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Exhibit 10.3
 
 
 

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BAYOU CITY EXPLORATION, INC.
 
EXHIBIT C
 
TURNKEY DRILLING CONTRACT
 
 
BAYOU CITY LOUISIANA DRILLING PROGRAM L.P.
 
 
 
 

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TURNKEY DRILLING CONTRACT
 
THIS AGREEMENT is made and entered into as of the 8th day of July. 2010 by and
between the parties herein designated as "Partnership" and "Contractor."
 
Partnership:          Bayou City Louisiana Drilling Program, L.P,
Address:                632 Adams Street, Suite 710
Bowling Green, Kentucky 42 I 01
 
Contractor:           Bayou City Exploration, Inc.
Address:              632 Adams Street, Suite 710
                              Bowling Green, Kentucky 42101
 
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained, Partnership engages Contractor as an Independent Contractor to
furnish the equipment. labor and services to drill, and complete its working
interest portion, as per Exhibit "1", of the well to be drilled on the
Partnership Prospect in Jefferson Davis Parish, Louisiana in search of oil
and/or gas.
 
The Partnership will make the specified payments to Contractor in order to
obtain a price from Contractor for the drilling and completion of the
Partnership Well to a specified depth, (ii) to assure that Contractor will be
available to drill, test and complete the subject Partnership Well for the
Partnership, (iii) to assure that Contractor will make available on a
preferential basis sufficient drilling and completion apparatus needed to drill,
test and complete the Partnership Well at the earliest possible time, (iv) to
obtain a preferential use of Contractor's services. and (v)  to assure competent
supervisory personnel are available in the drilling and completion of the
subject Partnership Well.
 
Contractor agrees to furnish all equipment, labor and services necessary for the
drilling to the depth indicated herein and the first completion attempt of such
Partnership Well. Contractor agrees that the work to be conducted under the
terms of this Agreement will be done with diligence and care in a good and
workmanlike manner and agrees to provide competent supervision of the work
performed hereunder. Unless specifically otherwise provided for herein, all the
required equipment, services and labor are furnished for the price set forth
herein.
 
1. 
LOCATION OF PARTNERSHIP WELL:

 
See Exhibit "1" attached hereto and made a part hereof,
 
2. 
TERMINATION DATE:

 
Contractor agrees to use its best efforts to complete operations for the
acquisition, drilling and testing of the Partnership Well by March 31, 2011, and
Contractor and the Partnership agree that time is of the essence under this
Agreement.
 
 
 
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3. 
BASIS OF DETERMINING AMOUNTS PAYABLE TO CONTRACTOR: Contractor shall be paid at
the following rate for the work performed hereunder: Turnkey Drilling and
Completion Price $1,493,333

 
4. 
DEPTH:

 
Subject to the right of the Partnership to direct the stoppage of work at any
time (as provided in paragraph 7). the Partnership Well shall be drilled to the
depth as specified in Exhibit "1" or to the depth at which the production casing
(production string) is set, whichever depth is first reached, which depth is
hereinafter referred to as the "Contract Depth."
 
5. 
TIME OF PAYMENT:

 
5.1 Basis: Payment by the Partnership to the Contractor of the Drilling Price
becomes due and payable upon the receipt by the Partnership of an invoice from
the Contractor. Neither commencement nor completion of Contractor's performance
shall be a condition precedent to this obligation to pay.
 
5.2 Attorneys' Fees: If this Agreement is placed in the hands of an attorney for
collection of any sums due hereunder, or suit is brought on same, or sums due
hereunder are collected through bankruptcy or probate proceedings, then the
Partnership agrees that there shall be added to the amount due reasonable
attorneys' fees and costs.
 
6. 
COMPLETION PROGRAM:

 
The Managing General Partner, along with other participating Industry Partners,
shall determine whether Contractor shall set a production string. In the event
the Managing General Partner directs that drilling operations cease and to
abandon the Partnership Well, Contractor shall plug the Partnership Well, remove
all drilling apparatus from the well sites and the obligations of the parties
hereunder shall cease. In the event the Managing General Partner directs
Contractor to set a production string and makes timely payment to the Contractor
of the completion price. Contractor shall commence the operations necessary to
attempt to complete the Partnership Well for commercial production, including
the setting of a production string and the acquisition, delivery and
installation of a pump jack, holding tank and all other necessary equipment
needed to extract and contain oil and/or gas from the Partnership Well.
 
7. 
STOPPAGE OF WORK BY THE PARTNERSHIP:

 
Notwithstanding the provisions of paragraph 3 with respect to the depth to be
drilled, the Managing General Partner shall have the right to direct the
stoppage of the work to be performed by the Contractor hereunder at any time
prior to reaching the Contract Depth and even though Contractor has made no
default hereunder. If the Partnership exercises its right to discontinue
drilling the well, the Partnership will not receive a. refund for any unused
portion of the Drilling Price allocable to the discontinued well.
 
8.
REPORTS  TO BE FURNISHED BY CONTRACTOR:

 
8.1 Contractor shall keep and 'furnish to the Partnership an accurate record of
the work performed and formations drilled on the IADC-API Daily Drilling Report
form or other form acceptable to the Partnership. A legible copy of said form
signed by Contractor's representative shall be furnished by Contractor to the
Partnership.
 
 
 
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8.2 Delivery tickets, if requested by the Partnership, covering any material or
supplies furnished by the Partnership shall be turned in each day with the daily
drilling report. The quantity, description and condition of materials and
supplies so furnished shall be checked by Contractor and such tickets shall be
properly certified by Contractor.
 
9. 
RESPONSIBILITY FOR A SOUND LOCATION:

 
Contractor shall prepare a sound location, adequate in size and capable of
properly supporting the drilling rig. Contractor shall be responsible for a
conductor pipe program adequate to prevent soil and subsoil washout, In the
event subsurface conditions cause a cratering or shifting of the location
surface, and loss or damage to the rig or its associated equipment results
therefrom, the Partnership shall not be responsible for reimbursing Contractor
for any such loss or damage including payment of work stoppage rate during
repair and/or demobilization if applicable.
 
10. 
RESPONSIBILITY FOR ROAD AND LOCATIONS:

 
Contractor agrees at all times to maintain roads to locations and each location
in such a condition that will allow free access and movement to and from the
drilling site in an ordinarily equipped highway type vehicle.
 
11. 
PAYMENT OF CLAIMS:

 
Contractor agrees to pay all claims for labor, material, services and supplies
to be furnished by Contractor hereunder, and agrees to allow no lien or charge
to be fixed upon the lease, the Partnership Well or other property of the
Partnership or the land upon which said Partnership Well is located.
 
12. 
RESPONSIBILITY FOR LOSS OR DAMAGE:

 
12.1 Contractor's Surface Equipment: Contractor shall assume liability at all
times for damage to or destruction of Contractor's surface equipment, including
but not limited to all drilling tools, machinery and appliances, for use above
the surface, regardless of when or how such damage or destruction occurs.
 
12.2 Contractor's In-Hole Equipment Basis: Contractor shall assume liability s
for damage to or destruction of Contractor's in-hole equipment, including but
not limited to drill pipe, drill collars and tool joints, and the Partnership
shall be under no liability to reimburse Contractor for any such loss.
 
12.3 Partnership's Equipment: The Partnership shall assume liability at all
times for any defective equipment owned by it, including but not limited to
casing, tubing, well head equipment, and Contractor shall be under no liability
to reimburse the Partnership for any such loss or damage.
 
12.4 Fire or Blow-Out: Should a fire or blowout occur or should the hole for any
cause attributable to Contractor's operators be lost or damaged while Contractor
is engaged in the performance of work hereunder, all such loss of or damage to
the hole including cost of regaining control of a fire or blowout, shall be
borne by Contractor; and if the hole is not in condition to be carried to the
Contract Depth as herein provided, Contractor shall, if requested by the
Partnership, commence a new hole without delay at Contractor's cost; and the
drilling of the new hole shall be conducted under the terms and conditions of
this Agreement in the same manner as though it were the first hole and
Contractor shall be responsible for replacement of any casing lost in a junked
and abandoned hole as well as the cost of preparing a new drill site for the new
hole and the road thereto. In such case, Contractor shall not be entitled to any
payment or compensation for expenditures made or incurred by Contractor on or in
connection with the abandoned hole.
 
 
 
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13. 
NO WAIVER EXCEPT IN WRITING:

 
It is fully understood and agreed that none of the requirements of this
Agreement shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Agreement, or other duly
authorized agent or representative of the party.
 
14.
FORCE MAJEURE:

 
If either party hereto is rendered unable, wholly or in part (and its
performance hereunder is not rendered merely commercially impracticable) by
force majeure to carry out its obligation under this Agreement, it shall give
the other party prompt written notice of the force majeure with reasonably full
particulars. Thereupon, the obligations of the notifying party, so far as they
are affected by the force majeure, shall be suspended during, but not longer
than, the continuance of the force majeure, and the notifying party agrees to
use reasonable diligence to remove the force majeure as quickly as possible,
This paragraph shall not relieve either party hereto for its obligations to
expend sums of money or to indemnify the other party hereto, as provided
elsewhere in this Agreement, The term "force majeure" as herein employed shall
mean an act of God, strike, lockout or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, extreme weather conditions, or governmental restraint,
 
15.
INFORMATION CONFIDENTIAL:

 
Upon written request by the Partnership, information obtained by Contractor in
the conduct of drilling operation on the Partnership Well, including, but not
limited to depth, formations penetrated, the results of coring, testing and
surveying, shall be considered confidential and shall not be divulged by
Contractor or its employees, to any person, firm or any corporation other than
the Partnership's designated representative.
 
16.
ASSIGNMENT:

 
Neither party may assign this Agreement without the prior written consent of the
other, and prompt notice of any such intent to assign shall be given to the
other party. If any assignment is made that material ly alters Contractor's
financial burden, Contractor's compensation shall be adjusted to give effect to
any increase or decrease in Contractor's operating costs.
 
17.
NOTICES AND PLACE OF PAYMENT:

 
All notices to be given with respect to this Agreement unless otherwise provided
for shall be given to Contractor and to the Partnership respectively at the
addresses hereinabove shown. All sums payable hereunder to Contractor shall be
payable at the address hereinabove shown unless otherwise specified herein.
 
 
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BAYOU CITY EXPLORATION, INC.
 
By:  /s/ Charles T. Bukowski                 
Charles T. Bukowski, Jr., President & CEO
 
BAYOU CITY LOUISIANA DRILLING PROGRAM, L.P. A KENTUCKY LIMITED PARTNERSHIP
 
By:  Bayou City Exploration, Inc.
       Managing General Partner
 
By:  /s/ Stephen C. Larkin                  
Stephen C. Larkin, , Chief Financial Officer

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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