FORM OF DRILLING AND OPERATING AGREEMENT
REVISED
AGREEMENT OF 12/1/2005
FORM
OF DRILLING AND OPERATING AGREEMENT
This
Agreement is entered into by and between Rockies Region Private Limited
Partnership, hereinafter designated and referred to as the "Partnership", and
Petroleum Development Corporation, hereinafter referred to and designated as
"PDC."
Whereas,
the parties to this agreement desire to enter into an agreement to explore and
develop certain Prospects for the production of oil and gas as hereinafter
provided,
It is
agreed as follows:
ARTICLE
I
DEFINITIONS
As used
in this agreement, the following words and terms shall be defined as
follows:
A. The
term "oil and gas" shall mean oil, gas, casinghead gas, gas condensate, and all
other liquid or gaseous hydrocarbons and other marketable substances produced
therewith, unless an intent to limit the inclusiveness of this term is
specifically stated.
B.
The term "Prospect" shall mean a spacing unit
established according to state regulatory guidelines and industry practice on
which the Partnership proposes to drill a well. Generally, the
spacing unit for Colorado ▇▇▇▇▇ will encompass approximately 32 acres for ▇▇▇▇▇
drilled in the Wattenberg Field and approximately 20 acres for ▇▇▇▇▇ drilled in
the Grand Valley Field; however, smaller units may be utilized, provided the
reduced spacing has been approved by the appropriate state regulatory
authority.
C. "Royalty"
shall mean a payment from gross revenues made to the owner of the oil and gas
mineral rights of a Prospect.
D. "Overriding
royalty" shall mean a payment from gross revenues to a party other than the
owner of oil and gas mineral rights of a Prospect.
E. "Proportionate
Working Interest" shall mean an interest in a well or Prospect of less than 100%
which bears that same percentage of costs of development and production as it
receives in production revenues after deducting for royalty and overriding
royalties.
F. "Non-operators"
shall mean all parties holding a proportionate working interest in a Prospect,
including the Additional General Partners and the Limited Partners, but
excluding PDC if it is also serving as Operator.
ARTICLE
II
EXHIBITS
The
following exhibits are incorporated in and made a part of this
agreement:
A.
Exhibit "A", Prospects.
1. Identification
of each Prospect to be drilled.
2. Target
formation.
3. The
Partnership fractional interest therein.
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B.
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Exhibit
"B", Insurance.
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C.
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Exhibit
"C", Additional Prospects.
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1. Identification
of additional Prospects added or substituted after the original date of this
agreement, and if substituted, identification of the Prospect which is
replaced.
2. Target
formation.
3. The
Partnership fractional interest therein.
4. Approval
by the Partnership and PDC.
ARTICLE
III
OPERATOR
A.
Designation and Responsibilities of Operator:
PDC shall
be the Operator of the Prospects, and shall conduct and direct and have full
control of all operations on the Prospects as permitted and required by, and
within the limits of this agreement. It shall conduct all such
operations in a good workmanlike manner, but it shall have no liability as
Operator to the Partnership for losses sustained or liabilities incurred, except
such as may result from negligence or misconduct. The Managing
General Partner may subcontract with another operator or operators to perform
some of all of the duties of the operator, on Terms and conditions substantially
the same as those discussed herein. The Managing General Partner will
supervise operations by other non-affiliated drilling contractors and
subcontractors.
B.
Resignation or Removal of Operator and Selection of
Successor:
1. Resignation
or Removal of Operator: PDC may resign as Operator at any time by
giving written notice thereof to the Partnership. If PDC terminates
its legal existence, no longer owns an interest in the Prospects, has filed a
petition under the Federal bankruptcy laws or any state insolvency law or a
receiver, fiscal agent, or similar officer has been appointed by a court for the
business or property of PDC, or is otherwise no longer capable of serving as
Operator, PDC shall be deemed to have resigned without any action by the
Partnership, except the selection of a successor. PDC may be removed
by the affirmative vote of Non-Operators owning a majority working interest in
each Prospect after excluding the voting interest of Operator. Such
resignation or removal shall not become effective until 7:00 o'clock A.M.,
Eastern time, on the first day of calendar month following the expiration of
ninety (90) days
after the giving of notice of resignation of PDC or action by the Non-Operators
to remove PDC as Operator, unless a successor Operator has been selected and
assumes the duties of PDC at an earlier date. PDC, after effective
date of resignation or removal, shall be bound by the terms hereof as a
Non-Operator. A change of a corporate name or structure of PDC or
transfer of PDC's interest to any single subsidiary, parent or successor
corporation shall not be the basis for removal of PDC as Operator.
2. Selection
of Successor Operator: Upon the resignation or removal of PDC, a successor
Operator shall be selected by the parties. The successor Operator
shall be selected by the affirmative vote of parties owning a majority working
interest in each Prospect; provided, however, if an Operator which has been
removed fails to vote or votes only to succeed itself, the successor Operator
shall be selected by the affirmative vote of parties owning a majority interest
after excluding the voting interest of the Operator that was
removed.
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C.
Employees:
The
number of employees used by PDC in conducting operations hereunder, their
selection, and the hours of labor and the compensation for services performed
shall be determined by PDC.
ARTICLE
IV
DRILLING
PROSPECTS
A. Prospects:
Exhibit
"A" lists Prospects initially to be acquired by the Partnership, and its
proportionate working interest in each Prospect. Most ▇▇▇▇▇ to be
drilled by the Partnerships will be offsets to producing
▇▇▇▇▇. Therefore, it is unlikely that a well drilled on a Prospect
will prove up any additional acreage outside the Prospect. If a
Partnership well does prove up additional acreage, PDC will assign the
Partnership a proportionate interest in such spacing units. The
foregoing requirement to expand a Prospect will not apply if the managing
general partner assigns the Partnership a Prospect that has Proved Reserves in
the target geological formation and the drilling unit protects against drainage
or if the Prospect is located on PDC’s ▇▇▇▇▇▇▇ or Chevron acreage in Garfield
County, Colorado or on acreage in PDC’s Burbak Project acreage in ▇▇▇▇▇ County,
North Dakota.
B.
Cost:
The
Partnership shall reimburse PDC for its proportionate share of the lesser
of:
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1.
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The fair market value of the Prospect, or | |
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2.
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The
"Cost" of acquisition of the Prospect including: (a) the price paid by PDC
for such property; (b) title examination, abstracting, brokers
commissions, filing fees, recording costs, transfer taxes, and other
charges incurred in connection with the acquisition of the property; (c)
bonuses, rentals and ad valorem taxes paid by PDC with respect to the
Prospect to the date of its transfer to the Partnership, interest on funds
used to acquire or maintain such property, and such portion of PDC's
expenses for geological, drafting, accounting, legal and other like
services allocated to the Prospect in accordance with generally accepted
accounting principles, not including for expenses incurred in the prior
drilling of ▇▇▇▇▇, and provided such expenses shall have been incurred not
more than 36 months prior to the purchase by the
program.
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C.
Substitution:
As
drilling progresses other, more desirable Prospects may become may become less
desirable as a result of additional information not available as of the date of
this agreement. For any undrilled Prospect, the Partnership may
request that PDC substitute another Prospect, in which case the entire
acquisition cost paid for the Prospect or a substitute thereof will be applied
against the cost of the substituted Prospect, and against other costs of this
contract if and to the extent the cost of the substitute Prospect is less than
the cost of the original Prospect it replaces. An amendment to this
agreement in the form of Exhibit "C" shall be used for the addition or
substitution of a Prospect.
D.
Title Examination and Opinion:
Title
examination shall be made by outside attorneys on the drillsite of any proposed
well prior to commencement of drilling operations. The opinion will
include ownership of the working interest, mineral, royalty, overriding royalty,
and production payments under the applicable leases. A copy of the
opinion will be furnished to the Partnership.
PDC shall
take such steps as are necessary in its best judgment to render title to the
leases assigned to the Partnership acceptable for the purposes of the
Partnership. No operation shall be commenced on leases acquired by
the Partnership unless the Partnership Manager is satisfied that necessary title
requirements have been satisfied by PDC and that the undertaking of such
operation would be in the interest of the Partnership. PDC shall be
free, however, to use their own best judgment in waiving title requirements and
shall not be liable to the Partnership, or Participants for any mistakes of
judgment; nor shall PDC be deemed to be making any warranties or
representations, express or implied, as to the validity or merchantability of
the title to any lease assigned to the Partnership or the extent of the interest
covered thereby.
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ARTICLE
V
INTEREST
IN COSTS AND PRODUCTION
A.
Royalties and Overriding Royalties:
The
Partnership interest in production from drilling Prospects will be subject to
the payment to non-affiliated parties of royalties and overriding royalties ,
provided the weighted average of all royalties for all Partnership Prospects
drilled shall not exceed 25% gross revenues. No such royalty or
overriding royalty will be paid to PDC or its affiliates.
B.
Proportionate Working Interest:
The
Partnership may acquire 100% of the working interest in a Prospect or a
proportionate interest of less than 100%. In the event the
Partnership acquires a proportionate interest, the respective obligations and
benefits acquired by the Partnership will be proportionately the same as the
working interest acquired. PDC and its affiliates may not retain any
overrides or other burdens on the interest conveyed to the
Partnership. The Partnership will pay a proportionate share of the
total of lease, development, and operating costs, and will be entitled to
receive a proportionate share of production subject only to royalties and
overriding royalties discussed in Article V, A.
C.
Joint Venture Activities:
PDC may
retain an interest or convey interests in undrilled Prospects to other Joint
Venturers, retaining for its own account a profit or promotional interest on the
interest conveyed. PDC shall require any party acquiring such an
interest to acquire a proportionate working interest and to assume and bear
alone all obligation associated with such an interest, and to bear alone and
hold the Partnership and other Joint Venturers harmless from all costs, claims,
and burdens associated with the interest acquired. At the discretion
of the Managing General Partner, the Partnership may enter into joint ventures
which allow a functional allocation of tangible, intangible and lease costs,
where each joint venturer is responsible for its overhead costs, provided the
Partnerships interest in the revenues and income of such a joint venture is
proportional to its contribution to the total cost of such venture.
D.
Adjustments:
Payment
of any ▇▇▇▇ shall not prejudice the right of the Partnership to protest or
question the correctness thereof: provided, however, all bills and
statements rendered to the Partnership by PDC during any calendar year shall
conclusively be presumed to be true and correct after a twenty-four (24) month
period unless the Partnership takes written exception thereto and makes claim on
PDC for adjustment. No adjustment favorable to PDC shall be made
unless it is made within the same prescribed period. The provisions
of this paragraph shall not prevent adjustments resulting from a physical
inventory of controllable material.
E.
Audits:
The
Partnership, upon notice in writing to PDC and all other Non-Operators, shall
have the right to audit PDC's accounts and records relating to the Partnership
▇▇▇▇▇ for any calendar year within the twenty-four (24) month period following
the end of the calendar year to be audited; provided, however the making of an
audit shall not extend the time for the taking of written exception to and the
adjustments of account. Where there are two or more Non-Operators,
the Non-Operators shall make every reasonable effort to conduct a joint audit in
a manner which will result in a minimum of inconvenience to PDC. PDC
shall bear no portion of the Non-Operators audit cost incurred under this
paragraph unless agreed to by PDC. The audits shall not be conducted
more than once each year without prior approval of PDC, except upon the
resignation or removal of PDC as operator, and shall be made at the expense of
those Non-Operators requesting such audit.
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PDC shall
reply in writing to an audit report within 75 days after receipt of such
report.
ARTICLE
VI
DRILLING
AND DEVELOPMENT
A. Agreement
To Drill and Complete:
PDC shall
commence drilling of a well or ▇▇▇▇▇ on each Prospect within 180 days of the
date of the initial formation of the Partnership, but in no case later than
March 30, 2006 and shall continue drilling thereafter with due diligence to the
Target formation unless a condition which renders further drilling impractical
is encountered at a lesser depth, or unless the Partnership agrees to complete
or abandon the well at a lesser depth.
PDC shall
make reasonable tests of all formations encountered during drilling which give
indication of containing economic quantities of oil and/or gas. If
such tests indicate the presence of economic quantities of oil and/or gas, PDC
shall complete the well and install such surface and well equipment, gathering
pipelines, heaters, separators, etc., as are necessary and normal in the area in
which the Prospect is located. If it is determined that the well is
not likely to produce oil and/or gas in commercial quantities PDC shall plug and
abandon the well in accordance with applicable regulations.
B. Cost
of Drilling and Completion:
The
Partnership shall bear its proportionate share of the cost of drilling and
completing or drilling and abandoning each Partnership well, where the Managing
General Partner serves as operator as follows:
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1.
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The
Cost of the Prospect, as defined;
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2.
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The
intangible costs of drilling and completing the well, including the
managing general partner’s compensation for acting as operator, equal to
14% of the total direct well cost if the investor partners’ interest in
the well is 70%, and proportionally reduced if the tangible costs exceed
30% of the direct well costs on average for the Partnership’s ▇▇▇▇▇, so
the managing general partner’s contribution to and interest in the
Partnership is increased above 30%;
and
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3.
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The
tangible Costs of drilling and completing the Partnership ▇▇▇▇▇ and of
gathering pipelines necessary to connect the well to the nearest
appropriate sales point or delivery
point.
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To the
extent that the Partnership acquires less than 100% of a Prospect, its Drilling
and Completion Costs of that Prospect will proportionately
decrease.
Intangible
drilling costs will include a monthly drilling well fixed overhead based on the
most recently published Ernst & Young fixed rate overhead
survey. The rate will be determined by state and well
depth.
In
addition, the managing general partner may also provide direct services in the
drilling and completion of the ▇▇▇▇▇, including land and legal services,
roustabout and construction services, supervision of drilling and completion
operations, engineering and geological services, and other
services. Such services will be provided at the managing general
partner’s cost determined in accordance with generally accepted accounting
principles and subject to written agreements.
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In the
event the foregoing rates for direct services exceed competitive rates available
from other non-affiliated persons in the area engaged in the business of
rendering or providing comparable services or equipment, the foregoing rates
will adjust to an amount equal to that competitive rate.
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C.
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Completion
By Less Than All Parties:
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In the
event not all Participants in a well wish to participate in a completion
attempt, the parties desiring to do so may pay all costs of the completion
attempt including the cost of necessary well equipment and a gathering pipeline,
and such parties shall receive all income and pay all operating costs from the
well until they have received an amount equal to 300% of the completion and
connection costs, after which time the non-consenting parties shall have the
right to receive their original interest in further revenues and
expenses.
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D.
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Prepayment:
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The
Partnership agrees to pay PDC the full cost of all planned Prospects prior to
December 31, 2005 in order to assure the Partnership of the rates quoted in
Article VI, B, to arrange for the drilling equipment for the ▇▇▇▇▇ through
subcontractors and to provide PDC with working capital for the drilling of the
▇▇▇▇▇.
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E.
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Refunds:
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In no
event shall PDC be obligated to refund any moneys paid to it by the Partnership
under this Agreement. In the event any amounts paid under Article VI,
D exceed costs due under Article VI, B, such excess shall be credited to the
Partnership and shall be expended for additional drilling.
ARTICLE
VII
PRODUCTION
AND SUBSEQUENT OPERATIONS
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A.
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Commencement
of Production:
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For
purposes of this agreement, production will commence:
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1.
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In
the case of gas ▇▇▇▇▇ when gas is first delivered from the well through a
pipeline or other delivery system to a
purchaser;
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2.
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In
the case of oil ▇▇▇▇▇ when the well has produced 100 barrels;
or
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3.
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In
the case of combination ▇▇▇▇▇ when either of criteria have been
satisfied.
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A well
will be deemed to be "in production" in any month thereafter in which oil or gas
are produced in commercial quantities.
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B.
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Production
Operations:
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PDC shall
provide all necessary labor, vehicles, supervision, management, accounting, and
overhead services for normal production operations, and lease accounting, and
shall be entitled to deduct from Partnership revenues a monthly well-tending fee
of $400 per Wattenberg Field well, $700 per Piceance Basin, $950 for Sand Wash
Basin, Red Desert Basin or Williston Basin well and a monthly Partnership
Administration charge of $100 per well. If the Partnership has producing ▇▇▇▇▇
in areas different from those above, the operator will charge a monthly
Partnership Administration fee of $100 per well plus a competitive industry rate
for operations and field supervision. Nonroutine operations will be
billed to the Partnership at their proportionate cost. Any nonroutine
operation with an estimated cost exceeding $10,000 will be authorized for
expenditure ("AFE" or "AFE'd") and submitted to the Non-Operators for
approval. Approval of a majority of the working interest owners will
be required to authorize such operations. If the Partnership
authorized such operations PDC shall have the right to deduct payment for the
cost from Partnership revenues.
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C.
Abandonment of ▇▇▇▇▇ That Have Produced:
Any well
which has been completed as a producer shall not be plugged and abandoned
without the consent of all Non-Operators. If all parties consent to
such abandonment, the well shall be plugged and abandoned in accordance with
applicable regulations and at the cost, risk of expense of all
owners. If, within (30) days after receipt of the notice of the
proposed abandonment of any well, all parties do not agree to the abandonment of
such well, those wishing to continue its operations from the interval(s) of the
formation(s) then open to production shall tender to each of the other parties
its proportionate shale of the value of the ▇▇▇▇▇ salvageable material and
equipment, less the estimated cost of salvaging and assign the non-abandoning
parties, without warranty, express or implied, as to title or as to quantity, or
fitness for use of the equipment and material, all of its interest in the well
and related equipment, together with its interest in leasehold estate as to, but
only as to, the interval or intervals of the formation or formations then open
to production.
D.
Marketing of Production:
The
Partnership shall have the right to take in kind and separately dispose of its
share of all oil and gas produced from the Prospects, excluding its
proportionate share of production required for lease operations and production
unavoidably lost. Initially the Partnership designates PDC as its
agent to market such production and authorizes PDC to enter into and bind the
Partnership in such agreements as it deems in the best interest of the
Partnership for the sale of such oil and/or gas. The Partnership may
rescind the designation of PDC as its agent with regard to all subsequent
marketing agreements by written notice at any time, but agrees to be bound by
such agreements as may then be in effect during their terms. The
Partnership shall bear its proportionate share of all marketing costs, if
any. In the event PDC provides marketing services, its charge shall
be no greater than those charges made by unaffiliated marketers. If
pipelines which have been built by PDC are used in the delivery of natural gas
to market, PDC may charge a gathering fee not to exceed that which would be
charged by a nonaffiliated third party for a similar service.
E.
Escalation in the Event of Rising Costs:
The
production and accounting charges provided in Article VII, B, may be adjusted
annually beginning January 1, 2007, to an amount equal to the rates from Article
VII, B, multiplied by the ratio of the then current average weekly earnings of
Crude Petroleum and Gas Production workers to the average weekly earnings of
Crude Petroleum and Gas Production workers for 2005, as published by the United
States Department of Labor, Bureau of Labor Statistics, provided that the charge
may not exceed the rate which would be charged by other comparable operators in
the area of operations.
ARTICLE
VIII
LIABILITY
OF PARTIES
A.
Liability of Parties:
If the
Partnership participates in a well with third parties the liability of the
parties shall be several, not joint or collective. The Partnership
shall be responsible only for its obligations, and shall be liable only for its
proportionate share of the costs of developing and operating the
Prospects. It is not the intention of the parties to create, nor
shall this agreement be construed as creating, a mining or other partnership or
association, or to render the parties liable as partners.
B.
Liens and Payment Defaults:
The
Partnership grants to PDC a lien upon its oil and gas rights in the Contract
Area, and a security interest in its share of oil and/or gas when extracted and
its interest in all equipment, to secure payment of its share of expense,
together with interest thereon. To the extent that PDC has a security
interest under the Uniform Commercial Code of the state, PDC shall be
entitled to exercise the rights and remedies of a secured party under
the Code. The bringing of a suit and the obtaining of judgment by PDC
for the secured indebtedness shall not be deemed an election of remedies or
otherwise affect the lien rights or security interest as security for the
payment thereof. In addition, upon default by the Partnership in the
payment of its share of expense, PDC shall have the right, without prejudice to
other rights or remedies, to collect from the purchaser the proceeds from the
sale of the Partnership's share of oil and/or gas until the amount owed by the
Partnership, plus interest, has been paid. Each purchaser shall be
entitled to rely upon PDC's written statement concerning the amount of any
default. PDC grants a like lien and security interest to the
Partnership to secure payment of PDC's proportionate share of
expenses.
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If any
party fails or is unable to pay its share of expense within sixty (60) days
after rendition of a statement therefor by PDC, PDC shall pay the unpaid amount
in the proportion that the interest of each such party bears to the interest of
all such parties.
C.
Payments and Accounting:
Except as
herein otherwise specifically provided, PDC shall promptly pay and discharge
expenses incurred in the development and operation of the Contract
Area pursuant to this agreement. PDC shall keep an accurate record of
the account hereunder, showing expenses incurred and charges and credits made
and received.
Regardless
of which party has contributed the lease(s) and/or oil and gas interest(s)
hereto on which royalty is due and payable, PDC shall pay or deliver or cause to
be paid or delivered the royalty and overriding royalty payments due under the
terms associated with the acquisition of each Prospect, and shall deduct such
payments from the revenue of the Partnership.
D. Taxes:
Unless
the Partnership elects to take production in kind, PDC shall pay or cause to be
paid all production, severance, excise, gathering and other taxes imposed upon
or with respect to the production or handling of such party's share of oil
and/or gas produced under the terms of this agreement, and shall be entitled to
reimbursement for such taxes from partnership revenue.
E.
Insurance:
At all
times while operations are conducted hereunder, PDC shall comply with the
workmen's compensation laws of the state of West Virginia. PDC shall
also carry or provide insurance as outlined in Exhibit "B", attached to and made
a part hereof. PDC shall require all contractors engaged in work on
or for the Contract Area to comply with the workmen's compensation law of the
state where the operations are being conducted and to maintain such other
insurance as PDC may require.
No
additional charge will be made for such insurance during drilling and completion
operations. When ▇▇▇▇▇ have been placed in production PDC may ▇▇▇▇
for the cost of providing such insurance, allocated among ▇▇▇▇▇ and operations
in accordance with generally accepted accounting principles.
ARTICLE
IX
INTERNAL
REVENUE CODE ELECTION
This
agreement is not intended to create, and shall not be construed to create, a
relationship of partnership or an association for profit between or among the
parties hereto. Notwithstanding any provision herein that the rights
and liabilities hereunder are several and not joint or collective, or that this
agreement and operations hereunder shall not constitute a partnership, if, for
federal income tax purposes, this agreement and the operations hereunder are
regarded as a partnership, each party hereby affected elects to be excluded from
the application of all of the provisions of Subchapter "K", Chapter 1, Subtitle
"A", of the Internal Revenue Code of 1986, as amended (the "Code") as permitted
and authorized by Code Section 761 and the regulations promulgated
thereunder. PDC is authorized and directed to execute on behalf of
the Partnership such evidence of this election as may be required by the
Secretary of the Treasury of the United States or the Federal Internal Revenue
Service, including specifically, but not by way of limitation, all of the
returns, statements, and the data required by Regulations
1.761. Should there be any requirement that each party hereby
affected to give further evidence of this election, each such party shall
execute such documents and furnish such other evidence as may be required by the
Federal Internal Revenue Service or as may be necessary to evidence this
election. No such party shall give any notices or take any other
action inconsistent with the election made hereby. If any present or
future income tax laws of the state or states in which the Contract Area is
located or any future income tax laws of the United States contain provisions
similar to those in Subchapter "K", Chapter l, Subtitle "A", of the Code, under
which an election similar to that provided by Section 761 of the Code is
permitted, each party hereby affected shall make such election as may be
permitted or required by such laws. In making the foregoing election,
each such party states that the income derived by such party from operations
hereunder can be adequately determined without the computation of partnership
taxable income.
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ARTICLE
X
CLAIMS
AND LAWSUITS
PDC may
settle any single uninsured third party damage claim or suit arising from
operations hereunder if the expenditure does not exceed One Thousand Dollars
($1,000.00) and if the payment is in complete settlement of such claim or
suit. If the amount required for settlement exceeds the above amount,
the Partnership shall assume and take over the further handling of its interest
in the claim suit, unless such authority is delegated to PDC. All
costs and expenses of handling, settling, or otherwise discharging such claim or
suit shall be at the joint expenses of the parties participating in the
operation from which the claim or suit arises. If a claim is made
against any party or if any party is sued on account of any matter arising from
operations hereunder over which such individual has no control because of the
rights given Operator by this agreement, such party shall immediately notify all
other parties, and the claim or suit shall be treated as any other claim or suit
involving operations hereunder all claims and suits involving title to any
interest subject to this Agreement shall be treated as a claim or suit against
all parties participating in the Prospect so affected.
ARTICLE
XI
FORCE
MAJEURE
If either
party is rendered unable, wholly or in part, by force majeure to carry out its
obligations under this agreement, other than the obligation to make money
payments, that party shall give to the other party prompt written notice of the
force majeure with reasonably full particulars concerning its; thereupon, the
obligations of the party giving the notice, so far as they are affected by the
force majeure, shall be suspended during, but no longer than, the continuance of
the force majeure. The affected party shall use all reasonable
diligence to remove the force majeure situation as quickly as
practicable.
The
requirement that any force majeure shall be remedied with all reasonable
dispatch shall not require the settlement of strikes, lockouts, or other labor
difficulty by the party involved, contrary to its wishes; how all such
difficulties shall be handled shall be entirely within the discretion of the
party concerned.
The term
"force majeure", as here employed, shall mean act of God, strike, lockout, or
other industrial disturbance act of the public enemy, war, blockade, public
riot, lightning, fire, storm, flood, explosion, governmental action,
governmental delay, restraint or inaction, unavailability of equipment or market
for oil and/or gas, and any other cause, whether of the kind specifically
enumerated above or otherwise, which is not reasonably within the control of the
party claiming suspension.
ARTICLE
XII
NOTICES
All
notices required by this agreement shall be given in writing addressed to the
parties as follows:
1.
For the Partnership:
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Petroleum
Development Corporation, Managing General Partner of Rockies Region Private
Limited Partnership, ▇.▇. ▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2.
For PDC:
Petroleum
Development Corporation
▇.▇. ▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Each
party shall have the right to change its address at any time, by giving written
notice to all other parties.
ARTICLE
XIII
TERM OF
AGREEMENT
In the
event a well drilled under any provision of this agreement, results in
production of oil and/or gas in paying quantities, this agreement shall continue
in force so long as any such well or ▇▇▇▇▇ produce, or are capable of
production, and for an additional period of 180 days from cessation of all
production; provided, however, if, prior to the expiration of such additional
period, one or more of the parties hereto are engaged in drilling, reworking,
deepening, plugging back, testing or attempting to complete a well or ▇▇▇▇▇
hereunder, this agreement shall continue in force until such operations have
been completed and if production results therefrom, this agreement shall
continue in force as provided herein.
It is
agreed, however, that the termination of this agreement shall not relieve any
party hereto from any liability which has accrued or attached prior to the date
of such termination.
ARTICLE
XIV
COMPLIANCE
WITH LAWS AND REGULATIONS
A.
Laws, Regulations and Order:
This
agreement shall be subject to the conservation laws of the state in which the
Prospects are located, to the valid rules, regulations, and orders of any duly
constituted regulatory body of said state; and to all other applicable federal,
state, and local laws, ordinances, rules, regulations, and orders.
B.
Governing Law:
This
agreement and all matters pertaining hereto, including, but not limited to,
matters of performance, non-performance, breach, remedies, procedures, rights,
duties and interpretation or construction, shall be governed and determined by
the law of the state in which the Prospect is located.
C.
Regulatory Agencies:
Nothing
herein contained shall grant, or be construed to grant, PDC the right or
authority to waive or release any rights, privileges, or obligations which the
Partnership may have federal or state laws or under rules, regulations or orders
promulgated under such laws in reference to oil, gas and mineral operations,
including the location, operation, or production of ▇▇▇▇▇, on tracts offsetting
or adjacent to the Contract Area.
With
respect to operations hereunder, the Partnership agrees to release PDC from any
and all losses, damages, injuries, claims and causes of action arising out of,
incident to or resulting directly or indirectly from Operator's interpretation
or application of rules, rulings, regulations, or orders of the Department of
Energy or predecessor or successor agencies to the extent such interpretation or
application was made in good faith. The Partnership further agrees to
reimburse PDC for any amounts applicable to the Partnership’s share of
production that PDC may be required to refund, rebate or pay as a result of such
an incorrect interpretation or application.
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ARTICLE
XV
MISCELLANEOUS
This
agreement shall be binding upon and shall inure to the benefit of the parties
hereto and to their respective heirs, devisees, legal representative, successors
and assigns.
This
instrument may be executed in any number of counterparts, each of which shall be
considered an original for all purposes.
IN
WITNESS WHEREOF, this agreement shall be effective as of 1st day of December
2005.
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/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇
▇. ▇▇▇▇▇,
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CFO
and Treasurer
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Petroleum
Development Corporation
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/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, President
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Petroleum
Development Corporation,
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Managing
General Partner
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Rockies
Region Private Limited Partnership
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