Exhibit 10.1
JOINT PARTICIPATION AGREEMENT
BLACKWATER PROSPECT
GREEN CANYON BLOCK 246
CENTRAL GULF OF MEXICO
This Joint Participation Agreement ("Agreement") effective this 14th day of
July, 2006 will serve as the definitive agreement between Marathon Oil Company
("MOC"), Woodside Energy (USA) Inc. ("WEI") and Ridgewood Energy Corporation
("Ridgewood"), sometimes hereinafter referred to collectively as "Parties" and
individually as "Party", concerning the drilling and evaluation of the
Blackwater Prospect as more fully described herein.
WHEREAS, MOC and WEI represent they currently own an undivided one hundred
percent of six-sixths (100% of 6/6ths) record title interest in the Outer
Continental Shelf Lease OCS-G 16716, covering Green Canyon Block 246. The
aforementioned Lease shall hereinafter sometimes be referred to as "GC 246" and
is more fully described on Exhibit "A" attached hereto; and,
WHEREAS, MOC and WEI desire to make available to Ridgewood a collective and
undivided thirty-five-percent (35%) operating rights interest in GC 246 from the
surface down to 20,000' TVD ("Shallow Rights"); and, a collective and undivided
ten percent (10%) operating rights interest in all depths below the Shallow
Rights down to a depth of 99,999' TVD ("Deep Rights") in GC 246; and
WHEREAS, Ridgewood desires to earn from MOC and WEI the aforementioned Shallow
Rights and Deep Rights by participating in and bearing a disproportionate share
of the cost of the GC 246 #1 well (hereinafter referred to as the "IBW"); and
WHEREAS, the Parties desire to make the Shallow Rights and Deep Rights subject
to two distinct and separate Joint Operating Agreements hereinafter referred to
as the Shallow Rights OA and Deep Rights OA, respectively; and
WHEREAS, MOC and WEI have negotiated with ▇▇▇▇ Corporation ("Hess") for Hess to
release the 4th slot on the Diamond Ocean Voyager Rig ("Voyager") to enable MOC
to enter into a drilling contract with Diamond Offshore to utilize said 4th slot
to drill the IBW. In consideration for Hess releasing the 4th slot back to
Diamond, MOC and WEI will assign to Hess an undivided thirty percent (30%)
operating rights interest in the Deep Rights subject to the Deep Rights OA.
NOW, THEREFORE, in consideration of the mutual promises and covenants made
herein, the Parties agree to the following terms and conditions:
1. MOC, as Operator, has entered into that certain contract dated July
14, 2006, by and between Marathon Oil Company and Diamond Offshore
under the terms of which MOC shall utilize the Voyager to drill the
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IBW which is anticipated to commence on or about August 10, 2006. Once
commenced, MOC agrees to prosecute the drilling of the IBW in a good
and workmanlike manner until the IBW reaches Objective Depth as set
forth in the AFE and Well Plan (attached hereto as Exhibit "B"). The
IBW shall be drilled pursuant to the terms of this Agreement, the AFE
and Well Plan and the Shallow Rights OA (attached hereto as Exhibit
"C"). In the event there is a conflict between this Agreement and the
Shallow Rights OA, this Agreement shall prevail.
2. Concurrent with the execution of this Agreement, the Parties shall
separately execute the attached Exhibit "B", AFE and Well Plan, and
shall be obligated to pay the gross actual costs incurred for the IBW
in the following promoted working interest percentages:
MOC-23.335%;
WEI-16.665%
Ridgewood-60.00%
until the IBW has been drilled to the Objective Depth and has been
tested, logged and evaluated as set forth in the AFE and Well Plan. At
such time as the IBW has been drilled to Objective Depth, tested,
logged and evaluated or the gross actual well costs of the IBW reach
$38.5MM ("Promote Cap"), whichever occurs first, Ridgewood's
disproportionate spending shall cease. Thereafter all further cost,
risk and expense of the operations for the IBW or any subsequent
operations proposed including sidetrack of the IBW shall be allocated
and paid on a nonpromoted basis in the following working interest
percentages:
MOC-40.0025%;
WEI-24.9975%
Ridgewood-35.00%
Notwithstanding the above in the event that the Objective Depth is
reached prior to the gross actual well costs reaching the Promote Cap,
and the Parties agree to either temporarily or permanently plug and
abandon the well, the Parties will pay the costs associated with
either operation on the promoted working interest percentages stated
above until the gross actual well cost reaches the Promote Cap at
which point the remaining costs to either temporarily or permanently
plug and abandon the well shall be paid on the non-promoted working
interest percentages.
3. At the earlier of either the IBW reaching Objective Depth and being
evaluated as described in the AFE and Well Plan, or the gross actual
well costs reach $42.6MM, Ridgewood shall have earned and be entitled
to an Assignment of Operating Rights ("Assignment") from MOC and WEI
covering:
1) The Shallow Rights (to be assigned in the proportions of
26.6675% of 8/8ths from MOC and 8.3325% of 8/8ths from WEI);
and
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2) The Deep Rights (to be assigned in the proportions of 6.667%
of 8/8ths from MOC and 3.333% of 8/8ths from WEI).
The Assignments in the Shallow Rights and the Deep Rights shall be
delivered to Ridgewood no later than thirty (30) days after the
release of the drilling rig from the IBW or any substitute well. Said
Assignments will be made free and clear of any burdens, liens, or
encumbrances, and shall be subject only to (i) this Agreement, (ii)
the terms and conditions of GC 246, and (iii) the applicable Shallow
Rights OA or Deep Rights OA. The Assignments shall be substantially in
the form attached hereto as Exhibit "D".
4. a) At such time as Ridgewood earns a Shallow Rights Assignment
pursuant to the terms of this Agreement, the working interest
percentages of the Parties in the shallow horizons and all further
operations involving the IBW and Shallow Rights shall be governed by
the Shallow Rights OA. The Shallow Rights working interest shall be:
Marathon - 40.0025%
Woodside -- 24.9975%
Ridgewood -- 35.0000%
b) At such time as Ridgewood earns a Deep Rights Assignment pursuant to
the terms of this Agreement, the working interest percentages of the
Parties in the deep horizons and all operations involving the Deep
Rights shall be governed by the Deep Rights OA, in the form of the
Shallow Rights OA revised to reflect depth limitations and ownership.
The Deep Rights working interest shall be:
Marathon - 40.002%
Woodside - 19.998%
Ridgewood - 10.000%
Hess 30.000%
Once the IBW reaches Objective Depth and is evaluated as described in
the AFE and Well Plan, Operator shall make a proposal, pursuant to the
Shallow Rights OA, to conduct subsequent operations on the well in
accordance with the Shallow Rights OA.
5. Contemporaneously with the execution of any Assignment of interest
pursuant to the terms of this Agreement, the Parties agree to execute
a Ratification of the Shallow Rights OA with a revised Exhibit "A"
attached thereto; and a Ratification of the Deep Rights OA with a
revised Exhibit "A" attached thereto, respectively.
6. In the event that, prior to reaching Objective Depth, the IBW should
encounter shallow water flows, impenetrable substances, mechanical
difficulties, pressurized shale or any other condition which renders
further drilling impracticable and which cannot be overcome by
reasonable and prudent operations, then and in such event MOC and/or
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WEI shall have the option for thirty (30) days following abandonment
of the IBW to propose the drilling of a substitute well to be located
and drilled in such a manner so as to achieve the same exploratory
results as the IBW. If MOC and WEI mutually agree to drill a
substitute well the substitute well shall be drilled. If either MOC or
WEI elects not to participate in a substitute well, the substitute
well shall be drilled, only if MOC or WEI agrees to assume the
combined working interest of MOC and WEI and agrees to pay one hundred
percent (100%) of the cost and expense of the combined working
interest in the substitute well. The right to drill a substitute
well(s) shall be ongoing so long as the previous well does not reach
Objective Depth and each substitute well is proposed within thirty
(30) days of abandonment of the previous well. If such substitute well
is timely commenced in accordance with the Shallow Rights OA, then
this Agreement shall not terminate but shall remain in full force and
effect as though the substitute well was the IBW. However, all costs
incurred in connection with the IBW will be carried over and added to
the cost on any substitute well(s) to calculate when the Promote Cap
is reached.
7. WEI shall have the right to continue to market additional interest in
GC 246 to third parties. In the event an agreement is entered into
with a third party prior to the earlier of the temporary abandonment
or permanent abandonment of the IBW, or any substitute therefore, any
well cost reduction realized by said agreement shall be deducted
solely from the net cost basis of WEI, up to a maximum 16.665% of the
gross well cost in the IBW well. Thereafter, any additional well cost
reduction shall accrue to the benefit of MOC at its sole discretion.
MOC and WEI shall each be solely responsible for the lease interest
earned by the third party associated with their applicable well cost
reductions. The Parties agree that, until the earlier of the temporary
or permanent abandonment of the IBW, WEI shall have a waiver of
Article 24.1.1 (Consent to Assignment), Article 24.1.4. (Minimum
Transfer of Working Interest), and Article 24.2 (Preferential Right to
Purchase) of the Shallow Rights OA and the Deep Rights OA as to the
possible sale of a portion of its rights in GC 246; provided that if
Deep Rights are included in any such sale, WEI shall sell a minimum of
a five percent (5%) interest in such Deep Rights.
The Parties agree MOC, WEI, and Hess shall each have the separate
right to market additional interest in the Deep Rights on GC 246 to
third parties. The Parties agree that, until the earlier of the
temporary or permanent abandonment of the initial exploratory well to
test the Deep Rights, MOC, WEI and Hess shall have a waiver of Article
24.1.1 (Consent to Assignment), and Article 24.1.4 (Minimum Transfer
of Working Interest) of the Deep Rights OA; provided that any such
sale shall be a minimum of five percent (5%) interest in such Deep
Rights.
8. The Parties acknowledge that there will be two separate operating
agreements governing the two different ownership groups in the
horizons above and below 20,000'TVD. The Parties agree to use best
efforts and accepted practices in the development of the shallow
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and deep horizons so as not to interfere with the respective
operations for each horizon if possible.
9. The Parties acknowledge and agree that pursuant to NTL No. 2006-G10,
Interim Guidelines for Moored Drilling Rig Fitness Requirements for
the 2006 Hurricane Season, effective May 19, 2006, in the event the
additional mooring components (anchors, chains and wires) for the
Voyager become available at any time during the drilling of the IBW
all Parties will pay their proportionate share of the costs for the
installation of same. The cost of installation, estimated to be $4MM,
shall be shared in the percentages of MOC-40.0025%, WEI-24.9975% and
Ridgewood-35% and will be in addition to the attached AFE and will not
be included in calculating the supplemental AFE cost overrun of the
well under the Shallow Rights OA.
10. Each Party has had the benefit of independent representation with
respect to the subject matter of this Agreement. This Agreement,
though drawn by one Party, shall be construed fairly and reasonably
and not more strictly against one Party than another. MOC and WEI make
no representations or warranties, express or implied, as to the volume
of reserves, if any, present on the Lease referred to herein or the
ability of said Lease to produce as a result of operations
contemplated hereunder.
11. This Agreement, and the exhibits attached and incorporated herein,
contain the final and entire agreement of the Parties with respect to
the subject matter of this contract. There are no representations,
warranties or promises, oral or written between the Parties other than
those included in this Agreement. Upon execution of this Agreement by
each of the Parties, this Agreement shall supersede and replace all
previous negotiations, understandings, or promises, whether written or
oral, relative to the subject of this Agreement. Each of the Parties
acknowledges that no Party has made any promise, representation or
warranty that is not expressly stated in this Agreement. This
Agreement shall not be modified or changed except by written amendment
signed by each of the Parties.
12. If any Party is a legal entity, including but not limited to, an
association, corporation, joint venture, limited partnership,
partnership, LLC, or trust, such Party represents to the other Parties
that the execution and delivery of this Agreement and the completion
of transactions contemplated herein have been duly authorized by all
necessary corporate proceedings and such Party has received all
necessary management approvals.
13. This Agreement may be executed by signing the original or a
counterpart hereof. If this Agreement is executed in multiple
counterparts, each counterpart shall be deemed an original and all of
which, when taken together, shall constitute but one and the same
Agreement with the same effect as if all Parties had signed the same
instrument. In the event this Agreement is circulated or executed via
facsimile, the signatures of the Parties shall be deemed original
and self-providing for all purposes under applicable law.
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14. This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and assigns, if permitted, and
shall constitute a covenant running with the land and the Lease
referred to herein. This Agreement does not benefit or create any
rights in any person or entity not a Party to this Agreement unless
specifically granted by a Party hereto pursuant to the terms contained
herein.
15. The Parties agree to comply with all applicable laws, ordinances,
governmental rules, regulations and orders in connection with the
Lease referred to herein and in performing their obligations and
duties hereunder, including, without limitation, those pertaining to
pollution control, environmental protection, securities laws and
regulations, the Fair Labor Standards Act and the Occupational Safety
and Health Act (as all of same may hereafter be amended). The Parties
shall also, unless exempt, comply with Executive Order 11246 (Equal
Employment Opportunity) effective October 24, 1965, together with all
relevant governmental rules, regulations and orders promulgated
pursuant thereto. The Parties agree that all provisions of said laws,
ordinances, rules, regulations and orders, as applicable to the
transactions contemplated in this Agreement, are deemed incorporated
herein by reference.
16. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS EXCLUSIVE OF ANY PROVISIONS
THAT WOULD DIRECT THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER
JURISDICTION.
17. MOC and WEI agree to protect, defend, indemnify, and hold Ridgewood
and its affiliates and its officers, directors, agents, servants, and
employees (collectively "Indemnitees"), harmless from and against any
and all claims, demands, costs, losses, expenses (including without
limitation, court costs and attorneys fees), penalties, suits and
judgments of any nature whatsoever (collectively "Claims") resulting
directly or indirectly from or arising out of or in connection with
MOC's and WEI's ownership and/or operatorship of the Lease prior to
the effective date of this Agreement, to the fullest extent which the
law will allow, WHETHER CAUSED IN WHOLE OR IN PART BY THE SOLE, JOINT,
OR CONCURRENT, ACTIVE OR PASSIVE, NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT OF THE ABOVE DESCRIBED INDEMNITEE (EXCEPTING ONLY THOSE
CLAIMS CAUSED BY THE INDEMNITEE'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OR THE UNSEAWORTHINESS OF ANY VESSEL OR UNAIRWORTHINESS OF
ANY AIRCRAFT.
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18. All notices, requests or demands to be given under this Agreement
shall be in writing and shall be deemed to have been given (i) three
(3) business days after being sent by registered mail or certified
mail, postage prepaid, or (ii) on the day sent, if hand delivered or
sent by facsimile, with receipt confirmed and verbal confirmation, in
each case addressed as follows or to such other address as may have
been furnished in writing to the other Parties hereto in accordance
with this Section:
If to MOC: If to Ridgewood:
--------- ----------------
Marathon Oil Company Ridgewood Energy Corporation
▇.▇. ▇▇▇ ▇▇▇▇ (Mail) 77253 11700 Katy Freeway
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇. ▇. ▇▇▇▇▇▇ Attention: Mr. W. ▇▇▇▇ ▇▇▇▇▇
Office Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Office Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Direct: (▇▇▇) ▇▇▇-▇▇▇▇ Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to WEI:
-----------
Woodside Energy (USA) Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Office Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Direct: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
19. Each of the Parties hereto shall timely execute, acknowledge and
deliver to the other such further documents and take such other
action, as may be reasonably requested in order to carry out the
purposes of this Agreement.
20. Notwithstanding any provisions in this Agreement to the effect that
the rights and liabilities of the Parties are several and limited to
each Parties' percentage working interest during the relevant period
(whether promoted or non-promoted working interest percentages) and
not joint nor joint and collective, for United States federal income
tax purposes, the Parties elect not to be excluded from the
application of subchapter K of Chapter 1, Subtitle A, of the Internal
Revenue Code of 1986, as amended, and similar provisions of applicable
state laws. The tax partnership created hereunder shall be governed by
the Tax Partnership Provisions attached hereto as Exhibit "E".
21. Ridgewood covenants and agrees that it shall not transfer or assign
all or any portion of its rights and/or obligations under this
Agreement without the written consent of MOC and WEI, which consent
will not be unreasonably withheld. Any such assignment made without
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such written consent shall be null and void. No permitted assignment
of the Agreement or any interest herein shall release Ridgewood from
any liability or duty assumed hereunder or obligation accrued before
such assignment without the express written agreement of MOC and WEI.
Notwithstanding the above, MOC and WEI agree and acknowledge that
Ridgewood may assign all or a portion of its rights and/or obligations
under this Agreement, and/or any interest earned hereunder to a
Ridgewood Energy drilling fund or fund(s) without the written consent
of MOC and WEI.
22. Ridgewood shall not make any releases or disclosures to any third
party with respect to the matters herein, including the existence
of this Agreement, without the prior written consent of MOC and
WEI. However, Ridgewood may make releases or public announcements
which are required in order to ,comply with applicable laws, and
Ridgewood may release information regarding the basic terms of
this transaction to prospective investors for its drill fund
marketing efforts prior to the drilling of the IBW.
23. If any term or provision of this Agreement is held to be invalid,
illegal, or unenforceable by any rule of law or public policy,
all other conditions and provisions of the Agreement shall,
nevertheless, remain in full force and effect.
24. This Agreement shall remain in full force and effect until all of
the obligations hereunder have been fulfilled or have expired
unless otherwise agreed by the Parties, except with respect to
any indemnities which shall survive termination of this
Agreement.
IN WITNESS WHEREOF, this Agreement is executed in the presence of competent
witnesses by the Parties to this Agreement as of the dates set out below, but is
made effective as of the date first above written.
WITNESSES: Marathon Oil Company
(SIGNATURE ILLEGIBLE) By: /S/ ▇.▇. ▇▇▇▇▇▇
--------------------- -----------------
(SIGNATURE ILLEGIBLE) Name: ▇. ▇. ▇▇▇▇▇▇
--------------------- -----------------
Title: Attorney-in-Fact
Date: July 27, ▇▇▇▇
▇▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇) Inc.
--------------------- By:
------------------
--------------------- Name:
------------------
Title:
------------------
Date:
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WITNESSES: Ridgewood Energy Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ W. ▇▇▇▇ ▇▇▇▇▇
--------------------- -----------------
Name: W. ▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
Date: 8-2-06
SIGNATURE PAGE TO THAT CERTAIN JOINT PARTICIPATION AGREEMENT EFFECTIVE JULY
14, 2006, BY AND AMONG MARATHON OIL COMPANY, WOODSIDE ENERGY (USA) INC. AND
RIDGEWOOD ENERGY CORPORATION
L:Blackwater:JPA MOC WEE Ridgewod Final 072606.doc
Page 9 of 10
ACKNOWLEDGEMENT
---------------
STATE OF TEXAS:
COUNTY OF ▇▇▇▇▇▇:
On this 27th day of July 2006, before me, appeared ▇. ▇. ▇▇▇▇▇▇, to me
personally known, who, being by me duly sworn, did say that he is the
Attorney-in-Fact for Marathon Oil Company, and that the foregoing instrument was
signed on behalf of said corporation by authority of its Board of Directors, and
said appearer acknowledged said instrument to be the free act and deed of said
corporation.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
NOTARY PUBLIC
My Commission expires: 1-22-2010
----------
ACKNOWLEDGEMENT [SEAL]
---------------
STATE OF TEXAS:
COUNTY OF ▇▇▇▇▇▇:
On this 2nd day of Aug 2006, before me, appeared W. ▇▇▇▇ ▇▇▇▇▇, to me
personally known who, being by me duly sworn, did say the he is the Exec Vice
President of Ridgewood Energy Corporation, and that the foregoing instrument was
signed on behalf of said corporation by authority of its Board of Directors, and
said appearer acknowledged said instrument to be the free act and deed of said
corporation.
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------
NOTARY PUBLIC
My Commission expires: 10/1/08
ACKNOWLEDGEMENT [SEAL]
---------------
STATE OF___________:
________ OF _______:
On this ______ day of ________________ 2006, before me, appeared did say that
she/he is the _________________________ for Woodside Energy (USA) Inc, and that
the foregoing instrument was signed on behalf of said corporation by authority
of its Board of Directors, and said appeared acknowledged said instrument to be
the free act and deed of said corporation.
-------------
NOTARY PUBLIC
My Commission expires: _________________
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EXHIBIT "A"
Attached to and made a part of that certain Joint Participation Agreement
effective July 14, 2006 by and between Marathon Oil Company, Woodside Energy
(USA) Inc. and Ridgewood Energy Corporation.
DESCRIPTION OF LEASE
--------------------
I. Blackwater Prospect Oil and Gas Lease
Federal Lease No. OCS-G 16716, effective September 1, 1996 covering all of
Block 246, Green Canyon, OCS Official Protraction Diagram, NG 15-3,
containing approximately 5760.00 acres.