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Exhibit 10.3
 
 

 

 

 
ALAMO ENERGY CORP.
 
and
 
NORTHDOWN ENERGY LIMITED
 
and
 
AIMWELL ENERGY LIMITED
 

 
JOINT OPERATING AGREEMENT
 

 
FOR
 

 
UK ONSHORE PETROLEUM EXPLORATION AND DEVELOPMENT
 
LICENCE NO. PEDL 245
 
BLOCKS TQ26, TQ36,TQ46 AND TQ56
 

 

 
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INDEX
 
 
1
Definitions and Interpretation
3
2
Duration
9
3
Scope and Understanding
9
4
Interests of the Participants
10
5
The Operator
10
6
Authorities and Duties of the Operator
13
7
Rights of the Participants
19
8
Insurance and Litigation
20
9
The Joint Operating Committee
22
10
Exploration and Appraisal Programmes and Budgets
28
11
Development Programmes and Budgets
30
12
Production Programmes and Budgets
31
13
Decommissioning Programme and Budget
33
14
General Provisions relating to Budgets
34
15
Sole Risk and Non-Consent
35
16
Costs and Accounting
47
17
Default
47
18
Disposal of Petroleum
50
19
Data and Confidentiality
50
20
Public Announcements
52
21
Outgoings and Grants
52
22
Covenant, Undertaking and Relationship
52
23
Assignment and Encumbrance
54
24
Withdrawal
55
25
Force Majeure
57
26
Disposal of Joint Property and Decommissioning
57
27
Intellectual Property
58
28
The Contracts (Rights of Third Parties) Act 1999
59
29
Applicable Law
59
30
Notices
59
31
Miscellaneous
60
 
SCHEDULE A JOINT OPERATING AGREEMENT UK PETROLEUM EXPLORATION  AND DEVELOPMENT
LICENCE NO. PEDL 245 BLOCKS TQ26, TQ 46 & TQ56 ACCOUNTING PROCEDURE
62  
SCHEDULE B TRUST DEED
79   SCHEDULE C ASSOCIATED AGREEMENTS  90

 
 
 
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THIS AGREEMENT is made the                    day
of                                2011
 
BETWEEN
 
1.
ALAMO ENERGY CORP, a company registered in Nevada with a mailing address of
10575 Katy Freeway, Suite 300, Houston, Texas, 77024, USA (“Alamo”);

2.
NORTHDOWN ENERGY LIMITED, a company registered in England (company number
7768741) whose registered office is at Oldfield House, Oldfield Road, London,
England, SW19 4SD (“Northdown”); and

3.
AIMWELL ENERGY LIMITED, a company registered in England (company number
05822509) whose registered office is at 10 Rosebery Avenue, Harpenden, Herts,
AL5 2QP (“Aimwell”).

 
WHEREAS
 
(A)  
The Participants are the present holders of the Licence.

 
(B)  
The Participants are parties to a Letter Agreement dated 11th January, 2010,
relating to their Participation in the Licence, as amended and novated from time
to time ( the “Participation Agreement”).

(C)  
Pursuant to the terms of the Participation Agreement and as more specifically
therein stated, Alamo and Northdown have each agreed to pay half of Aimwell’s
10.00% (ten per cent) Percentage Interest share of all costs, expenses,
liabilities and obligations arising in respect of operations jointly conducted
in respect of the Licence such that all of Aimwell’s Percentage Interests is
carried, until the date that a field development plan is formally approved by
the UK Secretary of State for the development of a discovery of petroleum in the
blocks comprised in the Licence.

(D)  
This Agreement is entered into by the Participants for the purposes of
regulating operations under the Licence and of defining their respective rights,
interests, duties and obligations in connection with the Licence and in
connection with all Petroleum produced under the Licence; and

 
(E)  
The Secretary has granted approval to this Agreement by virtue of the issue of
the Open Permission (Operating Agreements) effective from 22 September 2010 the
provisions of which apply to the terms of this Agreement.

 
NOW IT IS HEREBY AGREED as follows:
 
1.  
Definitions and Interpretation

 
1.1  
Definitions

 
In this Agreement, where the context admits, the words and phrases set out below
shall have the following meanings.
 
“Accounting Procedure” means the procedure set out in Schedule A.
 
“Acts” means the Petroleum Act 1998 and the Continental Shelf Act 1964 and any
regulations issued under them.
 
“Advance” means each payment of cash required to be made pursuant to a Cash
Call.
 
“AFE” means authority for expenditure.
 
 
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“Affiliate” means:
 
 
(a)  
if the Participant is a subsidiary of another company the Participant’s ultimate
holding company and any subsidiary (other than the Participant itself) of the
Participant’s ultimate holding company; or

 
 
(b)  
if the Participant is not a subsidiary of another company any subsidiary of the
Participant;

 
and for the purposes of this definition the terms “holding company” and
“subsidiary” shall have the meanings  given to them by section 1159 Companies
Act 2006 but disregarding paragraph 7 of Schedule 6 to the Act and a company
shall be treated  as a member of another company if its shares in that other
company are registered in the name of another person (or its nominee), by way of
security or in connection with the taking of security, and those shares may
still  be re-registered in the name of the first company on the satisfaction of
a condition.

“Agreement” means this Agreement and includes its recitals and the Schedules.
 
“Applicable Corruption Law’ means all of the laws relating to bribery,
corruption, money laundering or fraud: (a) of England & Wales including the
Bribery Act 2010; (b) of the country of incorporation of any of the Parties; and
(c) the Foreign Corrupt Practices Act, to the extent the same are applicable to
the Party concerned.
 
“Appraisal Drilling” has the meaning assigned to it in clause 15.1(b)(iv).
 
“Associated Agreement” means the agreements listed in Schedule D, as may be
amended from time to time, between  all of the Participants in their capacity as
such (or the Operator on behalf of  all of the Participants) and one or more
third parties  (including a Participant acting in a capacity other than as a
Participant), in which the Operator acts on behalf of all the Participants and
which the Participants have agreed shall be brought within the scope of this
Agreement as an Associated Agreement.
 
“Budget” means any budget in respect of a Programme.
 
“Cash Call” means any request for payment of cash in advance made by the
Operator to the Participants in connection with the Joint Operations or, where
the context so requires, to the Sole Risk Participant in connection with any
Sole Risk Project.
 
“Consequential Loss” means any indirect or consequential loss howsoever caused
or arising whether under contract, by virtue of any fiduciary duty, in tort or
delict (including negligence), as a consequence of breach of any duty (statutory
or otherwise) or under any other legal doctrine or principle whatsoever whether
or not recoverable at common law or in equity. “Consequential Loss” shall be
deemed to include, without prejudice to the foregoing generality, the following
to the extent to which they might not otherwise constitute indirect or
consequential loss:
 
 
a)  
loss or damage arising out of any delay, postponement, interruption or loss of
production, any inability to produce, deliver or process hydrocarbons or any
loss of or anticipated loss of use, profit or revenue;

 
 
(b)  
loss or damage incurred or liquidated or pre-estimated damages of any kind
whatsoever borne or payable, under any contract for the sale, exchange,
transportation, processing, storage or other disposal of hydrocarbons;

 
 
(c)  
losses associated with business interruption including the cost of overheads
incurred during business interruption;

 
 
(d)  
loss of bargain, contract, expectation or opportunity;

 
 
(e)  
damage to any reservoir, geological formation or underground strata or the loss
of hydrocarbons from any of them;

 
 
(f)  
any other loss or anticipated loss or damage whatsoever in the nature of or
consequential upon the foregoing.

 
 
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“Conversion Rate” means the mean of the spot selling and buying rates for
transaction between the two currencies in question as openly quoted by National
Westminster Bank Plc at 10.30am London time on the relevant date (or, if no such
rates were quoted on that date, on the next following date on which such rates
were quoted).
 
“Decommissioning” means the decommissioning and/or dismantling and/or demolition
and/or removal and/or disposal of Joint Property or any part of it including any
operations carried out in connection with or in contemplation of the foregoing
(including planning, acquiring long-lead items and maintenance of the Joint
Property following cessation of production but pending commencement of
decommissioning operations) together with any necessary site reinstatement all
as may be required under
 
(a)  
Legislation and any notices, orders, recommendations and guidelines made under
any Legislation; and/or

 
(b)  
the Licence; and/or

 
(c)  
this Agreement; and/or

 
(d)  
other agreements entered into by all the Participants or by the Operator on
behalf of all the Participants; and/or

 
(e)  
any consents and approvals, including without limitation, planning consents and
approvals given by any governmental or regulatory body in respect of the
development of a Discovery.

 
but excluding, if the Joint Property is not wholly removed, any residual
liability, and necessary continuing maintenance and insurance costs in relation
to it.
 
“Decommissioning Budget” means a budget put forward by the Operator in
accordance with clause 13 to provide for the removal and disposal of Joint
Property and the provision of the necessary financial obligations and
liabilities associated with facilities not wholly removed.
 
“Decommissioning Programme” means a programme approved in accordance with clause
13 to provide for the removal and disposal of Joint Property and performance of
the obligations and liabilities associated with facilities not wholly removed.
 
“Decommissioning Security Agreement” means the Decommissioning Security
Agreement referred to in clause 26.3 as it may be amended from time to time.
 
“Default Notice” has the meaning assigned to it in clause 17.1.
 
“Defaulting Participant” has the meaning assigned to it in clause 17.1.
 
“Development Plan” means a programme of development works to which the Secretary
has given consent or which the Secretary has served in accordance with Clause 13
of the Licence and “submission of a Development Plan” includes the formal and
informal submissions of documentation to the Secretary in order to seek
development and production consent for a Discovery.
 
“Discovery” means any discovery of reserves of Petroleum.
 
“Dollars” or “$” means dollars of the United States of America.
 
“Further Term” means any continuation or extension of the Licence beyond the
Second Term granted by the Secretary pursuant to Clause 4, 5, or 6 of the
Licence.
 
“Good Oilfield Practice” means the application of those methods and practices
customarily used in good and prudent oil and gas field practice in the United
Kingdom Continental Shelf or onshore in the United Kingdom, as may be
applicable, with that degree of diligence and prudence reasonably and ordinarily
exercised by experienced operators engaged in the United Kingdom Continental
Shelf in a similar activity under similar circumstances and conditions.
 
 
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“Indebtedness” means any obligation for the payment or repayment of money,
whether as principal or as surety and whether present or future, actual or
contingent, sole or joint.
 
“Initial Term” means the period specified as such in Schedule 5 of the Licence.
 
“Intellectual Property” means literary and artistic works (including but not
limited to designs, manuals, computer programmes, databases, scientific and
technical information) inventions, mask works, semiconductor topographies,
know-how and other material protected by law.
 
“Intellectual Property Rights” means patents, design rights, copyright, database
rights, utility models, semiconductor topography rights, rights in know-how and
confidential information whether registered or unregistered anywhere in the
world, and applications for any of the foregoing, and any other form of
protection afforded by law to a person to allow such person to prevent the use
of Intellectual Property owned by such person without consent.
 
“Invoice” means any invoice presented for payment by the Operator to a
Participant in accordance with the provisions of the Accounting Procedure in
connection with Joint Operations.
 
“Joint Account” means the account established and maintained by the Operator to
record all Advances, Cash Calls, Invoice payments, expenditures and Receipts in
the conduct of the Joint Operations.
 
“Joint Operations” means all operations which are conducted by the Operator on
behalf of all of the Participants in accordance with this Agreement after the
date of commencement of this Agreement as provided in clause 2.
 
“Joint Operating Committee” means the committee established pursuant to clause
9.1.
 
“Joint Petroleum” means all Petroleum won and saved under the Joint Operations.
 
“Joint Property” means all property acquired or held for use in connection with
the Joint Operations.
 
“Legislation” means the Acts and all other relevant international treaties
binding in the United Kingdom, national and local laws, by-laws, regulations,
decisions and judgments of any competent authority.
 
“LIBOR” means the London Interbank Offered Sterling Rate for one Month as quoted
in the London Financial Times.  In the event that such rate is not published in
the Financial Times, LIBOR shall mean the London Interbank Offered Sterling Rate
for one Month for the nearest day quoted by Lloyds TSB Bank plc.
 
“Licence” means the United Kingdom Petroleum Exploration and Development Licence
No. PEDL 245, Blocks TQ26, TQ36, TQ46 and TQ56 dated 14th October, 2008 and
commencing on 1st July 2008 issued by the Secretary and shall include any other
licence issued to the Participants in substitution or partial substitution for
it.
 
“Licence Area” means the area for the time being covered by the Licence
excluding any area in which the Participants have no beneficial interest and
which has become subject to a separate joint operating agreement pursuant to
clause 9.10.2.
 
“Matters” means all matters which are the subject of this Agreement and any
matters resulting therefrom.
 
 “Material” means property, facilities, equipment or supplies.
 
“Month” means a calendar month.
 
 
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“New Area” means:
 
(i) that part of the Licence Area in respect of which a Participant proposes to
transfer all or part of its Percentage Interest without transferring all of its
Percentage Interest in the remainder of the Licence Area; or
 
(ii) at any given time, any part of the Licence Area, being delimited by surface
area but applying only to that interpreted closure of any geological structure
or stratigraphic trap in which the reservoir or reservoirs exist, which is
subject to development by less than all Participants and in which the entire
Percentage Interest is owned by those of the Participants carrying out the
development.
 
“Non-Defaulting Participant” has the meaning assigned to it in clause 17.2(a).
 
“Non-Operator” means a Participant other than the Operator.
 
“Non-Sole Risk Participants” shall have the meaning assigned to it in clause
15.2.5.
 
“Oil and Gas UK” means that representative organisation trading as Oil and Gas
UK.
 
“Operator” means the Participant for the time being designated as such under
clause 5, acting in that capacity and not as the owner of a Percentage Interest.
 
“Outgoing Operator” has the meaning assigned to it in clause 5.7.1.
 
“Participant” means a party to this Agreement and its respective successors and
assigns.
 
“Passmark” shall have the meaning given to it in clause 9.8.2.
 
“Percentage Interest” means for each of the Participants the undivided
percentage interest held from time to time by it pursuant to this Agreement in
the Licence in so far as it relates to the Licence Area or, where the context so
requires, in any New Area.
 
“Petroleum” has the meaning assigned to it under the Licence.
 
“Pounds” or “£” means pounds sterling of the United Kingdom.
 
“Producing Part” shall have the meaning given to it in the Licence.
 
“Programme” means any programme of Joint Operations.
 
“Quarter” means a period of three Months ending on 31st March, 30th June, 30th
September or 31st December in any Year.
 
“Receipts” includes but is not limited to, grants received from any governmental
agency or body in the United Kingdom or of the European Union and monies (or the
monetary value of other consideration) arising from the sale of Joint Property.
 
“Representatives” means in relation to any Participant, any persons acting on
its behalf in connection with this Agreement.
 
“Second Term” means the term of years specified in the Licence as being the
period for which the Licence may be continued next after the expiry of the
Initial Term.
 
 
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“Secretary” means in relation to the Licence, the “Minister” as defined therein,
or, in relation to the exercise of functions under the Acts, the person
designated to exercise such functions, as the case may be.
 
“Senior Managerial Personnel” means in relation to any Participant, any person
employed by it or any of its Affiliates as a director or other corporate officer
or senior manager. For the purposes of this definition, “senior manager” shall
mean only:
 
 
(a)  
in relation to the Operator, any member of the management committee comprised of
senior managers which has overall responsibility for the management of the
assets and interests of the Operator and its subsidiaries and/or any person
employed by the Operator or its Affiliates who directly reports to any such
committee or to the board of directors or to any member of either in his
capacity as a member of such committee or board; and

 
 
(b)  
in relation to any Non-Operator, any member of any committee or board performing
the same or substantially the same function as the board of directors or the
management committee referred to in (a) above and any person employed by such
Non-Operator or its Affiliates who directly reports to any such committee or
board or to any member of either of them in his capacity as a member of such
committee or board.

 
“Simple Majority” means one or more Participants holding in aggregate more than
fifty per cent (50%) of the Percentage Interests of those entitled to vote.
 
“Sole Risk Development” shall have the meaning assigned to it in clause 15.1(d).
 
“Sole Risk Drilling” shall have the meaning assigned to it in clause 15.1(b).
 
“Sole Risk Interests” shall have the meaning assigned to it in clause 15.2.1.
 
“Sole Risk Participant” shall have the meaning assigned to it in clause 15.2.1.
 
“Sole Risk Project” shall have the meaning assigned to it in clause 15.1.
 
“Sole Risk Seismic” shall have the meaning assigned to it in clause 15.1(a).
 
“Sole Risk Testing” shall have the meaning assigned to it in clause 15.1(c).
 
“Surrendered Part” shall have the meaning given to it in the Licence.
 
“Wilful Misconduct” means an intentional or reckless disregard by Senior
Managerial Personnel of Good Oilfield Practice or any of the terms of this
Agreement in utter disregard of avoidable and harmful consequences but shall not
include any act, omission, error of judgement or mistake made in the exercise in
good faith of any function, authority or discretion vested in or exercisable by
such Senior Managerial Personnel and which in the exercise of such good faith is
justifiable by special circumstances, including safeguarding of life, property
or the environment and other emergencies.
 
“Working Day” means a day, other than a Saturday or Sunday, on which banks in
the cities of both London and Aberdeen are normally open for business.
 
“Work Obligations” means those firm obligations set out in Schedule 3 to the
Licence and any conditions referred to in clause 9.9.1(b).
 
“Year” means a calendar year.
 
 
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1.2  
Interpretation

 
In this Agreement:

1.2.1  
Reference to any statute, statutory provision or statutory instrument includes a
reference to that statute, statutory provision or statutory instrument as from
time to time amended, extended or re-enacted.

 
1.2.2  
Reference to the singular includes the plural and vice versa.

 
1.2.3  
Reference to any gender includes a reference to all other genders.

 
1.2.4  
Unless the context otherwise requires, reference to any clause is to a clause of
this Agreement.

 
1.2.5  
Reference to "include" means "including but not limited to".

 
1.2.6  
The headings are used for convenience only and shall not affect the construction
or validity of this Agreement.

 
2.  
Duration

 
2.1  
This Agreement shall be deemed to have commenced on the date hereof and shall,
subject to clauses 2.2 and 19, continue for so long as the Licence remains in
force and until all Joint Property has been disposed of, Decommissioning has
been completed and final settlement has been made between the Participants in
accordance with their respective rights and obligations hereunder.

 
2.2  
If obligations and liabilities arising out of the existence of Joint Property
are in the opinion of the Operator likely to exist beyond completion of
Decommissioning and final settlement the Participants shall enter into a
separate agreement with respect to meeting such obligations and liabilities
failing which:

 
(a)  
the Operator shall give notice to the Participants of the relevant circumstances
and this Agreement shall remain in full force and effect and its provisions
shall apply, mutatis mutandis, to the requirement of the Participants to meet
such obligations and liability; and

 
(b)  
this Agreement shall, for such purposes, survive the surrender of the Licence
Area or the determination of the Licence and in such event, the Percentage
Interests of the Participants for such purposes  shall be deemed to be the
Percentage Interests as they were at the date of such surrender or
determination.

 
3.  
Scope and Understanding

 
3.1  
Scope

 
3.1.1  
The scope of this Agreement shall extend to:

 
(a)  
the exploration for, and the appraisal, development and production of, Petroleum
under the Licence;

 
(b)  
without prejudice to clause 18, the treatment, storage and transportation of
Petroleum using Joint Property;

 
(c)  
without prejudice to clause 18, the consideration of technical and operational
issues in connection with the treatment, storage and transportation of Petroleum
using third party infrastructure;

 
(d)  
the consideration of technical and operational issues in connection with the use
of Joint Property by third parties;

 
 
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(e)  
the decommissioning or other disposal of Joint Property;

 
(f)  
the conditions for the carrying out of Sole Risk Projects in the Licence Area;
and

 
(g)  
the administration of the Associated Agreements and the performance of the
functions thereunder ascribed to the Operator.

 
3.1.2  
 Without prejudice to clause 3.1.3 and clause 3.1.1(g) , this Agreement shall
not extend to:

 
(a)  
any joint financing arrangements or any joint marketing or joint sales of
Petroleum;

 
(b)  
the consideration of any commercial terms in connection with the treatment,
storage and transportation of  Petroleum under the Licence using third party
infrastructure; and

 
(c)  
the consideration of any commercial terms in connection with the use of Joint
Property by third parties.

 
3.1.3  
Where the Operator represents the Participants in relation to any Associated
Agreement, unless otherwise agreed in such Associated Agreement, the
responsibility and liability of the Operator in relation to such Associated
Agreement shall be in accordance with this Agreement, and the liability of the
Participants under any Associated Agreement shall be apportioned in accordance
with their Percentage Interests.

 
3.1.4  
The Operator shall prepare and issue a revised Schedule D to the Participants
promptly following the execution of any agreement which the Participants have
agreed shall be incorporated as an Associated Agreement under this Agreement

 
3.2  
Understanding

 
Each Participant agrees that it has not been induced to enter into this
Agreement in reliance upon any statement, representation, warranty or
undertaking other than as expressly set out in this Agreement, and to the extent
that any such representation, warranty or undertaking has been given, the
relevant Participant unconditionally and irrevocably waives all rights and
remedies which it might otherwise have had in relation to it.  Nothing in this
clause shall however operate so as to exclude any right any Participant may have
in respect of statements fraudulently made or fraudulent concealment.
 
4.  
Interests of the Participants

 
Subject to the provisions of this Agreement, the Licence, all Joint Property,
all Joint Petroleum and all costs and obligations incurred in, and all rights
and benefits arising out of, the conduct of the Joint Operations shall be owned
and borne by the Participants in proportion to their respective Percentage
Interests which at the date of this Agreement are as follows:-
 
Alamo                                                       45.00 percent
 
Northdown                                               45.00 percent
 
Aimwell                                                   10.00 percent
 
TOTAL                                                    100.0 percent
 
5.  
The Operator

 
5.1  
Designation

 
Alamo is hereby designated and agrees to act as the Operator under this
Agreement for the purposes of the exploration for and the production of
Petroleum within the Licence Area.
 
 
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5.2  
Resignation

 
Subject to clause 5.6, the Operator shall have the right to resign:

5.2.1  
at the end of any Month by giving not less than one hundred and eighty
(180)  days notice to the Participants or such shorter period of notice as the
Joint Operating Committee may decide; or

 
5.2.2  
in the event of agreeing to assign its entire interest as Participant pursuant
to clause 23, at the end of any Month by giving not less than ninety (90) days
notice to the other Participants or such shorter period of notice as the Joint
Operating Committee may decide.

 
5.3  
Removal

 
5.3.1  
The Operator may be removed at the end of any Month by the Joint Operating
Committee giving not less than sixty (60) days notice to it if:

 
(a)  
the Joint Operating Committee determines that the Operator has committed any
material breach of, or failed to observe or perform any material obligation on
its part contained in, this Agreement  and such breach or failure has not been
remedied to the reasonable satisfaction of the Joint Operating Committee within
twenty-eight (28) days of receipt by the Operator of a notice from the Joint
Operating Committee requiring the Operator to remedy the breach or failure, or
within such longer period as may be specified in the said notice; or

 
(b)  
the aggregate Percentage Interest of the Operator and any Affiliate of the
Operator falls to less than ten per cent (10%).

 
5.3.2  
The Operator may be removed forthwith upon the Joint Operating Committee giving
notice to it if:-

 
(a)  
the Operator is unable to pay its debts as they fall due within the meaning of
section 123 (1) (e) of the Insolvency Act 1986 (but as if the words “if it is
proved to the satisfaction of the court that” were deleted) or has a voluntary
arrangement proposed under section 1 of the Insolvency Act 1986 or admits in
writing its inability to pay its debts as they mature or declares a moratorium
on the payment of all or a substantial part of its Indebtedness or makes a
general assignment for the benefit of creditors or applies for winding-up or
liquidation proceedings or is successfully put into forced or voluntary
liquidation (except for the purpose of voluntary reorganisation not involving
the insolvency of the Operator); or

 
(b)  
the Operator or any creditor or shareholder of the Operator petitions or applies
to any court, tribunal or authority for the appointment of, or the Operator has
or suffers to be appointed, any examiner, administrator, administrative
receiver, receiver, liquidator, trustee or similar officer of it, its
undertaking or any substantial part of its assets (and in the case of a petition
or application by a creditor, such petition or application is not dismissed
within fifteen (15) Working Days of it being presented or made); or

 
(c)  
the Operator (or its directors) files with the court a notice of intention to
appoint an administrator under the Insolvency Act 1986; or

 
(d)  
the Operator shall suffer a distress, execution, sequestration or other process
or any of the foregoing is being levied or enforced upon or sued out against the
whole or a substantial part of the assets, rights or revenues of the Operator,
and such distress, execution, sequestration or other process is not dismissed or
released within fifteen (15) Working Days; or

 
(e)  
any act or event shall occur or any proceedings shall be taken having the same
or similar effect to those described in (a) to (d) above (and whether or not
pursuant to the Insolvency Act 1986 as amended and/or supplemented by the
Insolvent Partnerships Order 1994) in relation to any partnership or
unregistered company of which the Operator is a member; or

 
 
11

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(f)  
the Operator otherwise enters into any settlement or takes any corporate action
or the Operator or any creditor or shareholder of the Operator takes any steps
in relation to the Operator under any law, regulation or decree of any
applicable jurisdiction whether now or hereafter in effect relating to or which
has an equivalent effect to any of clauses 5.3.2 (a), (b), (c), (d) or (e) above
taking into account the grace period provided for in clauses 5.3.2 (b) and (d);
or

 
(g)  
the Operator and its Affiliate(s) cease to hold any Percentage Interest ; or

 
(h)  
the Secretary withdraws his approval of the Operator; or

 
(i)  
the Operator has committed an act of Wilful Misconduct; or

 
(j)  
the Operator has failed to carry out any of its obligations under the
Decommissioning Security Agreement in any material respect.

 
5.4  
The Operator shall have no claim against the Participants as a consequence of
the resignation or removal of the Operator but such resignation or removal shall
be without prejudice to any rights, obligations or liabilities which accrued
during the period when the Operator acted as such.  If the Operator resigns
before the completion of all Work Obligations, it shall not be entitled to any
costs or expenses incurred in connection with the change of operatorship but if
the Operator resigns thereafter or is removed, it shall be entitled to charge to
the Joint Account such costs and expenses incurred in connection with the change
of operatorship as may be approved by the Joint Operating Committee (such
approval not to be unreasonably withheld), provided that the Operator shall not
be entitled to charge such costs to the Joint Account where it is removed
pursuant to clauses 5.3.1(a), 5.3.2(i) or 5.3.2(j).

 
5.5  
Election of Successor

 
  
As soon as practicable after notice is duly given as to the resignation or
removal of the Operator under clauses 5.2 or 5.3, a new Operator shall, subject
to its acceptance of the position under the terms of this Agreement and subject
to any necessary approval of the Secretary, be selected by the Joint Operating
Committee to assume the position of the Operator upon the effective date of the
resignation or removal.  If by the effective date of any resignation or removal
of the Operator under clauses 5.2 or 5.3, no such selection shall have been
made, the Non-Operator having the largest Percentage Interest and willing to
assume the position of Operator (and in the event of two or more such
Non-Operators with identical Percentage Interests that Non-Operator having held
such Percentage Interest for the longest time) shall be appointed and assume the
position of Operator, subject to any necessary approval of the Secretary.
 

5.6  
If no Non-Operator is willing to assume the position of Operator or no
Non-Operator is approved as Operator by the Secretary, the Participants shall be
deemed to have decided to abandon the Joint Operations and to surrender the
Licence in so far as it relates to the Licence Area. In such event:

 
5.6.1  
in the case of the resignation of the Operator, the Operator that has resigned;
or

 
5.6.2  
in the case of the removal of the Operator, the Non-Operator having the largest
Percentage Interest (and in the event of two or more such Non-Operators that
Non-Operator having held such Percentage Interest for the longest time)

   

  shall be the Operator for the purpose of effecting such surrender and
administering the disposal of Joint Property and due settlement in accordance
with the rights and liabilities of the Participants under this Agreement.

 
5.7  
Transfer of Responsibilities

 
5.7.1  
Except where clause 5.6.1 applies, upon the effective date of resignation or
removal of the Operator (the “Outgoing Operator”) under clause 5.2, the Outgoing
Operator shall hand or deliver to, or relinquish custody in favour of, the new
Operator selected or appointed to succeed it under clause 5.5 or 5.6, as the
case may be, all funds relating to the Joint Accounts, all Joint Property, all
Joint Petroleum and all books, records and inventories relating to the Joint
Operations other than those books, records and inventories maintained by the
Outgoing Operator as the owner of a Percentage Interest.  The Outgoing Operator
shall further use its reasonable endeavours to transfer to the aforesaid new
Operator, effective as of the effective date of such resignation or removal, its
rights as the Operator under all contracts exclusively relating to the Joint
Operations and the aforesaid new Operator shall assume all obligations of the
Outgoing Operator under them.  The new Operator and the Outgoing Operator shall
co-operate to ensure a smooth transition of operatorship.  Pending such transfer
and in relation to all other contracts relating to the Joint Operations (to the
extent such so relate) the Outgoing Operator shall hold its rights and interests
as the Operator from such effective date for the account and to the order of the
new Operator.

 
 
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5.7.2  
Without prejudice to any liability of the Outgoing Operator arising prior to
such effective date (subject always to clause 6.2.4), the Outgoing Operator
shall, from such effective date, no longer have any responsibility or authority
as Operator.

 
5.7.3  
The Joint Operating Committee shall have the option to order an audit of the
Joint Account and an inventory of all Joint Property and all Joint Petroleum
and, if conducted, such inventory shall be used in the return of and the
accounting for the said Joint Property and Joint Petroleum by the Outgoing
Operator for the purposes of the transfer of responsibilities under this clause
5.7.  Such option shall be exercised as soon as practicable after the date on
which the Outgoing Operator is required to transfer its responsibilities as
provided in clause 5.7.1 by notice given by the Joint Operating Committee.  All
costs and expenses incurred in connection with such audit and inventory shall be
for the Joint Account (except where the Outgoing Operator is removed pursuant to
clause 5.3.1(a) or 5.3.2 (i) or (j) in which case such costs and expenses shall
be borne by the Outgoing Operator).

 
5.8  
In respect of any vote of the Joint Operating Committee on any matter under this
clause (including on the giving of any notice under clauses 5.3.1 or 5.3.2),
other than pursuant to clause 5.3.1 (b), the Participant which is the Operator
(or in the case of clause 5.7.3, the Outgoing Operator) and any Participant
which is an Affiliate of the Operator (or in the case of clause 5.7.3, the
Outgoing Operator) shall not be entitled to vote and clause 9.8.2 shall apply.

 
6.  
Authorities and Duties of the Operator

 
6.1  
Rights

 
6.1.1  
Subject to all the provisions of this Agreement, the Operator has the right and
is obliged to conduct the Joint Operations by itself, its agents or its
contractors under the overall supervision and control of the Joint Operating
Committee.

 
6.1.2  
If the Operator does not conduct any of the Joint Operations itself, it shall
nevertheless remain responsible for such operations as the Operator as and to
the extent provided under this Agreement.

 
6.2  
Responsibilities

 
6.2.1  
Subject to the overall supervision of the Joint Operating Committee the
responsibilities of the Operator in relation to Joint Operations shall include,
but not be limited to:-

 
(a)  
the preparation of Programmes, Budgets and AFEs;

 
(b)  
the implementation of such Programmes and Budgets as shall, together with the
relevant AFEs, have been approved by the Joint Operating Committee;

 
(c)  
the prompt provision to each of the Participants of reports, data and
information ;

 
(d)  
the planning for and obtaining of all requisite services and Material;

 
(e)  
the direction and control of statistical and accounting services;

 
(f)  
the provision of all technical and advisory services required for the efficient
performance of the Joint Operations;

 
(g)  
the preparation of a Development Plan and its submission to the Secretary; and

 
(h)  
 the preparation of the Decommissioning Programme and its submission to the
Secretary.

 
 
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6.2.2  
The Operator shall

 
(a)  
conduct the Joint Operations in a proper and workmanlike manner in accordance
with Good Oilfield Practice;

 
(b)  
conduct the Joint Operations in compliance with the requirements of the Acts,
the Licence and any other applicable Legislation;

 
(c)  
do or cause to be done, with due diligence, all such acts and things within its
control as may be necessary to keep and maintain the Licence in force and
effect; and

 
(d)  
save as may otherwise be expressly provided under this Agreement (including the
Accounting Procedure), neither gain nor suffer a loss in such capacity as a
result of acting as Operator in the conduct of Joint Operations.

 
6.2.3  
The Operator shall establish and maintain appropriate business standards,
procedures and controls including those necessary to avoid any conflict between
the interests of its employees, contractors and agents, and the interests of the
Participants in the conduct of Joint Operations.

 
6.2.4  
Liability of the Operator

 
The Operator shall not be liable for and each Participant (including for the
avoidance of doubt the Participant designated as Operator) shall defend,
indemnify and hold the Operator harmless:

(a)  
to the extent of the indemnifying Participant’s Percentage Interest  from and
against any loss, damage or claim by or liability to any person, whether a
Participant or not, (including any award of damages and any legal or other costs
and expenses incurred in respect of such claim or liability) which arises,
whether directly or indirectly, out of the performance, non-performance or
misperformance by the Operator of any of its duties or obligations as Operator
hereunder or acting on behalf of the Participants under any Associated
Agreement, irrespective of negligence and/or breach of duty (whether statutory
or otherwise) on the part of the Operator, except only for any loss, damage,
claim or liability resulting from or arising out of:

 
(i)  
the Wilful Misconduct of the Operator; or

 
(ii)  
the failure of the Operator to obtain or maintain any insurance which it is
required to obtain and maintain under clause 8.1.1, except where the Operator
has used all reasonable endeavours to obtain or maintain any such insurance but
has been unable to do so and has promptly notified the Participants
participating or proposing to participate therein;

 
(b)  
from and against any Consequential Loss which such Participant may suffer or
incur arising, directly or indirectly, out of the performance, non-performance
or misperformance by the Operator of any of its duties or obligations as
Operator hereunder or acting on behalf of the Participants under any Associated
Agreement even in the event of its negligence and/or breach of duty (whether
statutory or otherwise) and/or Wilful Misconduct.

 
6.3  
Liens and Encumbrances

 
The Operator shall, in so far as it may be within its control, keep all Joint
Property and all Joint Petroleum free from all liens, charges and encumbrances
which might arise by reason of the conduct of the Joint Operations.
 
6.4  
Employees and Contract Personnel

 
Subject to the provisions of any approved Programme and Budget, the Operator
shall determine the number of employees employed, and persons hired under
contracts for services, by the Operator in connection with the Joint
Operations.  Subject to the provisions of clause 6.11, the Operator shall also
determine their selection, hours of work and remuneration.
 
 
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6.5  
Commitments for Material and Services

 
6.5.1  
The entire provisions of this clause 6.5 shall remain subject always to clause
6.10.2.

 
6.5.2  
In connection with work to be carried out pursuant to an approved Programme and
Budget or AFE:

 
(a)  
subject to clause 6.5.2 (b) the Operator, or any Affiliate of the Operator, may
supply necessary Material and services whether owned, leased or otherwise, from
its own resources and shall charge the costs to the Joint Account in accordance
with  the Accounting Procedure;

 
(b)  
in the event that the Operator, or any Affiliate of the Operator, proposes to
supply Material and/or services from its own resources which it estimates will
cost more than fifty thousand Pounds (£50,000) the Operator shall obtain the
approval of the Joint Operating Committee prior to supplying such Material
and/or services. Approval of an AFE which identifies the rates for supply of
such Material and services shall constitute approval for their supply under this
clause 6.5.2(b);

 
(c)  
to the extent that the Operator, or any Affiliate of the Operator, does not
supply Material or services from its own resources, it shall award the contract
for the supply of such Materials and services to third parties subject, where
applicable, to the procedures hereafter set out in this clause 6.5.

 
6.5.3  
The Operator or any of its Affiliates shall have the authority to obtain
Materials and/or services for Joint Operations pursuant to contracts awarded or
to be awarded to a third party where the Materials and/or services to be
provided will be provided to more than one field and/or more than one
operator.  For any such contract, in the event that the cost to the Joint
Account will or is likely to exceed two hundred and fifty thousand Pounds
(£250,000) per annum or is likely to exceed five hundred thousand Pounds
(£500,000) over its expected duration the Operator shall obtain the approval of
the Joint Operating Committee prior to the obtaining of such Materials and/or
services. The Operator shall not be obliged to divulge to the Joint Operating
Committee details which it reasonably considers to be of a commercially
sensitive nature (for example and without limitation, itemised rates, prices,
price-structures and incentives) in relation to any such multi-field and
multi-operator agreements under which it requires to obtain Materials and/or
services and which it considers are confidential between itself and its
contractors provided that such details may be audited under paragraph 7 of the
Accounting Procedure to ensure that all cost elements, including incentives and
benefits have been apportioned as expressly agreed by the Joint Operating
Committee, or in the absence of any such agreement, in a fair and equitable
manner across all fields and/or operators who are using the Materials and/or
services under the relevant contract.

 
6.5.4  
Subject to clause 6.5.3, in the case of any proposed contract to be awarded to a
third party under an Exploration, Appraisal, Production or Decommissioning
Programme and Budget where the commitment will or is likely to exceed five
hundred thousand Pounds (£500,000) or under a Development Programme and Budget
where the commitment will or is likely to exceed one million Pounds (£1,000,000)
the Operator shall unless the Joint Operating Committee otherwise decides:

 
(a)  
Upon request, supply the Non-Operators with copies of the tender documents;

 
(b)  
put out such contracts to competitive tender;

 
(c)  
report details of all bids received,  and promptly provide the Non-Operators
(when requested) with copies of the terms of any recommended contract(s);

 
(d)  
obtain the approval of the Joint Operating Committee prior to the award of a
contract provided that any Participant which fails to respond to the Operator’s
request for such approval within ten (10) Working Days shall be deemed to have
given such approval provided further that the consequences of a failure to
respond within the stated time is brought to each Participant’s attention at the
time that the Operator seeks Joint Operating Committee approval; and

 
 
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(e)  
promptly supply the Non-Operators (when requested) with conformed copies of the
contract and of any subsequent revisions to it.

 
(f)  
apply the above provisions to any revision to a contract  where such revision
will either alone or cumulatively exceed, in the case of a contract subject to
an Exploration, Appraisal, Production or Decommissioning Programme and Budget,
five hundred thousand Pounds (£500,000), and, in the case of a contract subject
to a Development Programme and Budget, one million Pounds (£1,000,000).

 
6.5.5  
Subject to clause 6.5.3, in the case of any proposed contract to be awarded to a
third party where the commitment will or is likely to exceed two hundred and
fifty thousand  Pounds (£250,000) but less than five hundred thousand Pounds
(£500,000) the Operator shall unless the Joint Operating Committee otherwise
decides:

 
(a)  
put out such contract to competitive tender; and

 
 
(b)  
award the contract provided that if the contract is awarded to a person other
than the lowest priced technically or operationally acceptable bidder the
Operator shall obtain the prior approval of the Joint Operating Committee before
awarding the contract provided that any Participant which fails to respond to
the Operator’s request for such approval within ten (10) Working Days shall be
deemed to have given such approval provided further that the consequences of a
failure to respond within the stated time is brought to each Participant’s
attention at the time that the Operator seeks Joint Operating Committee
approval.

 
6.5.6  
With respect to any proposed contract to be awarded to a third party not falling
under clauses 6.5.2, 6.5.3 or 6.5.4, the Operator shall obtain competitive
tenders except where the Operator considers that it is impractical or
inefficient to do so.

 
6.5.7  
The Operator shall use its reasonable endeavours to ensure that any contract
entered into by it can be freely assigned to any successor Operator in the event
of the resignation or removal of the Operator under clauses 5.2 and 5.3.

 
6.5.8  
The Operator shall act as agent of the Participants in dealings with contractors
and shall use reasonable endeavours to include in all contracts made pursuant to
this Agreement, a provision which ensures that the Operator makes the contract
on behalf of all the Participants.  The Operator shall use reasonable endeavours
to include in all such contracts provisions in the following or similar form for
which purpose “COMPANY” refers to the Operator and “CO-VENTURERS” refers to the
Non-Operators:

 
“The COMPANY enters into the CONTRACT for itself and as agent for and on behalf
of the other CO-VENTURERS. Notwithstanding the above:
 
(a)  
the CONTRACTOR agrees to look only to the COMPANY for the due performance of the
CONTRACT and nothing contained in the CONTRACT will impose any liability upon,
or entitle the CONTRACTOR to commence any proceedings against any CO-VENTURER
other than the COMPANY;

 
(b)  
the COMPANY and only the COMPANY is entitled to enforce the CONTRACT on behalf
of all CO-VENTURERS as well as for itself. For that purpose the COMPANY shall
commence proceedings in its own name to enforce all obligations and liabilities
of the CONTRACTOR and to make any claim which any CO-VENTURER may have against
the CONTRACTOR; and

 
(c)  
all losses, damages, costs (including legal costs) and expenses recoverable by
the COMPANY pursuant to the CONTRACT or otherwise shall include the losses,
costs (including legal costs) and expenses of the COMPANY’s CO-VENTURERS and
AFFILIATES except that such losses, damages, costs (including legal costs) and
expenses shall be subject to the same limitations or exclusions of liability
applicable to the COMPANY or the CONTRACTOR under the CONTRACT.”

 
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6.6  
Representation of the Participants

6.6.1  
Unless otherwise directed by the Joint Operating Committee, the Operator shall
represent the Participants regarding any matters or dealings with the Secretary
and other governmental authorities or third parties in so far as they relate to
the Joint Operations, provided that there is reserved to each Participant the
unfettered right to deal with the Secretary or any other governmental
authorities in respect of matters relating to its own Percentage Interest.  Save
for any routine correspondence which the Operator is obliged by legislation to
submit to the Secretary and other governmental authorities, the Operator shall
provide to each Participant in advance a copy of any material correspondence
which it proposes to provide to the Secretary or any other governmental
authorities or any third parties in relation to the Joint Operations and shall
obtain the consent of each Participant to the content of any such correspondence
which purports to represent the views of such Participant.

6.6.2  
Where the Operator has been informed or has reason to believe that matters of
material importance to the Participants are to be discussed at a meeting, it
shall give as much advance notice as is reasonably practicable to the
Participants of such meeting together, where practicable, with any agenda,
briefing papers or presentation materials and shall consult with the
Participants in relation to such meeting and report promptly thereafter. Any
Participant shall be entitled to attend such meeting.

 
6.7  
Records

 
The Operator shall prepare and maintain separate books, records and inventories
of the Joint Operations which shall be kept in compliance with the Accounting
Procedure and with due regard to the requirements of the Acts, the Licence, and
all applicable Legislation.
 
6.8  
Reports

 
The Operator shall:
 
(a)  
promptly provide each Participant with daily drilling reports and daily
production reports or access to real time information regarding production of
Joint Petroleum and such other reports as the Joint Operating Committee may
decide and, at the sole cost of the Participant requesting them, such additional
reports as such Participant may reasonably request; and

 
(b)  
make all reports concerning the Joint Operations to the appropriate governmental
authorities in a timely manner as required under the Acts and the Licence  and,
concurrently therewith, furnish copies of all such reports to all the
Participants.

 
6.9  
Consultation and Information

 
6.9.1  
The Operator shall freely consult with the Participants and keep them informed
of matters concerning the Joint Operations.

 
6.9.2  
Without prejudice to the generality of clause 6.9.1, the Operator shall:-

 
(a)  
inform each Participant of all logging, coring, testing and such other Joint
Operations as the Joint Operating Committee may decide with such advance notice
as is practicable in the circumstances, so that each Participant may, subject to
clause 7.3, have one or more representatives present on location during the
conduct of such operations;

 
 
(b)   
subject to the terms of any contract under which they were procured, promptly
provide each Participant with any and all data and interpretations of data
including but not limited to, seismic data, access to core samples, copies of
all well logs and core analyses and with such other data and information
relating to Joint Operations (including but not limited to, engineering,
geological, geophysical and technical  data) as the Joint Operating Committee
may decide and in addition, at the sole cost of the Participant requesting same,
such additional data and information as such Participant may reasonably request;
and

 
 
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(c)   
inform each Participant on a  timely basis of the activities of any land agent
appointed in furtherance of  Joint Operations and provide a regular report of
such agent's dealings with  landowners, local communities and other interested
parties, with particular  reference to matters of an environmental or planning
nature

 
6.10  
Expenditure and Actions

 
6.10.1  
The Operator is authorised to make such expenditures, incur such commitments for
expenditures and take such actions as may be authorised by the Joint Operating
Committee in accordance with clauses 10 to 14 provided that nothing contained in
this clause 6.10.1 shall derogate from the Operator’s duties under clause 6.5.

 
6.10.2  
The Operator is also authorised to make any expenditures or incur commitments
for expenditures or take actions it deems necessary in the case of emergency for
the safeguarding of lives or property or the prevention of pollution.  The
Operator shall promptly notify all the Participants of any such circumstances
and the amount of expenditures and commitments for expenditure so made and
incurred and actions so taken.

 
6.11  
Secondment

 
6.11.1  
The Participants agree that in certain circumstances a collaborative effort
between them may be beneficial to Joint Operations. Such collaborative effort
may include the secondment by a Non-Operator of personnel to the Operator’s
organisation:

 
(a)  
to work on a term assignment as a member of a project team; or

 
(b)  
to fill organisational positions;

 
in respect of Joint Operations. The length of any assignment shall be agreed
between the Non-Operator and the Operator. Notwithstanding the foregoing, the
Non-Operator shall have the right on giving three (3) months’ notice, to
withdraw its employee from any such assignment.
 
The Operator shall have the right to require the removal of any person seconded
to its organisation for reasonable cause.
 
6.11.2  
In respect of any person seconded to the Operator’s organisation under clause
6.11.1 for the period of such secondment:

 
(a)  
such person shall remain the employee of the Participant which seconded him and
such Participant shall remain responsible for all the legal obligations of an
employer associated with such employment;

 
(b)  
all costs associated with the employment of such person (including salary and
employee benefits) and all costs associated with his secondment to the
organisation of the Operator shall be chargeable to the Joint Account; and

 
(c)  
all work undertaken by such person shall be Joint Operations and accordingly the
Operator shall retain overall responsibility for such work and such person (and
the Participant which seconded him) shall benefit from all indemnities and
limitations of liability applying to the Operator hereunder, including those set
forth in clause 6.2.4 in relation to such work.

 
6.12  
Health, Safety and Environment

 
6.12.1  
Following approval of a Development Plan, the Operator shall prepare and submit
to the Joint Operating Committee for its approval a plan of Health, Safety and
Environment (“HSE”) matters containing the policies which will govern the Joint
Operations and the objectives and targets for the following Year. Such HSE plan
will take into account any policies, objectives and targets decided by the Joint
Operating Committee and will include an assessment of the health, safety and
environmental impact of the Joint Operations.

 
6.12.2  
The Operator shall report regularly on the implementation of the HSE plan
referred to above and shall promptly advise the Joint Operating Committee of any
matter arising out of or in connection with Joint Operations which may affect
such plan such as an occurrence that could have a negative impact on the
environment or could cause any serious illness, injury or death.

 
 
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6.12.3  
The Operator shall prepare and submit to the Joint Operating Committee for its
approval a programme for regular HSE audits to be performed by the Operator.
Each Participant shall have the right to join such audit upon reasonable notice
given to the Operator. The costs of conducting an HSE audit shall be charged to
the Joint Account.

 
6.13  
The Operator shall establish and maintain an alcohol and drugs policy and
enforcement procedure, which prohibits employees and agents, contractors and
subcontractors and invitees in any area in which Joint Operations are being
undertaken from:

 
(a)  
performing services while under the influence of alcohol or any controlled
substance;

 
(b)  
misusing legitimate drugs or possessing, using, distributing or selling illicit
or unprescribed controlled substances; or

 
(c)  
save in limited circumstances under arrangements approved by the Operator’s
management, possessing, using, distributing or selling alcoholic beverages when
in a work area.

7.  
Rights of the Participants

7.1  
Reservation of Rights

Subject as otherwise provided in this Agreement, each Participant reserves all
its rights under the Licence.
 
7.2  
Inspection Rights

 
Without prejudice to the provisions of paragraph 7 of the Accounting Procedure,
each Participant shall have the right to inspect, at all reasonable times during
normal business hours, all books, records and inventories of any kind or nature
maintained by or on behalf of the Operator and relating to the Joint Operations
other than those books, records and inventories maintained by the Operator as
the owner of a Percentage Interest, provided that such Participant gives the
Operator not less than fifteen (15) Working Days prior notice of the date upon
which it desires to make such inspection and identified the person or persons to
conduct such inspection.  Each Participant shall have the right to make copies
of such books, records and inventories at the sole cost of such Participant.
 
7.3  
Access Rights

 
7.3.1  
Each Participant shall have the right, at all reasonable times and at its sole
risk and expense, of access to the Licence Area and/or the Joint Operations
and/or the place of storage of samples obtained as a result of Joint Operations
provided such Participant gives the Operator reasonable notice of the date such
access is required and identifies the representative or representatives to whom
such access is to be granted.  If any Participant wishes access to be given to
more than one representative at a time the Operator shall not be required to
grant such access for the additional representatives if, and to the extent that,
the granting of such access will interfere with the conduct of the Joint
Operations.

 
7.3.2  
In the case of access to offshore operations:

 
(a)  
the Participant shall provide evidence that any representative  wishing to gain
access holds a current and valid certificate fully compliant with statutory and
regulatory requirements for individuals travelling to an offshore installation
and, where applicable, staying overnight; and

 
(b)  
 the Operator shall, at the cost of the Joint Account, provide facilities to
gain such access in transportation engaged thereon and also provide
accommodation offshore in so far as the provision of such facilities and
accommodation shall not interfere with the conduct of the Joint Operations.

 
 
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7.3.3  
The Participants shall procure that their representatives shall comply with all
safety procedures notified to the Participants by the Operator which are
implemented from time to time by the Operator whilst at the relevant location of
Joint Operations.

 
8.  
Insurance and Litigation

 
8.1  
Insurance

 
8.1.1  
The Operator shall obtain and maintain, in respect of the Joint Operations and
the Joint Property, all insurance required under the Licence or any other
applicable law or as may be required by any contract entered into by the
Operator in furtherance of Joint Operations and such other insurance as the
Joint Operating Committee may from time to time determine.  Except in respect of
any insurance which the Operator must take out in its own name, and subject to
clause 8.1.3, any Participant may elect not to participate in the insurance to
be taken out by the Operator under this clause provided such Participant gives
notice to that effect to the Operator and does nothing which may interfere with
the Operator’s negotiations for such insurance for the other Participants. The
cost of insurance in which any of the Participants are participating shall be
charged to the Participants so participating in proportion to their respective
Percentage Interests.  The Operator shall, in respect of all insurance obtained
pursuant to this clause 8.1.1:-

 
(a)  
upon request from any Participants provide to such Participants a copy of the
levels of coverage and the general conditions of the relevant policies when they
are issued;

 
(b)  
(except for employer’s liability or similar insurance) arrange for the
Participants participating in it, according to their respective Percentage
Interests, to be named as co-insureds on the relevant policies with waivers of
subrogation in favour of the Participants with respect to Joint Operations; and

 
(c)  
duly file all claims and take all necessary and proper steps to collect any
proceeds and, if all the Participants are participating in it, credit them to
the Joint Account or, if less than all the Participants are participating in it,
credit them to the participating Participants.

 
8.1.2  
Any of the Participants may obtain such other insurance as it deems advisable
for its own account at its own expense.  In the arranging of such other
insurance that Participant shall ensure it does not interfere with nor prejudice
the arrangement of any insurance by the Operator or any other Participant.  Such
insurance shall contain a waiver of subrogation by the insurer in favour of the
Operator and/or the other Participants.

 
8.1.3  
Each of the Participants electing not to participate in those insurances in
respect of which non-participation is permitted pursuant to clause 8.1.1 shall,
in respect of its Percentage Interest share of any liability which may arise in
connection with the Joint Operations and/or Joint Property, obtain and maintain
equivalent insurance (to include waivers of subrogation in favour of the other
Participants), or produce such evidence of financial responsibility, as may from
time to time be reasonably required by the Joint Operating Committee. Each of
the Participants shall, as and when required by the Joint Operating Committee
produce to it such evidence as it may reasonably require to establish:

 
(a)  
 that such insurance or other evidence of financial responsibility is being
maintained; and

 
(b)  
the security and creditworthiness of such insurance or financial responsibility.

 
8.1.4  
The Operator shall promptly on request provide such details relating to the
Joint Operations and/or Joint Property as a Participant may reasonably require
in order to arrange any insurances pursuant to clauses 8.1.2 and/or 8.1.3.

 
 
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8.1.5  
The Operator shall take reasonable steps to ensure that all contractors
(including sub-contractors) performing work in respect of the Joint Operations
and the Joint Property obtain and maintain all insurance required under the
Acts, the Licence or any other applicable Legislation and such other insurances
as the Joint Operating Committee may from time to time determine.  The Operator
shall in respect of all insurance obtained by such contractors (including
sub-contractors):-

 
(a)  
if requested by any Participant, supply such Participant with evidence that it
has been effected and is being maintained; and

 
(b)  
take reasonable steps to arrange for such contractors (including
sub-contractors) to obtain from their insurers a waiver of subrogation in favour
of the Participants.

 
8.1.6  
The Operator shall, without prejudice to any other obligations of the Operator
or rights of the Participants hereunder, give prompt notice to the Participants
of and shall allow the Participants or their insurers to investigate, subject to
the provisions of clause 7.3, any incident that has resulted in a fatality,
serious injury, material pollution incident or a material loss.

 
8.1.7  
The Operator shall provide all information requested by any Participant
effecting separate insurance to assist such Participant’s insurers’
investigation of any claims notified pursuant of clause 8.1.6.

 
8.2  
Not Used

 
8.3  
Litigation

 
8.3.1  
The Operator shall promptly notify the Participants of:

 
(a)  
any incidents, accidents or circumstances causing damage to Joint Property, the
costs of which may exceed ten thousand Pounds ( £10,000); and

 
(b)  
any serious injury or fatality or material pollution incident in connection with
the Joint Operations;

 
(c)  
any claim, litigation, demand or judgement relating to the Joint Operations
where the total amount in dispute and/or the total amount of damages together
with any costs are estimated to exceed ten  thousand Pounds (£10,000), or such
other amount as may from time to time be determined by the Joint Operating
Committee.

 
8.3.2  
The Operator shall have the authority to prosecute, defend or settle any claim,
litigation, lien, demand or judgement relating to the Joint Operations (other
than as between the Participants) provided that:-

 
(a)  
in the case of any litigation (irrespective of the estimated amount of damages
and costs) to be prosecuted or defended otherwise than in any court in the
United Kingdom the Operator shall have no such authority without the prior
approval of all the Participants except such authority as may be necessary:-

 
(i)  
to prevent judgement being given against the Joint Account while full authority
by the Participants is being sought; and

 
(ii)  
solely to enable the Operator to contest the exercise by the relevant court of
jurisdiction in the matter, provided that the Operator first obtains legal
advice in the relevant jurisdiction from an appropriate reputable legal
practitioner that the contest itself would not constitute submission by the
Operator to such jurisdiction; and

 
(b)  
where the total amount in dispute and/or the total amount of damages together
with any costs are estimated to exceed one hundred thousand Pounds (£100,000),
or such other amount as may from time to time be determined by the Joint
Operating Committee, the Operator shall have no such authority, save as set out
in clause 8.3.2 (a), without the prior approval of the Joint Operating
Committee.

 
 
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8.3.3  
Any Non-Operator shall promptly notify the other Participants of any claim,
litigation, lien, demand or judgement relating to or which may affect the Joint
Operations. In so far as such claim, litigation, lien, demand or judgement
relates to a matter in respect of which such Non-Operator wishes to be
indemnified pursuant to clause 22.2 such Non-Operator shall defend or settle it
in accordance with the directions of the Joint Operating Committee (or, in
default of any direction from the Joint Operating Committee, at its own
discretion acting reasonably and taking into account the interests of the other
Participants). Where the Non-Operator is entitled to be indemnified pursuant to
clause 22.2, such costs, expenses and damages as are payable pursuant to such
defence or settlement so relating shall be for the Joint Account except where
such defence or settlement arises in respect of an encumbrance granted by such
Participant, in which case it shall be liable for all costs, expenses and
damages incurred in respect of it.

 
8.3.4  
Notwithstanding the foregoing provisions of this clause 8.3, each Participant
having a potential liability in respect thereof shall have the right to
participate in any prosecution, defence or settlement conducted in accordance
with clause 8.3.2 or 8.3.3 at its sole cost and expense provided that such
participation shall not prejudice the interests of the other Participants.

 
8.3.5  
For the avoidance of doubt it is hereby declared that the conduct of any
litigation involving a Sole Risk Project, other than as between the
Participants, shall be at the sole cost and expense of the Participants
participating in such Sole Risk Project.

 
9.  
The Joint Operating Committee

 
9.1  
Establishment and Powers

 
There is hereby established a Joint Operating Committee which shall exercise
overall supervision and control of all matters pertaining to the Joint
Operations.  Without limiting the generality of the foregoing, but subject as
otherwise provided in this Agreement, the powers and duties of the Joint
Operating Committee shall include:-
 
(a)  
the consideration and determination of all matters in general relating to
policies, procedures and methods of operation hereunder with the intent that all
such operations should be undertaken in a manner consistent with Good Oilfield
Practice and in compliance with best practice standards in respect of health and
safety and of the environment;

 
(b)  
the consideration, and, if so required, determination of, inter alia, the
following:

 
(i)  
exploration, appraisal, development and production strategies;

 
(ii)  
contract strategy;

 
(iii)  
decisions as to cessation of production, strategies for Decommissioning and the
disposal of Joint Property; and

 
(iv)  
any other matter relating to the Joint Operations which may be referred to it by
the Participants or any of them (other than any proposal to amend this
Agreement) or which is otherwise designated under this Agreement for reference
to it;

 
(c)  
the approval of Programmes and Budgets; and

 
(d)  
the  amendment of the monetary limits set out in this Agreement from time to
time either generally or in respect of particular operations or particular
phases of operations, to take account of the general level of inflation and (if
appropriate) the prevailing costs of relevant goods and services, at the request
of the Operator or any Participant.

 
 
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9.2  
Representation

 
The Joint Operating Committee shall consist of one representative appointed by
each of the Participants provided always that more than one of the Participants
may appoint the same representative who shall represent them separately.  Each
Participant shall, as soon as possible after the date of this Agreement, give
notice to all the other Participants of the name of its representative and of an
alternate on the Joint Operating Committee.  Such representative may be replaced
from time to time, by like notice.  Representatives may bring to meetings of the
Joint Operating Committee such advisers as they consider necessary.  The
representative of a Participant or, in the absence of the representative, his
alternate, shall be deemed authorised to represent and bind such Participant
with respect to any matter which is within the powers of the Joint Operating
Committee.  The Operator shall also be entitled to be represented at meetings of
the Joint Operating Committee in its capacity as Operator, but its
representative in its capacity as Operator (which may be a different person to
its representative in its capacity as Participant) shall have no additional
voting rights.
 
9.3  
Chairman

 
The representative of the Participant which is the Operator shall be the
chairman of the Joint Operating Committee.
 
9.4  
Meetings

 
9.4.1  
The Joint Operating Committee shall hold meetings every Quarter (or at such
other regular intervals as may be decided by the Joint Operating Committee) at
the Operator’s designated office or at such other place as may be determined by
the Joint Operating Committee.  The Operator shall call such meetings and shall
give at least twenty (20) days notice of the time and date of each meeting,
together with an agenda and appropriate data and information relating to the
matters to be considered at that meeting.  By notice to all the other
Participants, any Participant can advise of additional matters which such
Participant desires to be considered at the meeting, and provided such notice is
given at least ten (10) days before the date of the meeting, those matters will
be considered.

 
9.4.2  
The Joint Operating Committee shall hold a special meeting upon the request of
any of the Participants.  Such request shall be made by notice to all the other
Participants and state the matters to be considered at that meeting.  Upon
receiving such request, the Operator shall without delay call a special meeting
for a date not less than seven (7) nor more than ten (10) days after receipt of
the request.

 
9.4.3  
For any meeting of the Joint Operating Committee, the period of notice
stipulated above may be waived with the consent of all the Participants.

 
9.4.4  
Any Participant not represented at a meeting may vote on any matter on the
agenda for such meeting by either:-

 
(a)  
appointing a proxy in writing; or

 
(b)  
giving notice of such vote to the Operator prior to the submission of such
matter for vote at such meeting.

 
9.5  
Minutes

 
The Chairman of the Joint Operating Committee shall appoint a secretary for the
Joint Operating Committee who will prepare the minutes of each meeting and
provide each Participant with a copy of them not more than fourteen (14) days
after the end of the meeting.  Each Participant shall notify all the other
Participants of its approval or disapproval of the minutes within fourteen (14)
days of receipt of them.  A Participant who fails to so notify will be deemed to
have approved the minutes.  The approval or disapproval of the minutes as
aforesaid shall not affect the validity of any action taken in good faith by the
Operator prior to receipt of any such notice on the basis of its understanding
of the decisions of the Joint Operating Committee.
 
 
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9.6  
Action without a Meeting

 
9.6.1  
The Participants may vote on and determine by notice to the Operator any
proposal of which they are given notice by the Operator (on its own initiative
or on the request of a Participant) and which they could validly determine at a
meeting of the Joint Operating Committee if duly held for that purpose.  Each
Participant shall cast its vote within fourteen (14) days after the proposal is
received by it except that where the Participants are requested to vote on and
determine any proposal relating to the deepening, side-tracking, testing,
plugging back, suspending or abandoning of a well on which drilling equipment is
then located or where, in the reasonable opinion of the Operator or the
Non-Operator notifying the proposal, as the case may be, the matter presented
for consideration by its nature requires determination in less than fourteen
(14) days and such fact and lesser period are so stated in the notice submitting
the proposal, the Participants shall cast their votes within such lesser period
which shall not be less than forty-eight (48) hours after receipt of the
proposal.  Failure by a Participant to cast its vote within the relevant period
shall be regarded as a vote by that Participant against the proposal.

 
9.6.2  
The Operator will give prompt notice of the results of any such voting to the
Participants and any decision so taken shall be binding on the Participants
notwithstanding that any Participant may have requested a special meeting to
discuss any such proposal under clause 9.4.2.

 
9.7  
Sub-Committees

 
The Joint Operating Committee may establish such advisory sub-committees as it
considers desirable from time to time.  Each sub-committee established shall be
given written terms of reference and shall be subject to such procedures as the
Joint Operating Committee may determine.  The meetings of sub-committees will as
far as possible be arranged so that the minutes of such meetings can be
presented to the Participants in sufficient time for consideration before the
next following regular meeting of the Joint Operating Committee.
 
9.8  
Voting Procedure

 
9.8.1  
Unless otherwise provided in this Agreement each Participant shall have a voting
interest equal to its Percentage Interest.

 
9.8.2  
Unless otherwise expressly provided in this Agreement, all decisions of the
Joint Operating Committee shall require the affirmative vote of two (2) or more
Participants (and for this purpose a Participant and its Affiliates shall be
deemed to be a single Participant) having  in aggregate a Percentage Interest of
at least sixty-five percent (65%) (such requirements being referred to as a
“Passmark”). For the purposes of this clause 9.8.2, if the right of a
Participant (or its Affiliates) to vote shall have been excluded pursuant to
clauses 5.8, 17.5.1 or 24.3 (g), decisions of the Joint Operating Committee
shall be made by the affirmative vote of two (2) or more Participants (and for
this purpose a Participant and its Affiliates shall be deemed to be a single
Participant) having individually or in aggregate a Percentage Interest of at
least sixty-five percent (65%) of the sum of the Percentage Interests of the
Participants entitled to vote and references to a “Passmark” shall be
interpreted accordingly.

 
9.8.3  
The following matters and decisions require the affirmative vote of all
Participants entitled to vote:

 
(a)  
the authorising of the Operator to prosecute or defend litigation outside the
United Kingdom as set out under clause 8.3.2(a);

 
(b)  
waiver of the period of notice for a meeting of the Joint Operating Committee as
set out under clause 9.4.3;

 
(c)  
the decision to seek relief from Work Obligations as set out under clause
9.9.1(a);

 
(d)  
approval of the creation of a New Area as set out under clause 9.10.1;

 
(e)  
satisfaction of a Work Obligation by a Sole Risk Project  as set out under
clause 15.2.4;

 
(f)  
the decision that the Operator may carry out Sole Risk Development as set out in
clause 15.2.9 (c);

 
 
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(g)  
the decision to abandon the Joint Operations as set out in clause 17.6.2;

 
(h)  
approval of the disclosure of confidential information as set out in clause
19.1;

 
(i)  
approval of the trading of data as set out in clause 19.2;

 
(j)  
consent to the transfer of an interest under the Licence or this Agreement as
set out in clause 23.2;

 
(k)  
any amendment of this Agreement as set out in clause 31.3;

 
(l)  
determination of the Licence as set out in clause 9.9.7.

 
9.8.4  
Subject to clause 11.1.4 and clause 15.9, all the Participants shall be bound by
each decision of the Joint Operating Committee duly made in accordance with the
provisions of this Agreement.

 
9.8.5  
Where this agreement provides that the agreement, approval or consent of the
Joint Operating Committee is not to be unreasonably withheld or delayed in
respect of any matter, then no Participant shall unreasonably withhold or delay
its vote in respect of such matter and each Participant shall act reasonably
when exercising its right to vote in respect of such matter.

 
9.9  
Licence Provisions

 
9.9.1  
Work Obligations

 
(a)  
 In respect of all Work Obligations, the Joint Operating Committee shall, unless
and to the extent that all the Participants agree to seek relief from such Work
Obligations and such relief is obtained from the Secretary, determine the
location and the time at which such Work Obligations are to be discharged
provided that, if the Joint Operating Committee has not in relation to any Work
Obligation made such determination by a date which is six (6) Months (or, in the
case of the drilling of a Well, twelve (12) Months) prior to the expiration of
the applicable period for the discharge of the Work Obligation, the Operator
shall promptly propose to the Participants a programme and timetable for the
discharge of the Work Obligation in question. Unless within one (1) Month after
such proposal Participants holding a Simple Majority agree on an alternative
programme and timetable which discharges the Work Obligation (in which case the
programme and timetable so agreed shall be deemed to be approved by the Joint
Operating Committee), the programme and timetable proposed by the Operator shall
be deemed to be approved by the Joint Operating Committee and the Work
Obligations shall be performed in accordance with such programme and timetable
and shall in any event be commenced not later than a date which will allow
timely completion of such Work Obligations before the expiration of the
applicable period for the discharge of the Work Obligation.

 
(b)  
Where the Secretary prescribes conditions for the continuation of a Licence in
accordance with its terms, any such conditions involving the carrying out of
work on the Licence shall be considered as Work Obligations as between those
Participants who have elected to continue the Licence under clause 9.9.3.

 
9.9.2  
Drill or Drop Well

 
(a)  
In respect of the well described in the drill-or-drop commitment set out in
Schedule 3 of the Licence (the “Drill-or-Drop Well”), unless by twelve (12)
Months before the last day of the Initial Term (the “Drill-or-Drop Date”) the
Joint Operating Committee has already approved the drilling of the Drill-or-Drop
Well, the Operator shall at such time present its recommendation as to whether
the Parties should drill the Drill-or-Drop Well, or allow the Licence  to cease
and determine (in so far as it relates to the Licence Area) as of the
Drill-or-Drop Date.

 
 
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(b)  
Each of the Participants shall not later than eleven (11) Months before the
Drill-or-Drop Date (or such later date as the Joint Operating Committee may
decide) notify the Operator whether it wishes to drill the Drill-or-Drop Well or
allow the Licence  to cease and determine (in so far as it relates to the
Licence Area) as aforesaid.

 
(c)  
If any Participant gives notice that it wishes to drill the Drill-or-Drop Well,
the Operator (if the Participant which is the Operator wishes to drill the
Drill-or-Drop Well) or any other Participant wishing to drill the Drill-or-Drop
Well shall submit a well proposal and AFE for the Drill-or-Drop Well not later
than ten (10) months before the Drill-or-Drop Date provided that if:

 
(i) one (1) or more Participants vote in favour of such well proposal and AFE
(as revised by agreement between them) by the date nine (9) Months before the
Drill-or-Drop Date (or such later date as the Joint Operating Committee may
decide);

(ii) the Participants so voting in favour include a party approved by the
Secretary as a drilling operator; and

(iii) the Secretary consents to the withdrawal from the Licence prior to the
drilling of the Drill-or–Drop Well of all those Participants who have not so
voted in favour;

then the Participants who have so voted in favour shall proceed to drill the
Drill-or-Drop Well in accordance with the well proposal and AFE.

(d)  
Any Participant not wishing to drill the Drill-or-Drop Well shall withdraw from
this Agreement and the Licence (in so far as it relates to the Licence Area) in
accordance with clause 24.3 effective no later than the Drill-or-Drop Date.
Without prejudice to the generality of clause 24.3, under no circumstance shall
the withdrawing Party have any liability or responsibility for the drilling of
the Drill-or-Drop Well or any rights in respect of it and the continuing
Participants shall indemnify each withdrawing Participant against all costs,
claims, liabilities and losses in respect of the Drill-or-Drop Well.

 
(e)  
If no Participant gives notice by seven (7) Months before the Drill-or-Drop Date
or votes in favour of a well proposal and AFE by [six (6)] Months before the
Drill-or-Drop Date (or, in each case, by such later date as the Joint Operating
Committee may decide) to drill the Drill-or-Drop Well, the Participants shall
allow the Licence to cease and determine as at the Drill-or-Drop Date.

 
9.9.3  
Not less than ninety (90) days prior to the latest date on which notice may be
given to continue or extend the Licence under Clauses 4, 5 or 6 of the Licence
(as applicable), the Operator shall convene a special meeting of the Joint
Operating Committee to decide whether to continue or extend the Licence and what
notice, if any, is to be given to the Secretary.  At each such meeting:

 
(a)  
should no Participant vote to continue or extend the Licence then the Licence
shall be determined at the expiration of the applicable term;

 
(b)  
should any of the Participants vote to continue or extend the Licence, notice to
continue the Licence shall be given in accordance with this clause.

 
9.9.4  
In the case of a notice to be given to the Secretary to continue the Licence
after the expiry of the Initial Term pursuant to Clause 4 of the Licence, those
Participants which have voted against the proposal to continue the Licence shall
have no vote in the Joint Operating Committee’s decision upon the delineation of
the Surrendered Part to be described in said notice (which Surrendered Part
shall be determined on the basis of a Simple Majority of the continuing
Participants).  Any decision on the delineation of the Surrendered Part shall be
subject to the provisions of clause 15.8.9.  Those Participants which have voted
against the continuation of the Licence shall withdraw from the Licence (in so
far as it relates to the Licence Area) in accordance with clause 24, effective
as of the expiry of the Initial Term.

 
 
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9.9.5  
In the case of a notice to be given to the Secretary to continue the Licence
after the expiry of the Second Term pursuant to Clause 5 of the Licence, or to
continue the Licence for a further term after the expiry of the Second Term
pursuant to Clause 6 of the Licence,   those Participants which have voted,  in
each case, against the proposal to continue the Licence shall have no vote in
the Joint Operating Committee’s decision regarding such extension and the
matters to be included in said notice (which decisions shall be determined on
the basis of a Simple Majority of the continuing Participants). Those
Participants which have voted against the continuation of the Licence shall
withdraw from the Licence (in so far as it relates to the Licence Area) in
accordance with clause 24, effective as of the expiry of the Second Term.

 
9.9.6  
In relation to the continuation or extension of the Licence under Clauses 4, 5
and 6 thereof, each of the Participants agrees to execute such documents as may
be necessary to effect the continuation of the Licence for the benefit of those
Participants desiring to continue the Licence.

 
9.9.7  
The affirmative vote of all Participants shall be required to determine the
Licence (in so far as it relates to the Licence Area) or surrender any part of
the Licence Area under Clause 10 thereof.

 
9.10  
New Areas

 
9.10.1  
One or more Participants having a beneficial interest in a proposed New Area and
wishing to create such New Area by transferring to another Participant or a
third party all or part of their respective Percentage Interests in such New
Area shall be entitled to do so only upon satisfaction of all of the following
requirements:

 
(a)  
those Participants intending to create a New Area (the “Proposing Participant”)
notifying the other Participants of their intention to create such New Area (the
boundaries of which shall be clearly identified);

 
(b)  
all the Participants approving such New Area;

 
(c)  
receipt of all necessary third party approvals;

 
(d)  
the transfer of all or part of the said Proposing Participant’s Percentage
Interest in respect of the New Area (the “Transferred Interest”) having effect
in accordance with clause 23;

 
(e)  
the party acquiring the Transferred Interest (the “Acquiring Party”) assuming
all rights, obligations and liabilities under this Agreement insofar as it
relates to the New Area in respect of such Transferred Interest (whether actual,
accrued, contingent or otherwise or whether arising before, at or after the time
of the said transfer) as if the Acquiring Party had at all times been a party to
this Agreement insofar as it relates to the New Area in place of the Participant
from who it acquired the Transferred Interest.

 
9.10.2  
Immediately after the provisions of clause 9.10.1 taking effect, or immediately
on approval of a Sole Risk Development, and subject always to clause 15.8.9,
this Agreement shall take effect as two (2) separate and distinct agreements as
follows:

 
(a)  
one (1) agreement which shall apply as a separate and distinct agreement (the
“New Area JOA”) between those Participants holding a beneficial interest in the
New Area (the “New Area JOA Participants”); and

 
(b)  
the other agreement which shall apply as a separate and distinct agreement (the
“Remaining Area JOA”) between those Participants holding a beneficial interest
in the Remaining Area (the “Remaining Area JOA Participants”).

 
9.10.3  
The New Area JOA Participants and the Remaining Area JOA Participants (together
with any other persons that are licensees of the Licence) shall enter into
appropriate trust and indemnity arrangements in respect of the New Area and the
Remaining Area which unless agreed otherwise shall be in the form attached
hereto as Schedule B.

 
 
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9.10.4  
For the avoidance of doubt and subject always to the arrangements described in
clause 9.10.3:

 
(a)  
the New Area JOA Participants may amend, supplement, substitute, terminate,
restate and novate the New Area JOA without the participation of or reference to
the Remaining Area JOA Participants and provided further that the New Area JOA
Participants shall have no rights, liabilities or obligations under the
Remaining Area JOA unless they currently are or subsequently become party to it;
and

 
(b)  
The Remaining Area JOA Participants may amend, supplement, substitute,
terminate, restate and novate the Remaining Area JOA without the participation
of or reference to the New Area JOA Participants and provided further that the
Remaining Area JOA Participants shall have no rights liabilities or obligations
under the New Area JOA unless they currently are or subsequently become party to
it.

 
10.  
Exploration and Appraisal Programmes and Budgets

 
10.1  
Annual Programme and Budget

 
10.1.1  
The Operator shall, in each Year, submit to each of the Participants not later
than 1st September a proposed exploration and/or appraisal Programme and Budget
for the next Year showing:-

 
(a)  
in the exploration section of the Programme and Budget, the exploration wells to
be drilled and other work to be undertaken, specifying in each case where any
approval is requested on a contingent basis, dependent on the success of another
part of the work programme;

 
(b)  
in the appraisal section of the Programme and Budget, the appraisal wells to be
drilled and other work to be undertaken, specifying in each case where any
approval is requested on a contingent basis, dependent on the success of another
part of the work programme;

 
(c)  
the information required under clause 14; and

 
(d)  
such other information as the Joint Operating Committee may have required the
Operator to provide.

 
10.1.2  
The proposed exploration and/or appraisal Programme and Budget shall be subject
to consideration, revision and approval by the Joint Operating Committee.  The
Joint Operating Committee shall consider such exploration and/or appraisal
Programme and Budget and make such revisions to it as it may determine as soon
as practicable but in any event not later than 1st November.  Not later than 1st
December the Joint Operating Committee shall approve an exploration and/or
appraisal Programme and Budget and such approval shall, subject to clauses 10.2
and 10.3, authorise and oblige the Operator to proceed with the exploration
section of the Programme and Budget. The Operator shall not however be
authorised nor obliged to proceed with any items identified as contingent items
in the Programme and Budget unless and until approved as firm items by the Joint
Operating Committee.  Notwithstanding the above, where commitments are required
prior to approval of the Programme and Budget, the Joint Operating Committee
will use reasonable endeavours to approve such commitments in advance of
approving the Programme and Budget and in time to allow such commitments to be
made and any commitments so approved shall form part of the approved Programme
and Budget to which they relate.

 
10.1.3  
In the event of a Discovery, the Operator shall, if the Joint Operating
Committee so decides and as soon as practicable after such decision, submit to
the Participants an appraisal Programme and Budget to evaluate such Discovery
(to the extent not already covered by the Programme and Budget referred to in
clause 10.1.1) which shall to the extent practicable, incorporate the elements
referred to in clause 10.1.1 and which shall be subject to consideration,
revision and approval by the Joint Operating Committee.  The Joint Operating
Committee shall, as soon as practicable following submission of the proposed
appraisal Programme and Budget consider such Programme and Budget and make such
revisions to it as may be agreed. Unless the Joint Operating Committee otherwise
decides, the Joint Operating Committee shall approve or reject the proposed
appraisal Programme and Budget within ninety (90) days of its submission by the
Operator to the Participants and such approval shall, subject to clauses 10.2
and 10.3, authorise and oblige the Operator to proceed with it.

 
 
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10.2  
Authorisation for Expenditure

 
Except as provided in clause 6.10.2, the Operator shall, before entering into
any commitment or incurring any capital expenditure or seismic expenditure in
excess of fifty thousand Pounds (£50,000) under an approved exploration and/or
appraisal Programme and Budget submit to the Participants an AFE for it in
accordance with the Accounting Procedure. To the extent that the Joint Operating
Committee approves an AFE, the Operator shall be authorised and obliged, subject
to clauses 6.5 and 10.3, to proceed with such commitment or expenditure.  The
Operator shall prepare and submit to the Participants a separate AFE for each
exploration or appraisal well, on a dry-hole basis. Drill stem testing shall be
a contingent item.
 
10.3  
Review and Amendments

 
10.3.1  
The Operator shall, as and when required by the Joint Operating Committee,
review the approved exploration and/or appraisal Programme and Budget and submit
to the Participants a report thereon.

 
10.3.2  
At any time any Participant may, by notice to the other Participants, propose
that an approved exploration and/or appraisal Programme and Budget and/or an
approved AFE be amended. The Joint Operating Committee shall consider such
proposal and, if the Joint Operating Committee so requires, the Operator shall
prepare and submit to the Participants a revised exploration and/or appraisal
Programme and Budget incorporating any such amendment and showing the matters
listed under clause 10.1.1. To the extent that any such amendment or revised
exploration and/or appraisal Programme and Budget is approved by the Joint
Operating Committee, the approved exploration and/or appraisal Programme and
Budget and/or AFE shall be deemed amended accordingly provided always that any
such amendment shall not invalidate any authorised commitment or expenditure
made by the Operator prior to such amendment.

 
10.4  
Work Obligations

 
In respect of any Work Obligations which are to be carried out following the
procedures laid down in clause 9.9.1 or 9.9.2 the Operator will include the
carrying out of such Work Obligations in the relevant exploration Programme and
Budget and, notwithstanding the foregoing provisions of this clause 10, such
Programme and Budget and any AFE shall, to the extent that they relate to the
carrying out of such Work Obligations and unless in either case the Joint
Operating Committee otherwise decides within twenty-eight (28) days of their
submission to the Participants, be deemed to be approved by the Joint Operating
Committee.
 
10.5  
Expenditure Overruns

 
The Operator shall use reasonable endeavours not to exceed the approved
exploration and/or appraisal Budget but shall be entitled without prior approval
of the Joint Operating Committee to incur expenditure:

(a)  
in excess of an approved AFE up to the lesser of ten per cent (10%) of the
amount of the approved AFE and  fifty thousand Pounds (£50,000); and

 
(b)  
subject to (a) above, in excess of an approved exploration and/or appraisal
Budget up to the lesser of ten per cent (10 %) of the amount of the approved
Budget and fifty thousand Pounds (£50,000).

 
Whenever it appears to the Operator that the over-expenditure for any item will
exceed the amount authorised under this clause 10.5, the Operator shall prepare
a revised AFE and/or Budget, as appropriate and will seek the prior approval of
the Joint Operating Committee to such amendment and additional expenditure prior
to entering into any further commitment.
 
 
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11.  
Development Programmes and Budgets

 
11.1  
Joint Programme and Budgets

 
11.1.1  
The Operator shall, if the Joint Operating Committee so decides and as soon as
practicable after such decision, submit to the Participants a proposed
development Programme and Budget for a Discovery showing:-

 
(a)  
the projects and other work to be undertaken;

 
(b)  
the information required under clause 14;

 
(c)  
the manner in which the development is to be managed with details of the number
of employees and contract personnel required;

 
(d)  
an estimate of the date of commencement of production and of the annual rates of
production; and

 
(e)  
such other information as the Joint Operating Committee may have required the
Operator to provide.

 
11.1.2  
The proposed development Programme and Budget shall be subject to consideration,
revision and approval by the Joint Operating Committee.  The Joint Operating
Committee shall meet to consider such development Programme and Budget as soon
as practicable and to make such revisions to it as it may determine.  Unless the
Joint Operating Committee otherwise decides, the Joint Operating Committee shall
approve or reject the development Programme and Budget within ninety (90) days
of its submission by the Operator to the Participants.

 
11.1.3  
If a development Programme and Budget is approved by the Joint Operating
Committee, each of the Participants shall decide within ninety (90) days of such
approval, or such longer period as the Joint Operating Committee may decide,
whether to participate in respect of its Percentage Interest share in the
development of the Discovery and shall inform the other Participants of its
decision by notice to them.  If all the Participants decide to participate in
the development of the Discovery the Operator shall prepare from the said
development Programme and Budget a Development Plan for submission to the
Secretary.  Any such Development Plan shall require the unanimous approval of
the participating Participants prior to its submission as aforesaid. If less
than all of the Participants decide to participate in the development of the
Discovery then clause 15.8.5 shall apply.

 
11.1.4  
Upon the Secretary authorising (whether by consenting or approving or serving a
Development Plan), the commencement of the development, any of the Participants
may, if the Programme and Budget approved by the Joint Operating Committee under
clause 11.1.2, has been or is required to be amended (which shall, for the
avoidance of doubt, include any change in the date of commencement of the
development or the rate at which Petroleum may be produced), by notice to the
other Participants given within twenty-eight (28) days following the said
authorisation elect not to proceed with the development.  If no Participant is
entitled to give such notice, or being entitled, no Participant gives such
notice, the approved development Programme and Budget (with any amendments as
aforesaid) shall be adopted for the development, the Participants shall be
obliged to participate in carrying it out and the Operator shall, subject to
clauses 11.2 and 11.3, be authorised and obliged to proceed in accordance with
it.  If any such notice is given the provisions of clause 15.8.6 shall apply.

 
11.1.5  
Any Participant which, under clause 11.1.4 or clause 15.8 is not participating
in the development of the Producing Part delineated for the purposes of Clause 8
of the Licence shall withdraw from the Licence (in so far as it relates to the
Licence Area) and this Agreement in accordance with clause 24.

 
11.2  
Authorisation for Expenditure

 
Except as provided in clause 6.10.2, the Operator shall, before entering into
any commitment or incurring any capital expenditure in excess of one hundred
thousand Pounds (£100,000) with respect to the preparation of a development
Programme and Budget or under an approved development Programme and Budget
submit to the Participants an AFE for it in accordance with the Accounting
Procedure. To the extent that the Joint Operating Committee approves an AFE, the
Operator shall be authorised and obliged, subject to clauses 6.5 and 11.3, to
proceed with such commitment or expenditure.  The Operator shall prepare and
submit to the Participants a separate AFE for each development well.
 
 
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11.3  
Review and Amendment

 
11.3.1  
The Operator shall, in each Year, review the approved development Programme and
Budget and submit to the Participants not later than 1st September a report
thereon together with an update of such development Programme and Budget dealing
separately with the next Year and the remaining phases of the approved
development Programme and showing the matters listed under clause 11.1.1.

 
11.3.2  
At any time any Participant may, by notice to all the other Participants,
propose that an approved development Programme and Budget and/or an approved AFE
be amended.  The Joint Operating Committee shall consider such proposal and, if
the Joint Operating Committee so requires, the Operator shall prepare and submit
to the Participants a revised development Programme and Budget incorporating any
such amendment and showing the matters listed under clause 11.1.1.  To the
extent that any such amendment or revised development Programme and Budget is
approved by the Joint Operating Committee, the approved development Programme
and Budget and/or AFE shall, subject to obtaining any necessary consent of the
Secretary, be deemed amended accordingly provided always that any such amendment
shall not invalidate any authorised commitments or expenditure made by the
Operator prior to such amendment.

 
11.4  
Expenditure Overruns

 
The Operator shall use reasonable endeavours not to exceed the approved
development Budget but shall be entitled without prior approval of the Joint
Operating Committee to incur expenditure:

(a)  
in excess of an approved AFE up to the lesser of ten per cent (10%) of the
amount of the approved AFE and  fifty thousand Pounds (£50,000); and

 
(b)  
subject to (a) above, in excess of an approved development Budget up to ten per
cent (10%) of the amount of the approved Budget and fifty thousand Pounds
(£50,000).

 
Whenever it appears to the Operator that the over-expenditure for any item will
exceed the amount authorised under this clause 11.4, the Operator shall prepare
a revised AFE and/or Budget as appropriate and will seek the prior approval of
the Joint Operating Committee to such amendment and additional expenditure prior
to entering into any further commitment.
 
12.  
Production Programmes and Budgets

 
12.1  
Annual Programme and Budget

 
12.1.1  
The Operator shall not later than 1st September in the Year prior to the
commencement of production and each subsequent Year until cessation of
production, submit to the Participants a proposed production Programme and
Budget for the next Year showing:

 
(a)  
the projects and other work to be undertaken;

 
(b)  
the information required under clause 14;

 
(c)  
an estimate of the date of commencement of production (if appropriate) and of
the monthly total production for each major production stream and injection
stream and the maximum daily rate to be achieved for each such stream in each
Month; and

 
(d)  
such other information as the Joint Operating Committee may have required the
Operator to provide.

 
 
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12.1.2  
The proposed production Programme and Budget shall be subject to consideration,
revision and approval by the Joint Operating Committee.  The Joint Operating
Committee shall meet to consider such production Programme and Budget and make
such revisions to it as it may determine as soon as practicable but in any event
not later than 1st November.  Not later than 1st December the Joint Operating
Committee shall approve a production Programme and Budget and such approval
shall, subject to clauses 12.2 and 12.3, authorise and oblige the Operator to
proceed with it. Notwithstanding the above, where commitments are required prior
to approval of the Programme and Budget, the Joint Operating Committee will use
reasonable endeavours to approve such commitments in advance of approving the
Programme and Budget and in time to allow such commitments to be made and any
commitments so approved shall form part of the approved Programme and Budget to
which they relate.  If the Joint Operating Committee does not approve a
production Programme and Budget by 1st December then, unless otherwise decided
by the Joint Operating Committee, the Operator shall continue to operate the
Joint Property to produce Petroleum in accordance with the most recently
approved production profile for the Field and with Good Oilfield Practice for
the next ninety (90) days and shall be entitled to incur operating expenditure
(and such capital expenditure as is necessary to maintain assets) in order to do
so.  If the Joint Operating Committee does not approve a production Programme
and Budget within such ninety (90) day period, but a production Programme and
Budget is approved by Participants holding a simple majority of the
Participating Interests then such production Programme and Budget shall be
deemed approved by the Joint Operating Committee. If a production Programme and
Budget is not approved by the Joint Operating Committee under this Clause 12.1.2
within such ninety (90) day period, then, subject to Clause 26.5, at the end of
such period the Operator shall cease production.

 
12.2  
Authorisations for Expenditure

 
Except as provided in clause 6.10.2, the Operator shall, before entering into
any commitment or incurring any expenditure in excess of fifty thousand Pounds
(£50,000) under an approved production Programme and Budget submit to the
Participants an AFE for it in accordance with  the Accounting Procedure. To the
extent that the Joint Operating Committee approves an AFE, the Operator shall be
authorised and obliged, subject to clauses 6.5 and 12.3, to proceed with such
commitment or expenditure.  The Operator shall prepare and submit to the
Participants a separate AFE for each production well.
 
12.3  
Amendment

 
At any time any Participant may, by notice to all the other Participants,
propose that an approved production Programme and Budget and/or an approved AFE
be amended.   The Joint Operating Committee shall consider such proposal and, if
the Joint Operating Committee so requires, the Operator shall prepare and submit
to the Participants a revised production Programme and Budget incorporating any
such amendment and showing the matters listed under clause 12.1.1.  To the
extent that an amendment is approved by the Joint Operating Committee, the
approved production Programme and Budget and/or AFE shall (subject to obtaining
any necessary consent of the Secretary) be deemed amended accordingly provided
always that any such amendment shall not invalidate any authorised commitment or
expenditure made by the Operator prior to such amendment.

12.4  
Expenditure Overruns

 
The Operator shall use reasonable endeavours not to exceed the approved
production Budget but shall be entitled without prior approval of the Joint
Operating Committee to incur expenditure:

(a)  
in excess of an approved AFE up to the lesser of ten per cent (10%) of the
amount of the approved AFE and fifty thousand Pounds (£50,000); and

 
(b)  
subject to (i) above, in excess of an approved production Budget up to ten per
cent (10%) of the amount of the approved Budget and fifty thousand Pounds
(£50,000).

 
Whenever it appears to the Operator that the over-expenditure for any item will
exceed the amount authorised under this clause 12.4, the Operator shall prepare
a revised AFE and/or Budget and will seek the prior approval of the Joint
Operating Committee to such amendment and additional expenditure prior to
entering into any further commitment.
 
 
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13.  
Decommissioning Programme and Budget

 
13.1.1  
The Operator shall, if the Joint Operating Committee so decides and as soon as
practicable after such decision, and in any event on its own initiative no later
than a date twelve (12) Months prior to the anticipated date of  Decommissioning
submit to the Participants a proposed Decommissioning Programme and
Decommissioning Budget which shall, in addition, include provision for any
necessary post-Decommissioning monitoring, maintenance and insurance. If no
Decommissioning Plan shall have been approved or deemed approved pursuant to the
terms of the Decommissioning Security Agreement then the Operator shall submit a
proposed Decommissioning Programme and Budget showing:-

 
(a)  
the work to be undertaken;

 
(b)  
the information required under clause 14;

 
(c)  
an estimate of the dates on which Decommissioning will commence and be
completed;

 
(d)  
all other matters relevant to the proper preparation for and management of
Decommissioning, including but not limited to decommissioning options,
alternative uses for Joint Property, an assessment of eligibility for derogation
from removal obligations, and the salvage value of Joint Property where it
cannot be reused;

 
(e)  
such other information as the Joint Operating Committee may have required the
Operator to provide.

 
13.1.2  
The proposed Decommissioning Programme and Decommissioning Budget referred to at
clause 13.1.1 shall be subject to consideration, revision and approval by the
Joint Operating Committee.   The Joint Operating Committee shall meet to
consider such proposed Decommissioning Programme and Decommissioning Budget as
soon as practicable and to make such revisions to it as it may
determine.  Unless the Joint Operating Committee otherwise decides, the Joint
Operating Committee shall approve or reject the proposed Decommissioning
Programme and Decommissioning Budget within ninety (90) days of its submission
by the Operator and, if approval is given, such approval shall, subject to this
clause 13.1, authorise and oblige the Operator to submit such proposed
Decommissioning Programme to the applicable governmental and/or regulatory body
provided that, if the Joint Operating Committee has not approved such
Decommissioning Programme and Decommissioning Budget by a date which is six (6)
Months prior to the due date for submission of the Decommissioning Programme to
applicable governmental and/or regulatory body, then unless Participants holding
a Simple Majority agree on a Decommissioning Programme and Decommissioning
Budget (in which case the Decommissioning Programme and Decommissioning Budget
so agreed shall be deemed to be approved by the Joint Operating Committee), the
Decommissioning Programme and Decommissioning Budget proposed by the Operator
shall be deemed to be approved by the Joint Operating Committee and  the
Operator shall be authorised and obliged to submit such proposed Decommissioning
Programme to the applicable governmental and/or regulatory body for approval
under the Petroleum Act 1998.

 
13.1.3  
Upon the Secretary approving a Decommissioning Programme the Operator shall,
subject to clauses 13.2 and 13.3, be authorised and obliged to proceed with it
as approved and with any necessary post-Decommissioning monitoring, maintenance
and insurance.

 
13.2  
Authorisation for Expenditure

 
Except as provided in clause 6.10.2, the Operator shall, before entering into
any commitment or incurring any capital expenditure in excess
of  fifty  thousand pounds (£50,000) under an approved Decommissioning Programme
and Decommissioning Budget, submit to the Participants an AFE for it in
accordance with the Accounting Procedure.  To the extent that the Joint
Operating Committee approves an AFE, such approval not to be unreasonably
withheld or delayed where the AFE is consistent with the approved
Decommissioning Programme and Budget, the Operator shall be authorised and
obliged, subject to clauses 6.5 and 13.3, to proceed with such commitment or
expenditure.
 
13.3  
Amendment

 
At any time any Participant may, by notice to all the other Participants,
propose that the approved Decommissioning Programme and Decommissioning Budget
be amended.  The Joint Operating Committee shall consider such proposal and, if
the Joint Operating Committee so requires, the Operator shall prepare and submit
to the Participants a revised Decommissioning Programme and Decommissioning
Budget incorporating any such amendment and showing the matters listed under
clause 13.1.1. To the extent that the Joint Operating Committee approves an
amendment, the approved Decommissioning Programme and Decommissioning Budget
shall be deemed amended accordingly, subject to any necessary approval by the
Secretary, provided always that any such amendment shall not invalidate any
authorised commitment or expenditure made by the Operator prior to such
amendment.
 
 
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13.4  
Expenditure Overruns

 
The Operator shall use reasonable endeavours not to exceed the approved
Decommissioning Budget but shall be entitled without prior approval of the Joint
Operating Committee to incur expenditure:

(a)  
in excess of an approved AFE up to the lesser of ten per cent (10%) of the
amount of the approved AFE and fifty thousand Pounds (£50,000); and

 
(b)  
subject to (a) above, in excess of an approved Decommissioning Budget up to ten
per cent (10%) of the amount of the approved Budget and fifty thousand Pounds
(£50,000).

 
Whenever it appears to the Operator that the over-expenditure for any item will
exceed the amount authorised under this clause 13.4, the Operator shall prepare
a revised AFE and/or Budget as appropriate and will seek the prior approval of
the Joint Operating Committee to such amendment and additional expenditure prior
to entering into any further commitment, such approval not to be unreasonably
withheld or delayed where the over-expenditure is necessary to comply with the
Decommissioning Programme approved by the Secretary of State.
 
14.  
General Provisions relating to Budgets

 
14.1  
Each Budget required under clauses 10 to 13 shall include:

 
14.1.1  
an estimate in Pounds of the total cost of the applicable Programme and a
sub-division of such total into each main classification and sub-classification
of cost to provide a breakdown of the workscope into work elements in sufficient
detail to allow adequate cost allocation and control.  The estimate for each
such classification and sub-classification of cost shall be phased on an accrual
basis and shall be shown by Quarter for the first Year and, where applicable, by
Year for each subsequent Year of the Programme;

 
14.1.2  
an estimate of the amount if in excess of one hundred thousand Pounds (£100,000)
equivalent of each currency other than Pounds in which such total cost is to be
paid, together with the exchange rates used.  Such estimate shall be phased by
Quarter for the first Year and, where applicable, by Year for each subsequent
Year of the Programme;

 
14.1.3  
the amount of any escalation allowance added;

 
14.1.4  
the amount of any contingency allowance added;

 
14.1.5  
an estimate of the timing and value of AFEs;

 
14.1.6  
an estimate of the cost and the total number of man-Months budgeted; and

 
14.1.7  
a statement indicating which budget items, if any, are contingent upon the
outcome of other budget items such as the testing of wells;

 
14.1.8  
an estimate of all amounts over two hundred and fifty thousand Pounds (£250,000)
per annum or is likely to exceed  five hundred thousand Pounds (£500,000) over
its expected duration to be charged under any multi-field or multi-operator
contract pursuant to clause 6.5.3.

 
 
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14.2  
In addition, each development Budget required under clause 11 shall include:

 
 
14.2.1 
an estimate of funding currency requirements phased on a cash basis detailing
Quarterly requirements for the first Year and annual requirements for each
subsequent Year of the development; and

 
 
14.2.2 
an estimate of the timing and value of commitments to be made under the
development Budget identifying the total commitments under each main
classification of cost as provided in clause 14.1.1 in each Quarter of the first
Year and in each of the subsequent Years of the development.

 
14.3  
In addition, each production Budget required under clause 12 shall be divided
into capital expenditure and operating expenditure sections and shall include:

 
 
14.3.1 
an estimate of payments under any major rental contracts and, where relevant,
the production profile upon which these payments have been determined;  and

 
 
14.3.2 
in the capital expenditure section an estimate of the capital cost to complete
activities brought forward commencing in the respective budget Year.

 
14.4  
Each review of or amendment to a Budget as provided in clauses 10 to 13 shall
include:

 
(a)  
actual cash payments, net of Receipts and accruals to date;

 
(b)  
actual commitments to date; and

 
(c)  
revised estimates of all items detailed in clauses 14.1, 14.2 and 14.3 as
appropriate.

 
14.5  
The Operator may, with the prior approval of the Joint Operating Committee,
transfer sums between Budget sub-classifications after Budgets have been
approved.

 
15.  
Sole Risk and Non-Consent

 
15.1  
Sole Risk Projects

 
Any Participant may undertake any of the following types of project (each a
“Sole Risk Project”) as a sole risk project subject to the following provisions
of this clause:

(a)  
subject to clause 15.4, sole risk seismic (including geochemical sampling,
gravity and magnetic or other geophysical/geological surveying) (“Sole Risk
Seismic”);

 
(b)  
subject to clause 15.5, sole risk drilling (“Sole Risk Drilling”) consisting
of:-

 
(i)  
the drilling of an exploratory well or the deepening or side-tracking of a
suspended well neither of such wells being inside the interpreted closure
(according to the most recent information submitted to the Joint Operating
Committee) of any geological structure or stratigraphic trap on which a well has
been drilled in which Petroleum of potential commercial significance has been
found to be present; or

 
 
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(ii)  
the drilling of an exploratory well or the deepening or side-tracking of a
suspended well inside the interpreted closure (according to the most recent
information submitted to the Joint Operating Committee) of any geological
structure or stratigraphic trap on which a well has been drilled in which
Petroleum of potentially commercial significance has been found to be present
and which well is drilled, deepened or side-tracked to a different stratigraphic
level to that in which such Petroleum was found to be present within that
interpreted closure and which is not completed in the horizon in which such
Petroleum was found to be present, provided always that the approval of the
Joint Operating Committee shall be required before any such drilling, deepening
or side-tracking is carried out; or

 
(iii)  
the deepening or side-tracking of a well which is in the course of being drilled
and which does not form part of a development Programme, provided always that,
unless the Joint Operating Committee otherwise decides, any testing programmes
by the Participants must have been carried out, the Participants informed of the
results and a decision of the Joint Operating Committee taken to abandon the
well before any such deepening or side-tracking is carried out; or

 
(iv)  
the drilling of a well (“Appraisal Drilling”) inside the interpreted closure of
any geological structure or stratigraphic trap on which a well has been drilled
in which Petroleum has been found to be present;

 
(c)  
subject to clause 15.7, sole risk testing and logging (“Sole Risk Testing”)
consisting of:

 
(i)  
the testing and logging of intervals by re-entering a suspended well, or

 
(ii)  
the testing and logging of intervals in a well currently being drilled;

 
(d)  
subject to clause 15.8, sole risk development (“Sole Risk Development”)
consisting of the development of a Discovery.

 
15.2  
General Conditions

 
15.2.1  
Any Sole Risk Project shall be carried out at the sole risk, cost and expense of
the Participant proposing such project and any other Participant electing to
join such project in accordance with the terms of this clause (each being a
“Sole Risk Participant”).  If a Sole Risk Project is undertaken by more than one
Sole Risk Participant the interest in such Sole Risk Project including the risk,
cost and rights and obligations pursuant to the Licence as it applies to such
Sole Risk Project shall, subject to any subsequent adjustment in the case of
Sole Risk Development pursuant to clause 15.8.8 or to full payment being made
pursuant to clause 15.6.2, be borne by each Sole Risk Participant in the
proportion that its Percentage Interest bears to the sum of the Percentage
Interests of the Sole Risk Participants or in such other proportion as the Sole
Risk Participants may agree (the “Sole Risk Interests”).

 
15.2.2  
A Sole Risk Participant shall exercise all necessary precautions to ensure that
a Sole Risk Project does not jeopardise, hinder or unreasonably interfere with
the Joint Operations provided that a Sole Risk Development shall have priority
over Joint Operations approved subsequent to the authorisation of such Sole Risk
Development by the Secretary.

 
15.2.3  
Subject to clauses 15.4.1(b) and 15.5.1(b), no Sole Risk Project may be carried
out if it is substantially similar to or conflicts with all or part of any
Programme approved by the Joint Operating Committee and which is still to be
carried out at the commencement of the Sole Risk Project.

 
15.2.4  
No Sole Risk Project may be carried out which would satisfy an outstanding Work
Obligation unless all the Participants agree.

 
15.2.5  
A Sole Risk Participant shall:

 
(a)  
indemnify and hold harmless the other Participants (“Non-Sole Risk
Participants”) against all actions, claims, demands and proceedings whatsoever
brought by any third party (including without limitation any employee of the
Sole Risk Participant) arising out of or in connection with the Sole Risk
Project;

 
(b)  
in so far as it may be within its control keep the Licence free from all liens,
charges and encumbrances which might arise by reason of the conduct of the Sole
Risk Project; and

 
(c)  
further indemnify the Non-Sole Risk Participants against all damages, costs,
losses and expenses whatsoever directly or indirectly caused to or incurred by
them as a result of anything done or omitted to be done in the course of
carrying out such Sole Risk Project, excepting only damage inflicted to the
subsurface including any reservoir.

 
 
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The approval of a Non-Sole Risk Participant to the conduct of a Sole Risk
Project (whether or not such approval is required) shall not constitute a waiver
of these provisions.

15.2.6  
A Sole Risk Participant carrying out Sole Risk Drilling under clause
15.1(b)(iii) shall be entitled to use Joint Property for such Sole Risk Drilling
unless the Joint Operating Committee otherwise decides within the period for
response to the notice proposing such Sole Risk Drilling provided under clause
15.5.3.  A Sole Risk Participant wishing to use Joint Property for a Sole Risk
Project other than as aforesaid shall give notice to all the Participants
stating the purposes for which the Joint Property is to be used.  Within
twenty-eight (28) days after such notice, the Joint Operating Committee shall
decide whether such Sole Risk Participants shall be authorised to so use Joint
Property.  In all cases, consent to the use of Joint Property shall not be
unreasonably withheld, conditioned or delayed and any charges for such use shall
be on a reasonable and equitable basis.

 
15.2.7  
A Sole Risk Participant shall be entitled to use for a Sole Risk Project any
data and information which it owns jointly with the Non-Sole Risk
Participants.  Data and information obtained in respect of Sole Risk Seismic,
Sole Risk Drilling and Sole Risk Testing shall remain the property of the Sole
Risk Participant, until and in the event that one or more of the Non-Sole Risk
Participants discharges in full its liability to the Sole Risk Participant under
clauses 15.4.5, 15.6.2 or 15.7.6, as the case may be, when such data and
information shall become the Joint Property of the Participants discharging such
liability and the Sole Risk Participant.

 
15.2.8  
A Sole Risk Participant shall make available promptly following completion of
Sole Risk Drilling data and information obtained from such Sole Risk Drilling
(but for the avoidance of doubt not data and information obtained from Sole Risk
Seismic or Sole Risk Testing) and Non-Sole Risk Participants shall have the
right on reasonable prior written notice to view but not to copy such data and
information at the premises of the Sole Risk Participant within twenty-eight
(28) days of receipt of notice from the Sole Risk Participant that such data and
information is available for inspection and provided that such data and
information shall be held strictly confidential by the Non-Sole Risk
Participant.

 
15.2.9  
Subject to any necessary consent of the Secretary, a Sole Risk Project shall be
carried out by the Operator on behalf of the Sole Risk Participant under the
provisions of this Agreement provided that, with the exception of any Sole Risk
Project involving the use of Joint Property as provided under clause 15.2.6, if
the Operator is not participating in the Sole Risk Project:-

 
(a)  
in the case of Sole Risk Seismic, the Sole Risk Participant shall be entitled to
carry out the Sole Risk Seismic itself;

 
(b)  
in the case of Sole Risk Drilling, other than as set out in clause 15.1(b)(iii)
the Operator may decline to carry out the Sole Risk Drilling;

 
(c)  
in the case of Sole Risk Development, the Operator shall not carry out the Sole
Risk Development unless all the Participants otherwise agree.

 
In any of such events the Sole Risk Project shall, subject to any necessary
consent of the Secretary, be carried out by the Sole Risk Participant, or, if
more than one Participant takes part in the Sole Risk Project, the Sole Risk
Participant appointed by them and, in respect of the conduct of such Sole Risk
Project, such Sole Risk Participant shall, unless the context otherwise
requires, be deemed to be the Operator in respect of the independent application
of this Agreement as provided in clause 15.2.10.
 
15.2.10  
In connection with any Sole Risk Project:

 
(a)  
the Sole Risk Project will be carried out under the overall supervision and
control of a committee consisting of the Sole Risk Participants in lieu of the
Joint Operating Committee;

 
(b)  
the computation of costs and expenses of the Sole Risk Project incurred by the
Sole Risk Participants shall be made in accordance with the principles set out
in the Accounting Procedure;

 
 
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(c)  
the Operator or the Sole Risk Participant carrying out the Sole Risk Project
shall maintain separate books, records and accounts (including bank accounts)
for the Sole Risk Project which shall be subject to the same right of
examination and audit by the Sole Risk Participants and, so long as they are
entitled to elect to participate in the Sole Risk Project, the Non-Sole Risk
Participants as those relating to the Joint Operations;

 
(d)  
the costs and expenses of the Sole Risk Project shall not be reflected in the
statements and billings rendered by the Operator for the Joint Operations;

 
(e)  
if the Operator is carrying out a Sole Risk Project on behalf of a Sole Risk
Participant, the Operator shall be entitled to make Cash Calls on the Sole Risk
Participant in connection with the Sole Risk Project and shall not use Joint
Account funds or be required to use its own funds for the purpose of paying the
costs and expenses of the Sole Risk Project; furthermore the Operator shall not
be obliged to commence or, having commenced, to continue the Sole Risk Project
unless and until the relevant Advances have been received from the Sole Risk
Participant; and

 
(f)  
without prejudice to clause 15.8.9, where the context permits, and until the
creation of a New Area pursuant to clause 9.10, the provisions of this Agreement
(not including clauses 23 and 24) shall apply mutatis mutandis as between the
Operator or the Sole Risk Participant carrying out the Sole Risk Project (as the
case may be) and the Sole Risk Participants as if references to Percentage
Interests were references to their Sole Risk Interests.

 
15.3  
Selection of Sole Risk Projects

 
15.3.1  
If any Participant wishes to propose the conduct of a Sole Risk Project other
than Sole Risk Development and such Sole Risk Project will conflict with Sole
Risk Seismic or Sole Risk Drilling or Sole Risk Testing proposed in accordance
with clause 15.4 or clause 15.5 or clause 15.7, such Participant shall have the
right for a period of five (5) days (or twenty-four (24) hours if the drilling
equipment is on location), from receipt of the proposal notice issued pursuant
to clauses 15.4.2, 15.5.2, 15.5.3, 15.7.2 or 15.7.3, as the case may be, to
propose, by notice to all Participants, its alternate operation.  Such
alternative proposal shall contain the information specified in clause 15.4.2,
clause 15.5.2, clause 15.5.3, clauses 15.7.2 or 15.7.3, as the case may be.

 
15.3.2  
Each of the Participants, other than the respective proposing Participants,
shall elect by notice to the Operator whether or not to participate in any of
the proposals.  Failure to so respond shall be deemed an election not to
participate in any proposal.

 
15.3.3  
The proposal receiving the largest aggregate Percentage Interest vote shall have
priority over any other proposal.  If the vote is tied, the Operator shall
select one of the proposals gaining the highest aggregate Percentage Interest
vote.  The Operator shall notify the result of such voting and selection, as the
case may be, to all the Participants.  Each Participant shall, within two (2)
Working Days (or twenty four (24) hours if drilling equipment is on location)
notify the Operator whether or not it wishes to participate in the successful
proposal.  Any Participant failing to respond within such period shall be deemed
to have elected not to participate.

 
15.3.4  
If the Participants electing to participate in the successful proposal, together
with the Participant proposing it, reach a Passmark, the successful proposal
shall be carried out by the Operator as part of Joint Operations.

 
15.3.5  
If the Participants electing to participate in the successful proposal, together
with the Participant proposing it, do not reach a Passmark, the Operator shall
(subject to clause 15.2.9) carry out the proposed operation on behalf of the
proposing Participant and the Participants voting in favour of it in accordance
with the provisions of clause 15.2.

 
 
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15.4  
Sole Risk Seismic

 
15.4.1  
No Sole Risk Seismic may be proposed unless:

 
(a)  
such seismic was proposed to the Joint Operating Committee at the time of
consideration of the current exploration and appraisal Programme and Budget but
was not included in such Programme and Budget; or

 
(b)  
having been included in the current exploration and appraisal Programme and
Budget the Joint Operating Committee has, where an AFE is required, voted
against or failed to vote in favour of such AFE (or the relevant part of it)
relating to such seismic within twenty-eight (28) days of submission of such AFE
to the Participants provided that the decision of the Joint Operating Committee
to change the timing of such seismic within the Year to which the current
exploration and appraisal Programme relates shall not be a vote against the AFE
for the purposes of this clause 15.4.1 (b); or

 
(c)  
such seismic was proposed to the Joint Operating Committee in reasonably
sufficient detail by way of amendment to the current exploration and appraisal
Programme and Budget and the Joint Operating Committee has voted against or
failed to vote in favour of such seismic within sixty (60) days of submission of
such amendment to the Participants.

 
15.4.2  
Subject to clause 15.4.1, if a Participant wishes to propose Sole Risk Seismic
it shall give notice to the other Participants setting out:

 
(a)  
the proposed area of such seismic including line locations (2D); and

 
(b)  
all other relevant information including, but not limited to, the date on which
it proposes that the operations should be started, such date  being not less
than thirty (30) days and not more than one hundred and eighty (180) days from
the date of notice.

 
Each of the Participants receiving such notice shall respond to it, by notice to
the other Participants, within twenty-eight (28) days of receipt, electing
whether or not to participate.  Any Participant failing to respond within the
said twenty-eight (28) days shall be deemed to have elected not to participate.
 
15.4.3  
If the Participants electing to participate, together with the Participant
proposing the Sole Risk Seismic, reach a Passmark, the operations shall be
carried out, in accordance with the said notice, by the Operator as part of the
Joint Operations as if determined by the Joint Operating Committee and, if
appropriate, the current relevant Programme  shall be deemed amended accordingly
and the Operator shall promptly notify the Participants of the consequential
amendments to the current relevant  Budget.

 
15.4.4  
If the Participants electing to participate, together with the Participant
proposing the Sole Risk Seismic, do not reach a Passmark, such Sole Risk
Participants may within twenty-eight (28) days following the expiration of the
notice given under clause 15.4.2 require the Operator (subject to clause 15.2.9)
to undertake the Sole Risk Seismic.  The Sole Risk Seismic may not be commenced
later than one hundred and eighty (180) days following such notice.

 
15.4.5  
If any Participant which was a Non-Sole Risk Participant wishes at any time to
acquire the data and information obtained from any Sole Risk Seismic, then such
Non-Sole Risk Participant shall pay to the respective Sole Risk Participant (or
if more than one Sole Risk Participant, in proportion to their respective Sole
Risk Interests) an amount equal to five (5) times the amount it would have
contributed to such Sole Risk Seismic had it originally participated in such
Sole Risk Seismic.  Any Participant making such payment shall thereupon become a
joint owner of such data and information.

 
15.5  
Sole Risk Drilling

 
15.5.1  
No Sole Risk Drilling under clause 15.1(b)(i), (ii) or (iv) may be proposed
unless:

 
(a)  
such drilling was proposed to the Joint Operating Committee at the time of the
consideration of the current exploration and appraisal Programme and Budget but
was not included in such Programme and Budget; or

 
 
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(b)  
having been included in the current exploration and appraisal Programme and
Budget the Joint Operating Committee has voted against or failed to vote in
favour of an AFE (or the relevant part of it) relating to such drilling within
twenty-eight (28) days of submission of such AFE to the Participants provided
that a decision by the Joint Operating Committee to change the timing of such
drilling within the Year to which the current exploration and appraisal
Programme and Budget relates shall not be a vote against the AFE for the purpose
of this clause 15.5.1(b); or

 
(c)  
such drilling was proposed to the Joint Operating Committee in reasonably
sufficient detail by way of amendment to the current exploration and appraisal
Programme and Budget and the Joint Operating Committee has voted against or
failed to vote in favour of such drilling within sixty (60) days of submission
of such amendment to the Participants; or

 
(d)  
in the case only of Sole Risk Drilling under clause 15.1(b)(iv), the Joint
Operating Committee has abandoned or completed its appraisal Programme in
respect thereof and the Joint Operating Committee has voted against or failed to
vote in favour of a proposal to instruct the Operator to prepare a development
Programme in respect thereof and no Participant has given notice under clause
15.8.1 that it intends to prepare such a development Programme.

 
15.5.2  
Subject to clause 15.5.1 if a Participant wishes to propose Sole Risk Drilling
under clause 15.1(b) (i), (ii) or (iv) it shall give notice to the other
Participants setting out:-

 
(a)  
the proposed location, depth and stratigraphic objectives of such drilling; and

 
(b)  
all other relevant information including, but not limited to, the date on which
it proposes that operations should be started, such date being not less than
sixty (60) nor more than one hundred and eighty (180) days from the date of the
notice.

 
Each of the Participants receiving such a notice shall respond to it, by notice
to the other Participants, within twenty-eight (28) days of receipt, electing
whether or not to participate.  Any Participant failing to respond within the
said twenty-eight (28) days shall be deemed to have elected not to
participate.  Any Participant which believes that not all relevant information
has been provided by the proposing party shall within the said twenty eight (28)
days notify the proposing Participant as to what additional information it
requires, acting reasonably, and no Participant which fails to notify such
requirements within such twenty-eight (28) day period shall thereafter be
entitled to object that the notice given under this clause failed to provide all
relevant information.  If further information is provided, the recipient shall
have fourteen (14) days from its receipt to elect whether or not to participate.
 
15.5.3  
If a Participant wishes to propose Sole Risk Drilling under clause 15.1(b)(iii),
such Participant shall give as much notice as possible to the other Participants
stating whether it wishes to use Joint Property for such Sole Risk Drilling
(and, if so, what items) and setting out such relevant information as is
necessary in order to allow the other Participants to consider the proposal and
elect whether or not to participate.  Each of the Participants receiving such a
notice shall respond to it, by notice to the other Participants, within
forty-eight (48) hours of receipt (or within such longer period as may be
specified in the notice), electing whether or not to participate.  Any
Participant failing to respond within the said period shall be deemed to have
elected not to participate.

 
15.5.4  
If the Participants electing to participate under clause 15.5.2 or clause
15.5.3, together with the Participant proposing the Sole Risk Drilling, reach a
Passmark, the operations shall be carried out, in accordance with the said
notice, by the Operator as part of the Joint Operations as if determined by the
Joint Operating Committee and, if appropriate, the current relevant Programme
shall be deemed amended accordingly and the Operator shall promptly notify the
Participants of the consequential amendments to the current relevant Budget.

 
 
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15.5.5  
If the Participants electing to participate under clause 15.5.2 or clause
15.5.3, together with the Participant proposing the Sole Risk Drilling, do not
reach a Passmark, such Sole Risk Participants may, subject to the provisos to
clause 15.1(b)(ii) or (iii) in the case of Sole Risk Drilling under those
provisions, within twenty-eight (28) days following the expiration of the said
notice, if given under clause 15.5.2, or within forty-eight hours following the
expiration of such notice if given under clause 15.5.3, require the Operator
(subject to clause 15.2.9) to undertake the Sole Risk Drilling.  If such
circumstance results from the Joint Operating Committee voting against or
failing to vote in favour of an AFE under the current exploration and appraisal
Programme, such Programme shall be deemed amended accordingly and the Operator
shall promptly notify the Participants of the consequential amendments to the
current exploration and appraisal Budget.  In the case of a notice given under
clause 15.5.2, the Sole Risk Drilling may not be commenced later than one
hundred and eighty (180) days following such notice. In the case of a notice
given under clause 15.5.3, the Sole Risk Drilling may be commenced as soon as it
is possible to do so without interference to the Joint Operations on that well.

 
15.6  
Payments for Sole Risk Drilling

 
15.6.1  
(a)If Sole Risk Drilling carried out under clause 15.1(b) (i), (ii) or (iii) has
resulted in a particular Discovery, any Participant which was a Non-Sole Risk
Participant in all or part of such Sole Risk Drilling and which wishes to
participate in Appraisal Drilling relating to that Discovery, or, if no
Appraisal Drilling is to be conducted, then in any development, may elect to do
so by notice in writing to the existing Sole Risk Participants served:

 
(i)  
within twelve (12) Months from the date of completion of the Sole Risk Drilling,
or

 
(ii)  
prior to the date of the spudding of a well in respect of such Appraisal
Drilling relating to that Discovery, or

 
(iii)  
within thirty (30) days after Joint Operating Committee approval of a
development Programme and Budget in respect of that Discovery,

 
 
whichever is the earliest.

 
(b)  
If Sole Risk Drilling has been carried out under clause 15.1(b)(iv) in respect
of a particular Discovery, any Participant which was a Non-Sole Risk Participant
in all or part of such Sole Risk Drilling may elect to participate in further
Appraisal Drilling or in a development Programme relating to that Discovery by
notice in writing to the existing Sole Risk Participants served:

 
(i)  
within twelve (12) Months from the date of completion of the Sole Risk Drilling,
or

 
(ii)  
prior to the date of the spudding of a well in respect of  such further
Appraisal Drilling relating to that Discovery, or

 
(iii)  
within thirty (30) days after Joint Operating Committee approval of a
development Programme and Budget in respect of that Discovery,

 
 
whichever is the earliest.

 
 
(c)
Any Participant which was a Non-Sole Risk Participant and was entitled to
give   notice under paragraph (a) or (b) above and fails to give such a notice
within the periods specified therein shall not be entitled to participate in the
development of that Discovery.

 
15.6.2  
A Participant serving a notice as set out in clause 15.6.1(a) or (b) shall pay
to the respective Sole Risk Participant (if more than one Participant, in
proportion to their respective Percentage Interests in the Licence or in such
other proportion as they may have agreed under clause 15.2.1):

 
(a)  
 an amount in respect of the costs of such Sole Risk Drilling (“Drilling
Costs”); and

 
 
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(b)  
any costs relating to such Discovery incurred by the Sole Risk Parties since
such Sole Risk Drilling and up to the date of the notice, (“Interim Costs”);
equal to five (5) times its Percentage Interest share of such Drilling Costs and
Interim Costs.  Such amount shall be paid, in cash in the currency or
proportionately in the currencies in which the contributions for the costs and
expenses would have been made to the Joint Account under paragraph 3.2 of the
Accounting Procedure.  A Non-Sole Risk Participant making the requisite payment
in full pursuant to this clause 15.6.2 to the Sole Risk Participant(s) shall be
deemed to have elected to participate in the relevant Sole Risk Project to the
extent of its Percentage Interest and the Sole Risk Interests will be adjusted
accordingly.  Such Sole Risk Participant shall be liable for its Sole Risk
Interest share of all costs and expenses, incurred on and after the date of the
aforesaid notice under clause 15.6.1(a) or (b), relating to the Appraisal
Drilling or development, as the case may be, and shall in addition be liable for
the payment provided under clause 15.6.3.  A Non-Sole Risk Participant that does
not make the above payment by the due time shall lose its rights to participate
in any further operations relating to the Discovery and in any New Area created
in relation to it.

 
15.6.3  
Upon the Secretary authorising (whether by consenting or by approving or by
serving a Development Plan) under Clause 17 of the Licence the commencement of
the development of a Discovery in respect of which Sole Risk Drilling has been
carried out, then any Non-Sole Risk Participant which has served notice under
clause 15.6.1 and made the payments required under the provisions of clause
15.6.2 to one or more Sole Risk Participants in respect of that Discovery shall
in addition be liable to pay to each of such Sole Risk Participants as are also
participating in the development an amount in Pounds in respect of each Sole
Risk Drilling operation in which it did not participate calculated in accordance
with the following formula:-

 
A = B x C/D
 
where:
 
A =           the amount to be paid to a Sole Risk Participant in respect of a
Sole Risk Drilling operation;
 
B =           the amount paid to that Sole Risk Participant in respect of such
Sole Risk Drilling operation pursuant to clause 15.6.2 (any payment made
pursuant to clause 15.6.2 in a currency other than Pounds being translated to
Pounds at the Conversion Rate on the date of payment by the Non-Sole Risk
Participant);
 
C =           the value of the Index on the date on which the Secretary
authorised commencement of the development;
 
D =           the value of the Index on the date of termination of such Sole
Risk Drilling operation;
 
and where the “Index” means the Index Numbers of Producer Prices published by
National Statistics in the Monthly Digest of Statistics in table 18.9 under the
heading “output of manufactured products”, provided that:
 
(i)  
if the factor C/D is less than one (1), then the figure one (1) shall be
substituted; and

 
(ii)  
if the Index shall cease to be published, then the nearest equivalent index
shall be used in lieu of it with any adjustments to it as may be appropriate.

 
15.6.4  
Any liability which arises under clause 15.6.3 shall be satisfied by the
Non-Sole Risk Participant paying to the Sole Risk Participant (if more than one
Non-Sole Risk Participant, in proportion to the liability of each such
Participant) amounts equal to the amounts of the Percentage Interest share of
the Sole Risk Participant of the Invoices or Advances paid or payable under the
relevant approved development Programme and Budget until the liability of the
Non-Sole Risk Participant pursuant to clause 15.6.3 has been extinguished and
such amounts shall be paid in Pounds to the Sole Risk Participant:-

 
(a)  
within thirty-five (35) days of the date of the said authorisation in the case
of Invoices or Advances paid prior to such date, and for the purpose of
calculating the amount payable under this clause 15.6.4 (a)  any Invoice or
Advance paid in a currency other than Pounds shall be translated to Pounds at
the Conversion Rate on the date of the said authorisation; and

 
 
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(b)  
not less than two (2) Working Days before the due dates for payment of the
Invoices or Advances in the case of Invoices or Advances to be paid subsequent
to the date of the said authorisation, and for the purpose of calculating the
amounts payable under this clause 15.6.4(b) any Invoice or Advance to be paid in
a currency other than Pounds shall be translated to Pounds at the Conversion
Rate on the fourth (4th) Working Day before the due date for payment of it.

 
In the event that any liability of the Non-Sole Risk Participant is not fully
extinguished by the payments made in accordance with the foregoing provisions of
this clause 15.6.4 any balance shall become immediately payable by the Non-Sole
Risk Participant to the Sole Risk Participant within 30 days of receipt of a
written demand to that effect from the Sole Risk Participant to the Non-Sole
Risk Participant notified after the final Invoice or Cash Call to be issued
under the relevant development Programme and Budget has been issued.
 
15.7  
Sole Risk Testing

 
15.7.1  
No Sole Risk Testing may be carried out unless:

 
(a)  
in the case of testing under clause 15.1(c)(i) the intervals to be tested are
not planned to be tested by another future well under any exploration and
appraisal Programme and Budget already approved by the Joint Operating Committee
at the time the Sole Risk Testing is proposed;

 
(b)  
in the case of testing under clause 15.1(c)(ii) the Joint Operating Committee
has voted against or failed to vote in favour of a proposal to instruct the
Operator to carry out a testing programme in respect of the relevant intervals
within the relevant well.

 
(c)  
all drilling operations (which shall include Sole Risk Drilling) shall have been
completed in respect of the relevant well (and in any testing programme where it
is proposed to test one or more intervals in the relevant well as a Sole Risk
Project and one or more intervals in the same well for the Joint Account, then
the deepest such interval shall be tested first and thereafter each further
proposed interval rising up the well, unless the Participants otherwise agree to
an alternative testing programme in respect of the relevant intervals within the
relevant well).

 
(d)  
where Sole Risk Testing of one or more intervals in a well has been proposed
concurrently with testing of other intervals in the same well for the Joint
Account, flows of Petroleum, if any, from intervals tested under Sole Risk
Testing can be and are measured separately from flows of Petroleum if any from
intervals in the same well tested for the Joint Account.

 
15.7.2  
If a Participant wishes to propose Sole Risk Testing under clause 15.1(c)(i), it
shall give notice to the other Participants setting out all relevant information
including the date on which it proposes that operations should be started, such
date being not less than 60 days nor more than 180 days from the date of the
notice.  Each of the Participants receiving such a notice shall respond to it,
by notice to the other Participant, within twenty-eight (28) days of receipt,
electing whether or not to participate.  Any Participant failing to respond
within the said twenty-eight (28) days shall be deemed to have elected not to
participate.

 
15.7.3  
If a Participant wishes to propose Sole Risk Testing under clause 15.1(c)(ii),
such Participant shall, upon completion of the drilling of the well and after
the Joint Operating Committee has voted against testing of all or any such
intervals within the said well, give notice to the other Participants setting
out such relevant information as is necessary in order to allow the other
Participants to consider the proposal and elect whether or not to
participate.  Each of the Participants receiving such notice shall respond to
it, by notice to the other Participants, within forty-eight (48) hours of
receipt, electing whether or not to participate.  Any Participant failing to
respond within the said period shall be deemed to have elected not to
participate.

 
 
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15.7.4  
If the Participants electing to participate under clauses 15.7.2 or 15.7.3,
together with the Participant proposing the Sole Risk Testing, reach a Passmark,
the proposed Sole Risk Testing shall be carried out in accordance with the said
notice by the Operator as Joint Operations  as if determined by the Joint
Operating Committee and the then current Programme shall be deemed amended
accordingly and the Operator shall promptly notify the Participants of the
consequential amendments to the current relevant  Budget.

 
15.7.5  
If the Participants electing to participate under clauses 15.7.2 or 15.7.3,
together with the Participant proposing the Sole Risk Testing, do not reach a
Passmark, such Sole Risk Participants may, subject to clause 15.2.9, request the
Operator to undertake the Sole Risk Testing.  In the case of a notice given
under clause 15.7.2 the Sole Risk Testing will be commenced on or as soon as
possible after the date specified in the said notice and in any event not later
than 180 days thereafter.  In the case of a notice given under clause 15.7.3 the
Sole Risk Testing will be commenced as soon as it is possible to do so without
interference to the Joint Operations on that well.

 
15.7.6  
The results of and data pertaining to any Sole Risk Testing shall not be
disclosed to any Non-Sole Risk Participant unless that Non-Sole Risk Participant
has paid the Sole Risk Participant or Participants (if more than one in
proportion to their respective Sole Risk Interests) an amount equal to five (5)
times the amount it would have contributed to such Sole Risk Testing had it
participated in the Sole Risk Testing in the first place, whereupon the data
pertaining to the Sole Risk Testing shall become the joint property of the
Participants discharging such liability and the Sole Risk Participant.

 
15.8  
Sole Risk Development

 
15.8.1  
In the event that a proposal is made to the Joint Operating Committee that a
development Programme and Budget should be prepared for a particular Discovery,
pursuant to clause 11.1.1 and such proposal is rejected then, provided that any
appraisal Programme approved by the Joint Operating Committee and relating to
that Discovery has been completed (but excluding any appraisal work included in
an exploration and appraisal Programme and Budget if an AFE for it has been
submitted to the Participants under clause 11.2 and the Joint Operating
Committee has voted against or failed to vote in favour of such AFE within
twenty-eight (28) days after submission), any Participant may give notice to the
other Participants that it intends to prepare a development Programme and Budget
for that Discovery.  Such Participant, together with such of the other
Participants as within twenty-eight (28) days of such notice give counter-notice
of their wish to participate in it, shall be entitled to proceed with the
preparation of, and to submit such Programme and Budget for approval by, the
Joint Operating Committee in accordance with clause 11.1.2.

 
15.8.2  
If a development Programme and Budget prepared in accordance with clause 15.8.1,
or a revised form of it, is approved by the Joint Operating Committee in
accordance with clause 11.1.2, then the Participant or Participants which
prepared the development Programme and Budget shall be entitled to charge all
reasonable costs incurred in the preparation of it to the Joint Account together
with interest calculated on a day to day basis at the rate of two percent (2%)
above LIBOR from time to time from the date on which the costs were incurred to
the date of repayment.

 
15.8.3  
In the event that, following the submission to the Joint Operating Committee for
a proposed development Programme and Budget for a particular Discovery in
accordance with clause 11.1.2, the Joint Operating Committee does not approve
such development Programme and Budget within the period provided in that clause,
then any Participant may serve notice on the other Participants of its intention
to develop the Discovery at sole risk.  Such notice shall be accompanied by
details of its proposed development Programme and Budget.  The other
Participants may (subject to clause 15.6.2 where the Discovery resulted from
Sole Risk Drilling) give counter-notice that they wish to participate in the
development:-

 
(a)  
within twenty-eight (28) days of such notice if the proposed development
Programme and Budget is the same as, or substantially similar to, that which was
not approved by the Joint Operating Committee; or

 
(b)  
within ninety (90) days of such notice if the proposed development Programme and
Budget is substantially different from that which was not approved by the Joint
Operating Committee.

 
 
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15.8.4  
If all the other Participants elect to participate under clause 15.8.3 the
Participants shall proceed with the development in accordance with such
development Programme and Budget and the provisions of clause 11.1.4 shall apply
upon the Secretary authorising (whether by consenting or by approving or by
serving a Development Plan) the commencement of the development. The
Participants which prepared the development Programme and Budget shall be
entitled to charge all reasonable costs incurred in its preparation to the Joint
Account relating to that Discovery together with interest calculated on a day to
day basis at the rate of two per cent (2%) above LIBOR from time to time from
the date on which the costs were incurred to the date of repayment.  Where less
than all the Participants elect to participate under clause 15.8.3 the
Participants which proposed the development Programme and Budget shall be
entitled to charge all reasonable costs incurred in the preparation of it to the
Participants electing to participate together with interest at the rate
specified in the previous sentence.

 
15.8.5  
In the event that, following approval by the Joint Operating Committee of a
development Programme and Budget pursuant to clause 11.1.3 or following any
notice served under clause 15.8.3, less than all the Participants, or in the
case of clause 15.8.3 less than all the Non-Sole Risk Participants, elect to
participate in the development of a Discovery within the periods respectively
provided in those clauses, those Participants which elected to participate, or
in the case of clause 15.8.3 the Sole Risk Participants and those Non-Sole Risk
Participants which elected to participate, shall be entitled to proceed with the
development of the Discovery at their sole risk in accordance with the relevant
development Programme and Budget provided that if, upon the Secretary
authorising (whether by consenting or by approving or by serving a Development
Plan) the commencement of the development, such development Programme and Budget
has been or is required to be materially amended (which shall for the avoidance
of doubt include any change in the date of commencement of the development or
the rate at which Petroleum may be produced) then the Participants participating
in the development shall as soon as practicable following such authorisation
give notice to the other Participants of such amendments and within twenty-eight
(28) days of such notice:-

 
(a)  
any of the Participants participating in the development of the Discovery may by
notice to all the other Participants, elect not to proceed with the development;
and/or

 
(b)  
any of the Participants not participating in the development of the Discovery
may, by notice to all the other Participants elect to do so. On such election
such Participant shall pay to the respective Sole Risk Participant (if more than
one, in proportion to their respective Percentage Interests in the Sole Risk
Project or such other proportion as they may have agreed) an amount equal to the
reasonable costs incurred in the preparation of the Development Plan together
with interest calculated on a day to day basis at the rate of two per cent (2%)
above LIBOR from time to time from the date on which the costs were incurred to
the date of repayment.

 
Those Participants which, at the expiry of the said period of twenty-eight (28)
days, are participating in the development shall be obliged to carry it out.
 
15.8.6  
In the event that, following the Secretary authorising (whether by consenting or
by approving or by serving a Development Plan) the commencement of a development
in which all the Participants are participating, any of the Participant elects
not to proceed with the development under clause 11.1.4, the other Participants
shall be entitled to proceed with the development in accordance with the
approved development Programme and Budget (as amended) and, if they do so
proceed, shall be obligated to carry out the development.

 
15.8.7  
In the event that less than all the Participants participate in the development
of a Discovery in respect of which no Sole Risk Drilling has been carried out
then, unless the Participants participating in such development unanimously
agree otherwise, the Percentage Interest of each Participant in such development
shall be in proportion to its Percentage Interest in the Licence.

 
15.8.8  
In the event that less than all the Participants participate in the development
of a Discovery in respect of which Sole Risk Drilling has been carried out then,
unless the Participants participating in such development unanimously agree
otherwise:-

 
(a)  
if the Participant which participated in the first such Sole Risk Drilling (for
the purposes of this clause 15.8.8 “Original Sole Risk Participant”) or if more
than one such Participant, all such Participants, participate in the
development, then the Percentage Interest of each Participant which was not an
Original Sole Risk Participant in such development shall equal its Percentage
Interest in the Licence, and the remaining Percentage Interest in the
development shall be held by the Original Sole Risk Participant (if more than
one, in proportion to their Sole Risk Interests); or

 
 
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(b)  
if less than all the Original Sole Risk Participants participate in the
development, then the calculation under (i) above shall first be performed as
though all the Original Sole Risk Participants were participating.  The
Percentage Interests in such development of those Original Sole Risk
Participants who do not participate shall then be allocated to all the
participating Participants, in proportion to the Percentage Interests obtained
in such preliminary calculation.

 
 
 (c)  
any Participant which does not participate in the development of a Discovery
shall have no further rights in such development.

15.8.9  
Sole Risk Development will in respect of the areas comprised in the development
be regarded as creating a New Area and the provisions of clause 9.10 shall apply
to it.  For the purposes of any application of Clauses 4, 5 or 6 of the Licence,
the Participants agree that, in the event of the creation of any New Area during
the term of the Licence, the surface area above such New Area will, to the
extent permitted under the Licence, be included in the part of the Licence Area
to which the Licence is to continue to apply during the Second Term or any
Further Term subject to the surface areas above any area comprised in any
development carried out under the Joint Operations and authorised by the
Secretary prior to his authorisation of the Sole Risk Development having
priority.

 
15.8.10  
The Participants recognise that it is possible that more than one development
Programme and Budget may be proposed under clause 15.8.3 for the development of
the Discovery at sole risk and that such proposals may conflict.  In such event,
the Participants shall meet to discuss such a deadlock and seek in good faith to
resolve the matter.  Notwithstanding any other provision of this Agreement, no
Participant shall be entitled to proceed with the development of the Discovery
as a Sole Risk Project until such deadlock has been resolved to the satisfaction
of each of the Participants.

 
15.9  
Non-Consent

 
15.9.1  
Nothing contained in this clause 15.9 shall relieve any Party from its
Percentage Interest share of all costs associated with the performance of Work
Obligations.

 
15.9.2  
Subject to Clause 15.9.1, if any Party votes against an AFE submitted to the
Joint Operating Committee under an exploration or appraisal Programme and Budget
pursuant to clauses 10 and 11 in respect of any operation of the nature
described in clause 15.1(b)(i), (ii), (iii) or (iv) (a “Drilling Operation”)
and, notwithstanding such vote, such AFE is approved by the Joint Operating
Committee, then that Party shall have the right, by giving notice to all other
Parties within seven (7) days (or in the case of an operation of the nature
described in Clause 15.1(b)(iii), within twenty four (24) hours) of being
notified of the approval of such AFE, to elect not to participate in the
Drilling Operation.  The Operator shall then promptly advise all Parties who
have approved the Drilling Operation AFE (the “Electing Parties”) of the
aggregate respective Percentage Interests of the Parties who have elected not to
participate in the Drilling Operation AFE (the “Non-Electing Parties”).

 
15.9.3  
Within fourteen (14) days (or within twenty-four (24) hours in the case of an
operation of the nature described in Clause 15.1(b)(iii)) of such notification
by the Operator under this clause 15.9.2, each of the Electing Parties shall
have the right but not the obligation, to assume that proportion of the
respective Percentage Interests of the Non-Electing Parties in the Drilling
Operation which the respective Percentage Interests of such Electing Party bears
to the total of the respective Percentage Interests of all Electing Parties or
such greater proportion as may not be taken up by any other Electing Party.  If
the Electing Parties decline to assume all of the interests of the Non-Electing
Parties, the Drilling Operation shall not be conducted and the said Programme
and Budget shall be amended correspondingly.  If the Electing Parties (or any of
them) assume all of the respective Percentage Interests of the Non-Electing
Parties in the Drilling Operation (whether in the aforesaid proportions or
otherwise):

 
(i)  
the Operator shall commence such Drilling Operation within the period covered by
the said Programme and Budget; and

 
(ii)  
the provisions of Clauses 15.2.1 to 15.2.6 inclusive, Clauses 15.2.7 to 15..2.10
inclusive, Clause 15.6 and 15.8.8 to 15.8.10 inclusive, shall apply, mutatis
mutandis. to such Drilling Operation with the Electing Parties being deemed to
be the Sole Risk Parties, the Non Electing Parties being deemed to be the Non
Sole Risk Parties, the Operator being deemed to be the Sole Risk Operator and
such Drilling Operation being deemed Sole Risk Drilling under clause 15.1.

 
 
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16.  
Costs and Accounting

 
16.1  
The Accounting Procedure

 
The Accounting Procedure is hereby made part of this Agreement.  In the event of
any conflict between any provision in the main body of this Agreement and any
provision in the Accounting Procedure, the provision in the main body shall
prevail.
 
17.  
Default

 
17.1  
Notice of Default

 
If any Participant (“Defaulting Participant”) fails to pay in full its share of
any Invoice or Advance by the due date in accordance with paragraph 4.4 or
paragraph 4.6 of the Accounting Procedure or is in Default (as such term is
defined in the Decommissioning Security Agreement) the Operator shall as soon as
practicable give notice to all the Participants of such default and the date of
its commencement (a “Default Notice”).
 
17.2  
Failure to Pay

 
If the Defaulting Participant fails to pay in full its share of any Invoice or
Advance by the due date in accordance with paragraph 4.4 or paragraph 4.6 of the
Accounting Procedure then (except where such Invoice or Advance relates to the
costs of Decommissioning in which case the provisions of the Decommissioning
Security Agreement shall apply):-
 
(a)  
with the exception of the Defaulting Participant each Participant
(“Non-Defaulting Participant”) shall contribute, in accordance with this clause
17.2, a share of the amount in default in the proportion that its Percentage
Interest bears to the total of the Percentage Interests of the Non-Defaulting
Participants and pending receipt of such additional contributions the Operator
shall make arrangements to meet any commitments falling due by borrowing the
necessary finance or by making the necessary finance available itself and all
costs of any such finance shall be charged to the Non-Defaulting Participants;
finance made available by the Operator shall bear interest calculated on a day
to day basis at a rate equal to two (2) per cent above LIBOR from time to time;

 
(b)  
within three (3) Working Days following the date of service of the Default
Notice, the Operator shall notify all the Participants of the liability of each
of the Non-Defaulting Participants to contribute to the amount in default and
shall make a further Cash Call or issue a further Invoice accordingly to take
effect on the expiry of the six (6) Working Days specified in clause 17.2(c) or
on such later date as the Joint Operating Committee may decide; and

 
(c)  
if such default continues for more than six (6) Working Days after the date of
service of the Default Notice each of the Non-Defaulting Participants shall on
the Working Day next following such sixth or later agreed Working Day pay the
amount notified under clause 17.2(b), and thereafter shall continue to pay, in
addition to its share of subsequent Advances or Invoices, the same proportion of
that part of all such subsequent Advances or Invoices attributable to the
Defaulting Participant until such time as the Defaulting Participant has
remedied its default in full or until forfeiture of its interest pursuant to
clause 17.6,  and failure by any Participant to make such payments shall
likewise and with the same results render that Participant in default.

 
17.3  
Remedy of Default

 
17.3.1  
The Defaulting Participant shall have the right to remedy the default at any
time prior to forfeiture of its interest pursuant to clause 17.6, by payment in
full to the Operator or, if the Non-Defaulting Participants have paid any
amounts under clause 17.2(c), the Non-Defaulting Participants, in proportion to
the amounts so paid by them, of all amounts in respect of which the Defaulting
Participant is in default, together with interest thereon calculated on a day to
day basis at a rate equal to the rate stipulated from time to time under the
Late Payment of Commercial Debts (Interest) Act 1998, from and including the due
date for payment of such amounts until the actual date of payment.

 
 
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17.3.2  
If the default is remedied in accordance with clause 17.3.1, the Defaulting
Participant shall (from the day after the date on which the default is remedied)
have restored to it the right to take in kind and dispose of its Percentage
Interest share of Petroleum subject to any lifting procedures, but for the
avoidance of doubt shall not be entitled to receive or be compensated for any
Petroleum sold by the Operator on its behalf pursuant to clause 17.4 during any
period in which it was in default.

 
17.4  
Disposal of Petroleum

 
If any default continues for more than six (6) Working Days after the date of
notification by the Operator under clause 17.1 then, for so long as the default
so continues, the Defaulting Participant shall not be entitled to take in kind
and dispose of its Percentage Interest share of Petroleum which shall instead be
taken in kind and disposed of on behalf of the Defaulting Participant by the
Operator and the actual proceeds of such sale (after the deduction of any costs
incurred by the Operator in respect of such sale) shall be applied as follows:
 
(a)  
first to discharge the liability of the Defaulting Participant to the
Non-Defaulting Participants as specified in clause 17.3 (by application to first
the interest and then the principal), in the proportions in which their
respective Percentage Interests bear to the total of such liability; and

 
(b)  
if any proceeds remain in the hands of the Operator after all liabilities
arising under clause 17.3 have been settled, to discharge any outstanding
liability of the Defaulting Participant to make provision for the costs of
Decommissioning under the Decommissioning Security Agreement; and

 
(c)  
if any proceeds remain in the hands of the Operator after all liabilities
arising under clauses 17.4 (a) and 17.4 (b) have been settled, the Operator
shall transfer such proceeds promptly to the Defaulting Participant.

 
17.5  
Rights under this Agreement suspended

 
17.5.1  
After service of a Default Notice and during the continuation of any default the
Defaulting Participant shall not be entitled to be represented at meetings of
the Joint Operating Committee or any sub-committee of it nor to vote thereat and
clause 9.8.2 shall apply in relation to any matters requiring the consent or
approval of Participants under this Agreement, subject to the following
provisions:

 
(a)  
in respect of any decision to conduct operations of the type described in clause
15.1, whether proposed as a Sole Risk Operation or proposed to the Joint
Operating Committee as Joint Operations,  the Non-Defaulting Participants shall
be entitled to proceed with such operation as a Sole Risk operation with the
Non-Defaulting Participants being deemed to be the Sole Risk Participants and
the Defaulting Participant being the Non-Sole Risk Participant;

 
(b)  
for any decision requiring the consent or approval of all Participants
(including for the avoidance of doubt the approval of any transfer pursuant to
clause 23), the consent or approval of the Defaulting Participant shall not be
required and the consent or approval of all Non-Defaulting Participants shall be
sufficient to decide the matter;

 
(c)  
the Defaulting Participant shall be bound by decisions of the Joint Operating
Committee or, where this Agreement requires unanimity, by decisions of all of
the Non-Defaulting Participants, made during the continuation of the default.

 
17.5.2  
After service of a Default Notice and during the continuation of any default the
Defaulting Party shall have no further access to any data and information
relating to the Joint Operations other than such information or data as may be
necessary to enable the Defaulting Party to remedy its default.

 
17.5.3  
After service of a Default Notice and during the continuation of any default the
Defaulting Party shall not be entitled to withdraw pursuant to clause 24 and
shall be entitled to transfer all or any part of its interest pursuant to clause
23 only if its default is remedied prior to such transfer.

 
 
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17.6  
Forfeiture of interest

 
17.6.1  
Subject to the remaining provisions of this clause 17.6, in the event that the
default continues for more than sixty (60) days or thirty (30) days if such
default occurs in respect of an Invoice or Cash Call issued by the Operator in
respect of an exploration well from the date of service of a Default Notice in
respect of a single default (or for a cumulative period of sixty (60) days in
respect of a number of defaults within any twelve successive calendar months)
then each of the Non-Defaulting Participants who at the expiration of the
applicable period stated above, has fully complied with its obligation to make
payment under Clause 17.2 (c), shall have the right to have forfeited to it and
to acquire, by notice to the other Participants, the interest of the Defaulting
Participant in the Licence (in so far as it relates to the Licence Area) and in
and under this Agreement or, if any other Non-Defaulting Participant exercises
such right within thirty (30) days after the first notice of exercise, its
proportionate share of the interest of the Defaulting Participant in the Licence
(in so far as it relates to the Licence Area) and in and under this Agreement,
such share being the proportion which its Percentage Interest bears to the total
Percentage Interests of the Non-Defaulting Participants exercising such right
(or as the Non –Defaulting Participants exercising such right may otherwise
agree).

 
17.6.2  
Until any Non-Defaulting Participant exercises such right as is mentioned in
clause 17.6.1 then, without prejudice to any rights of the Non-Defaulting
Participants, and unless all the Non-Defaulting Participants agree to abandon
the Joint Operations, the Joint Operations shall continue and the Operator shall
continue to apply the provisions of clause 17.4.

 
17.6.3  
Any forfeiture of the interest of the Defaulting Participant in the Licence (in
so far as it relates to the Licence Area) and in and under this Agreement
pursuant to clause 17.6.1 shall be:

 
(a)  
subject to any necessary consent of the Secretary;

 
(b)  
without prejudice to any other rights of each Participant other than the
Defaulting Participant;

 
(c)  
acquired as beneficial owner or owners free of any charges and encumbrances
(other than rent and royalty under the Licence); and

 
(d)  
effective as of the date of the forfeiture.

 
17.6.4  
Upon forfeiture and acquisition of the interest of a Defaulting Participant
under clause 17.6.1, a Defaulting Participant shall promptly join in such
actions as may be necessary or desirable to obtain any necessary consent of the
Secretary and shall execute and deliver any and all documents necessary to
effect any such forfeiture and acquisition, and all costs and expenses
pertaining to any such forfeiture  and acquisition (including for the avoidance
of doubt any stamp duty or stamp duty land tax incurred on the documents
executed to effect such forfeiture and acquisition) shall be the responsibility
of the Defaulting Participant.

 
17.7  
Power of Attorney

 
The Defaulting Participant appoints the Operator to be its attorney for the
purposes of:

(a)  
taking and disposing on its behalf of its Percentage Interest share of any
Petroleum and applying the proceeds as set out in clause 17.4;

 
(b)  
taking such actions as may be necessary or desirable to obtain any necessary
consent of the Secretary to a forfeiture pursuant to clause 17.6.2; and

 
(c)  
executing and delivering on its behalf and in its name any and all documents
necessary to effect any such forfeiture and acquisition;

 
 
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and all costs and expenses pertaining to any such forfeiture and
acquisition(including for the avoidance of doubt any stamp duty or stamp duty
land tax incurred on the documents executed to effect such forfeiture and
acquisition) shall be the responsibility of the Defaulting Participant.
 
17.8  
Default by the Operator

 
If the Participant acting as Operator fails to pay in full its share of any
Invoice or Advance by the due date in accordance with paragraph 4.4 or paragraph
4.6 of the Accounting Procedure or is in Default (as defined in the
Decommissioning Security Agreement) then the Non-Operator having the largest
Percentage Interest (and in the event of two or more such Non-Operators with
identical Percentage Interests that Non-Operator having held such Percentage
Interest for the longest time) shall be entitled to and shall exercise all of
the powers of the Operator under this clause 17 in respect of such default,
including without limitation the power of attorney in this clause 17.8.
 
18.  
Disposal of Petroleum

 
Subject to clauses 15 and 17, in respect of the development of any Discovery:-

(a)  
each of the Participants shall have the right to take in kind and separately
dispose of its Percentage Interest share in the total quantities of Petroleum
available under this Agreement, provided always that the Operator shall have the
right to use in any Joint Operations  as much of such Petroleum as may be needed
by it for that purpose and the quantities to be so used shall be excluded from
the estimates to be provided by the Operator; and

 
(b)  
each of the Participants shall have the obligation to take in kind and
separately dispose of its Percentage Interest share in all Petroleum produced;

 
(c)  
the Participants which have or may have Percentage Interests in respect of such
development shall prior to the commencement of production agree allocation,
attribution and lifting procedures to reflect the principles set out at
paragraphs (a) and (b) of this clause 18.

19.  
Data and Confidentiality

19.1  
Confidential Data and Information

 
All data and information acquired or received by any Participant (including by
the Participant acting in the capacity of Operator) under this Agreement shall
be held confidential by such Participant during the continuance of this
Agreement and for a period of five (5) years thereafter and shall not be
divulged in any way to any third party, without the prior written approval of
all the other Participants provided that:-
 
(a)  
any Participant (including the Participant acting in the capacity of Operator)
may, without such approval, disclose such data and information:-

 
(i)  
to the extent required by the Acts, the Licence, any other applicable
Legislation or by any government, statutory or regulatory body or to comply with
the rules of a recognised stock exchange or the Stock Exchange Commission of the
United States of America;

 
(ii)  
to the extent that it is already lawfully known to the Participant at the date
of disclosure under no obligation of confidentiality;

 
(iii)  
to the extent that it is in the public domain or enters into the public domain
except by breach of this Agreement; or

 
(iv)  
to the extent that it becomes available to the Participant through a third party
which expressly represents that it is under no obligation of confidentiality in
respect of it;

 
(b)  
any Participant (including the Participant acting in the capacity of Operator)
may, subject to clause 19.1 (c), disclose such data and information to:

 
(i)  
its employees, directors, officers and contractor personnel;

 
 
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(ii)  
any Affiliate of such Participant and its employees, directors, officers and
contractor personnel provided that the Participant shall be responsible for the
acts of such Affiliate and its employees, directors, officers and contractor
personnel in respect of such data and information as if they were its own; or

 
(iii)  
any bona fide intended assignee of such Participant, or bona fide intended
purchaser of the  shares in such Participant or in a holding company of such
Participant; or

 
(iv)  
any outside professional consultants; or

 
(v)  
any bank or financial institution from whom such Participant is seeking or
obtaining finance; or

 
(vi)  
any insurer or insurance broker from which such Participant is seeking
insurance.

 
(c)  
Before disclosing any such data or information to any person under the
provisions of clause 19.1 (b), the Participant shall procure that the proposed
recipient of such Information is (i) made aware of the terms of this Agreement,
and (ii) except where disclosure is made under the provisions of clause 19.1(b)
(i) or (ii), is bound to the Participant to maintain confidentiality of such
data or information by professional confidentiality or on terms no less onerous
than those set out in this clause.

 
(d)  
The Operator may disclose such data and information to:

 
(i)  
such persons as may be necessary in connection with the conduct of the Joint
Operations;

 
(ii)  
any party requesting a release pursuant to the provisions of the Guidelines for
Release of Proprietary Seismic Data agreed between the Secretary of State and
Oil and Gas UK, provided that such party executes a seismic release agreement
substantially in the form of the industry standard seismic release agreement
published from time to time by Oil and Gas UK.

 
(e)  
In the event of any Participant ceasing to hold a Percentage Interest, such
Participant shall nevertheless remain bound by this clause 19.1.

 
19.2  
Trading Rights

 
The Operator may, with the prior written approval of all the Participants and on
such terms and conditions as they may determine, exchange any such data and
information for other similar data and information and the Operator shall
promptly provide all the Participants with a conformed copy of the agreement
relating to such exchange and all such other data and information.  In any
event, the Operator shall enter into such trade or exchange agreements for and
on behalf of itself and the other Participants and shall obtain an undertaking
in substantially the same terms as clause 19.1 from any third party to such
trade.   Notwithstanding the foregoing provisions of this clause 19, if any
Participant is also the owner or part owner of such other data and information
it shall not be entitled to prevent an exchange which has been approved by all
the other Participants.
 
19.3  
Licensed Data

 
Where the Joint Operating Committee authorises the Operator to obtain a licence
of data (including inter alia seismic data), the following principles shall
apply unless otherwise unanimously agreed by the Participants:

19.3.1  
subject to clause 19.3.2 below, in the case of newly licensed data, the cost of
the original aggregate licence fee shall be apportioned between the Participants
in proportion to their Percentage Interests (excluding any Participant that is
already licensed to use the data in question in relation to Joint Operations);

 
19.3.2  
any assignee of a Percentage Interest will be jointly and severally liable with
the assignor for the full amount of any fee payable by the licensee as a result
of such assignment and/or as a result of the access to or use of the licensed
data by such assignee; and

 
19.3.3  
where any Participant is subject to a direct or indirect change of control, such
Participant shall be liable for the full amount of any fee payable by the
licensee as a result of such change of control.

 
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20.  
Public Announcements

20.1  
Subject to clause 20.2, the Operator shall be responsible for the preparation
and release of all public announcements and statements regarding this Agreement
or the Joint Operations provided always that no such public announcement or
statement shall be issued or made unless all the Participants have been
furnished with a copy in advance and the approval of the Joint Operating
Committee has been obtained, except that the Operator shall not be prohibited
from making such public announcements as it may think appropriate in the case of
serious incidents of personal injury or pollution where obtaining the consent of
the Joint Operating Committee is not practicable but shall promptly furnish all
the Participants with a copy thereof.

 
20.2  
If any Participant shall itself wish to issue or make any public announcement or
statement regarding this Agreement or the Joint Operations it shall not do so
unless it furnishes all the Participants with a copy of such announcement or
statement in advance and obtains the approval of the Joint Operating Committee
provided that, notwithstanding any failure to obtain such approval, no
Participant or any Affiliate of such Participant shall be prohibited from
issuing or making any such public announcement or statement if it is necessary
to do so in order to comply with any applicable law or the regulations of a
recognised stock exchange or the Securities and Exchange Commission of the
United States.  The Participants issuing or making any such announcement or
statement shall, contemporaneously with the issuing or making thereof, provide a
copy to each other Participant.

21.  
Outgoings and Grants

21.1  
Outgoings

The Participants shall be liable for the payment of their respective Percentage
Interest shares of all sums which may be properly payable under the Acts and the
Licence provided that to the extent permitted by the Acts and the Licence, the
Operator shall pay all such sums excepting royalties from the Joint Account.
Each Participant shall be responsible for the settlement of its own royalties in
accordance with the provisions of the Licence.
 
21.2  
Grants

 
Grants received by any of the Participants from any governmental agency or body
in the United Kingdom or of the European Union in respect of their respective
expenditures made pursuant to this Agreement will be retained by the Participant
receiving them.  The Operator shall supply to any Participant applying for a
grant, at the sole cost of the Participant requiring it, all requisite data and
information which such Participant may reasonably require for the purpose.
 
21.3  
Emissions allowances and credits

 
Prior to the start of production under any development the Participants shall
consider how to deal with any allowances or credits in respect of the emission
of any substance into the environment which are issued to the Operator in
respect of the Field or any Joint Property and shall develop procedures for the
allocation and/or disposal of any such allowances or credits not required for
Joint Operations and, without prejudice to the right and obligation of the
Operator to purchase such allowances or credits as may be necessary to comply
with its obligations under clause 6.2.2,  for the purchase or other provision of
additional allowances or credits where insufficient allowances and credits are
issued to the Operator for the purposes of Joint Operations.

 
22.  
Covenant, Undertaking and Relationship

 
22.1  
Covenant and Undertaking

 
Without prejudice to the overriding responsibility of the Operator under clause
6.2.2, each Participant hereby covenants and undertakes with each other
Participant that it will comply with all the applicable provisions and
requirements of the Acts and the Licence and will do all such acts and things
within its control as may be necessary to keep and maintain the Licence in force
and effect.
 
 
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22.2  
Relationship

 
22.2.1  
The liability of the Participants hereunder shall be several and not joint or
collective and each Participant shall be responsible only for its individual
obligations hereunder.  It is expressly agreed that it is not the purpose or
intention of this Agreement to create, nor shall it be construed as creating,
any mining partnership, commercial partnership or other partnership.

 
22.2.2  
Subject to clauses 6.2.4, 8.3.3 and 19.3, each Participant agrees to indemnify
and keep each other Participant indemnified, to the extent of its Percentage
Interest share, for any claim by or liability to (including any costs and
expenses necessarily incurred in respect of such claim or liability) any person
not being a Participant hereto, arising from or in connection with the Joint
Operations including (without prejudice to the generality of the foregoing) any
such claim or liability resulting from the actual negligence of any Participant
but excluding any such claim or liability which is caused by the Wilful
Misconduct of any Participant.  In the case of any such claim or liability which
is caused by the Wilful Misconduct of a Participant, such Participant shall
indemnify and defend the other Participants and hold them harmless against such
claim or liability (including any award of damages and any legal or other costs
and expenses incurred in respect of such claims or liability) but in no event or
circumstance whatever (including Wilful Misconduct) shall such Participant be
liable for any Consequential Loss of another Participant.

 
22.2.3  
In respect of any representative of a Participant exercising its rights of
access under clause 7.3 in any offshore site where Joint Operations are being
conducted:

 
(a)  
the Participant shall be responsible for and shall defend, indemnify,  and hold
harmless the other Participants, the Operator, its Affiliates and their
respective directors, officers and employees (including agency personnel) from
and against  any loss, damage, claim or liability (including any award of
damages and any legal or other costs and expenses incurred in respect of such
claim or liability) in respect of loss of or damage to the property of and
personal injury (including death or disease) to such representative,
irrespective of negligence and/or breach of duty (whether statutory or
otherwise) on the part of any indemnified person except only for any loss,
damage, claim or liability resulting from the Wilful Misconduct of the
indemnified person; and

 
(b)  
any loss, damage, claim or liability (including any award of damages and any
legal or other costs and expenses incurred in respect of such claim or
liability) in respect of loss of or damage to Joint Property or property of the
other Participants, the Operator, its Affiliates and their respective directors,
officers and employees (including agency personnel)or personal injury (including
death or disease) to such persons arising out of or connected to the visit of
such representative shall be treated as arising from or in connection with Joint
Operations for the purposes of clause 22.2.2.

 
22.3  
Ethical Behaviour

 
 
22.3.1  
Each Participant represents that it shall and, as far as practicable procure
that, its respective Representatives shall, comply with the Applicable
Corruption Law with respect to all Matters. The remaining provisions of this
Clause 22.3 are without prejudice to the generality of the foregoing.

22.3.2  
Each Participant represents that it and its employees will have been given
adequate training and informed of their obligations in relation to the
Applicable Corruption Law and that such Participant will have in place adequate
policies and procedures in relation to business ethics and conduct and reporting
and investigating suspected violations which are compliant with Applicable
Corruption Law and that it will have used reasonable endeavours to ensure in
relation to all Matters that all its other Representatives comply with
Applicable Corruption Law and will have in place adequate policies and
procedures in relation to business ethics and conduct and reporting and
investigating suspected violations which are compliant with Applicable
Corruption Law.

 
22.3.3   
Each Participant represents that to the best of its knowledge and belief neither
it nor any of its Representatives:

(a)  
has at any time been found by a court to have breached Applicable Corruption
Law; nor

(b)  
is being investigated for engaging in any conduct with respect to Matters which
would constitute a breach of Applicable Corruption Law.

 
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22.3.4  
Each Participant represents, warrants and covenants that if at any time it
becomes aware that any of the circumstances set out in Clause 22.3.1, 22.3.2 or
22.3.3 are not as it has confirmed it will notify all other Participant
immediately in writing and will promptly take all such steps as may be necessary
and/or requested by the other Participant to ensure minimum adverse effect on
this Agreement.

 
22.3.5  
In this Clause 22.3 the words “to the best of its knowledge and belief” shall
refer only to those matters within the direct knowledge and belief of the
relevant Participant and its employees and shall not (unless expressly and
reasonably so requested by another Participant) require that the relevant
Participant shall have carried out any enquiries or have conducted any
monitoring of the activities of any of its Representatives.

 
22.3.6  
In the event of a breach by any Participant of any of Sub-Clauses 22.3.1 to
22.3.4, the Participant in breach shall immediately take such action as is
necessary to remedy the breach.  Without prejudice to any other express remedies
referred to elsewhere in this Agreement or any rights or remedies available at
law or in equity, in the event a Participant breaches any of Sub-Clauses 22.3.1
to 22.3.4, each other Participant has the right to take whatever action it deems
appropriate if, acting reasonably, it deems such termination necessary to avoid
damage to its reputation or to avoid criminal or other sanctions by the relevant
authorities and shall not be liable to pay any compensation to the other
Participants for loss of profits or loss of goodwill or for any other loss or
damage howsoever arising as a result of the termination under this Clause
22.3.6.

 
22.3.7  
In the event that any Participant may be in breach of this Clause 22.3, each
such Participant indemnifies and holds each of the other Participant harmless
from and against any and all claims, damages, liabilities, losses, penalties,
costs and expenses, other than Consequential Loss, suffered by each such
indemnified Participant arising from or related to, any breach by the
indemnifying Participant of this Clause 22.3.

23.  
Assignment and Encumbrance

23.1  
Restriction

No transfer of any interest under the Licence (in so far as it relates to the
Licence Area) or this Agreement shall be made by any Participant otherwise than
in respect of an undivided interest in all or part of its interest in the
Licence (in so far as it relates to the Licence Area) and in and under this
Agreement (so that any such transfer shall include all or a corresponding part
of any interest of such Participant in a Sole Risk Project) in accordance with
the following provisions of this clause or the provisions of clause 24.
 
23.2  
Conditions

 
No transfer shall be effective or binding upon the Participants unless the
remaining, non-transferring Participants shall each have consented to such
transfer in writing (which consent may only be withheld on grounds that the
financial responsibility and technical capability of the proposed transferee to
discharge the obligations under this Agreement as they relate to the interest to
be transferred has not been adequately demonstrated).
 
23.3  
Effective Date

 
No transfer shall be effective or binding upon the Participants until the date
upon which each of the following has occurred:
 
(a)  
any necessary consent and approval of the Secretary to such transfer shall have
been obtained and evidence of it furnished to all the Participants by the
transferring Participant; and

 
(b)  
all Participants (including the transferring Participant) execute a written
instrument (in form and content satisfactory to the Participants and duly
executed by the transferee) in which the transferee accepts and assumes in place
of the transferring Participant:

 
(i)  
 all of the obligations under this Agreement in so far as the interest
transferred is concerned whether incurred before, on or after the effective date
of the transfer;

 
(ii)  
all of the obligations under the Decommissioning Security Agreement in so far as
the interest transferred is concerned and the transferee makes such provision
(if any) in respect of the costs of Decommissioning as is required under the
Decommissioning Security Agreement;

 
(iii)  
where a New Area has been created, all of the obligations under such trust and
indemnity arrangements in respect of the New Area and the Remaining Area as have
been entered into pursuant to clause 9.10.3.

 
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23.4  
Consent

A Participant (including the Participant acting in the capacity of Operator)
shall promptly join in such reasonable actions as may be necessary or desirable
to obtain any consent and approval of the Secretary in connection with, and
shall execute and deliver any and all documents reasonably necessary to effect,
any such transfer.

23.5  
Costs

 
All costs and expenses pertaining to any such assignment shall be the
responsibility of the transferring Participant.  For the avoidance of doubt any
stamp duty or stamp duty land tax incurred on the documents executed to effect
such transfer shall either be paid by the transferring Participant, or the
transferring Participant shall be responsible for procuring the payment of it by
the transferee.
 
23.6  
Encumbrance

 
Nothing contained in this clause 23 shall prevent a Participant from mortgaging,
pledging or otherwise encumbering all or part of its interest in the Licence and
in and under this Agreement for the purpose of security relating to finance
provided that:-
 
(a)  
such Participant shall remain liable for all obligations relating to such
interest; and

 
(b)  
the mortgage, pledge or encumbrance shall be subject to any necessary approval
of the Secretary and be expressly subordinated to the rights of the other
Participants under this Agreement, including without limitation those set out in
clause 17;

 
(c)  
such Participant shall ensure that any such mortgage, pledge or encumbrance
shall be and shall be expressed to be without prejudice to the provisions of
this Agreement.

24.  
Withdrawal

24.1  
Restriction

No Participant may withdraw from the Licence (in so far as it relates to the
Licence Area) or this Agreement otherwise than in accordance with the following
provisions of this clause.
 
24.2  
Right

 
24.2.1  
Any Participant may, subject to clauses 9.9, 24.2.3 and 24.3 and always provided
that all Work Obligations have been completed, at any time up to and including
the date of the meeting to be held pursuant to clause 9.9.3 to decide whether to
continue the Licence beyond the Initial Term, give notice to the other
Participants that it wishes to withdraw from the Licence (in so far as it
relates to the Licence Area) and this Agreement.  Within thirty (30) days of
receipt of such notice (but in any event no later than the date of such
meeting), any of the other Participants may similarly give notice that it wishes
to withdraw from the Licence (in so far as it relates to the Licence Area) and
this Agreement.  If all the other Participants give such notice no assignment
shall take place, the Participants shall be deemed to have decided to abandon
the Joint Operations and the Licence (in so far as it relates to the Licence
Area) shall be surrendered on the earliest possible date.  If less than all the
other Participants give such notice the withdrawing Participants shall withdraw
from the Licence (in so far as it relates to the Licence Area) and this
Agreement on the earliest possible date and shall assign their respective
interests in the Licence and in and under this Agreement to the non-withdrawing
Participants in accordance with clause 24.3 without any compensation whatsoever.

 
 
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24.2.2  
In the event that the Licence is continued for a Second Term or a Further Term
any Participant may, subject to clauses 24.2.3 and 24.3, and always provided
that all Work Obligations in respect of such Second Term or Further Term have
been completed at any time thereafter give notice to the other Participants that
it wishes to withdraw from the Licence (in so far as it relates to the Licence
Area) and this Agreement.  Within thirty (30) days of receipt of such notice,
any of the other Participants may similarly give notice that it wishes to
withdraw from the Licence (in so far as it relates to the Licence Area) and this
Agreement.  If all the other Participants give such notice no assignment shall
take place, the Participants shall be deemed to have decided to abandon the
Joint Operations and the Licence shall be surrendered on the earliest possible
date.  If less than all the other Participants give such notice the withdrawing
Participants shall withdraw from the Licence (in so far as it relates to the
Licence Area) and this Agreement on the earliest possible date and shall assign
their respective interests in the Licence (in so far as it relates to the
Licence Area) and in and under this Agreement to the non-withdrawing
Participants in accordance with clause 24.3 without any compensation whatsoever.

 
24.2.3  
No Participant participating in or subject to a Development Plan may withdraw
pursuant to this clause 24.2 from the Licence and this Agreement prior to the
completion of the Relevant Works (as defined in clause 17 of the Licence)
comprised in such Development Plan.

 
24.3  
Conditions

 
With respect to clause 24.2:
 
(a)  
a withdrawing Participant shall assign all of its said interest to the
non-withdrawing Participants, which interest shall (unless otherwise agreed by
such non-withdrawing Participants) be allocated to them in the proportion in
which their respective Percentage Interests prior to the effective date of
withdrawal (as  defined in sub-clause (b)) bear to the total of such Percentage
Interests;

 
(b)  
a withdrawing Participant shall promptly join in such actions as may be
necessary or desirable to obtain any consent of the Secretary in connection
with, and shall execute and deliver any and all documents necessary to effect,
any such assignment and a withdrawal shall not be effective and binding upon the
Participants until the date upon which all such actions shall have been done and
documents executed and delivered (“the effective date of withdrawal”) and all
costs and expenses pertaining to any such assignment (including for the
avoidance of doubt any stamp duty incurred on the documents executed to effect
such assignment) shall be the responsibility of the withdrawing Participant;

 
(c)  
a withdrawing Participant shall promptly join in all actions required by the
other Participants for the maintenance of the Licence provided that its
participation in such actions shall not cause it to incur after the date on
which notice of withdrawal is given any financial obligations except as provided
in this clause 24;

 
(d)  
a withdrawing Participant shall pay all liens and penalties which may be
prescribed by the Secretary and all costs and expenses incurred by the other
Participants in connection with such withdrawal;

 
(e)  
a withdrawing Participant shall not be allowed to withdraw from the Licence and
this Agreement if its said interest is subject to any liens, charges or
encumbrances other than rent and royalty under the Licence, unless the other
Participants are willing to accept the assignment subject to such additional
liens, charges or encumbrances;

 
(f)  
unless the Participant or Participants acquiring its said interest agree to
accept the withdrawing Participant’s liabilities and obligations, a withdrawing
Participant shall, subject to clause 11.1.4 and clause 15.9, remain liable and
obligated for its Percentage Interest share of all expenditure for  the Joint
Account under any Programme and Budget approved by the Joint Operating Committee
and, where applicable, authorised by AFE prior to the date on which notice of
withdrawal is given (including any obligations and liabilities under any
Associated Agreements which could not be avoided if Joint Operations were
abandoned) even if the operations concerned are to be implemented thereafter
provided always that this sub-paragraph (f) shall not render a withdrawing
Participant liable for any amounts which such Participant would not have been
obliged to pay had it not withdrawn;

 
 
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(g)  
After service of a notice of intention to withdraw and until the effective date
of withdrawal the withdrawing Participant shall not be entitled to be
represented at meetings of the Joint Operating Committee or any sub-committee of
it nor to vote thereat and clause 9.8.2 shall apply in relation to any matters
requiring the consent or approval of Participants under this Agreement subject
to the following provisions:

 
(i)  
for any decision requiring the consent or approval of all Participants
(including for the avoidance of doubt the approval of any transfer pursuant to
clause 23), the consent or approval of the withdrawing Participant shall not be
required and the consent or approval of all the other Participants shall be
sufficient to decide the matter;

 
(ii)  
the withdrawing Party shall have no further access to any data and information
relating to the Joint Operations;

 
(iii)  
the withdrawing Participant shall be bound by decisions of the Joint Operating
Committee  or, where this Agreement requires unanimity, by decisions of all of
the non-withdrawing Participants.

 
 
(h)  
If a Participant  withdraws after the completion of the Relevant Works (as
defined in clause 13 of the Licence) comprised in a Development Plan but prior
to the commencement of the Run Down Period (as defined in the Decommissioning
Security Agreement, such withdrawing Participant shall remain liable for its
Percentage Interest share immediately prior to its withdrawal of the costs of
Decommissioning in respect of operations in which it participated  and, prior to
its withdrawal, shall provide security for such costs in such form as the other
Participating Parties may reasonably require.

 
25.  
Force Majeure

 
25.1  
Each obligation of a Participant (including the Participant acting in the
capacity of Operator) hereunder, other than the obligation to make payments of
money, shall be suspended while such Participant is prevented or hindered from
complying therewith by any cause beyond the reasonable control of such
Participant provided that a lack of funds shall be deemed not to be a cause
beyond reasonable control.  In such event, such Participant shall give notice of
suspension as soon as reasonably possible to the other Participants stating the
date and extent of such suspension and the cause of it.  Any of the Participants
whose obligations have been suspended as aforesaid shall resume the performance
of such obligations as soon as reasonably possible after the removal of the
cause and shall so notify all the other Participants.

 
In this clause 25 “Force Majeure” means any cause beyond the reasonable control
of such Participant, and which such Participant by the exercise of reasonable
diligence is unable to prevent, avoid or remove, provided that a lack of funds
shall not constitute Force Majeure.
 
26.  
Disposal of Joint Property and Decommissioning

 
26.1  
If the Operator shall consider that any item of the Joint Property is no longer
needed or suitable for the Joint Operations, the Operator shall, subject to the
provisions of the Licence and the Accounting Procedure, dispose of such Joint
Property. The Operator shall notify the Participants of such disposal as soon as
practicable thereafter.

 
26.2  
If the Joint Operating Committee shall decide to cease Joint Operations in whole
or in part, subject to clause 26.4 and to any necessary consent of the Secretary
to the cessation of production:

 
26.2.1  
the Operator shall endeavour to recover and dispose of as much of the Joint
Property as the Joint Operating Committee directs can economically and
reasonably be recovered or as may be required to be recovered under the Licence
or any other applicable law or pursuant to the terms and conditions of any
planning consent granted by an, and the net cost or net proceeds shall be
charged or credited to the Joint Account;

 
26.2.2  
in respect of any development, the Operator shall proceed to decommission in
accordance with the Decommissioning Programme and Budget.

 
 
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26.3  
The Operator shall, if the Joint Operating Committee so decides and as soon as
practicable after such decision, and in any event on its own initiative no later
than a date twelve (12) Months prior to the earlier of the anticipated date of
submitting an application for planning consent to the applicable regulatory or
governmental authority for the development of an onshore Discovery or the
submission of a Development Plan for the Secretary’s approval, whichever shall
occur first ("the Relevant Date"), the Participants shall negotiate, agree and
execute an agreement relating to the decommissioning of onshore installations,
buildings and pipelines used in connection with the Joint Operations
("Decommissioning Security Agreement") which shall, inter alia, be based on and
reflect the principles, objectives and intent set out in the proforma
Decommissioning Security Agreement published by Oil and Gas UK dated March 2009
(or such revised proforma published by Oil and Gas UK or any successor
organisation which proforma does not materially deviate in substance from the
overall objectives and intent of the proforma dated March 2009), comply with the
requirements of the Acts and any other relevant legislation and any planning
consent granted in respect of the development of a Discovery.

 
26.4  
Joint Operations shall be finally abandoned upon the affirmative vote of the
Joint Operating Committee or in the event of deemed abandonment in accordance
with Clauses 24.2.1 or 24.2.2 .

 
26.5  
Notwithstanding any other provision of this Agreement, in the event any
Participant is required by Law or the terms of the Licence to effect the
Decommissioning of any Joint Property (including without limitation the
demolition and removal thereof, and any necessary site reinstatement) such
Participant shall effect such Decommissioning and the reasonable cost it incurs
in doing so shall be charged to the Joint Account, subject to Clause 26.4.

 
  26.6  
Following completion of Decommissioning, the Participants shall remain liable
for any residual liability which arises at law if Joint Property is not wholly
removed, unless and until the Participants enter into a separate agreement as
contemplated in clause 2.2.

27.  
Intellectual Property

27.1  
Any Intellectual Property developed specifically for Joint Operations the
development of which is charged to the Participants in proportions to their
Percentage Interests and which neither contains nor is derived from existing
Intellectual Property of any of the Participants is termed “Joint Operations
Intellectual Property” and, subject to the provisions of clause 19, shall be
part of Joint Property.  Intellectual Property Rights in Joint Operations
Intellectual Property (“Joint Operations Intellectual Property Rights”) shall
vest in the Operator on behalf of and for the benefit of the Participants.

 
27.2  
Any Participant and any of its Affiliates shall have an irrevocable, perpetual,
royalty-free, fully paid-up worldwide right to use such Joint Operations
Intellectual Property, and an irrevocable, perpetual, royalty-free, fully
paid-up worldwide licence to use such Joint Operations Intellectual Property
Rights, for its/their own operations and in any other bona fide operations in
which such Participant and/or its Affiliates has/have an interest, always
provided that, in the case of such bona fide operations, any other person
participating in such operations gives a prior written undertaking to each of
the Participants:

 
(a)  
to keep such Joint Operations Intellectual Property confidential in terms no
less stringent than those which bind the Participant in question hereunder;

 
(b)  
not to use Joint Operations Intellectual Property Rights for any purpose except
in connection with such operations; and

 
(c)  
to enter into such commercial arrangements with respect to such use as the Joint
Operating Committee may reasonably require.

 
27.3  
In the event that the Intellectual Property of any of the Participants (other
than Joint Operations Intellectual Property) is offered for use in connection
with Joint Operations then the Participant proposing to supply such Intellectual
Property shall be entitled to require that, prior to its Intellectual Property
being made available as aforesaid, the right to use its Intellectual Property,
together with a licence under any relevant Intellectual Property Rights, shall
be granted to the other Participants on such reasonable terms and conditions as
may be agreed having due regard to the respective interests of each of the
Participants.    A Participant’s Intellectual Property used under any licence
granted under this clause shall not constitute Joint Intellectual Property and
clause 27.2 shall not apply to it.

 
 
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27.4  
Notwithstanding the provisions of clause 5 or any other provisions of this
Agreement, neither the Operator nor any other Participant shall be obliged to
disclose any of its own or its Affiliates’ Intellectual Property to any of the
other Participants or to grant a licence of its or its Affiliates’ Intellectual
Property Rights for use in connection with Joint Operations.

28.  
The Contracts (Rights of Third Parties) Act 1999

28.1  
Except as provided in this clause 28, no provision of this Agreement is intended
by the Participants to be construed as creating any right(s) enforceable by a
third party and all third party rights implied by law are, to the extent
permissible by law, excluded from this Agreement.

 
28.2  
Subject to the remaining provisions of this clause, clause 22.2.3(a) are
intended to be enforceable by the persons specifically referred to in those
clauses, by virtue of the 1999 Act;

 
28.3  
Notwithstanding clause 28.2, this Agreement may be rescinded, amended or varied
by the Parties without notice to or the consent of any person who is not a Party
even if, as a result, that person’s right to enforce a term of this Agreement
may be varied or extinguished.

 
28.4  
The rights of any person under clause 28.2 shall be subject to such person’s
written agreement to submit irrevocably to the exclusive jurisdiction of the
English Courts in respect of all matters relating to such rights with the
exception of any choice of law rules.

 
29.  
Applicable Law

 
This Agreement shall be governed by and shall be construed according to the laws
of England and in respect of any dispute regarding the validity, enforceability
or interpretation of this Agreement each of the Participants (including the
Participant acting in the capacity of Operator) hereby irrevocably submits to
the exclusive jurisdiction of the English courts with the exception of any
choice of law rules.
 
30.  
Notices

 
Any notice required to be given pursuant to this Agreement shall be in writing
and may be given by delivering it by hand at, or by sending it by prepaid first
class post or facsimile to, the relevant address (marked for the attention of
the relevant person) set out below or such other address or person as any
Participant may notify to the other Participants from time to time.  Any notice
required to be given to the Operator may be given by delivering it by hand at,
or by sending it by prepaid first class post or facsimile to, the relevant
address for the Participant acting in the capacity of Operator from time to
time.  Any such notice given as aforesaid shall be deemed to have been given or
received at the time of delivery (if delivered by hand), the first Working Day
next following the day of sending subject to receipt of a record of successful
transmission to the recipient’s facsimile machine (if sent by facsimile) and the
second Working Day next following the day of sending (if sent by post).  Without
prejudice to the foregoing provisions of this clause, if a Participant to which
a notice is given does not acknowledge it by the end of the third Working Day
next following the day of delivery or sending, the Participant giving the notice
shall communicate with the Participant which has not so acknowledged and, if
necessary, re-deliver or re-send the notice.
 
Alamo:

10575 Katy Freeway
Suite 300
HoustonTexas
77024

    Attn:  Chief Executive Officer

Facsimile: #7134648381
 
Copy by email to: allan@alamoenergycorp.com

 
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Northdown:
 
Oldfield House,
Oldfield Road,
London,
SW19 4SD

Attn:  Managing Director

Facsimile: Not Applicable
 
Copy by email to:
 
peter.ross@wimbledonenergy.co.uk/ alexmacd47@gmail.com
 
Aimwell:
 
10 Rosebery Avenue,
Harpenden, Herts,
AL5 2QP

Attn: Mike Rose
 
Facsimile: Not Applicable
 
Copy by email to: mikerose@aimwellenergy.com

 
 
31.  
Miscellaneous

 
31.1  
Costs and Expenses

 
Each Participant shall bear its own costs and expenses in relation to the
negotiation and execution of this Agreement.

31.2  
Entire Agreement

 
This Agreement and the Participation Agreement represents the entire agreement
of the Participants in relation to its subject matter and supersedes any prior
understandings, agreements or undertakings, whether oral or written, relating to
such matters.   In particular, and without prejudice to the foregoing, Alamo and
Northdown hereby agree that the Confidentiality Agreement dated 14 September
2011 between them is hereby terminated.  

31.3  
Amendment

 
This Agreement shall not be amended except by written instrument executed by all
the Parties.

31.4  
Waiver

 
No waiver by any Participant of any provisions of this Agreement shall be
binding unless made expressly in writing.  No waiver by any Participant of any
rights under this Agreement or arising out of any breach of this Agreement shall
be considered as a waiver of any subsequent rights arising under the same or any
other provision.

 
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31.5  
Severance

 
If any provision (or part of it) of, or pursuant to, this Agreement is or
becomes unlawful, void or unenforceable, the legality, validity or
enforceability of any other part of that provision or any other provision shall
not be affected but shall continue in full force and effect.

31.6  
Precedence

 
In the event of any conflict between the body of this Agreement and its
Schedules, the terms of the body of this Agreement shall take precedence. In the
event of any conflict between the Participation Agreement and this Agreement,
the terms of the Participation Agreement shall prevail.

IN WITNESS WHEREOF the Participants have caused this Agreement to be executed as
a deed and delivered by their duly authorised representatives the day and year
first above written.
 
 
Executed and delivered as a deed by
)
 
ALAMO ENERGY CORP.
acting by the following person who in accordance with the laws of the State of
Nevada are acting under its authority:
)
)
)
)
……………………………………
 
)
Director
…………………………………………
)
     
)
             

Executed and delivered as a deed by
)
 
NORTHDOWN ENERGY LIMITED
)
……………………………………
on being signed by:
)
Director
…………………………………………
)
 
and
……………………………(Witness)
)
……………………………………
   
Director/Secretary/Witness
   
Witness Name:
Address:
 
 
 
 
Occupation:

Executed and delivered as a deed by
)
 
AIMWELL LIMITED
)
……………………………………
on being signed by:
)
Director
…………………………………………
)
 
and
……………………………(Witness)
)
……………………………………
   
Director/Secretary/Witness
   
Witness Name:
Address:
 
 
 
 
Occupation:

 

 

 
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SCHEDULE A  JOINT OPERATING AGREEMENT
 

 

 

 
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PETROLEUM EXPLORATION AND DEVELOPMENT
 
LICENCE PEDL 245
 

 
BLOCKS TQ26, TQ36, TQ46 & TQ 56
 

 
ACCOUNTING PROCEDURE
 
 

 
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SECTION I - GENERAL PROVISIONS
 
 

 1. DEFINITIONS

 

 1.1  
For the purposes of this Schedule:

 
 “Accounting Period” means the period in respect of which invoices shall be
issued by the Operator, being the period from the date upon which the accounting
system of the Operator is open for recording transactions in relation to any
Month to the date upon which such system is closed for recording transactions in
relation to such Month (both dates inclusive);
 
 “Cost Control Report” has the meaning given to it in paragraph 31;
 
 “Joint Audit Committee” means the multi-venture audit committee established by
the Operator in respect of all of its operations;
 
 “Major Surplus Item” has the meaning given to it in paragraph 26.1;
 
 “Personnel Rate” has the meaning given to it in paragraph 12.1;
 
 “SOAPs” means Standard Oil Accounting Procedures issued by Oil and Gas UK from
time to time;
 
 “Technical Support and General Expertise” has the meaning given to it in
paragraph 22.1.
 
1.2  
Words and expressions defined in the Agreement have the meanings ascribed to
them in clause 1.

 
1.3  
Reference in this Agreement to any clause shall be a reference to a clause in
the Agreement.

 
1.4  
Reference in this Agreement to any Section shall be a reference to a section of
this Schedule.

 
1.5  
Unless the context otherwise requires, reference to any paragraph is to a
paragraph of this Schedule.

 
2.  
GENERAL PRINCIPLES

 
2.1  
The Operator shall charge and credit the Joint Account for all costs and
receipts properly and necessarily incurred and relating to the conduct of Joint
Operations in accordance with this Accounting Procedure and, if the Joint
Operating Committee so determines, in accordance with the principles set out in
the SOAPs in effect on the date on which the transaction is charged or credited
to the Joint Account provided that in the event of any conflict between the
SOAPs and this Accounting Procedure, this Accounting Procedure shall prevail.

 
2.2  
The purpose of this Accounting Procedure is to establish the principles of
accounting which shall truly reflect the Operator's actual cost to the end that
the Operator shall, subject to the provisions of the Agreement, neither gain nor
lose by reason of the fact that it acts as the Operator.  Accordingly, it is the
intention of the Participants that there shall be no duplication of items
charged to the Joint Account.

 
2.3  
It is intended that the Accounting Procedure is fair and equitable as regards
the charges, income, losses and gains attributed to the Joint Account and to
their apportionment amongst the Participants and as regards the rights of the
Participants on the disposal of assets and surplus materials.  The Participants
agree that if the Joint Operating Committee considers that the methods described
in this Agreement are materially inequitable, the Participants shall meet and in
good faith endeavour to agree on changes in methods deemed appropriate to
correct any inequity.

 
 
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2.4  
The Operator shall advise the Participants of changes to its internal accounting
procedures that will materially affect the basis and level of charge or income
to the Joint Account at least 30 days in advance of the change.

 
3.  
ACCOUNTING RECORDS

 
3.1  
The Operator shall open and maintain such separately identifiable accounting
records as may be necessary to record in a full and proper manner all Invoice
and Advance payments received by the Operator from each Participant and all
expenditure incurred and all Receipts obtained by the Operator in connection
with Joint Operations.

 
3.2  
Expenditures and Receipts funded in currencies other than Pounds shall be
converted into Pounds at the Conversion Rate in accordance with the Operator's
standard accounting practice charged to the Joint Account in such
currencies.  Where expenditure is incurred in any currency other than Pounds but
settled in Pounds, the sum charged to the Joint Account shall be the actual cost
in Pounds of the other currency purchased. Any exchange gain or loss shall be
for the Joint Account.

 
3.3  
Each of the Participants is responsible for maintaining its own accounting
records to comply with all legal requirements and to support all fiscal returns
or any other accounting reports required by any governmental authority in regard
to Joint Operations, except those (if any) which it is the statutory obligation
of the Operator to prepare and submit on behalf of itself and the
Participants.  The Operator will provide the other Participants with such
accounting data and information as may be necessary to:

 
(i)            fulfil any statutory obligation to which the other Participants
are subjected,
 
 
(ii)
permit any other Participant to claim any allowance or grant to which it  may be
entitled and for which an application is required by such Participant;

 
to the extent that such accounting data and information could reasonably be
expected to be available from accounting records maintained by the Operator.

3.4  
The Operator shall in addition to the data required under this Accounting
Procedure supply to any Participant such further accounting data which such
Participant may reasonably request to the extent that such accounting data and
information could reasonably be expected to be available from accounting records
maintained by the Operator and provided that the cost of provision of such
further data shall be to the account of the requesting Participant.

 

 4.  
BILLING INVOICES AND SCHEDULES

 
4.1  
Unless otherwise agreed the Operator shall initially fund the costs of Joint
Operations on behalf of each Participant subject to reimbursement by each
Participant of such costs and payment by each Participant of the financing fee
referred to at paragraph 4.6 below. Should the Joint Operating Committee decide
that it is more appropriate for the Operaor to issue a Cash Call each
Participant to meet major payments from time to time, the Operator shall have
the right to do so by giving each Participant at least fourteen (14) days notice
of the required amount and the payment date. No finance fee shall apply to
payments funded by Cash Call.

 
4.2  
The Operator shall send an Invoice to each Participant within ten (10) days
following the end of each Accounting Period for each Month in respect of all
payments made and all Receipts obtained by the Operator in connection with the
Joint Operations during such Accounting Period.

 
4.3  
The Invoices referred to in paragraph 4.2 shall show the net total of all
payments (i.e. less all Receipts) relating to the Joint Account and the amount
of it payable by or repayable to each Participant and shall be accompanied by
billing schedules which shall be schedules dividing such payments and receipts
into main classifications and sub-classifications of expenditure consistent with
the relevant Budget.  The billing schedules shall also show cumulative annual
net totals of all payments (less all Receipts) and cumulative payment totals
since inception (less all Receipts).  The Invoice shall also include the
financing fee referred to in paragraph 4.6 below.

 
 
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4.4  
All Invoices and billing schedules shall give totals in Pounds/each currency
utilised.

 
4.5  
The cash basis rather than the accrual basis shall be used in the Invoices and
billing schedules.  Nevertheless for the Non-Operators’ internal accounting
purposes the Operator shall show its estimate of accrued expenditure for each
AFE and main budget heading.

 
4.6  
Each Non-Operator shall pay the Operator a financing fee to be calculated on the
following basis:-

 
F = (C x PI) x (I x P/365)

Where:
 
 
F
represents the financing fee payable by each Non-Operator to the Operator;

 
C
represents the aggregate cost of the Joint Operations funded by the Operator on
behalf of each Participant in terms of paragraph 4.1 above and to be invoiced by
the Operator to each Participant in relation to the relevant Accounting Period;

 
PI
represents the relevant Non-Operator’s Percentage Interest;

 
I
represents interest at LIBOR as specified in the Financial Times on the
Accounting Period midpoint date;

 
 
P
represents the number of days from the mid point date of the relevant Accounting
Period to the date when payment of the relevant Invoice becomes due (both dates
inclusive).

4.7  
Each Participant shall pay its Invoice on the due date which shall be ten (10)
days after the date of issuing the Invoice.    If any Participant fails to pay
the invoice in full, the provisions of Clause 17 shall apply.

 
4.8  
Where there are no continuing Joint Operations and the Operator is administering
the joint venture on a care and maintenance basis only, billing schedules need
only be produced if specifically requested by any Participant.

 
5.  
INVENTORIES OF MATERIAL/ASSET RECORDS

 
5.1  
The Operator shall keep the following records:

 
5.1.1  
records of any stock of Material purchased by the Operator shall be kept by the
Operator or its agent in accordance with the Operator's standard procedures for
controlling such Material; and

 
5.1.2  
records of expenditure in relation to the acquisition of Joint Property for
Joint Operations.

 
5.2  
At reasonable intervals a complete inventory shall be taken by the Operator of
all controllable Material forming part of Joint Property, in accordance with the
Operator's standard materials procedures in force from time to time.

 
5.3  
At reasonable intervals a reconciliation shall be made between an inventory list
and the records of stocks held on the Joint Account and a list of surpluses and
shortages shall be determined by the Operator.  Inventory adjustments shall be
made by the Operator to the Joint Account for surpluses and shortages, with
relevant explanations where available.

 
5.4  
A special inventory shall be taken upon any change of the Operator, the cost of
which shall be charged to the Joint Account.

 
 
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6.  
ADJUSTMENTS

 
Payment of any Invoices shall not prejudice the right of any Participant to
protest or question the correctness of any amount included in any Invoice or
billing schedule.  Subject to the right of audit under paragraph 7 all Invoices
and billing schedules rendered to each Participant by the Operator in relation
to any Year shall conclusively be presumed to be true and correct after twenty
four (24) Months following the end of such Year unless within the said twenty
four (24) Month period any Participant makes written exception to it and makes
claim on the Operator for adjustment.  The provisions of this paragraph shall
not prevent adjustments resulting from accounting adjustments, physical
inventories of property as provided in paragraph 5 nor prevent the settlement of
any claims involving a third party nor prevent adjustments required as a result
of any statutory provisions.  No interest will be payable on such adjustments.
 
7.  
AUDITS

 
7.1  
Subject to paragraph 7.2 below, all Non-Operators shall have the right to audit
the accounts and records of the Joint Account for each Year including the
billing schedules relating to it and to obtain all necessary information for
such purposes, before the end of the twenty-fourth (24th) Month following the
end of such Year.  The Non-Operators shall give at least sixty (60) days notice
to the Operator of their intention to conduct an audit.  The right of audit
includes the right of access at all reasonable times during normal business
hours to all accounts and records, pertaining to the Joint Account, maintained
by the Operator and its Affiliates.

 
7.2  
Audits of accounts and records pertaining to the Joint Account which:

 
7.2.1  
include information generally accepted as proprietary and confidential; or

 
7.2.2  
are maintained by Affiliates of the Operator, other than any Affiliate of the
Operator which is conducting a substantial part of Joint Operations on behalf of
the Operator; or

 
7.2.3  
relate to charges made under paragraph 11, 12 and 22; or

 
7.2.4  
relate to multi-field or multi-operator contracts pursuant to clause 6.5.3 and
contain information which the Operator considers to be commercially sensitive
(for example and without limitation, itemised rates, prices, price structures
and incentives):

 
shall, unless the Joint Operating Committee decides otherwise, be audited in
accordance with paragraph 7.3 or 7.4 as applicable.
 
7.3  
For the accounts and records referred to in paragraphs 7.2.1 to 7.2.3 above, the
Operator’s statutory auditors (provided they accept such appointment) shall on
request by  the Non-Operators conduct such audit in accordance with terms of
reference established by the Operator, provided that the Operator shall use
reasonable endeavours to take account of any reasonable comments of the
Non-Operators on such terms of reference.  The terms of reference shall include
as a minimum those referred to in paragraph 7.6 below. If the Operator’s
statutory auditors will not accept such appointment, an external auditor of
international standing, to be appointed by the Joint Operating Committee, shall
conduct such audits.  Provided that such accounts and records relating to
paragraphs 11 and 12 as are not proprietary and confidential (and for these
purposes accounts and records relating to paragraph 12.1.3 shall be considered
non-confidential) shall be audited by a combined team of the Operator’s
statutory auditors and representatives of the Non-Operators.

 
7.4  
For the accounts and records referred to in paragraph 7.2.4 above the audit
shall be conducted:

 
7.4.1  
 according to the process adopted by the Joint Audit Committee; or

 
7.4.2  
in the event that no such process is adopted by the Joint Audit Committee or to
the extent that the process adopted does not apply to any accounts and records
referred to in paragraph 7.2.4  above, such audits shall be conducted jointly by
the Operator’s contract compliance accountants and the representatives of the
Non-Operators working together.

 
 
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7.5  
The Non-Operators shall jointly appoint one (1) representative and an alternate
who shall participate in any such audits of accounts and records referred to in
paragraph 7.3  and in paragraph 7.2.4 above and shall, as soon as possible after
such appointment, give notice to the Operator of the name of such representative
and alternate. The Non-Operators shall use reasonable endeavours to retain
notified representatives and/or alternates for a period of twelve (12) Months
after the date of such notification.

 
7.6  
Subject to the prior approval of the Joint Operating Committee, the Operator
will arrange for a regular audit of the accounts and records referred to in
paragraph 7.2 above.  The auditors will be asked to confirm that in all material
respects:

 
7.6.1  
the salary and related benefits described in paragraph 12 are consistent with
the payroll records;

 
7.6.2  
the administrative overhead costs have been allocated in accordance with
paragraph 12.1.3 and have been correctly charged to the Joint Account and in
accordance with the Operator's standard accounting policies and practices;

 
7.6.3  
the percentage rate charged under paragraph 22 is calculated on a consistent
basis and has not resulted in a material over-recovery of costs.

 
7.7  
In respect of contracts entered into by the Operator on behalf of the
Participants, the Operator shall use reasonable endeavours to obtain audit
rights for all Non-Operators in all contracts. Where the Operator obtains audit
rights the Non-Operators may carry out audits of such contracts jointly with the
Operator.

 
7.8  
The Non-Operators shall make every reasonable effort to conduct audits jointly
in a manner which will result in a minimum of inconvenience to the
Operator.  The Operator shall make every reasonable effort to co-operate with
the Non-Operators and, where appropriate, the auditors conducting an audit under
paragraph 7.2 and will provide reasonable facilities and assistance.

 
7.9  
At the conclusion of each audit, the Non-Operators shall endeavour to settle
outstanding matters with the Operator and a written report will be circulated to
all the Participants within three (3) Months of the conclusion of each
audit.  The report shall include all claims arising from such audit together
with comments pertinent to the operation of the accounts and records.  The
Operator shall reply to the report in writing as soon as possible and in any
event not later than three (3) Months following receipt of the report.  Should
the Non-Operators consider that any matter in the report or reply requires
further investigation, the Non-Operators shall have the right to conduct further
investigation in relation to such matter notwithstanding that the period of
twenty-four (24) Months referred to in paragraph 7.1 may have expired.  Such
further investigation shall be commenced within thirty (30) days and be
concluded within sixty (60) days of the receipt of such a report or reply,
unless mutually agreed by all the Participants.  Such agreement is not to be
unreasonably withheld.  If any outstanding matter is not settled within nine
months of the conclusion of the audit then it shall be referred to the Joint
Operating Committee in accordance with Clause 7.11 below.

 
7.10  
Notwithstanding that the said period of twenty-four (24) Months may have
expired, if evidence exists that the Operator has been guilty of Wilful
Misconduct, the Non-Operators shall have the right to conduct further audits in
respect of any earlier periods.

 
7.11  
All adjustments resulting from an audit agreed between the Operator and the
Non-Operators conducting the audit shall be rectified promptly in the Joint
Account by the Operator and reported to the Non-Operators.  If any dispute shall
arise in connection with an audit, it shall be referred to the Joint Operating
Committee for resolution by unanimous agreement.  In the event that unanimous
agreement is not reached, then such matter shall be referred to an expert
appointed by the President of the Institute of Chartered Accountants in England
and Wales.  The decision of such expert shall be binding on all Participants.

 
7.12  
Costs incurred by the Operator in connection with carrying out any audit under
this paragraph 7 shall be charged to the Joint Account. Costs incurred by the
Non-Operators in connection with carrying out any audit under this paragraph 7
shall not be charged to the Joint Account.

 
 
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8.  
FORECASTING AND REPORTING

 
8.1  
The Operator shall furnish each Participant with AFEs and Cost Control Reports
in accordance with the procedures described in Section IV.

 
9.  
MODIFICATION AND REVISIONS

 
The Accounting Procedure may be revised or amended from time to time by
agreement of all of the Participants or, where expressly so provided, by
agreement of the Joint Operating Committee.

 
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SECTION II- CHARGEABLE EXPENDITURE
 
10.  
GENERAL

 
Subject to the limitations set out in this Section and to other relevant
provisions of the Agreement the Operator shall charge, with effect from the date
of signature of the Agreement, the Joint Account with the items of expenditure
set out in this Section II insofar as they relate to and are necessary for the
conduct of Joint Operations.
 
11.  
PERSONNEL COSTS

 
11.1  
The Operator shall be entitled to charge to the Joint Account the Personnel
Rates in respect of all personnel who work on Joint Operations, as set out in
paragraphs 11 and 12, or on such other basis as may be proposed by the Operator
from time to time and is approved by the Joint Operating Committee.

 
11.2  
Subject to paragraph 11.3, all personnel who work on Joint Operations under the
direct control of the Operator shall maintain time sheets for the purpose of
charging salary and related benefits direct to the Joint Account.  Time sheets
will record time worked either as hours or a percentage split of the time spent
for the timesheet period on Joint Operations and all other operations whether
such personnel are engaged full time or part time on Joint Operations and will
show the time worked on the various projects and other classifications of cost
to enable costs to be allocated to AFEs and Budget classifications.

 
11.3  
The following personnel need not maintain time sheets:

 
11.3.1  
personnel dedicated to Joint Operations, in which case the salary and related
benefits of such personnel shall be charged to  Joint Operations on the basis of
actual costs as specified in paragraph 12; or

 
11.3.2  
personnel who support Joint Operations and where it is impracticable to maintain
time sheets, in which case the salary and related benefits of such personnel
shall be recovered under the provisions of paragraph 12.

 
11.4  
Personnel Employed by the Operator or any of its Affiliates

 
The amount to be charged to the Joint Account for each person who is employed by
the Operator or by any of its Affiliates and who is working on Joint Operations
under the direct control of the Operator, other than personnel who:

11.4.1  
fall within paragraph 11.3; or

 
11.4.2  
are involved in providing services under paragraph 16.2, in which case the cost
of salary, related benefits and associated administrative overhead will be
recovered through the rate charged under that paragraph; or

 
11.4.3  
work in a location for which the cost of salary, related benefits and associated
administrative overhead is to be charged direct under paragraph 21;

 
shall be determined from the hours recorded for such person to Joint Operations,
as shown on the time sheets, as the product of such hours and the Personnel
Rates calculated in accordance with paragraph 12.1.

The Operator shall recover non-direct time such as annual holidays, public
holidays, sickness, staff training, general administration and other like items
both from Joint Operations and other operations conducted each year on equitable
bases.

 
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11.5  
Personnel Seconded to the Operator or any of its Affiliates from the other
Participants (other than in respect of those providing services in paragraph
11.6) or hired from third party agencies

 
The amount to be charged to the Joint Account for each person who is working
full-time or part-time on Joint Operations and who is either seconded to the
Operator or any of its Affiliates from any other Participant, or hired from any
third party agency, other than personnel who:

11.5.1  
fall within paragraph 11.3; or

 
11.5.2  
are involved in providing services under paragraphs 16.1 and 16.2, in which case
the cost of such seconded or hired personnel is through the rate charged under
those paragraphs; or

 
11.5.3  
work in a location for which the cost of such seconded or hired personnel and
associated administrative overhead is to be charged direct under paragraph 12;

 
shall be determined from the hours time recorded for such person to Joint
Operations, as shown on the time sheets, as the product of such hours and the
Personnel Rates calculated in accordance with paragraph 12.1.
 
11.6  
Personnel employed or hired by the Participants (other than the Operator) who
provide services to the Joint Operations (other than in respect of those
seconded to the Joint Operations in paragraph 11.5).

 
Where the Operator requests such services, the amount to be charged shall be
determined as the product of hours time recorded for such person to Joint
Operations, as shown on time sheets, and the Personnel Rates calculated in
accordance with paragraph 12.1.1 and, where appropriate, the Participant’s
administrative overhead costs in accordance with paragraph 12.1.3 below, such
amounts to be charged to the Operator by monthly invoice.
 
12.  
PERSONNEL RATES

 
12.1  
For the purposes of this Accounting Procedure “Personnel Rates” shall comprise
the following:

 
12.1.1  
salary and related benefits of personnel under paragraphs 11.4, 11.5 and 11.6
above including:

 
(a)  
gross salary plus related allowances and benefits payable generally by the
Operator or any of its Affiliates or a Participant from whom personnel are
seconded or who provide services to the Joint Account as part of its standard
terms of employment in force in the relevant period;

 
(b)  
pension costs (assessed as a percentage of salary cost for all the Operator's or
its Affiliates' employees from time to time);

 
(c)  
National Insurance cost;

 
(d)  
any governmental tax, duty, levy and/or impost that may be levied upon the
Operator or any of its Affiliates or a Participant from whom personnel are
seconded or who provide services to the Joint Account in respect of such
personnel; and

 
(e)  
in the case of personnel hired from third party agencies, the cost invoiced by
the third party agency.

 
12.1.2  
employment cost of persons under paragraph 11.5 above

 
The cost of the person as invoiced by the other Participant consistent with
12.1.1 above, or the invoice from the third party agency.

 
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12.1.3  
Administrative overhead costs

 
Administrative overhead costs, which shall exclude any costs and expenses of a
corporate nature, comprise the items detailed below which are incurred by the
Operator or any of its Affiliates or a Participant from whose offices the
Operator has requested the services in paragraph 11.6. These shall be allocated
in accordance with the Operator's or its Affiliates' or the Participant’s
standard accounting policies and practices in force from time to time which will
be advised to the Participants and the Operator as appropriate:
 
(a)  
Salary and related benefits (as described in paragraph 12.1.1) of the personnel
referred to in paragraph 11.3 who are employed on Joint Operations or who
support Joint Operations.  Such personnel may be employed by, seconded to or
hired from any third party agency by the Operator or any of its Affiliates.

 
(b)  
Overhead costs incurred in supporting Joint Operations such as property costs,
personnel department costs, office services, routine computer applications and
costs of other support departments and like items.

 
(c)  
All other costs of the Operator and any of its Affiliates in respect of
personnel supporting Joint Operations which are not specifically provided as
chargeable to the Joint Account elsewhere in this Section II other than any
other type of expenditure which may be specifically approved by the Joint
Operating Committee under paragraph 24 as being separately chargeable.

 
12.2  
Personnel Rates shall be charged as follows:

 
12.2.1  
The Personnel Rates for each cost area in the Operator's or the Participant’s
organisation as the case may be, shall reflect the average salary and related
benefits together with administrative overhead costs as defined in paragraph
12.1.3 above incurred by such cost area.

 
12.2.2  
The Personnel Rates calculated for each cost area shall be based on the
Operator's or the Participant’s annual budget as the case may be, for
administrative overhead costs divided by the annual time writing hours budgeted
for each cost area and shall be applied consistently to all operations
undertaken by the Operator or the Participant.

 
12.2.3  
For charging purposes during the budget year, the Personnel Rates for any cost
area may be adjusted by the Operator or the Participant to reflect actual cost
experience during the year and to reflect appropriate levels of administrative
overhead for each cost area.

 
12.2.4  
Following the end of each year, the Operator or the Participant shall adjust the
charges to the Joint Account for each cost area to the costs actually incurred
using the same allocation bases as in the Operator's or the Participant’s annual
budget as the case may be.  The total adjustment to the Joint Account will be
highlighted in the relevant billing if material.

 
12.2.5  
Payments in respect of retirement, severance and other like items shall be
allocated equitably to Joint Operations and other operations of the Operator and
its Affiliates. Such costs in respect of personnel seconded to the Operator from
another Participant who provide services to the Joint Account shall remain a
cost of that Participant.

 
13.  
EXPENSES INCURRED BY PERSONNEL

 
The Operator shall be entitled to charge to the Joint Account all direct
expenses reasonably and necessarily incurred by personnel who work under the
direct control of the Operator or any of its Affiliates on Joint Operations
including:-

(i)             travel and relocation expenses; and
 
(ii)           living allowance (when paid in lieu of hotel expenses for visits
to site).
 
All expenses charged to the Joint Account under this paragraph shall be in
accordance with the Operator's or the Participant’s standard terms of employment
in force in the relevant period and shall include those incurred in connection
with the families of personnel where appropriate.

 
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Relocation expenses at the termination of a period of work on Joint Operations
will be on the basis of a return to domicile within the United Kingdom unless
the personnel involved return to a location outside the United Kingdom from
which they have been drawn for work on Joint Operations when the relocation
expenses shall be on the basis of a return to that location.  Direct expenses
charged under the provisions of this paragraph will be charged on an equitable
basis taking into consideration time spent by personnel on both Joint Operations
and on other operations of the Operator or its Affiliates.  .
 
14.  
MATERIAL

 
14.1  
The Operator shall be entitled to charge to the Joint Account Material purchased
by the Operator from third parties or transferred from the Operator or any of
its Affiliates for use in connection with Joint Operations, including Material
purchased for or transferred from warehouse stock, at values provided in
paragraphs 14.2 and 14.3 unless otherwise chargeable under this Section II.  So
far as is reasonably practical and consistent with efficient and economical
operation and with adequate provision for emergencies, only such Material shall
be purchased or transferred to Joint Property as may be required for immediate
use, and the accumulation of surplus stocks of Joint Property shall be avoided.

 
14.2  
Material which is purchased specifically for Joint Operations shall be charged
at the cost price which shall reflect net invoice charges (after deducting all
trade and cash discounts actually received which, for the avoidance of doubt,
shall include all discounts obtained by the Operator (and or its Affiliates) in
relation to contracts provided to more than one field and/or more than one
operator), freight, inspection, forwarding and documentation fees, packing
costs, duties, licence fees and other like charges.

 
14.3  
Material transferred to Joint Operations from the Operator's warehouse and which
is normally held as part of the Operator's common warehouse stocks shall be
charged as follows:

 
14.3.1  
in the event such material is not replaced in stock, the price for the relevant
material as recorded by the Operator's inventory accounting system, together
with a financing charge of one and a half per cent (1.5%) above LIBOR multiplied
by the average stock turnover for that stock category in months divided by
twelve (12) (or such other figure as may be decided by the Joint Operating
Committee from time to time to cover the cost of financing the holding of such
stocks), or such other value as the Joint Operating Committee decides;

 
In respect of each stock category, the stock turnover figure to which the
financing fee is applied should be limited to 12 months.

14.3.2  
in the event that such material is replaced in stock the cost price (as
specified in paragraph 14.2) to replace such material or such other charge as
the Joint Operating Committee decides  prior to such transfer;

 
14.3.3  
if any item of Material is not exclusively transferred to Joint Operations, the
Participants shall only be charged the relevant proportion of the price or
value;

 
14.3.4  
chemicals and gas oil shall be excluded from the calculation and no financing
charge shall be levied on issues of these items.

 
14.4  
Material purchased for Joint Operations which the Operator wishes to use on
other operations and which has a value in excess of five hundred thousand Pounds
(£500,000) shall only be so used following approval by the Joint Operating
Committee unless the material has previously been declared surplus to the
requirements of Joint Operations.  The value to be charged to the Operator for
material so used shall be on the basis of paragraph 14.2 for material not
normally held as warehouse stocks or paragraph 14.3 in the case of materials
held in stock or as otherwise decided by the Joint Operating Committee.

 
 
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14.5  
Material transferred from the Operator or any of its Affiliates for use on Joint
Operations in the safeguarding of lives or property or the prevention of, or
mitigation of pollution under clause 6.10.2 shall be charged in accordance with
the provisions of paragraphs 14.2 or 14.3 as appropriate.

 
14.6  
In the case of any Material which is defective and in respect of which there
exists a manufacturer's or supplier's guarantee, express or implied, the
Operator shall endeavour to recover from the manufacturer or supplier in
question under such guarantee provided that a credit shall not pass to the Joint
Account until an adjustment has been received by the Operator from the
manufacturer or supplier.

 
15.  
TRANSPORT

 
The Operator shall be entitled to charge to the Joint Account the cost of
transport to move personnel and Material necessarily incurred by the Operator or
any of its Affiliates in connection with Joint Operations, unless otherwise
chargeable in this Section II.
 
16.  
SERVICES

 
16.1  
Services Provided by Participants and Third Parties

 
The Operator shall, subject to the approval of the Joint Operating Committee
where required under clause 6.5 of the Agreement, be entitled to charge to the
Joint Account the cost of consultants and other services and facilities provided
by Participants (other than the Operator) and third parties for Joint
Operations, unless otherwise chargeable in this Section II.

16.2  
Services Provided by the Operator or by any of its Affiliates

 
The Operator shall be entitled to charge to the Joint Account the cost of any
services and facilities owned, partly owned, leased or hired by the Operator or
any of its Affiliates where authorised by the Operator for use on Joint
Operations subject to the approval of the Joint Operating Committee where
required under clause 6.5 of the Agreement as follows:

16.2.1  
The costs to be charged shall include the operating costs including normal
depreciation and interest, where applicable, and all other costs normally
associated with the provision of such services and facilities including, inter
alia, salary and related benefits and attributable overheads of personnel
involved in providing the services.

 
16.2.2  
If such services are used in connection with other operations, the costs charged
to the Joint Account shall be a proportion calculated on an equitable basis, in
accordance with the standard accounting procedure of the Operator or the
Affiliate as appropriate and in force from time to time and each shall notify
the other Participants of any material change in the basis of such allocations.

 
16.2.3  
Services and facilities charged on the above basis may include, inter alia,
laboratory, general, engineering, computing, environmental protection services,
material procurement and common operational services and facilities, provided
that where a drilling rig, seismic vessel, other vessel or other major facility,
which is owned, partly owned, leased or hired by the Operator or any of its
Affiliates, is used for Joint Operations, the cost to be charged shall include
the operating costs including the normal depreciation and interest, where
applicable, and all other costs normally associated with the provision of such
services and facilities including, inter alia, mobilisation, demobilisation,
repair and recertification costs.  Such costs shall be comparable with
prevailing market rates.

 
17.  
DAMAGE AND LOSSES

 
The Operator shall be entitled to charge to the Joint Account all costs and
expenses arising out of any loss or damage to Joint Property, or otherwise
sustained in connection therewith, including any necessary repair or replacement
of it due to fire, flood, storm, theft, accident or any other cause except to
the extent such costs and expense arise out of the Wilful Misconduct of the
Operator.
 
 
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18.  
LEGAL EXPENSES

 
The Operator shall be entitled to charge to the Joint Account all costs and
expenses of litigation and other legal services necessary or expedient in
connection with Joint Operations provided however, that costs of the Operator's
legal personnel shall be chargeable pursuant to the provisions of paragraph
2.  The provisions of this paragraph shall not apply to any costs incurred in
relation to any claim by any Participant against any other Participant.
 
19.  
TAXES

 
The Operator shall be entitled to charge to the Joint Account all taxes and
other governmental levies of every kind and nature (other than those on profits
or income of the Participants) assessed or levied upon or in connection with
Joint Operations which have been paid by the Operator for the benefit of or on
behalf of the Participants and which are not recoverable by the Operator.  If
the Operator demonstrates that any tax which is normally recoverable cannot be
so recovered, such tax will be chargeable under this paragraph.
 
20.  
INSURANCE AND CLAIMS

 
The Operator shall be entitled to charge to the Joint Account:

(a)  
Premiums paid for insurance carried for the benefit of all the Participants
pursuant to clause 7.1 in connection with Joint Operations.

 
(b)  
Expenditures made in settlement of any claims, damages and other such expenses,
in connection with Joint Operations.

 
21.  
FIELD EXPENSES

 
The Operator shall be entitled to charge to the Joint Account the cost
(including salary, related benefits and associated administration overhead of
personnel employed by the Operator or by any of its Affiliates and including the
cost of personnel seconded to the Operator or any of its Affiliates from a
Participant (other than the Operator) or hired from any third party agency) of
establishing and maintaining shore bases, warehouses, camps and other field
facilities used in connection with Joint Operations.  If such facilities are
used in connection with other operations the cost charged to the Joint Account
shall be a proportion calculated on an equitable basis, provided that in respect
of the costs of initial receipt, internal handling, maintenance and storage of
material held at the Operator's field bases the proportion of such costs to be
charged to the Joint Account shall be in accordance with the standard accounting
practice of the Operator and which shall be made on an equitable basis.
 
22.  
TECHNICAL SUPPORT AND GENERAL EXPERTISE

 
22.1  
For the purposes of this paragraph 22 “Technical Support and General Expertise”
shall mean the cost of providing technical support and general expertise not
specifically charged elsewhere in this Accounting Procedure due to the
impracticality of so doing, including but not limited to:

 
22.1.1  
 general advisory services such as health, safety and environmental advice,
technical services, research and development support, geological, geophysical,
drilling, petroleum engineering and other support activities where it is
impractical to charge on a measured useage basis;

 
22.1.2  
parent company overhead.

 
23.  
LICENCE PAYMENTS

 
The Operator shall be entitled to charge to the Joint Account Licence rentals
and fees of whatever nature paid by the Operator on behalf of the Participants
in connection with the Joint Operations.
 
24.  
OTHER TYPES OF EXPENDITURE

 
The Operator shall be entitled to charge to the Joint Account any type of
expenditure not covered by the types of expenditure described in paragraphs 10
to 23 incurred by Operator which is necessary and proper for Joint Operations,
provided it is approved by the Joint Operating Committee.  Such other types of
expenditure shall be subject to audit in accordance with paragraph 7.

 

 
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SECTION III- RECEIPTS
 
25.  
GENERAL

 
25.1  
The Operator shall promptly credit to the Joint Account all net proceeds
received in connection with Joint Operations as a result of:

 
25.1.1  
sale of Material and other Joint Property as provided in paragraphs 26 and 27;

 
25.1.2  
services provided to third parties or individual Participants by the Operator on
behalf of the Participants whether using Material, other Joint Property,
facilities, expertise or otherwise as provided in paragraph 28;

 
25.1.3  
reimbursement by third parties of any sums expended by the Operator on behalf of
the Participants;

 
25.1.4  
insurance claims made by the Operator in respect of insurance carried for the
benefit of all the Participants;

 
25.1.5  
claims made by the Operator on behalf of the Participants;

 
25.1.6  
Material returned to the Operator or any of its Affiliates from Joint Operations
as provided in paragraph 29;

 
25.1.7  
Material transferred to other activities which has previously been purchased for
Joint Operations;

 
25.1.8  
grants or other payments from Governmental sources;

 
25.1.9  
all taxes (including Value Added Tax), rentals and other fees recoverable by the
Operator; and

 
25.1.10  
other event giving rise to a Receipt (including interest) by the Operator on
behalf of the Participants.

 
26.  
DISPOSAL OF MATERIAL PURCHASED FOR JOINT OPERATIONS

 
26.1  
If the Operator shall consider that any items of Material having an original
unit cost to the Joint Account of more than one hundred thousand Pounds
(£100,000) or aggregate or original unit costs totalling more than five hundred
thousand Pounds (£500,000) (“Major Surplus Items”) are no longer needed or
suitable for Joint Operations it shall give notice to the other Participants
accompanied by details of the Major Surplus Items and obtain the prior approval
of the Joint Operating Committee before disposing of such Major Surplus Items in
the manner  provided in this paragraph 26.

 
26.2  
The provisions of this paragraph 26 shall also apply to material which is
normally held as part of the Operator's warehouse stocks and which has been
transferred to Operations from the Operator's common warehouses if not accepted
by the Operator in accordance with paragraph 29.

 
26.3  
Material Purchased by the Participants

 
26.3.1  
The Operator shall have a prior right to purchase any surplus Material, other
than Major Surplus Items, but is under no obligation to do so.  In the case of
Major Surplus Items, the disposal of which has been approved by the Joint
Operating Committee, each of the Participants shall be entitled for a period of
thirty (30) days from the date of such approval, subject to paragraph 26.3.2, to
offer to purchase such Major Surplus Items by giving notice to the Operator.

 
26.3.2  
If more than one Participant indicates, within the said period of thirty (30)
days, a wish to acquire the same Major Surplus Items, then the Operator shall
promptly, in respect of each such item, give notice to the other Participants
which wish to acquire that item.  The Participants concerned shall be allowed
fourteen (14) days from the date of such notification to agree upon a division
or allocation of each such item between themselves.  If the Participants
concerned are unable to agree upon the division or allocation of any Major
Surplus Item, the Operator shall request competitive bids from the Participants
concerned in respect of that item and shall accept the highest bid. Where the
Operator bids in competition with other Participants it shall arrange the
bidding procedure to ensure that it gains no advantage from acting as the
Operator.

 
26.3.3  
Unless otherwise decided by the Joint Operating Committee, all items of surplus
Material to be sold under paragraph 26.3.1 or 26.3.2, shall be sold at prices
determined by the Operator in accordance with the values stipulated in paragraph
14.

 
 
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26.4  
Material Transferred to Other Operations

 
In the event that Material purchased and used in Joint Operations has a residual
value and is transferred by the Operator for use in connection with other
operations, apportionment of the original cost, together with the cost of
necessary repair and refurbishment, will be determined in accordance with the
Operator's standard accounting practices. Such costs shall be comparable with
prevailing market rates.

26.5  
Material Purchased by Others

 
If no Participant has notified the Operator, in accordance with paragraph
26.3.1, of its wish to purchase any or all Major Surplus Items or if the
Operator does not exercise its option to purchase any other items or surplus
Material, then the Operator shall, unless the nature or value of an item makes
tendering impracticable or uneconomic, prepare a list of the items for sale and
competitive bids shall be requested from third parties.  Subject to its right to
refuse any offer the Operator shall customarily accept the highest offer,
provided that if the highest offer is not accepted, the Operator will inform the
Participants in advance of refusing such offer, giving its reason for doing so.

26.6  
Alternative Methods of Disposal

 
In the event that no such bids for items of surplus Material are received or if
the nature or value of an item makes tendering impracticable or uneconomic, the
Operator shall dispose of such items as it thinks fit other than to itself or
its Affiliates provided that, if any Major Surplus Items are involved, the
Operator shall make a recommendation to the  Joint Operating Committee for an
alternative method of disposal and shall obtain the approval of the Joint
Operating Committee to it prior to implementation.

26.7  
All documentation relating to the disposal of surplus Materials shall be
retained as part of the records available for audit.

 
27.  
DISPOSAL OF JOINT PROPERTY OTHER THAN MATERIAL

 
If the Operator shall consider that any item of Joint Property, other than
Material, which has an aggregate cost to Joint Operations of more than one
hundred thousand Pounds (£100,000), is no longer needed or suitable for Joint
Operations it shall inform the Joint Operating Committee and the Joint Operating
Committee shall decide whether such item shall be disposed of and, if so, the
terms and conditions of disposal.
 
28.  
SERVICES PROVIDED TO THIRD PARTIES OR INDIVIDUAL PARTICIPANTS  BY THE OPERATOR
ON BEHALF OF THE PARTICIPANTS

 
28.1  
Services using Material, other Joint Property, facilities, expertise or other
resources available to Joint Operations may be rendered to third parties or
individual Participants as provided in this paragraph 28, except that in no
instance shall the provision of such services jeopardise, hinder or unreasonably
interfere with Joint Operations.  The provisions of this paragraph 28 shall not
apply to the provision of services to a third party or individual Participants
in an emergency, nor to services rendered by the Operator in accordance with
paragraphs 14.3, 16.2 and 21.

 
28.2  
If the Operator shall consider that the Material, other Joint Property,
facilities, expertise or other resources available to Joint Operations which is
required to fulfil any request for a service made by a third party or a
Participant has an original cost to the Joint Account of more than two hundred
and fifty thousand Pounds (£250,000) (“Major Service”), the Operator shall give
notice to each Participant accompanied by details of the Major Service
requested, the identity of the third party or Participant making such request
and the Operator's recommendation as to the terms and conditions on which the
Major Service should be provided and obtain the prior approval of the Joint
Operating Committee before rendering such Major Service to such third party or
Participant.

 
28.3  
Unless otherwise decided by the Joint Operating Committee, services other than a
Major Service shall be provided at rates which are not less than those charged
by third parties for like services on comparable terms in the areas where Joint
Operations are located.  Where applicable the rates shall include interest and
depreciation.

 
28.4  
The Joint Operating Committee shall decide any necessary order of priority when
several conflicting requests for the same service are made.

 
29.  
MATERIAL RETURNED TO THE OPERATOR'S WAREHOUSES FROM JOINT OPERATIONS

 
Material which was transferred to Joint Operations from the Operator's
warehouses in accordance with the provision of paragraph 14.3 shall be returned
to the Operator at the price charged in accordance with paragraph 14.3.1 less
the cost of any inspection and/or reconditioning.  The Operator shall have the
right to determine the suitability of Material to be re-warehoused and Material
which is not accepted will be disposed of under paragraph 26 of this Section
III.
 

 
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SECTION IV - FORECASTING AND REPORTING PROCEDURE
 
30.  
AUTHORISATION FOR EXPENDITURE

 
30.1  
AFEs will be established for each classification or sub-classification of cost
in a Budget.  Where individual items of expenditure are attributable to more
than one such classification or sub-classification such items shall be
apportioned on an equitable basis.

 
30.2  
Notwithstanding the above, AFEs for expenditure on wells included in any Budget
which constitutes Capital Expenditure shall be issued separately on a dry hole
and tested basis.

 
30.3  
The Operator shall request approval of an AFE at a time when the main details of
the relevant commitment can be ascertained and the AFE shall be approved by the
Participants in accordance with paragraph 30.6 below.

 
30.4  
If Joint Operating Committee so determines it may set a level of expenditure
below which, or categories of expenditure in respect of which, AFEs are not
required, which levels and/or categories may vary for different types of
Programmes and Budgets.

 
30.5  
The AFE will describe the scope of work, give the estimate of the items of
expenditure necessary to complete such work, give the estimated timings of such
expenditure and show separately the base cost (being the Operator's estimate of
the most likely cost at the time of preparation of the AFE), escalation (being
the Operator's estimate of increases in unit cost of labour, Materials or
services, if any, for the period of the AFE), and any contingency (being the
Operator's estimate of contingent occurrences).  The total of the base cost,
contingency and escalation shall be the “Estimated Final Cost”.  Necessary
further details to support the Estimated Final Cost of activities will be
included as attachments to the extent reasonably required by the Joint Operating
Committee in order to approve such AFEs.

 
30.6  
A Participant voting in favour of an AFE shall confirm its approval of such AFE
by signing an AFE form and returning it to the Operator within thirty (30) days
of receipt.  Any Participant not approving such AFE shall confirm their
non-approval as soon as possible and, in any event, not later than thirty (30)
days from receipt, giving the reason for such non-approval.  All such
notification of approval or non-approval of AFEs to the Operator shall be
notified by the voting Participant to all other Participants.  Notwithstanding
the foregoing, an AFE may still be valid if approved by the requisite number of
Participants within ninety (90) days of receipt.

 
30.7  
After approval of an AFE by the Joint Operating Committee the Operator shall
promptly notify all the Participants indicating the identity of those
Participants whose authorisations have formed part of such approval.

 
30.8  
In circumstances where the Operator reasonably believes it necessary, it may
request the Joint Operating Committee to reduce the normal notice periods for
approval of an AFE.

 
31.  
COST CONTROL REPORTS

 
31.1  
The Operator will closely control all costs and will furnish the Participants on
or before the 10th working day following the end of each month with a Cost
Control Report.

 
A “Cost Control Report” shall mean a report containing such information on
actual costs against estimates and such other information as the Joint Operating
Committee may decide from time to time.

 
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SCHEDULE B
 
 
 
 

 
 
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TRUST DEED
 

 
 
 

 
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DATED                                                                                                     20[
]
 
[           ]
 
and
 
[           ]
 

 
TRUST DEED in respect of UNITED KINGDOM PETROLEUM PRODUCTION LICENCE No. P.xxx,
Block xxxx
 
 Note : Provisions  in italics need only be included where the Part Areas are
horizontally/stratigraphically divided
 

 
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THIS TRUST DEED is made on  the          day of                     2011
 
BETWEEN:
(1)
[                                ] , a company registered in England (company
number [          ]) and having its registered office at [                 ]
(“[          ]”);
(2)
[                                ] , a company registered in England (company
number [          ]) and having its registered office at [                 ]
(“[          ]”);
(3)
[                                ] , a company registered in England (company
number [          ]) and having its registered office at [                 ]
(“[          ]”);
WHEREAS:
A.
Each of the Parties is a party to the Licence; and
B.
The Parties wish to make certain declarations and confirmations as to the terms
on which each of them hold their respective beneficial interests in each part of
the Licence Area.

 
NOW IT IS HEREBY AGREED AS FOLLOWS:
 1.           Definitions
 
1.1
In this Trust Deed (including the recitals hereto) the following expressions
shall have the following meanings:-
“Acts” means the Petroleum Act 1998 and the Continental Shelf Act 1964 and any
regulations issued under them.
“Block” means a block within the United Kingdom Continental Shelf as shown on
the reference map deposited at the Department of Business, Enterprise and
Regulatory Reform;
 “Licence” means United Kingdom Petroleum Production Licence No. P.xxx granted
by deed of licence dated  [ ], under the Acts and presently comprising Block
xxx;
“Licence Administrator” means the Party approved by the Secretary from time to
time as the operator under the Licence or such other Party as may be elected by
agreement of the Parties from time to time to perform the duties of the Licence
Administrator which are set out in Clause 9. The Licence Administrator on the
Effective Date is xxx;
“Licence Area” means Block(s) xxxx, being the area in which for the time being
the Parties or any of them may exercise the rights granted by the Licence;
“Lower Layer Parties” means those of the Parties who are the Part Area Owners of
the Lower Layers;
“Lower Layers” means [          ];
“Operating Agreement” means any operating agreement from time to time between
the relevant Part Area Owners relating to the management of operations in any
Part Area;
“Other Parties” means those of the Parties who are not Lower Layer Parties;
“Part Area” means each part of the Licensed Area to which a separate Operating
Agreement applies or in which a Party holds the entire beneficial interest, as
further defined in Schedule 1;
“Part Area Owner” means a Party which has a beneficial interest in one or more
Part Areas, as further defined in Schedule 2;
“Secretary” means the “Minister” as defined in the Licence, or, in relation to
the exercise of the regulatory functions under the Acts, the person designated
to exercise such functions, as the case may be;
“Senior Supervisory Personnel” means any person employed by a Party as a
director or other corporate officer or who occupies a senior managerial position
in such Party with direct responsibility for the conduct of operations in
relation to the Upper Layers or the Lower Layers;
“Upper Layers” means [            ];
“Wilful Misconduct” means, in relation to a Party, an intentional or conscious
or reckless disregard by its Senior Supervisory Personnel of good and prudent
oil and gas field practice or of any of the terms of this Agreement in utter
disregard of avoidable and harmful consequences but shall not include any act,
omission or error of judgment or mistake made in the exercise in good faith of
any function, authority or discretion vested in or exercisable by such Senior
Supervisory Personnel and which in the exercise of such good faith is
justifiable by special circumstances including but not limited to safeguarding
of life, property or the environment and other emergencies.
 
1.2
 For the purposes of this Trust Deed the “Percentage Share” of a Part Area Owner
in a particular Part Area shall be that percentage which the percentage interest
share (howsoever expressed in the relevant Operating Agreement from time to
time) held by such Part Area Owner in that Part Area is of the aggregate of all
of the percentage interest shares of all the Part Area Owners of the same Part
Area.  The percentage shares as at the date of this Agreement are as set out in
Schedule 2.

 
 
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1.3
In this Trust Deed (including the recitals hereto):
 
 
1.3.1
 where the context requires, words denoting the singular shall also include the
plural and vice versa;
       
1.3.2
 all references to Clauses and the Schedule are, unless otherwise expressly
stated, references to clauses of and schedules to this Trust Deed; and
       
1.3.3
 the Schedule forms part of this Trust Deed and shall have the same force and
effect as if expressly set out in the body of this Trust Deed.
 
 2.           Declaration of Trust
 
2.1
 The benefit of all estate, rights and interests of the Parties in and under the
Licence in relation to the Licensed Area shall be applied in accordance with the
terms of this Trust Deed.
 
2.2
 Each Part Area Owner confirms and undertakes that notwithstanding the terms of
the Licence, it holds a beneficial interest in the estate, rights and interests
in and under the Licence only in respect of the Part Area(s) of which it is a
Part Area Owner.
 
2.3
 Each Part Area Owner declares that it holds its entire estate, rights and
interests in and under the Licence in respect of each Part Area of which it is
not a Part Area Owner in trust for and to the benefit of the Part Area Owners
which have a beneficial interest in such Part Area.
 
2.4
 Each of the Parties will do all such acts and things within its control as may
be necessary to keep and maintain the Licence in full force and effect and will
refrain from doing anything within its control which would justify revocation of
the Licence. Each Part Area Owner undertakes to comply with all applicable
provisions and requirements of the Licence and of any applicable laws and
regulations relating to activities and operations in respect of its Part Area.
 
2.5
 Nothing contained in this Trust Deed shall prejudice or affect the rights and
obligations of the Part Area Owners of the same Part Area inter se pursuant to
the relevant Operating Agreement applying from time to time to that Part Area.
 
        3.           Covenants and Undertakings
 
3.1
 Each Part Area Owner (in this Clause 3, the "Covenantor") covenants (separately
in respect of each Part Area of which it is a Part Area Owner) that upon the
request and at the cost of each of the Part Area Owners of another Part Area (in
this Clause 3, the "Requesting Parties"), the Covenantor will:
 
 
3.1.1
 comply in a timely manner with any and all reasonable directions given by the
Requesting Parties which are reasonably necessary to enable the Requesting
Parties to exercise their rights and/or perform their obligations in relation to
their Part Area; and
 
 
3.1.2
 promptly execute all such deeds and documents and do all such acts and things
as the Requesting Parties may reasonably request in relation to the Part Area of
which the Requesting Parties are the Part Area Owners
PROVIDED THAT such compliance, execution or action would not constitute a breach
of the Licence and PROVIDED FURTHER THAT any necessary approval has been
obtained of the Secretary and PROVIDED FURTHER THAT nothing in the foregoing
shall oblige the Covenantor to comply with any direction or execute any deed or
documents or take any actions which may be unreasonably prejudicial to its
interests except in so far as such are required by the direction of the
Secretary.
 
3.2
 Each of the Parties undertakes (except in accordance with Clause 3.1) that:
 
 
3.2.1
 it will not assign, charge or otherwise dispose of or encumber any interest in
a Part Area of which it is not a Part Area Owner or purport to do so; and
 
 
3.2.2
 it will not otherwise deal with any such interest or exercise any right or
power granted by the Licence in relation to any Part Area of which it is not a
Part Area Owner or any right derived from a right so granted except to comply
with any direction of the Secretary as required by law.
 

 
 
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 4.           Indemnity
 
4.1
 Each Part Area Owner (in this Clause 4, the "Covenantor") undertakes that it
will indemnify and keep indemnified each and any Part Area Owner of another Part
Area (in this Clause 4, the "Indemnified Party") against each and any claim,
demand, action, proceeding, loss, damage and/or expense (including without
limitation legal expenses) made against or suffered or incurred by the
Indemnified Party  as a result of any failure by the Covenantor to comply with
the covenants and undertakings given by it in this Trust Deed and/or to perform
any obligations arising under the Licence or pursuant to the Acts as a result of
any operations carried on in the Part Area of which the Covenantor is a Part
Area Owner whether arising on, before or after the date of this Trust Deed
PROVIDED THAT if more than one Covenantor is liable to indemnify the same
Indemnified Party against the same claim, demand, action, proceeding, loss,
damage, cost (including legal cost) and/or expense then:
 
 
4.1.1
 if all such Covenantors are Part Area Owners of the same Part Area, the
liability of each shall be limited to that proportion of the aggregate liability
to the Indemnified Party which its Part Area Owner's Percentage Share bears to
the aggregate of the Part Area Owners’ Percentage Shares of all the Covenantors
who are so liable; but
 
 
4.1.2
 if such Covenantors are Part Area Owners of different Part Areas, the aggregate
liability to the Indemnified Party shall be apportioned between such Part Areas
pro rata to the area covered by each. Thereafter, the share of liability
attributed to each individual Part Area Owner shall be discharged in accordance
with Clause 4.1.1; and
 
 
PROVIDED FURTHER THAT an Indemnified Party shall not be entitled to an indemnity
pursuant to this Clause 4 if and to the extent that any claim, demand, action,
proceeding, loss, damage, cost and/or expense made against or suffered or
incurred by it arises as a result of its own negligence, omission, breach of
duty (statutory or otherwise) or breach of the provisions of the Licence insofar
as attributable to it under this Trust Deed.
 
 
 5.           Periodic Payments
 
 
The periodic payments payable to the Secretary pursuant to the terms of the
Licence shall be apportioned between the Part Areas pro rata to the area from
time to time covered by each and then apportioned between the respective Part
Area Owners in accordance with the relevant Operating Agreement applying from
time to time to such Part Area in the proportion that each Part Area Owner’s
Percentage Share bears to the aggregate of all Part Area Owners’ Percentage
Shares for such Part Area. Where one Part Area overlies another Part Area the
payments due in relation to the aggregate of such Part Areas shall first be
prorated equally between the Part Areas and then apportioned between the owners
of the respective Part Areas as aforesaid. The Parties shall bear and discharge
the obligations of the licensees of the Licence with regard to royalties in
proportion to their entitlements to the petroleum in respect of which such
royalties become payable or deliverable and the Parties shall indemnify one
another accordingly.
 
 6.           Stratigraphically Divided Areas
 
6.1
The Lower Layer Parties shall with the consent of each of the Other Parties (not
to be unreasonably withheld) and with all other necessary consents and
approvals, including those of the Secretary, and subject to Clause 6.2, have
access to the Lower Layers from the surface of the area comprised in the Licence
or otherwise through the Upper Layers PROVIDED THAT such access shall not
interfere with any operations or planned or proposed operations of the Part Area
Owners of the Upper Layers.
 
6.2
Without prejudice to Clause 4 prior to the Lower Layers Parties gaining access
to the Lower Layers pursuant to Clause 6.1, whether from the surface of the area
comprised in the Licence or otherwise through the Upper Layers, they shall: (i)
provide security to the satisfaction of the Other Parties, whose approval of
such security shall not be unreasonably withheld, provided that a Lower Layer
Party meeting or exceeding a current rating of “AA” by Standard & Poor’s or
“Aa2” by Moody’s or is a 100% subsidiary of an entity holding such rating shall
not be required to provide such security; and (ii) notwithstanding any
conflicting provisions in the Operating Agreement applicable to the Lower Layers
and to the extent only of its Percentage Interest as set out in the Operating
Agreement, indemnify each of the Other Parties against any Claim suffered by the
Other Parties as a result of or in connection with such access or any associated
operations including any loss of or damage to any reservoir or hydrocarbon
accumulation provided however that, where the Lower Layer Parties have submitted
a well programme to the Other Parties and the Other Parties have approved such
well programme, following the granting of such approval and where such well is
drilled in accordance with such well programme by the Lower Layer Parties, the
Lower Layer Parties and their contractors shall have no liability  to the Other
Parties for any claim, demand, action, proceeding, loss, damage or expense
suffered or incurred by the Other Parties as a result of or in connection with
such access or any associated operations  including  loss or damage to any
reservoir or hydrocarbon accumulation irrespective of the negligence or breach
of duty (statutory or otherwise), save to the extent that such claim, demand,
action, proceeding, loss, damage or expense is attributable to the Wilful
Misconduct of the Lower Layer Parties, (iii) The Contract (Rights of Third
Parties) Act 1999 shall only apply in respect of the benefit created in favour
of the contractors referred to in this Clause 6.2.  Clause 6.2 may be amended,
varied or terminated by the Parties without notice to or the consent of such
contractors even if such contractors' rights under this Clause 6.2 would be
amended, varied and/or terminated.]

 
 
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       7.    Assignment
 
7.1
 
 
 
7.2
 Each of the Parties agrees with the other Parties that it shall not transfer or
assign any right or interest in relation to the Licence and/or any Part Area
without simultaneously assigning to the proposed assignee or transferee of such
rights and interests a corresponding part of its rights and interests under this
Trust Deed in accordance with this Clause 7.
No transfer of any interest in a Part Area shall be effective or binding upon
the non-transferring Parties unless each of the remaining, non-transferring
 
Parties shall have consented to such transfer in writing provided that:
 
7.2.1  in the case of a non-transferring Party which is not a Part-Area Owner in
respect of the Part Area to be transferred such non-transferring Party may only
withhold its consent on grounds that the financial responsibility and technical
capability of the proposed transferee to discharge obligations of the
transferring Party relating to the interest to be transferred for which such
non-transferring Party has joint and several liability under the Licence or the
Acts has not been adequately demonstrated); and
 
7.2.2 in the case of a non-transferring Party which is a Part-Area Owner in
respect of the Part Area to be transferred such non-transferring Party may only
withhold its consent in relation to the proposed transfer of interest if and to
the extent that it is entitled to withhold its consent under the Operating
Agreement applicable to such Part Area.
 
7.3
 No such transfer shall be effective or binding upon the non-transferring
Parties until the date upon which each of the following has occurred:-
 
 
7.3.1
 any necessary consent and approval of the Secretary to such transfer shall have
been obtained and evidence of  it furnished to all the Parties by the
transferring Party; and
 
 
7.3.2
 all Parties (including the transferring Party) execute a written instrument (in
form and content satisfactory to the Parties and duly executed by the
transferee) in which the transferee accepts and assumes in place of the
transferring Party:
 
   
(a)
 all of the obligations under this Trust Deed in so far as the interest
transferred is concerned whether incurred before, on or after the effective date
of the transfer; and
 
   
(b)
 all of the obligations under any agreement between the relevant Part Area
Owners in which the  Part Area Owners make provision for the costs of
decommissioning in so far as the interest transferred is concerned and the
transferee makes such provision (if any) in respect of the costs of
decommissioning as is required under the provisions of such agreement;
 
   
and which includes a new Schedule to replace the then current Schedule showing
the relevant percentage interest shares of the Parties in each Part Area
subsequent to the transfer.
 
7.4
 Subject to Clause 7.2, a Party shall promptly join in such reasonable actions
as may be necessary or desirable to obtain any consent and approval of the
Secretary in connection with, and shall execute and deliver any and all
documents reasonably necessary to effect, any such transfer.
 
7.5
 All costs and expenses pertaining to any such assignment shall be the
responsibility of the transferring Party.  For the avoidance of doubt any stamp
duty or stamp duty land tax incurred on the documents executed to effect such
transfer shall either be paid by the transferring Party, or the transferring
Party shall be responsible for procuring the payment of it by the transferee.
 

 
 
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7.6
 Nothing contained in this Clause 7 shall prevent a Party from mortgaging,
pledging or otherwise encumbering all or part of its interest in a Part Area and
in and under this Trust Deed for the purpose of security relating to finance
provided that:-
 
 
(a)
such Party shall remain liable for all obligations relating to such interest;
 
 
(b)
the mortgage, pledge or encumbrance shall be subject to any necessary approval
of the Secretary and be expressly subordinated to the rights of the other
Parties under this Trust Deed; and
 
 
(c)
such Party shall ensure that any such mortgage, pledge or encumbrance shall be
and shall be expressed to be without prejudice to the provisions of this Trust
Deed.

 
    8.   Termination of the Licence
 
8.1   Not more than nine (9) months prior to the expiration of the [current term
of the Licence and each and every further term or period of the Licence], the
Licence Administrator shall convene a meeting of the Parties to decide whether
to continue the Licence and what notice, if any, is to be given to the
Secretary.  At each such meeting the Part Area Owners of each Part Area shall
advise the Licence Administrator of their decision (taken in accordance with
their respective Operating Agreement) as to whether or not to continue the
Licence in respect of their Part Area and:
 
8.1.1 if none of the Part Ares are to be continued, then the Licence shall be
determined at the expiration of the applicable term or period;
 
8.1.2 if some but not all of the Part Areas are to be continued, those Part Area
Owners of the Part Areas to be surrendered shall withdraw from the Licence in
respect of such Part Areas and the Part  Area Owners of the Part Areas which are
to be continued shall determine between themselves the period of further
continuation of the Licence and modifications (if any) to the terms and
conditions of the Licence to be proposed to the Secretary in such application
(provided that the foregoing is without prejudice to the rights in respect of
such matter as between the Part Area Owners of each Part Area pursuant to the
relevant Operating Agreement or any other agreements reached by them in respect
of such matter);
 
8.1.3 if all of the Part Areas are to be continued, then the Parties shall agree
the period of further continuation of the Licence and modifications (if any) to
the terms and conditions of the Licence to be proposed to the Secretary in such
application and the Licence Administrator shall submit the required application
to the Secretary.
 
8.2 The agreement of all the Parties shall be required to determine the Licence
under clause 10 of the Licence. Upon such agreement being reached, all such
Parties shall forthwith join together in effecting the determination of the
Licence by promptly giving the Secretary the due and requisite notice to that
effect, provided that Clause 5 shall survive such termination.
 
8.3  The Licence Administrator shall have no liability to the other Parties in
relation to any failure to perform its obligations under this Clause 8 even in
the event of its negligence except in the case of its Wilful Misconduct
 
 9.       Miscellaneous
 
9.1
 Without prejudice to any rights, obligations or liabilities then accrued, the
provisions of this Trust Deed as they affect a particular Party shall terminate
and cease to have effect with respect to that Party on such date as such Party
ceases to hold any interest in the Licensed Area.
 
9.2
 This Trust Deed may be executed in any number of counterparts, and by the
Parties on separate counterparts, but shall not be effective until each Party
has executed at least one counterpart. Each counterpart shall constitute an
original of this Trust Deed but all the counterparts shall together constitute
but one and the same instrument.
 
9.3
 Save as set out in Clause 6.2, a third party shall have no right pursuant to
the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this
Trust Deed, but this does not affect any right or remedy which exists apart from
such Act and which may be available to such third party.
 
9.4
 This Trust Deed shall be governed by and construed in accordance with English
law and the Parties submit to the exclusive jurisdiction of the English Courts.
 

 
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IN WITNESS WHEREOF this Trust Deed has been duly executed by the Parties the day
and year first above written.
 

 
Executed as a deed by
)
 
[                                     LIMITED]
)
……………………………………
on being signed by:
)
Director
…………………………………………
)
 
and
……………………………………
)
……………………………………
   
Director/Secretary

 
Executed as a deed by
)
 
[                                     LIMITED]
)
……………………………………
on being signed by:
)
Director
…………………………………………
)
 
and
……………………………………
)
……………………………………
   
Director/Secretary

Executed as a deed by
)
 
[                                     LIMITED]
)
……………………………………
on being signed by:
)
Director
…………………………………………
)
 
and
……………………………………
)
……………………………………

 
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SCHEDULE 1
 
Part 1
Area A (Block __/___)
 
Latitude                                         Longitude
 
­­__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W

Part 2
Area B (Block __/___)
 
Latitude                                         Longitude
 
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W

Part 3
Area C (Block __/___)
 
Latitude                                         Longitude
 
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W

Part 4
Area D (Block __/___)
 
Latitude                                         Longitude
 
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
__Degr __’ __.___”N                                                    __Degr
__’ __.___”W
 

 
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SCHEDULE 2
 
Part 1
Area A Percentage Interest Shares

 
Area A Owner
Percentage Interest Share
*
%
 
%

 
Part 2
Area B Percentage Interest Shares

 
Area B Owner
Percentage Interest Share
*
%
 
%

 
Part 3
Area C Percentage Interest Shares

 
Area C Owner
Percentage Interest Share
*
%
 
%

 
Part 4
Area D Percentage Interest Shares

 
Area D Owner
Percentage Interest Share
*
%
 
%

 
* denotes the operator
 

 
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SCHEDULE C
 
ASSOCIATED AGREEMENTS
 

 
There are no Associated Agreements at the date of execution of this Agreement
 
 
 
 
 
 
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