EXHIBIT 4.10
PURCHASE AND SALE AGREEMENT DATED DECEMBER 18, 2003
BETWEEN CALEX AND PNP PETROLEUM INC.
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PURCHASE AND SALE AGREEMENT
By and between
PNP PETROLEUM, INC.
As Seller
And
CALIFORNIA EXPLORATION, INC..
As Buyer
As of the 18th day of
December 2002
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated as of the 18th day of
December 2002, is by and between PNP Petroleum, Inc. a Texas corporation,
("Seller") and California Exploration, Inc., a Nevada corporation ("Buyer").
IN CONSIDERATION OF the agreements and covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and in reliance upon the representations and warranties contained
herein, Seller and Buyer agree, upon the terms and subject to the conditions
contained herein, as follows:
ARTICLE I
PURCHASE AND SALE
PURCHASE AND SALE OF THE ASSETS. Seller agrees to sell, assign, convey and
deliver to Buyer, and Buyer agrees to purchase and acquire from Seller at
Closing (hereinafter defined), but effective as of 12:01 a.m. C.S.T. on January
1, 2003 (the "Effective Date") a net three percent (3%) of the right, title and
working interest of Seller in and to the following properties described in
Sections 1.1 through 1.7 (collectively, the "Assets"):
1.1. LEASES. A net three percent (3%) of the right, title and working
interest in the properties, described on Exhibit "A", attached hereto
and made a part hereof, whether such properties are in the nature of
fee interests, leasehold interests, licenses, concessions, working
interests, farmout rights, royalty, overriding royalty or other
non-working or carried interests, operating rights or other mineral
rights of every nature and any rights that arise by operation of law
or otherwise, in all such properties and lands covered thereby and
pooled, unitized, communitized or consolidated with such properties
(the "Leases"). In addition, Buyer shall be entitled to a net three
percent (3%) of the right, title and working interest in and to any
and all Leases that have been acquired pursuant to any of the
Contracts.
1.2. ▇▇▇▇▇. A net three percent (3%) of the right, title and working
interest in the oil, condensate or natural gas ▇▇▇▇▇, water source
▇▇▇▇▇, and other water and other types of injection and disposal ▇▇▇▇▇
either located on the Leases (including, but not limited to those
described on the attached Exhibit "B") or on lands pooled or unitized
therewith or held for use in connection with the Leases under a
Surface Contract (as hereinafter defined), whether producing,
operating or shut-in (the "▇▇▇▇▇") (the Leases and ▇▇▇▇▇ herein
collectively referred to as the "Oil and Gas Properties").
1.3. SEVERED SUBSTANCES. A net three percent (3%) of the, right, title and
working interest in all severed crude oil, natural gas, casinghead
gas, drip gasoline, natural gasoline, petroleum, natural gas liquids,
condensate, products, liquids and other hydrocarbons and other
minerals or materials of every kind and description produced from the
Oil and Gas Properties and either (a) in storage tanks on the
Effective Date or (b) sold on or after the Effective Date (the
"Substances").
1.4. CONTRACTS. A net three percent (3%) of the right, title and working
interest in all contracts, commitments, agreements, and arrangements
that in any way relate to the
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properties described in Sections 1.1. through 1.7., inclusive,
including, without limitation, all leases, easements, privileges,
right-of-way agreements, permits, servitudes, licenses or other
agreements relating to the use or ownership of surface and subsurface
properties and structures that are used or held for use in connection
with the exploration and production of Substances from the Oil and Gas
Properties, and all existing or proposed unitization, pooling and
communitization agreements, declarations and orders to the extent they
relate to or affect the Leases, all options, farmout agreements,
exploration agreements, operating agreements, area of mutual interest
agreements, all oil, gas liquids, condensate, casinghead gas and gas
sales, purchase, exchange, gathering, transportation, production,
storage, treatment and processing contracts, or other contracts for
the disposal of Substances therefrom or in connection therewith and
any and all amendments, ratifications or extensions of the foregoing,
together with (i) all rights, privileges, and benefits of Seller
thereunder arising on or after the Effective Date, (ii) all claims for
take-or-pay or other similar payments arising before or after the
Effective Date and (iii) rights of subrogation for any claims that
arise on or after the Effective Date under any insurance policy held
by Seller that covers the properties described in Sections 1.1 through
1.7, inclusive (all such contracts, insofar and only insofar as such
contracts affect the properties described in Sections 1.1 through 1.7,
inclusive, referred to hereinafter as the "Contracts").
1.5. EQUIPMENT. A net three percent (3%) of the right, title and working
interest in all the personal property, fixtures, equipment leases,
improvements, oil field equipment and physical facilities or interests
therein that are used or held for use in connection with the ownership
or operation of the Oil and Gas Properties, including, without
limitation, tanks and tank batteries, disposal facilities, storage
facilities, buildings, structures, field separators and liquid
extractors, compressors, pumps, pumping units, valves, fittings,
machinery and parts, engines, boilers, meters, apparatus, implements,
tools, appliances, cables, wires, towers, casing, tubing and rods,
gathering lines or other pipelines, field gathering systems, and all
other similar fixtures and equipment (the "Equipment").
1.6. INFORMATION AND DATA. To the extent in the possession of Seller or any
agent, employee or affiliate of Seller, copies of all (a) abstracts,
title opinions, title reports, title policies, lease and land files,
surveys, analyses, compilations, correspondence, filings with
regulatory agencies, other documents and instruments that directly
relate to the properties described in Sections 1.1 through 1.7,
inclusive; (b) reproducible copies of computer databases that directly
relate to the properties described in Sections 1.1 through 1.7,
inclusive; (c) geophysical, geological, engineering, exploration,
production, seismic and other technical data, magnetic field
recordings, digital processing tapes, field prints, summaries,
reports, maps, studies and other analyses, whether written or in
electronically reproducible form, that directly relate to the Oil and
Gas Properties; and (d) all other books, records and files containing
financial, title or other information that directly relate to the
properties described in Sections 1.1 through 1.7, inclusive (the
"Data").
1.7. PAYMENT RIGHTS. A net three percent (3%) of the right, title and
working interest in all (a) accounts, instruments and general
intangibles (as such terms are defined in the Uniform Commercial Code
of Texas) arising from the sale or other disposition on or
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after the Effective Date of any of the Assets described in Sections
1.1 through 1.6, inclusive; and (b) liens and security interests in
favor of Seller under any law, rule or regulation or under the
Contracts arising from the sale or other disposition on or after the
Effective Date of any of the Assets described in Sections 1.1 through
1.6, inclusive (the "Payment Rights").
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. Buyer agrees to pay to Seller, at closing,
twenty-three and one-half percent (23.5%) of the proposed workover
budget for Phases 1-3, as outlined on the attached Exhibit "C". The
net amount due from Buyer at closing shall be $43,500 (the "Purchase
Price"). Seller has already commenced said workover program and it is
understood and agreed that Buyer shall only be responsible for a net
three percent (3%) of any amount over the outlined $186,500 budget for
Phases 1-3 and a net three percent (3%) of any future operations
proposed and approved under the terms of the operating agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1. ORGANIZATION. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the state Texas
3.2. POWER AND CONFLICTS. Seller has full corporate power and authority to
carry on its business as presently conducted, to enter into this
Agreement and to perform its obligations under this Agreement. Seller
has the necessary power and authority to sell the Assets. The
execution and delivery of this Agreement by Seller does not, and the
consummation of the transactions contemplated by this Agreement shall
not, (a) violate or be in conflict with, or require the consent of any
person or entity under, any provision of the articles of incorporation
or bylaws or other governing documents of Seller, (b) conflict with,
result in a breach of, constitute a default (or an event that with the
lapse of time or notice, or both would constitute a default) under, or
require any consent, authorization or approval under any agreement or
instrument to which Seller is a party or to which any of the Assets or
Seller is bound, (c) violate any provision of or require any consent,
authorization or approval under any judgment, decree, judicial or
administrative order, award, writ, injunction, statute, rule or
regulation applicable to Seller, or (d) result in the creating of any
lien, charge or encumbrance on any of the Assets.
3.3. AUTHORIZATION. The execution and delivery of this Agreement have been,
and the performance of this Agreement and the transaction contemplated
hereby shall be at the time required to be performed hereunder, duly
and validly authorized by all requisite corporate action on the part
of the Seller.
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3.4. ENFORCEABILITY. This Agreement has been duly executed and delivered on
behalf of Seller and constitutes the valid and binding obligations of
Seller enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, reorganization
or moratorium statutes, equitable principles or other similar laws
affecting the rights of creditors generally ("Equitable Limitations").
At the Closing, all documents and instruments required hereunder to be
executed and delivered by Seller shall be duly executed and delivered
and shall constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms, except as enforceability
may be limited by Equitable Limitations.
3.5. LITIGATION AND CLAIMS. No claim, dispute, demand, filing, cause of
action, administrative proceeding, lawsuit or other litigation is
pending or, to the knowledge of Seller, threatened against Seller or
the Assets that could now or hereafter adversely affect the ownership
or operation of any of the Assets. No written or oral notice from any
governmental body or any other person has been received by Seller (a)
claiming any violation or repudiation of the Assets or any violation
of any law, environmental, conservation or other ordinance, code, rule
or regulation or (b) requiring, or calling attention to the need for
any work, repairs, construction, alternations or installations on or
in connection with the Assets with which Seller has not fully
complied.
3.6. COMPLIANCE WITH LAW AND PERMITS. Seller has obtained all necessary
governmental certificates, consents, permits, licenses or other
authorizations that are required for the ownership of the Assets by
Seller and no violations exist or have been recorded with respect of
such licenses, permits or authorizations.
3.7. STATUS OF CONTRACTS. All of the Contracts that relate to the Oil and
Gas Properties (a) are in full force and effect, and (b) neither
Seller nor, to the knowledge of Seller, any other party to the
Contracts (i) is in breach of or default, or with the lapse of time or
the giving of notice, or both, would be in breach or default, with
respect to any of its obligations thereunder to the extent that such
breaches or defaults have an adverse effect on the Oil and Gas
Properties or (ii) has given or threatened to give notice of any
default under or inquiry into any possible default under, or action to
alter, terminate, rescind or procure a judicial reformation of any
Contract to the extent that such default has an adverse effect on the
Oil and Gas Properties.
3.8. PRODUCTION BURDENS, TAXES, EXPENSE AND REVENUES. To the knowledge of
Seller, all rentals, royalties, excess royalty, overriding royalty
interest and other payments due under or with respect to the Assets
have been properly and timely paid, including, but not limited to, the
distribution of all proceeds of production for which Seller has
received payment from the Purchaser; all ad valorem, property,
production, severance and other taxes based on or measured by the
ownership of the Assets or the production of Substances therefrom have
been properly and timely paid. All expenses payable by Seller under
the terms of the Contracts have been properly and timely paid when due
except for such expenses as are being currently paid prior to
delinquency in the ordinary course of business.
3.9. STATUS OF EQUIPMENT. The ▇▇▇▇▇ and Equipment are in good repair,
working order and operating condition and are adequate for the
operation of the Oil and Gas Properties as currently being operated;
however, the ▇▇▇▇▇ and Equipment are being delivered in "as is-where
is" condition.
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3.10.LEASES. With respect to the Leases and to the knowledge of Seller:
(a) the Leases have been maintained in all material respects according
to their terms, in material compliance with the agreements to which
the Leases are subject; (b) the Leases are presently in full force and
effect and (c) no other party to any Lease is under material breach or
default with respect to any of its material obligations thereunder.
3.11.ACCURACY OF REPRESENTATIONS. No representation or warranty by Seller
in this Agreement or any agreement or document delivered by Seller
pursuant to this Agreement contains an untrue statement of a material
fact or omits to state a material fact necessary to make the
statements contained in any such representation or warranty, in light
of the circumstances under which it was made, not misleading. There is
no fact known to Seller that materially and adversely affects (or may
materially and adversely affect) the operation, prospects or condition
of any portion of the Assets that has not been set forth in this
Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
4.1. ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada.
4.2 POWER AND CONFLICTS. Buyer has full corporate power and authority to
carry on its business as presently conducted, to enter into this
Agreement, to purchase the Assets on the terms described in this
Agreement and to perform its other obligations under this Agreement.
The execution and delivery of this Agreement by Buyer does not, and
the consummation of the transactions contemplated by this Agreement
shall not, (a) violate or be in conflict with, or require the consent
of any person or entity under, any provision of the articles of
incorporation or bylaws or other governing documents of Buyer, (b)
conflict with, result in a breach of, constitute a default (or an
event that with the lapse of time or notice, or both would constitute
a default) under, or require any consent, authorization or approval
under any agreement or instrument to which Buyer is a party or is
bound, or (c) violate any provision of or require any consent,
authorization or approval under any judgment, decree, judicial or
administrative order, award, writ, injunction, statute, rule or
regulation applicable to Buyer.
4.3 AUTHORIZATION. Buyer's execution and delivery of this Agreement have
been, and Buyer's performance of this Agreement and the transactions
contemplated hereby shall be at the time required to be performed
hereunder, duly and validly authorized by all requisite corporate
action on the part of the Buyer.
4.4. ENFORCEABILITY. This Agreement has been duly executed and delivered on
behalf of Buyer and constitutes a legal, valid and binding obligation
of Buyer enforceable in accordance with its terms, except as
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enforceability may be limited by Equitable Limitations. At the
Closing, all documents required hereunder to be executed and delivered
by Buyer shall be duly executed and delivered and shall constitute
legal, valid and binding obligations of Buyer enforceable in
accordance with their terms, except as enforceability may be limited
by Equitable Limitations.
4.5. CLAIMS AND LITIGATION. There is no suit, action, claim, investigation
or inquiry by any person or entity or by any administrative agency or
governmental body and no legal, administrative or arbitration
proceeding pending, or to Buyer's knowledge, threatened against Buyer
or any affiliate of Buyer that has or will materially affect Buyer's
ability to consummate the transactions contemplated by this Agreement.
4.6. ACCURACY OF REPRESENTATIONS. No representation or warranty by Buyer in
this Agreement or any agreement or document delivered by Buyer
pursuant to this Agreement contains or will contain an untrue
statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained in any such
representation or warranty, in light of the circumstances under which
it was made, not misleading.
ARTICLE V
TITLE MATTERS
SELLER'S TITLE: Seller makes no representations or warranties as to its title to
the Oil and Gas Properties, except those created by, through or under Seller.
ARTICLE VI
CLOSING
6.1 THE CLOSING. The assignment and purchase of the Assets pursuant to
this Agreement shall be consummated (the "Closing") at ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at the offices of Seller
before 5:00 p.m. on or before the 20th day of December 2002 (the
"Closing Date").
6.2 PAYMENT OF PURCHASE PRICE. At the Closing, Buyer shall pay to Seller
the Purchase Price by wire transfer. The wire transfer should be sent
to the account of PNP Petroleum, Inc. at the following:
First Union National Bank Routing number: ▇▇▇▇▇▇▇▇▇
Roanoke Virginia
Beneficiary 1st Clearing Corporation 5050000000631
PNP Petroleum Acct: 67396239
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ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1 SURVIVAL. All representations, warranties, covenants, agreements and
indemnities of or by the parties shall survive the Closing and
execution and delivery of the assignments contemplated hereby.
7.2 SELLER'S INDEMNIFICATION. To the extent permitted by law, Seller, from
and after Closing, shall indemnify and hold harmless Buyer, its
affiliates, officers, directors, employees, agents, consultants and
representatives from and against any and all damage, loss, cost,
expense, obligation, claim or liability, including reasonable counsel
fees and reasonable expenses of investigating, defending and
prosecuting litigation (collectively, the "Damages"), suffered by
Buyer as a result of any obligation or liability of Seller arising
from ownership or operation of the Assets prior to the Effective Date.
7.3 BUYER'S INDEMNIFICATION. To the extent permitted by law, Buyer, from
and after Closing, shall indemnify and hold harmless Seller, its
affiliates, officers, directors, employees, consultants, agents and
representatives from and against any and all Damages suffered by
Seller as a result of the following: (a) any liability or obligation
arising from its operation of the Assets on and after the Effective
Date (other than Damages resulting from a breach of any
representation, warranty or covenant of Seller contained in this
Agreement), (b) the breach of any representation or warranty of Buyer
set forth in this Agreement; and (c) the breach of, or failure to
perform or satisfy any of the covenants of Buyer set forth in this
Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 "BUSINESS DAY" shall mean a day other than the days that banking
institutions are required or permitted to be closed under the laws of
the State of Texas.
8.2 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas without giving effect
to any principles of conflicts of laws.
8.3 INTEGRATION. This Agreement and the Exhibit attached hereto entered
into by the parties under the provisions of this Agreement set forth
the entire agreement and understanding of the parties in respect of
the transaction contemplated hereby and supersede all prior
agreements, prior arrangements and prior understandings relating to
the subject matter hereof. No representation, promise, inducement or
statement of intention has been made by Seller or Buyer that is not
embodied in this Agreement or in the documents referred to herein, and
neither Seller nor Buyer shall be bound by or liable for any alleged
representation, promise, inducement or statement of intention not so
set forth.
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8.4 HEADINGS. The Section headings contained in this Agreement are for
convenient reference only and shall not in any way affect the meaning
or interpretation of this Agreement.
8.5 INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part
hereof, and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this
Agreement.
EXECUTED as of the date first set forth above.
SELLER:
PNP PETROLEUM, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇
BUYER:
CALIFORNIA EXPLORATION, INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇▇▇▇
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EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PURCHASE AND SALE AGREEMENT DATED DECEMBER 18, ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ EXTENSION
NOTE: Except where indicated otherwise, all recording references given
below are to the indicated Records of the County Clerk of ▇▇▇▇▇▇▇
County, Texas. Lot numbers given below refer to Lots located within
the Second Subdivision of the ▇. ▇. ▇▇▇▇▇▇▇ Ranch, ▇▇▇▇▇▇▇ County,
Texas, as same appears of record in Volume 2, page 43, Map and Plat
Records, ▇▇▇▇▇▇▇ County, Texas.
1. ▇▇▇▇▇▇ "D" LEASE:
Oil Gas and Mineral Lease dated December 1, 1936, from ▇. ▇. ▇▇▇▇▇▇, et ux, as
Lessor, to ▇. ▇. ▇▇▇▇▇▇▇▇▇▇ as Lessee, covering 120 acres, more or less, being
all of Lot 26 and the West one half (1/2) of Lot 27, appearing of record at
Volume 99; page 272, et seq, Deed Records. Said Lease is subject to the terms of
that certain Assignment and ▇▇▇▇ of Sale from Mobil Producing Texas and New
Mexico, Inc. to ▇. ▇. ▇▇▇▇▇▇▇, effectively dated Ap~ 1,1991, recorded in at
Volume 743 page 875, et seq, Deed Records, and to that certain Amendment and
Ratification from ▇▇▇▇▇ ▇▇▇▇▇▇, et al, countemart copies of which appear of
record beginning at Volume 744, Page 1003, et seq of the Deed Records.
(90-180-11)
2. SCHUECH "E" LEASE
Oil Gas and Mineral Lease dated January 5, 1937, from ▇. ▇. ▇▇▇▇▇▇▇, et ux as
Lessor, to ▇. ▇. ▇▇▇▇▇▇▇▇▇▇ as Lessee, covering 80 acres, more or less! being
all of Lot 31, and appearing of record at Volume 99, page 292, et seq, Deed
Records. Said Lease is subject to that certain Assignment and ▇▇▇▇ of Sale from
Mobil Producing Texas and New Mexico, Inc. to ▇. ▇. ▇▇▇▇▇▇▇, effectively dated
April 1, 1991, and appearing of record at Volume 743, page 875, et seq, of the
Deed Records (90-180-10)
3. ▇▇▇▇▇▇ "C" LEASE:
Oil Gas and Mineral Lease dated March 30, 1990! between ▇▇▇. ▇. ▇. ▇▇▇▇▇▇, et
al, Lessor, and ▇. ▇. ▇▇▇▇▇▇▇, Lessee, covering 120.0 acres of land, more or
less, being all of Lot 22, containing 80.0 acres of land, more or less, and the
East or Northeast Half of Lot 27, containing 40 acres of land, more or less,
recorded in Volume 731, page 886, Deed Records. Said Lease is subject to the
terms of that certain Amendment and Ratification from ▇▇▇▇▇ ▇▇▇▇▇▇, et al,
countemart copies of which appear of record beginning at Volume 744, Page 1028,
et seq of the Deed Records. (89-180-7)
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4. ▇▇▇▇▇▇▇ BAY PASTURE LEASE:
Oil, Gas and Mineral Lease dated October 11, 1979, from ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.1 et
al., as Lessor, to R. H ▇▇▇▇▇▇▇, as Lessee, recorded in Volume 684, Page 7, Deed
Records, ▇▇▇▇▇▇▇ County, Texas, covering 480 acres of land, more or less, out of
the ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, A-59, ▇▇▇▇▇▇▇ County, Texas, INSOFAR AND ONLY INSOFAR
as said Lease covers a 40-acre tract described in a Partial Release dated
September 23, 1987, and appearing of record at Volume 702, Page 159, Deed
Records. (79-164-2)
5. SCHUECH "B" LEASES (ALL COVERING LOT 23):
Each of the following six leases covers 80 acres of land, more or less, being
all of Lot 23.
a. Oil, Gas and Mineral Lease dated December 3, 1981, from ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, et ux. as Lessor, to ▇. ▇. ▇▇▇▇▇▇▇, as Lessee, recorded in
Volume 611, Page 626, Deed Records. (81-168-2A)
b. Oil, Gas and Mineral Lease dated December 3.. 1981, from ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, et vir, as Lessor, to ▇. ▇. ▇▇▇▇▇▇▇, as Lessee,
recorded ill Volume 611, Page 630, Deed Records. (81-168-2B)
c Oil, Gas and Mineral Lease dated December 2, 1981, from ▇▇▇▇ ▇▇▇▇▇▇▇,
as Lessor, to ▇. ▇. ▇▇▇▇▇▇▇, as Lessee, recorded in Volume 611, Page
634, Deed Records. (81-168-2C)
d. Oil, Gas and Mineral Lease dated December 2, 1981, from ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, et al., as Lessor, to RH. ▇▇▇▇▇▇▇, as Lessee, recorded in
Volume 612, Page 70, Deed Records. (81-168-2D)
e. Oil, Gas and Mineral Lease dated December 17, 1981, from The United
States National Bank of Galveston, Trustee for Abe and ▇▇▇▇▇ ▇▇▇▇▇▇
Foundation, as Lessor, to ▇. ▇. ▇▇▇▇▇▇▇, as Lessee, recorded in Volume
612, Page 251, Deed Records. (BI-168-2E)
f. Oil, Gas and Mineral Lease dated September 23, 1983, from ▇▇ ▇. ▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Lessors, to ▇. ▇. ▇▇▇▇▇▇▇, as Lessee, recorded
in Volume 636, Page 100, Deed Records. (81-168-2F)
6. ▇▇▇▇▇▇▇ "G" LEASE:
Oil, Gas and Mineral Lease dated January 6, 1982, from ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., et
al. as Lessor, to ▇. ▇. ▇▇▇▇▇▇▇, as Lessee, recorded in Volume 612, Page 254,
Deed Records, covering 80 acres of land, more or less, being all of Lot 24.
(81-168-4)
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7. ▇▇▇▇▇▇▇ "R" LEASES:
Each of the following four leases are subject to subject to that certain
Assignment and ▇▇▇▇ of Sale from Mobil Producing Texas and New Mexico, Inc. to
▇. ▇. ▇▇▇▇▇▇▇, effectively dated January31 1991 and appearing of record at
Volume 743, page 864 et seq, of the Deed Records of ▇▇▇▇▇▇▇ County, Texas. Each
lease covers the 194.54 acres, more or less, out of Lot 46, more particularly
described in each lease.
a. Oil Gas and Mineral Lease as amended, dated February 1 1989, from
▇▇▇▇▇▇ ▇. E Aston Individually and as Attorney-in-Fact for ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Lessor, to Mobil Producing Texas & New Mexico
Inc., as Lessee, appearing of record at Volume 717, page 994, et seq
of the Deed Records. (90-182-2(a))
b. Oil Gas and Mineral Lease, as amended dated February 1,1989, from ▇▇▇▇
▇▇▇▇▇▇▇ Lupe Individually and as Attorney-in-Fact for ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, as Lessor, to Mobil Producing Texas & New Mexico Inc., as
Lessee, appearing of record at Volume 717, page ~0l0, et seq, of the
Deed Records. (90-182-2(b))
c. Oil Gas and Mineral Lease, as amended, dated February 1, 1989, from
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as Attorney-in-Fact for ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ as Lessor, to Mobil
Producing Texas & New Mexico Inc., as Lessee, appearing of record at
Volume 717, page 1002, et seq, of the Deed Records. (90-182-2(c))
d. Oil Gas and Mineral Lease, as amended, dated February 1, 1989, from
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III, Individually and as Attorney-in-Fact for
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Lessor, to
Mobil Producing Texas & New Mexico Inc., as Lessee, appearing of
record at Volume 717, page 1018, et seq, of the Deed Records.
(90-182-2(d))
8. THE ▇▇▇▇▇▇▇▇▇ LEASES:
Each of the following four (4) leases covering Lot 26, containing 8G acres, more
or less.
a. Oil, Gas and Mineral Lease, as amended, dated October22 1991, between
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Lessor, and ▇. ▇. ▇▇▇▇▇▇▇, Lessee, recorded in
Volume 758, Page 14, Deed Records. (90-180-13(a))
b. Oil, Gas and Mineral Lease, as amended, dated December 1, 1995,
between S. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Lessor, and ▇. ▇. ▇▇▇▇▇▇▇, Lessee, a
Memorandum of which appears of record at Volume 66, Page 979, of the
Official Records.
-78-
c. Oil, Gas and Mineral Lease, as amended, dated October 22~ 1991,
between ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, et al, Lessor, and ▇. ▇. ▇▇▇▇▇▇▇, Lessee,
recorded in Volume 753, Page 609, Deed Records. (90-180-13(c))
d. Oil, Gas and Mineral Lease, as amended, dated October 22,1991, between
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, et al, Lessor, and ▇. ▇. ▇▇▇▇▇▇▇, Lessee, and
recorded in Volume 752 Page 964, Deed Records. (90-180-~3(d))
9. Oil Gas and Mineral Lease, as amended, dated October 1, 1992, from ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇., as Lessor, to RH. ▇▇▇▇▇▇▇, as Lessee. appearing of record at
Volume 766, page 617, of the Deed Records.
10. Schuech Oil Unit 8 as Designated by Unit Designation appearing of record at
Volume 159, Page 1041 of the Official Records of ▇▇▇▇▇▇▇ County, Texas,
covering 40 acres more or less as the pooled leases cover the oil and
casinghead gas found in the stratigraphic equivalent of the subsurface
interval from 6821 feet to 6827 feet (as such interval appears in the
electric Log of the ▇.▇. ▇▇▇▇▇▇▇ Well No.1, ▇▇▇▇ ▇▇▇▇▇▇▇ L(pound)B~ Lease
on Lot 23 of the Second Subdivision of the ▇.▇. ▇▇▇▇▇▇▇ Ranch, ▇▇▇▇▇▇▇
County, Texas).
11. Oil, Gas and Mineral lease dated June 7, l 999 from ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
et. al. to ▇.▇. ▇▇▇▇▇▇▇, covering 80 acres more or jess, being all of Lot
30 more particularly described in said Lease , recorded in Volume 142, Page
724 of the Official Records of ▇▇▇▇▇▇▇ County, Texas.
12. Oil, Gas and Mineral lease dated June 7, 1999 from ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
et. al. to ▇.▇. ▇▇▇▇▇▇▇, covering 80 acres more or less, being all of Lot
33, more particularly described in said Lease , recorded in Volume 142,
Page 700 of the Official Records of ▇▇▇▇▇▇▇ County Texas.
13. Oil, Gas and Mineral lease dated June 7, 1999 from ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ et
al. to ▇.▇. ▇▇▇▇▇▇▇, covering 80 acres more or less, being all of Lot 37,
more particularly described in said Lease recorded in Volume 142, Page 718
of the Official Records of ▇▇▇▇▇▇▇ County, Texas.
14. Oil, Gas and Mineral lease dated June 7, 1999 from ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
et. al. to ▇.▇. ▇▇▇▇▇▇▇, covering 69.07 acres more or less, being all of
Lot 40, more particularly described in said Lease, recorded in Volume 142,
Page 706.
15. Oil, Gas and Mineral lease dated June 7, 1999 from ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
et. al. to ▇.▇. ▇▇▇▇▇▇▇, covering 40 acres more or less, being the
Southwest 112 of Lot 29, more particularly described in said Lease ,
recorded in Volume 142, Page 712.
16. Oil, Gas and Mineral Lease, as amended, dated June 21, 1999, from ▇▇▇▇
▇▇▇▇▇▇▇▇▇, Successor Guardian of the Estate of ▇▇▇▇▇▇▇ Schaefer1 N.C.M to
▇.▇. ▇▇▇▇▇▇▇, covering 149.07 acres being all of Lots 32 and 39 more
particularly described in said Lease1 recorded in Volume, 144, Page 967.
-79-
17. Oil, Gas and Mineral lease dated October 6, 1999, from Cal Parley's Boys
Ranch to ▇.▇. ▇▇▇▇▇▇▇, covering the 40 acres, more or less, being the
Northeast 1/2 of Lot 29 more particularly described in said Lease recorded
in Volume 147, Page 416.
18. Oil, Gas and Mineral lease dated June 11, 2001 from ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ to S. ▇▇▇▇▇ ▇▇▇▇▇▇▇ covering SQ, more or less, being the
Southeast 1/2 of Lot 19 more particularly described in said Lease ,
recorded in Volume 183, Page 561
-80-
EXHIBIT "B"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
PURCHASE AND SALE AGREEMENT DATED DECEMBER 18, ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ EXTENSION
WELL NAME API # FIELD NAME LEASE #
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. #3 42-239-31728 Bay Pasture 06321
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. G-1 ▇▇-▇▇▇-▇▇▇▇▇ TW Frio 7400 08309
▇▇▇▇▇▇▇, ▇. ▇. R-2 ▇▇-▇▇▇-▇▇▇▇▇ TW Frio 41-A 08253
▇▇▇▇▇▇▇, ▇.▇. R-1 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ 05203
▇▇▇▇▇▇▇, ▇.▇. G-2 ▇▇-▇▇▇-▇▇▇▇▇ TW Frio 7830 06668
▇▇▇▇▇▇▇, ▇.▇ R-9 ▇▇-▇▇▇-▇▇▇▇▇ WR Bennview 04297
▇▇▇▇▇▇▇, ▇. ▇. R-4 ▇▇-▇▇▇-▇▇▇▇▇ WR 5100 08321
▇▇▇▇▇▇▇, ▇.▇. Q-1 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 6400 07098
▇▇▇▇, ▇. ▇. #1 42-239-32168 WR 6840 08578
Schuech Unit 8 (B-1) ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 6840 08535
▇▇▇▇▇▇▇, ▇. ▇. E-6 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 01674
▇▇▇▇▇▇▇, ▇. ▇. E-7 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 01674
▇▇▇▇▇▇▇, ▇. ▇. E-1 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 01674
▇▇▇▇▇▇▇, ▇. ▇. E-3 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 01674
▇▇▇▇▇▇▇, ▇. ▇. E-5 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ 01637
▇▇▇▇▇▇▇, ▇▇▇▇ B-7 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 6200 08219
▇▇▇▇▇▇▇, ▇▇▇▇ B-2 ▇▇-▇▇▇-▇▇▇▇▇ TW Frio 5830 152485
-81-
▇▇▇▇▇▇▇, ▇▇▇▇ B-4 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ 08219
Schuech Unit 1 42-239-32313 ▇▇ ▇▇▇▇ 7400 08111
Schuech Unit 9 42-239-32142 ▇▇ ▇▇▇▇ 6200 08626
▇▇▇▇▇▇ ▇.▇. C-1 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 07877
▇▇▇▇▇▇ ▇.▇. C-2 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 5100 07889
▇▇▇▇▇▇ ▇.▇. C-3 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 7020 120228
▇▇▇▇▇▇ ▇.▇. C-4 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 6200 08171
▇▇▇▇▇▇ ▇.▇. D-1 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 6220 172154
▇▇▇▇▇▇ ▇.▇. D-2 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ 01639
WELL NAME API # FIELD NAME LEASE #
▇▇▇▇▇▇ ▇.▇. D-3 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 5915 172144
▇▇▇▇▇▇ ▇.▇. D-4 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 01676
▇▇▇▇▇▇ ▇.▇. D-5 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 01676
▇▇▇▇▇▇ ▇.▇. D-6 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇ 5100 08362
▇▇▇▇▇▇ ▇.▇. D-9 ▇▇-▇▇▇-▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ 01639
-82-
EXHIBIT C
ATTACHED HERETO AND MADE A PART HEREOF THAT CERTAIN
PURCHASE AND SALE AGREEMENT DATED DECEMBER 18, 2002
PNP PETROLEUM, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
REVIEW AND SUMMARY
-83-
Table of Contents
West Ranch Field History......................................................1
Planned Development Stages....................................................1
Phase 1:...................................................................1
Phase 2:...................................................................1
Phase 3:...................................................................1
Phase 4:...................................................................2
Phase 5:...................................................................2
Phase 6:...................................................................2
Phase 7:...................................................................2
Capital Expenditures..........................................................2
Marketing.....................................................................2
Terms.........................................................................2
Proposed Schedule of Work 2002 - 2003.........................................3
-84-
PNP PETROLEUM, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
West Ranch Field History
Properties Overview
The West Ranch Field is located approximately 25 miles southeast of
Victoria, in ▇▇▇▇▇▇▇ County, Texas. The field was discovered in 1938 by Mobil
Oil and has produced in excess of 300 BCF gas and 300 MMBO from hundreds of
▇▇▇▇▇.
The geology of West Ranch consists of typical Gulf Coast sand sequences
with numerous stacked sand pays of both Miocene and Frio age rocks. Over 25 main
producing sands have been identified within the West Ranch production limits
with the ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, 41-A, 98-A and ▇▇▇▇ ▇▇▇▇▇ being the most prolific
producers. These sands are historically high permeability, high porosity sands
capable of producing high fluid rates.
In the early 1980's the previous operator, ▇▇▇▇ ▇▇▇▇▇▇▇, became active in
the region through acquisition of a few old producing well bores. After
reworking geological structure and net sand maps, ▇▇▇▇ was able to extend the
southwest production limits of the field by the drilling of infield ▇▇▇▇▇
targeting structural highs.
Through a friendly foreclosure process, PNP will be able to obtain clean
title in the properties and is scheduled to take over operations on January 1,
2002.
The property includes 35 ▇▇▇▇▇ currently producing 40-60 bopd through 6
active producers on gas lift. After a detailed engineering analysis of the
property, PNP has developed a plan, which focuses on the re-establishing of shut
in ▇▇▇▇▇ to active status, add compression, salt water handling and disposal and
will quickly add value to the property while minimizing capital expense.
Planned Development Stages
PHASE 1:
During the first 30 days, PNP will focus on increasing the compression and
ability to use make up gas from the Florida Pipeline system through Reliant
Field Services. Next, turning on four more ▇▇▇▇▇ to continue to increase daily
production.
PHASE 2:
The second 30 days will consist of optimization of the field gas lift
system and production facilities while systemically testing 1 well on sub pump.
A total of three new ▇▇▇▇▇ will be added as well as construction of larger
flowlines on the Schuech E Lease. The ▇▇▇▇▇▇ D-2 and D-9 will be tested in the
▇▇▇▇▇▇▇▇▇.
PHASE 3:
The third 30 days will consist of continued field optimization, adding
compression up to 8 mmscfpd and increasing the SWD capabilities. We plan on
moving in pumping units on the ▇▇▇▇ 1 and Schuech B-1 and recompleting the
Schuech ▇-▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇.
-▇▇-
▇▇▇▇▇ ▇:
The fourth 30 days will include the re-completing of the Schuech B-5 and
▇▇▇▇▇▇ C-4 ▇▇▇▇▇ into the ▇▇▇▇ Sand. Both will be equipped with larger 3.5"
tubing for high volume lifting capacities.
PHASE 5:
The fifth 30 days will include two plug back re-completions in the ▇▇▇▇▇▇▇
R-2 and R-10.
PHASE 6:
The sixth 30 days will include two re-completions in the ▇▇▇▇▇▇▇ R-1 and
G-1 ▇▇▇▇▇.
PHASE 7:
The seventh 30 days will include the plug back re-completion of the Schuech
B-2 well into the ▇▇▇▇▇▇▇▇▇ sand and include 3/5" tubing and a submersible pump.
Capital Expenditures
At this time, it is estimated that the total project capital expenditures
will be approximately $ 451,000 with Phases 4-7 completed out of cashflow.
Marketing
West Ranch Field lies on a major pipeline system consisting of HPL's 20" ,
Valero's 24", and Eastern Gas 24" pipelines to only name a few. Currently, Flint
Hills LP purchases the crude oil at Upper Gulf Coast Index plus $ 3.25 per bbl
and Florida Pipeline is our gas sales interconnect at the spot market.
Terms
PNP is offering working interest in the properties. PNP is offering 5% WI
for $49,995 and 10% for $99,990 in the entire project plus its share of the
current proposed $ 186,500 workover budget. (This budget is estimated through
the third Phase above.)
PNP had developed additional projects for future investment opportunities
including development of EOR and Gas Storage Projects.
-86-
PROPOSED SCHEDULE OF WORK 2002 - 2003
WEST RANCH PROPERTIES
PROPOSED SCHEDULE OF WORK 2002 - 2003
PROJECTED CUM CUM CUM LIFT
WELL ZONE MO/YR BOPD BOPD BWPD BWPD FG FG GAS
▇▇▇▇▇▇▇ 3 Bay Pasture Sep-02 8 8 20 0 0 0 0
▇▇▇▇▇▇▇ R4 5100 Sep-02 14 22 800 800 10 10 500
▇▇▇▇ 1 6840 Sep-02 11 33 40 840 10 20 200
Schuech B1 6840 Sep-02 11 44 40 880 20 40 250
Schuech E6 ▇▇▇▇ Sep-02 6 50 600 1480 20 60 350
Schuech E7 ▇▇▇▇ Sep-02 8 58 800 2280 20 80 500
Add Compression 4.0 mmcfd Sep-02 0 58 0 2280 80
▇▇▇▇▇▇ C5 5100 Sep-02 11 69 800 3080 0 80 500
▇▇▇▇▇▇ D5 ▇▇▇▇ Sep-02 15 84 1500 4580 50 130 600
----------------------------------------------------------------------------------------------------------
Schuech E3 ▇▇▇▇▇▇▇▇▇ Oct-02 13 97 1300 5880 15 145 350
Schuech E6 ▇▇▇▇ Oct-02 8 105 800 6680 20 165 50
Schuech E7 ▇▇▇▇ Oct-02 7 112 700 7380 20 185 100
▇▇▇▇▇▇ C1 ▇▇▇▇ Oct-02 30 142 3000 10380 60 245 0
▇▇▇▇▇▇ D1 ▇▇▇▇ Oct-02 15 157 1500 11880 30 275 600
----------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇ ▇▇▇▇ ▇▇▇-▇▇ 5 162 10 11890 40 315 -200
Schuech B1 6840 Nov-02 5 167 10 11900 40 355 -250
Add Compression 8.0 mmcfd Nov-02 0 167 0 11900 355
Add SWD well +15k bwpd Nov-02 0 167 0 11900 355
Schuech E1 ▇▇▇▇▇▇▇▇▇ Nov-02 15 182 1500 13400 15 370 500
----------------------------------------------------------------------------------------------------------
Schuech B5 ▇▇▇▇ Dec-02 30 212 3000 16400 60 430 800
▇▇▇▇▇▇ C4 ▇▇▇▇ Dec-02 30 242 3000 19400 60 490 800
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ Jan-03 0 242 300 19700 150 640 300
▇▇▇▇▇▇▇ R10 (1A) ▇▇▇▇ ▇▇▇-03 24 266 1200 20900 48 688 300
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ Feb-03 14 280 1000 21900 10 698 500
▇▇▇▇▇▇▇ G1 7765 Feb-03 30 310 1000 22900 60 758 500
----------------------------------------------------------------------------------------------------------
Schuech B2 ▇▇▇▇▇▇▇▇▇ Mar-03 30 340 3000 25900 30 788 0
▇▇▇ Compression $0.10 per MCF
SWD $0.01 per bbl
Ovhd/misc $1,000 per well
-87-
OTHER CAPITAL ITEMS DATE EST COST
Overflow tank at ▇▇▇▇▇▇▇ Oct-02 $2,500
Flowline jumper on ▇▇▇▇▇▇ C5 Dec-02 $10,000
-88-