Exhibit 10.13

CONTRACT No. 424048860

This agreement is filed as a translation from the original Spanish language
version and is supplied solely

for informational purposes. The original version in the Spanish language is the
definitive agreement and is

the version that has legal force and effect.

TABLE OF CONTENTS

 

  STATEMENTS CLAUSES   ONE.   PURPOSE OF THE CONTRACT TWO.   CONTRACT AMOUNT
THREE.   METHOD OF PAYMENT FOUR.   FINANCING SOURCES FIVE.   ASSIGNING
COLLECTION RIGHTS SIX.   WITHHOLDINGS SEVEN.   FINANCING EXPENSES EIGHT.  
EXCESS PAYMENTS NINE.   COST ADJUSTMENT TEN.   CONTRACTUAL PENALTIES ELEVEN.  
PERFORMANCE PERIOD TWELVE.   TERM THIRTEEN.   EXTENSION TO THE COMPLETION DATE
FOURTEEN.   WORK FOR ADDITIONAL AMOUNTS OR FOR ITEMS NOT ESTABLISHED IN THE ITEM
CATALOGUE FIFTEEN.   CONTRACT AMENDMENTS SIXTEEN.   ACT OF GOD OR FORCE MAJEURE
SEVENTEEN.   CONTRACT PERFORMANCE BOND AND GUARANTEE ON LATENT DEFECTS EIGHTEEN.
  INSURANCE POLICIES NINETEEN.   AUTHORIZED REPRESENTATIVES TWENTY.  
SUBCONTRACTING TWENTY-ONE.   CONTRACTOR RELATIONS WITH ITS WORKERS TWENTY-TWO.  
LIABILITY OF THE PARTIES TWENTY-THREE.   ACCEPTANCE OF THE WORK TWENTY-FOUR.  
SETTLEMENT AND CONTRACT COMPLETION TWENTY-FIVE.   CONTRACT SUSPENSION
TWENTY-SIX.   EARLY TERMINATION OF THE CONTRACT TWENTY-SEVEN.   ADMINISTRATIVE
RESCISSION OF THE CONTRACT TWENTY-EIGHT.   RESCISSION PROCEDURE TWENTY-NINE.  
INFORMATION CONFIDENTIALITY THIRTY.   CLAIMS AND DISPUTES OF A TECHNICAL OR
ADMINISTRATIVE NATURE THIRTY-ONE.   EXPERT DECISION THIRTY-TWO.   CONCILIATION
THIRTY-THREE.   APPLICABLE LAW AND JURISDICTION THIRTY-FOUR.   CONTINUATION OF
THE WORK THIRTY-FIVE.   TAX CLAUSE THIRTY-SIX.   TRAINING AND CONDUCT OF
CONTRACTOR PERSONNEL THIRTY-SEVEN.   NOTIFICATIONS THIRTY-EIGHT.   PRIORITY OF
DOCUMENTS THIRTY-NINE.   ATTACHMENTS TO THIS CONTRACT CLAUSE.   OTHER
STIPULATIONS CLAUSE.   JOINT AND SEVERAL OBLIGATION

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CONTRACT No. 424048860

 

CLAUSE.   NATIONAL CONTENT PERCENTAGE CLAUSE.   LEGAL AND MATERIAL AVAILABILITY
OF LOCATIONS FOR PERFORMING WORK CLAUSE.   ELECTRONIC LOG

 

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CONTRACT No. 424048860

 

PEMEX

North Region Department

Office of the Manager of Well Maintenance and Drilling, D.N.

Office of the Deputy Manager of Administration and Finance

Superintendency of Material Resources

 

Contractor Name:

MERCO INGENIERIA INDUSTRIAL, S.A. DE C.V. AND FORBES ENERGY SERVICES (JOINT
PROPOSAL)

  

Management Centre:

2383814020821800

Tax Registry Number (RFC):

MII030908KH4

TAXPAYER IDENTIFICATION NUMBER: 98-0581100

  

Financial Entry:

314302515

Contract No.:

424048860

  

Contract Request:

5000008966

Contract Amount:

$234,256,757.01 MXP (two hundred and thirty-four million, two hundred and
fifty-six thousand, seven hundred and fifty-seven pesos and 01/100 cents), plus
US$48,842,604.99 (forty-eight million, eight hundred and forty-two thousand, six
hundred and four US dollars and 99/100 cents)

  

International Public Tender with TLC

 

18575051-027/08

 

Tender: 027/08-TOUSPC-P

UNIT PRICE PUBLIC WORKS CONTRACT, ENTERED INTO BY AND BETWEEN PEMEX EXPLORACIÓN
Y PRODUCCIÓN, WHO WILL BE CALLED PEP, REPRESENTED BY MARTIN TERRAZAS ROMERO, IN
HIS CAPACITY AS MANAGER OF THE NORTH DIVISION, APPOINTED TO THE DEPARTMENT OF
THE WELL DRILLING AND MAINTENANCE UNIT OF PEMEX EXPLORACIÓN Y PRODUCCIÓN; AND
MERCO INGENIERIA INDUSTRIAL S.A. DE C.V. AND FORBES ENERGY SERVICES LTD. (JOINT
PROPOSAL), WHO WILL BE CALLED THE CONTRACTOR, REPRESENTED BY MR. JOSE ANDRES
SUAREZ IN HIS CAPACITY AS GENERAL ATTORNEY, REPRESENTATIVE AND AGENT OF BOTH
COMPANIES, IN ACCORDANCE WITH THE FOLLOWING STATEMENTS AND CLAUSES:

S T A T E M E N T S

I. PEP states that:

 

  I.1. It is a decentralized agency of the Federal Public Administration, with
its own legal status and assets, and with the legal capacity to enter into this
contract, in accordance with the Constitutional Law of Petróleos Mexicanos and
Subsidiary Agencies, published in the Official Journal of the Federation on
July 16, 1992.

 

  I.2. Its representative has the powers to enter into this contract, which he
proves through the Public Instrument No. 72,297 dated May 3, 2005 and executed
in the presence of Notary Public 19 of the Federal District, Miguel Alessio
Robles, which have not been revoked, amended or limited in any way on the
signing date of this contract.

 

  I.3. It has the necessary authorizations to carry out the investment
corresponding to the work hereunder, as recorded in the official investment
authorization letter No. 340-A-259 (PEG – Poza Rica Pidiregas Comprehensive
Project) dated February 15, 2002.

 

  I.4. The work hereunder was awarded through the International Public Tender
that was carried out in accordance with the Free Trade Agreements signed by the
United Mexican States number 18575051-027-08, based upon article 134 of the
Political Constitution of the United Mexican States, articles 3 section II, 26
section I, 27 section I, 28, 30 section II subsection a) and article 34 of the
Law of Public Works and Related Services.

 

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  I.5. Its head office for the purposes of this contract is the Administrative
Building of the Office of the Manager of Well Drilling and Maintenance, North
Division: Interior del campo PEMEX; Colonia Herradura, Codigo Postal 93370; Poza
Rica de Hidalgo, Veracruz and its Federal Tax Registry Number is PEP-920716-7XA.

II. The CONTRACTOR states that:

 

  II.1. MERCO INGENIERIA INDUSTRIAL S.A. DE C.V. is a legally established
company with its own legal status, in accordance with the legal provisions of
the United Mexican States, as certified by the following Public Instruments

 

  a) Testimony from the public instrument 2,053 of September 5, 2003, executed
in the presence of the Notary Public 115 of Reynosa, Tamaulipas, Jacinto Flores
Pena, which first testimony is duly registered at the Public Registry of
Commerce of Reynosa, Tamaulipas, under number 775, volume 2-016, First Book
dated October 1, 2003, in which the company’s incorporation is recorded.

 

  b) Testimony from the public instrument 2,112 of February 10, 2004, executed
in the presence of the Notary Public 115 of Reynosa, Tamaulipas, Jacinto Flores
Pena, which first testimony is duly registered at the Public Registry of
Commerce of Reynosa, Tamaulipas, under number 775, volume 2-016, First Book
dated March 2, 2003, in which the General Ordinary Shareholders’ Meeting was
notarized, in which the following, among other things, were agreed to: the
resignation of the General Manager and Administrative Manager, the revocation of
powers of attorney and amendment of Transitional Article Four of the Articles of
Incorporation referring to the limitation established for exercising the General
Power of Attorney for Ownership Acts, ordering now that the power of attorney
for ownership acts may be exercised individually by the sole director under the
broadest terms.

 

  II.2. Its representative has the powers to enter into this contract, as
certified by Public Instrument No. 13163, dated July 11, 2008, which first
testimony was duly registered at the Public Registry of Commerce of Reynosa,
Tamaulipas, under number 327, volume 2-007, First Book dated July 11, 2008,
executed in the presence of the Notary Public 233 of Reynosa, Tamaulipas,
Alfonso Fuentes Garcia, which have not been revoked, amended or limited in any
way on the signing date of this contract.

 

  II.3. It is Mexican and agrees, even when changing nationality, to continue to
be considered as a Mexican as far as this contract is concerned, and to not
invoke the protection of any foreign government, under penalty of losing all
rights arising from this contract to the benefit of the United Mexican States.

 

  II.4. At the time of entering into this contract, it is current in the payment
of all its tax obligations, according to the provisions of article 32-D of the
Tax Code of the Federation and its RFC is MII30908KH4.

 

  II.5. FORBES ENERGY SERVICES, LTD. is a British company legally incorporated
and existing in accordance with the legal provisions of England, Great Britain,
as proven by the Certificate of Incorporation, registered at the Company
Register on April 11, 2008 under registration number 41727; Certificate of
Deposit of Memorandum of Increase of Share Capital registered at the Companies
House on April 15, 2008, under registration number 41727, and with the
Certification issued by Evelou Mosley in her capacity as Secretary of the
Company on May 22, 2008, which document is certified by the Notary Public of the
City of Hamilton, Bermuda, Tonya L. Marshall on July 8, 2008, which has its
APOSTILLE issued by Leleath G. Bailey, Governor and Commander in Chief of the
Bermudas under Certification No. 26,273.

 

  II.6. Its representative has the powers to enter into this contract, as
certified by the notarization of the power of attorney that was executed abroad,
performed through public instrument number 14,072 dated September 23, 2008,
executed in the presence of the Notary Public No. 6 of Poza Rica, Ver., Joao
Gilberto Lopez Hernandez, which have not been revoked, amended or limited in any
way on the signing date of this contract.

 

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  II.7. It is a legal entity of American nationality and agrees to be considered
as a Mexican as far as this contract is concerned, and to not invoke the
protection of any foreign government, under penalty of losing all rights arising
from this contract to the benefit of the United Mexican States.

 

  II.8. It does not have a permanent establishment in the country, and during
the execution of this contract it does not intend to create one. However, if it
were to be created according to the applicable laws, it commits to giving notice
to the Ministry of the Treasury and Public Credit, to the Tax Administration
Service (SAT) and to PEP, and to comply with its tax obligations in the Mexican
Republic and that its Taxpayer Identification Number is 98-0581100.

 

  II.9. Its common address for the purposes of this contract is Cerro Azul
No. 212 Colonia Petrolera, Reynosa, Tamaulipas C.P. 88680, Tel: (01-899)
920-2211, Fax: (01-899) 920-2240. E-mail: mercoingenieria@grupomerco.com,
jose.suarez@grupomerco.com.

 

  II.10. It has the legal capacity to enter into contracts and meets the
technical and financial conditions to undertake the performance of the work
hereunder, and has the necessary experience for the efficient performance of
said work.

 

  II.11. It is fully aware of the contents and requirements that are established
by: (i) the Law of Public Works and Related Services and its Regulations;
(ii) the laws, regulations and other administrative provisions issued in the
area of public works and related services; (iii) the Safety and Health
Regulations of Petróleos Mexicanos and what applies from the Regulatory
Framework of Industrial Safety, Occupational Health, Environmental Protection
and Energy Saving of Petróleos Mexicanos and Subsidiary Agencies; (iv) the work
procedures, the construction specifications in force at PEP and the specific
specifications for the work, the project, the execution program, the monthly
amounts of the work arising therefrom; and (v) the item catalogue, which as
attachments duly signed by the parties, form an integral part of this contract.

 

  II.12. It has properly inspected the site where the work hereunder will be
carried out, in order to consider all factors that take part in its execution,
and they are in agreement with the technical specifications that PEP provided it
and all documents that form a part thereof.

 

  II.13. It meets all necessary legal requirements to enter into this contract,
and does not fall under any of the scenarios set forth in articles 51 and 78 of
the Law of Public Works and Related Services.

 

  II.14. Based upon the provisions of article 36 of the Law of Public Works and
Related Services, they submitted a joint proposal within International Public
Tender Number 18575051-027/08 as covered under the Purchasing Chapters of the
Public Sector of the Free Trade Agreements signed by the Mexican Government with
different countries, and based upon aforementioned provision and article 50 of
the Regulations of the Law of Public Works and Related Services, they did enter
into a private agreement for the joint proposal dated July 17, 2008, which forms
an integral part of this contract as attachment Format DT-17, whereby they
jointly and severally undertake to execute the work under the terms of this
contract. For the purposes of this agreement in principle and consistent with
the agreement of the joint proposal, the companies awarded with this instrument
have designated MERCO INGENIERIA INDUSTRIAL, S.A. DE C.V. as a common
representative.

 

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Taking the above statements into consideration, the parties agree to be bound in
accordance with the following:

C L A U S E S

 

ONE  

PURPOSE OF THE CONTRACT. PEP requires and the CONTRACTOR undertakes to perform,
in accordance with this contract and its attachments, the complete work for the
“WELL MAINTENANCE AND REPAIR WORK, AT THE POZA RICA – ALTAMIRA ASSET OF THE
NORTH REGION” (PACKAGE I).

 

It is expressly understood and agreed that the CONTRACTOR will not have any
share in the hydrocarbons extracted or produced at any of the development or
exploratory wells hereunder, and that PEP will not give the CONTRACTOR a share
in any compensation from the resulting production of the wells. The only right
that the CONTRACTOR has is to receive the compensation provided for in this
contract, as a result of the execution of the work hereunder, which is not
dependent or contingent upon any factor that is not the very compliance with its
obligations under this contract.

 

PEP will request that the CONTRACTOR execute the work through written work
orders.

 

In compliance with the provisions of the second paragraph of article 36 of the
Law of Public Works and Related Services and article 50 of its Regulations, and
under the terms of Clause Two of the Private Agreement dated July 17, 2008,
presented in the Joint Proposal of the companies: MERCO INGENIERIA INDUSTRIAL
S.A. DE C.V. and FORBES ENERGY SERVICES LTD, the participation in the work
hereunder for each member of the group will be according to the following:

 

MERCO INGENIERIA INDUSTRIAL S.A. DE C.V. is under obligation to execute: the
administration, control and management of the contract in addition to:

 

1.      Infrastructure works (complete item 9.0 and sub-items).

 

2.      Platforms (complete item 10.0 and sub-items).

 

3.      Construction of anchors (complete item 11.0 and sub-items).

 

4.      Supplementary works (complete item 12.0 and sub-items).

 

FORBES ENERGY SERVICES LTD is under obligation to execute: the operation and
engineering described in:

 

1.      Interventions with contractor equipment (complete item 2.0 and
sub-items).

 

2.      Interventions with PEP equipment and contractor coordination (complete
item 3.0 and sub-items).

 

3.      Share of daily rental of drilling equipment (complete item 4.0 and
sub-items).

 

4.      Monitoring system (complete item 5.0 and sub-items).

 

5.      Optional services (sub-items 6.1, 6.2, 6.5, 6.6, 6.7 and 6.8 from item
6.0).

 

6.      Hydraulic testing upon introducing the production equipment (item 8.0
and sub-items).

 

TWO

 

 

CONTRACT AMOUNT. The total amount of this contract is: $234,256,757.01 MXP (two
hundred and thirty-four million, two hundred and fifty-six thousand, seven
hundred and fifty-seven pesos and 01/100 cents), plus US$48,842,604.99
(forty-eight million, eight hundred and forty-two thousand, six hundred and four
US dollars and 99/100 cents) plus the Value Added Tax.

 

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CONTRACT No. 424048860

 

THREE  

METHOD OF PAYMENT. The CONTRACTOR will receive from PEP the amount resulting
from applying the unit prices to the amounts of work performed, as total payment
for each item unit of work completed, executed according to the contract,
construction specifications and quality standards.

 

The amount to pay for the work hereunder will be calculated by preparing
estimates that will cover monthly periods and will be submitted by the
CONTRACTOR to the site supervision office. They will be accompanied by the
documentation that certifies the admissibility of their payment, within 6 (six)
calendar days following the cut-off date, which will be the last day of each
month. If the estimates are not submitted in the aforementioned term, the
corresponding estimate will be submitted on the following cut-off date, without
giving rise to a claim for expenses and/or financing costs from the CONTRACTOR.
The site supervision office will have a period no longer than 15 (fifteen)
calendar days to review and authorize the estimates, following the date that the
corresponding estimates are submitted to it.

 

When analyzing and calculating the payment amounts, the applicable fees and
taxes shall be considered, under the terms of the tax laws. The CONTRACTOR will
be solely responsible for the invoices meeting the administrative and tax
requirements for their payment. Therefore, the delay in their payment due to the
lack of any of these, or due to their incorrect or late submission, will not be
grounds to request the payment of financing expenses as referred to in article
55 of the Law of Public Works and Related Services.

 

The parties who sign this contract in their capacity as CONTRACTORS, agree that
the company MERCO INGENIERIA S.A. DE C.V., in its capacity as Common
Representative, will be the one to submit the invoices for each and every one of
the payments arising from this contract. This is with the understanding that PEP
will not be liable for the manner in which the Common Representative distributes
or divides the earnings or losses with respect to the amounts that it receives
as a result of this contract.

 

The submission date of the estimates to the site supervision office shall be
recorded in the log.

 

Estimates for work performed shall be paid by PEP, under its responsibility,
within a period no longer than 20 (twenty) calendar days, from the date on which
they have been authorized by the site supervision office. This date will be
recorded in the log of the work and in the estimates themselves.

 

Payments to the CONTRACTOR will be done invariably by an automatic bank deposit
into account of the credit institution authorized to operate in the United
Mexican States, selected by the CONTRACTOR, who shall notify PEP in writing
directly at the Payment Window for the North Region, located at Boulevard campo
PEMEX s/n (to one side of the vehicle entrance #2) interior campo PEMEX Col.
Herradura C.P. 93370, Poza Rica de Hgo. Ver, prior to the first of the payments
that take place under this contract.

 

The estimates and the settlement, even though they have been paid, will not be
considered full acceptance of the work, since PEP expressly reserves the right
to file claims for missing or poorly performed work, and where appropriate, for
the excess payment that has been made.

 

The payment of the cost adjustments and financing cost will be done in the
estimates following the month on which the granted adjustment has been
authorized, by applying to the amount of the aforementioned estimates the
detailed increase corresponding to said factors for each type of adjustment. The
latest adjustments that have been authorized shall be applied. All adjustment
factors granted shall accumulate.

 

Payment of the authorized estimates of non-recoverable expenses that are duly
proven will be done in accordance with the terms and conditions of the second
paragraph of article 54 of the Law of Public Works and Related Services. No
additional cost will be applicable to the resulting amounts, whether for
indirect costs, financing or profits.

 

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Once the CONTRACTOR has received the payment, it will have 15 (fifteen) calendar
days to dispute any aspect thereof. Once this period has passed without any
claim being filed, the payment will be considered definitively accepted and the
CONTRACTOR will release PEP from any obligation related to said payment.

 

Payments will be made in local currency at the exchange rate published by the
Bank of Mexico in the Official Journal of the Federation on the date on which
said payments are made.

 

FOUR

 

 

FINANCING SOURCES. The CONTRACTOR acknowledges that Petróleos Mexicanos, its
Subsidiary Agencies or any financial institution and/or affiliate that it may
designate for this purpose, may use the resources from financing, in order to
finance the payments arising from this contract. The CONTRACTOR knows and
undertakes to inform its CONTRACTOR and/or subcontractors on a timely basis
regarding the requirements related to the documentation required by the
financing sources, in order to ensure compliance with the provisions of this
clause.

 

The “Country of Origin Certificate for Goods and/or Services”, submitted prior
to the signing of this contract, is integrated into this contract as attachment
“G-1”, with the understanding that PEP may request any clarification or
additional information from the CONTRACTOR regarding the certificate referred to
in this clause during the validity of the contract. Likewise, in the event that
the information considered in said certificate were to be amended during the
validity of this contract, the CONTRACTOR undertakes to notify PEP immediately
after the CONTRACTOR is aware of the amendment, which will not mean that an
amendment is made to this contract.

 

The CONTRACTOR undertakes to submit the documentation required by the financing
sources, which shall be submitted in accordance with the requirements
established in attachment “G” named “Documentation Required by Financing
Sources”. To this end, it will follow the instructions and specific formats in
force that are contained within the “Instructions from Petróleos Mexicanos and
its Subsidiary Agencies for the Submission of Documentation Required by the
Financing Sources”, which was delivered to it prior to the signing of this
contract. The current instructions referred to in this clause, are also
available on the following webpage of PEMEX:
www.pemex.com/proveedores/documentación.

 

The CONTRACTOR shall appear at the responsible department (“Financing Module”)
of PEP, before each payment event in order to provide the documentation required
by the financing sources, which may apply. The responsible department
(“Financing Module”) will issue the “Documentation Tracking Receipt” and/or will
affix the corresponding seal, which will become part of the support
documentation that the CONTRACTOR must attach to each payment request that it
submits under this contract.

 

PEP will not be under obligation to issue or submit the “Documentation Tracking
Receipt” and/or corresponding seal when the CONTRACTOR does not submit the
documentation required by the applicable financing sources, without just cause.

 

PEP may request any modification, clarification or additional information from
the CONTRACTOR related to the documentation required by the financing sources.

 

In the same manner, the CONTRACTOR accepts that for certain cases, the
documentation required by the financing sources shall be submitted to the entity
(agent bank, export credit agency, Corporate Finance Office, etc.) that PEP may
indicate on a timely basis.

 

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CONTRACT No. 424048860

 

FIVE  

ASSIGNMENT OF COLLECTION RIGHTS. The CONTRACTOR may not assign the rights and
obligations arising from this contract either partially or fully in favour of
any other individual or legal entity, except for the collection rights on the
estimates for the work performed. In this case, the CONTRACTOR shall request
consent from PEP in writing, who will come to an appropriate decision within a
term of 15 (fifteen) calendar days from the request submission. In the event
that the aforementioned period has passed without PEP having given a response in
writing to the request from the CONTRACTOR, this request will be considered not
accepted.

 

If as a result of the assignment of the collection rights requested by the
CONTRACTOR, a delay in payment were to occur, the payment of financing expenses
as referred to in article 55 of the Law of Public Works and Related Services
will not apply. Neither will the process of assigning collection rights grant
the CONTRACTOR the right to request an extension to the completion date.

 

SIX

 

 

WITHHOLDINGS. The CONTRACTOR accepts that the following withholdings will be
performed on each of the estimates that are paid:

 

 

a).-   FIVE THOUSANDTHS of the amount of the work performed, which will be set
aside for the Ministry of the Civil Service for the fees from the inspection
service, supervision and control of the work, which PEP will deliver to the
Treasury of the Federation, in accordance with article 191 of the Federal Law of
Fees.

 

SEVEN

 

 

FINANCING EXPENSES. In the case of non-compliance in the payment of the
estimates and cost adjustment, PEP at the request of the CONTRACTOR, shall pay
financing expenses at a rate that will be equal to that set by the Revenue Law
of the Federation in cases of late payment of tax credits. Said expenses will
begin to be generated when the parties have defined the amount to be paid and
will be calculated on the unpaid amounts. They must be calculated by calendar
days from the time they are calculated and until the date they are actually made
available to the CONTRACTOR, in accordance with article 55 of the Law of Public
Works and Related Services.

 

EIGHT

 

 

EXCESS PAYMENTS. In the case of excess payments that the CONTRACTOR has
received, it shall return the excess amounts paid plus the corresponding
interest, as indicated in clause six “WITHHOLDINGS” of this contract. The
interest will be calculated on the excess amounts paid in each case and will be
calculated by calendar days, from the payment date to the date on which the
amounts are actually made available to PEP.

 

It will not be considered an excess payment when the differences borne by the
CONTRACTOR are offset in the following estimate, or in the settlement, if said
payment had not been identified previously.

 

NINE

 

 

COST ADJUSTMENT. The parties agree to the review and adjustment of the costs
that make up the unit prices of this contract, agreed upon in local currency, in
accordance with article 56 of the Law of Public Works and Related Services and
articles 105, 106 and 144 of its Regulations. Therefore, both parties agree to
take the itemized costs that are listed in Format DE-1 as the basis for
performing the costs adjustments, which the CONTRACTOR attached in its proposal.
According to article 105 from the Regulations of the Law of Public Works and
Related Services, within 60 (sixty) calendar days following the publication of
the indices that are applicable to the period for said indices, the CONTRACTOR
shall request the corresponding cost adjustment from PEP. Once the above period
has passed, the CONTRACTOR no longer has the right to claim the cost adjustment
for the period in question.

 

Within 60 (sixty) calendar days following receipt of the request, PEP will issue
the applicable decision in writing. Authorization of the cost adjustment shall
be done through the official decision letter that agrees upon the corresponding
increase or decrease.

 

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CONTRACT No. 424048860

 

 

Adjustment of the costs that make up the agreed unit prices in local currency,
which are part of the total direct costs, will be done according to the express
terms of articles 56, 57 section III and 58 of the Law of Public Works and
Related Services, and articles 145, 146, 147, 152 and 153 of its Regulations.

 

LOCAL CURRENCY.

 

I.       The adjustments will be calculated from the date on which the increase
or decrease has occurred in the cost of the inputs, with regard to the
incomplete work, according to the execution schedule agreed upon in the
Contract, or if there is a delay not attributable to the CONTRACTOR, regarding
the schedule that had been agreed upon.

 

When the delay is due to causes attributable to the CONTRACTOR, the cost
adjustment will proceed exclusively for the incomplete work according to the
schedule that had been agreed upon.

 

The base indices that will serve for calculating the cost adjustments in the
Contract will be those that correspond to the date of the ceremony for
submission and opening of proposals.

 

The original prices of the inputs shall be the prevailing prices at the time the
proposals are submitted and opened, and may not be modified or replaced by any
variation that may occur between the date they are submitted and the last day of
the adjustment month.

 

II.     The cost increases or decreases of the inputs will be calculated based
upon the Producer Price Indices for Services that the Bank of Mexico publishes.

 

When the indices that the CONTRACTOR and PEP require are not found among those
published by the Bank of Mexico, PEP will proceed to calculate them according to
the prices that it investigates, using the guidelines and methodology issued by
the Bank of Mexico.

 

In the specific case of labour, the variation corresponding to the minimum wage
of the corresponding Region will be used as the index, which is published by the
National Minimum Wage Commission in the Official Journal of the Federation.

 

III.    The original prices of the Contract will remain fixed until the
completion of the contracted work. The adjustment will be applied exclusively to
the direct costs, holding the indirect costs and original earnings constant
during the performance of the Contract. The financing cost will be subject to
variations in the interest rate that the CONTRACTOR has considered in it its
proposal; and

 

IV.   All other guidelines that the Ministry of the Civil Service may issue in
this regard.

 

Review of the cost adjustments will be monthly, where the parties agree that the
authorized factors will remain fixed during this period. For calculation of the
factor that will prevail during the monthly period, the indices corresponding to
the calendar month are considered, for the month in which the validity of the
factor begins.

 

Calculation of the cost adjustments will be subject to the provisions of Section
II of CHAPTER FIVE from the Regulations of the Law of Public Works and Related
Services.

 

When the cost adjustment moves upwards, the CONTRACTOR will be the one to
initiate it. If it is downwards, PEP will be the one to do this.

 

Within sixty (60) calendar days following the receipt of the request, PEP will
issue the applicable decision in writing. The authorization of the cost
adjustment shall be made through the official decision document that agrees to
the corresponding increase or decrease.

 

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The payment of the cost adjustments will be made on the estimates following the
month in which the granted adjustment has been authorized.

 

The procedure used for updating prices consists of calculating the sum of the
terms formed by each of the proportions or incidents (expressed in decimals) in
which the respective inputs take part, multiplied by the quotient formed by the
relative current and prior inputs corresponding to the dates that determine the
update period. The cost adjustment procedure in local currency may not be
modified during the contract term.

 

The above procedure can be expressed in the following equation:

 

LOGO [g79040ex10_14pg11.jpg]

 

 

 

    Where:     Pa =    Updated sum price.     Po =    Contractual sum price that
is to be updated.     S =    Sum of the “n” terms.     Zm =    Proportion or
incident in which the input “m” takes part in the direct cost of the work.    
INm =    Is the relative cost input on the update for the input “m”     IOm =   
Is the relative cost input on the proposal submission and opening date.     m =
   Number of inputs that can go from 1 to “n”.     Ffm =    Modified Financing
Factor.     Fo =    Original Financing Factor as a fraction.     Ia =    Updated
Interest Rate as a fraction.     Io =    Original Interest Rate as a fraction.

 

 

The payment of the cost adjustments and financing cost will be done in the
estimates following the month on which the granted adjustment has been
authorized, by applying to the amount of the aforementioned estimates the
detailed increase corresponding to said factors for each type of adjustment. The
latest adjustments that have been authorized shall be applied.

 

DOLLARS:

 

The adjustment of the costs that make up the agreed unit prices in dollars,
which take part in the total direct cost, will be done according to the express
terms of article 33 section VI of the Law of Public Works and Related Services
and article 153A of its Regulations.

 

Review of the costs for the portion offered in Dollars shall be done through the
following procedure:

 

I.       The adjustments will be calculated from the date on which the increase
or decrease to the established index has taken place, with respect to the
incomplete work, according to the execution schedule that had been agreed upon
in the Contract, or in the event that there is a delay not attributable to the
CONTRACTOR, with respect to the schedule that had been agreed upon.

 

When the delay is due to causes attributable to the CONTRACTOR, the cost
adjustment will proceed exclusively for the incomplete work, according to the
schedule that had been agreed upon.

 

The date that will serve as a basis for calculating the cost adjustments for the
dollar portion, will be the date corresponding to the proposal submission and
opening ceremony.

 

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The original prices in dollars shall be the prevailing prices at the time of the
proposal submission and opening, and may not be modified or replaced by any
variation that occurs between their submission date and the last day of the
adjustment period.

 

Review of the cost adjustments will be monthly

 

II.     The increase or decrease in costs of inputs will be calculated for
inputs other than foreign labour upon the basis of the Producer Price Index
PCUOMFG-OMFG, while foreign labour will be based upon the Average Weekly
Earnings of Production Workers CES0500000030, both published by the Bureau of
Labor Statistics of the US Department of Labor. For national inputs other than
labour, they will be based upon the Producer Price Index with Services excluding
petroleum SP6, and for labour, the minimum wage published by the National
Minimum Wage Commission in the Official Journal of the Federation of the
corresponding region, as well as the average monthly exchange rates for meeting
obligations in foreign currency published by the Bank of Mexico.

 

III.    The original prices of the Contract will remain fixed until the
completion of the contracted work. The adjustment will apply exclusively to the
direct costs offered in dollars, with the excess cost factor remaining constant,
and

 

IV.   To all other guidelines that the Ministry of the Civil Service issues for
this purpose.

 

Within sixty (60) calendar days following the receipt of the request, PEP will
issue the applicable decision in writing. The authorization of the cost
adjustment shall be made through the official decision document that agrees to
the corresponding increase or decrease.

 

When the cost adjustment moves upwards, the CONTRACTOR will be the one to
initiate it. If it is downwards, PEP will be the one to do this.

 

The payment of the cost adjustments will be made on the estimates following the
month on which the granted adjustment has been authorized.

 

The formalization of the cost adjustment shall be done through the official
decision letter that agrees upon the corresponding increase or decrease.
Consequently, no agreement will be required.

 

The cost adjustment procedure in Dollars may not be modified during the validity
of the Contract.

 

The above procedure can be expressed in the following equation:

 

LOGO [g79040ex10_14pg12.jpg]

 

   

Where:

 

     

XD1 + XD2 + ZMN1 + ZMN2 = 1

 

    Fa = Update factor.  

 

Foreign inputs offered in Dollars

   

 

XD1 =

 

 

Proportion or incident by which the total of the foreign inputs takes part in
the direct cost of the work.

 

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IaD1 =

 

 

The Producer Price Index PCUOMFG-OFMG that is published by the Bureau of Labor
Statistics on the update for the foreign inputs.

   

 

IoD1 =

 

 

The Producer Price Index PCUOMFG-OFMG that is published by the Bureau of Labor
Statistics on the proposal submission and opening date for foreign inputs.

   

 

XD2 =

 

 

Proportion or incident by which the total of the foreign inputs takes part in
the direct cost of the work quoted in dollars.

   

 

IaD2 =

 

 

The Average Weekly Earnings of Production Workers CES0500000030 that is
published by the Bureau of Labor Statistics on the update for the foreign labour
quoted in dollars.

   

 

IoD2 =

 

 

The Average Weekly Earnings of Production Workers CES0500000030 that is
published by the Bureau of Labor Statistics on the proposal submission and
opening date for the foreign labour quoted in dollars.

 

 

National inputs offered in Dollars

   

 

ZMN1 =

 

 

Proportion or incidence by which the total national inputs, other than labour,
take part in the direct cost of the work quoted in dollars.

   

 

IaMN1 =

 

 

Is the National Producer Price Index with services excluding petroleum SP6,
which the Bank of Mexico publishes on the update for the national inputs, other
than labour, in the direct cost of the work offered in dollars.

   

 

IoMN1 =

 

 

Is the National Producer Price Index with services excluding petroleum SP6,
which the Bank of Mexico publishes on the proposal submission and opening date
for the national inputs, other than labour, in the direct cost of the work
offered in dollars.

   

 

ZMN2 =

 

 

Proportion or incidence by which the total national labour, takes part in the
direct cost of the work quoted in dollars.

   

 

IaMN2 =

 

 

Is the minimum wage of the Region that corresponds to the performance of the
work, which is published by the National Minimum Wage Commission in the Official
Journal on the update for national labour in the direct cost of the work offered
in dollars.

   

 

IaMN2 =

 

 

Is the minimum wage of the Region that corresponds to the performance of the
work, which is published by the National Minimum Wage Commission in the Official
Journal on the proposal submission and opening date for national labour in the
direct cost of the work offered in dollars.

   

 

TCaMN =

 

 

The average exchange rate for settling obligations in foreign currency from the
month of the update, which is obtained from the following webpage:
www.banxico.org.mx on the following path: Exchange Rate Market > Exchange Rates
> Average exchange rates of the period > Publication date in the Official
Journal of the Federation.

   

 

TCoMN =

 

 

The average exchange rate for settling obligations in foreign currency on the
month of the proposal submission and opening.

 

 

The maximum overall cumulative adjustment percentage that may be granted for the
portion offered in dollars is 3% annualized. In other words, no more than 3% may
be granted for each period of twelve (12) months or its monthly equivalent.

 

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The lower of the following will be applied: the result produced by the formula,
and the result from multiplying the number of months included between the
proposal submission and opening date and the update month by 0.25%, divided by
100.

 

(0.25% x N) / 100; where N = Number of months counted from the month following
that of the proposal submission and opening date, and up to and including the
update month.

 

NOTES:

 

If during the validity of the contract, the agreed indices in the specific
equation were to no longer be published, the parties will use those that the
Bank of Mexico and the U.S. Bureau of Labor Statistics establish as equivalent
for national and foreign inputs respectively, provided that more advantageous
conditions are not granted by this substitution with respect to the originally
agreed indices.

 

In the event that with the use of the equivalent indices it is detected that
more advantageous conditions are being granted to the CONTRACTOR, the last
authorized factor will be granted, which will prevail for the rest of the
contract.

 

None of the cost adjustment procedures may be modified during the term of the
Contract.

 

NINE

 

 

CONTRACTUAL PENALTIES.

 

The parties to this contract agree that in the event there are delays in the
performance of the work due to causes attributable to the CONTRACTOR, PEP will
apply the following contractual penalties:

 

 

    1.0    FOR EACH DAY OF DELAY     1.1    If during the well intervention, the
CONTRACTOR is delayed in the period established for this, in accordance with
Attachment “B” of the contract, it will be subject to the application of a
contractual penalty consisting of the amount equivalent to one percent (1%) of
the cost of the intervention that it is carrying out, specified in Attachment
“DE-10” of this contract, for each day of delay or prorated fraction of delay.  
  2.0    Penalty for equipment delays and/or shutdowns     2.1    Delay in
transportation. In the case of transportation services of the repair equipment,
when the Contractor does not arrive at the assigned location within the time
agreed according to items 1.2 to 1.5 of ATTACHMENT “B” due to causes
attributable to the same, PEP will penalize the CONTRACTOR US$ 350.00 for each
hour of delay or fraction of standby time.     2.2    Delay of Operations. If
the CONTRACTOR does not commence operations at the scheduled time due to causes
attributable to the same, it will be penalized US$ 350.00 for each hour or
fraction of delay.     2.3    Shutdown of Contractor Equipment. In the event
that the operation of the well repair equipment is suspended due to causes
attributable to the CONTRACTOR, it will be penalized US$ 350.00 for each hour or
fraction of shutdown of the equipment when it operates on a daily rate.     2.4
   Shutdown of PEP Equipment. In the event that the operation of the well repair
equipment owned by PEP is suspended due to causes attributable to the
CONTRACTOR, it will be penalized $350.00 for each hour or fraction of the
equipment shutdown.

 

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The penalties will be applied on the estimates that the CONTRACTOR generates. If
it is not possible to apply the established penalties in any of the above cases,
the CONTRACTOR is under obligation to deliver to PEP the amount corresponding to
said penalties through a certified cheque, otherwise the performance bond will
be exercised.

 

If PEP decides to demand compliance with this contract in accordance with
article 1846 of the Federal Civil Code, applicable by extension, the CONTRACTOR
shall submit the express consent from the surety institution regarding the
guarantees of this contract, where it indicates the period granted to comply
with the obligation.

 

The contractual penalties established in this clause may in no case be greater
than the amount of the performance bond in their entirety.

 

The application of said penalties will not take place when the delay or
interruption comes from an act of God or force majeure event or any other cause
not attributable to the CONTRACTOR.

 

The penalties for delay in the performance of the work agreed to in this clause,
or any other contractual penalty that must be applied in relation to this
contract, will be applied against the estimates that the CONTRACTOR submits to
PEP and that PEP pays to the company MERCO INGENIERIA INDUSTRIAL S.A. DE C.V.,
by virtue of its appointment as Common Representative, regardless of which of
the parties is responsible for the delay in the performance of the work and/or
any other breach of contract, according to the parts of the works that each
company is under obligation to perform as referred to in clause one of this
contract, with the understanding that PEP will not be responsible for the manner
in which the Common Representative applies the penalties and/or distributes the
payments that it receives as a result of this contract.

ELEVEN   PERFORMANCE PERIOD. The CONTRACTOR undertakes to perform the work
hereunder in 730 calendar days from September 26, 2008 and to complete it no
later than September 25, 2010, in accordance with the stipulations agreed to in
the contract and its attachments. TWELVE   TERM. This contract will be valid
from the date of its signing and until the legal act is formalized through which
the rights and obligations of the parties are ended in their entirety. THIRTEEN
 

EXTENSION TO THE COMPLETION DATE. The completion date indicated in the clause
named “PERFORMANCE PERIOD”, may be extended, without the performance period of
the contract being modified in this regard, by adjusting the execution schedule,
only when the following events occur:

 

(a) If any duly proven act of God or force majeure event occurs, the completion
date of the performance period will be extended by a period of time equal to
that of the suspension caused by the same, provided an annotation is made in the
log and the CONTRACTOR submits its extension request in writing to PEP along
with the corresponding support documentation, which shall be done prior to the
notice of completion of the work. If said request is not submitted by the
CONTRACTOR and said annotation is not performed, no extension will be granted.
PEP shall give its decision regarding the extension request within 30 (thirty)
calendar days following the submission of the request. If it does not do so, the
request will be considered accepted. In the event the extension is accepted, an
agreement in writing shall be formalized, with the updated execution schedule
being established;

 

(b) If the work or any part thereof cannot move forward or are delayed due to
any act or omission of PEP or another CONTRACTOR working on the site, without
involving the CONTRACTOR or any of its subcontractors, the completion date of
the execution schedule will be extended, for the period of time whereby the work
or part thereof is thus suspended, provided an annotation is made on the log and
the CONTRACTOR submits its extension request in writing to PEP along with the
corresponding support documentation, within the performance period. If

 

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said request is not submitted by the CONTRACTOR and said annotation is not
performed, no extension will be granted. In the event that it is proven that the
event is attributable to PEP, it shall give its decision regarding the extension
request within 30 (thirty) calendar days following the submission of the
request. If it does not do so, the request will be considered accepted. In the
event the extension is accepted, this shall be formalized through the
corresponding support certificate; and

 

(c) In the event that PEP orders the suspension of work, it shall proceed in
accordance with the clause named “CONTRACT SUSPENSION”.

FOURTEEN  

WORK FOR ADDITIONAL AMOUNTS OR FOR ITEMS NOT ESTABLISHED IN THE ITEM CATALOGUE.
If during the contract period, PEP requires the performance of additional
amounts of work or work for items not established in the item catalogue, or the
CONTRACTOR realizes the need to carry them out, the latter may only perform said
work once it has written authorization or through an annotation on the log by
the site supervisor, except in cases of an emergency where it is not possible to
wait for his authorization.

 

In the event that the scenarios established in this clause were to occur, the
CONTRACTOR, once the work is performed, may prepare its estimates and submit
them to the site supervisor on the following estimate. PEP may authorize the
payment of the estimates for the work performed.

 

In the case of additional amounts, these will be paid at the unit prices
originally agreed to in this contract. In the case of items not established in
the item catalogue, their unit prices shall be reconciled and authorized prior
to their payment, pursuant to the provisions of articles 76, 77, 78 and other
applicable articles of the Regulations of the Law of Public Works and Related
Services.

FIFTEEN   CONTRACT AMENDMENTS. The amount and/or period of the contract may be
amended for duly proven reasons, and through an agreement in writing, under the
terms of article 59 of the Law of Public Works and Related Services and articles
69 and 80 of its Regulations. SIXTEEN  

ACT OF GOD OR FORCE MAJEURE. An act of God or force majeure are understood to be
natural phenomena or acts committed by persons that are beyond the control of
either of the parties and that take place without there being fault or
negligence on the part of the parties. These events are unavoidable,
unforeseeable, or cannot be avoided even when they are foreseen, which prevent
the affected party from performing its obligations in accordance with this
contract. Among others, the following events are considered to be acts of God or
force majeure: strikes and labour disturbances (provided they have not given
rise or contributed to them), riots, quarantines, epidemics, wars (declared or
not), blockades, civil disturbances, insurrections, fires (when they have not
given rise or contributed to them) and storms.

 

In the event of suspension of work arising from an act of God or force majeure,
the provisions of the clauses named “EXTENSION TO THE COMPLETION DATE” and
“CONTRACT SUSPENSION” will be observed.

 

In the event of early termination of work arising from an act of God or force
majeure, the provisions of the clause named “EARLY TERMINATION OF THE CONTRACT”
of this contract will be observed.

SEVENTEEN  

CONTRACT PERFORMANCE BOND AND WARRANTY FOR LATENT DEFECTS.

 

CONTRACT PERFORMANCE BOND.

 

The CONTRACTOR, in order to guarantee compliance with the obligations arising
from this contract, delivered to PEP prior to signing of the contract, a bond
policy for 10% (ten percent) of the contract amount, issued by an authorized
surety institution, in favour of PEP.

 

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  The CONTRACTOR expressly states:   (A)    Its intent to waive the right for
compensation as granted by the applicable substantive legislation, in the event
there are credits in its favour owed by PEP. It therefore gives its express
consent so that the granted guarantee may take effect in the event of a breach
of the obligations arising from this contract, as well as any other balance in
favour of PEP.   (B)    Its consent to the bond being paid independently of any
type of appeal being filed to the administrative or non-judicial courts.   (C)
   Its consent for the bond that guarantees contract performance to remain in
force during the substantiation of all judicial or arbitration proceedings and
the respective appeals that are filed in relation to the contract, until the
final decision is given that orders execution by the governing authority or
court.   (D)    Its consent to be bound jointly with its surety in the case of a
claim, and based upon the power that it is granted by article 118 bis of the
Federal Law of Surety Institutions, that the exception of judicial consideration
will only be justified if a sealed copy of the lawsuit is produced. In this
lawsuit it must state that by exercising the principal action, the debtor
indicates this contract as being the document for the basis of this action, and
that there is a relationship between the benefits claimed and the facts that
support the non-admissibility of the claim. It expressly waives any other
meaning that may be given to the exception of judicial consideration or
enforceability of the bond policy that is subject to a judicial or
administrative dispute between the parties of this contract. Likewise, in this
scenario, the surety institution will enter the payment of the applicable amount
on the business day immediately following the expiry of the thirty-day period
granted by article 93 of the Federal Law of Surety Institutions to decide on the
admissibility of the claim.   (E)    Its acceptance of the performance bond
staying in force until the guaranteed obligations have been fulfilled in their
entirety to the satisfaction of PEP, with the understanding that the agreement
for its release shall be granted through a document signed by PEP.   (F)    Its
consent to the surety settling 50% of the amount guaranteed in the bond to PEP
in the event that it does not submit the warranty on defects, latent defects and
any other liability under the terms of the provisions of the Law of Public Works
and Related Services and of this contract.   (G)   

Its consent to the claim that is submitted to the surety due to breach of
contract, being duly integrated with the following documentation:

 

1. Written claim to the surety institution.

 

2. Copy of the bond policy and its amending documents, where applicable.

 

3. Copy of the guaranteed contract and its attachments, where applicable.

 

4. Copy of the notification document to the debtor for its breach of contract.

 

5. Quantification of the breach of contract.

  (H)    Its consent to the surety paying the maximum guaranteed amount to PEP
in the event that the work hereunder is not usable or available by PEP,
notwithstanding the fact the corresponding progress certificate had been issued.
This is with the understanding that any exception arising from the investment
and/or partial or total application of the advance payment and/or payment of
estimates will not be valid for the purpose of determining the enforceability of
the entire amount guaranteed in the bond. This is because, according to the
purpose of this contract, the obligation of investing and/or applying the
advance payment and the payment of estimates is indivisible, since its purpose
is a performance of work that can be useful or available to PEP only when it is
fulfilled in its entirety. Consequently, any application of funds and/or partial
or full investment of the advance payment and/or payment of estimates received
by the CONTRACTOR that does not bring about useful and available work to PEP in
accordance with the purpose of this contract, will be ineffective for
establishing any exception that attempts to lessen the enforceability of the
total guaranteed amount.

 

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  (I)    Its consent to remove and take away the equipment or goods hereunder,
in the event they are not useable or exploitable, when so required by PEP.  

In the event of any modification to the amount or period agreed to in this
contract and/or its attachments, the CONTRACTOR undertakes to deliver to PEP
within fifteen (15) calendar days following the formalization of the respective
amending agreement, the amending document for the originally granted guarantee,
according to the terms established in this contract, where the obligations of
this contract and the corresponding agreement are guaranteed. In the event that
the CONTRACTOR does not comply with this delivery, PEP may decide to enforce the
administrative rescission of the contract. The amending document shall contain
the stipulation that it is joint, several and inseparable from the bond
initially submitted by the CONTRACTOR.

 

Provided the contract is being complied with under the agreed terms, the
guarantee shall be replaced by another equivalent to 10% (ten percent) of the
amount of the work not yet performed, including amounts related to cost
adjustments and agreements in said sum, if any, except for what is provided for
in the second paragraph of article 61 of the Regulations of the Law of Public
Works and Related Services, which will be submitted within 15 (fifteen) calendar
days from the date on which the CONTRACTOR is notified in writing of the
authorized investment.

 

WARRANTY ON LATENT DEFECTS.

 

Once the work is completed, or accepted (where applicable) under the terms of
article 138 of the Regulations of the Law of Public Works and Related Services,
the CONTRACTOR will be liable for the defects arising therefrom, from latent
defects and any other liability that it has incurred, under the terms indicated
in this contract and in the applicable legislation.

 

The work will be guaranteed for a period of 12 (twelve) months for compliance
with the obligations referred to in the above paragraph. Therefore, prior to
accepting the work, the CONTRACTOR, at its own choosing, shall create a bond for
the equivalent of 10% (ten percent) of the total exercised amount of the work;
submit a standby letter of credit for the equivalent of 5% (five percent) of the
total exercised amount of the work, or provide liquid funds for an amount
equivalent to 5% (five percent) of the same amount in trusts especially created
for this purpose. This warranty will be released once the twelve months have
elapsed, starting from the date of the physical certificate of acceptance of the
work, provided that no liability has arisen against the CONTRACTOR during that
period.

 

When the quality warranty is created through a bond policy, it shall be issued
by an authorized surety institution, and shall be issued in strict adherence to
the Format DI-4 presented in the bidding guidelines of this contract.

 

When the quality warranty is created through a standby letter of credit, it
shall be confirmed or issued by a banking institution authorized to operate in
Mexico, and shall be issued in strict adherence to the quality warrantee format
issued by the Risks and Insurance Management of this contract.

 

When the warranty is created through the contribution of liquid funds in a
trust, the latter shall be managed by a trust institution authorized to operate
in the Mexican Republic. The Trust shall include the following aspects: it shall
be irrevocable; shall be made out to PEP as the beneficiary; and the resources
under the trust shall be invested in fixed income instruments.

 

If the warranty on defects, latent defects in the work and any other liability
was established through a bond, it will be released in accordance with the
provisions of the bond policy that is granted under the terms of article 68 of
the Regulations of the Law of Public Works and Related Services.

 

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The CONTRACTOR, where applicable, may withdraw its contributions into the trust
and the respective earnings, after twelve months have passed from the date of
acceptance of the work. The bond or letter of credit will be automatically
cancelled in the same period of time, as the case may be. In the event that an
irrevocable letter of credit has been issued, the CONTRACTOR will proceed with
its immediate cancellation.

 

The rights of PEP will be preserved to demand the payment of amounts that are
not paid from the compensation that in its opinion are applicable, once the
guarantees are exercised according to this clause.

 

If prior to the execution of the applicable guarantees, the CONTRACTOR states
its desire to pay the guaranteed amount directly, said payment shall be received
by PEP. In this case, the corresponding guarantees shall be released.

EIGHTEEN  

INSURANCE POLICIES. The CONTRACTOR shall have insurance policies for
Construction All Risks and/or Assembly during the physical execution of the
works (including, where applicable, performance tests), issued by an insurance
company legally authorized for this purpose by the United Mexican States. It
will deliver to PEP, prior to the start date of the physical execution of the
works, a copy and original of the documents that prove payment of the premiums
for comparison and to be later returned.

 

In the case of any accident that occurs during the term of the policy, the
Contractor will be solely responsible for filing any claim to its insurers,
completely documented. Any and all deductibles applicable to the aforementioned
insurance policy will invariably be assumed by the Contractor.

 

If the aforementioned insurance policies are not delivered to PEP the day prior
to the start date of the physical execution of the works at the very latest, PEP
will be authorized to not allow the Contractor to execute the works hereunder,
and this will not release the Contractor from its full responsibility as far as
the Execution Schedule originally agreed to for the performance of the contract
purpose.

 

In the case of any amendment to this contract that affects the insurance
policies, the Contractor shall deliver the respective policy or endorsement
prior to the formalization of the amendment.

 

The Contractor will be solely responsible for taking out the insurance limits,
terms, conditions and scope of the coverage, as well as the deductibles and
exclusions, which it deems appropriate based upon its risk analyses. Therefore,
PEP will not be responsible for the sufficiency or insufficiency of the
insurance conditions that the insurance policy may have.

 

OTHER INSURANCE

 

The Contractor will be solely responsible for having any other insurance policy
at its cost, which it deems necessary according to the nature and complexity of
the contract scope.

NINETEEN  

AUTHORIZED REPRESENTATIVES. PEP, prior to commencement of the work, will
designate the site supervisor, who will perform the functions established in
article 53 of the Law of Public Works and Related Services, and article 84 of
its Regulations. Through this site supervisor, it will give the CONTRACTOR
instructions in writing that it deems pertinent related to its performance, in
the agreed manner and with the modifications that PEP may order.

 

Supervision is the technical assistance provided by the site supervisor’s
office, with the functions that are indicated in this regard under article 86 of
the Regulations of the Law of Public Works and Related Services, independently
of those that may be agreed to in the supervision contract, where applicable.
When supervision is performed by third parties, the site supervisor may install
this after commencement of the work.

 

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For its part, the CONTRACTOR is under obligation to have a construction
superintendent for the entire time the work is performed, who shall know the
project and the terms of reference and have the power to hear and receive all
types of notifications related to the work, even those of a personal nature. He
will also have sufficient powers to make decisions in all that relates to
contract compliance, under the terms established in article 87 of the
Regulations of the Law of Public Works and Related Services.

 

Before commencing work, the CONTRACTOR is under obligation to designate and
maintain during the term of the contract, a manager over industrial safety,
occupational health and environmental protection, as well as a coordinator. They
shall know the project, as well as the industrial safety, occupational health
and environmental protection standards and procedures established by PEP, as
well as the provisions in those areas contained in Attachment “S” “Safety,
occupational health and environmental protection obligations of the Suppliers or
Contractors that perform activities at the facilities of PEMEX Exploración y
Producción”.

 

The construction superintendent of the CONTRACTOR, as referred to in this
clause, may not act as a manager over industrial safety, occupational health and
environmental protection of the CONTRACTOR.

 

At any time and with sufficient grounds, PEP may request that any of the
CONTRACTOR’S representatives be changed, and the latter is under obligation to
designate another person who meets the corresponding requirements.

TWENTY  

SUBCONTRACTING. In the event that the CONTRACTOR needs to subcontract any part
of the work or when it purchases materials or equipment that include their
installation on the site, which have not been included in its proposal as work
to be subcontracted, it shall request authorization from PEP 05 (FIVE) calendar
days in advance to the scheduled commencement of the work it intends to
subcontract. It shall indicate: (i) the name of the possible subcontractor in
question; (ii) the part of the work to be subcontracted; and (iii) sufficient
information so that PEP is able to evaluate the technical capability of the
possible subcontractor. Likewise, PEP will be entitled to request from the
CONTRACTOR any information in addition to that delivered by the latter, in order
to authorize the subcontracting in question. PEP will have a period of 05 (FIVE)
calendar days from the date of receipt of the notification, or from the date of
receipt of the additional information requested, to accept or reject the
execution of said contract in writing. In the event that the aforementioned
period has passed without PEP having accepted or rejected the request from the
CONTRACTOR in writing, it will be deemed not accepted.

 

In the event that the CONTRACTOR wishes to replace a subcontractor, it shall
request authorization from PEP under the terms indicated in this clause. This
will not be grounds for increasing the agreed prices or the execution period.

 

The parties agree that the CONTRACTOR will be strictly prohibited from
subcontracting the work hereunder in its entirety.

 

Notwithstanding any subcontracting, the CONTRACTOR is and will be solely liable
for the quality and the proper and timely execution of the work in accordance
with this contract. The subcontractors will not have any action or right to
exercise against PEP whatsoever.

TWENTY-ONE   CONTRACTOR RELATIONS WITH ITS WORKERS. As employer and manager of
the personnel that it uses in order to perform the work hereunder, the
CONTRACTOR will be solely liable for the obligations arising from the legal
provisions and other labour and social security legislation towards its workers.
For this reason, the CONTRACTOR agrees to be liable for all claims that its
workers or third parties may file against it or against PEP, including personnel
from its authorized subcontractors who take part in the contracted work with or
for PEP. In the event that PEP is involved, it will be under obligation to hold
PEP harmless from any trial or liability arising from the performance of the
work hereunder. It will likewise compensate PEP whenever the latter may so
request in writing, for any amount that it should pay in this regard, including
the payment of lawyers’ fees.

 

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TWENTY-TWO  

LIABILITY OF THE PARTIES. The CONTRACTOR will be solely liable for the
performance of the work and will be subject to all laws, regulations and
legislation of the governing authorities in the area of construction, safety,
use of public roads, ecological and environmental protection that govern
federal, state or municipal boundaries. It will also be subject to the safety
and health provisions of PEP for carrying out the work established in Attachment
“S” “Safety, occupational health and environmental protection obligations of the
Suppliers or Contractors that perform activities at the facilities of PEMEX
Exploración y Producción” of this contract and to the instructions given by PEP
in this regard, for which it undertakes to know the respective standards and
regulations that apply according to the work hereunder.

 

For work that has not been performed according to the stipulations of this
contract or to the orders from PEP that are given in writing, PEP will order
their immediate demolition, repair or replacement with additional work that may
be necessary, which the CONTRACTOR will complete at its own expense, without
having any right to additional compensation whatsoever. In this case, PEP, if it
deems appropriate, may order the total or partial suspension of contracted work,
as long as said additional work is not performed. This will not be grounds for
increasing the amount or time period indicated in this contract for its
completion.

 

If the CONTRACTOR performs work for a value higher than what has been
contracted, independently of the liability that it incurs for performing excess
work, will not be entitled to claim any payment whatsoever, nor any modification
of the period for performing the work.

 

The parties acknowledge that liability for breach of their contractual
obligations may not exceed the total amount of the contract, without prejudice
to the application of late penalties established in this instrument.

 

In cases of fire, explosion, surface rupture or loss of control of any well, PEP
will coordinate the operations until the well is completely under control, and
the CONTRACTOR is under obligation to assist PEP in the control operations, and
will provide the equipment, materials and services included and required to
control the well, and where applicable, for drilling a relief well or wells. The
expenses and costs arising from the above will be borne by PEP.

 

PEP will be solely liable for environmental damages arising as a result of the
activities related to hydrocarbons under the terms of article 3 of the
Regulations of the Regulatory Law from Article 27 of the Constitution in the
Area of Petroleum. Therefore, in no case will the CONTRACTOR be deemed liable
for the loss of hydrocarbons, for general production losses or for damages
caused to third parties or the environment as a result of PEP’S own operation.
Consequently, it will release the CONTRACTOR from any obligation for any claims
arising from seepage or any other uncontrolled flow of oil, gas, water or any
other substance that comes from the subsoil.

 

PEP will be responsible for the general administration of the project, as well
as for providing the basic drilling schedules, designing and defining the
seating depth of the casing pipe, deciding upon the core cutting intervals,
defining the production equipment, selecting the discontinuous intervals,
defining the production testing and generally selecting and requesting the
performance of any of the optional work from the CONTRACTOR, and where
applicable defining the capping of abandoned wells.

 

The CONTRACTOR will be liable for any contamination, including its control and
removal, that originates on the ground surface or in the sea due to leaks,
spills or dumping of gas, fuels, lubricants, engine oils, drilling fluids,
completion and drilling cuts, pipe grease, solvents, ballasts, sediment,
garbage, sewage or any other liquid or solid of any nature in the possession and
control of the CONTRACTOR.

 

The CONTRACTOR will not be liable for damage or a loss to any formation, strata
or reserve under the surface, with the understanding that the CONTRACTOR is
under the obligation that

 

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when performing the work, it will use the best available international
practices, the proper, advanced and safe technologies, and the fluids used will
meet the appropriate physicochemical, geological and filtering properties.

 

The CONTRACTOR pledges that the handling, use and disposal of any substance,
waste, particle or contaminating material, including any form of energy, will be
carried out in accordance with the GENERAL LAW FOR COMPLETE WASTE PREVENTION AND
MANAGEMENT and other applicable provisions.

 

Notwithstanding the foregoing, the damages that either of the parties may cause
to the other and/or third parties due to their negligence, misconduct or bad
faith, with be borne by the party that causes them. When said damages arise
without negligence, misconduct or bad faith from either of the parties, each of
them will bear their own costs without a right to compensation.

 

It is agreed that under no circumstance will the parties be liable to each other
for indirect damages of any nature, punitive damages or non-immediate
consequential damages, including those arising from fire, explosion, surface
rupture or loss of control of any well.

 

When one of the parties causes damage and the affected party demands the repair
of said damage from the party that did not cause it, and this has been given by
a judicial or administrative decision, the party that caused it shall pay the
amounts that the defendant may have incurred as a result of the actions,
complaints, lawsuits, claims, trials, proceedings, taxes, costs and direct and
immediate expenses, including lawyers’ fees and legal costs, regulated at the
corresponding fee.

 

The risks, conservation and cleanliness of the work up to the time of its
delivery will be the responsibility of the CONTRACTOR, as well as compliance
with what is stated in articles 90 and 91 of the Regulations of the Law of
Public Works and Related Services.

TWENTY-THREE  

ACCEPTANCE OF THE WORK. The acceptance of the work will be done in accordance
with article 64 of the Law of Public Works and Related Services, and articles
135, 136, 137 and 138 of its Regulations. Acceptance of the work will be
recorded in the corresponding certificate.

 

Once the work hereunder has been concluded, the complete acceptance of said work
will proceed. For the purposes of the foregoing, the CONTRACTOR will notify PEP
in writing or through a record that is made on the log, of the full completion
of the work, indicating that all of this work is completed in accordance with
the terms of reference of this contract. Within fifteen (15) calendar days
following the date of receipt of the aforementioned notification, the resident
service supervisor will verify that the work is properly concluded, and must
prepare the corresponding support certificate.

 

If during verification of the work, the site supervisor’s office observes
deficiencies in the performance and completion thereof, or decides that it has
not been performed according to the contract terms of reference, it will request
in writing that the CONTRACTOR repair or correct it, so that it may be performed
pursuant to the provisions established in this contract. In this scenario, the
agreed verification period of the work in the contract may be extended for the
period of time agreed upon by the parties to correct the deficiencies. The
foregoing is without prejudice to PEP deciding to rescind the contract.

 

When defects or latent defects appear within the year following the completion
date that is established in the acceptance certificate, in the work performed or
goods provided for executing the purpose of this contract, PEP will request
their immediate repair or replacement, which the CONTRACTOR will complete
without any entitlement to compensation. If the CONTRACTOR should not attend to
the requirements of PEP within the stipulated period, the latter may entrust the
repair or replacement to third parties or do it directly, under the terms of the
applicable legal provisions, at the expense of the CONTRACTOR.

 

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  If the CONTRACTOR should not attend to the defects and latent defects in the
work performed or goods provided for executing the purpose of this contract, at
the order of PEP within the requested period, PEP will exercise the warranty
granted by the CONTRACTOR, for the period of 12 (twelve) months once the work is
concluded, as referred to in the corresponding paragraph of the clause named
“CONTRACT PERFORMANCE BOND AND WARRANTY ON LATENT DEFECTS” of this contract.
TWENTY-FOUR   SETTLEMENT AND CONTRACT COMPLETION. Having physically accepted the
work, PEP through the site supervision office, and the CONTRACTOR, shall prepare
the settlement of the work within a term of 60 (sixty) calendar days, wherein
credits in favour and against each of the parties will be recorded, describing
the general item that gave rise to them and the resulting balance, under the
terms of article 64 of the Law of Public Works and Related Services, and
articles 139 to 143 of its Regulations. The document where the settlement of the
work is recorded will form part of this document and shall at least contain the
stipulations of article 141 of the Regulations of the Law of Public Works and
Related Services. TWENTY-FIVE  

CONTRACT SUSPENSION. PEP has the power to suspend temporarily, in whole or in
part, the work contracted in any state in which it is found, on justified
grounds or of general interest, and may decide on the temporary nature of the
suspension, which may not be extended or be indefinite, without this implying
the termination of the contract. For this reason, PEP will notify the
CONTRACTOR, stating the causes bringing this about, the date it will start and
the probable resumption of work, as well as the actions that it must consider
with regard to personnel and construction equipment. In all cases of suspension,
the site supervisor’s office will prepare a support certificate that will
contain at least what is indicated in article 117 of the Regulations of the Law
of Public Works and Related Services.

 

The completion date will be extended proportionately to the period that includes
the suspension, without modifying the agreed performance period. The deficient
supply of materials and permanent installation equipment by the CONTRACTOR will
not be grounds for suspending the work, when said supply is the responsibility
of the CONTRACTOR.

 

When the suspension of work is decided due to causes attributable to PEP, the
CONTRACTOR may request the payment of non-recoverable expenses from the time of
notification that terminates the suspension, provided these are reasonable, duly
proven and related directly to this contract, as stated in article 62 of the Law
of Public Works and Related Services, and are generated during the suspension.
These expenses will be limited to the provisions of article 116 of the Law of
Public Works and Related Services.

 

If during the validity of this contract there are suspensions of work, which
periods are reduced and difficult to quantify, the parties may agree that the
periods be grouped on a monthly basis and formalized by signing a single support
certificate, which will be prepared on the first day of the month following the
month on which these suspensions had taken place.

 

When the suspensions arise from an act of God or force majeure, there will be no
liability whatsoever to the parties. They must only sign an agreement where it
acknowledges the period of the suspension and the dates for restarting and
ending the work, without modifying the execution period established in the
contract. Therefore, only the payment of non-recoverable expenses indicated in
the second paragraph of article 119 of the Regulations of the Law of Public
Works and Related Services will proceed.

 

When the continuation of services is made impossible by the act of God or force
majeure, the CONTRACTOR may choose to not carry them out. In this scenario, it
shall observe the provisions of the clause named “EARLY TERMINATION OF THE
CONTRACT” of this agreement in principle.

TWENTY-SIX   EARLY TERMINATION OF THE CONTRACT. PEP may terminate this contract
early through a written notice given to the CONTRACTOR for this purpose,
pursuant to the terms of articles 60 and 62 of the Law of Public Works and
Related Services and articles 120, 121, 122 and 123 of its Regulations.

 

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TWENTY-SEVEN   ADMINISTRATIVE RESCISSION OF THE CONTRACT. PEP may rescind this
contract administratively, in the event that the CONTRACTOR breaches its
obligations in the following cases:   1).-    If the CONTRACTOR, due to causes
attributable to it, does not commence the work hereunder within fifteen calendar
days following the agreed date without just cause, pursuant to the Law of Public
Works and Related Services and its Regulations.   2).-    If the CONTRACTOR
interrupts the performance of work without just cause, or refuses to correct any
part thereof, which had been detected as defective by PEP.   3).-    If the
CONTRACTOR does not perform the work in accordance with the stipulations of this
contract, or without just cause does not observe the orders given by the site
supervisor or by the supervisor.   4).-    If the CONTRACTOR does not comply
with the work orders due to a lack of materials, labour or construction
equipment, and in the judgment of PEP it may hinder the satisfactory completion
of the work within the stipulated period or stage. This will not mean a delay in
the performance of the work order, and will therefore not be considered a breach
of this contract and grounds for its rescission, when the delay takes place due
to the lack of information with regard to plans, specifications and quality
standards, physically turning over the work areas and the timely delivery of
materials and permanent installation equipment, licenses, permits that PEP must
provide or furnish, as well as when PEP had ordered the suspension of the work.
  5).-    If the CONTRACTOR is declared to be under bankruptcy proceedings under
the terms of the Bankruptcy Proceedings Law.   6).-    If the CONTRACTOR
subcontracts part of the work hereunder, without having the written
authorization of PEP.   7).-    If the CONTRACTOR assigns the collection rights
arising from this contract, without the written authorization of PEP.   8).-   
If the CONTRACTOR does not provide the necessary means and information to PEP
and the departments that have the power to intervene for the inspection,
oversight and supervision of the services.   9).-    If the CONTRACTOR fails to
keep the guarantees current during the execution time of the work, or in the
event that other guarantees are required due to the amendments to the contract
(endorsements), these guarantees are not delivered, or when delivered they do
not meet the conditions stipulated in the contract and the applicable standards.
  10).-    The disclosure of confidential information to third parties that PEP
has provided to the CONTRACTOR.   11).-    The violation of professional secrecy
or disclosure of confidential information to third parties that PEP has provided
to the CONTRACTOR.   12).-    If the CONTRACTOR does not meet any of its
obligations established in the clause named “Financing Sources”.   13).-    Due
to a repeat breach of any of the obligations contained in the “S” Attachment.
For the purposes of this cause for rescission, a repeat breach will be
understood as lack of compliance by two or more events, or two or more times for
the same event, whether or not it is a question of obligations referring to time
periods.

 

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  14).-    When as a result of carrying out the contract, the CONTRACTOR causes
the death of one or more people, due to its lack of foresight, negligence or
failure to comply with any of the requirements or obligations established in the
“S” Attachment, or due to a breach of other contract obligations or provisions
in the area of Environmental Safety and Health.   15).-    If as a result of the
performance of the work, the death of a worker of the CONTRACTOR or PEP is
caused, or of a third party due to the causes attributable to the CONTRACTOR due
to its lack of foresight, negligence or failure to comply with the contract
obligations or the safety provisions.   16).-    When the CONTRACTOR causes an
accident by failing to comply with the general requirements stated in the
following points: II.9; II.10 or II.11.5 of Attachment “S”.   17).-    When
carrying out the contract, the CONTRACTOR commits environmental crimes by
failing to comply with any of the requirements of the “S” attachment, other
contract obligations or provisions in the area of Environmental Safety and
Health.   18).-    If the CONTRACTOR, being a foreigner, invokes the protection
of its government in relation to the contract.   19).-    If the CONTRACTOR’S
workers call a strike or stoppage of work, because it has not properly paid its
wages and other labour benefits.   20).-    For any illegal conduct attributable
to the workers of the CONTRACTOR that damage the assets of PEP, without
prejudice to a decision from the Public Ministry of the Federation to a report
filed by PEP for these acts.   21).-    In general, due to the CONTRACTOR’S
breach of any of the obligations arising from this contract and its attachments,
or the laws, agreements, regulations and other applicable obligations;  

 

When it is PEP who decides to rescind the contract, said rescission will be
fully legal by operation of law and without the need for a court declaration.
Completion of the procedure that is established in the following clause will be
sufficient. When it is the CONTRACTOR who decides to rescind the contract, it
will need to go to the corresponding lower court and obtain the respective
declaration.

 

In the case of a contract rescission due to causes attributable to the
CONTRACTOR, once the respective decision has been issued, PEP will abstain from
paying the amounts resulting from services rendered that are not yet settled,
until the appropriate settlement is executed, as a precaution and from the time
said rescission commences. This shall be done within 30 (thirty) calendar days
from the date on which this decision is communicated, in order to proceed to
exercise the guarantees. The cost overrun for work not yet performed that is
delayed, shall be provided for in the settlement, as well as all that concerns
the recovery of materials and equipment that have been delivered to it, where
appropriate.

 

Once PEP has notified of the commencement of the contract rescission procedure,
PEP will proceed to take immediate possession of the work performed to take
charge of the property and the respective facilities and to suspend the work.
With or without the presence of the CONTRACTOR, the site supervisor will prepare
a support certificate of the status of the work, which shall at least contain
what is stated in article 130 of the Regulations of the Law of Public Works and
Related Services. This certificate will serve as a basis for the corresponding
settlement. The support certificate will be prepared in the presence of a Notary
Public.

 

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PEP may, along with the CONTRACTOR, reconcile the balances arising from the
rescission in order to preserve the interests of the parties within the
settlement. PEP may record in the settlement the acceptance of the work that the
CONTRACTOR has performed until the rescission of this contract, as well as the
equipment and materials that had been installed on site or are in the process of
manufacturing, provided they are subject to use within the incomplete work, and
must in all cases adhere to sections I, II, III and IV of article 132 of the
Regulations of the Law of Public Works and Related Services.

 

When the contract is rescinded due to causes attributable to PEP, it will pay
for the work performed, as well as the non-recoverable expenses, provided these
are reasonable, duly proven and related directly to this contract, as stated in
article 62 of the Law of Public Works and Related Services.

 

The cost overrun is the difference between the amount that it would represent
for PEP to conclude the pending work with another CONTRACTOR and the cost of the
unperformed work at the time this contract is rescinded. In order to determine
the cost overrun and its amount, PEP will proceed according to the instructions
of article 134 of the Regulations of the Law of Public Works and Related
Services.

 

In the event that the contract is rescinded under the terms of this clause, PEP
may choose between applying the contractual penalties or the cost overrun as
referred to in the above paragraph, under the terms of section II of article 62
of the Law of Public Works and Related Services.

 

The CONTRACTOR will be under obligation to return all documentation to PEP that
PEP had delivered to it for performing the work, within a period of 10 (ten)
calendar days, from the commencement of the respective procedure.

TWENTY-EIGHT  

RESCISSION PROCEDURE. If PEP deems that the CONTRACTOR has violated any of the
grounds for rescission that are stated in this contract, it will proceed as
follows:

 

1.      The rescission procedure will begin from the time that the CONTRACTOR is
notified of the breach of contract that it has incurred, so that within a term
of 15 (fifteen) business days, it may provide an explanation as it is entitled
and provide the proof that it deems appropriate;

 

2.      Once the term has passed as referred to in the above point, a decision
will be made in consideration of the arguments and proof that had been
presented; and

 

3.      The decision to (not) rescind the contract shall have a proper basis and
grounds and be duly communicated to the CONTRACTOR within 15 (fifteen) business
days following the date on which it has given its answer.

 

In the event that PEP decides to rescind the contract, said rescission will take
effect from the notification date of the respective decision, so it may proceed
according to section II of article 62 of the Regulations of the Law of Public
Works and Related Services, without the need for a court ruling.

 

The CONTRACTOR acknowledges and accepts that the public servant that is signing
this contract in the name and on the behalf of PEP, or the public servant that
has the powers to do so, will be the ones who, where applicable, perform each
and every one of the processes related to the administrative rescission
procedure of this contract, and indicate the following by way of illustration
but not limitation: determining the beginning of the administrative rescission
procedure, processing all of the stages of the same and for deciding upon its
administrative rescission, and other actions that may be necessary for the
administrative rescission procedure.

TWENTY-NINE   INFORMATION CONFIDENTIALITY. All drawings, plans, specifications,
designs, data, reports, studies or other documents or information of any nature,
in any form, that are developed by the CONTRACTOR or by any of its
subcontractors, or provided to the CONTRACTOR by PEP, in relation to the
performance of the work hereunder, will be the exclusive property of PEP.

 

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The CONTRACTOR grants PEP a permanent, transferable, non-exclusive license that
is free of fees to use all concepts, products, processes (patentable or not),
material protected by copyright (including but not limited to: documents,
specifications, calculations, maps, drafts, notes, reports, data, models,
samples, plans, designs and software) and information that is the property of
the CONTRACTOR, once the performance of the work established in this contract
has commenced, and is used by the CONTRACTOR or provided or delivered to PEP by
the CONTRACTOR during the provision of the work hereunder.

 

All concepts, products, processes (patentable or not), material subject to
protection or protected by copyright (including but not limited to: documents,
specifications, calculations, maps, drafts, notes, reports, data, models,
samples, plans, designs and software) or information that is the exclusive
property of PEP that had been developed, produced or put into practice for the
first time by the CONTRACTOR or any of its employees as a result of the
performance of the work hereunder, will be the property of PEP once it is
created, whether it was delivered to PEP or not at the time it was created.
Where applicable, it must be delivered to PEP when it so requires.

 

If PEP so requires in writing, the CONTRACTOR shall do all that is necessary in
favour of PEP and in the manner that the latter indicates, to obtain patents or
copyrights on any part of the result of the work, provided this part is
patentable or may be subject to copyrights. This is with the understanding that
the patents, copyrights or any other exclusive right that arises from this
contract will invariably be created in favour of PEP.

 

The CONTRACTOR guarantees that said information will be disclosed to its
employees only to the extent that they need to know, and that it will not make
any announcement, take any photographs or provide information to any member of
the public, press, business entity or any other official body, unless it has
obtained the prior written consent from PEP.

 

For the purpose of compliance with the above obligations, the CONTRACTOR agrees
to take all necessary measures to ensure that its personnel will keep said
information in the strictest of confidence, which include but are not limited
to: establishing procedures in consultation with PEP to ensure the
confidentiality of said information, and taking the necessary measures to
prevent its disclosure to any unauthorized party. It also agrees to remedy any
unauthorized disclosure, including but not limited to requiring the execution of
confidentiality agreements for its employees and instituting security measures.

 

Notwithstanding the foregoing, this confidentiality obligation will not apply to
the information of that nature that was known previously by the CONTRACTOR, or
that was made available to it on an unrestricted and non-confidential basis,
whether it is or may become generally available to the public in a manner other
than the erroneous dissemination of the CONTRACTOR personnel.

 

Likewise, both parties acknowledge and accept to consider all information
(technical, legal, administrative, accounting, financial, etc.) that is
documented in any support material as confidential, which has been developed and
is directly or indirectly related to the award procedure, or during the
performance of the work, as well as all information or documentation that causes
any claim or technical dispute.

 

The confidentiality obligations contained in this clause will remain in effect
for a period of twelve (12) years from the completion or rescission date hereof.

THIRTY   CLAIMS AND DISPUTES OF A TECHNICAL OR ADMINISTRATIVE NATURE. Should any
claim or dispute of a technical or administrative nature arise related to the
interpretation or execution of the contract, the CONTRACTOR may make its written
claim to the site supervisor within 10 (ten) calendar days of the occurrence of
the difference, so that the latter may make a decision on the difference
existing between the parties. If it does not make its claim within the period
indicated in this paragraph, the CONTRACTOR waives its right to any latter claim
for the difference in question.

 

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CONTRACT No. 424048860

 

 

The CONTRACTOR, for each difference, may only file one claim to the site
supervisor, and for its disagreement with the decision to the claim, a technical
or administrative dispute under the terms of this clause.

 

In order to reach a decision on the claim, the site supervisor will perform the
pertinent consultations and will bring together the necessary elements and/or
documents. The site resident will have a period of 10 (ten) calendar days from
the receipt of the request made by the CONTRACTOR to issue his decision in
writing and make it known, establishing the contractual basis for his decision.

 

Once having received the decision from the site supervisor’s office, the
CONTRACTOR will have a period of three (3) calendar days to notify of its
rejection. Otherwise it will be deemed as accepted.

 

If the CONTRACTOR accepts the final decision, the site supervisor will proceed
to issue the corresponding document, and where applicable, will proceed with the
formalization of the corresponding agreement.

 

If the decision from the site supervisor is not accepted by the CONTRACTOR, it
may request that the claim be reviewed as a dispute of a technical or
administrative nature.

 

If the CONTRACTOR chooses to have the claim reviewed as a dispute of a technical
or administrative nature, it will discuss the same aspects that gave rise to its
claim, and therefore may not add additional, supplementary or complementary
petitions, rectify defects, make corrections or replacements to the original
claim.

 

The dispute procedure of a technical or administrative nature will be carried
out in the following manner:

 

The CONTRACTOR shall submit it in writing to PEP, with a copy to the site
supervisor, indicating the disputed topics, within 3 (three) calendar days
following the date on which the CONTRACTOR had received the final decision of
the site supervisor, regarding the resolution of the claim.

 

The request that the CONTRACTOR may make in this regard shall indicate whether
it is a dispute of a technical or administrative nature that is subject to
resolution, and will contain the following as a minimum:

 

a) Itemized description of the facts under dispute, listing them specifically
with the documentation that proves them;

 

b) Clear and precise indication of its intentions, stating the arguments and
contractual and legal provisions that support its claim;

 

c) Documentation verifying the facts upon which its dispute is based, duly
organized and identified by the attachment number.

 

The Office of the Deputy Manager of Contract Services D.N. of P.E.P. may decide
for itself on the dispute of a technical or administrative nature which has been
exercised by the CONTRACTOR, or delegate this power to the department that it
deems pertinent, in which case it will notify the CONTRACTOR of the name of the
designated department, sending a copy to the site supervisor.

 

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CONTRACT No. 424048860

 

 

The Office of the Deputy Manager of Contract Services D.N. of P.E.P. or where
applicable, the designated department, will verify that the dispute has been
submitted in due time and form, otherwise it will reject it. If the dispute is
not rejected, the Office of the Deputy Manager of Contract Services D.N. of
P.E.P., or where applicable, the designated department, will notify the
CONTRACTOR of the commencement of the dispute procedure, who will have 10 (ten)
business days to submit any documents or allegations that it deems necessary,
which it had not submitted with its request. The Office of the Deputy Manager of
Contract Services D.N. of P.E.P., or where applicable, the designated
department, will proceed to analyze and study the topic in dispute and will
summon the CONTRACTOR in writing within a period of 3 (three) days from the
submission of the dispute, to initiate clarifications.

 

During the clarifications, the parties will meet as many times as necessary and
the assigned department shall notify the CONTRACTOR of its decision within 30
(thirty) calendar days following its commencement.

 

If the CONTRACTOR accepts the decision on the dispute of a technical or
administrative nature, the Office of the Deputy Manager of Contract Services
D.N. of P.E.P., or where applicable, the designated department, will notify the
site supervisor, who will issue the corresponding change order, and where
appropriate will proceed with the formalization of the respective agreement,
thus concluding the procedure for the resolution of claims and disputes of a
technical or administrative nature with legal effects on the parties.

THIRTY-ONE   EXPERT DECISION. In the event that any technical dispute should
remain between the parties, which decision has not been accepted by the
CONTRACTOR and is related to the execution, compliance or non-compliance with
the Technical Specifications established for achieving the purpose of this
Contract, the parties agree to submit the dispute in question to an Expert
Decision. For this, each of them will select one of the experts listed in the
Expert List attached to this Contract, for submitting said dispute for its
analysis and resolution. If said Experts come to an agreement regarding their
resolutions, said agreement will be final and binding upon the parties. In this
stage, PEP and the CONTRACTOR shall cover the costs of the Expert that they have
selected, regardless of whether they have or haven’t come to an agreement. In
the event that the two Experts selected by the parties in the first stage do not
come to an agreement regarding their resolutions, both Experts will choose a
third one by mutual agreement from the Expert List attached to this Contract,
who shall resolve the technical dispute. The resolution of this last Expert will
be final and binding upon the parties and all of the costs that have been
generated in this regard will be covered by PEP and the CONTRACTOR in equal
parts. THIRTY-TWO  

CONCILIATION. The CONTRACTOR will be entitled to file a complaint to the
Ministry of the Civil Service, if it deems that PEP has breached the terms and
conditions agreed to in the contract. The conciliation procedure will be
substantiated in terms of the provisions of articles 89 to 91 of the Law of
Public Works and Related Services.

In the event that the parties come to conciliation, the respective agreement
will be binding upon them and their compliance may be demanded by the
corresponding legal channel. Otherwise their rights will remain intact, so that
they may exercise them at the respective lower court.

THIRTY-THREE   APPLICABLE LAW AND JURISDICTION. This contract will be governed
by the Federal Laws of the United Mexican States and other provisions that arise
therefrom that are in force. In the event that any dispute should arise that is
related to this contract, the parties expressly agree to submit to the
jurisdiction of the Federal Courts of Poza Rica de Hgo. Ver. Therefore, the
CONTRACTOR irrevocably waives any jurisdiction that may pertain to it due to its
present or future domicile, or for any cause. THIRTY-FOUR   CONTINUATION OF THE
WORK. Unless there is provision that states otherwise in this contract, or there
is a written order issued by PEP, the CONTRACTOR shall continue with the
services and comply with its obligations pursuant to this contract,
notwithstanding the fact that proceeding(s) have been initiated for resolving
claims and disputes of a technical or administrative nature, or disputes
according to this contract.

 

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CONTRACT No. 424048860

 

THIRTY-FIVE

   TAX CLAUSE. Each of the parties will comply with the pertinent tax
obligations, and will pay each and every one of the contributions and other tax
charges that they are obligated to pay during the term, execution and
fulfillment of this contract and its attachments, pursuant to the federal, state
and municipal law of the United Mexican States and the United States of America.
The foregoing is without prejudice to the withholdings that PEP is obligated to
pay according to the laws in this area.

THIRTY-SIX

  

TRAINING AND CONDUCT OF THE CONTRACTOR PERSONNEL. All CONTRACTOR personnel who
perform any activity within PEP facilities as a result of the performance of the
work hereunder will be bound to comply with the Industrial Safety, Occupational
Health and Environmental Protection provisions indicated in Attachment “S”
“Safety, occupational health and environmental protection obligations of the
Suppliers or Contractors that perform activities at the facilities of PEMEX
Exploración y Producción”, without prejudice to the other legal provisions that
the CONTRACTOR is under obligation to meet, as well as those that PEP may issue
following the signing of this Contract.

 

Likewise, the CONTRACTOR is under obligation to prove to PEP, prior to the
commencement of the work, that the personnel who will perform the work have
received training by a duly authorized company in the last 12 (twelve) months,
according to the provisions of the Federal Labour Law, in the areas that are
related to the work to be performed, as well as in the areas of Industrial
Safety, Occupational Health and Environmental Protection.

 

In the event that the CONTRACTOR does not reliably prove to the satisfaction of
PEP that its personnel have received training in the areas of Industrial Safety,
Occupational Health and Environmental Protection, it may not enter PEP’S
facilities, and therefore any delay in the work execution schedule arising from
this breach of contract will not be grounds for deferring the commencement date
of the same or extending the contract execution period.

 

The CONTRACTOR will take all measures to prevent illegal, seditious or
objectionable behaviour by the personnel under its charge, in order to maintain
discipline among the personnel who perform the work, whether or not they are in
any of the facilities of PEP.

THIRTY-SEVEN

  

NOTIFICATIONS. The parties undertake to communicate in writing all information
that is generated as a result of compliance and execution of this contract,
pursuant to the following:

 

Communications to PEP:

 

Communications regarding technical issues shall be delivered personally to the
site supervisor or the person that he may designate, personally or through any
other means of messaging that ensures its receipt at the following address:
Boulevard Gonzalez Ortega S/N, a un costado de Bomberos C.P. 93370, Poza Rica,
Veracruz.

 

Communications of an administrative nature shall be delivered personally, or by
any other means of messaging that ensures its receipt, to the authorized
representative of PEP, the Contract Site Supervision Office of the Drilling
Operations Unit of Poza Rica-Altamira, at the address indicated hereafter,
sending a copy to the site supervisor and/or PEP supervisor located at Boulevard
Gonzalez Ortega S/N, a un costado de Bomberos C.P. 93370, Poza Rica, Veracruz.

 

Communications to the CONTRACTOR:

 

Communications regarding technical issues shall be delivered personally to the
construction supervisor, or may be sent through any other means of messaging
that ensures its receipt at the address indicated in number II.9 of the
statement section of this contract.

 

Communications of a legal or administrative nature may be delivered personally
to the legal representative of the CONTRACTOR, or be sent by any other means of
messaging that ensures their receipt, to the address indicated in number II.9 of
the statement section of this contract.

 

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CONTRACT No. 424048860

 

THIRTY-EIGHT

   PRIORITY OF DOCUMENTS. For the purpose of interpreting this contract and in
the event that there are contradictions between the different documents that
make it up, the provisions contained in the contract will prevail over those
contained in its attachments. In the event there are contradictions between
attachments, the attachments that are made up of documents that form part of the
bidding conditions will prevail over the attachments that are made up of
documents that form part of the CONTRACTOR’S proposal.

THIRTY-NINE

   ATTACHMENTS TO THIS CONTRACT. The attachments that are signed in agreement by
both parties are added hereto and form an integral part of this contract, which
are stated below:    Attachment A    PLANS AND THEIR LIST.    Attachment B   
GENERAL SPECIFICATIONS AND INDIVIDUAL SPECIFICATIONS OF THE PROJECT   
Attachment B-1    STANDARDS    Attachment DE-10    ITEM CATALOGUE    Attachment
DE-10A    UNIT PRICE CATALOGUE    Attachment DT-12    CALENDAR SCHEDULE FOR
GENERAL EXECUTION OF THE WORK    Attachment DT-3    LIST OF MACHINERY AND/OR
EQUIPMENT AND THEIR PHYSICAL LOCATION    Attachment DT-10    LIST OF INPUTS THAT
TAKE PART IN THE INTEGRATION OF THE PROPOSAL    Attachment DSP    PERMANENTLY
INSTALLED MATERIALS AND EQUIPMENT THAT PEP WILL PROVIDE    Attachment “E”   
MACHINERY AND/OR EQUIPMENT THAT PEP WILL PROVIDE (DIFFERENT THAN WHAT IS
PERMANENTLY INSTALLED)    Attachment G    DOCUMENTATION REQUIRED BY THE
FINANCING SOURCES.    Attachment G-1    CERTIFICATE ON THE COUNTRY OF ORIGIN OF
THE GOODS AND/OR SERVICES.    Attachment S    OBLIGATIONS IN SAFETY,
OCCUPATIONAL HEALTH AND ENVIRONMENTAL PROTECTION FOR THE SUPPLIERS OR
CONTRACTORS THAT PERFORM ACTIVITIES AT THE FACILITIES OF PEMEX EXPLORACIÓN Y
PRODUCCIÓN.    Attachment BEO    TERMS AND CONDITIONS OF THE ELECTRONIC LOG   
Attachment DT-17    PRIVATE AGREEMENT FOR A JOINT PROPOSAL

FORTY

   OTHER STIPULATIONS. When the work hereunder is performed within the
facilities of PEP, the CONTRACTOR undertakes to give preference to the personnel
proposed by the Petroleum Workers Union of the Mexican Republic or however it
may be called in the future, for the performance of the same, under equal
conditions and without prejudice to the rights that third parties may have
according to the law.

FORTY-ONE

   JOINT AND SEVERAL OBLIGATION. Each of the parties that sign this contract in
their capacity as CONTRACTORS, jointly and severally assume the obligations of
the other signing parties under said capacity. They likewise state that the
joint proposal agreement that is attached hereto as “Format DT-17: Private
Agreement for Joint Participation” forms an integral part of the same.

FORTY-TWO

  

NATIONAL CONTENT PERCENTAGE. The CONTRACTOR is under obligation to comply with a
national content percentage of 5% on the contract amount, determined according
to what is indicated in the bidding guidelines that gave rise to this contract.
In no case may the CONTRACTOR decrease this national content percentage, without
the prior consent of PEP in writing, which will only be given in the case where
said percentage is not lower than 5%.

 

Any substitution of equipment, materials and/or suppliers for those originally
proposed by the CONTRACTOR for the purposes of meeting the national content
percentage, in accordance with this Clause, shall be authorized by PEP, provided
said substitution does not mean changing the amount or the period of the
contract, and complies with the specifications of the same and the execution
schedule.

 

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CONTRACT No. 424048860

 

  

PEP will conduct the verification of compliance with the national content
percentage established in this clause, once the CONTRACTOR has provided the
entirety of the purchase orders for the permanently installed equipment and
materials listed in Attachment DT-10. In addition, the CONTRACTOR shall submit
to PEP the country of origin declaration for said permanently installed
equipment and materials. Said document shall comply with the format and terms of
completion indicated in Attachment DT-10.

 

The CONTRACTOR’S failure to comply with any of the obligations referred to in
this clause will be grounds for rescission of this statement of intent.

FORTY-THREE

   LEGAL AND MATERIAL AVAILABILITY OF LOCATIONS FOR PERFORMING WORK. The
performance of the work shall start on the date indicated in the EXECUTION
PERIOD clause, and to this effect PEP will legally and materially make available
to the CONTRACTOR in a timely manner the property(ies) on which the work must be
performed. PEP’S failure to comply with this obligation will extend the
originally agreed date by an equal period of time for the completion of the
work. The delivery shall be stated in writing.

FORTY-FOUR

  

ELECTRONIC LOG. The parties, under the terms of the last paragraph of section
XIII or article 46 of the Law of Public Works and Related Services, agree that
the preparation, control and tracking of the site log for this contract will be
kept through the software program named “Electronic Log of the Oil Industry”. To
this end, it will be subject to the rules, mechanisms and procedures established
in the attachment “BEO” – Terms and Conditions of Use of the Electronic Log.

 

Consistent with the above, the parties agree that all references in this
contract to the term “Log” will be understood as being made to the software
program named “Electronic Log of the Oil Industry”.

 

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CONTRACT No. 424048860

 

FORTY-FIVE

  

DEBT RECOVERY.

 

The CONTRACTOR gives its authorization so that any amount from prior or current
debts, unpaid advance payments, breaches of contract or application of penalties
arising from any contract, agreement or legal act entered into with PEP may be
deducted from the estimates and settlements of this contract, based upon
articles 1832 and 2188 of the Federal Civil Code, with the supplementary
application of the Law of Public Works and Related Services, as per article 13
of the same.

 

This contract is signed in agreement in Poza Rica de Hidalgo, Ver. in three
copies, on September 3, 2008.

Authorized by:

CONTRACTOR

MERCO INGENIERIA INDUSTRIAL S.A. DE C.V.

FORBES ENERGY SERVICES LTD.

/s/ Jose Andres Suarez Canales

JOSE ANDRES SUAREZ CANALES

GENERAL ATTORNEY AND

AGENT REPRESENTATIVE

PEMEX EXPLORACIÓN Y PRODUCCIÓN

/s/ Martin Terrazas Romero

MARTIN TERRAZAS ROMERO

MANAGER OF THE NORTH DIVISION, APPOINTED TO THE DEPARTMENT OF THE WELL DRILLING
AND MAINTENANCE UNIT OF PEMEX EXPLORACIÓN Y PRODUCCIÓN

 

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CONTRACT No. 424048860

 

Reviewed by:

 

Technical

 

/s/ Luis Angel Ayala Gomez

LUIS ANGEL AYALA GOMEZ

OFFICE MANAGER

OFFICE OF THE DEPUTY MANAGER OF

CONTRACT SERVICES, D.N.

 

Technical

 

/s/ Arturo Alfredo Musalem Solis

ARTURO ALFREDO MUSALEM SOLIS

OFFICE MANAGER

OFFICE OF THE DEPUTY MANAGER OF

ADMINISTRATION AND FINANCE, D.N.

Prepared by:

/s/ Hugo Amaya Enderle

HUGO AMAYA ENDERLE

SUPERINTENDENT OF MATERIAL RESOURCES, D.N.

Legal Review

/s/ Eduardo Montesinos Martinez

EDUARDO MONTESINOS MARTINEZ

OFFICE OF THE DEPUTY MANAGER OF

LEGAL SERVICES, NORTHEAST REGION, POZA RICA

THIS SHEET FORMS A PART OF CONTRACT NUMBER: 424048860, SIGNED ON SEPTEMBER 26,
2008,

WHICH CONSISTS OF 34 (THIRTY-FOUR) SHEETS OF PAPER.

 

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This agreement is filed as a translation from the original Spanish language
version and

is supplied solely for informational purposes. The original version in the
Spanish

language is the definitive agreement and is the version that has legal force and
effect.

Agreement No. 1 (One) Inclusion of Project and New Concepts with Additional
Increase

of Contract Amount No. 424048860

Merco Ingeniería Industrial S.A. de C.V. and Forbes Energy Services LTD.

PEMEX

EXPLORACIÓN Y PRODUCCIÓN

Alternate Direction North Region

Manager’s Office for Well Drilling and Maintenance, North Division

Material Resources D.N.

Follow-up and Control of Supply Contracts

Agreement No. 1 (One) on Inclusion of New Concepts with Additional Increase of
the Unit-Price Government Construction Contract Amount No. 424048860 entered
into by and between PEMEX – Exploración y Producción, a public decentralized
entity of the federal government, hereinafter referred to as “PEP”, represented
by Mr. Benito Criollo Herrada, Manager for Well Drilling and Maintenance, North
Division of the Well Drilling and Maintenance Unit, party of the first part, and
Merco Ingeniería Industrial S.A. de C.V. and Forbes Energy Services LTD,
hereinafter referred to as “Contractor”, the first respectively represented by
Mr. Luis Lauro Moreno Ricart as Sole Administrator, and the latter by Mr. José
Andrés Suárez Canales as Special Agent, party of the second part, pursuant to
the following background, representations and clauses:

- BACKGROUND -

I.- On September 26, 2008 as a result of an international public bid made
pursuant to the Free Trade Agreements signed by the United Mexican States number
18575051-027-08 and pursuant to articles 134 of the Political Constitution of
the United Mexican States, 3 paragraph II, 26 paragraph I, 27 paragraph I, 28,
30 paragraph II a) and 34 of the Law of Public Works and related Services, the
parties entered into the aforementioned contract to perform services related to:
“Well Repair and Maintenance Works in the Poza Rica-Altamira Comprehensive Asset
of the North Region” (Package I).

II.- The contract amounts to $234,256,757.01 pesos (two hundred thirty four
million two hundred fifty six thousand seven hundred and fifty seven Mexican
pesos 01/100 Mexican Currency) plus US$48,842,604.99 (forty eight million eight
hundred forty two thousand six hundred four U.S. dollars 99/100) plus Value
Added Tax and a 730 (seven hundred and thirty) calendar day performance term
from September 26, 2008 consequently until September 25, 2010.

 

1

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III.- The parties signed the following attachments as part of the original
contract:

 

Exhibit A    BLUEPRINTS AND THEIR RELATIONSHIP Exhibit B    GENERAL AND
PARTICULAR SPECIFICATIONS OF THE PROJECT EXHIBIT B-1    NORMS EXHIBIT DE-10   
CATALOG OF CONCEPTS EXHIBIT DE-10A    UNIT PRICE CATALOG EXHIBIT DT-12   
CALENDAR PROGRAM FOR GENERAL EXECUTION OF THE WORKS EXHIBIT DT-3    LIST OF
MACHINERY AND/OR EQUIPMENT AND THEIR PHYSICAL LOCATION EXHIBIT DT-10    LIST OF
ITEMS USED TO FORM THE PROPOSAL EXHIBIT DSP    MATERIALS AND PERMANENT
INSTALLATION EQUIPMENT SUPPLIED BY PEP EXHIBIT “E”    MACHINERY AND EQUIPMENT TO
BE SUPPLIED BY PEP (DIFFERENT FROM THOSE RELATED TO PERMANENT INSTALLATION)
EXHIBIT G    DOCUMENTS REQUIRED BY FINANCIAL SOURCES EXHIBIT G-1    CERTIFICATE
REGARDING LAND OF ORIGIN OF GOODS AND/OR SERVICES EXHIBIT S    SAFETY, WORK
HEALTH AND ENVIRONMENTAL PROTECTION OBLIGATIONS OF SUPPLIERS OR CONTRACTORS
PERFORMING ACTIVITIES IN PEMEX EXPLORACIÓN Y PRODUCCIÓN FACILITIES EXHIBIT BEO
   TERMS AND CONDITIONS OF USE FOR ELECTRONIC LOGBOOK EXHIBIT DT-17    COMMON
PROPOSAL PRIVATE AGREEMENT

IV.- According to its purpose, the contract is performed in the Poza
Rica-Altamira Comprehensive Asset of PEP’s North Region; however in Exhibit “B”
within the chapter “Scope” a possibility was established to perform the same in
PEP’s North Region Assets.

V.- By means of official communication No. 203-21600-1067-2009 dated
September 28, 2009 and a Technical Opinion, the Assistant Manager’s Service
Office for the North Division Contract requests the Superintendent’s Office for
Material Resources, North Division, to draft an agreement including new concepts
regarding an amount increase, as well as the Tertiary Oil Project of the Gulf,
to contract number 424048860. The latter is pursuant to the following
justification contained in the technical opinion:

By means of official communication 999-21000-2600-449-2009, the Residence of
Contracts of the Operating Unit for Gulf Tertiary Oil Drilling based on the
scope chapter of the contract that specifies that works subject matter of the
same shall be performed in PEP’s Assets of the North Region, requested the
Assistant Manager’s Office for Contract Services, North Division, to perform
actions to enter into an agreement to Include the Tertiary Gulf Oil Project by
increasing the contract amount of contract No. 424048860 with duration until
September 25, 2010; the purpose of the latter is to contribute to meet the 2009
and 2010 Well Repair Program of the Tertiary Gulf Oil Comprehensive Asset.

 

2

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Likewise, by means of communications 208-21000-21600-1376/2008 and
208-21000-218000-1-0655-2009, the Contract Office of the Poza Rica- Altamira
Drilling Operation Unit, due to its needs and to operation programs, requested
the Assistant Manager’s Office for Contract Services, North Division, to take
all steps to enter into an agreement including new concepts (works with steel
line units and rod equipment, respectively) into contract no. 424048860 in order
to contribute in a timely and more efficient manner to the development and
compliance with operation works and programs.

I. TECHNICAL ASPECT

Inclusion of the Gulf Tertiary Oil Project

The following items are within the works performed under contract no. 424048860
and required to be included in the Tertiary Gulf Oil Project:

 

  •  

Major repairs

 

  •  

Minor repairs

 

  •  

Pneumatic pumping conversion

 

  •  

Mechanical pumping conversion

 

  •  

Rehabilitation of pneumatic pumping

 

  •  

Rehabilitation of mechanical pumping

 

  •  

Water injector conversion

 

  •  

Change of flowing rig

 

  •  

Well improvement identification

 

  •  

Infrastructure works (reconditioning of paths and platforms)

The need to include the Tertiary Gulf Oil Project is based on the need to cover
a substantial increase to PEP’s operation contracts; the latter is shown in the
existing project portfolio. The following chart shows the operation contract for
the Tertiary Gulf Oil Comprehensive Asset that covers 4,071 major repairs and
17,777 minor repairs from 2009 to 2023.

 

ATG
Comprehensive
Asset

   2009    2010    2011    2012    2013    2014    2015    2016    2017    2018
   2019    2020    2021    2022    2023    TOTAL

Major repairs

   501    300    300    300    300    300    300    300    300    300    300   
300    300    300    300    4,701

Minor repairs

   274    1,396    1,294    1,127    1,193    1,224    1,226    1,168    1,130
   1,216    1,099    1,270    1,235    1,245    1,080    17,177               
                                                                

TOTAL

   775    1,696    1,594    1,427    1,493    1,524    1,526    1,468    1,430
   1,516    1,399    1,570    1,535    1,545    1,380    21,878               
                                                                

 

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Thereafter and based on the need to replace and increase production fees of the
North Region for this year in the Tertiary Gulf Oil Comprehensive Asset, 775
well repairs were programmed, 501 major and 274 minor repairs among them, and to
perform that work volume 34 repair equipment units were programmed; and since
PEP does not have sufficient infrastructure to take care of that volume,
operation fronts to work on the Tertiary Gulf Oil Comprehensive Asset are
programmed to be formed as follows:

 

SCHEME

   EQUIPMENT  

Management

   8   

Contract 424047834

(Replacement Bid I Contract 424047834)

(Replacement Bid II Contract 424047834)

   14

(7

(7

  

) 

) 

Contract 424048860

   6   

Contract 424048861

   6          

Total

   34          

This contract shall contribute with an average of 18 monthly interventions in
wells located in locations of the ATG Comprehensive Asset and be performed by
operating 6 well repair equipment units, thus contributing with 18% of the total
interventions to be performed in this Asset in 2009 and 2010 respectively. This
contract currently operates with 4 repair equipment units in the Poza Rica –
Altamira Comprehensive Asset, and the 6 equipment units contemplated to work in
the ATG Comprehensive Asset are independent from them.

By including the Tertiary Gulf Oil Project, an insertion is necessary in the
third paragraph of point 3.5 of exhibit “B” General Work Specifications in order
to agree with Contractor on the possibility to request additional equipment as
follows:

It reads:

“Pursuant to operation requirements of the Yearly Intervention and Investment
Program, PEP may request CONTRACTOR 1 (one) up to 2 (two) additional well repair
equipment units to total 7 (seven) equipment units supplied by Contractor,
either together or in a separate manner, and this shall be informed to
CONTRACTOR and the latter shall supply the same no later than 60 days
thereafter”.

It should read:

“Pursuant to operation requirements of the Yearly Intervention and Investment
Program, PEP may request CONTRACTOR 1 (one) up to 2 (two) additional well repair
equipment units to total 6 (six) equipment units supplied by Contractor, either
together or in a separate manner, and this shall be informed to CONTRACTOR and
the latter shall supply the same no later than 60 days thereafter”. However, in
the event it is required due to operation requirements, PEP may, by common
consent with contractor, request him additional equipment besides the
aforementioned equipment units.

 

4

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Works with Steel Line Units

Work concepts that UOPRA has to include in the aforementioned contract are
mechanical operation works with steel line units for land oil wells in their
repair, maintenance, termination and/or non-equipment operation stage, using
mechanical tools in 2  3/8”, 2  7/8”, 3  1/2” and 4  1/2” production rigs in
wells of the North Region, since said work concepts are necessary to contribute
to meet PEP’s operation programs.

The purpose of performing these works is to give support to oil well repair and
maintenance operations where several mechanical operations have to be worked out
in production rigs that are securely operated and where performance of the same
requires the use of sophisticated tools in different diameters and technical
specifications depending on the rig to be operated.

The incorporation of works with steel line units to contract no. 424048860
results from the need to meet a 27% increase in well repair operations
programmed for this year’s POT-I with respect to the former year, since PEP does
not have sufficient units to meet mechanical operations resulting from repair
works currently performed by UOPRA with a total of 20 equipment units, because
it only has 7 steel line units, not being sufficient to comply with this
program.

AIPRA

LOGO [g79040ex10_15pg05.jpg]

In the same way in which there was an increase in this year’s programmed
activities, there is an increase to the following years. This may be observed in
the current project portfolio as shown in Chart 1. That is why it is important
to have steel line works, since they will help to meet operation programs in
subsequent years.

It should be noted that performing works with a steel line unit aims to
strengthen the strategic plans of the Poza Rica-Altamira and the Gulf Tertiary
Oil Comprehensive

 

5

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Assets and timely meet the established commitments and goals by avoiding waiting
periods in well repair, maintenance and termination operations currently being
suffered for a lack of the required steel line units, and thereupon a timely
intervention that allows optimization and continuity to well repair activities,
among other primary activities aimed at maintaining hydrocarbon production
standards.

Works with steel line units shall contribute a good degree to the success of
repair, maintenance and completion works of North Region Wells and thus
contribute to meet Operation Programs, since as stated hereinabove, waiting
times are to be avoided, being the same non-productive times that do not
generate value to the project.

The contract currently has a $28’264,360.79 pesos (twenty eight million two
hundred sixty four thousand three hundred and sixty pesos 79/100 Mexican
currency) fiscal year plus US$7’365,711.53 (seven million three hundred sixty
five thousand seven hundred eleven US dollars 53/100) highlighting that there is
a sufficient amount to guarantee continuity of operation programs of the Poza
Rica-Altamira Comprehensive Asset in an efficient and secure manner.

In order to comply and provide continuity to PEP’s operation contract regarding
oil well repair and maintenance work in the North Region, it is requested to
include the Gulf Tertiary Oil Project into contract no. 424048860 with an
increase amounting to US$24’999,998.33 (twenty four million nine hundred ninety
nine thousand nine hundred ninety eight US dollars 33/100). This amount covers
programmed works to be performed in the ATG Comprehensive Asset in 2009 and is
covered by budget projects shown in chart no. 2. It is worth mentioning that due
to budget provisions, the amount regarding works to be performed in 2010 could
not be obtained and will be pending.

 

YEAR

   ITEM    FUND    FUNCTIONAL AREA    COST CENTER    FINANCIAL
POSITION    US$
AMOUNT 2009    11D    GULF TERTIARY OIL PROJECT    FEX    11DP0000BP527900   
2251000022538140    314302515    10,000,000 2009    11D    GULF TERTIARY OIL
PROJECT    PEF    11DD9E00PD127908    2251000022538140    314302515   
15,000,000

CHART NO. 2

 

DESCRIPTION

   AMOUNT Amount increase in national currency    $ 41’043,200.00 pesos Dollar
homologated total at the exchange rate of the date of opening of proposals
10.2608    US$ 4’000,000.00 Amount increase in US dollars    US$ 21’000,000.00
       TOTAL    US$ 25’000,000.00       

 

6

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As a result of the above, Contract 16 (sixteen) New Concepts is included and
this may be observed in Exhibit DE-10,1 attached to this opinion and the
contract amount is extended to $41’043,200.00 Mexican Currency (forty one
million forty three thousand two hundred pesos 00/100 Mexican Currency) plus
US$21’000,000.00 (twenty one million US dollars 00/100), resulting in a new
contract amount of $275’299,957.01 Mexican Currency (two hundred seventy five
million two hundred ninety nine thousand nine hundred fifty seven pesos 01/100
Mexican Currency) plus US$69’842,604.99 (sixty nine million eight hundred forty
two thousand six hundred four US dollars 99/100) representing a 17.52% increase
in Mexican Currency and 42.99% in USD of the original contracted amount.

The drafting hereof does no imply affecting any conditions with respect to the
nature and essential features of the original contract purpose, on the contrary,
by including said concepts the originally contracted works shall be performed in
an efficient and safe manner.

VI.- The Area of Cost Engineering of the Superintendent’s Office for Material
Resources North Division by means of an Economic Opinion dated November 5, 2009,
with a prior economic analysis of the concepts added to the contract, considers
admissible the insertion of new concepts since the same meet the required
economic conditions and are convenient to the interests of PEMEX EXPLORACIÓN –
PRODUCCIÓN to perform the work concepts described herein.

VII.- For work performance in the Tertiary Gulf Oil Comprehensive Asset there is
sufficient budget under the Comprehensive Tertiary Gulf Oil conceptual project
by means of financial position 314302515, and Cost Center 2251000022538140.

Representations

PEP represents that:

Mr. Benito Criollo Herrada as Manager of Oil Drilling and Maintenance North
Division of the Well Drilling and Maintenance Unit represents to be legally
capable to enter into this agreement on behalf and representation of PEP,
evidencing his legal capacity and authority with a true copy of public deed
number 130,023 dated May 29, 2009 granted by notary public 103 of Mexico City,
Federal District, Mr. Armando Gálvez Pérez Aragón.

Contractor represents that:

1. Luis Lauro Moreno Ricart evidences his legal capacity and authority as Sole
Administrator of Merco Ingeniería Industrial, S.A. de C.V. with a true copy of
public deed number 2,053 dated September 5, 2003 granted by notary public 115 of
the City of Reynosa, Tamaulipas, Mr. Jacinto Flores Peña, recorded before the
Public Registry of Commerce of Reynosa, Tamaulipas under number 775, volume
2-016, commerce section dated October 1, 2003 and it has not been revoked,
modified or limited at all.

 

7

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2. José Andrés Suárez Canales evidences his legal capacity and authority as
Special Attorney-at-Law of Forbes Energy Services LTD by means of Notary
Certification number 12394 dated October 6, 2009 before Mr. A. Ramsés
Capitanachi López, notary public no. 7 of the Seventh Notary Circumscription of
the State of Veracruz; and that instrument is duly recorded before the Poza
Rica, Veracruz Public Registry of Real Estate Property and Commerce under
electronic commercial folio No. 7322*7 dated October 22, 2009.

Based on the above and pursuant to the Fourteenth and Fifteenth Contract
Clauses, article 59 of the Public Works Law, and 69 to 80 of its Regulations,
and considering that the execution hereof does not imply a substantial change to
the original project, nor changes the purpose of the project, nor affects
conditions related to the nature and material characteristics of the contract’s
purpose and that are maintained as originally agreed upon, nor is it executed to
avoid in any manner whatsoever compliance with the Law and Treaties, the parties
agree upon the following:

CLAUSES

First: Work performance in the Tertiary Gulf Oil Operation Unit

PEP and Contractor shall perform the works provided hereunder in the Tertiary
Gulf Oil Comprehensive Asset located in Pemex Exploración y Producción North
Region, prevailing the prices originally agreed upon, and therefore Contractor
shall not effect any additional charge for work performance, since they all have
the same nature and scope as originally contracted.

Second: Inclusion of New Concepts with Additional Amount Increase.

Pursuant to Background points V, VI and VII hereof, the parties shall include 16
(sixteen) New Concepts regarding extraordinary items under numbers: 6.9, 15.1,
15.2, 15.3, 15.4, 15.5, 15.6, 15.7, 15.8 15.9, 15.10, 15.11, 15.12, 15.13, 15.14
and 15.15, as explained in further detail in Exhibit “B” Additional that adds on
Exhibit “B”, and Exhibit DE-10A-1 that complements Exhibit DE-10A and that form
part hereof.

Likewise, the parties shall increase the contract amount in $41,043,200.00 pesos
national currency (forty one million forty three thousand two hundred pesos
00/100 Mexican Currency) plus US$21’000,000.00 (twenty one million US dollars
00/100) that added to the originally agreed upon amount of $234,256,757.01 pesos
(two hundred thirty four million two hundred fifty six thousand seven hundred
and fifty seven Mexican pesos 01/100 Mexican Currency) plus US$48,842,604.99
(forty eight million eight hundred forty two thousand six hundred four U.S.
dollars 99/100) result in a new contract amount of $275’299,957.01 Mexican
Currency (two hundred seventy five

 

8

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million two hundred ninety nine thousand nine hundred fifty seven pesos 01/100
Mexican Currency) plus US$69’842,604.99 (sixty nine million eight hundred forty
two thousand six hundred four US dollars 99/100).

The increase percentage equals 17.52% in Mexican Currency plus 43% in USD with
respect to the original contracted amount.

Third. Modified Total Amounts

As a consequence of the foregoing, the Second Clause is modified regarding the
“Contract Amount” as follows: “The total amount hereof is $275’299,957.01
Mexican Currency (two hundred seventy five million two hundred ninety nine
thousand nine hundred fifty seven pesos 01/100 Mexican Currency) plus
US$69’842,604.99 (sixty nine million eight hundred forty two thousand six
hundred four US dollars 99/100) plus Value Added Tax.”

Fourth: Changes to Contract Exhibits.

Exhibit B is modified.- General Specifications, in point A.1 to include the
Tertiary Gulf Oil Comprehensive Asset within the contract scope under the terms
and conditions agreed upon hereunder and in the respective Contract.

Exhibit B is modified.- General Specifications, in point D.4, to agree upon
contractor’s obligation to supply all necessary personnel and equipment to
perform the works in the Tertiary Gulf Oil Comprehensive Asset pursuant to
descriptions and characteristics described in that exhibit.

Exhibit B is modified.- General Specifications, in point 3.5, third paragraph to
add a new paragraph to read as follows:

“Pursuant to operation requirements of the Intervention and Investment Yearly
Program, PEP may request CONTRACTOR 1(one) up to 2(two) additional well repair
equipment units to total 6 (six) equipment units supplied by Contractor, either
together or in a separate manner, and this shall be informed to CONTRACTOR and
the latter shall supply the same no later than 60 days thereafter”. However, in
the event it is required due to operation requirements, PEP may, by common
consent with contractor, request additional equipment from him besides the
aforementioned equipment units.

Fifth: Other provisions.

The parties agree that the works shall be preformed under the terms and
conditions provided hereunder and in contract 424048860 and its respective
exhibits, and any references in the contract and exhibits to the Poza
Rica-Altamira Comprehensive Asset by virtue hereof shall be deemed applicable to
the Gulf Tertiary Oil Comprehensive Asset.

 

9

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Sixth: Exhibits.

As a consequence of the agreement contained in the Second Clause hereof, the
Thirty Ninth Clause of the agreement is modified to include “Exhibit “B
Additional” and Exhibit DE-10A-1 that form part hereof.

Seventh: Endorsement as Collateral.

Contractor in order to secure compliance with his obligations hereunder shall
deliver to the Superintendent’s Office of Material Resources of the Alternate
Administration and Finance Manager’s Office of Well Drilling and Maintenance
North Division with offices located in the Administrative Building of the Well
Drilling and Maintenance Manager’s Office, North Division, ground floor, colonia
Herradura, C.P. 93370 of this city on the date of formalization hereof; an
amount increase endorsement to surety bond(s) regarding due compliance
originally provided in the Seventeenth Clause hereof regarding a contract
compliance guarantee and a hidden defect guarantee amounting to $4’104,320.00
Mexican Currency (four million one hundred and four thousand three hundred
twenty pesos 00/100 Mexican Currency) plus US$2,100,000.00 (two million one
hundred thousand US dollars 00/100) equal to 10% of the amount increased
hereunder and covering works performed in the Gulf Tertiary Oil Comprehensive
Asset and other terms hereof, as well as a Risk Increase endorsement to the
Insurance Policy provided in the Eighteenth Clause covering works performed in
the Gulf Tertiary Oil Comprehensive Asset, indicating that the same are joint
and undividable from the original bond, delivered to guarantee compliance with
the contract and covering the terms hereof; in the understanding that the lack
of timely submission of those documents shall allow PEP to suspend invoice
payments regarding works performed in the Tertiary Gulf Oil Comprehensive Asset
at the increased amount cost that has been presented or is to be presented for
collection until those policy endorsements are satisfactorily delivered. That
suspension shall not generate payment of financial expenses since it is a cause
attributable to Contractor and may be a cause for rescission.

Eighth: Survival of provisions.

All clauses of contract no. 424048860 and their exhibits remain in effect,
except as provided hereunder; any reference or provision in the contract or its
exhibits that applies to the Poza Rica-Altamira Comprehensive Asset of the Pemex
Exploración y Producción North Region, shall be deemed applicable to the
Tertiary Gulf Oil Comprehensive Asset.

Except for the aforementioned clauses that must be understood hereunder as
surviving with no change, all provision of the contract and its exhibits, as
well as the 730 (seven hundred and thirty) calendar day time period for
performance from September 26, 2008 and consequently ending on September 25,
2010.

 

10

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After this instrument has been read by the contracting parties and being the
same duly informed of its content and scope, they sign it by common consent in 3
counterparts in the City of Poza Rica de Hidalgo, Veracruz, on December 4 2009.

On behalf of:

 

Merco Ingeniería Industrial, S.A. de C.V.   Forbes Energy Services LTD /s/ Luis
Lauro Moreno Ricart   /s/ José Andrés Suárez Canales Luis Lauro Moreno Ricart  
José Andrés Suárez Canales Sole Administrator   Special attorney-in-fact PEMEX
Exploración y Producción /s/ Benito Criollo Herrada Benito Criollo Herrada

Manager of Well Drilling and Maintenance North Division

Of the Well Drilling and Maintenance Unit

Revision: Administrative   Technical /s/ Hugo Amaya Enderle   /s/ Luis Angel
Ayala Gómez Hugo Amaya Enderle   Luis Angel Ayala Gómez Acting secretary of the
Alternate   Contract Services Alternate Manager Administration and Finance
Manager’s Office   P.M.P., D.N. P.M.P., D.N.  

This page forms part of Agreement No. 1 (ONE) of Contract No. 424048860 signed
on December 4, 2009 that consists of 12 (twelve) pages.

 

Drafted by: /s/ Jorge Avendaño López Jorge Avendaño López Acting secretary of
the Material Resources Superintendent’s Office P.M.P., D.N

 

11

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Legal review by: /s/ Lic. Eduardo Montesinos Martínez Lic. Eduardo Montesinos
Martínez Legal Service Alternate Manager Poza Rica Northeast Region

This page forms part of Agreement No. 1 (ONE) of Contract No. 424048860 signed
on December 4, 2009 that consists of 12 (twelve) pages.

 

12

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PEMEX EXPLORACIÓN Y PRODUCCIÓN

WELL DRILLING AND MAINTENANCE MANAGER’S OFFICE, D.N.

CONTRACT SERVICE ALTERNATE MANAGER’S OFFICE, D.N.

EXHIBIT B (ADDITIONAL)

DESCRIPTION AND SCOPE OF CONCEPTS TO BE INCLUDED

Mechanical operations with steel line units include a process whereby special
tools are lowered with steel line using different devices within the well, and
include transportation of the same to the well by PEP, installation time and
dismantling of equipment, introduction into the well of rig operation and
accessories; it includes surface pressure control equipment for 5,000 work psi
(preventing device, lubricators, among others), well calibration using adequate
printing blocks according to the internal diameter of the well’s production rig
to be operated and to PEP’s request, likewise, items to be included regarding
works with steel line units also include sample taking and a final report of the
operation in printed and electronic mode.

For adequate performance of the works with steel lines, Contractor shall meet
the following PEP procedures:

Procedure to perform operations with steel line: PE-IE-OP-005-2008

The works shall be performed with a transportable Steel Line Unit with internal
combustion engine, transmission and torque converter, hydraulic winch and mast,
with 0.092” to 0.125” diameter stainless steel cable according to PEP’s
requirement, with dashboard indicating weight and depth, with adequate
dimensions to drive without restrictions in federal and state roads and easy
access to well locations where works will be performed. Moreover, works to be
performed with rod equipment (simplified equipment) shall be wells with
mechanical pumping production rigs. Those works consist of rod recovery and
installation, as well as changing pumps that have deficiencies in that rig; the
purpose of the latter is that upon correcting said deficiency the well may
continue and maintain its production level; it is noted that upon performing
those works with simplified (rod) equipment operation times will be optimized,
since that equipment has less components, and this makes its movement and
operation faster, as well as cheaper with respect to a conventional repair
equipment.

 

13

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ITEM 6.9. WORK WITH SIMPLIFIED EQUIPMENT (ROD DEVICE) FOR RID INTRODUCTION AND
RECOUP AND PUMP CHANGE

 

  •  

Performance: this work requires a 375 HP transportable equipment installed in a
4 ax truck with internal combustion engine and electronic control for 8530 feet
(2547 m) depths. The equipment is equipped with double drum winch, brake system
cooled down by water with pneumatic clutch and impact device in the crown,
telescopic mast of hydraulic operation, with 69 feet (21.04 m) height and
151,746 pound (68,892 Kg) loading capacity equipped with traveling pulley, crown
and 6 line caparison, mechanical pump hanging rod device, continuing stairs to
the crown, three-stage hydraulic jack, anti wind for mast fixing, hanging device
and “chango” exhaust line, hydro pneumatic control dashboard; weight, pressure
and torque indicator, emergency and alarm stop. It includes 5000 psi pressure
control equipment that consists of double 7  1/16” preventing device with 2
 3/8” to 4  1/2” rams with 2  1/16” lateral exits, as well as a rod preventing
device.

 

  •  

Process: Contractor shall perform the works in mechanical pump production gears,
change the pumps with rod equipment, rod recoup and/or new rod kit installation
with 375 HP rod equipment under the program requested by PEP as stated in the
work order.

 

  •  

Verification: PEP’s supervisor shall verify compliance of the operation
requested with the work order.

 

  •  

Measurement: Payment units are calculated in days.

 

ITEM 15.1

CALIBRATION FOR 2  3/8” TO 4  1/2” PIPELINES WHEN THE OBJECTIVE IS NOT MET

 

  •  

Description: it is the steel line execution process, introduction and recoup of
calibration systems for 2  3/8”-4  1/2” diameter pipelines with impression
block, paraffin or die-cutters; it includes inner depth (P.I.) verification,
print making and 5,000 PSI pressure control equipment. When due to well
conditions there is a resistance and an initiated Service is interrupted with a
diameter and a new one has to be taken down with a lower one, the depth charge
shall be paid considering the maximum achieved, regardless of the number of runs
into the well and of the calibrator diameters used for that purpose. 0° to 88°
deviation well operations have to be considered (case of horizontal wells).
Likewise, with this item, in the event that due to well conditions it is not
possible to reach the programmed depth in one of the other steel line work
concepts and PEP decides to suspend the operation, payment shall be made by
meter according to the maximum depth attained by that operation.

 

  •  

Performance: a winch operator and assistant are needed, as well as calibration
tools (print block, paraffin stamper or cutter), weight bars, mechanical
scissors, flexible deviator joints (knees), movement joints (mobile), smaller
tools like adaptors, flange connections and joints, Steel Line Unit, with
mechanical and electronic depth system, surface tension-weight system, as well
as operation activities to be performed such as: installation, assembly, testing
and uninstalling movements for adequate work performance.

 

14

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  •  

Verification: PEP’s supervisor shall verify compliance with the operation
program according to the Work Order.

 

  •  

Process: it is considered to perform pipeline calibration works, inner depth
verification and seal printing at a given depth and under PEP’s requested
program as stated in the Work Order.

 

  •  

Measurement unit: the amount to be estimated shall be by (meter) depending on
the calibrated depth.

 

ITEM 15.2 SAMPLE RECOUP WITH BUCKET OR SAMPLE BARREL.

 

  •  

Description: it is the fluid depth sample taking process with steel line unit
and consists of sample taking with bucket or barrel samplers in the well. It
includes well calibration with a minimum  1/8” diameter larger than the tool to
be introduced and 5,000 PSI pressure control equipment. 0° to 88° deviation well
operations have to be considered (case of horizontal wells). Equipment and
accessories have to be considered for this item and the same will have to be
compatible with PEP’s reservoir laboratory equipment and bottles according to
the amount of samples requested by PEP.

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter), weight bars, mechanical scissors, flexible
detour joints (knees) and moving (mobile) joints, minor tools like adapters,
flange connections and joints, sample bucket or barrel that supports corrosive
environment are needed, as well as 0.600 cc volume Steel Line Units with mode
depth recording system: mechanic and electronic, superficial tension-weight
system, as well as activities to be performed in the operation such as:
installation movements, assembling, testing and uninstalling for adequate work
performance.

 

  •  

Process: Works are considered to be performed at a depth and under the
registration program for deep sample taking according to the Work Order and
PEP’s needs.

 

  •  

Verification: PEP’s supervisor shall verify the quality of the recovered sample,
as well as compliance with the operation program according to the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.3 OPENING OR CLOSING OF SLIDING SHIRTS

 

  •  

Description: it is the process of performing with steel line tool the
introduction and recoup for shirt opening and closing, supplied by PEP. The goal
of shirt opening is to establish communication between production pipelines and
the annular space. The closing shirt is to isolate that communication, including
calibration and 5,000 PSI pressure control equipment. 0° to 88° deviation well
operations are to be considered (case of horizontal wells).

 

15

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  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with operation tools
according to the type of shirt within the well (example, Otis type “B”, Camco,
Baker shirt operator, etc.), weight bars, mechanical scissors, flexible detour
joints (knees) and moving (mobile) joints, minor tools like adapters, flange
connections and joints, Steel Line Units with depth system mode: mechanic and
electronic, superficial tension-weight system, as well as activities to be
performed in the operation such as: installation movements, assembling, testing
and uninstalling for adequate work performance.

 

  •  

Process: Works are considered to be performed with Steel Line Unit and
accessories to perform opening and/or closing operation of sliding shirts that
allow communication or not between production pipelines and the annular space at
the designated depth and under the program requested by PEP in the Work Order.

 

  •  

Verification: PEP’s supervisor shall verify compliance with the operation
program for the opening and/or closing operation of the sliding shirts that
allow communication or not between pipelines and the annular space according to
requests contained in the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.4.- TO PLACE OR RETRIEVE MECHANICAL STOPPER.

 

  •  

Description: it is the process of performing with steel line the introduction
and placement of a mechanical stopper supplied by PEP within a production
pipeline to try to maintain all the rig with pressure, the middle tree valves or
as an additional safety device while changing the middle tree valves by
preventing devices or vice versa, including calibration and 5,000 PSI pressure
control equipment. 0° to 88° deviation well operations are to be considered
(case of horizontal wells).

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with the respective
accessories for stopper placement or recoup (mechanical lock, blind stopper with
matching system, releaser and fisher as well as its respective matching
extensions), depending on its type or brand (example, Otis, Camco MA and CA,
Baker FWG stopper, etc.), weight bars, mechanical scissors, flexible detour
joints (knees) and moving (mobile) joints, minor tools like adapters, flange
connections and joints, Steel Line Units with depth measurement system in mode
as follows: mechanic and electronic, superficial tension-weight system, as well
as activities to be performed in the operation such as: installation movements,
assembling, testing and uninstalling for adequate work performance.

 

  •  

Process: Placement and recoup works of the mechanical stopper at a given depth
are considered to be performed and under the program requested by PEP in the
Work Order.

 

16

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  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for placement or recoup of the mechanical stopper according to the
request contained in the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.5.- TO PLACE OR RECOVER FOOT VALVE

 

  •  

Description: it is the process of performing placement or recoup of foot or
retention valves with steel line to allow a one way flow. Once placed in its
nipple, it does not allow any flow from outside into the inner part of the well.
The foot valve shall be supplied by PEP, includes calibration and 5,000 PSI
pressure control equipment. 0° to 88° deviation well operations are to be
considered (case of horizontal wells).

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with the respective
accessories for foot valve placement or recoup (releaser and fisher), depending
on its type or brand (example, Otis, Camco MA and CA, Baker FWG stopper, etc.),
weight bars, mechanical scissors, flexible detour joints (knees) and moving
(mobile) joints, minor tools like adapters, flange connections and joints, Steel
Line Units with depth measurement system in mode as follows: mechanic and
electronic, superficial tension-weight system, as well as activities to be
performed in the operation such as: installation movements, assembling, testing
and uninstalling for adequate work performance.

 

  •  

Process: Placement and recoup works of the foot valve at a given depth are
considered to be performed and under the program requested by PEP in the Work
Order.

 

  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for placement or recoup of the foot valve according to the request
contained in the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.6.- TO PLACE AND RECOUP PNEUMATIC PUMP VALVE.

 

  •  

Description: it is the process of performing placement or recoup of Pneumatic
Pump valves with steel line. The purpose is that these valves operate gas
injection into the production pipeline to lighten the column of oil and produce
it to the surface. The Pneumatic Pump valve shall be supplied by PEP. Unit Line
accessories include calibration and 5,000 PSI pressure control equipment. 0° to
88° deviation well operations are to be considered (case of horizontal wells).

 

17

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  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with the respective
accessories for BN valve placement or recoup (releaser and fisher), weight bars,
mechanical scissors, flexible detour joints (knees) and moving (mobile) joints,
minor tools like adapters, flange connections and joints, Steel Line Units with
depth measurement system in mode as follows: mechanic and electronic,
superficial tension-weight system, as well as activities to be performed in the
operation such as: installation movements, assembling, testing and uninstalling
for adequate work performance.

 

  •  

Process: Placement and recoup works of the Pneumatic Pump valve at a given depth
are considered to be performed and under the program requested by PEP in the
Work Order.

 

  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for placement or recoup of the pneumatic pump valve according to the
request contained in the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.7 TO PLACE OR RECOUP PNEUMATIC PUMPING SHUTTER

 

  •  

Description. It is the process of performing with steel line placement or recoup
of a Pneumatic Pumping shutter to inject gas inside the production pipeline.
When it has been placed in its seat. The Pneumatic Pumping shutter shall be
supplied by PEP. Line unit accessories include calibration and 5,000 PSI
pressure control equipment. 0° to 88° deviation well operations are to be
considered (case of horizontal wells).

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with the respective
accessories for Pneumatic Pumping shutter placement or recoup (releaser and
fisher), weight bars, mechanical scissors, flexible detour joints (knees) and
moving (mobile) joints, minor tools like adapters, flange connections and
joints, Steel Line Units with depth measurement system in mode as follows:
mechanic and electronic, superficial tension-weight system, as well as
activities to be performed in the operation such as: installation movements,
assembling, testing and uninstalling for adequate work performance.

 

  •  

Process: Placement and recoup works of the Pneumatic Pump shutter at a given
depth are considered to be performed and under the program requested by PEP in
the Work Order.

 

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  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for placement or recoup of the pneumatic pump shutter according to the
request contained in the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.8 TO RECOVER MATCHING ELEMENT OF PNEUMATIC PUMPING ACCESSORY.

 

  •  

Description. It is the process of performing with steel line recoup of the
matching rod of a pneumatic pumping accessory and thus establish communication
matching the existing pressures between the annular space and the production
pipeline in the rigs that have pneumatic pump chucks. The Pneumatic Pumping
matching element of the accessory shall be supplied by PEP. It includes
calibration and 5,000 PSI pressure control equipment. 0° to 88° deviation well
operations are to be considered (case of horizontal wells).

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with the respective
accessories to recoup accessory equalizing element of pneumatic pumping (special
element fishers), weight bars, mechanical scissors, flexible detour joints
(knees) and moving (mobile) joints, minor tools like adapters, flange
connections and joints, Steel Line Units with depth measurement system in mode
as follows: mechanic and electronic, superficial tension-weight system, as well
as activities to be performed in the operation such as: installation movements,
assembling, testing and uninstalling for adequate work performance.

 

  •  

Process: Recoup works of the equalizing element of pneumatic pumping at a given
depth are considered to be performed and under the program requested by PEP in
the Work Order.

 

  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for placement or recoup of the equalizing element of the pneumatic pump
according to the request contained in the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.9.-

TO PLACE AND RECOUP PIPELINE ANCHOR: 2  3/8”, 2  7/8”, 3  1/2” and 4  1/2”

 

  •  

Description: It is the process of performing with steel line placement or recoup
of the 2  3/8”, 2  7/8”, 3  1/2” and 4  1/2” pipeline anchor to prevent a loss
of pneumatic

 

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pump valves and accessories during a change of the same. The pipeline anchor
shall be provided by PEP. It includes calibration and 5,000 PSI pressure control
equipment. 0° to 88° deviation well operations are to be considered (case of
horizontal wells).

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with the respective
accessories for pipeline anchor placement or recoup (special fishers and JD type
releaser), weight bars, mechanical scissors, flexible detour joints (knees) and
moving (mobile) joints, minor tools like adapters, flange connections and
joints, Steel Line Units with depth measurement system in mode as follows:
mechanic and electronic, steel line superficial tension-weight system, as well
as activities to be performed in the operation such as: installation movements,
assembling, testing and uninstalling for adequate work performance.

 

  •  

Process: Placement and recoup works of pipeline anchors at a given depth are
considered to be performed and under the program requested by PEP in the Work
Order.

 

  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for fish displacement according to the request contained in the Work
Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.10.- TO PLACE OR RECOUP BOTTOM THROTTLE ACCORDING TO PIPELINE DIAMETER.

 

  •  

Description: It is the process of performing with steel line the introduction
and placement or recoup at a given depth indicated by PEP of the bottom throttle
in 2  3/8”, 2  7/8”, 3  1/2” and 4  1/2” pipelines. It includes calibration and
5,000 PSI pressure control equipment. 0° to 88° deviation well operations are to
be considered (case of horizontal wells).

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with the respective
accessories for bottom throttle placement or recoup (fisher, releaser and bottom
throttle packer with different diameters), weight bars, mechanical scissors,
flexible detour joints (knees) and moving (mobile) joints, minor tools like
adapters, flange connections and joints, Steel Line Units with depth measurement
system in mode as follows: mechanic and electronic, steel line superficial
tension-weight system, as well as activities to be performed in the operation
such as: installation movements, assembling, testing and uninstalling for
adequate work performance.

 

  •  

Process: Placement and recoup works of the bottom throttle according to the
pipeline diameter at a given depth are considered to be performed and under the
program requested by PEP in the Work Order.

 

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  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for placement or recoup of bottom throttles according to the request
contained in the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.11.- TO PLACE OR RECOUP PEP’S ANCHOR WITH PRESSURE-TEMPERATURE SENSORS.

 

  •  

Description: It is the process of performing with steel line placement or recoup
of 2  3/8”, 2  7/8”, 3  1/2” and 4  1/2” diameter pipelines of an anchor with
pressure-temperature recording sensors to provide a mechanism that allows to
host and hang measurement instruments, installing them with a mechanical nipple
or tubing stop in an anchor tubing less (optional) according to the pipeline’s
diameter and to the program indicated by PEP. This work is generally performed
in tests with prolonged data monitoring of 7, 15, 20, 30 days, etc. time
periods, that will depend on the memory capacity of the data recording
instrument. Recoup of the anchor with sensor is done, in general, when the
maximum time to obtain information from a used device has been met, either to
replace or to definitely withdraw the same. It includes calibration and 5,000
PSI pressure control equipment. 0° to 88° deviation well operations are to be
considered (case of horizontal wells).

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with the respective
accessories for placement or recoup of the anchor with pressure and temperature
sensor (fisher, releaser, anchor mechanical lock, shock absorber, centralizer
and measurement instruments), weight bars, mechanical scissors, flexible detour
joints (knees) and moving (mobile) joints, minor tools like adapters, flange
connections and joints, Steel Line Units with depth measurement system in mode
as follows: mechanic and electronic and superficial tension (weight-tension)
system, as well as activities to be performed in the operation such as:
installation movements, assembling, testing and uninstalling for adequate work
performance.

 

  •  

Process: Placement or recoup of anchor with pressure and temperature sensor at a
given depth are considered to be performed and under the program requested by
PEP in the Work Order.

 

  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for placement or recoup of anchor with pressure and temperature sensor
according to the request contained in the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

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ITEM 15.12.- TO DISPLACE RESISTANCE OR FISH.

 

  •  

Description: The purpose of fish displacement with steel line is to slide and
strike with a scissor an obstruction that prevents free passage into the well
through the production rig until it may go to the bottom leaving free access to
any other tool to be introduced. It includes calibration and 5,000 PSI pressure
control equipment. 0° to 88° deviation well operations are to be considered
(case of horizontal wells).

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, together with the respective
accessories for fish displacement (blind box), weight bars, mechanical scissors,
flexible detour joints (knees) and moving (mobile) joints, minor tools like
adapters, flange connections and joints, Steel Line Units with depth measurement
system in mode as follows: mechanic and electronic and superficial tension
(weight-tension) system, as well as activities to be performed in the operation
such as: installation movements, assembling, testing and uninstalling for
adequate work performance.

 

  •  

Process: Resistance or fish displacement works at a given depth are considered
to be performed and under the program requested by PEP in the Work Order.

 

  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for fish displacement according to the request contained in the Work
Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.13.- STEEL LINE FISHING

 

  •  

Description: The purpose of fishing with a Steel Line Unit is to recoup tools
and/or accessories that stayed as fish within the well. It includes calibration
and 5,000 PSI pressure control equipment. 0° to 88° deviation well operations
are to be considered (case of horizontal wells).

 

  •  

Performance: a winch operator and two assistants, calibration tools (printing
block, paraffin stamper or cutter) are required, weight bars, mechanical
scissors, flexible detour joints (knees) and moving (mobile) joints, minor tools
like adapters, flange connections and joints. There are several fishing tools
with specific purposes for this type of operation such as: davit harpoon (for
wire fishing), JD or JU type fisher (to fish tool with fish neck), O’Bannon type
fisher (for tools without fish neck). Steel Line Units with depth measurement
system in mode as follows: mechanic and electronic and superficial tension
(weight-tension) system, as well as activities to be performed in the operation
such as: installation movements, assembling, testing and uninstalling for
adequate work performance.

 

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  •  

Process: Fish displacement works with steel line at a given depth are considered
to be performed and under the program requested by PEP in the Work Order.

 

  •  

Verification. PEP’s supervisor shall verify compliance with the operation
program for steel line fishing according to the request contained in the Work
Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Day) depending on the
program requested by PEP. In the event that due to well conditions the
programmed depth is not reached and PEP decides to suspend the operation,
payment shall be made under Item 15.9. The amount to estimate would be by meter
according to the maximum depth reached.

 

ITEM 15.14.- 5,000 PSI PRESSURE CONTROL EQUIPMENT TO USE WITH H2S/CO2.

 

  •  

Description: This service shall have all pressure control equipment components
for sour environments (H2S and/or CO2) and includes accessories for proper
performance such as: flange adapters, nuts and bolts with rings for 5,000 PSI.
The team shall present the respective certification, as well as the respective
recently preformed tests (not older than one year). This Service must include a
basic and original kit of parts.

 

  •  

Performance: A pressure Control Equipment Operator, 5,000 PSI pressure control
equipment for sour environments with all necessary components and accessories
for its proper performance and operation, as well as several activities to be
performed during operation: installation movements, assembling, tests and
uninstalling for proper work performance.

 

  •  

Process: Works are considered to be performed with pressure control equipment
for sour environments under the requested program as stated in the Work Order
and at PEP’s request.

 

  •  

Verification: PEP’s supervisor shall verify compliance with the operation
program with 5,000 PSI pressure control equipment for sour environments as
requested in the Work Order.

 

  •  

Measurement Unit: The amount to estimate shall be per Day or Day prorate
depending on the program requested by PEP and considering full service.

 

ITEM 15.15.-

TO DRILL 2  3/8”, 2  7/8” AND 3  1/2” PRODUCTION PIPELINES WITH STEEL LINE
EQUIPMENT.

 

  •  

Description: A production pipeline is drilled when the well has to be controlled
and its production rig lacks of a sliding shirt. This work is performed with a
Steel Line unit.

 

  •  

Performance: An operator and an assistant are required. The equipment consists
of a winch, calibration tools, accessories (printing block, paraffin stamper or
cutter), a 5000 psi lubricator. The Steel Line unit will be installed, the
punching tool shall be assembled and taken down at a depth specified by PEP, the
pipeline shall be drilled then withdrawn, well tools shall be tested with
pressure and circulation work effectiveness. The charge shall be supplied by
PEP.

 

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  •  

Process: Works are considered to be performed with Steel Line Unit and
accessories to drill production pipelines that allow communication or not among
production pipelines and the annular space at a designated depth and under the
program requested by PEP in the Work Order.

 

  •  

Measurement Unit: the amount to estimate shall be by (Work) depending on the
program requested by PEP and considering complete work. In the event that due to
well conditions the programmed depth is not reached and PEP decides to suspend
the operation, payment shall be made under Item 15.9. The amount to estimate
would be by meter according to the maximum depth reached.

 

Merco Ingeniería Industrial, S.A. de C.V.   Forbes Energy Services, LTD /s/ Luis
Lauro Moreno Ricart   /s/ José Andrés Suárez Canales Luis Lauro Moreno Ricart  
José Andrés Suárez Canales Sole Administrator   Special attorney-in-fact Pemex
Exploración y Producción /s/ Luis Angel Ayala Gómez Luis Ángel Ayala Gómez
Alternate Manager for Contract Services, D.N.

GVT/MAS

(Illegible signature)

Contract 424048860

 

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