<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>ex10_1.txt
<TEXT>
Exhibit 10.1
[CHEVRON LOGO] North America Upstream
Gulf of Mexico Land Division
935 Gravier Street
New Orleans, LA 70112
Tel 504-592-6751
Fax 504-592-7110
September 5, 2007
Ridgewood Energy Corporation Marlin Coastal, L.L.C.
11700 Old Katy Road, 3861 Ambassador Caffery Parkway,
Suite 280 Suite 600
Houston TX, 77079 Lafayette, LA 70503
Attention: Mr. W. Greg Tabor Attention: Mike Lipari
Helis Oil and Gas Company, LLC Houston Energy, L.P.
228 St. Charles Ave. 1415 Louisiana Street
Suite 912 Suite 2400
New Orleans, LA 70130 Houston, TX 77002
Attention: Doug St. Clair Attention: Allen Wihite
Participation Agreement
El Toro Prospect
---------------------------------------
West Cameron Block 57 OCS-G 21534 No. 3
Offshore, Gulf of Mexico
Gentlemen:
This Participation Agreement ("PA"), when executed by each of the Parties
hereto, being Chevron Midcontinent, L.P., formerly named Pure Resources, L.P.
("Pure"), Marlin Coastal, L.L.C. ("Marlin"), Helis Oil and Gas Company, LLC
("Helis"), Houston Energy, L.P. ("Houston Energy"), hereinafter Pure, Marlin,
Helis and Houston Energy being referred as the "Co-owners", and Ridgewood Energy
Corporation ("Ridgewood"), all inclusive parties sometimes hereinafter referred
to as the "Parties", will evidence the agreement between the Parties to explore,
develop and operate certain rights in the "Contract Area", as defined below. The
Parties hereby agree to the following terms and conditions:
1. CONTRACT AREA. The Contract Area is the leasehold acreage that covers the
following described property:
West Cameron Block 57 (OCS-G 21534) as said lease covers depths from
the surface of the earth down to the base of the CrisR-2 sand at a
depth of 15,500' vertical sub-sea or to the base of the stratigraphic
equivalent of the CrisR-2 sand, as seen in the Stone West Cameron
Block 45 OCS-299 #20 By-Pass-1, whichever is the deeper but limited
to the following acreage aliquots, hereinafter referred to as the
"Contract Area".
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September 5, 2007
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N/2 NW/4 SW/4; S/2 SW/4 NW/4; NE/4 SW/4 NW/4; SW/4 SE/4 NW/4;
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SW/4 NW/4 NE/4; S/2 NE/4 NW/4; SE/4 NW/4 NW/4; N/2 SE/4 NW/4;
-------------------------------------------------------------
The Co-owners' leasehold and that certain Joint Operating Agreement between IP
Petroleum Company, Inc., as Operator, and The William G. Helis Company, L.L.C.,
et al, as Non-Operators, covering West Cameron Area, Block 57, dated July 1,
2000 ("OA"), attached hereto as Exhibit "B", being both the Co-owners' leasehold
and the OA interest in the Contract Area, to the best of our information and
belief is set out as shown in Exhibit "A" attached hereto, and the Contract Area
is hereinafter referred to as the "El Toro Prospect". The division of interest
in Exhibit "A" shall control in any conflict between this agreement and Exhibit
"A".
The "Working Interest w/ Leverage Percentage" column, as shown under the
Division of Interest on said Exhibit "A", sets forth the promoted interest to be
borne by Ridgewood and the leveraged interests to be borne by the Co-owners as
described in the rights and obligations of Article 3 and Article 4 herein below.
It is stipulated by all Parties that the interest of Houston Energy in the El
Toro Prospect has been committed to and assumed by the parties, such that
Houston Energy will be deemed to participate in the exploration of such prospect
through the delivery of its interest in such prospect and in the Contract Area
to the Parties for its Working Interest After Leverage Percentage rights and
interests but will not participate in, and will not be obligated for, the costs
or risk of the well for the El Toro Prospect, until Ridgewood has earned an
interest in the Contract Area pursuant to this PA and the Working Interest After
Leverage Percentages apply. In the event this PA terminates without an earning,
or Ridgewood does not earn and this PA expires, the Co owners' interests in the
Contract Area will revert to the OA working interests shown on Exhibit "A".
The "Working Interest After Leverage Percentage" column, shown under the
Division of Interest on said Exhibit "A", sets forth the interest of the Parties
in the well and the Contract Area, once and if Ridgewood has earned an interest
in the Contract Area pursuant to this PA.
Subject to Article 6 herein below, Ridgewood shall be provided access to land
records and files at the offices of Pure or Marlin during business hours for its
own independent review of the title materials related to the interest of the
Co-owners and to any unrestricted geologic and geophysical data for its own
independent review and analysis. Ridgewood may withdraw from this PA for
material title defects, which cannot be timely cured or which Co-owners decline
to cure, at any time prior to Marlin accepting a turnkey bid proposal from
Applied Drilling Technology Inc. ("ADTI") for the drilling of the well
contemplated hereunder. Any Ridgewood withdrawal shall terminate this Agreement
as to and among all Co-owners. Ridgewood shall supply each of the Co-owners a
copy, free of cost to the Co-owners, of any Contract Area title analysis
conducted by Ridgewood.
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2. INITIAL WELL AND OBJECTIVE. Subject to the other terms hereof, as well as
weather delays, delivery of materials (e.g. pipe), rig availability and
obtaining all requisite permits, Marlin, as the designated drilling
operator, shall use reasonable business-like efforts to commence or cause
to be commenced, on or before November 1, 2007, the drilling of the West
Cameron Block 57, OCS-G 21534 No. 3 well, hereinafter sometimes referred to
as the "Initial Well". Except as otherwise provided herein and after
execution of this PA, the Parties hereby obligate themselves to participate
in or support, in the case of Houston Energy, the drilling of the Initial
Well for the exploration and production of oil and gas according to the
terms and conditions of this PA. The Initial Well will be drilled and
logged, with due diligence and in accordance with good oilfield practice,
as per the final executed and approved Marlin Authority for Expenditure
("AFE") and well plan, as attached hereto as Exhibit "C", within the
Contract Area, on West Cameron Block 57 OCS-G 21534. The Initial Well will
be drilled and logged at a surface and bottom-hole location 6215' FNL &
2684' FWL at the target location of LA-S NAD27 State Plane Coordinates
X=1290829, Y=358059 of West Cameron Area, Block 57, to a depth of 15,500'
vertical sub-sea or the base of the stratigraphic equivalent of the CrisR-2
sand formation, where this sand top is expected to occur between -14,600'
and -14,900' vertical sub-sea elevation, as seen in the Stone West Cameron
Block 45 OCS-299 # 20 By-Pass-l, whichever depth is lesser, hereinafter
referred to as the "Objective". Until that time the Initial Well has
reached the Objective and all logging, testing and evaluation contemplated
in the AFE has been completed and a recommendation has been made by Marlin,
Ridgewood does not have the right to propose any operation but will hold a
voting rights interest for its Working Interest w/ Leverage Percentage in
operations proposed by others. Upon reaching the Objective and when all
logging, testing and evaluation contemplated in the AFE has been completed
and a recommendation has been made by Marlin, any recommendation or
proposals by the Parties will be subject to all appropriate terms and
conditions of the OA regarding subsequent operations, priority of
operations, voting rights and penalties. After earning Ridgewood will
become a rights holder under the OA for its Working Interest After Leverage
Percentage, and operations conducted after that earning shall be subject to
the OA provisions, including non-consent voting rights and penalty. For any
Party, including Ridgewood, electing not to participate in any proposed
operation after reaching the Objective and completion of all logging,
testing and evaluation, its Working Interest After Leverage Percentage will
be subject to the OA penalty for any exploratory well and its working
interest, only after satisfaction of the OA's non-consent conditions and
penalties, will be that as set out in Exhibit "A" of this PA, Division of
Interest, in the column labeled "Working Interest After Leverage
Percentage". Unless otherwise agreed by the Parties, each Party electing to
participate in the operation after reaching the Objective may, but is not
obligated to, elect to participate in any operations and bear that portion
of the costs and risks attributable to the interests of the
Non-participating Party in the ratio that the Participating Party's
interest listed in the column labeled "Working Interest After Leverage
Percentage" in Exhibit "A" bears to the total interest of all participating
Parties under the same column. Such non-consent operation shall not proceed
unless 100% of the costs and risks of that operation are assumed by the
participating Parties and any penalty recoupment shall inure only to the
participating Parties in proportion to its or their participation. As
between the Parties, the Initial Well is proposed as an exploratory well as
to financial penalties of the Contract Area during any recoupment period
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and is to be drilled and logged pursuant to the terms and conditions of the
AFE and OA. Such limited rights grant is not intended to vest ownership in
the Contract Area in Ridgewood until such vesting of ownership to Ridgewood
is earned as set out in Article 5 below. Upon earning an interest in the
Contract Area pursuant to this PA, Ridgewood agrees to adopt and ratify the
OA effective as of the date of earning. The terms and provisions of the OA
are incorporated herein as if set forth in full, are not, by that
incorporation, intended to create any operating rights area in which
Ridgewood owns an interest in the Contract Area and apply, prior to any
earning by Ridgewood but, solely to recognize the rights, privileges and
protections of Marlin as the drilling operator, and each of the non-
operating Co-owners, and for pre-earning notices, content and election
periods and access by Ridgewood to the rig floor, but not otherwise.
3. PROSPECT WELL COST SHARING. Marlin has proposed and each of the Co-owners
and Ridgewood have approved and agreed to participate for a share of the
costs for or support, in the case of Houston Energy, the drilling and
logging of the Initial Well in the Contract Area as set forth in the
attached Exhibit "C" AFE. By executing this PA and obligating itself to
participate in the Initial Well, Ridgewood holds the right to earn 33.4917%
of 100% working interest of the Co-owners' interest in the Contract Area,
upon meeting the obligations herein and in particular those set forth in
Article 5 below for the Initial Well or Substitute Well, by paying 50.2375%
(its Working Interest w/ Leverage percentage) of the costs, to the extent
applicable under this PA, of drilling and logging to the Objective, and/or
plugging and abandoning, as a dry hole if applicable, of the Initial Well
or Substitute Well, up to seventeen million two hundred thousand dollars
($17,200,000.00) gross of the dry hole costs, without regard to the AFE
amount. If the Initial Well's actual costs of drilling and logging to the
Objective and/or plugging and abandoning as a dry hole if applicable
exceeds the amount of seventeen million two hundred thousand dollars
($17,200,000.00) gross or upon reaching the Objective, whichever occurs
first, Ridgewood will thereafter pay and bear 33.4917% (its Working
Interest After Leverage Percentage) of the costs and risks of all
subsequent operations in such well for further drilling and/or plugging and
abandoning operations. Ridgewood will not hold the right to assume sole
ownership of the Initial Well or become a sole participating party, until
it earns as set out in Article 5. Marlin as drilling operator shall conduct
any Ridgewood sole account operations. The Parties agree that should a
Substitute Well, as specified in Article 10 below, be approved by the
Parties and commenced, Ridgewood's obligation to pay 50.2375% of the AFE
costs will cease at the point in time that the actual costs of drilling and
logging to the objective and/or plugging and abandoning as a dry hole if
applicable incurred in the Initial Well plus the actual costs incurred in
the Substitute Well combined equal seventeen million two hundred thousand
dollars ($17,200,000.00) gross; provided however, once the aggregate costs
of the Initial Well and Substitute Well equal seventeen million two hundred
thousand dollars ($17,200,000.00) gross, Ridgewood's share of all
subsequent drilling and logging costs will be 33.4917%, subject to further
rights, elections and provisions of this PA or the OA, as applicable.
Effective upon and after reaching the Objective, but not before, the right
to non-consent further or subsequent drilling or logging operations
provided by the overexpenditure provision of the OA shall apply to
subsequent operations. Prior to reaching the Objective, the Parties remain
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bound to the obligations of the PA, subject to the other terms of Article
2. It is the intention of the Parties, subject to this Article 3 and
Article 4 below, that the 1.5:1 promote borne by Ridgewood in favor of the
Co-owners under the PA for the costs and risk of drilling and logging
operations conducted under the PA shall end upon the earlier of earning, as
detailed in Article 5 below, or the aggregate expenditure of seventeen
million two hundred thousand dollars ($17,200,000.00).
4. ADDITIONAL PROMOTE. The Parties further agree that, unless Ridgewood
conducts sole account operations in the Initial Well under its Article 3
right then otherwise, if the Initial Well or Substitute Well is completed
for production as a successful well, that Ridgewood agrees to pay an
additional promote by paying 50.2375% (its Working Interest w/ Leverage
Percentage) of the costs, to the extent applicable under this PA, of
completion, tie-back, flow-back and hook-up, up to ten million four hundred
thousand dollars ($10,400,000.00) gross costs of the completion, tie-back,
flow-back and hook-up costs. If the completion, tie-back, flow-back and
hook-up actual cost exceeds the amount of ten million four hundred thousand
dollars ($10,400,000.00) gross, Ridgewood will thereafter pay and bear
33.4917% (its Working Interest After Leverage Percentage) of the costs and
risks of all subsequent operations in such well over such completion,
tie-back, flow-back and hook-up costs for further operations.
5. EARNING, ASSIGNMENT, TIMING & INTEREST TRANSFERRED. Ridgewood shall earn,
Pure shall prepare and the Co-owners shall timely deliver, a mutually
acceptable Assignment of Operating Rights ("Assignment") in the form
attached hereto as Exhibit "F" in the Contract Area to Ridgewood, if and
only if:
a) the Initial Well or Substitute Well is drilled and logged to the
Objective as described in Article 2 above, or
b) if the Initial Well, or its Substitute Well, either fails to reach the
Objective, or reaches the Objective, but the Parties have expended at
least seventeen million two hundred thousand dollars ($17,200,000.00),
whether such well is completed or not, then Ridgewood will be entitled
to an Assignment of the Co-owners' operating rights for its Working
Interest After Leverage Percentage, as set forth on Exhibit "A" as
provided for herein, and
c) Ridgewood complies with all of the terms of this PA.
Within thirty (30) days of satisfying a) and c) or b) and c) of the above
referenced events, the Co-owners will assign, without warranty of title,
express or implied and effective as of the date of its earning, to
Ridgewood 33.4917% of 8/8ths gross and 26.1235% of 8/8ths net of the
Co-owners' operating rights within the Contract Area, from the surface of
the earth to the sub sea true vertical depth of 15,500' or to the
stratigraphic equivalent of the base of the CrisR-2 sand as seen in the
Stone West Cameron Block 45 OCS-299 # 20 By-Pass-l, whichever is the lesser
depth. Such interest is further subject to and burdened by all of the
contracts, agreements and dedications recited herein or of public record
and lessor's royalty and the overriding royalty interests as set out on
Exhibit "A" or in this PA.
Notwithstanding a) and b) above but if the Initial Well or Substitute Well
fails to reach the Objective, but encounters, as mutually agreed by all
Parties, a zone(s) or formation(s) capable of producing in paying
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quantities, above the Objective, that is within the Contract Area, and is
completed for production under the PA where Ridgewood participates, and the
Co-owners mutually agree to cease further drilling operations prior to
reaching the Objective, Ridgewood will thereafter be entitled to an
Assignment of operating rights within the Contract Area for its Working
Interest After Leverage Percentage but limited to the total depth drilled
and logged plus 100 feet. Rights under the OA in the event of an election,
by any of the Co-owners, to non-consent to operations above Objective,
where the Initial Well has not reached Objective or the Parties have not
expended at least seventeen million two hundred thousand dollars
($17,200,000.00), are reserved solely to and among the Co-owners. That is,
Ridgewood shall not hold any right to penalty recoupment.
6. WARRANTY. The transfer of any interest in the Contract Area pursuant to
this PA to Ridgewood shall be made by the Co-owners without express or
implied warranty of any kind. The Co-owners shall grant and convey to
Ridgewood full subrogation and substitution to all the Co-owners' rights in
warranty against the predecessors in interest of the Co-owners and its
affiliates or merged entities. The Co-owners shall, subject to Article 1,
provide Ridgewood full access to the Co-owners' files and records related
to the Contract Area for independent review and analysis by Ridgewood. Such
files and records are not warranted as complete or accurate but were
maintained as business records upon which the Co-owners relied. Any
reliance by Ridgewood is at its own risk.
7. NO NEW LEASE BURDENS. Until Ridgewood earns an interest under this PA, or
until the right to earn a portion of the Co-owners' interest in the
Contract Area pursuant to this PA terminates, Ridgewood and the Co-owners
(except as specified in Article 15) agree that they have not and will not
create any additional lease burdens or dedications on the Contract Area. No
mortgage or pledge or financing arrangement by Ridgewood of this PA or any
interest earned, whether before or after any such interest is earned or
assigned, is ever permitted without the prior written consent of each of
the Co-owners, which consent shall not be unreasonably withheld. Such
condition shall be made express in any Assignment of earned area made to
Ridgewood.
8. TRANSFER SUBJECT TO APPLICABLE APPROVALS. In the event that the transfer of
any interest in and to the Contract Area requires approval of the lessor or
of any federal agency having jurisdiction, the obligation to obtain such
pertinent approval shall be Ridgewood's, at its cost and risk. The
Co-owners agree to assist Ridgewood as necessary to help Ridgewood secure
such approvals, including but not limited to the preparation of mutually
agreeable assignments or conveyance instruments appropriate for filing and
recordation purposes with the MMS and/or applicable parish records.
Notwithstanding anything to the contrary, but excluding any lessor consent
or approval, the Co-owners represent to Ridgewood that any consent to
assign requirements that may effect a transfer of interest into Ridgewood
upon its earning will be the responsibility of the Co-owners to effectuate
on behalf of Ridgewood.
9. ACCOUNTING MATTERS. As to the Contract Area, all costs and expenses, which
are accrued or incurred pursuant to this PA and under any transfer of
interest in the Contract Area executed pursuant hereto, if any, shall be
determined and accounted for in accordance with the Accounting Procedure,
which is in Exhibit "C" of the OA, attached hereto as Exhibit "B".
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10. SUBSTITUTE WELL. If the Initial Well is drilled and prior to reaching the
Objective, Marlin encounters mechanical difficulties, gulf coast conditions
or other conditions which render further drilling impractical, or if the
Parties agree, per Article 5 above, to complete the Initial Well above, but
without reaching the Objective, then without limiting the Parties' rights
pursuant to Article 5, then any of the Parties shall have the right to
propose the drilling of another well to the Objective, hereinafter referred
to as a "Substitute Well", at and to any legal location in the Contract
Area, but such operations must commence within 180 days after the date the
rig was released from the last operation on the Initial Well. If such well
is proposed and Ridgewood participates and the Substitute Well is timely
and properly commenced and drilled in compliance with all terms and
conditions provided herein for the Initial Well, then such Substitute Well
shall, in all respects (but, in any event, shall be subject to the Article
3 and Article 4 cumulative cost sharing limitation for the Initial Well and
Substitute Well) be considered as if it was the Initial Well and any
references in this PA to the Initial Well shall also include any Substitute
Well.
11. SUBSEQUENT OPERATIONS. Should Ridgewood earn hereunder as provided above
and the Parties mutually agree to complete the Initial Well in the
Objective, or should the Parties mutually agree, per Article 5 above, to
complete the Initial Well above but without reaching the Objective, any
such permitted wells and operations shall be conducted in accordance with
the OA. Should Ridgewood earn hereunder and the Initial Well be deemed a
dry hole, a subsequent well may be proposed by any of the Parties at any
time as a Substitute Well, in accordance with the provisions of the OA but
also subject to the other provisions of this PA bearing upon a Substitute
Well.
12. DESIGNATIONS. The Parties agree to execute the necessary designation of
operator forms and any other forms required by the MMS or other regulatory
authorities to carry out their operations and to make Marlin, the drilling
operator under the PA, if required, and Pure the Operator under the OA,
with any earning by Ridgewood.
13. OPERATING AGREEMENT. Before any earning by Ridgewood under this PA and any
ratification or execution of the Exhibit "B" OA after earning under the PA,
Ridgewood acknowledges the Co-owners' interest available to Ridgewood
hereunder remains bound under this PA and the OA. Should Ridgewood earn
hereunder, Ridgewood shall formally ratify the OA, attached hereto as
Exhibit "B", only as it pertains to the Contract Area and earned rights.
Notwithstanding any other provision of this PA that might indicate to the
contrary, if there is any conflict between any other provision of this PA
and a provision of the OA, the other provisions of this PA shall prevail,
as between the Parties, prior to any earning.
14. TERM. This PA shall automatically terminate, without liability or
obligation, in the event the Initial Well is not commenced on or before
November 1, 2007, subject only to weather delays, delivery of materials
(e.g. pipe), rig availability and obtaining all requisite permits.
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Once and if a well has been drilled and logged in which Ridgewood
participates and earns and which participation entitles Ridgewood to an
Assignment as provided above in Article 5, those PA rights and obligations
surviving the earning and the OA shall remain in effect as to such Contract
Area, so long as any obligations between the Parties remain unsatisfied.
Unless otherwise provided, the PA shall terminate with an earning by
Ridgewood as a dry hole and the end of the right to propose a Substitute
Well or with the completion, tie-back, and flow-back and hook-up for a
successful completion. Matters arising after either such event shall be
governed by the OA, with the exception, that the Tax Partnership and all
obligations not satisfied under the PA, the Dispute Resolution as set out
in Article 27 and Confidentiality Agreement and AMI as set out in Article
15.C 3, shall survive any such termination of this PA.
15. REPRESENTATIONS. The business records of the Co-owners reflect with respect
to the Contract Area and El Toro Prospect that:
A. The Contract Area is dedicated and committed to the following
Contracts and Agreements;
1) Natural Gas Processing Agreement-Gulf of Mexico, between Chevron
U.S.A. Inc., Texaco Exploration and Production Inc. (predecessor
in interest to Chevron U.S.A. Inc.) and Dynegy Midstream Services
Limited Partnership (now called "TARGA Midstream Services,
Limited Partnership"), as amended, effective March 1, 2002.
2) Reserve Dedication and Discount Commodity Rate Agreement, between
Stingray Pipeline Company, L.L.C. and Pure Resources, L.P.,
effective June 15, 2003.
3) Amendment to Reserve Dedication and Discount Commodity Rate
Agreement June 15, 2003, between Pure Resources, L.P. and
Stingray Pipeline Company, L.L.C., effective April 29, 2005.
4) Reserve Dedication Agreement, between Stingray Pipeline Company,
L.L.C. and Marlin Coastal LLC, effective April 1, 2006.
B. All required filings have been made with the applicable
regulatory authorities and Co-owners are not aware of any
notices, pending or threatened violations of any applicable
regulation.
C. The Contract Area is subject to the following Contracts and
Agreements:
1) Oil and Gas Lease dated July 1, 2000 from the U.S. Department of
the Interior, Minerals Management Service, as Lessor, to IP
Petroleum Company, Inc., The William G Helis Company, L.L.C. and
Houston Energy, Inc., as Lessee, being Serial Number OCS-G 21534,
covering All of Block 57, West Cameron Area, OCS Leasing Map,
Louisiana Map No. 1, subject to;
a. Assignment of Overriding Royalty and Reversionary
Interest in Oil and Gas Lease from IP Petroleum
Company, Inc., The William G Helis Company, L.L.C. and
Houston Energy, Inc. to Louisiana Offshore Ventures II,
effective July 1, 2000.
b. Assignment of Record Title from IP Petroleum Company,
Inc. to Duke Energy Hydrocarbons, LLC, effective July
1, 2000.
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c. Assignment of Record Title from IP Petroleum Company,
Inc. to Pure Resources, L.P., effective October 1,
2000.
d. Assignment of Record Title from The William G Helis
Company, L.L.C. to Pure Resources, L.P., effective July
1, 2001.
e. Assignment of Record Title from Pure Resources, L.P. to
Houston Energy, L.P., effective July 1, 2001.
f. Assignment of Record Title from Marlin Energy Offshore,
L.L.C. to Marlin Coastal, L.L.C., effective April 1,
2005.
2) Joint Operating Agreement between IP Petroleum Company, Inc., as
Operator, and The William G Helis Company, L.L.C., et al as
Non-Operators, covering West Cameron Area Block 57, dated July 1,
2000, as amended May 30, 2001, Memorandum of Joint Operating
Agreement to which has been recorded under File Number 267001,
Conveyance Book 918, Mortgage Book 254 of the Official Public
Records of Real Property of Cameron Parish, Louisiana and under
File Number 12-267001 of the UCC records of the State of
Louisiana and further amended by Amendment to Joint Operating
Agreement Outer Continental Shelf-Gulf of Mexico dated December
17, 2004.
3) MOPU Lease Agreement dated February 28, 2003 between Union Oil of
California and Blake Offshore, L.L.C., as amended and extended.
4) Confidentiality Agreement and AMI dated July 31, 2007 between
Pure Resources, L.P. and Ridgewood Energy Corporation.
5) Counter Proposal to Ridgewood's Offer to Participate letter dated
August 21, 2007, as Parties agreed and accepted on August 21,
2007.
D. The Co-owners represents, to the best of its knowledge, that with
respect to that portion of the Lease the Co-owners are contributing to
the Contract Area that:
1) The Co-owners are in material compliance with the terms and
conditions of the Lease.
2) The Lease is not subject to any royalty, overriding royalty, net
profits interest or other similar burden on production, except as
referenced above or of public record, and the lessor's royalty.
3) There are no liens, mortgages, deeds of trust, judgments or other
encumbrances of any kind or nature on the Lease or the Co-owners
working interest in the Lease.
4) There are no pending claims or litigation relative to the Lease.
5) There are no preferential purchase rights, consents to assign or
other restrictions on the Co-owners ability to enter into this
Agreement or they are waived by the execution of this PA by each
of the Co-owners.
6) There are no other owners of working interests in the Lease
included within the Contract Area, who are not a party to this
PA.
16. INTEGRATED AGREEMENT. Except as provided in Article 18 below, this PA and
the Exhibits attached hereto comprise the entire agreement between the
Parties and supersedes all prior agreements and understandings relating to
the subject matter hereof, including the Counter Proposal to Ridgewood's
Offer to Participate letter dated August 21, 2007, between the Parties.
Further, excepting what is provided in Article 18 below, in the event of
any conflicts between the provosions of this PA and any other agreement,
including any operating
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agreement or any agreement referenced herein as an exhibit or to be
executed by the Parties hereafter, the provisions of this PA shall control,
as between the Parties, prior to any earning by Ridgewood.
17. TAX PARTNERSHIP. The Parties understand and agree that the arrangement and
undertakings evidenced by this PA, taken together, result in a partnership
for purposes of Federal income taxation and for purposes of certain state
income tax laws which incorporate or follow Federal income tax principles
as to tax partnerships. Such partnership for tax purposes is hereinafter
referred to as the "Tax Partnership". For every other purpose of this PA,
however, and notwithstanding any other provision of this PA, express or
implied, to the contrary, the Parties understand and agree that their legal
relationship to each other under applicable state law with respect to all
property subject to this PA is one of tenants in common, or undivided
interest owners, or lessee-sublessees, and not one of partnership; that the
liabilities of the Parties shall be several and not joint or collective;
and that each Party shall be solely responsible for its own obligations.
The Tax Partnership shall be governed by Exhibit "D" as attached to this
PA. Except as provided in such Exhibit "D", the Parties agree not to elect
to have the Tax Partnership excluded from the application of all or any
part of Subchapter K of Chapter One of Subtitle A of the Internal
Revenue Code of 1986, as amended (the "Code"), from any successor
provisions thereto under the Code, or from any provisions of state income
tax laws of substantially the same effect.
The Parties agree that the election to be excluded from the application of
Subchapter K of Chapter One of Subtitle A of the Code made in Article 20.1
of the OA is no longer operative for the El Toro Prospect Contract Area and
that the provisions of Exhibit "D" will survive the termination of this PA.
18. AREA OF MUTUAL INTEREST. Notwithstanding any other agreement to the
contrary, and both prior to and after any Ridgewood earning of any interest
in the Contract Area described herein in Article 1, the Confidentiality
Agreement and AMI dated July 31, 2007 between Pure Resources, L.P. and
Ridgewood Energy Corporation as referenced above in Article 15.C.3 shall
survive and will control any AMI obligations between the Parties and the
Parties further agree that the provisions of the referenced Confidentiality
Agreement and AMI shall take precedence over the PA.
19. PRODUCTION HANDLING AGREEMENT. Whereas the Co-owners may continue to
utilize the MOPU under terms of agreement referenced above or install a
permanent production facility to handle earned area production and others,
the Parties agree to handle and process Ridgewood production as set forth
below.
a) It is recognized that the MOPU Lease requires at least 90 days notice
of termination prior to March 3, 2008. Pure, for the Co-owners, will
continue to utilize the MOPU to handle earned area production, if any,
up until that time. Should it be deemed economic by the Co-owners, the
Co-owners may propose a permanent facility, at the cost and risk of
the Co-owners solely, and not Ridgewood, or terminate the MOPU Lease
as of March 3, 2008, at the sole election of Pure with the consent of
the Co-owners. If warranted by the facts as of November 26, 2007 and
in the good faith opinion of Pure, Pure, for the Parties, agrees to
seek
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Ridgewood El Toro PA
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<PAGE>
to negotiate a month-to-month MOPU Lease extension or exercise its
right to extend the MOPU Lease under its terms for an additional year.
In the event of a dry hole under this PA, the Co-owners are freed from
any obligations to Ridgewood for, and Ridgewood releases any right to,
the MOPU Lease and its utilization. Pure and the Co-owners make no
representation and disclaim that any extension of the MOPU Lease
beyond March 3, 2008 is assured; and,
b) In the event Ridgewood participates in a completion for production
under this PA and during any period Ridgewood production is handled by
and at the MOPU, Ridgewood's charges and expenses for the receipt,
handling and re-delivery into a departing transportation pipeline at
the MOPU host facility of its share of production will be calculated,
invoiced and paid on a through-put basis on its share of the allocated
production from the West Cameron Block 57 OCS-G 21534 No. 3 El Toro
prospect well, being the Initial Well or a Substitute Well, at the
Ridgewood after earning interest of 33.4917% in the production from
and for such well as to all production handled at the MOPU under the
Accounting Procedure attached to the Operating Agreement as and for
facilities supplied by the operator. If Ridgewood's share of Contract
Area production is handled by and at any permanent facility set by,
and the cost, risk and expense of, the Co-owners, Ridgewood will not
be required to contribute capex towards such facility, however,
Ridgewood shall enter into a mutually acceptable production handling
agreement with the Co-owners, prior to first production handling into
an permanent facility, in which the following handling terms and fees
shall be incorporated into the production handling agreement; 1) $0.15
/MCF gas, 2) $1.00/bbl oil, 3) $1.00/bbl water, 4) $0.05 per stage of
compression, 5) annual escalation of such production handling fees and
any monthly minimum fee to adjust for inflation based on the Annual
Wage Index Percentage Adjustment recommended each year by the Council
of Petroleum Accountants Society ("COPAS"), 6) a monthly minimum fee
of $5000.00 for any month the cumulative production handling fees are
less than that dollar amount, 7) an allocation of natural gas for
fuel, vent, flare and loss, borne in kind or, alternatively, at the
cost of replacement, if Ridgewood volumes are insufficient, 8) a
reservation by the Co-Owners, as owners of such permanent facility,
for re-negotiation of the production handling fees for any unusual
market condition materially increasing the costs bearing upon the
materials or services provided under the PHA and 9) a unilateral
indemnity and insurance obligation in favor of Co-owners, as
processor, for losses and claims arising from the receipt, handling
and re-delivery of the production. Other generally accepted PHA terms
shall be incorporated but as to financial matters, Co-owners shall be
limited to the terms and fees above.
20. REASSIGNMENT. Ridgewood agrees to reassign the interest assigned as per
Article 5 above, in the event that 1) Ridgewood has earned by reaching
Objective or expenditure of obligated funds but where no well drilled
hereunder is mutually deemed as capable of producing in paying quantities
from any portion of the Contract Area within 180 days from the lapse of the
right to propose a Substitute Well under the PA or 2) at any time after
production in paying quantities is established on, and Ridgewood has earned
in, the Contract Area, should there be a cessation of all production in
paying quantities from the Contract Area, Ridgewood will have one hundred
eighty (180) days after cessation of production in which to commence
additional
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September 5, 2007
<PAGE>
drilling, completion or reworking operations, and should operations fail to
result in production in paying quantities attributable to any of the
Contract Area, the Co-owners shall hold the right to elect that Ridgewood
reassign to the Co-owners holding an interest in the Lease and in
proportion to that Lease ownership all of the Ridgewood interest in the
Contract Area, where Ridgewood retains all prior obligations until
satisfied. This reassignment obligation due to cessation of operations or
production, as described above, shall apply for so long as the Co-owners,
their successors or assigns, an interest in the Contract Area. In the event
of any reassignment to the Co-owners, their successors or assigns, the
Contract Area or portion thereof shall be reassigned free from any
overriding royalty, lien, encumbrance, dedications or other burden placed
thereon by Ridgewood. In addition, reassignment shall not relieve Ridgewood
of liability for obligations assumed, which accrued prior to said
reassignment, including, without limitation, the obligation to plug and
abandon any well in which Ridgewood participated in or on the Contract
Area.
21. GOVERNING LAW. This PA shall be governed by and in accordance with the laws
of the State of Louisiana, without regard to any choice of law or rule
thereof that would direct the application of the laws of any other
jurisdiction.
22. INDIVIDUAL LIABILITY. The rights, duties, elections, obligations, and
liabilities of the Parties shall be several and not joint or collective,
and nothing contained herein is intended to create, nor shall it be
construed as creating, a partnership of any kind (except the tax
partnership specified in Article 17 above), joint venture, association, or
other business entity recognizable by law for any purpose. The Parties
shall be individually responsible only for their own obligations, except as
herein described.
23. NOTICES. All notices required hereunder shall be in writing sent by
certified mail or overnight mail delivery, or by facsimile
telecommunications to the addresses set forth below, and shall be deemed
effective when actually received by the addressee, as follows:
--------------------------------------------------------------------------------
Ridgewood Energy Corporation Chevron U.S.A. Inc.
11700 Old Katy Road, Suite 280 935 Gravier Street
Houston TX 77079 New Orleans, LA 70112
Tel: (281) 293-8449 Tel: (504) 592-6356
Fax: (281) 293-7705 Fax: (504) 592-7110
Attn: W. Greg Tabor Attn: Gordon R. Cain
Executive Vice President Land Manager
Houston Energy, L.P. Marlin Coastal, L.L.C.
1415 Louisiana Street 3861 Ambassador Caffery Parkway
Suite 2400 Suite 600
Houston, TX 77002 Lafayette, LA 70503
Tel: (713) 650-8008 Tel: (337) 769-4339
Fax: (713) 650-8305 Fax: (337) 769-4342
Attention: Allen Wihite Attention: Mike Lipari
--------------------------------------------------------------------------------
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September 5, 2007
<PAGE>
--------------------------------------------------------------------------------
Helis Oil and Gas Company, LLC
228 St. Charles Ave.
Suite 912
New Orleans, LA 70130
Tel: (504) 681-3321
Fax: (504) 522-6486
Attention: Doug St. Clair
--------------------------------------------------------------------------------
24. COUNTERPART EXECUTION. This PA may be executed by signing the original or a
counterpart thereof with the same force and legal effect as if all
executions were on one single instrument.
25. SUCCESSORS AND ASSIGNS. This PA shall be binding upon and inure to the
benefit of the Parties and their respective heirs, representatives,
successors and assigns. Ridgewood shall not assign, mortgage, pledge,
transfer or exchange their rights or interests in this PA or any rights
earned hereunder without the prior written consent of each of the
Co-owners, which consent shall not be unreasonably withheld.
26. INSURANCE. Ridgewood shall, to the extent of its before earning interest,
independently acquire the coverage and amounts as shown on Exhibit "B" OA
and provide evidence of such coverage to Pure prior to commencement of
operations hereunder. Such coverage and limits shall not in any way limit
any Ridgewood indemnity due the Co-owners.
27. DISPUTE RESOLUTION. Notwithstanding anything contained heretofore in this
PA to the contrary, the Parties specifically acknowledge and agree that any
claim, controversy or dispute arising out of, relating to, or in connection
with this PA, including the interpretation, validity, termination or breach
thereof, shall be resolved solely in accordance with the Dispute Resolution
Procedure set forth in Exhibit "E" attached hereto and made a part hereof.
28. INDEMNITY.
A. Ridgewood, to the full extent of its rights and interests hereunder,
agrees to protect, indemnify, and save the Co-owners, its parents,
subsidiaries, affiliates, and/or successors and the directors,
officers, employees or agents of each ("Co-owners Company Group") free
and harmless from all obligations, business dealings, liabilities,
debts, charges, claims, damages, demands, costs (including attorneys'
fees and court costs), penalties and causes of action arising directly
or indirectly out of any dealing with third parties Ridgewood has with
regard to financing or the assignment of, in whole or in part, any
rights under this PA and to relieve the Co-owners Company Group from
any and all liability (exclusive of business debts and charges)
incurred as a result of such actions. The indemnities and covenants of
this Article 28 shall be effective whether or not such obligations,
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September 5, 2007
<PAGE>
business dealings, liabilities, debts, charges, claims, damages, demands,
costs (including attorneys' fees and court costs), penalties and causes of
action aforesaid are caused wholly or partly by negligence attributed to
the Co-owners Company Group, or by any other means, excepting those
occurrences involving the gross negligence or willful misconduct of the
Co-owners Company Group.
B. The Co-owners, to the full extent of their rights and interests
hereunder, agree to protect, indemnify, and save Ridgewood, its
parent, subsidiaries, affiliates, and/or successors and the directors,
officers, employees or agents of each ("Ridgewood Company Group") free
and harmless from all obligations, business dealings, liabilities,
debts, charges, claims, damages, demands, costs (including attorneys'
fees and court costs), penalties and causes of action arising directly
or indirectly out of any dealings with third parties the Co-owners has
with regard to financing or the assignment of, in whole or in part,
any rights under this PA and to relieve the Ridgewood Company Group
from any and all liability (exclusive of business debts and charges)
incurred as a result of such actions. The indemnities and covenants of
this Article 28 shall be effective whether or not such obligations,
business dealings, liabilities, debts, charges, claims, damages,
demands, costs (including attorneys' fees and court costs), penalties
and causes of action aforesaid are caused wholly or partly by
negligence attributed to the Ridgewood Company Group, or by any other
means excepting those occurrences involving the gross negligence or
willful misconduct of the Ridgewood Company Group.
C. The Co-owners shall, as between the Co-owners, remain solely liable
for all liabilities, costs and risks of any kind or nature arising out
of its operations relating to the OA that are not related to this PA
and in which Ridgewood does not participate, including, but not
limited to the plugging and abandonment and remediation of all
existing wells, platforms and other facilities on the Contract Area,
if any.
29. DISCLAIMER OF WARRANTY.
THIS PA IS MADE WITHOUT ANY WARRANTY OF TITLE. THE CO-OWNERS FURTHER DO NOT
WARRANT EITHER EXPRESS, STATUTORY OR IMPLIED, AS TO TITLE, MERCHANTABILITY,
CONDITION, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO THE LEASE IN
THE CONTRACT AREA, AND ALL OTHER PROPERTY COVERED BY THIS PA, INCLUDING,
BUT NOT LIMITED TO THE WELL BORES, EQUIPMENT AND FACILITIES UTILIZED BY THE
PARTIES HEREUNDER, OR ANY OTHER SORT OF WARRANTY AND IS WITHOUT RECOURSE
AGAINST THE CO-OWNERS WHATSOEVER, EVEN AS TO THE RETURN OF CONSIDERATION.
THE CO-OWNERS MAKE NO REPRESENTATIONS OR WARRANTIES REGARDING RIDGEWOOD'S
RIGHT OF INGRESS TO AND EGRESS FROM THE CO-OWNERS LEASE ACROSS ADJACENT OR
ADJOINING LANDS.
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September 5, 2007
<PAGE>
THE CO-OWNERS SPECIFICALLY DISCLAIM, AND RIDGEWOOD EXPRESSLY WAIVES ANY
IMPLIED WARRANTY OF TITLE WITH RESPECT TO THE LEASE IN THE CONTRACT AREA.
RIDGEWOOD ACKNOWLEDGES THAT THIS EXPRESS WAIVER SHALL BE CONSIDERED A
MATERIAL AND INTEGRAL PART OF THIS PA AND PART OF THE CONSIDERATION GIVEN
THEREFOR. RIDGEWOOD FURTHER ACKNOWLEDGES THAT THIS WAIVER HAS BEEN
SPECIFICALLY BROUGHT TO RIDGEWOOD'S ATTENTION AND THAT RIDGEWOOD HAVE
VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS WAIVER. THE PARTIES AGREE THAT
FOR THE PURPOSES OF THIS WAIVER OF THE IMPLIED WARRANTY OF TITLE, CO-OWNERS
SHALL BE CONSIDERED AS A SELLER.
RIDGEWOOD ACKNOWLEDGES THAT (i) IT IS A SOPHISTICATED INVESTOR NON-OPERATOR
IN THE OIL AND GAS BUSINESS; (ii) IT UNDERSTANDS THE RISKS INVOLVED IN OIL
AND GAS EXPLORATION AND DEVELOPMENT; AND (iii) IT UNDERSTANDS THAT UNDER
ITS PARTICIPATION RIDGEWOOD ASSUMES ALL OF THE RISKS ATTENDANT TO THE
EXPLORATION AND PRODUCTION OPERATIONS CONTEMPLATED UNDER THIS PA AND THAT
THE RIDGEWOOD INVESTMENT MADE HEREUNDER IN THOSE OPERATIONS CONDUCTED UNDER
THIS PA IS FULLY AT RISK.
Please indicate your agreement to the terms and conditions as set forth by
executing this PA and the set of four (4) signature pages in the space provided
and return to the attention of Ron Munn at the letterhead address on or before
October 5, 2007 and Pure will distribute original signature pages to all the
parties.
Page 15 of 16
Ridgewood El Toro PA
September 5, 2007
<PAGE>
AGREED TO AND ACCEPTED this 26 day of Sept, 2007.
CHEVRON MIDCONTINENT, L.P.
By Chevron Midcontinent Operations Company, Its General Partner
By: /s/ Michael C. Smith
--------------------
Michael C. Smith
Title: Assistant Secretary
AGREED TO AND ACCEPTED this _____ day of ____________, 2007.
HELIS OIL AND GAS COMPANY, LLC
By: _________________________
Title:________________________
AGREED TO AND ACCEPTED this _____ day of ____________, 2007.
HOUSTON ENERGY, L.P.
By: _________________________
Title:________________________
AGREED TO AND ACCEPTED this _____ day of ____________, 2007.
MARLIN COASTAL, L.L.C.
By: _________________________
Title:________________________
AGREED TO AND ACCEPTED this 27th day of September 2007.
RIDGEWOOD ENERGY CORPORATION
By: /s/ W. A. Tabor
---------------
W. Greg Tabor
Title: Executive Vice President
Page 16 of 16
Ridgewood El Toro PA
September 5, 2007
</TEXT>
</DOCUMENT>