Exhibit 10.34
THE PORTIONS OF THIS EXHIBIT 10.34 MARKED "********" HAVE BEEN OMITTED
HEREFROM AND CONFIDENTIALLY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
Offshore Exploration Agreement
By and Between
Texaco Exploration and Production Inc.
And
McMoRan Oil & Gas LLC
December 20, 1999
TABLE OF CONTENTS
ARTICLE PAGE
1. SUBJECT MATTER, DEFINITIONS, EXHIBITS AND
CONSTRUCTIONS 1
1.1 Subject Matter and Purpose 1
1.2 Defined Terms 2
1.3 Exhibits 6
1.4 Rules of Construction 7
2. ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇
▇.▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇
2.2 Texaco Prospects 7
2.3 Exhibit 8
2.4 Area of Mutual Interest 8
2.5 Early Relinquishment Lease Schedule 9
3. TERM OF AGREEMENT 9
3.1 Term 9
3.2 Option Periods 9
4. PROSPECT IDENTIFICATION 10
4.1 Prospect Identification 10
4.2 Co-Working Interest Owner's Proposals 12
4.3 Restriction on Use of Existing Platforms 13
4.4 Election Not to Participate in a Co-Working
Interest Owner Well 14
4.5 Rights Limitation on Use of Existing ▇▇▇▇▇ 14
4.6 ▇▇▇▇▇ Proposed by Texaco after the Effective Date 15
4.7 Access to Well Data 15
4.8 Protection from Drainage 15
4.9 Third Party Well Proposal Restriction 15
5. FARMOUT/SUBLEASE ACREAGE 16
5.1 Individual Farmout Agreements 16
5.2 Contract Acreage Restrictions/Limitations 16
5.3 Texaco's Participation Options and Overriding Royalty 16
5.4 General Farmout Agreement Terms and Conditions 18
5.5 Impenetrable Substances 20
5.6 Project Payout 20
5.7 Payout Notice 21
5.8 Option to Participate 21
5.9 Overriding Royalties 21
5.10 Proportionate Reduction 23
5.11 Failure to Drill the Initial Test Well 23
5.12 McMoRan's Continuous Option to Earn 23
5.13 Operating Agreement Execution 23
5.14 Designation of Operator 24
6. PRESSURE COMMUNICATION AND COMMON RESERVOIRS 25
6.1 Pressure Communication Restriction 25
6.2 Common Reservoirs 26
7. FINANCIAL OBLIGATIONS 27
7.1 Obligation to Fund Exploratory Operations 28
7.2 Spending Schedule 28
7.3 Exploratory ▇▇▇▇▇ and Other Exploration Activities 29
7.4 Spending Schedule Deficit Penalty 30
7.5 Spending Schedule Deficit Penalty Deferral 30
7.6 Liquidated Damages Credit 31
7.7 Exhibit 31
7.8 Accounting Report 31
7.9 Audit Rights 32
7.10 Right to Option Period 32
7.11 Parent Company Guarantee 32
8. PERIODIC TECHNICAL REVIEWS 33
8.1 Periodic Technical Overview 33
9. TEXACO'S TECHNICAL REPRESENTATION 33
9.1 Technical Staff 33
9.2 Cost of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇. ACREAGE RELEASE SCHEDULE 34
10.1 Option Period 1 Acreage Release 34
10.2 Option Period 2 Acreage Release 34
10.3 Option Period 3 Acreage Release 34
10.4 Option to Release Additional Acreage 34
10.5 Release Notification 35
10.6 Acreage Release Credit 35
11. NOTICES 36
11.1 Notices 36
11.2 Change in Designated Representative 36
12. EXISTING AGREEMENTS AND PREFERENTIAL RIGHTS 36
12.1 Existing Agreements 36
12.2 Preferential Rights and Consents to Assign 37
13. RIGHTS RESERVED 37
13.1 Lease Rights Reservations 37
14. PRODUCTION HANDLING AND CONTRACT OPERATIONS 38
14.1 Production Handling Option 38
14.2. Contract Operating Option 38
15. TAX MATTERS 39
15.1 Income Tax Election 39
16. EXISTING FACILITIES 39
16.1 Existing Facilities 39
17. GEOPHYSICAL DATA 40
17.1 Seismic Rights 40
17.2 Hazard Survey Data 40
17.3 Texaco's Proprietary Seismic Data 40
18. RENTALS, MINIMUM ROYALTY AND LEASE MAINTENANCE 41
18.1 Rentals and Minimum Royalty 41
19. MEDIA RELEASES 42
19.1 Public Announcements 42
19.2 Media Releases 42
20. FILES 42
20.1 Access to Files 42
21. ASSIGNMENTS AND TRANSFER OF INTEREST 44
21.1 Assignment of this Agreement 44
21.2 Lease or Prospect Successors and Assigns 44
21.3 Appointment of Agent 44
22. CONFIDENTIALITY 45
22.1 Confidentiality 45
22.2 Speculative Seismic Data 45
22.3 Disclosure of Confidential Data 45
22.4 Risk of Use of Confidential Data 46
22.5 Confidentiality Agreement - Exhibit 46
23. GOVERNING LAW 46
23.1 Choice of Law 46
23.2 Pending and Future Litigation and Claims 46
24. FORCE MAJEURE 47
24.1 Force Majeure 47
25. DISPUTE RESOLUTION 49
25.1 Dispute Resolution 49
26. TERMINATION 49
26.1 Termination 49
26.2 Lease Expiration or Termination 49
27. INDEMNITY 49
27.1 Indemnity 49
28. BREACH 50
28.1 Breach 50
29. NO WARRANTY 50
29.1 Non-Warranty 50
30. GENERAL PROVISIONS 51
30.1 Leases Treated Separately 51
30.2 Non-Interference 51
30.3 Governmental Approvals 52
30.4 Amendments 52
30.5 Declaration of Agreement 52
30.6 Other Rights, Remedies Reserved 52
30.7 No Waiver 52
30.8 No New Lease Burdens 52
30.9 Severability 53
30.10 Entire Agreement 53
30.11 Further Assurances 53
30.12 Waiver of Subrogation 53
30.13 Surviving Obligation 53
30.14 Conflict of Terms 53
LIST OF EXHIBITS
Exhibit "A" Leases Subject to this Agreement
Exhibit "A-1" Early Relinquishment Termination Schedule
Exhibit "B" Texaco Identified Prospects
Exhibit "C" Area of Mutual Interest
Exhibit "D" Farmout Agreement
Exhibit "E" Sublease
Exhibit "F" Prospect Dispute Resolution Procedure
Exhibit "G" Operating Agreement
Exhibit "H" Confidentiality Agreement
Exhibit "I" Dispute Resolution Procedure
(Excepting Prospect Disputes)
Exhibit "J" Declaration of Agreement
OFFSHORE EXPLORATION AGREEMENT
THIS OFFSHORE EXPLORATION AGREEMENT ("Agreement"),
is made and entered into
this 20th day of December, 1999, by and between Texaco
Exploration and Production Inc., a Delaware
corporation, hereinafter sometimes referred to as
"Texaco", and McMoRan Oil & Gas LLC, a Delaware
limited liability company, hereinafter sometimes referred
to as "McMoRan". Texaco and McMoRan are
sometimes hereinafter referred to individually as "Party"
and/or collectively as "Parties".
W I T N E S S E T H:
WHEREAS, McMoRan has expressed a desire to secure the
right to earn and/or own certain
leasehold interests currently owned by Texaco Exploration
and Production Inc. (Texaco) in the Outer
Continental Shelf, Offshore Louisiana and Texas and the
State of Louisiana; and
WHEREAS, Texaco is desirous of having an entity with
proven expertise in both exploring for
and producing ▇▇▇▇▇ in the central and western portions
of the Gulf of Mexico evaluate through
exploratory drilling the hydrocarbon potential on a
significant portion of the non-productive leasehold
currently owned by Texaco in such areas; and
WHEREAS, McMoRan has, in the past, demonstrated its
ability to find commercial quantities
of hydrocarbons in the Gulf of Mexico and is willing to
commit financial and personnel resources now
and in the future to explore and develop the non-
producing acreage of Texaco as described herein; and
WHEREAS, Texaco is agreeable in to granting McMoRan the
right and option to explore
certain Texaco non-productive leasehold, and if
successful, to earn an interest in such leasehold all as
more particularly set forth below.
NOW THEREFORE, for and in consideration of the
mutual advantages and benefits accruing to
the Parties hereto, the sufficiency of which is hereby
acknowledged, the Parties hereto agree that the
following shall constitute the agreement between Texaco
and McMoRan concerning the drilling of various
▇▇▇▇▇ hereinafter described on the "Contract Acreage"
hereinafter identified and, upon the satisfaction of
certain conditions contained herein, the acquisition of
interests by McMoRan from Texaco. This
Agreement upon execution by Texaco and McMoRan shall
supersede and replace all prior agreements and
verbal conversations between Texaco and McMoRan regarding
the transaction set forth herein.
ARTICLE 1
1. SUBJECT MATTER, DEFINITIONS, EXHIBITS AND CONSTRUCTIONS
1.1 Subject Matter and Purpose.
The subject matter of this Agreement is the
exploration and development of the Contract Area,
as defined below, by McMoRan and Texaco pursuant to the
terms and conditions hereinafter provided
together with the rights and obligations of McMoRan and
Texaco concerning such exploration and
development of the Contract Area..
The purpose of this Agreement is to provide a means
whereby Texaco is to make available to
McMoRan offshore acreage (as defined herein) for the
drilling of Exploratory ▇▇▇▇▇ by McMoRan in an
attempt to find and develop economic reserves for the
benefit of the Parties hereto. It is contemplated
that situations will arise during the term of this
Agreement that are not specifically covered herein. In
the event these situations do arise the Parties agree, in
the spirit of cooperation, to use all reasonable
efforts to resolve such situations to the mutual benefit
of both Parties.
1.2 Defined Terms.
For purposes of this Agreement, including the
Exhibits, except as otherwise expressly provided
or unless the context otherwise requires, the terms
defined in this Section 1.2 have the meanings
assigned to them herein and the capitalized terms defined
elsewhere in the Agreement by inclusion in
quotation marks and parentheses have the meanings so
ascribed to them.
"AFE" means an Authority for Expenditure prepared by a
Party to the Agreement, or a Co-
Working Interest Owner, for the purpose of estimating the
Well Costs to be incurred in connection with
a proposal to drill, deepen, or sidetrack a well
hereunder.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly
controlling or controlled by, or under common control
with, such Person. For purposes of this
definition, the term "control" (including, with
correlative meanings, the terms "controlling," "controlled
by" and "under common control with") as applied to any
Person, means the possession, directly or
indirectly, of the power to direct or cause the direction
of the management of such Person, whether
through ownership of voting securities, by contract or
otherwise, and specifically with respect to a
corporation, partnership or limited liability company
means ownership of fifty percent (50%) or more of
the voting stock in such corporation or of the voting
interest as a partner in such partnership or as a
member of such limited liability company.
"Agreement" means this Offshore Exploration Agreement
between Texaco and McMoRan
including the Exhibits attached hereto or referred to
herein.
"Allocation" shall mean the fractional share of
hydrocarbon reserves attributable to each Lease
(or portion thereof) within a Prospect. The necessity
for and procedures by which the Allocation is
made are set forth in Section 4.1 below. Allocation
under this Agreement is binding only on the Parties
hereto and their permitted successors and assigns. It is
not binding on Third Parties. The purpose of
this Allocation is to establish the initial participation
of the Leases included in a Prospect for purposes
of the sharing of costs (as well as ownership of
production) until such time as the Parties mutually agree
to the adjustment or re-determination thereof, or until
such adjustment or re-determination is otherwise
made in accordance with the terms hereof, or in
accordance with governmental regulations.
"Area of Mutual Interest" or "AMI" means the areas and
blocks listed on Exhibit "C" attached hereto.
"Available Acreage" shall mean the non-productive acreage
located on the Leases listed on
Exhibit "A" attached hereto and made a part hereof which
non-productive acreage is subject to this Agreement.
"Business Day" means a day on which the Minerals
Management Service New Orleans
Regional Office is open for business.
"Casing Point" means that point in time when a well
has reached the Objective Depth or such
other depth as may be mutually agreed by the Parties, and
all logs, cores and other tests have been
completed that are sufficient to make a determination
concerning the running of production casing or
the plugging and abandonment of the well, and the results
thereof have been furnished to all Parties as
customary under the controlling Operating Agreement.
"Contract Acreage" means collectively those
portions of the Leases and lands described as
Available Acreage on Exhibit "A" attached hereto and made
a part hereof .
"Co-Working Interest Owner" means an owner of a
record title, operating rights and/or
working interest in a Lease subject to this Agreement
that is not a Party hereto.
"Earning Well" means a well drilled in accordance with
the provisions of Article 5 hereof that
is (i) a well in which McMoRan participates in the
drilling of, and (ii) which is drilled to the Objective
Depth, and (iii) which is a well that satisfies the
criteria of to 30 CFR 250.111 as a well capable of
producing in paying quantities, and (iv) McMoRan, within
sixty (60) days from rig release of the Initial
Test Well, commits in writing to Texaco its plans to
install the necessary facilities (not including Existing
Facilities unless the owners thereof agree) as soon as
possible to place the hydrocarbons discovered on
production, and (v) which well is located at a bottom
hole location on a Lease subject hereto or in a Unit
including all or a portion of a Lease.
"Effective Date" means the effective date of this
Agreement, being 7:00 a.m., Central Standard
Time, January 1, 2000 or the first day of the calendar
month following the Execution Date, if later.
"Execution Date" shall be the date set forth above.
"Exclusion Areas" shall mean those portions of the Leases
outside the Contract Acreage which
are not subject to this Agreement.
"Existing Facilities" means all property located on
or associated with the Contract Acreage as of the
Effective Date used or held for use in connection with
the production, treatment, gathering, storage and
compression of oil and/or gas from, on, or attributable
to any Lease listed on Exhibit "A", including but not
limited to, (1) platforms, cassions, fixtures, tanks,
pumps, pipelines, appurtenances and improvements, (2) all
equipment or material permanently or temporarily located
on the Contract Acreage; and, (3) other structures
located on or used in connection with the Leases.
"Existing Operating Agreement" means the controlling
operating agreement between the
owners of a Lease effective prior to the Effective Date
of this Agreement, or any operating agreement
that would subsequently replace such an agreement.
"Exploratory Activities" means the acquisition, licensing
and/or processing of geophysical
data, the completion and submittal of required
governmental forms and permits, the conduct of shallow
hazards surveys and archeological surveys, the
mobilization and demobilization of a drilling rig, the
drilling, logging, temporarily or permanently abandoning
of an Exploratory Well, the payment of rentals
on non-producing leases and minimum royalties on
producing Leases and the costs of acquiring and
maintaining any leasehold interests pursuant to the
provisions of this Agreement (including but not
limited to the Area of Mutual Interest provisions
hereof).
"Exploration Program Co-Venturers" means the financial
co-venturers of McMoRan who have
executed a specific agreement with McMoRan to fund
certain oil and gas activities in the Gulf of Mexico
related to this Agreement.
"Exploratory Objective" means any zone, interval or
horizon not in pressure communication
with a zone, interval or horizon that is currently
producing or is capable of producing oil and/or gas
from an existing wellbore located on a Lease.
"Exploratory Well" means a well proposed to be
drilled into to evaluate an Exploratory
Objective. A well will be considered an Exploratory Well
if any bona fide objective in a well is an
Exploratory Objective, even if other objectives in the
well do not qualify as Exploratory Objectives. In
order for a well to qualify as an Exploratory Well, the
Parties must agree, in writing, on its designation
as an Exploratory Well prior to commencement of actual
drilling. Neither Party will unreasonably
withhold its agreement to such qualification. Any
substitute well or additional well specified under a
Farmout Agreement or Sublease drilled following the
drilling of an Initial Test Well, shall be considered
an Exploratory Well without a separate mutual agreement
being required for the designation thereof as
an Exploratory Well if and only if the substitute well or
additional well is proposed to be drilled to not
less than the Objective Depth of the unsuccessful
Exploratory Well it is replacing.
"Farmout Acreage" shall mean the acreage and depths
to be included under each Farmout
Agreement under the provisions of Section 5.2.
"Farmout Agreement" means the Farmout Agreement to
be entered into for each Prospect
established hereunder that is located on the Outer
Continental Shelf, Offshore Louisiana or Texas, the
form of which is attached hereto as Exhibit "D."
"Initial Test Well" shall be the first Exploratory Well
proposed by McMoRan and drilled after
the Effective Date of this Agreement on each Prospect
located on an Exhibit A Lease, on lands pooled
or unitized with an Exhibit A Lease, or on a Prospect
which includes all or a portion of an Exhibit A
Lease where Texaco has not previously been afforded the
opportunity to elect to retain its overriding
royalty or to participate as a working interest owner in
said Prospect as detailed in Section 5.3, below.
"Lease" or "Leases" shall mean the offshore oil and gas
leases issued by the United States of
America or State of Louisiana listed on Exhibit "A".
"Objective Depth" shall mean the objective total
depth of an Initial Test Well or substitute
well as specified in the AFE for such well as proposed in
accordance with the provisions of this
Agreement.
"Operating Agreement" means the Operating Agreement to be
entered into by the Parties in
accordance with the provisions of this Agreement and the
Farmout Agreement, Sublease or the
agreement entered into pursuant to Section 5.3.4, the
form of Operating Agreement which is attached
hereto as Exhibit "G."
"Operating Rights" shall mean all of the rights,
obligations, liabilities and attributes of a
working interest ownership covering less than all depths,
and potentially less than the entire surface
area, in and on a Lease.
"Paying Quantities" means that volume of production
of oil and/or gas in sufficient quantities
that when sold will yield a return of money in excess of
the cost of production, including taxes, royalty,
overriding royalty and similar burdens, lifting,
compression and transportation costs. The cost of
production does not include costs associated with
drilling, testing, completing, sidetracking, deepening,
re-completing or reworking a well or of surface or subsea
equipment and pipelines used in connection
with such production.
"Person" means, and shall be interpreted broadly to
include, without limitation, any individual,
corporation, association, company, limited liability
company, trust, estate, partnership, joint venture,
unincorporated organization, other business entity, any
government or any department or agency
thereof, or any other legal entity.
"Plugging and Abandonment" means the plugging,
replugging, abandonment, removal,
disposal, seafloor restoration and remediation
obligations which are required for ▇▇▇▇▇ drilled or other
operations conducted pursuant to this Agreement. Such
obligations shall include, but not be limited to,
all necessary and proper plugging and abandonment and/or
removal and disposal of the ▇▇▇▇▇,
structures, and equipment located on or associated
therewith, the necessary and proper capping and
burying, if required, of all associated flow lines, and
any necessary disposal of naturally occurring
radioactive material ("NORM").
"Prospect" shall mean an area believed to encompass
an accumulation(s) of hydrocarbons
having one or more productive formations. The area
encompassing these accumulations shall be
described on a surface acreage basis, and subject to any
depth limitations agreed to by the Parties,
acceptable to the Minerals Management Service for
approval of transfer documents. If McMoRan
owns an interest in a lease contiguous to a Lease subject
to this Agreement, such lease (or portion
thereof) may also be included in a Prospect at the
request of McMoRan but subject to the approval of
Texaco. Procedures for determining the Lease, or
portions thereof, which are deemed to be included
within a Prospect are set forth in Section 4.1, below.
"Prospect Dispute" shall be a disagreement between
Texaco and McMoRan about (i) which
Leases, or portion thereof, comprise a Prospect; and/or
(ii) the Allocation as to the Leases within a
Prospect. In the event the Parties are unable to resolve
any disagreement as to the configuration of a
Prospect, the Prospect Dispute shall be resolved pursuant
to the procedures set forth in Exhibit "F".
"Remote Location" shall mean a drilling location
that is not from a platform.
"Representatives" means the respective directors,
officers, supervisors, employees, partners,
lenders, consultants, attorneys and legal counsel,
financial advisors, accountants, marketing
representatives and other agents of the Parties.
"Reservoir" means a subsurface porous, permeable
rock body that contains or is thought to
contain an accumulation of oil and/or gas, separated by
faulting or other subsurface anomaly from other
areas containing accumulations of oil and/or gas in the
same or different strata.
"Sublease" means the Sublease to be entered into
for each Prospect established hereunder that
is located in the State of Louisiana, the form of which
is attached hereto as Exhibit "E."
"Texaco Co-Working Interest Owner" is any Third
Party who owns a real property interest
with Texaco in any Lease listed on Exhibit "A".
"Third Parties" means a Person not a Party to this
Agreement.
"Well Costs" means the costs and expenses of all
services and materials used and associated
with drilling, sidetracking, deepening, testing,
completing, and equipping a well hereunder, including,
but not limited to the costs and expenses associated with
the following items: (1) permitting with
applicable government agencies; (2) drill site
preparation (including hazard surveys); (3) actual drilling,
deepening or sidetracking operations (including
mobilization and demobilization of the rig to the drill
site); (4) logging, coring and testing of the well for
the presence of oil and/or gas; (5) completing and
equipping the well for production (up to and including
wellhead connections in the event a well is not
then equipped with wellhead connections); (6) the costs
of Plugging and Abandonment if the well is not
saved for production; (7) the cost to temporarily abandon
a well; and (8) the drilling overhead rate for
the well as set forth in the applicable Accounting
Procedure attached to the Operating Agreement,
Farmout Agreement or Sublease. All such costs and
expenses shall be determined in accordance with
the Accounting Procedure.
"Unit" means the pooling of all or a portion of one
or more Leases with all or a portion of
another lease or leases not subject to this Agreement.
1.3 Exhibits.
The following Exhibits are attached hereto and
incorporated herein by reference:
Exhibit "A" Leases Subject to this Agreement
Exhibit "A-1" Early Relinquishment Termination Schedule
Exhibit "B" Texaco Identified Prospects
Exhibit "C" Area of Mutual Interest
Exhibit "D" Farmout Agreement
Exhibit "E" Sublease
Exhibit "F" Prospect Dispute Resolution Procedure
Exhibit "G" Operating Agreement
Exhibit "H" Confidentiality Agreement
Exhibit "I" Dispute Resolution Procedure
(Excepting Prospect Disputes)
Exhibit "J" Declaration of Agreement
1.4 Rules of Construction.
For purposes of this Agreement:
(a) Unless the context otherwise requires: (1) "or" is
not exclusive; (2) an accounting term
not otherwise defined has the meaning assigned to it in
accordance with accounting principles
generally accepted in the United States of America; (3)
words in the singular include the plural,
and words in the plural include the singular; (4) words
in the masculine include the feminine,
words in the feminine include the masculine and words
with appropriate correlative meanings
include such correlative meanings; (5) any date specified
for any action that is not a Business
Day shall be deemed to mean the first Business Day after
such date; (6) reference to a Person
includes such Person's successors and assigns and, in the
case of governmental bodies, Persons
succeeding to their respective functions and capacities;
and (7) any amounts due or payable
under this Agreement shall be paid in United States
currency.
(b) References to Articles and Sections are, unless
otherwise specified, to Articles and
Sections of this Agreement. Neither the captions to
Articles or Sections thereof nor the Table of
Contents shall be deemed to be a part of this Agreement
but are added for convenience only.
(c) References herein to any agreement or other
instrument shall, unless the context
otherwise requires (or the definition thereof otherwise
specifies), be deemed references to the
same as it may from time to time be changed, modified,
supplemented, amended or extended.
There is no incorporation by reference herein unless
expressly so stated.
ARTICLE 2
2. CONTRACT AREA.
2.1 Contract Area.
This Agreement shall cover certain non-producing
leasehold rights and interests of Texaco in and
to the Leases described in Exhibit "A." There are Leases
on Exhibit "A" which are currently held by
production and others which are in their primary term. The
productive areas on the Leases held by
production are specifically excluded both horizontally
and vertically from this Agreement and reserved by
Texaco. It is understood between the Parties hereto that
this Agreement shall apply only to the non-
productive portions of the referenced Leases as those
non-productive areas are specifically identified on
Exhibit "A" as Available Acreage. This Agreement
therefore shall cover only the Contract Acreage as
described on Exhibit "A" and all other portions of the
Leases subject hereto are specifically excepted from
this Agreement and reserved by Texaco.
2.2 Texaco Prospects.
Attached hereto as Exhibit "B" is a list of
Prospects Texaco has identified on various Leases
subject to this Agreement. Prior to the execution of
this Agreement, a technical presentation was given to
McMoRan by Texaco covering each of these Prospects.
Within thirty (30) days from the Effective Date
of this Agreement, McMoRan will notify Texaco in writing
of its selection and commitment to drill two
(2) or more of the Prospects identified on Exhibit "B"
for the purpose of spending at least $10,000,000.00
with respect to the interest of Texaco. This commitment
to spend at least $10,000,000.00 for the account
of Texaco shall be in addition to those amounts
referenced in Section 7.1 below, subject to the provisions
of Section 7.7. Once McMoRan has selected the Prospects
it will drill, the provisions of Article 5 herein
shall apply as to the selected Prospects. The Initial
Test Well on the Prospects which McMoRan selects to
drill must be commenced within the first twelve (12)
months from the Effective Date of this Agreement
unless mutually agreed to the contrary by the Parties
hereto. In the event McMoRan is unable to drill or
cause to be drilled a well on a Prospect selected from
Exhibit "B" after a good faith attempt to do so,
McMoRan will have the right to select a substitute
Prospect from the remaining Prospects listed on Exhibit
"B" or elect to drill a Prospect it generates from the
Leases listed on Exhibit "A". Should McMoRan elect
to substitute for the undrilled Prospect a Prospect
developed from the Leases listed on Exhibit "A", Texaco
shall have the same rights and options as it would have
had if the Prospect had been selected from Exhibit
"B" (i.e. a Casing Point election).
Exhibit "B" sets forth the description that is
mutually agreed for each of the Exhibit "B" Prospects.
The establishment of the Allocation, Objective Depth and
other items described in Section 4.1 that are
called for in order to constitute a complete proposal for
the drilling of the Initial Test Well hereunder for
each Exhibit "B" Prospect shall be accomplished in
accordance with the provision of Section 4.1.
2.3 Exhibit "B" Prospect Selection Period.
On Exhibit "B" is a column entitled "Option Period
Termination" wherein specific dates are listed
corresponding with each Texaco presented Prospect.
McMoRan will have the right and option on or
before the Option Period Termination date specified for
each Prospect to elect whether or not it will
commit to drill the corresponding Prospect. Should
McMoRan elect to drill a Prospect listed on Exhibit
"B", it will notify Texaco in writing of its election and
the provisions of Article 5 shall apply to each
Prospect so selected. With the exception of the Texaco
Prospects selected by McMoRan pursuant to
Section 2.2 above, should McMoRan fail to commit to drill
an Exhibit "B" Prospect on or before the
expiration of the Option Period Termination date,
McMoRan's option to drill and earn such Prospect in
accordance with the terms and conditions of this
Agreement shall automatically terminate without any
further action by either Party. Effective as of the
expiration of the Option Period Termination Date the
acreage associated with each of these Prospects, as
determined by Texaco, shall be excluded from this
Agreement and McMoRan will no longer have the right and
option to earn any portion of such acreage or
Prospect.
2.4 Area of Mutual Interest.
Absent an agreement to the contrary, in the event
on or before four (4) years from the Effective
Date of this Agreement McMoRan or its Affiliates acquires
an interest in a lease covering any of the
blocks identified on Exhibit "C", or any portion of such
blocks, then Texaco's rights and options as stated
in this Agreement regarding the overriding royalty and
working interest options shall apply to the interest
so acquired by McMoRan or its Affiliates. Based on
Texaco's elections as provided herein, McMoRan or
its Affiliates will assign to Texaco the applicable
overriding royalty or working interest in and to the
acquired lease at no cost to Texaco. If Texaco elects to
acquire a working interest, McMoRan or its
Affiliates will assign to Texaco Operating Rights in and
to the Prospect under which Texaco has elected to
acquire such working interest. Should Texaco elect to
acquire an overriding royalty, such overriding
royalty will be assigned to Texaco within thirty (30)
days of notice to McMoRan of such election. Texaco
will acquire its proportionate share of the obligations,
if any, associated with the acquired interest. In
addition, Texaco's overriding royalty or working interest
in such acquired lease shall be in the same
proportion as Texaco's previous interest in the lease if
Texaco owned such an interest, or if Texaco did not
have a previously owned interest in the lease, in the
same proportion as the offsetting Lease in which
Texaco has or had an ownership interest.
In the event Texaco should acquire an additional or
initial interest in any lease on a block listed on
Exhibit "C", Texaco will commit and include such interest
in and to this Agreement during the term
hereof. McMoRan's rights and options as provided herein
shall apply to any such additional or initial
interest acquired by Texaco as to the additional or
initial interest in such Exhibit "C" leases.
2.5 Early Relinquishment Lease Schedule.
Attached as Exhibit "A-1" is a list of Leases which
shall be subject to this Agreement for the
period of time shown in the "Option Period Termination
Date" column of said Exhibit "A-1". Should
McMoRan commit to pursue the drilling of an Exploratory
Well on any of the Leases listed on Exhibit "A-
1" on or before the corresponding Option Period
Termination Date shown for a particular Lease by
presenting its proposal to drill under Section 4.1, then
that particular Lease shall remain subject to this
Agreement and McMoRan's rights and options associated
with such Lease(s) shall continue. For any
Lease listed on Exhibit "A-1" where McMoRan does not
commit to pursue the drilling of an Exploratory
Well on or before the Option Period Termination Date,
this Agreement shall automatically terminate on
the Option Period Termination Date as to each such Lease.
ARTICLE 3
3. TERM OF AGREEMENT.
3.1 Term.
This Agreement shall begin on the Effective Date
and shall continue for a period of forty-two (42)
months (this 42 month period hereinafter referred to as
the "Primary Term"). If, prior to the end of
Option Period 3 as defined below, McMoRan has satisfied
the minimum financial obligations as specified
in Article 7, or is entitled to an extension as provided
under Section 7.10, this Agreement will be
automatically extended for an additional six (6) month
period (hereinafter referred to as the "Extended
Term"). At the end of the Primary Term or, if this
Agreement is extended as provided above, at the end of
the Extended Term, the provisions of Article 26 shall
apply.
3.2 Option Periods.
To effect the purposes of this Agreement, the
Primary Term shall be divided into four (4) separate
periods or segments identified as "Option Period 1",
"Option Period 2", "Option Period 3", and "Option
Period 4" (hereinafter referred to individually as
"Option Period" and collectively as "Option Periods").
These periods shall run sequentially in numeric order
with no lapse in time between the expiration of one
Option Period and the beginning of the next. The
separate Option Periods shall be defined as follows:
3.2.1 Option Period 1: "Option Period 1" shall
begin on the Effective Date and continue
for a period of eighteen (18) months.
3.2.2 Option Period 2: "Option Period 2" shall
begin on the first day of the nineteenth
(19th) month after the Effective Date and continue
through the last day of the thirtieth
(30th) month.
3.2.3 Option Period 3: "Option Period 3" shall
begin on the first day of the thirty-first
(31st) month after the Effective Date and continue
through the last day of the forty-second
(42nd) month.
3.2.4 Option Period 4: Should McMoRan be entitled
to "Option Period 4" as provided
in this Agreement, Option Period 4 shall begin on the
first day of the forty-third (43rd)
month after the Effective Date and continue through the
last day of the forty-eighth (48th)
month.
Once all applicable Option Periods have terminated, the
only acreage McMoRan will have access to will
be the acreage covered by the Farmout Agreement(s) and/or
Sublease(s) applicable to the Prospects
McMoRan has earned or elected to drill, subject to the
provisions of Section 7.2.4.
ARTICLE 4
4. PROSPECT IDENTIFICATION.
4.1Prospect Identification.
(a) In the event, during the term of this
Agreement, McMoRan identifies a Prospect on the
Contract Area on any Lease(s) subject hereto and wishes
to propose the drilling of an Initial
Test Well thereon or on lands pooled or unitized
therewith, such proposal by McMoRan shall be
presented at a detailed technical meeting to Texaco,
including without limitation, (1) a detailed
presentation of McMoRan's geological, geophysical and
engineering interpretations and
evaluations, including, but not limited to McMoRan
integrating any speculative and/or
proprietary 3-D seismic reprocessing data, subject to any
license or other contractual restrictions
imposed upon McMoRan; (2) McMoRan's drilling and
evaluation program and associated
AFE; (3) the proposed outline of the Prospect, possible
exploration, delineation and/or
development scenarios including cost estimates therefor,
when available. Should McMoRan's
proposed Prospect be comprised of all or a portion of
more than one (1) Lease subject hereto or
a Lease(s) or portions thereof and a lease (or portion
thereof) not subject to this Agreement in
which McMoRan owns an interest and/or has the
right/option to earn an interest, McMoRan
shall also provide to Texaco a proposed Allocation.
Except to the extent specifically restricted
by contract with Third Parties, McMoRan shall, prior to
the end of such technical meeting,
provide Texaco with color copies of any and all data
presented at such technical meeting.
Provided Texaco has a license to all the seismic data
utilized in proprietary reprocessing by
McMoRan, in order to assist Texaco in determining whether
or not to participate in the Initial
Test Well and Prospect as set forth below, McMoRan shall,
subject to contractual restrictions,
allow Texaco to utilize and work in McMoRan's offices any
reprocessed proprietary 3-D
seismic data which McMoRan has relied upon in proposing
the Initial Test Well or Prospect and
which directly relates to said well and/or Prospect.
This Section 4.1 shall not apply to a
proposal to drill a Texaco Co-Working Interest Owner
Initial Test Well by a Texaco Co-
Working Interest Owner which shall be governed by Section
4.2, below.
(b) The detailed technical meeting referenced
above in Section 4.1(a) shall be hosted by
McMoRan at McMoRan's offices in New Orleans upon ten (10)
Business Days prior written
notice to Texaco from McMoRan, unless mutually agreed
otherwise by the Parties. Any
technical meeting proposing an Initial Test Well shall be
held no less than sixty (60) days prior
to McMoRan spudding the Initial Test Well unless
otherwise mutually agreed. Texaco and
McMoRan shall mutually agree on the Prospect description
and Allocation, if applicable,
including the acreage to be allocated to the Prospect and
any depth limitation with respect thereto.
The acreage to be allocated to the Prospect will be
sufficient to encompass the potential drainage
area of all objective zones of the Prospect described on
a surface acreage basis in increments not
smaller than a 1/4 1/4 1/4 block.
If Texaco agrees with McMoRan's Prospect description and
Allocation, if applicable, Texaco
will have thirty (30) days to advise McMoRan of its
election as applicable under Section 5.3.2
herein. Should Texaco disagree with McMoRan's Prospect
description and/or Allocation, then
within ten (10) Business Days after the technical meeting
described above, Texaco shall notify
McMoRan it disagrees with the Lease(s), or portions
thereof, McMoRan has identified as
constituting the Prospect and/or the Allocation, as
applicable, and shall propose an alternate
description. Failure by Texaco to notify McMoRan of its
disagreement within such ten (10) day
period shall be considered agreement by Texaco both to
the Lease(s), or portion thereof,
McMoRan has identified as comprising the Prospect and
also the Allocation, if applicable. If
Texaco notifies McMoRan of its disagreement within the
aforesaid time, then McMoRan and
Texaco shall meet at McMoRan's offices in New Orleans
within five (5) days after receipt by
McMoRan of the notification and seek to reach agreement
on the Leases or portion thereof
comprising the Prospect and the Allocation (if
applicable). After good faith negotiations, if the
Parties fail to agree on the Lease(s) or portion(s)
thereof and depths comprising such Prospect at
such meeting, or the Allocation, if applicable, then
immediately thereafter both Texaco and
McMoRan shall resolve said dispute consistent with the
Prospect Dispute Resolution Procedure
(Exhibit "F").
(1) Provided there is no potential Lease expiration,
within forty-five (45) days from
the date of the technical meeting or, if the Parties have
been unable to agree on either
the areas and depths of the Lease(s) comprising the
Prospect or the Allocation and have
had to resort to the procedures set forth in Exhibit "F",
within ten (10) Business Days
from the decision of the arbitrator, Texaco shall have
the option to make the elections as
specified under Section 5.3 below.
(2) If the Lease where the proposed Initial Test
Well will be drilled will expire
within ninety (90) days, Texaco's aforesaid election
shall be made within ten (10)
Business Days of the meeting at which Texaco and McMoRan
attempted to resolve
their disagreement about the areas and depths of the
Leases comprising the Prospect or
the Allocation, as applicable. This election shall be
made even if the Parties have been
unable to agree on the areas and depths of the Leases
comprising the Prospect or the
Allocation and have elected to proceed under the Prospect
Dispute Resolution
Procedure (Exhibit "F"), and such dispute resolution
procedure has not been completed
on the date of Texaco's election.
(c) It is understood between the Parties hereto that
there may be occasions where Third
Parties are participating with McMoRan in the drilling of
a Prospect where McMoRan and said
Third Parties have previously executed an operating
agreement covering the subject Prospect.
Should an operating agreement exist, McMoRan will have
the obligation to provide a copy of
the operating agreement to Texaco at least ten (10)
Business Days in advance of any working
interest participation election Texaco is required to
make. The existing operating agreement
shall be the operating agreement to control operations on
the Prospect. It is understood between
the Parties hereto that in the event Texaco has to accept
and ratify an existing operating
agreement, in the event there are provisions in that
operating agreement which are unacceptable
to Texaco, McMoRan will in good faith attempt to amend
the operating agreement to satisfy
Texaco's concerns.
(d) Any election made by Texaco either to participate
as a working interest owner or to
retain an overriding royalty as detailed herein shall
apply separately on a Prospect by Prospect
basis. In the event a federal or state Unit is formed by
applicable governmental authority, a
single operating agreement covering the entirety of the
Unit will be acceptable.
4.2 Co-Working Interest Owner's Proposals.
(a)This Section 4.2(a) governs a Texaco Co-Working
Interest Owner's proposal to drill an
Exploratory Well at a Remote Location on the Contract
Area. This Section shall not apply to
the Initial Test Well proposed by McMoRan, which is
governed by Section 4.1 above. Should a
Texaco Co-Working Interest Owner propose the drilling of
an Exploratory Well in the Contract
Area (or portion thereof) at a Remote Location prior to
McMoRan proposing its Initial Test
Well applicable to an Exhibit A Lease, Texaco shall
extend to McMoRan, subject to applicable
existing contractual restrictions, the one-time option to
participate in such well. Texaco shall
provide McMoRan with all or that portion of the Co-
Working Interest Owner proposal Texaco
is contractually allowed to disclose. Texaco shall ,
subject to applicable existing contractual
restrictions make, in its sole opinion, relevant
geological, geophysical and/or engineering data
available to McMoRan, if Texaco has any such data
covering the proposal, and Texaco and
McMoRan shall establish a Prospect therefor in accordance
with the procedures described in
Section 4.1
(1) McMoRan will have a one-time option to elect
whether or not it chooses to
participate in the drilling of the Co-Working Interest
Owner Exploratory Well. This
option must be exercised within ten (10) Business Days of
receipt of notice from
Texaco of the Co-Working Interest Owner proposal. Should
McMoRan advise it is
willing to participate, Texaco will contact its Co-
Working Interest Owners in the
Lease(s) under which the proposal has been made and
propose farming out its interest
in the Co-Working Interest Owner proposal to McMoRan
covering the Prospect
established under Section 4.1 above. Should the
necessary number/required percentage
of the Co-Working Interest Owners concur with Texaco's
request to farmout, then the
provisions of Article 5 shall apply to the Co-Working
Interest Owner's proposal and
such Exploratory Well shall be the Initial Test Well as
provided hereunder. Should
McMoRan elect not to participate in the Co-Working
Interest Owner's proposal, then
McMoRan's right and option to drill and earn that portion
of the Contract area
associated with the Co-Working Interest Owner's
Exploratory Well Prospect shall
terminate and the Prospect will thereafter be excluded
from this Agreement should the
Co-Working Interest Owner's Exploratory Well be drilled.
In the event McMoRan
elects not to participate in the Co-Working Interest
Owner's proposal, Texaco will have
the right and option to participate in said proposal and
the Prospect associated with the
proposal shall be excluded from this Agreement should the
Co-Working Interest Owner
Exploratory Well be drilled.
(2) If prior to Texaco's receipt of its Co-Working
Interest Owner's Exploratory
Well proposal McMoRan had identified an identical and/or
similar Prospect pursuant
to Section 4.1(a) on the Lease where the Texaco Co-
Working Interest Owner
Exploratory Well proposal has been made, McMoRan will
continue to be required to
make the election specified in this Section 4.2.
(3) Notwithstanding anything to the contrary
stated in this Section 4.2, if the
existing agreements with Texaco's Co-Working Interest
Owners do not allow
McMoRan's participation in the Co-Working Interest Owners
proposal, or should any
of Texaco's Co-Working Interest Owners refuse to allow
Texaco to farmout all or a
portion of its interest in the Co-Working Interest Owners
Exploratory Well to
McMoRan, then McMoRan shall not be granted the right to
participate in the proposed
well and the acreage associated with the Co-Working
Interest Owners Prospect shall be
excluded from this Agreement should the Co-Working
Interest Owner's Exploratory
Well be drilled. Texaco will have the right and option
to participate in said proposal
and the Prospect associated with the proposal shall be
excluded from this Agreement
should the Co-Working Interest Owner Exploratory Well be
drilled.
(b) Should Texaco receive a Co-Working Interest Owner's
Exploratory Well proposal
covering a portion of the Contract Area where said well
is to be drilled from an Existing Facility
located on a Lease subject hereto, then Texaco may, but
shall not be obligated to, offer
McMoRan the opportunity to participate in such proposal
on the basis described in Section
4.2(a)(1), or as otherwise mutually agreed. If Texaco,
in its sole discretion, chooses not to offer
McMoRan the opportunity to participate in the proposal,
or should McMoRan elect not to
participate in such offered opportunity, then the
Prospect associated therewith will be
specifically excluded from this Agreement and McMoRan's
rights and options pursuant to this
Agreement associated with the Co-Working Interest Owners
Prospect will terminate if the well
proposed is drilled.
4.3 Restriction on Use of Existing Platforms.
Notwithstanding anything to the contrary in Section 4.2
above, this Agreement in no way will
be construed in any manner whatsoever as granting a right
and/or option for McMoRan to utilize any
platform, well, machinery, production equipment, pipeline
and/or any other improvement and
equipment in which it does not own an interest located on
and/or associated with any Lease subject
hereto, irrespective of a Texaco Co-Working Interest
Owner's proposal to drill a well from an existing
platform into the Contract Acreage. McMoRan will have
the obligation to negotiate and execute a
mutually agreeable platform use and/or production
handling agreement with Texaco and, if required, the
other owners of said Platform and/or facilities thereof
prior to McMoRan being given the opportunity to
participate in a Texaco Co-Working Interest Owner's
proposal. Should McMoRan fail to enter into a
mutually agreeable platform use and/or production
handling agreement, McMoRan shall be deemed to
have forfeited its right to earn an interest in the
Contract Acreage encompassing the Prospect the Texaco
Co-Working Interest Owner proposes to drill if said well
is actually drilled. If McMoRan does execute
the appropriate platform use and/or handling agreement
and participates in any such Texaco Co-
Working Interest Owner well, such well shall be deemed to
be the Initial Test Well for such Prospect
and McMoRan shall be entitled to a Farmout Agreement or
Sublease as the case may be.
4.4 Election Not to Participate in a Co-Working
Interest Owner Well.
Should McMoRan elect not to participate in a Texaco
Co-Working Interest Owner well
proposal and the well is drilled, McMoRan shall be deemed
to have automatically forfeited its right
and/or option to earn any portion of the Contract Acreage
included in the Prospect covered by the
Texaco Co-Working Interest Owners proposal. However, in
the event McMoRan has independently
identified a Prospect pursuant to Section 4.1 on the
portion of the Contract Acreage to be evaluated by
the Co-Working Interest Owners proposed well prior to
receiving written notice of said Texaco Co-
Working Interest Owner proposal and if McMoRan's Prospect
is not penetrated by the proposed well as
same may be deepened or sidetracked in connection with
the initial drilling operations for said well,
McMoRan's forfeiture shall not include the geographic
area assigned to McMoRan's Prospect, less the
associated subsea depths forfeited by virtue of not
participating in said Texaco Co-Working Interest
Owner's well proposal. Notwithstanding anything in this
Section 4.4 to the contrary, it is fully
understood and acknowledged that in the event both Texaco
and McMoRan elect not to participate in
the drilling of said Texaco Co-Working Interest Owner
Initial Test Well, the Contract Acreage
associated with the Prospect shall nevertheless be
excluded from this Agreement and McMoRan's rights
and options associated therewith shall terminate upon
notice from Texaco if the well is actually drilled.
4.5 Rights Limitation on Use of Existing ▇▇▇▇▇.
Notwithstanding anything to the contrary in this
Agreement, without the express approval of
Texaco, McMoRan shall not have the right and/or option to
participate in: (i) the deepening and/or
sidetracking of any existing well which has been drilled
into the Contract Acreage prior to the Effective
Date; and/or (ii) any well drilled from a platform by
Texaco and/or its Co-Working Interest Owners in
the Contract Acreage subsequent to the Effective Date for
which McMoRan did not have a participating
interest, that is also subsequently deepened and/or
sidetracked into the Contract Acreage subject hereto.
In either event, the subsea depths portion of the
Contract Acreage which McMoRan has not earned
penetrated by said deepening and/or sidetracking
originally made part hereof shall no longer be made
subject to this Agreement upon notice from Texaco.
4.6 ▇▇▇▇▇ Proposed by Texaco after the Effective Date.
During the term of this Agreement Texaco may identify one
or more Prospects and submit a
proposal to McMoRan to drill a well or ▇▇▇▇▇, or to
deepen or sidetrack an existing Texaco well or ▇▇▇▇▇
to evaluate such Prospect. Texaco shall give McMoRan
notice regarding Prospects developed by
Texaco and shall submit such proposals to McMoRan in
writing. Texaco's notice shall include an
identification of the Prospect and the information
regarding the well to be drilled. It is agreed between
the Parties hereto that in the event Texaco proposes a
Prospect and well after the Effective Date of this
Agreement, the rights and options of Texaco and McMoRan
as to the Prospect and well proposed shall
apply as if the Prospect had been listed on Exhibit "B"
at the time of execution of this Agreement. All
Exhibit "B" Prospects initiated under this Section 4.6
shall be established in accordance with the
procedures set forth in Section 4.1, with the exception
that Texaco shall propose the Prospect to
McMoRan and McMoRan shall have the right to accept the
Prospect for inclusion under the terms of
this Agreement. Should McMoRan choose not to include
Texaco's Prospect under the terms of this
Agreement, Texaco will have the right and option to drill
or cause to be drilled the Prospect and exclude
the acreage associated with this Prospect from this
Agreement once the drilling contract to drill the
proposed well has been executed.
4.7 Access to Well Data. 4.7 Access to Well Data
tc \l 2 "4.7 Access to Well Data"
During the term of this Agreement Texaco shall be
entitled to receive, at no cost, a copy of any
and all well data obtained from any well drilled or
caused to be drilled by McMoRan or its Exploration
Program Co-venturers located on the Contract Acreage or
lands pooled therewith under any Farmout
Agreement or Sublease.
4.8 Protection from Drainage.
The Parties hereto recognize that producible reservoirs
common to both a Lease and adjacent or
adjoining lands not listed on Exhibit A may exist. In
the event McMoRan elects to develop or produce
hydrocarbons from such common reservoirs from adjacent
lands not listed on Exhibit A, McMoRan, in
good faith, shall attempt to pool or unitize that portion
of the Lease so as to reasonably protect the Lease
from drainage. In addition, in the event a Third Party
drills a well draining or capable of draining the
Contract Acreage, McMoRan will have the obligation to
take appropriate actions, to the extent it has the
right to do so, to protect the Contract Acreage from
drainage, including but not limited to drilling a well
pursuant to this Agreement. Should McMoRan fail or
refuse to timely take the above required steps
necessary to protect the Contract Acreage from drainage,
McMoRan shall forfeit that portion of the
Contract Acreage subject to drainage upon receipt of a
written demand from Texaco for the release of
said acreage.
4.9 Third Party Well Proposal Restriction.
Prior to McMoRan drilling (or causing to be
drilled) the Initial Test Well on a Prospect, or
participating in a Texaco Co-Working Interest Owner
Exploratory Well on a Lease, only a permitted
successor or assign of McMoRan, if any, to the rights
and/or options prescribed herein, shall have the
right and/or option to propose a well under this
Agreement as to such Exhibit A Lease.
ARTICLE 5
5. FARMOUT/SUBLEASE ACREAGE5.
5.1 Individual Farmout Agreements.
Pursuant to Section 4.1 above, should McMoRan
identify one or more Prospects it chooses to drill
on the Contract Acreage, the Parties shall enter into a
separate Farmout Agreement or Sublease (if the
Prospect(s) is located on any portion of a Louisiana
State Lease), similar in form to that which is attached
hereto as Exhibit "D" for the Farmout Agreement and
Exhibit "E" for the Sublease, as appropriately
modified to conform to the elections made under Section
5.3, below covering each Prospect McMoRan
commits to drill. The intent of the Parties hereto is
that each drillable Prospect identified by McMoRan
shall be independent and not be combined with any other
Prospect. The rights, obligations and elections
of the Parties, as stipulated in this Article 5, shall
apply separately for each Prospect.
5.2 Contract Acreage Restrictions/Limitations.
Under each Farmout Agreement or Sublease, the
geographic acreage associated with the identified
Prospect, including any geological restrictions/depth
limitations, will be identified and specifically stated
as constituting the Farmout Acreage or Sublease Acreage.
Each Prospect and the acreage associated
therewith will be treated independently of the other
Prospects identified on the Contract Acreage. The
acreage to be covered by the Farmout Agreement or
Sublease and any restrictions or limitations associated
therewith will be determined under Article 4. In the
event the Parties hereto, after good faith negotiations,
are unable to mutually agree on the acreage to be covered
by the Farmout Agreement or Sublease, or any
restrictions or limitations associated therewith, the
Prospect Dispute Resolution Procedure , as more fully
described in Section 4.1 shall apply. Should the
Parties, after good faith negotiations, be unable to
mutually agree on any term or condition to any Farmout
Agreement or Sublease other than those specified
in the main body of this Agreement, or in the forms
attached hereto as Exhibits "D" and "E", then the
Parties agree that the particular Prospect subject to the
disputed Farmout Agreement or Sublease shall be
excluded from the Contract Acreage and McMoRan shall
release same from this Agreement in a similar
matter as provided under Article 26 .
5.3 Texaco's Participation Options and Overriding Royalty.
Under any Farmout Agreement or Sublease
contemplated pursuant to this Agreement, Texaco
shall retain the continuing rights, options and elections
as specified below:
5.3.1 On Prospects listed on Exhibit "B", or
deemed, pursuant to Section 4.6 to be listed on
Exhibit "B", presented by Texaco to McMoRan, Texaco
shall:
5.3.1.1 On each Lease in each Prospect that is
currently held by production or on which
there is a well which satisfies the criteria of 30 CFR
250.111 on the Effective
Date of this Agreement, be carried, at no cost or
expense, to Casing Point on
the Initial Test Well, its substitute or an additional
well. At Casing Point,
Texaco will have the option to (1) begin participating in
the continued
operations of the Initial Test Well and all subsequent
operations on the Prospect
pursuant to the terms and conditions of the applicable
operating agreement, for a ******** working interest, or
(2) retain a ******** overriding royalty convertible
to a ******** working interest in each Lease to the extent it is
included in the Prospect at
Project Payout. In the event Texaco elects to acquire a
working interest, in no
event will Texaco be required to reimburse McMoRan for
any costs or
expenses incurred or accrued in regard to any operations
conducted on or
associated with the Prospect prior to Casing Point or
conversion of its
overriding royalty interest, whichever is applicable.
5.3.1.2 On each Lease in each Prospect that is
not described in Subsection 5.3.1.1, be
carried, at no cost or expense, to Casing Point on the
Initial Test Well, its
substitute or an additional well. At Casing Point,
Texaco will have the option
to (1) begin participating in the continued operations of
the Initial Test Well
and all subsequent operations on the Prospect pursuant to
the terms and
conditions of the applicable operating agreement, for a
******** working interest, or (2) retain a ********
overriding royalty convertible to a ******** working
interest in each Lease to the
extent it is included in the Prospect at Project Payout.
In the event Texaco
elects to acquire a working interest, in no event will
Texaco be required to
reimburse McMoRan for any costs or expenses incurred or
accrued in regard to
any operations conducted on or associated with the
Prospect prior to Casing
Point or conversion of its overriding royalty interest,
whichever is applicable.
5.3.2 On any Prospect not listed on Exhibit "B",
Texaco shall:
5.3.2.1 On each Lease in each Prospect that is
currently held by production or on which
there is a well which satisfies the criteria of 30 CFR
250.111on the Effective
Date of this Agreement, have the right and option to (1)
participate with
McMoRan for a ******** working interest in the Initial Test
Well, its substitute or additional well under the terms
and conditions of the
applicable operating agreement, or (2)******** overriding
royalty convertible to a ********
working interest in each such
Lease to the extent it is included in the Prospect at
Project Payout. In the event
Texaco elects to convert its overriding royalty to a
working interest, in no event
will Texaco be required to reimburse McMoRan for any
costs or expenses
incurred or accrued in regard to any operations conducted
on or associated with
the Prospect prior to conversion of its overriding
royalty interest.
5.3.2.2 On each Lease in each Prospect that is
not described in Subsection 5.3.2.1, have
the right and option to (1) participate with McMoRan for
a ********working interest in the Initial
Test Well, its substitute
or additional well under the terms and conditions of the
applicable operating agreement, or (2) ********
overriding royalty convertible to a ********working interest
in each such Lease to the extent it
is included in the Prospect at Project Payout. In the
event Texaco elects to
convert to its overriding royalty to a working interest,
in no event will Texaco
be required to reimburse McMoRan for any costs or
expenses incurred or
accrued in regard to any operations conducted on or
associated with the
Prospect prior to conversion of its overriding royalty
interest.
5.3.3 Under Subsections 5.3.1.1 and 5.3.1.2 above,
McMoRan shall pay ********of Texaco's share of the Well Costs to Casing
Point.
5.3.4 In the event Texaco elects to participate upfront
with a working interest in the Initial
Test Well on a Prospect in accordance with the provisions
of Section 5.3.2, then Texaco
and McMoRan agree to enter into an agreement implementing
such election, including
provisions setting forth the requirements for McMoRan's
earning of an assignment(s) of
operating rights in accordance with this Agreement,
obligating Texaco to execute the
appropriate assignment(s) of operating rights (with no
reservation of an overriding
royalty interest) subject to the satisfaction of the
applicable earning requirements, and
providing that the Parties will share the costs and risks
of the Initial Test Well as well as
all subsequent operations on a non-promoted basis in
accordance with the provisions of
an operating agreement consistent with the provisions of
Section 5.13.
5.3.5 Should Texaco fail to timely notify McMoRan in
writing of its election to participate
for a working interest, then Texaco's election shall be
deemed to be an election to retain
an overriding royalty as specified under Section 5.3.
5.4 General Farmout Agreement Terms and Conditions.
Notwithstanding anything herein to the contrary in
Section 5.3 above, Texaco will either
participate and/or farmout or sublease to McMoRan all or
that portion of its leasehold interest, as to which
it does not elect to participate, in the Contract Acreage
located in each Prospect McMoRan chooses to
drill. Subject to Texaco's elections as stipulated in
Section 5.3 above, the Texaco interest in the Contract
Acreage to be farmed-out or subleased will vary. Each
applicable Farmout Agreement or Sublease will
state the Texaco interest being farmed-out or subleased.
Except as otherwise provided in this Agreement,
the following terms and conditions shall be applicable to
all the Farmout Agreements and Subleases
executed by the Parties hereto pursuant to the provisions
of this Agreement.
5.4.1 Within ninety (90) days from the execution of
a Farmout Agreement or Sublease, or other
mutually agreed period of time, McMoRan will, at its sole
cost, risk and expense, and subject to
rig availability and the obtaining of required permits,
commence the drilling of the Initial Test
Well under the Farmout Agreement or Sublease. The
surface location, bottomhole location and
primary objective for the Initial Test Well shall be
mutually agreed upon between Texaco and
McMoRan, provided, however, in the event the Parties do
not agree, McMoRan's proposal(s)
shall govern unless Texaco elects, as provided in this
Agreement, to participate in the drilling of
the applicable well. Subject to the exception stated
below, McMoRan will not be required to
drill all Prospects identified during any Option Period
simultaneously; however, McMoRan will
have the obligation to drill the Initial Test Well on
each Prospect consecutively during any
individual Option Period with no more than ninety (90)
days elapsing between rig release on the
Initial Test Well on one Prospect as to which a Farmout
Agreement or Sublease has been
executed and commencement of the Initial Test Well on the
next Prospect. The order in which
all Initial Test ▇▇▇▇▇ will be drilled during any
individual Option Period, and the grouping of
the Prospects, will be left to the discretion of McMoRan.
The well commencement deadlines
referenced herein, as will be reflected in the
appropriate Farmout Agreements or Subleases,
shall be subject to rig availability and the obtaining of
required permits, consents and waivers (if
any).
5.4.2 If prior to reaching the Objective Depth on
any well drilled pursuant to the provisions
stated in a Farmout Agreement or Sublease, conditions are
encountered in such well which render
further drilling operations impractical, McMoRan will
have thirty (30) days in which to advise
Texaco of its election to drill a substitute well. In
the event McMoRan elects to drill a substitute
well, the well must be commenced within sixty (60) days
after the date the rig is released from the
previous well, subject to rig availability and the
obtaining of any required permits. Any substitute
well drilled will be drilled under the same terms and
conditions as the well it is replacing.
McMoRan will not be required to pursue the drilling of
the next Prospect located on the Contract
Acreage during a specific Option Period until it has
drilled a well, or its substitute(s), to the
Objective Depth on the Prospect where it was currently
conducting drilling operations.
5.4.3 In the event the Initial Test Well or
its substitute on any individual Prospect is (1) drilled
to the Objective Depth, (2) satisfies the criteria under
the provisions of 30 CFR 250.111 as a well
capable of producing in paying quantities, and (3)
McMoRan, within sixty (60) days from rig
release, commits in writing to Texaco its plans to
install the necessary facilities as soon as possible
to develop the hydrocarbons discovered, McMoRan will have
earned an assignment from Texaco
of Texaco's Operating Rights, as specified herein, in
that portion of the Contract Acreage
associated with the Prospect drilled from the surface
down to the stratigraphic equivalent of the
total depth drilled and logged, or such deeper depths as
mutually agreed, (this well being an
"Earning Well"), subject to the reservations stated in
Section 5.3 above.
In the event any such Initial Test Well or
its substitute or any subsequent well under Section 5.12
does not reach the Objective Depth due to encountering
any formation which cannot be
penetrated, or any adverse condition which cannot be
overcome by means considered reasonable
and appropriate in the industry and at reasonable cost,
but such well satisfies the criteria described
above in (2) and (3) of this Section 5.4.3, McMoRan will
have earned an assignment of Operating
Rights, as specified herein in that portion of the
Contract Acreage associated with the Prospect
drilled from the surface down to the stratigraphic
equivalent of the base of the deepest geological
horizon that satisfies the criteria of 30 CFR 250.111 in
such well, excluding any reserved depths
(this well also constitutes an Earning Well but limited
as to depth described above). No such
Earning Well shall preclude the drilling of a substitute
well.
5.4.4 Unless otherwise specifically stated in
this Agreement, any Operating Rights assignment
made by Texaco in favor of McMoRan, pursuant to the
provisions stated in the applicable
Farmout Agreement(s) or Sublease(s), will if applicable
be made subject to Texaco retaining the
overriding royalty specified in Section 5.3 in and to all
production from the Prospect acreage
before Project Payout (as defined below) for each
Prospect. Under Farmout Agreements or
Subleases where Texaco retains an overriding royalty
interest, at Project Payout, Texaco will have
the option of retaining its overriding royalty interest
in the Prospect or converting the retained
overriding royalty interest to a ********working interest.
Texaco's election to
convert its overriding royalty to a working interest
shall be exercisable on a Prospect by Prospect
basis upon Project Payout as defined below.
5.4.5 McMoRan shall not earn or have the right to earn
any interest in nor be responsible or
liable for any existing ▇▇▇▇▇, platforms, flowlines or
environmental conditions which are located
on any portion of the Contract Acreage prior to the
Effective Date of this Agreement. In addition,
notwithstanding anything herein to the contrary, under no
circumstances will McMoRan be
allowed to earn any productive sand segment in pressure
communication with Texaco's ▇▇▇▇▇
located in or around any acreage covered by any Farmout
Agreement or Sublease executed
pursuant hereto except as otherwise mutually agreed. The
pressure communication and common
reservoir restrictions are found under Article 6 below.
5.4.6 The dollar amount of liquidated damages for failure
to drill the Initial Test Well, to be
filled in the blank space of each Farmout Agreement or
Sublease, shall be an amount not to
exceed ******** of the AFE dry hole cost for
the Initial Test Well for each Prospect
on which the Parties mutually agree liquidated damages
will be appropriate.
5.5 Impenetrable Substances.
If McMoRan drills to a depth shallower than the
agreed upon Objective Depth and
encounters "impenetrables," including any formation which
cannot be penetrated, or any adverse
condition which cannot be overcome, by means considered
reasonable and appropriate in the industry
and at reasonable cost, McMoRan shall have the right to
drill a substitute well in accordance with
Subsection 5.4.2 above.
5.6 Project Payout.
"Project Payout" shall be defined as that point in
time when the proceeds from the sale of
production attributable to McMoRan's interest farmed in
from Texaco in all successful ▇▇▇▇▇ drilled by
McMoRan on a Prospect [exclusive of a) royalties which
are to be paid or delivered to Lessor under the
terms of the applicable leases, b) Texaco's overriding
royalty, c) any other burdens of record covering the
Contract Acreage existing prior to the Effective Date of
this Agreement d) transportation charges allowed
under the terms of the applicable Lease(s), e) Third
Party and/or Texaco processing, handling and
transportation fees, and f) any production taxes], equal
the sum of the total actual cost incurred by
McMoRan attributable to McMoRan's interest farmed in from
Texaco in the drilling, testing, completing,
equipping and workover of all successful ▇▇▇▇▇ through
the installation of the wellhead equipment,
including any caissons and/or other type of well
protectors, any flowlines or pipelines installed, production
equipment exclusively purchased for said ▇▇▇▇▇ and/or a
platform with production facilities installed to
service such ▇▇▇▇▇ and production, and the monthly
operating cost allocated to the ▇▇▇▇▇. The
determination of all Project Payout costs shall be made
in accordance with the Accounting Procedure
attached to the applicable Farmout Agreement or Sublease.
Project Payout shall not include any costs or
expenses associated in any way with any unsuccessful
well(s) drilled or unsuccessful operations conducted
in any well located on the Contract Acreage operated by
McMoRan or in which McMoRan has an interest.
5.7 Payout Notice.
McMoRan shall promptly notify Texaco in writing at
least thirty (30) days prior to the
point in time when McMoRan anticipates Project Payout
will occur on each individual Prospect.
5.8 Option to Participate. 5.8
On each Prospect where Texaco has elected to retain
an overriding royalty before Project
Payout, Texaco shall have the option, on a Prospect by
Prospect basis, to convert its retained overriding
royalty interest to a working interest in all ▇▇▇▇▇
located on each Prospect earned by McMoRan, the
equipment therein and thereon and the production
therefrom, by giving written notice thereof to
McMoRan within sixty (60) days after receipt of the
aforementioned Project Payout notification. In the
event Texaco exercises such option, McMoRan agrees to
assign to Texaco, effective as of the date of
Project Payout, an undivided ******** of
its rights in and to the ▇▇▇▇▇, the equipment
therein, thereon and related thereto, and the production
therefrom attributable to the interest covered by the
applicable Farmout Agreement or Sublease. McMoRan shall
reassign to Texaco ******** of the Operating Rights originally
conveyed by Texaco to McMoRan in said Prospect(s). The
assignment from McMoRan to Texaco shall be free and clear
of all burdens except Lessor's royalty and
other burdens of record covering the earned Contract
Acreage existing prior to the Effective Date of this
Agreement.
5.9 Overriding Royalties.
Any overriding royalties reserved by Texaco
pursuant to any Farmout Agreement or
Sublease shall be delivered or paid to Texaco as herein-
below provided:
(a) The overriding royalties which are reserved herein on
oil and/or other liquid
hydrocarbons that are produced from a Prospect, shall be
an amount equal to the
percent of total production produced and saved at the
wellhead, the separator or drips;
the same shall be delivered to the credit of Texaco in
the pipeline to which the well(s)
may be connected, free of all costs except that the
overriding royalty shall bear its
proportionate share of Third Party transportation costs
actually incurred, if any;
provided, however, if McMoRan, or an affiliate of
McMoRan, purchases or sells such
oil and/or other liquid hydrocarbons at the well(s) or at
a delivery point on or off the
leased premises, McMoRan shall pay the price being paid
for such oil and/or other
liquid hydrocarbons under an arm's-length transaction at
the point of sale for such oil
and/or other liquid hydrocarbons, or the resale price
received by McMoRan, or any
affiliate of McMoRan, whichever is greater, for its own
oil and/or other liquid
hydrocarbons produced from said well(s) received at the
well(s) or at a delivery point
on or off the leased premises after the deduction of
Third Party transportation cost
actually incurred, if any. In no event shall the price
paid be less than the price received
by McMoRan, or an affiliate of McMoRan, after the
deduction of Third Party
transportation cost actually incurred, if any, whichever
is greater. Anything to the
contrary notwithstanding, the price used for determining
Texaco's overriding royalties
shall not be less than the price used for royalty
valuation in favor of the Minerals
Management Service, as Lessor of its respective leases
described herein, or the State of
Louisiana, as Lessor of its respective leases.
(b) The overriding royalties which are reserved herein
on gas, casinghead gas and/or other
gaseous substances shall be an amount equal to the
percent of total production specified
above which may be produced and saved from the Prospect
at the well(s) or on the
lease, the same to be delivered to the credit of Texaco
in the pipeline to which the
well(s) my be connected, free of all costs except that
the overriding royalty shall bear its
proportionate share of Third Party transportation costs
actually incurred, if any;
provided, however, if McMoRan purchases, utilizes or
sells same at the well(s) or at a
delivery point on or off the leased premises, McMoRan
shall pay the resale price
realized therefrom by McMoRan, or an affiliate of
McMoRan, but in no event less than
the gross proceeds received from the sale of such gas,
after deducting the costs of any
required dehydration, separation and Third Party
transportation of such gas which occur
on the leased premises or at a delivery point off the
leases premises. Anything to the
contrary notwithstanding, the price used for determining
Texaco's overriding royalties
shall not be less than the price used for royalty
valuation in favor of the Minerals
Management Service, as Lessor of its respective leases
described herein, or the State of
Louisiana, as Lessor of its respective leases described
herein.
(c) The overriding royalty interest herein
reserved shall bear its proportion of all production
related taxes, if any, which now or hereafter become
applicable thereto or affect same, as
well as its proportionate part of all oil or gas used for
operations hereunder. However,
McMoRan shall pay to Texaco the proportion of said taxes
charged to the overriding
royalty interest herein reserved which are refunded to
McMoRan by the purchaser of
production.
(d) Texaco may, at any time or from time to time,
require that the payment of any or all of the
above reserved overriding royalties be made in kind upon
thirty (30) days written notice.
Any gas contract with a term exceeding six (6) months
executed by McMoRan after the
date hereof shall provide that upon thirty (30) days
written notice of Texaco's intention to
take its overriding royalty gas in kind, such overriding
royalty gas shall be released from
the contract. The right to take overriding royalty in
kind is entirely separate as to oil and
gas; that is, Texaco may take the royalty oil without
taking the gas, or vice versa, and said
right may be exercised as to either of said products from
time to time.
(e) Payments of the aforesaid overriding royalties shall
be made by McMoRan to Texaco as
to oil monthly between the first and the end of the
calendar month next succeeding the
month in which the oil which is covered hereby is sold or
utilized, and as to gas monthly
between the first and the end of the second calendar
month next succeeding the month in
which the gas which is covered hereby is sold or
utilized. Such overriding royalties are
over and above the royalty and overriding royalties
McMoRan is obligated to pay to the
Lessor and others under the applicable Lease(s). McMoRan
agrees it will remit to
Texaco, in the time period set out above, the full amount
of the overriding royalty
due Texaco regardless of the number of co-venturers
McMoRan may have in the
Prospect, if any. Texaco shall look only to McMoRan for
the payment of its
overriding royalty.
5.10 Proportionate Reduction.
All percentage interests of Texaco referred to in
this Article 5 assume that the Texaco Leases
cover the entirety of the mineral interest in each Lease
subject to this Agreement and that Texaco has
the right to one hundred percent (100%) of the working
interest in any well hereunder. In the event that
Texaco's interest in any existing Lease is less than one
hundred percent (100%) of the mineral interest in
any Lease subject hereto, or if Texaco has less than the
right to 100% working interest in any well, then
the percentage interests of Texaco and Operating Rights
interest McMoRan is entitled to receive, and
McMoRan's obligations to bear costs and liabilities,
shall be proportionately reduced to reflect the
actual interests of Texaco in the Contract Acreage,
Leases and Prospect prior to McMoRan earning a
portion thereof pursuant to the applicable Farmout
Agreement or Sublease.
5.11 Failure to Drill the Initial Test Well.
Should McMoRan fail to commence or cause to be commenced
operations for the drilling of the
Initial Test Well on the farmed-out or subleased Prospect
or lands pooled or unitized therewith in
accordance with the terms of the Farmout Agreement or
Sublease, then the Farmout Agreement or
Sublease shall terminate and McMoRan shall be subject to
the liquidated damages penalty stated in the
applicable Farmout Agreement or Sublease.
Notwithstanding the payment of the penalty as specified in
the Farmout Agreement or Sublease, McMoRan shall continue
to have the right and option to again
propose the drilling of an Initial Test Well on a
Prospect created pursuant to the provisions stated in
Article 4 above.
5.12 McMoRan's Continuous Option to Earn.
It is understood and agreed that in the event McMoRan
drills the Initial Test Well and/or
substitute therefor and fails to earn an interest in the
Operating Rights associated therewith pursuant to
the terms and conditions of this Agreement, McMoRan may
drill additional well(s) under the applicable
Farmout Agreement or Sublease or, at its option, shall
have the continuing right and option to earn the
acreage in the Prospect it has failed to earn by
including the acreage in another Prospect under another
Farmout Agreement or Sublease.
5.13 Operating Agreement Execution.
In the event Texaco elects to participate with a working
interest in the Initial Test Well pursuant
to Sections 5.3.1 or 5.3.4, Texaco and McMoRan shall
execute an operating agreement substantially
similar in form to the one attached hereto as Exhibit "G"
within ten (10) Business Days of Texaco's
election to participate. A separate operating agreement
shall be executed for each Prospect in which
Texaco elects to participate with a working interest.
Should McMoRan propose the drilling of an Initial
Test Well pursuant to Section 4.1 above,
and Texaco subsequently elects to participate in the
drilling of said well pursuant to Section 5.3.2
,Texaco and McMoRan shall, as soon as reasonably possible
from Texaco's election to participate, enter
into an operating agreement substantially similar in form
to that which is attached hereto as Exhibit "G"
(the Parties acknowledge that changes in such form may be
necessary to accommodate requests of Third
Parties) to cover the Lease(s) (or the portion thereof)
within the Prospect, such operating agreement to
be effective as of the date of Texaco's election to
become a working interest co-owner, irrespective of
when such agreement is executed. In the event an
operating agreement is already in place between
McMoRan and its co-owner(s), Texaco shall be provided a
copy of such operating agreement at the
detailed technical meeting referred to in Section 4.1
above. Texaco will be required to accept and ratify
such existing operating agreement if it so elects to
become a working interest co-owner specifically
subject to McMoRan's agreement and obligation to, in good
faith, attempt to amend such operating
agreement to satisfy any objections Texaco has to such
operating agreement.
In the event McMoRan earns an interest in any
Prospect farmout or sublease acreage and Texaco
elects to convert its retained overriding royalty
interest to a working interest in an individual Prospect at
Project Payout, the Parties shall enter into a mutually
acceptable form of operating agreement, similar in
form to that which is attached as Exhibit "G", that will
apply exclusively to and control further operations
on that particular Prospect. The operating agreement
shall be negotiated as soon as reasonably practical
after Texaco has made its election to convert its
overriding royalty to a working interest. Texaco's election
to convert its overriding royalty to a working interest
shall apply separately to each Prospect at Project
Payout of that particular Prospect. An election by
Texaco to convert its overriding royalty to a working
interest on one Prospect shall not apply to any other
Prospect. In the event an operating agreement is
already in place between McMoRan and its co-owner(s),
Texaco shall be provided a copy of such
operating agreement at the time it receives notice from
McMoRan that Project Payout will soon be
reached. Texaco will be required to accept and ratify
such existing operating agreement if it so elects to
become a working interest co-owner specifically subject
to McMoRan's agreement and obligation to, in
good faith, attempt to amend such operating agreement to
satisfy any objections Texaco has to such
operating agreement.
5.14 Designation of Operator.
Should an Initial Test Well be proposed by McMoRan on a
Prospect which encompasses all or a
part of a Lease in which Texaco is the one hundred
percent (100%) owner and Operator, Texaco shall
designate McMoRan, under the terms hereof, Operator of
the Contract Area necessary to drill the
proposed well. Should said Initial Test Well be proposed
by McMoRan on a Lease in which Texaco is
not the one hundred percent (100%) owner, but is the
designated Operator, as indicated thereon, Texaco
will provide McMoRan with Designation of Operator forms,
under the terms hereof, naming McMoRan
Operator thereof, after receipt from McMoRan of notice
that all other record title and applicable
operating rights owners of the Contract Acreage in
question have agreed to designate McMoRan as
operator. Should said Initial Test Well be proposed by
McMoRan on a Lease in which Texaco is not the
designated Operator, Texaco will timely provide McMoRan,
under the terms hereof, with Designation
of Operator forms subsequent to McMoRan providing Texaco
with written concurrence from Texaco's
co-owner(s) that they have agreed to designate McMoRan as
Operator. Notwithstanding anything to the
contrary in this Section 5.14, should McMoRan fail to
earn an interest in the Operating Rights as
prescribed herein, McMoRan shall automatically relinquish
operatorship to the entity previously
designated as operator for that portion of the Contract
Acreage McMoRan was designated operator.
Should Texaco at any time become a working interest
owner in any Prospect, and in any operation
subsequent to the drilling of the Earning Well or its
substitutes, Texaco shall have the option, but not the
obligation to assume the responsibility of Operator and
the designated applicant under the applicable
regulations for oil spill financial responsibility
purposes for the Prospect on which it has become a
working interest owner if the majority of the owners in
such Prospect mutually agree (or such other
percentage that may be specified in the applicable
operating agreement).
ARTICLE 6
6. PRESSURE COMMUNICATION AND COMMON RESERVOIRS.
6.1 Pressure Communication Restriction
Notwithstanding anything to the contrary in any
other Section in this Agreement, any productive
sand interval encountered in any well drilled or caused
to be drilled by McMoRan under this Agreement
that is in reservoir or pressure communication with a
productive sand interval that is producing or is
capable of producing in Paying Quantities from any well
drilled prior to the drilling of a McMoRan well
on a Lease by Texaco or its co-owners shall be excluded
from this Agreement and specifically reserved by
Texaco. If at any time McMoRan proposes to drill a well
which could encounter a sand interval(s) which
could potentially be in reservoir or pressure
communication with a productive sand interval(s) that is
producing or capable of producing in any such existing
well as described above, prior to drilling such well
Texaco and McMoRan will establish the criteria for
determining whether the well once drilled would be in
reservoir or pressure communication. In the event
McMoRan drills a well and encounters a sand
interval(s) not originally anticipated to contain
hydrocarbons in Paying Quantities but, upon review by
either Party is believed to potentially be in reservoir
or pressure communication with a productive sand
interval(s) that is producing or capable of producing in
Paying Quantities in an existing well as described
above, the Parties hereto will exchange information and
shall meet as soon as reasonably possible to
establish the criteria for determining whether or not the
interval(s) in question is actually in reservoir or
pressure communication.
McMoRan shall provide Texaco a geologic,
geophysical and engineering review ("the Technical
Review") before or after reaching total depth in any well
drilled hereunder that encounters a productive
hydrocarbon zone that may be in communication with a
productive horizon in such an existing well drilled
by Texaco or its co-owners. Texaco shall advise McMoRan
within 90 business days of the Technical
Review if it, in good faith, believes that a sand
interval encountered in such well is potentially in reservoir
or pressure communication with a sand interval that is
producing or capable of producing in Paying
Quantities from such an existing well drilled by Texaco
or its co-owners. McMoRan and Texaco shall
provide reasonable access to available geologic,
geophysical and engineering data. If Texaco fails to give
McMoRan notice within the 90 day period Texaco shall
cease to have any rights to claim that any interval
encountered in McMoRan's well is in reservoir or pressure
communication with such an interval in a
Texaco well.
In the event there is a disagreement between Texaco
and McMoRan as to whether or not such a
Texaco well containing a producing sand, or sand capable
of producing in Paying Quantities, is in
reservoir or pressure communication with a productive
sand, or sand capable of producing in McMoRan's
well, then within 180 days after the Technical Review or;
if customary and necessary pressure data
specific to the interval in question in McMoRan's well is
not then available; 90 days following receipt of
such data, Texaco and McMoRan shall furnish all available
geological, geophysical and engineering data,
including bottom hole pressure data and reservoir
characteristics, to a mutually acceptable engineering
firm to determine, with reasonable confidence, whether or
not reservoir or pressure communication exists
between such intervals. The decision of the engineering
firm shall be final and binding on the Parties
hereto. The cost of the work performed by the
engineering firm shall be shared equally between Texaco
and McMoRan.
In the event the only sand interval(s) capable of
producing hydrocarbons in commercial quantities
discovered in a well drilled by McMoRan is in reservoir
or pressure communication with one or more sand
interval(s) producing or capable of producing in Paying
Quantities from such an existing Texaco well(s),
then unless otherwise agreed by the Parties, McMoRan
shall not earn any portion of the Prospect as a
result of the drilling of that well. For the purpose of
this Agreement, this particular well shall be
considered unsuccessful and the provisions of Section 5.4
above as to ▇▇▇▇▇ incapable of producing in
Paying Quantities shall apply.
In the event that Texaco has timely notified
McMoRan that a sand interval in a McMoRan well is
potentially in reservoir or pressure communication with
such an existing Texaco well as described above,
and the issue has not been previously resolved, prior to
producing any such sand interval, McMoRan will
gather at McMoRan's expense the pressure data in
McMoRan's well in the interval necessary to assist
both Parties in determining whether or not such sand
interval is actually in reservoir or pressure
communication with a sand interval producing or capable
of producing in such an existing Texaco well.
6.2 Common Reservoirs.
In the event McMoRan drills a well located on a
Prospect that discovers a reservoir(s) not in
reservoir communication with a productive sand
interval(s) that is producing or is capable of producing in
paying quantities from a well drilled by Texaco or its
co-owner(s) located on the lease, but which
discovered reservoir(s), based on well information and
available seismic data, underlies both the Prospect
and acreage owned by Texaco located outside the Contract
Acreage and not covered by this Agreement
("non-farmout acreage"), McMoRan shall, prior to
producing said well enter into an agreement with
Texaco calling for the unitization of the common
Reservoir(s).
An initial determination of equity interest between
Texaco and McMoRan in the common
reservoir(s) will be based on available geologic,
engineering, and geophysical data to develop composite
equivalent net acre feet within most likely limits of the
common Reservoir(s) underlying the Prospect and
non-farmout acreage. Equivalent net acre feet (gas and
oil net acre feet shall be added together at the ratio
of six (6) thousand cubic feet to one (1) barrel of
liquid ratio) shall be determined for the common
Reservoir(s) from isopach and/or isochore maps prepared
by Texaco and/or McMoRan. If more than one
Reservoir is common between the Prospect and non-farmout
acreage, the total composite net acre feet for
the Prospect and non-farmout acreage shall be determined
by summing all the net acre feet for the various
common reservoirs. Texaco's and McMoRan's interest
ownership in the unit shall be determined based on
a ratio of the net acre feet allocated to the Prospect
and non-farmout acreage as that acreage bears to the
total net acre feet of the common reservoir(s). The
Parties will endeavor to determine the initial equity
interest no later than 180 days from rig release from the
earning well.
In the event there is a disagreement between Texaco
and McMoRan as to the most likely limits of
the common Reservoir(s) as based on available geologic,
engineering, and geophysical data and as
depicted on the isopach and isochore maps prepared by
Texaco and/or McMoRan, or Texaco and
McMoRan cannot agree upon the calculation of the
composite net acre feet of said Reservoir(s) as
between the acreage covered by this Agreement and the
non-farmout acreage, Texaco and McMoRan shall
furnish all available geological, geophysical and
engineering data, including bottom hole pressure data and
Reservoir characteristics, to a mutually acceptable oil
and gas consulting firm to prepare isopach and
isochore maps and calculate the composite net acre feet
of said Reservoir(s). The isopach and isochore
maps prepared by the consulting firm shall be the ones
used by the Parties hereto. The cost of the work
performed by the consulting firm(s) shall be shared
equally between Texaco and McMoRan. In no event
will McMoRan produce any common Reservoir in any well
drilled pursuant hereto until all outstanding
issues between Texaco and McMoRan have been resolved
regarding the sharing of production from and
equity interest in such common Reservoir(s). Texaco
shall prepare the appropriate unitization agreement
and forward such agreements to McMoRan for negotiation,
review and comments. In such agreements
Texaco shall address cost equalization and equity
determinations and/or redeterminations as appropriate.
Once the unitization agreement(s) is/are executed by
Texaco and McMoRan, McMoRan will be allowed to
produce the well that encountered a common Reservoir(s).
Commitment of all or any portion of the
Prospect to a Unit shall not reduce McMoRan's cost
recoupment rights under the applicable Farmout
Agreement or Sublease.
In the event, prior to drilling any well on any
Prospect subject hereto, McMoRan determines it
will encounter a geological horizon that may contain
commercial quantities of hydrocarbons which could
possibly underlie both a portion of the Contract Acreage
and acreage owned by Texaco not subject to this
Agreement, McMoRan shall advise Texaco of this
possibility and propose the formation of a Unit. Should
the Parties agree to form a Unit prior to McMoRan
drilling said well, an agreement covering the Parties
rights and obligations in the proposed Unit shall be
executed by the Parties. Failure by the Parties to reach
an agreement will not preclude McMoRan from drilling its
well on the Prospect in accordance with the
provisions stated herein.
ARTICLE 7
7. FINANCIAL OBLIGATIONS.
7.1 Obligation to Fund Exploratory Operations.
During the term of this Agreement, McMoRan shall
have the obligation to spend, subject to
Section 7.3 below, not less than One Hundred Million
dollars ($100,000,000.00) on Exploratory ▇▇▇▇▇
and Exploration Activities on or directly associated with
Texaco's interest in the Contract Acreage and
Leases associated therewith. Satisfaction of this
obligation to spend is strictly to be determined based
on Texaco ownership interest in a Lease or lands pooled
or unitized therewith as that interest exists on
the Effective Date of this Agreement. In no event will
McMoRan be allowed to satisfy the obligation to
spend the committed funds as stated above on any other
ownership interest of any party in any Lease or
lands pooled or unitized therewith. (As an example, if
Texaco owns a 50% interest in a Lease, and
McMoRan farms-in all of Texaco's and the other leasehold
owners interest in the Lease, should
McMoRan spend $1,000,000.00 drilling a well under the
farmout, McMoRan will be allowed to credit
only $500,000 in satisfying its expenditure obligation to
Texaco.)
7.2 Spending Schedule.
The spending obligation of McMoRan as described
above shall be divided into four (4) separate
periods or segments to coincide with the Option Periods
described in Section 3.2 above. "Spending
Schedule 1" will coincide with "Option Period 1",
"Spending Schedule 2" will coincide with "Option
Period 2", "Spending Schedule 3" will coincide with
"Option Period 3", and "Spending Schedule 4"
will coincide with "Option Period 4" (hereinafter
referred to individually as "Spending Schedule" and
collectively as "Spending Schedules"). These Spending
Schedules shall run sequentially in numeric
order with no lapse in time between the expiration of one
Spending Schedule and the beginning of the
next. The separate Spending Schedules shall be defined
as follows:
7.2.1 Spending Schedule 1: "Spending Schedule 1"
shall begin on the Effective Date and
continue until the end of the eighteenth (18th) month
from the Effective Date and shall
cover forty percent (40%) of the obligatory amount stated
in Section 7.1 McMoRan is
required to spend pursuant to this Agreement.
7.2.2 Spending Schedule 2: "Spending Schedule 2"
shall begin on the first day of the
nineteenth (19th) month after the Effective Date and
continue through the last day of the
thirtieth (30th) month and shall cover thirty percent
(30%) of the obligatory amount stated
in Section 7.1 McMoRan is required to spend pursuant to
this Agreement.
7.2.3 Spending Schedule 3: "Spending Schedule 3"
shall begin on the first day of the thirty-
first (31st) month after the Effective Date and continue
through the last day of the forty-
second (42nd) month and shall cover thirty percent (30%)
of the obligatory amount stated
in Section 7.1 McMoRan is required to spend pursuant to
this Agreement.
7.2.4 Spending Schedule 4: With respect to
Option Period 4, there shall be no Spending
Schedule and McMoRan shall not be obligated to spend any
obligatory amount during
such Option Period. During Option Period 4 Texaco and
McMoRan shall have the same
rights and obligations hereunder as existed during Option
Periods 1, 2 and 3 (except for
McMoRan not having any minimum expenditure or well
commitment obligations). As to
any Prospect that is established and on which McMoRan
commits to participate in the
drilling of an Exploratory Well prior to the end of
Option Period 4, the Parties shall use
their best efforts to mutually agree upon and execute the
appropriate Farmout Agreement
or Sublease as provided herein prior to the end of Option
Period 4 but, if despite such
efforts, such Farmout Agreement or Sublease is not
executed by both Parties prior to the
Option Period 4 expiration date, this Agreement will
survive such expiration date as to,
and only as to, such Lease or portions thereof included
in a previously agreed upon
Prospect to be included under a Farmout Agreement or
Sublease (including any Farmout
Agreement or Sublease agreed to by Texaco and McMoRan
executed within sixty (60)
days of the end of Option Period 4). If the Parties are
unable to mutually agree upon and
execute the appropriate Farmout Agreement(s) or
Sublease(s) within sixty (60) days from
termination of the remainder of this Agreement as
provided under Article 26, then the
rights and obligations of the Parties hereto shall
terminate as to any Lease or portion
thereof not included under a fully executed Farmout
Agreement or Sublease. The sole
consequence of any failure by McMoRan to drill an
Exploratory Well that is committed
to during Option Period 4 (other than any mutually agreed
liquidated damages
incorporated into the applicable Farmout Agreement or
Sublease) shall be the forfeiture of
all rights as to the affected Prospect.
7.3 Exploratory ▇▇▇▇▇ and Other Exploration Activities.
For purposes of determining what funds will be
credited to McMoRan in the fulfillment of its
obligation to spend the funds stated in Section 7.1, the
Parties hereto agree that at least eighty percent
(80%) of the funds allocated to each Spending Schedule
must be spent by McMoRan on Well Costs
directly attributable to Exploratory ▇▇▇▇▇, and any
substitute ▇▇▇▇▇ or additional ▇▇▇▇▇ prior to earning or
which earns an interest in the affected Prospect drilled
therefor pursuant to this Agreement. Funds
actually spent or funds committed to be spent by McMoRan
on Exploratory ▇▇▇▇▇ during any singular
Spending Schedule period shall be credited to McMoRan for
that particular Spending Schedule. For
funds committed to, but not spent, in any Spending
Schedule period, those funds will be credited to the
Spending Schedule period for which they were committed as
long as the funds are fully spent in the
subsequent Spending Schedule period. If the committed
funds are not fully spent in the subsequent
Spending Schedule period, McMoRan will lose the credit it
had received for the committed funds it did
not spend. The credit previously given for the
committed funds will be reversed out of the applicable
Spending Schedule period and a determination of whether
or not any deficit penalty is due pursuant to
Section 7.4 will be made. If a deficit penalty is due,
payment of such penalty will be handled as
provided under Section 7.4 below.
In regard to the remaining required expenditure
obligation due during any individual Spending
Schedule, McMoRan shall have the option, if it chooses
not to spend the remaining funds or portions
thereof on drilling Exploratory ▇▇▇▇▇, to derive such
remaining expenditures from any Exploration
Activities, other than those Exploration Activities
directly associated with the drilling of Exploratory
▇▇▇▇▇, conducted during a Spending Schedule period. Funds
actually spent or funds committed to be
spent by McMoRan on these Exploration Activities during
any singular Spending Schedule period shall
be credited to McMoRan for that particular Spending
Schedule. For funds committed to but not spent in
any Spending Schedule period, those funds will be
credited to the Spending Schedule period for which
they were committed as long as the funds are fully spent
in the subsequent Spending Schedule period.
If the committed funds are not fully spent in the
subsequent Spending Schedule period, McMoRan will
lose the credit it had received for the committed funds
it did not spend.
Any funds spent in excess of the funds, as
described in this Section 7.3, actually spent or
committed to be spent during any Spending Schedule period
shall be credited toward satisfying the
following Spending Schedule period(s).
Notwithstanding anything herein to the contrary, McMoRan
will be allowed to take credit for
allowable Exploratory Activities expenditures incurred
between November 17, 1999 and the Execution
Date on Leases subject to this Agreement.
7.4 Spending Schedule Deficit Penalty.
Should McMoRan fail to spend, and/or commit to
spend, the required funds necessary to meet
or exceed the expenditure amounts stated in any Spending
Schedule, subject to Section 7.5 below,
McMoRan will have the obligation, within thirty (30) days
of receipt of notice from Texaco, to pay to
Texaco in cash, as directed by Texaco, ********
of the funds in any single Spending
Schedule not spent or committed to be spent for that
particular Spending Schedule period.
Notwithstanding anything herein to the contrary, in the
event any preferential rights to purchase any
interests subject hereto are exercised as specified in
Section 12.2 below, and McMoRan is not entitled to
earn an interest in the applicable Prospect as provided
herein, then McMoRan will be given credit against
the spending obligations set out in Section 7.2 above,
after the Exploratory Well is drilled, for the Well
Costs it would have spent (based on the cost to drill,
log and temporarily or permanently plug and abandon
the Exploratory Well as estimated in McMoRan's AFE for
said Exploratory Well) for the account of
Texaco had it been allowed to participate in the drilling
of such Exploratory Well.
7.5 Spending Schedule Deficit Penalty Deferral.
Notwithstanding the obligation to pay a deficit
penalty as described in Section 7.4 above, during
any Option Period McMoRan, upon mutual agreement between
the Parties hereto, which agreement will
not be unreasonably withheld by either Party, will be
allowed to defer up to twelve and one-half percent
(12.5%) of the Spending Schedule amount required to be
spent during any Option Period as a result of
McMoRan's inability, after attempting in good faith, to
cause an Exploratory Well to be drilled on a
Prospect included under a Farmout Agreement or Sublease.
The amounts to be deferred shall be based
on the cost to drill, log and temporarily or permanently
plug and abandon the Exploratory Well as
estimated in McMoRan's AFE for the well(s) that would
have been drilled. The deferred amounts shall
be added to the total amount of the required funds to be
expending under the following Spending
Schedule. If in fact funds are deferred from one
Spending Schedule to the next, the amount deferred
when added to the existing amount required to be spent
within a Spending Schedule shall establish, and
for purposes of this Agreement, a new revised Spending
Schedule for the applicable Option Period. In
the event all funds are not spent by the end of Option
Period 3, or Option Period 4 as the case may be,
the deficit penalty as specified in Section 7.4 above
shall apply.
7.6 Liquidated Damages Credit.
During the term of this Agreement, should
liquidated damages come due as a result of
McMoRan's failure to drill a well as provided under any
applicable Farmout Agreement or Sublease, any
payments due to Texaco shall not be in addition to the
penalty as specified in Section 7.4 above. When
liquidated damages are incurred, McMoRan shall note these
amounts on the monthly reports as specified
in Section 7.8 below. No payment of any liquidated
damages shall be owed to Texaco until the deficit
penalty for any Spending Schedule Option Period has been
determined. If a deficit penalty is due, the
amount of the liquidated damages owed to Texaco shall
replace that portion of the deficit penalty that is
equal to the cumulative liquidated damages incurred for
that Spending Schedule Option Period. If the
cumulative liquidated damages exceed the deficit penalty
the difference in the two amounts shall be
deferred to the next Option Period. This carried
forward portion of the liquidated damages shall be added
to any liquidated damages incurred in that particular
Spending Schedule Option Period. At the end of this
Spending Schedule Option Period reconciliation of the
liquidated damages and deficit penalty for that
particular Spending Schedule Option Period shall be
handled in the same manner as specified above for
the previous Spending Schedule Option Period. If at the
end of the Option Period 2 there are liquidated
damages amounts remaining after accounting for the
deficit penalty as specified herein, the liquidated
damages will be added to the funds McMoRan is required to
spend for Spending Schedule 3. In the event
liquidated damages remain or become due at the end of
Option Period 3, those funds shall be paid to
Texaco after adjusting for the deficit penalty as
specified in this Section 7.6; provided, however, in the
event the term of this Agreement is extended and Option
Period 4 is applicable, the amount of such
liquidated damages shall be reduced by the amount of any
expenditures incurred or commitments made by
McMoRan during Option Period 4. Notwithstanding anything
herein to the contrary, if any liquidated
damages become due during the term of this Agreement
McMoRan, at its sole option and upon written
notice to Texaco, shall have the right to add the amount
of the liquidated damages to the amount it is
obligated to spend in any Spending Schedule.
7.7 Exhibit "B" Well Commitment.
Notwithstanding anything herein to the contrary
regarding this Article 7, after McMoRan has
selected the two (2) or more Texaco Prospects listed on
Exhibit "B" it chooses to specifically commit to
drill for the purpose of satisfying the $10,000,000
commitment specified in Section 2.2 above,
McMoRan shall have the obligation, not option, to drill
these ▇▇▇▇▇ in accordance with the applicable
Farmout Agreement or Sublease. The first $10,000,000.00
of the funds spent by McMoRan in regard to
these two (2) or more obligatory ▇▇▇▇▇ shall not be
included in the amounts required to be spent by
McMoRan to satisfy its spending obligations specified in
Section 7.1. However, any amount spent in
excess of said $10,000,000.00 shall be credited toward
satisfying the obligation specified in Section 7.1
above.
7.8 Accounting Report.
McMoRan will record and document the expenditures it
makes in satisfying its expenditure
obligations as stated herein. McMoRan will provide
Texaco with a report every month beginning the
month following the first month after the Effective Date
where McMoRan expends any funds pursuant
hereto. Each report shall detail the expenditures
McMoRan has incurred or committed to incur that are
known at the time the report comes due. This report
shall be due by the fifteenth (15th) of the month
following the reporting month. Within sixty (60) days
after the end of any Spending Schedule period,
McMoRan will provide a summary report for the preceding
Spending Schedule period. In all reports
prepared by McMoRan, McMoRan will summarize the amount of
funds spent or committed to be spent
claimed during the applicable month or Spending Schedule
period.
7.9 Audit Rights.
Upon written notice to McMoRan, Texaco may examine
McMoRan's accounts and records from
time to time during normal business hours required to
verify McMoRan's compliance with the financial
obligations assumed by McMoRan in this Agreement. Such
examinations shall be made directly by
Texaco at its expense or through an independent
accounting firm of Texaco's choice retained at Texaco's
expense. If performed, Texaco shall commence its initial
audit of McMoRan's accounts and records
pursuant hereto, including but not limited to the audit
of the production and sales of all hydrocarbons
received from the property, within twenty-four (24)
months from the end of the calendar year in which the
first report as specified in Section 7.8 above is
received by Texaco. After the initial audit has been
conducted or the initial audit period has expired without
such audit being commenced, Texaco may
commence subsequent audits only within the twenty-four
(24) months following the end of the calendar
year in which subsequent production statements are
received.
7.10 Right to Option Period.
As provided herein, in the event McMoRan has
satisfied the minimum financial obligations as
specified in Section 7.1 and 7.7 above, this Agreement
will be automatically extended for Option Period 4
as described in Subsection 3.2.4. In addition, should
McMoRan fail to spend all the funds required in
Spending Schedule 3, and a deficit penalty becomes due as
provided herein, then the provisions of Section
7.5 shall apply and McMoRan will, pursuant to Section
7.5, be allowed to defer a portion of the unspent
funds to Option Period 4. At the termination of Option
Period 4 should McMoRan, after good faith
attempts, be unsuccessful in spending the Spending
Schedule 4 funds, any deficit penalty due will
automatically be forgiven. In the event McMoRan fails to
use good faith in attempting to spend the
Spending Schedule 4 funds, the applicable deficit penalty
will be due.
In the event McMoRan has obtained the right to
Option Period 4, if requested by McMoRan,
Texaco will attempt to supplement Exhibit "A" with
additional leases to assist McMoRan in identifying
Prospects to drill. Supplementing Exhibit "A" will be at
the option to Texaco and shall not be considered
an obligation.
7.11 Parent Company Guarantee.
McMoRan shall provide Texaco, upon the Execution Date of
this Agreement, a parent
guarantee in a form acceptable to Texaco covering the
deficit spending and liquidated damages
obligations of McMoRan as described in this Article 7.
In addition to the above guaranty obligations,
the parent of McMoRan will also guarantee any
indemnification obligations of McMoRan arising out of
any Farmout Agreement, Sublease or Operating Agreement
between McMoRan and Texaco entered
into pursuant to this Agreement.
ARTICLE 8
8. PERIODIC TECHNICAL REVIEWS8.
8.1 Periodic Technical Overview.
Within six (6) months from the Effective Date and each
six (6) month period thereafter during
the term of this Agreement, McMoRan shall present to
Texaco, at a mutually agreeable time in
McMoRan's New Orleans office, its evaluations and
interpretations, of any geological, geophysical and
engineering data, including but not limited to any 2-D or
3-D seismic data reprocessing, either
speculative or proprietary (subject to license and other
contractual limitations), that McMoRan
generated, acquired, performed and/or conducted by itself
or its consultants over any portion of the
Contract Area McMoRan is currently evaluating or has
evaluated since the last overall technical
presentation as specified in this Section 8.1. During
each meeting McMoRan will provide Texaco with
a written report identifying the Prospects McMoRan
anticipates will be proposed to Texaco for
inclusion either under a Farmout Agreement or Sublease
within the next six (6) months. Included in this
report will be any information McMoRan has developed
regarding the location and configuration of the
Prospect(s), the well(s) to be drilled, objectives of
the/these well(s), timing of ▇▇▇▇▇ to be drilled and
cost estimates McMoRan generated, if any.
ARTICLE 9
9. TEXACO'S TECHNICAL REPRESENTATION9.
9.1 Technical Staff.
During the term of this Agreement, Texaco shall have the
right to assign two (2) of its
employees, representatives and/or consultants to work
with, consult or advise McMoRan's employees,
consultants or advisors on matters related to this
Agreement. McMoRan will provide Texaco's
employees, representatives or consultants with office
space in McMoRan's New Orleans office or in an
office where work on the Contract Acreage or acreage
associated therewith is being conducted. In
addition, McMoRan will provide the necessary office and
other equipment to allow Texaco's
employees, representatives or consultants to work with,
consult or advise on matters directly related to
the Leases and Contract Acreage subject hereto. The
McMoRan office space and equipment shall be
provided at the expense of McMoRan. Texaco will retain
the right, as it so chooses, to alternate the
employees, representatives or consultants working,
consulting or advising on matters related to this
Agreement. Any Texaco employee, representatives or
consultants temporarily located in a McMoRan
designated office will agree prior to entering the
McMoRan office to follow the rules and guidelines, as
disclosed by McMoRan, of safe office conduct. During the
period of time any Texaco employee,
representative or consultant is located in a designated
McMoRan office, any McMoRan proprietary data
disclosed to the Texaco employees, representatives and/or
consultants shall be considered and held
confidential in accordance with Section 22.1 and shall
not be disclosed to Third Parties without the
written consent of McMoRan.
9.2 Cost of Texaco Personnel.
During the term of this Agreement, should Texaco at
any time elect to locate an employee,
representative or consultant in a McMoRan designated
office, the salaries, wages, fees, charges or
benefits, if any, associated with each such employee,
representative or consultant, shall be the
responsibility of Texaco.
ARTICLE 10
10. ACREAGE RELEASE SCHEDULE.
10.1 Option Period 1 Acreage Release.
On or before the expiration of Option Period 1as
described in Section 3.2 above, McMoRan
agrees to identify and release from this Agreement not
less than twenty-five percent (25%) of the Leases
comprising the Contract Acreage as described on Exhibit
"A" after deducting any Lease included in any
Prospect drilled or committed to be drilled by McMoRan as
provided herein or released pursuant to
Sections 10.5 and 10.6 hereof. After release of this
portion of the Contract Acreage, this Agreement shall
only apply to the remaining portion of the Contract
Acreage and associated Leases not released.
10.2 Option Period 2 Acreage Release.
On or before the expiration of Option Period 2 as
described in Section 3.2 above, McMoRan
agrees to identify and release from this Agreement not
less than forty percent (40%) of the balance of the
Leases comprising the Contract Acreage as described on
Exhibit "A" after deducting any Lease included
in any Prospect drilled or committed to be drilled by
McMoRan as provided herein and after taking into
account the Leases and Contract Acreage released pursuant
to Section 10.1 above and Sections 10.5 and
10.6 below. After release of this portion of the
Contract Acreage, this Agreement shall only apply the
remaining portion of the Contract Acreage and associated
Leases not released.
10.3 Final Option Period Acreage Release.
On or before the expiration of the final Option
Period hereunder (either Option Period 3 or Option
Period 4, whichever is applicable as described in Section
3.2 above), McMoRan agrees to identify and
release from this Agreement any remaining Lease and/or
portion of the Contract Acreage not subject to a
Farmout Agreement or Sublease as specified in Article 5
above, or subject to a Farmout Agreement or
Sublease, or as provided for in Section 7.2.4. After
release of the remaining uncommitted portions of the
Contract Acreage, this Agreement shall only apply to
those portions of the Contract Acreage and
associated Leases covered by or committed to a Farmout
Agreement or Sublease.
10.4 Option to Release Additional Acreage.
McMoRan will be allowed to select what portion of
the Contract Acreage and associated Leases it
will release. McMoRan will also have the option to
release more than twenty-five percent (25%) of the
Leases as specified in Section 10.1 and forty percent
(40%) of the Leases specified in Section 10.2.
10.5 Release Notification.
To perfect the release of the Leases and Contract
Acreage as specified herein, McMoRan shall, on
or before the end of the applicable release period as
defined in Sections 10.1, 10.2 and 10.3 above, prepare
and deliver to Texaco a written document identifying the
Leases and Contract Acreage which McMoRan
has selected for release. Any release document submitted
to Texaco will be effective no later than the last
day of the Option Period on which such acreage is being
released. Upon delivery of the release
document(s) to Texaco, the rights and options granted
McMoRan under this Agreement as to the released
Leases and Contract Acreage shall terminate.
Notwithstanding anything herein to the contrary, in no
event shall the execution of a release as described in
this Article 10 relieve McMoRan of any financial
obligation that has been incurred or accrued pursuant to
this Agreement.
10.6 Acreage Release Credit.
In addition to the releases provided for above, the
partial or full releases of Leases effected as a
result of: (i) the exclusion of acreage from this
Agreement in accordance with Section 2.3 and/or (ii) the
relinquishment of Leases in accordance with Section 2.5,
shall be credited toward satisfaction of the
release requirements of this Article 10. Also, if
McMoRan drills more than one (1) Exploratory Well on a
Lease(s) in separate Prospects hereunder, McMoRan shall
receive a credit of one (1) Lease for each
Exploratory Well so drilled in excess of one (1)
Exploratory Well, for purposes of calculating the number
of Leases that McMoRan is obligated to release in
satisfaction of its obligation under this Article 10. If
under the operation of any provisions of this Agreement
an interest in the Contract Acreage is excluded or
relinquished or is no longer subject to this Agreement,
including but not limited to a Lease terminating
under the provisions stated in said Lease, it will
automatically be deemed to be included in McMoRan's
list of released Leases.
In the event any Lease subject hereto terminates or
expires under its own terms prior to McMoRan
electing to relinquish its rights to such Lease(s)
pursuant to this Article 10, McMoRan will be given credit
toward its acreage release obligation for each such
terminated or expired Lease. This credit shall apply to
the Option Period in which such Lease(s) terminated or
expired. Any Lease that terminates or expires
shall, subject to Section 2.4 above, be excluded from
this Agreement and neither Party hereto shall have
any obligation to the other regarding such terminated or
expired Lease(s).
After identification of the Leases and Contract Acreage
to be released under any release required
under this Article 10, Texaco shall be free to drill,
sell, farmout, joint venture or dispose of, in any manner
it so chooses, the released acreage. McMoRan hereby
agrees and releases Texaco from any liability
whatsoever with regard to the released acreage relating
to the activities of McMoRan and any information
and/or data McMoRan may have given to Texaco in regard
thereto. In the event Texaco discloses this
data to any Third Party within two (2) years of the
release of acreage, Texaco will require the Third Party
to execute an appropriate confidentiality agreement.
ARTICLE 11
11. NOTICES.
11.1 Notices.
All notices authorized or required between the
Parties by any of the provisions of this
Agreement, unless otherwise specifically provided, shall
be in writing and delivered in Person or by
United States mail, overnight express delivery, courier
service, telegram or facsimile (with receipt
confirmed), postage or charges prepaid, and addressed to
such Parties at the addresses set forth below:
Texaco Exploration and Production Inc. McMoRan Oil & Gas LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (70130) 1615 Poydras, Suite 500 (70112)
P. O. ▇▇▇ ▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Land Manager - OCS Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Senior Vice President
Any originating notice and/or response thereto
given under any provision hereof shall be deemed
given only when received by the party to whom such notice
is directed, except that; (1) any notice or
response by certified U.S. mail, return receipt
requested, properly addressed pursuant to this Article 12,
and with all postage and charges prepaid, shall be deemed
received on the date that the party to whom it
was directed has received it, and (2) any notice or
response given by overnight express delivery or courier
shall be deemed received upon acknowledgement of receipt
by the party to whom it was directed, or
within 72 hours of delivery of such notice whichever is
sooner.
11.2 Change in Designated Representative.
Each party shall have the right to change its
address and its designated representative at any time,
and from time to time, by giving prior written notice
thereof to the other party.
ARTICLE 12
12. EXISTING AGREEMENTS AND PREFERENTIAL RIGHTS.
12.1 Existing Agreements.
McMoRan recognizes and acknowledges that many Leases are
either currently producing on a
lease basis, currently producing on a unit basis and/or
currently maintained by unit activity and/or
production, and thus, are subject to certain agreements
and other contracts that may affect the rights
and/or options granted to McMoRan under this Agreement.
It is understood between the Parties hereto
that the rights and option of McMoRan shall be
specifically subject to these existing agreements as
those agreements apply to the Contract Acreage. McMoRan
shall upon execution of a Farmout
Agreement or Sublease become bound by all such existing
agreements relating to the affected Prospects
to the extent of its interest, whether disclosed or
undisclosed to it by Texaco prior to McMoRan
executing any Farmout Agreement or Sublease, provided
that McMoRan shall be bound by undisclosed
agreements only in the event that McMoRan acting with due
diligence could have discovered the
undisclosed agreements. Provided further that McMoRan
shall not be bound by such agreements in the
event McMoRan is unable to drill the required well under
the applicable Farmout Agreement or
Sublease which subsequently terminate.
12.2 Preferential Rights and Consents to Assign.
Upon the establishment of the description of a Prospect
and the execution of the applicable
Farmout Agreement or Sublease, Texaco shall promptly
prepare and send: (1) notices to the
holders of any consents to assign any of the interest
in the Prospect covered under such Farmout
Agreement or Sublease requesting such consents; and (2)
notices to the holders of any applicable
preferential rights to purchase any interest in the
Prospect, if any, requesting waivers of such
preferential rights to purchase. Texaco shall use
reasonable efforts to cause such consents and waivers
of preferential rights to purchase (or the exercise
thereof) to be obtained as soon as reasonably practical
after providing such notices. McMoRan shall cooperate
with Texaco in seeking to obtain such consents
and waivers of preferential rights.
If any preferential rights to purchase any interests
subject hereto are exercised, those interests in
the Lease(s) to be transferred to a Third Party as a
result of the exercise of such preferential rights shall
be excluded from this Agreement for all purposes. Should
a preferential right be exercised and
McMoRan not be entitled to earn an interest in the
applicable Prospect as provided herein, then pursuant
to Section 7.4 above, McMoRan will be given credit, after
the Exploratory Well is drilled, for the
applicable Well Costs.
ARTICLE 13
13. RIGHTS RESERVED.
13.1 Lease Rights Reservations.
TEXACO EXPRESSLY RETAINS AND RESERVES EXCLUSIVELY
UNTO ITSELF THE FOLLOWING:
(a) All oil, gas and mineral rights, except as to
those areas described on Exhibit "A" as to
the Contract Acreage, and all rights of ingress, egress,
use, occupancy, and any and all other rights
granted by, through and under the federal or state leases
subject hereto, necessary or convenient to
exercise and enjoy all oil, gas and mineral rights
reserved to Texaco, including but not limited to, the
right to conduct operations on the Exclusion Areas,
construct, maintain and operate platforms and
pipelines on and across Leases and Exclusion Areas,
subject to McMoRan's rights to earn the
assignment(s)/sublease(s) as provided hereunder.
(b) One hundred percent (100%) of the leasehold
and working interest in and to the Exclusion Areas.
(c) In the Exclusion Areas, all of the oil
and/or gas produced and to be produced therefrom
and all of the revenues associated therewith, all
producing reservoirs or reservoirs currently identified
by Texaco as capable of producing underlying the Contract
Acreage associated with any existing
wellbores as of the Effective Date, and the right to
drill new ▇▇▇▇▇, sidetrack or deepen existing ▇▇▇▇▇ or
any other activity as directed by Texaco, or in which
Texaco participates if directed by a Co-Working
Interest Owner, on the Leases as to the Exclusion Areas.
(d) All rights of ownership and use held by
Texaco's Affiliates in any pipeline or rights of
ways.
(e) The right of ownership and/or operatorship of
the Existing Facilities and the revenues realized
therefrom.
(f) Texaco also reserves any platform, facilities,
wellbores, pipelines or rights-of-way installed,
drilled or obtained in the future located on or in the
vicinity of the Contract Acreage related to Texaco's
operations on the Leases subject hereto, in which McMoRan
does not own an interest.
ARTICLE 14
14. PRODUCTION HANDLING AND CONTRACT OPERATIONS.
14.1 Production Handling Option.
Texaco, as an accommodation to McMoRan, will
consider handling production resulting from any
well drilled by McMoRan on any acreage farmed out or
subleased at Texaco's facilities (if excess capacity
exists) located in the vicinity of any acreage earned by
McMoRan pursuant to any Farmout Agreement or
Sublease. McMoRan will have the option to enter into an
agreement with Texaco to handle its production
attributable to any Prospects earned by paying reasonable
and customary fees for the services provided. A
production handling agreement will be negotiated by the
Parties in the event one is needed and if the
Parties mutually agree to pursue Texaco handling
McMoRan's production.
14.2 Contract Operating Option.
Texaco, as an accommodation to McMoRan, will
consider contract operating any successful ▇▇▇▇▇
drilled by McMoRan on any Prospect earned by McMoRan
pursuant to any Farmout Agreement or
Sublease located on a Lease operated by Texaco. McMoRan
will have the option to enter into a contract
operating agreement with Texaco paying reasonable and
customary fees for the services provided. A
contract operating agreement will be negotiated by the
Parties in the event one is needed if the Parties
mutually agree to pursue Texaco contract operating
McMoRan's ▇▇▇▇▇ and/or facilities.
ARTICLE 15
15. TAX MATTERS.
15.1 Income Tax Election.
Notwithstanding any other provision herein, the
rights and liabilities hereunder are several and not
joint or collective and this Agreement shall not
constitute a partnership. If for federal income tax
purposes this Agreement and the operations or activity
hereunder are regarded as a partnership, then for
federal income tax purposes each party elects to be
excluded from the application of all provisions of
Subchapter K, Chapter 1, Subtitle A, Internal Revenue
Code of 1986 as amended ("Code"), as permitted
and authorized by Section 761 of said Code and the
regulations promulgated thereunder. Texaco is hereby
authorized and directed to execute on behalf of each
party such evidence of this election as may be
required, including specifically, but not by way of
limitation, all of the returns, statements and data
required by law.
Should there be any requirement that each party
further evidence this election, each party agrees
to execute such documents and furnish such other evidence
as may be required. Each party further agrees
not to give any notices or take any other action
inconsistent with the election made hereby. If any present
or future income tax law of the United States or any
state contains provisions similar to those contained in
Subchapter K, Chapter 1, Subtitle "A" of the Code, under
which an election similar to that provided by
Section 761 of said Subchapter K is permitted, each party
agrees to make such election as may be
permitted by such laws. In making this election, each
party states that the income derived by it from the
operations or activities under this Agreement can be
adequately determined without the computation of
partnership taxable income.
The provisions of this Article 15 shall not affect
or demise the Parties rights and obligations
under any Farmout Agreement or Sublease entered into
pursuant to this Agreement.
ARTICLE 16
16. EXISTING FACILITIES.
16.1 Existing Facilities.
Notwithstanding any rights and/or options provided
McMoRan under the terms and conditions
of this Agreement, this Agreement shall in no way be
construed in any manner whatsoever as a right
and/or option for McMoRan to utilize any Existing
Facility; provided, however, Texaco is agreeable, in
its capacity, to assisting McMoRan and McMoRan's co-
working interest owners, if any, to by
expending reasonable and good faith efforts to provide
McMoRan and its co-working interest owners
with access to an Existing Facility if capacity is
available or projected to be available and not planned to
be utilized by Texaco and/or any of Texaco's co-working
interest owners; provided McMoRan and its
co-working interest owners, if any, agree to pay
reasonable fees for the use of any such Existing Facility
and the services, if any, provided therewith.
Notwithstanding the willingness of McMoRan to pay
reasonable fees, under no circumstances will it be
construed that Texaco is under any obligation
whatsoever to provide access to or capacity on any
Existing Facility located on any Lease subject to this
Agreement. In no event shall McMoRan have any liability
or obligation with respect to any Existing
Facility except as specifically provided in a separate
written agreement between McMoRan and the
owners of such facilities.
ARTICLE 17
17. GEOPHYSICAL DATA.
17.1 Seismic Rights.
During the term of this Agreement and subsequent to
any detailed technical meeting held by
McMoRan pursuant to Section 4.1 above, should McMoRan, in
support of its findings and/or
interpretations, present to Texaco certain initial or
reprocessed proprietary 2-D or 3-D, Texaco shall
have the right to acquire a license (subject to existing
contractual restrictions imposed on McMoRan) to
said proprietary initial or reprocessed data from McMoRan
,at no cost to Texaco, subject only to the
execution of a mutually agreed upon form of data license.
In the event McMoRan presents data owned
by Third Parties which has been reprocessed by McMoRan,
Texaco will have the right and option to
acquire a license, for no cost, from McMoRan covering
such reprocessed data only in the event Texaco
has a license as to all speculative data utilized in the
reprocessing. In all cases where Texaco exercises
its option to acquire a license from McMoRan covering the
data referenced in this Section 17.1, Texaco
will be required to pay all tape copy and delivery
charges. McMoRan makes no representation and shall
have no liability to Texaco regarding the accuracy or
completeness of any data disclosed to Texaco
hereunder. However, in the event McMoRan becomes aware
of any error in any data, it shall use good
faith efforts to advise Texaco of such error(s). Any
such information or data provided hereunder is
provided as a convenience only and any reliance on or use
by Texaco is at Texaco's sole risk.
17.2 Hazard Survey Data.
Texaco will attempt, at no cost to McMoRan, upon
its written request, to make available for a
limited time, and from time to time, those shallow hazard
data Texaco owns and/or controls covering
any Exhibit A Lease. Texaco's hazard data is provided
only as an accommodation and such data shall
be returned to Texaco as soon as McMoRan has completed
its use of same or upon Texaco's written
request to return such data. Texaco makes no
representations or warranties and shall have no liability
whatsoever to McMoRan regarding the accuracy or
completeness of the shallow hazard data disclosed
to McMoRan hereunder. Any such information or data
provided hereunder is provided as a
convenience and accommodation only and any reliance on or
use by McMoRan is at McMoRan's sole
risk.
17.3 Texaco's Proprietary Seismic Data.
Prior to earning any acreage under this Agreement,
Texaco will allow McMoRan access to its
proprietary seismic data covering the Contract Acreage.
Upon McMoRan earning an assignment of a
Prospect, Texaco is agreeable to granting McMoRan a
license covering that portion of Texaco's
proprietary seismic data covering the Contract Acreage
associated with the earned Prospect. The fee to be
paid to license the seismic data, and the licensing
agreement to be executed between Texaco and
McMoRan, shall be negotiated at the time McMoRan elects
to license the data. McMoRan must submit a
written proposal to Texaco prior to the termination of
this Agreement proposing the license of a portion of
Texaco's data. Failure of McMoRan to submit such a
proposal, or in the event the Parties are unable to
negotiate a mutually agreeable licensing fee and/or
licensing agreement, shall terminate Texaco's
obligation to license McMoRan any data. After earning an
assignment of a Prospect, McMoRan will no
longer be allowed access to Texaco's proprietary seismic
data covering that particular Prospect unless it
acquires a license to use said data. This right to
acquire a license covering Texaco's seismic data shall
apply separately to each Prospect earned by McMoRan.
Texaco makes no representation and shall have
no liability to McMoRan regarding the accuracy or
completeness of any data disclosed to McMoRan
hereunder. Any such information or data provided
hereunder is provided as a convenience only and any
reliance on or use by McMoRan is at McMoRan's sole risk.
ARTICLE 18
18. RENTALS, MINIMUM ROYALTY AND LEASE MAINTENANCE.
18.1 Rentals and Minimum Royalty.
McMoRan shall be responsible for reimbursing Texaco for
Texaco's share of any rental or
minimum royalty that comes due and payable, on a lease-
by-lease basis, for each Exhibit "A" Lease,
commencing on the Effective Date, less any share that any
Third Party is obligated to pay. This
responsibility shall continue until the first to occur of
the following: (a) McMoRan relinquishes its right
to earn an interest in the affected Lease, (b) the Lease
terminates, or (c) this Agreement terminates
pursuant to Article 26 below, whichever occurs first.
Texaco shall pay or cause to be paid the rental
and/or minimum royalty on each Lease. McMoRan agrees to
reimburse Texaco for the entirety of
Texaco's share of such rental and/or minimum royalty,
excluding any share that any Third Party is
obligated to pay, within thirty (30) days after receipt
of an invoice from Texaco for same. However, on
a lease-by-lease basis, with at least sixty (60) days
advance written notice received by Texaco,
McMoRan, at its sole option and discretion, shall have
the right to relinquish to Texaco its right to earn
an interest in a Lease and thereby relieving itself of
its obligation to reimburse Texaco. Should
McMoRan elect to relinquish its rights to Texaco, but
fail to provide Texaco with sixty (60) days
advanced written notice, McMoRan will remain liable for
the next ensuing rental or minimum royalty
payment for which timely notification was not received.
If McMoRan fails to reimburse Texaco within the
time specified, Texaco may terminate this
Agreement as to that particular Lease, provided Texaco
has given McMoRan written notice of its intent to
terminate and within five (5) days following receipt of
notice, McMoRan fails to make such
reimbursement. Once McMoRan has earned and received an
assignment as provided herein, McMoRan
will continue to be responsible for reimbursing Texaco
for making any rentals or minimum royalty
payments that may come due regarding any Lease that
remains subject hereto. Texaco shall not be liable
for failure to make a proper payment during the time in
which it is responsible for doing so, but agrees to
use the same degree of care used in making such payments
under its other leases. The termination of this
Agreement or the termination of any such assignment of
interest pursuant to this Agreement shall not
relieve McMoRan of its obligations to reimburse Texaco
for any payments so made during the period this
Agreement was in effect, and during the period that such
Lease(s) are subject to this Agreement, the right
of such termination to be an additional right reserved by
Texaco and not a limitation of any of Texaco's
rights herein.
ARTICLE 19
19. MEDIA RELEASES.
19.1 Public Announcements.
The Parties hereto agree that prior to making any
public announcement or statement with
respect to the transaction contemplated by this
Agreement, the Party desiring to make such public
announcement or statement shall provide the other Party
with a copy of the proposed announcement or
statement at least seven (7) Business Days prior to the
intended release date of such announcement. The
other Party shall thereafter consult with the Party
desiring to make the release, and the Parties shall
exercise their reasonable best efforts to (i) agree upon
the text of a joint public announcement or
statement to be made by both such Parties or (ii) in the
case of a statement to be made solely by one
Party, obtain approval of the other Party hereto to the
text of a public announcement or statement.
Nothing contained in this paragraph shall be construed to
require either Party to obtain approval of the
other Party hereto to disclose information with respect
to the transaction contemplated by this
Agreement to any state or federal governmental authority
or agency to the extent required by applicable
law or necessary to comply with disclosure requirements
of the New York Stock Exchange or any other
regulated stock exchange.
19.2 Media Releases.
Except as may be otherwise authorized by the applicable
operating agreement, if any, neither
Party shall make any press release or other public
announcement regarding operations conducted
pursuant to this Agreement without the prior written
consent of the other, which consent shall not be
unreasonably withheld; provided that McMoRan shall be
entitled to issue press releases concerning the
results of drilling or testing of ▇▇▇▇▇ or other
operations conducted pursuant to this Agreement without
the prior consent of Texaco, but McMoRan shall provide a
copy of each such press release to Texaco
prior to releasing same. The foregoing, however, shall
not restrict disclosures by either Party which are
required by applicable securities or other laws or
regulations or the applicable rules of any stock
exchange having jurisdiction over the disclosing party or
its Affiliates.
ARTICLE 20
20. FILES.
20.1 Access to Files.
During the term of this Agreement, Texaco shall
permit, to the extent it has the right to do so,
McMoRan and its Representatives at reasonable times
during normal business hours to examine, in
Texaco's offices at their actual location, the Prospect
and land files (excluding all economic and risk
evaluations, reserve information, all legal files,
attorney-client communications or attorney work
product, records and documents subject to confidentiality
provisions and auditor's reports) pertaining to
the Prospects disclosed by Texaco to McMoRan as listed on
Exhibit "B". In addition, to the extent it
has the right to do so, McMoRan will be allowed access to
geological, geophysical, engineering and
land files, subject to the same exclusions listed above,
covering the Leases hereto in support of the
development of McMoRan's Prospects as contemplated
herein. McMoRan shall be obligated to
maintain the confidentiality of such files and
information in accordance with the provisions and
limitations described in Article 22, below. Texaco and
its representatives make no representation or
warranty as to, and shall have no liability to McMoRan
regarding, the accuracy or completeness of the
information disclosed to McMoRan hereunder. Any
information or data furnished hereunder by Texaco
is provided as a convenience only and any reliance on or
use of same is at McMoRan's sole risk. The
inadvertent disclosure by Texaco to McMoRan of attorney-
client communications, attorney work
product, legal files or other confidential information
shall not be deemed to be a waiver of the attorney-
client privilege, the attorney work-product privilege, or
any other privilege or right protecting the
confidentiality of data or information. Anything in this
Agreement to the contrary notwithstanding,
however, Texaco and their representatives shall have no
liability to McMoRan for failing to allow
McMoRan to examine, or to ▇▇▇▇▇ ▇▇▇▇▇▇▇ access to any of
the files or materials referred to in this
Section 20.1. Access to Texaco's Prospect files is
strictly and solely as an accommodation to
McMoRan.
ARTICLE 21
21. ASSIGNMENTS AND TRANSFER OF INTEREST .
21.1 Assignment of this Agreement.
It is agreed that McMoRan shall not assign, either
in whole or in part, its rights and interest in this
Agreement without the prior written consent of Texaco,
such consent not to be unreasonably withheld.
Upon receipt of Texaco's written consent, which consent
can be conditioned on, but not limited to,
requesting adequate security for the future performance
by assignee, payment of all delinquent accounts
and resolving all outstanding disputes, any assignment
made by McMoRan hereof shall 1) contain a
limitation in favor of Texaco requiring that Texaco's
written consent must also be obtained prior to any
future assignments of this Agreement in whole or in part,
2) that said instrument contain a provision
indicating said assignment is made subject to this
Agreement, and 3) the assignee agrees in writing to be
bound by all the terms and conditions of this Agreement.
21.2 Lease or Prospect Successors and Assigns.
It is agreed that McMoRan shall not assign, either
in whole or in part, its interest or rights to
interest in and to any Lease or Prospect without the
written consent of the Texaco, such consent not to be
unreasonably withheld, provided, however, McMoRan shall
have the right to assign an interest in any
Lease or Prospect to its Exploration Program Co-
Venturers. Upon receipt of Texaco's written consent, or
in the event of an assignment by McMoRan to its
exploration program partners, any assignment made by
McMoRan hereof shall 1) contain a limitation in favor of
Texaco requiring that Texaco's written consent
must also be obtained prior to any future assignments of
interest in whole or in part, 2) that said instrument
contain a provision indicating said assignment is made
subject to this Agreement, and 3) the assignee
agrees in writing to be bound by all the terms and
conditions of this Agreement. It shall be fully
understood that in the event the assigning party
encumbers or burdens the Contract Acreage or any portion
thereof after earning an interest herein, the assigning
party shall hold the non-assigning party free and clear
of any and all obligations, liability and/or
responsibility for such encumbrance(s) or burden(s). Any
assignment made pursuant to this Section 21.2 shall be in
accordance with and in compliance to the
accepted practices, guidelines and policies of the
Minerals Management Service.
21.3 Appointment of Agent.
If at any time the interest of McMoRan or its
successor is divided among or is assigned to and
owned by two or more co-owners or an entity in which
equity ownership is held by two or more co-
owners, Texaco may, at its discretion, require such co-
owners designate in writing a trustee, mandatory or
agent with full authority and all rights necessary to
settle, compromise, dismiss, or release on behalf of
such co-owners any loss, expense, claim, damage, penalty,
fine, lawsuit, or similar matter arising from
operations hereunder, including full authority to act for
all said co-owners as insureds under or with
respect to any policy of insurance relevant to such
matters.
ARTICLE 22
22. CONFIDENTIALITY.
22.1 Confidentiality.
It is understood and agreed that no Party to this
Agreement, for a period of four (4) years from the
effective date hereof, shall divulge to any Third Party
or parties any geophysical, geological or engineering
information that is received from the other Party on the
Contract Acreage without first obtaining the
written consent of such other Party to this Agreement to
release any such information that it received.
Such consent, however, shall not be necessary for a Party
to divulge such information to any part(y)ies
from whom said Party to this Agreement may receive a
contribution for the drilling of a well under any
Farmout Agreement or Sublease, to a financial institution
(or similar entity) from whom a Party is
attempting to secure funds or financing, to a pipeline
company for the purpose of securing a pipeline
connection, or to Exploration Program Co-venturers or
Representatives. Notwithstanding the above,
either Party may disclose confidential data to its
Affiliate(s) provided that such Affiliate agrees to maintain
the confidentiality of such confidential data under the
same conditions as stated herein.
Subject to disclosures that may be authorized by any
operating agreement applicable to a
particular Lease, any and all data revealed and disclosed
by Texaco to McMoRan and McMoRan to
Texaco shall be treated as confidential, less and except
any data that now or hereafter becomes generally
available to the public, was known by Texaco or McMoRan
prior to the Execution Date of this
Agreement, was already in Texaco's or McMoRan's
possession prior to the Execution Date of this
Agreement, or hereafter comes into Texaco's or McMoRan's
possession from a Third Party who has the
right to disclose such information as applicable.
22.2 Speculative Seismic Data.
The Parties hereto have in their possession certain
seismic data licensed from Third Parties
("Speculative Seismic Data") which impose various
restrictions and limitations on either Parties right to
use, disclose and/or display such data relating to the
properties identified in Exhibit "A". Notwithstanding
any other provision in this Agreement, Texaco and McMoRan
both agree that neither Party shall remove
from each others office, copy, or reveal to any other
party whomsoever, any Speculative Seismic Data
disclosed by one Party to the other. Each Party agrees
it will only view such Speculative Seismic Data for
no other purpose other than necessary to review the work
product generated as a result of the purpose of
this Agreement. Under no circumstances will the Party
who views the Speculative Seismic Data be
allowed to use the Speculative Seismic Data for any other
purpose than what viewing the data was
intended unless the viewing Party has first obtained a
license from the Third Party owner of such
Speculative Seismic Data or the disclosing Party, or the
owner of the Speculative Seismic Data, advises
the viewing Party that such data is no longer to be held
confidential.
22.3 Disclosure of Confidential Data.
In the event a Party hereto, or its
representatives, are required by any court or legislative or
administrative body (by oral questions, interrogatories,
requests for information or documents, subpoena,
civil investigation demand, or any similar process) to
disclose any confidential information or data not
owned by said Party, the Party required to make such
disclosure shall provide the owner of the
confidential information or data with prompt notice of
such requirement in order to afford the owner of
such information or data the opportunity to seek an
appropriate protective order. However, if the owner of
such information or data is unable to obtain or does not
seek such protective order and the Party that is
required to make such disclosure, or its representatives,
are, in the opinion of counsel, compelled to
disclose confidential information or data under pain of
liability for contempt or other censure penalty,
disclosure of such information or data may be made
without liability.
22.4 Risk of Use of Confidential Data.
It is understood by the Parties hereto that any
confidential information or data, both oral and
written, furnished by one Party to the other is to be
considered accurate, however, neither Party hereto
makes any representations or warranties, express,
implied, statutory or otherwise, with respect to the
accuracy or completeness of the confidential information
or data disclosed or any condition or aspect
thereof. To the best of it's knowledge, the Party making
such disclosure represents that it has full legal or
contractual authorization or right to disclose such
information and data to the other Party. Each Party
hereto agrees that it will use such confidential
information and data at its sole peril and risk, and the
disclosing Party shall have no liability whatsoever with
respect to the use by receiving Party of any
information or data, whether confidential or otherwise,
furnished by the disclosing Party to the Receiving
Party. Any decision or action taken by the receiving
Party of such disclosed confidential information and
data shall be based solely on the receiving Party's
independent evaluation, judgement and decisions.
22.5 Confidentiality Agreement - Exhibit "H".
Attached hereto as Exhibit "H" is a document
entitled "Confidentiality and AMI Agreement".
The Parties hereto executed this Confidentiality and AMI
Agreement prior to the Effective Date of this
Agreement. The Parties hereto agree that upon the
Effective Date of this Agreement the AMI provisions
as stated in the Confidentiality and AMI Agreement shall
terminate and no longer be in force and effect.
The remaining provisions as stated in Exhibit "H" shall
also terminate and no longer be in force and effect
for every property listed on Exhibit "A" to the
Confidentiality and AMI Agreement with the exception of
those Leases subject hereto listed on Exhibit "B" hereto
which said remaining provisions of such
Confidentiality and AMI Agreement shall remain in full
force and effect for the term stated therein, except
to the extent that such provisions are inconsistent with
the provisions of this Agreement.
ARTICLE 23
23. GOVERNING LAW.
23.1 Choice of Law.
The terms and conditions of this Agreement shall be
governed and interpreted under the LAWS
OF THE STATE OF LOUISIANA excluding, however, any
provisions of Louisiana law which might
direct or refer such determination to the laws of any
other jurisdiction.
23.2 Pending and Future Litigation and Claims.
McMoRan acknowledges that Texaco Exploration and
Production Inc. is a party in the lawsuits
listed in that certain letter dated December 20, 1999
from Texaco to McMoRan, in which lawsuits Texaco
or Affiliates of Texaco, along with other persons, have
been named as defendants ("Pending Litigation").
In no event shall Texaco be liable to McMoRan for
any additional royalties that McMoRan may
be required to pay on McMoRan's share of production or
other damages or losses incurred by McMoRan
as a result of the Pending Litigation or future
litigation involving the Leases. Provided, however, should
there be an increase in royalty rate resulting from the
Pending Litigation or future litigation for events
which occurred, or are alleged to have occurred, prior to
the Effective Date related to the Texaco Leases or
related to those portions of the Leases reserved or
excluded from this Agreement by Texaco, such increase
in royalty rate shall first be satisfied out of the
overriding royalty and/or working interest reserved by
Texaco before McMoRan will become liable to pay any
portion of the increased royalty rate.
McMoRan acknowledges and agrees that Texaco and its
Affiliates shall have full and unfettered
discretion in the handling and settling of any such
claim, demand, action, cause of action, or lawsuit for
events which occurred, or alleged to have occurred prior
to the Effective Date pursuant to the Pending
Litigation or where future litigation as they relate to
the Texaco Leases, and McMoRan specifically
waives any claim it may otherwise have against Texaco
arising out of or relating to the handling or
settling of any such claim, demand, action, cause of
action, or lawsuit asserted under the Pending
Litigation or future litigation; provided, however, that
in the event that such claim contemplated by this
Section 23.2 covers periods after the Effective Date,
McMoRan may assist in defending the litigation.
The references in this Agreement to any suits or claims
are not intended to be exclusive, and
Texaco and their Representatives shall have no liability
to McMoRan for failing to refer to, or otherwise
advise McMoRan regarding any other suits or claims.
ARTICLE 24
24. FORCE MAJEURE.
24.1 Force Majeure.
Should McMoRan be prevented from complying with any
express or implied covenant of this
Agreement (other than the obligation to make monetary
payments), by reason of "force majeure", as
hereinafter defined, the express or implied covenant so
affected shall automatically be extended so long as
the cause or causes for such delays or interruptions
continue and for an additional sixty (60) days
following the cessation of such delay or interruption.
"Force majeure" is herein defined as an act of God,
adverse weather conditions, inability to obtain materials
in the open market or transportation thereof, war,
strikes, lockouts, riots, insurrections or any other
conditions or circumstances not wholly within the control
of McMoRan (other than financial) or any federal, state
or municipal law, order, permit, rule or regulation.
McMoRan shall not be liable to Texaco in damages for
failure to perform as required hereunder or to
comply with any covenant, agreement or requirement hereof
during the time McMoRan is relieved from
its obligations hereunder, provided that McMoRan has
given written notice to Texaco within thirty (30)
days after the occurrence of the cause relied upon to
suspend the obligations of McMoRan hereunder.
McMoRan shall not be relieved from any express or implied
obligations under the oil, gas or mineral lease
by operation of force majeure hereunder, unless such oil,
gas or mineral lease also suspends such
obligations for the same cause. Further, if the oil and
gas lease provides for a time for the suspension of
obligations less than sixty (60) days, the provisions of
such lease shall control.
ARTICLE 25
25. DISPUTE RESOLUTION.
25.1 Dispute Resolution.
Notwithstanding anything contained heretofore in
this Agreement to the contrary, and except as
to those disputes involving Prospect Identification which
shall be resolved in accordance with the
provisions of Article 4 hereof, the Parties specifically
acknowledge and agree that any claim,
controversy or dispute arising out of, relating to, or in
connection with this agreement, including the
interpretation, validity, termination or breach thereof,
shall be resolved solely in accordance with the
Dispute Resolution Procedure set forth in Exhibit "I"
attached hereto and made a part hereof.
ARTICLE 26
26. TERMINATION.
26.1 Termination.
Unless terminated pursuant to another provision in
this Agreement or unless extended pursuant to
another provision, this Agreement shall remain in effect
from the date first above written through June 30,
2003 (or through December 31, 2003 if the Extended Term
is applicable under Section 3.2 above), at
which time it shall automatically terminate without any
other action by any Party hereto. As to each Lease
listed on Exhibit "A", as each Lease expires or
terminates, it will no longer be subject to this Agreement.
Subject to the provisions of Article 18, Texaco may also
elect to terminate this Agreement as to a
particular Lease for McMoRan's non-payment of minimum
royalty or rental as required pursuant
hereto. It is understood between the Parties hereto that
after termination of this Agreement the only
acreage McMoRan will have access to will be that acreage
covered by the individual Farmout Agreements
or Subleases which have been executed (or committed to
under Section 7.2.4) between Texaco and
McMoRan pursuant to this Agreement. Notwithstanding the
termination of this Agreement each Party
shall continue to be obligated to fulfill its existing
commitments, obligations, liabilities and
undertakings theretofore incurred hereunder or incurred
under the terms of those agreements attached as
Exhibits hereto.
26.2 Lease Expiration or Termination.
Although Texaco will use its best good faith
efforts to monitor ongoing activities on the Leases,
Texaco shall not be liable to McMoRan for any Lease
termination and/or Texaco's (or its co-owners)
failure to maintain any Lease during the term of this
Agreement but Texaco will attempt, so long as
Texaco owns Record Title or Operating Rights in any such
Lease, to notify McMoRan at least sixty (60)
days before such Lease will terminate.
ARTICLE 27
27. INDEMNITY.
27.1 Indemnity.
McMoRan agrees to protect, indemnify, and save
Texaco, its parent, subsidiaries, affiliates, and/or
successors and the directors, officers, employees or
agents of each ("Texaco Company Group") free and
harmless from all obligations, business dealings,
liabilities, debts, charges, claims, damages, demands,
costs (including attorneys' fees and court costs),
penalties and causes of action arising directly or indirectly
out of all of McMoRan's operations under this Agreement,
and related to any dealing with Third Parties
McMoRan has with regard to financing or the assignment
of, in whole or in part, any rights under this
Agreement, and to relieve the Texaco Company Group from
any and all liability (exclusive of business
debts and charges) incurred as a result of such
operations. The indemnities and covenants of this Section
27.1 shall be effective whether or not such obligations,
business dealings, liabilities, debts, charges, claims,
damages, demands, costs (including attorneys' fees and
court costs), penalties and causes of action
aforesaid are caused wholly or partly by negligence
attributed to the Texaco Company Group, or by any
other means, excepting those occurrences involving the
gross negligence or willful misconduct of the
Texaco Company Group.
Texaco agrees to protect, indemnify, and save
McMoRan, its parent, subsidiaries, affiliates, and/or
successors and the directors, officers, employees or
agents of each ("McMoRan Company Group") free
and harmless from all obligations, liabilities, debts,
charges, claims, damages, demands, costs (including
attorneys' fees and court costs), penalties and causes of
action arising directly or indirectly out of all of
Texaco's operations under this Agreement and to relieve
the McMoRan Company Group from any and all
liability incurred as a result of such operations. The
indemnities and covenants of this Section 27.1 shall
be effective whether or not such obligations,
liabilities, debts, charges, claims, damages, demands, costs
(including attorneys' fees and court costs), penalties
and causes of action aforesaid are caused wholly or
partly by negligence attributed to the McMoRan Company
Group, or by any other means, excepting those
occurrences involving the gross negligence or willful
misconduct of the McMoRan Company Group.
ARTICLE 28
28. BREACH.
28.1 Breach.
Anything herein to the contrary notwithstanding,
any failure by McMoRan to comply with any
material obligation hereunder shall be considered a
breach of this Agreement, except where the Agreement
is deemed to immediately terminate upon the occurrence or
non-occurrence of an event or action and/or
where Texaco is not required to give prior notice to
McMoRan under any provision in this Agreement. In
the event of any such breach, Texaco shall notify McMoRan
of such breach and if McMoRan does not
correct or is not in good faith attempting to correct
such breach within thirty (30) days of receipt of such
notice, Texaco may terminate this Agreement in whole or
in part by notifying McMoRan in writing of
such termination, without prior notice or demand being
made upon McMoRan and without the necessity
of placing McMoRan in default; provided, however, the
failure by Texaco to exercise at any time or from
time to time such right of termination shall not effect a
waiver of any breach or of Texaco's right
subsequently to terminate this Agreement.
ARTICLE 29
29. NO WARRANTY.
29.1 Non-Warranty.
THIS AGREEMENT IS MADE WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS,
STATUTORY OR IMPLIED, AS TO TITLE, MERCHANTABILITY, CONDITION, QUALITY OR
FITNESS FOR A PARTICULAR PURPOSE AS TO THE TEXACO LEASES, AND ALL OTHER
PROPERTY COVERED BY THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO THE
WELL BORES, EQUIPMENT AND FACILITIES UTILIZED BY MCMORAN HEREUNDER, OR
ANY OTHER SORT OF WARRANTY AND IS WITHOUT RECOURSE AGAINST TEXACO
WHATSOEVER, EVEN AS TO THE RETURN OF CONSIDERATION. TEXACO REPRESENTS
THAT IT HAS NOT ASSIGNED OR MORTGAGED THE TEXACO LEASES. TEXACO MAKES NO
REPRESENTATIONS OR WARRANTIES REGARDING MCMORAN'S RIGHT OF INGRESS TO
AND EGRESS FROM THE TEXACO LEASES ACROSS ADJACENT OR ADJOINING LANDS.
TEXACO SPECIFICALLY DISCLAIMS, AND MCMORAN EXPRESSLY WAIVES THE
IMPLIED WARRANTY OF TITLE NOTED IN LA. R. S. 31:120 WITH RESPECT TO THE
TEXACO LEASES. MCMORAN ACKNOWLEDGES THAT THIS EXPRESS WAIVER SHALL BE
CONSIDERED A MATERIAL AND INTEGRAL PART OF THIS AGREEMENT AND PART OF
THE CONSIDERATION GIVEN THEREFOR. MCMORAN FURTHER ACKNOWLEDGES THAT
THIS WAIVER HAS BEEN SPECIFICALLY BROUGHT TO MCMORAN's ATTENTION AND
THAT MCMORAN HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS WAIVER.
THE PARTIES AGREE THAT FOR THE PURPOSES OF THIS WAIVER OF THE IMPLIED
WARRANTY OF TITLE, TEXACO AND THEIR AFFILIATES SHALL BE CONSIDERED AS THE
SELLER HEREUNDER AND MCMORAN EXPRESSLY WAIVES ALL RIGHTS OF
SUBROGATION IN WARRANTY OF THE SELLER AGAINST OTHER PERSONS GRANTED TO
A BUYER BY LOUISIANA CIVIL CODE ARTICLE 2503.
MCMORAN ACKNOWLEDGES THAT (i) IT IS A SOPHISTICATED INVESTOR AND
OPERATOR IN THE OIL AND GAS BUSINESS; (ii) IT UNDERSTANDS THE RISKS INVOLVED
IN OIL AND GAS EXPLORATION AND DEVELOPMENT; AND (iii) IT UNDERSTANDS THAT
ITS PARTICIPATION IN THIS AGREEMENT IS A HIGHLY RISKY UNDERTAKING AND THAT
MCMORAN MIGHT NOT RECOVER ANY OF ITS INVESTMENT MADE HEREUNDER.
ARTICLE 30
30. GENERAL PROVISIONS.
30.1 Leases Treated Separately.
Unless otherwise provided, the terms and provisions
stated in Article 5 above, shall apply
separately to each Lease listed on Exhibit "A".
30.2 Non-Interference.
Any and all operations conducted and/or performed on any
Lease for which McMoRan is
operator shall be conducted and performed with due
diligence and in a workmanlike manner and shall
be coordinated and scheduled so as not to unreasonably
interfere with existing or anticipated operations
located on the interests in the leases not transferred
hereunder by Texaco, if applicable. In the event that
the proposed drilling on an Initial Test Well on any
Prospect is delayed because of potential interference
with operations on a Lease by Texaco or its co-owners,
then Texaco agrees that the period to commence
operations on the Initial Test Well shall be extended, if
requested by McMoRan, for the duration of the
interference plus a reasonable amount of time for McMoRan
to coordinate its activities after cessation
of operations by Texaco or its co-owners.
30.3 Governmental Approvals.
From and after the execution hereof, each of the Parties
hereto, without further consideration,
shall use its best efforts to execute, deliver, submit,
gain approvals of, and record (or cause to be
executed, delivered, submitted, and recorded) good and
sufficient permits, designations, other regulatory
documents, and instruments of conveyance and transfer (as
applicable), and take such other action as
may be reasonably required to carry out the purposes of
this Agreement and to give effect to the
covenants, stipulations and obligations of the Parties
hereto.
30.4 Amendments.
This Agreement shall not be modified or amended
except by mutual agreement of the Parties in
writing. No action or failure to act on the part of
either party hereto shall be construed as a modification or
amendment to, or a waiver of, any of the provisions of
this Agreement.
30.5 Declaration of Agreement.
Should either Party request a Declaration of
Agreement be executed for filing in the applicable
public records, both Parties agree to execute a
Declaration of Agreement similar in form as that which is
attached hereto as Exhibit "J." Either Party shall have
the right and option, at its own expense, of filing
such Declaration of record in the appropriate State
and/or Federal offices.
30.6 Other Rights , Remedies Reserved.
No provision contained herein providing for
the termination of this Agreement shall be construed
as precluding, nor shall it preclude, Texaco from
asserting its respective rights to specific performance,
damages, or any other rights or remedies to which it may
be entitled.
30.7 No Waiver.
Texaco's failure to enforce any of the provisions
of this Agreement shall not effect a waiver of any
violation thereof nor preclude enforcement of that or any
other provisions hereof at that or any other time.
30.8 No New Lease Burdens.
As to each Lease that remains subject to this
Agreement, until McMoRan has received an
assignment of an interest, or relinquishes its rights to
earn any interest therein, or until this Agreement
terminates, Texaco agrees not to create any additional
lease burdens on such Lease and not to assign all or
a portion of its interest in the Contract Acreage unless
such assignment is expressly subject to this
Agreement. Prior to McMoRan receiving an assignment of
an interest in a Prospect, Texaco shall not
create or allow the creation of any additional lease
burdens affecting the Contract Acreage which
McMoRan has a right to earn hereunder. During the term
of this Agreement, Texaco will use its best
efforts not to prejudice the rights and options of
McMoRan as stipulated hereunder.
30.9 Severability.
Every provision in this Agreement is intended to be
severable. If any term or provision hereof is
held by a court of competent jurisdiction to be illegal
or invalid for any reason whatsoever, all other
conditions and provisions of this Agreement shall
nevertheless remain in full force and effect.
30.10 Entire Agreement.
This Agreement constitutes the entire understanding
between the parties with respect to the
subject matter hereof, superseding all negotiations,
prior discussions and prior agreements and
understandings relating to the subject matter hereof.
30.11 Further Assurances.
Each Party agrees to execute and deliver all such
additional documents, instruments and
assurances and to perform such additional acts as may be
necessary or appropriate to effectuate and
perform all of the terms and conditions of this
Agreement.
30.12 Waiver of Subrogation.
McMoRan shall provide from its insurers a waiver of
subrogation for any matter covered under
the applicable Farmout Agreements or Subleases and Texaco
shall be named as an additional insured
under these policies as permitted.
30.13 Surviving Obligation.
THE TERMINATION OF THIS AGREEMENT SHALL NOT RELIEVE ANY PARTY
HERETO FROM ANY EXPENSE, LIABILITY OR OTHER OBLIGATION OR ANY REMEDY
THEREFOR WHICH HAS ACCRUED OR ATTACHED PRIOR TO THE DATE OF SUCH
TERMINATION.
30.14 Conflict of Terms.
In the event of any conflict between the main body of
this Agreement and attached exhibits, the
provisions of the main body of this Agreement shall
control.
IN WITNESS WHEREOF, this Agreement is executed and
made effective by the Parties hereto
on the date first above written.
WITNESSES:
TEXACO EXPLORATION AND PRODUCTION INC.
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Attorney-in-Fact
MCMORAN OIL & GAS LLC
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
Exhibit "A"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Leases Subject to this Agreement"
Exhibit "A-1"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Description of Additional Acreage with Termination
Dates"
Exhibit "B"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Texaco Identified Prospects"
Exhibit "C"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Area of Mutual Interest"
Exhibit "D"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Farmout Agreement"
Exhibit "E"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Sublease"
Exhibit "F"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Prospect Dispute Resolution Procedure"
Exhibit "G"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Operating Agreement"
Exhibit "H"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Confidentiality Agreement"
Exhibit "I"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Dispute Resolution Procedure"
Exhibit "J"
Attached to and made a part of that certain Offshore
Exploration Agreement dated December 20,
1999, by and between Texaco Exploration and Production
Inc. and McMoRan Oil & Gas LLC.
"Declaration of Agreement"