such audit. In addition, Participant shall have the same
audit rights as held by McMoRan under third party agreements including the
right to elect participation in any audit performed by another non-operator
if McMoRan elects not to participate in such audit and Participant shall
receive copies of all reports of joint venture audits which are conducted.
25.2 Access. Participant or its duly authorized represen-tative shall
have access at all reasonable times, at its expense and risk, to the
▇▇▇▇▇▇▇ floor of any well being drilled hereunder in which Participant is
participating; and Participant shall have the right to inspect all
materials on hand for the account of the Program and to observe any such
operations conducted hereunder.
25.3 Claims and Litigation. Except as to matters arising with respect
to a particular Prospect after the Program Operating Agreement has become
applicable as to all further operations thereon under the provisions of
this Agreement (as to which the provisions of such Program Operating
Agreement will govern), all investigation, litigation and settlements in
connection with titles, claims and causes of action of every kind and joint
rights and interests of the members of the McMoRan Group in the Program
Area in connection with the Program shall be carried on, conducted and
defended for and on behalf of all members of the McMoRan Group involved.
Each party shall notify the others of any process served upon it in any
such suit or claim. Where a claim has been made or a suit has been filed
against McMoRan or Participant or any other member of the McMoRan Group for
damages caused by or arising out of operations the expense of which is
charged to the Exploration Fund as authorized herein, McMoRan shall retain
legal counsel to handle the defense of such suit or claim and notify
Participant and other members of the McMoRan Group involved of the
retention of such legal counsel. The cost of such legal services shall be
charged in the same manner as Exploration Expenditures are charged.
Participant may, if it so chooses, elect to retain its own legal counsel
(at Participant's expense) to defend its interests in any such suit or
claim; and in such event the claim or suit shall be defended by a committee
of attorneys selected by and representing the separate interests of the
respective members of the McMoRan Group (with each member of the McMoRan
Group being responsible for the fees and expenses of its own counsel), with
McMoRan's counsel as chairperson. All settlements of suits and claims
shall be subject to the approval of Participant; except that McMoRan may
settle any claim under $100,000 without first receiving Participant's
approval, provided the payment is in complete settlement. The costs and
expenses involved in those matters which are subject to the provisions of
this Paragraph 25.3 shall be shared and borne solely by the parties who
participated in such operation or Leasehold Interests in proportion to
their respective participation in the applicable operation or Leasehold
Interests. McMoRan agrees to keep Participant advised as to claims for
which Participant may be partly responsible hereunder.
25.4 Good Faith. McMoRan and Participant agree to act in good faith
with respect to their respective activities under this Agreement.
25.5 Governing Law. This Agreement and the documents provided for
herein shall be deemed to be governed by, and construed in accordance with,
the laws of the State of Louisiana.
25.6 Failure to Respond. Except as provided in Paragraph 10.1 hereof,
whenever under this Agreement (exclusive of the applicable Program
Operating Agreement) Participant is given the right to approve or
disapprove or participate or decline to participate in a proposed operation
or acquisition, failure to respond shall be deemed a response to disapprove
or decline to participate in the proposed operation or acquisition unless
McMoRan is recommending and electing to plug and abandon a well, in which
event failure to respond shall be an election to plug and abandon.
25.7 Conflicts. Should there be any conflict between the body of this
Agreement and any Exhibit hereto, the provisions contained in the body of
this Agreement shall control.
25.8 Reciprocal Rights. All rights granted by Participant in this
Agreement to the other members of the McMoRan Group who are not parties to
this Agreement shall be reciprocal and McMoRan has entered or shall enter
into agreements which shall cause such other members of the McMoRan Group
to grant such reciprocal rights to Participant. To the extent necessary
for Participant and such other members of the McMoRan Group to enforce the
aforesaid reciprocal rights, Participant shall be designated as a third
party beneficiary in such other agreements and such other members of the
McMoRan Group are hereby designated as third party beneficiaries of this
Agreement.
25.9 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns; provided, however, nothing herein contained shall be construed as
permitting an assignment contrary to the terms and provisions of this
Agreement.
IN WITNESS WHEREOF, this Agreement is executed in multiple copies each
of which shall be deemed to be an original on December 19, 1997 but
effective as of the date first above written.
McMoRan Oil & Gas Co.
By:__________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President
Freeport-McMoRan Resource Partners,
Limited Partnership
By: Freeport-McMoRan Inc.,
its Administrative Managing General
Partner
By:_________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President
The remainder of the Exhibits to the Amendment to Participation
Agreement McMoRan 1997 Exploration Program between McMoRan Oil & Gas Co.
and Freeport-McMoRan Resource Partners, Limited Partnership dated as of
December 15, 1997 have been intentionally omitted and will be provided upon
request.
