Exhibit 10.1
(LETTERHEAD) [w13944w1394401.gif]
EXPLORATION AND DEVELOPMENT AGREEMENT
This EXPLORATION AND DEVELOPMENT AGREEMENT (the “Agreement”) is effective as of
the 26th day of August, 2005 (“Effective Date”), by and between American Natural
Energy Corporation (“ANEC”), an Oklahoma corporation, and Dune Energy, Inc.
(“Dune”) hereinafter collectively referred to as the (“Parties”) or individually
as a (“Party”).
WHEREAS, ANEC is currently the holder of the rights of lessee under the “Bayou
Couba Lease” (as herein defined);
WHEREAS, ANEC owns a 3-D seismic survey covering all of a 23.138 square mile
area as depicted by the red outline on Exhibit “A” hereto;
WHEREAS, ANEC and Exxon Mobil Corporation have entered into a Development
Agreement dated November 22, 2002, as amended on December 19th, 2003, (the
“EMDA”), creating an Area of Mutual Interest (“AMI”) covering approximately
11,486 acres and depicted by the area shaded gray on Exhibit “A” hereto;
WHEREAS, Dune desires to acquire a portion of ANEC’s rights in the AMI;
WHEREAS, Exxon Mobil Corporation has consented to ANEC’s assignment of 50% of
its interest in the EMDA to Dune by letter dated September 9, 2005; and
WHEREAS, the Parties desire to conduct joint exploration operations, including
the drilling of exploratory or development wells, for the discovery of and for
the production of oil and/or gas in the Bayou Couba Field located in Saint
Charles Parish Louisiana.
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:

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ARTICLE 1.
DEFINITIONS
All terms used in this agreement shall have the same meaning as provided for in
the EMDA except as expressly stated herein. The Parties agree to be bound by the
terms of the EMDA and any place that this Agreement is silent the EMDA will
control. The terms used in this Agreement shall have the same meanings as
defined below:
     1.01 “Additional 3-D Seismic” shall mean any seismic data obtained other
than ANEC’s 23.138 square mile survey.
     1.02 “ExxonMobil Development Agreement” or “EMDA” shall mean the
Development Agreement dated November 22, 2002, as amended by letter agreement
dated December 19, 2003, between ANEC and ExxonMobil covering approximately
11,486 acres and attached hereto and made a part of this Agreement for all
purposes as Exhibit “B”.
     1.03 “Dune AMI” shall mean the area shaded gray within the green outline,
as shown on Exhibit “C” hereto, presently covering approximately 31,367 acres.
     1.04 “Exploratory Well” shall mean any well drilled on acreage within the
Dune AMI.
     1.05 “Exxon Mobil Fee Lands” shall mean the lands outlined in green on
Exhibit “A” hereto containing approximately 27,000 acres.
     1.06 “Shoreline Leases” shall mean the lands and rights covered by the oil
and gas
     leases listed on Exhibit “D” hereto containing approximately 184 acres.
ARTICLE II
SEISMIC
     2.01 Reprocessing: ANEC represents and warrants that it possesses 3D
Seismic which has been reprocessed using pre-stacked time and pre-stacked depth
migration techniques with respect to an area encompassing approximately 23.138
square miles as shown by the red outline on Exhibit “A” hereto.
     2.02 Sharing: Upon execution of this Agreement, ANEC agrees that it shall
provide Dune with a copy of the reprocessed 3D Seismic, in the form available to
ANEC, for Dune and its Affiliates’ use in evaluating prospects on the Dune AMI
acreage. Any reprocessing by Dune of the 3-D Seismic will be at Dune’s sole risk
and expense and will be provided to ANEC at no cost immediately upon completion
     2.03 Additional 3-D Seismic Data Acquisition: ANEC and Dune agree to
jointly approach ExxonMobil to initiate discussions to acquire Additional 3-D
Seismic as proposed by

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SEI, Inc., on and equal basis. Any lands added to the Exxon Mobil Development
Agreement as a result of jointly acquiring the new 3-D data will be shared by
Dune and ANEC on an equal basis. Should either Party pay a disproportionate
share of the seismic acquisition cost that party will be entitled the same
disproportionate share of the acreage acquired, but in no event shall either
Party own less that 25%.
     ARTICLE III
PROSPECT FEES
     3.01 EMDA Prospect Fee: In consideration of ANEC’s assignment to Dune of
50% of ANEC’s rights in and to the lands contributed by ANEC, being the Delta
Securities Corporation, Inc. lease dated November 14, 1941, (DSCI Lease) subject
to the ExxonMobil Development Agreement, Dune will pay to ANEC a prospect fee in
the amount of One Million Dollars US ($1,000,000.00), payable in four
installments as follows:

  3.01.1   $225,000.00 due immediately upon ExxonMobil’s approval of Dune
pursuant to article 8, section 8.03, Assignability of the EMDA (such sum has
been paid and ANEC acknowledges receipt thereof);     3.01.2   $225,000.00 due
September 30, 2005 (such sum has been paid and ANEC acknowledges receipt
thereof):     3.01.3   $225,000.00 due January 15, 2006: and     3.01.4  
$325,000.00 due March 15, 2006:     3.01.5   Upon payment of each of the above
listed installments, Dune shall be deemed to have earned it’s pro rata share of
ANEC’s interest in the lands described in 3.01.     3.02   Dune Financing:
Should Dune be successful in obtaining financing in the amount of Five Million
Dollars US ($5,000,000.00) or more, prior to making the final installment
provided for above Dune shall pay to ANEC Two Hundred Twenty Five Thousand
Dollars ($225,000.00) within twenty (20) business days from the closing of said
financing, One Hundred Sixty Two Thousand Five Hundred Dollars ($162,500.00) on,
or before November 30, 2005 and the balance of One Hundred Sixty Two Thousand
Five Hundred Dollars ($162,500.00) on, or before January 10, 2006.

     3.03 Exploration Prospect Fee: Dune agrees to pay to ANEC an additional
prospect fee in the amount of Five Hundred Thousand Dollars US ($500,000.00)
which will be due within five (5) business days from Dune’s receipt of a log
from either of the first two Exploratory Wells drilled pursuant to this
Agreement in which both Parties elect to attempt a completion.

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ARTICLE IV
ESTABLISHMENT OF DUNE AMI
     4.01 Establishment of AMI:The Parties hereby establish and create an Area
of Mutual Interest herein defined as the Dune AMI presently covering
approximately 31,367 acres. As provided for herein the Parties agree to share on
an equal basis any and all rights, title and interest owned or acquired within
the Dune AMI area.
     The following six (6) types of Acreage comprise the Dune AMI.
     “Type 1”: ANEC’s Bayou Cuba Lease containing approximately 1,319 acres.
(Defined as “Class 1” acreage in the existing EMDA).
     “Type 2”: ExxonMobil Fee Lands included within the AMI created by the EMDA
containing approximately 5,800 acres. (Defined as “Class 2” acreage in the
existing EMDA).
     “Type 3”: ExxonMobil Fee Lands not covered by the EMDA but a part of the
Dune AMI containing approximately 19,881 acres. (Not defined in the existing
EMDA).
     “Type 4”: Shoreline Leases containing approximately 184 acres. (Defined as
“Class 4” acreage in the existing EMDA).
     “Type 5” Currently unleased State and private acreage comprising
approximately 4,183 acres. (Defined as “Class 4” acreage in the existing EMDA).
     “Type 6” Any additional lands offered to ANEC or Dune by ExxonMobil as a
result of the acquisition of Additional 3-D Seismic or any other means will be
shared between the Parties on and equal cost and term basis. (Not defined in the
existing EMDA).
     4.02 Acreage Acquisition: Should either Party hereto enter into an
agreement to acquire any rights, title or interests in lands included within the
Dune AMI the acquiring party will immediately Notify the non-acquiring party by
providing the costs, description and terms associated with the acquisition along
with a copy of all leases, instruments, assignments or agreements evidencing the
transaction. The non-acquiring party will have 10 calendar days from receipt of
the Notice to the elect to participate by paying its proportionate share of such
properties proposed for sale.
     4.03 Assignment: The Parties hereby agree that any assignment required
pursuant to this agreement will be in substantially the same form as attached
hereto as Exhibit “F”.
     4.04 Burdens: The Parties hereby agree to share on an equal basis existing
burdens on lands within the Dune AMI including but not be limited to royalty
interests, overriding royalty interests and any other burdens affecting said
lands including the burden sharing provided for in the EMDA. All overriding
royalty interests, net profits interest and production payments created through
the reorganization of Couba Operating, Inc., will be born solely by ANEC.

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     4.05 Indemnity: Each Party is solely responsible for its own lease
obligations, royalties, overriding royalties and other burdens as described in
Section 4.04. The Party so burdened shall assume and alone bear all obligations
and shall indemnify, defend, protect and hold the other harmless (including all
costs and attorneys’ fees) from all claims, demands, and causes of action filed
by any party related to any alleged interest in production from the AMI.
ARTICLE V
OPERATIONS WITHIN THE DUNE AMI
     5.01 Proposed Dune AMI Drilling Prospects: During the term of this
Agreement the Parties agree as follows with respect to each drilling opportunity
within the Dune AMI:
     (a) Either Party may propose Drilling Prospects. Such a Drilling Prospect
shall be presented by Notice to the other Party for review. Upon receipt of the
Notice, such Party shall have a period of thirty (30) calendar days (the
“election period”), from its receipt of such Notice, to elect to participate in
the Drilling Prospect by delivering written notice of such election to the
proposing Party. (Failure to respond within the election period shall be deemed
an election to not participate in such Drilling Prospect.)
     (b) If either Party timely notifies the proposing Party of its election to
participate in such Drilling Prospect, such Party shall be responsible for its
proportionate share of all drilling and completion costs incurred in connection
with the drilling of the Drilling Prospect in which such Party has elected to
participate, and operations shall proceed pursuant to section 5.03 of this
Article V.
     5.02 Election Not to Participate: In the event either Party elects or is
deemed not to have elected to participate in a Drilling Prospect located on the
Dune AMI, the non participating party will relinquish its interest in the
Drilling Prospect to the proposing party and the proposing party shall have
150 days from the end of the election period within which to commence drilling
operations on the Drilling Prospect. If the proposing party fails to commence
drilling operations as aforesaid or the well drilled fails to produce oil and/or
gas in paying quantities, the Acreage within the Drilling Prospect shall again
be subject to this provision, and any Party wishing to propose a Drilling
prospect thereon must comply with the procedures set forth in Section 5.01.
     In the event a designated Drilling Prospect encompasses two or more Types
of acreage as defined in 4.01 above, then the allocation of interest shall be
applied proportionately according to the contribution of each Type of acreage to
the Drilling Prospect area.
     5.03 Dune AMI JOA: All Drilling Prospects for which the receiving Party
elects to participate pursuant to Section 5.01 above shall be subject to and
conducted pursuant to a separate joint operating agreement (the “JOA”) in the
form attached hereto as Exhibit “B”. Each JOA shall cover only the aerial extent
of the Drilling Prospect from the surface to the stratographic equivalent of the
base of the formation into which a completion is made resulting in production of
oil and/or gas in paying quantities. ANEC shall be designated operator under
each

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JOA; however, ExxonMobil shall have the right, to be exercised in its sole
discretion at any time, to assume operatorship of any Drilling Prospect(s), and
ANEC shall remain operator of any remaining Drilling Prospects. Each JOA shall
govern all operations within each Drilling Prospect, provided, however, in the
event of a conflict between this Agreement, the EMDA and the JOA, and then the
EMDA shall take precedence. Upon termination of this Agreement, the Operating
Agreement shall remain in force.
ARTICLE VI
CONFIDENTIALITY
     6.01 Confidentiality: Except as provided for in Sections 6.02 and 6.03, and
except for necessary disclosures to governmental agencies, no Party shall
release Confidential Data unless agreed to by each Party.
     6.02 Limited Disclosure: Any Party may make Confidential Data available to
reputable engineering firms for hydrocarbon reserve or other technical
evaluations, to accountants, tax advisers, attorneys, reputable financial
institutions for study prior to commitment of funds, to outside professional
consultants and to the extent required under applicable laws or by a
governmental authority, provided that the governmental authority is requested to
hold such data confidential, and to a “third Party” with whom a Party is engaged
in a bona fide effort to sell, farm out or trade any portion of all of its
interest in the Dune AMI. The Confidential Data made available shall not be
removed from the custody or premises of the Party making such data available.
Any third Party permitted such access shall first agree in writing neither to
disclose such data to others nor to use such data except for the purposes for
which it is disclosed.
     6.03 Affiliates: Despite the provisions of section 6.01, there shall be no
requirement for approval with respect to the disclosure of Confidential Data to
Affiliates of the Parties.
ARTICLE VII
TERM
     7.01 Term: This Agreement shall commence on the date first written above
and shall remain in effect for as long as the EMDA remains in affect.
ARTICLE VIII.
PRODUCTION HANDLING AND GAS LIFT SUPPORT
     8.01 Handling of Dune AMI Production: Production developed pursuant to this
Agreement shall be handled through ANEC’s Bayou Couba facilities. When Dune has
a working interest share of production in a Drilling Prospect, Dune shall be
responsible solely for its share of facilities operating costs attributable to
Dune’s working interest share of production.
ARTICLE IX
DRILLING COMMITMENT

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     9.01 Drilling: Dune has participated in the drilling of the DSCI Well # 92
ST, and the DSCI Well # 51 ST and has indicated an interest in participating in
the drilling of the DSCI Well # 151 and the DSCI Well # 96 ST.
ARTICLE X
MISCELLANEOUS
     10.01 Notices: Any Notice, demand, request or report required or permitted
to be given or made to a Party under this Agreement shall be in writing and
shall be deemed given or made when sent by first-class mail, postage prepaid,
certified mail, express mail or facsimile to the Party at the following
addresses:

         
 
  If to ANEC:   American Natural Energy Corporation
One Warren Place
6100 South Yale Suite 300
Tulsa, Oklahoma 74136
Attn: Michael Paulk
Phone: (918) 481-1440
Facsimile: (918) 481-1473
E-mail: mike@annrg.com
 
       
 
  If to Dune:   Dune Energy, Inc.
3050 Post Oak Blvd., Suite 695
Houston, Texas 77056
Attn: Amiel David
Phone: (713) 888-0895
Facsimile: (713) 888-0899
Email: amiel@duneenergy.com
 
       
 
  and:   Matthew S. Cohen, Esq.
Eaton & Van Winkle LLP
3 Park Avenue – 16th Floor
New York, NY 10016
Fax: (212) 779-9928
Email: mcohen@evw.com

     10.02 Ratification: Dune hereby accepts and ratifies all terms and
conditions of the EMDA and agrees to be bound by all its terms and conditions in
the same manner as ANEC.
     10.03 OMIT: The Parties hereby agree and confirm that specifically excluded
from this
     Agreement is the following:

  a.   All wells listed on Exhibit E, hereto.

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  b.   Any settlement, payment, redrill or any other manner of reconciliation
agreed to between the relevant parties to the currently pending lawsuit American
Natural Energy Corporation vs. Workstrings, et al which covers all operations
conducted on the Exxon Mobil Fee # 2 Well with a surface location in
Section 15-T15S-R21E and a bottom hole location of Section 14-T15S-R21E St.
Charles Parish Louisiana along with any and all reserves associated with the
initial wellbore and subsequent sidetracking operations. In a similar manner
Dune will be indemnified and held harmless from any action of the courts
relative to this case. Should the Fee#2 be redrilled by ANEC, Dune will have the
option to participate with 50% proportionately reduced, by paying its share of
all costs.     c.   The Production Facility, equipment, barges, boats,
compressors, separators, tanks, buildings, disposal well being DSCI Well # 85,
sales pipelines and any other personal property utilized in the processing of
storing of or transporting of production from the Bayou Couba Field.

     10.04 Subject Agreements: This agreement and the interest transferred to
Dune by ANEC through this agreement is subject to all prior agreements affecting
the interest of ANEC which includes the Purchase and Exploration Agreement dated
March 10, 2003 between ANEC and TransAtlantic Petroleum (USA) Corp., the
Compromise Settlement Agreement dated effective January 1, 2002, between ANEC
and Cawdor, et al. and the Development Agreement dated November 22, 2002, as
amended, between ANEC and Exxon Mobil Corporation. ANEC represents and warrants
that, except as set forth above, there are no other unrecorded agreements,
written or otherwise, that affect the interest transferred to Dune by this
Agreement.
     10.05 Entire Agreement: This Agreement, together with all Exhibits hereto,
embodies the full and complete agreement and understanding of the parties, and
any other agreements concerning the matters addressed herein are merged herein.
Alterations, modifications or amendments shall not be effective or binding upon
the Parties unless agreed to by the Parties in writing.
     10.06 Counterparts: This Agreement may be executed in counterparts and each
shall be deemed an original for all purposes.

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IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the
Effective Date.

              AMERICAN NATURAL ENERGY CORPORATION
 
       
 
  By:   /s/ Michael Paulk
 
       
 
      Michael Paulk President
 
            DUNE ENERGY, INC.
 
       
 
  By:   /s/Amiel David
 
       
 
      Name:
Title:

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