Exhibit 10.3

 

A.A.P.L. FORM 610 - 1989

 

MODEL FORM OPERATING AGREEMENT

 

 

OPERATING AGREEMENT

 

DATED

 

 

January 27

,

2006

    ,

 

 

 

year

 

 

OPERATOR

  Noble Energy, Inc.

 

 

 

CONTRACT AREA

  Grant Complex

 

(See legal description below)

 

 

 

 

 

COUNTIES OF

  Perkins and Chase

  , STATE OF

  Nebraska

 

Township 12 North, Range 37 West, 6th P.M. - Sections 19-22,27-34

Township 12 North, Range 38 West, 6th P.M. - Sections 19-36

Township 12 North, Range 39 West, 6th P.M. - Sections 19-36

Township 12 North, Range 40 West, 6th P.M. - Sections 22-27,34-36

Township 11 North, Range 37 West, 6th P.M. - Sections 3-10,15-22,27-34

Township 11 North, Range 38 West, 6th P.M. - ALL

Township 11 North, Range 39 West, 6th P.M. - ALL

Township 11 North, Range 40 West, 6th P.M. - ALL

Township 10 North, Range 37 West, 6th P.M. - Sections 3-10,15-22,22-34

Township 10 North, Range 38 West, 6th P.M. - ALL

Township 10 North, Range 39 West, 6th P.M. - ALL

Township 10 North, Range 40 West, 6th P.M. - ALL

Township 9 North, Range 37 West, 6th P.M. - Sections 5-8,17-20,29-32

Township 9 North, Range 38 West, 6th P.M. - ALL

Township 9 North, Range 39 West, 6th P.M. - ALL

Township 9 North, Range 40 West, 6th P.M. - ALL

Township 8 North, Range 38 West, 6th P.M. - Sections 4-9,16-21,28-33

Township 8 North, Range 39 West, 6th P.M. - ALL

Township 8 North, Range 40 West, 6th P.M. - ALL

Township 8 North, Range 41 West, 6th P.M. - Sections 1-3,10-15,22-27,34-36

Township 7 North, Range 39 West, 6th P.M. - ALL

Township 7 North, Range 40 West, 6th P.M. - ALL

Township 7 North, Range 41 West, 6th P.M. – ALL

 

 

COPYRIGHT 1989 – ALL RIGHTS RESERVED
AMERICAN ASSOCIATION OF PETROLEUM
LANDMEN, 4100 FOSSIL CREEK BLVD.
FORT WORTH, TEXAS, 76137, APPROVED FORM.

 

A.A.P.L. NO. 610 – 1989

 

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TABLE OF CONTENTS

 

Article

 

Title

 

Page

I.

 

DEFINITIONS

 

1

II.

 

EXHIBITS

 

1

III.

 

INTERESTS OF PARTIES

 

2

 

 

B. INTERESTS OF PARTIES IN COSTS AND PRODUCTION:

 

2

 

 

C. SUBSEQUENTLY CREATED INTERESTS:

 

2

IV.

 

TITLES

 

2

 

 

A. TITLE EXAMINATION:

 

2

 

 

B. LOSS OR FAILURE OF TITLE:

 

3

 

 

1. Failure of Title

 

3

 

 

2. Loss by Non-Payment or Erroneous Payment of Amount Due

 

3

 

 

3. Other Losses

 

3

 

 

4. Curing Title

 

3

V.

 

OPERATOR

 

4

 

 

A. DESIGNATION AND RESPONSIBILITIES OF OPERATOR:

 

4

 

 

B. RESIGNATION OR REMOVAL OF OPERATOR AND SELECTION OF SUCCESSOR:

 

4

 

 

1. Resignation or Removal of Operator

 

4

 

 

2. Selection of Successor Operator

 

4

 

 

3. Effect of Bankruptcy

 

4

 

 

C. EMPLOYEES AND CONTRACTORS:

 

4

 

 

D. RIGHTS AND DUTIES OF OPERATOR:

 

4

 

 

1. Competitive Rates and Use of Affiliates

 

4

 

 

2. Discharge of Joint Account Obligations

 

4

 

 

3. Protection from Liens

 

4

 

 

4. Custody of Funds

 

5

 

 

5. Access to Contract Area and Records

 

5

 

 

6. Filing and Furnishing Governmental Reports

 

5

 

 

7. Drilling and Testing Operations

 

5

 

 

8. Cost Estimates

 

5

 

 

9. Insurance

 

5

VI.

 

DRILLING AND DEVELOPMENT

 

5

 

 

A. INITIAL WELL:

 

5

 

 

B. SUBSEQUENT OPERATIONS:

 

5

 

 

1. Proposed Operations

 

5

 

 

2. Operations by Less Than All Parties

 

6

 

 

3. Stand-By Costs

 

7

 

 

4. Deepening

 

8

 

 

5. Sidetracking

 

8

 

 

6. Order of Preference of Operations

 

8

 

 

7. Conformity to Spacing Pattern

 

9

 

 

8. Paying Wells

 

9

 

 

C. COMPLETION OF WELLS; REWORKING AND PLUGGING BACK:

 

9

 

 

1. Completion

 

9

 

 

2. Rework, Recomplete or Plug Back

 

9

 

 

D. OTHER OPERATIONS:

 

9

 

 

E. ABANDONMENT OF WELLS:

 

9

 

 

1. Abandonment of Dry Holes

 

9

 

 

2. Abandonment of Wells That Have Produced

 

10

 

 

3. Abandonment of Non-Consent Operations

 

10

 

 

F. TERMINATION OF OPERATIONS:

 

10

 

 

G. TAKING PRODUCTION IN KIND:

 

10

 

 

(Option 1) Gas Balancing Agreement

 

10

VII.

 

EXPENDITURES AND LIABILITY OF PARTIES

 

11

 

 

A. LIABILITY OF PARTIES:

 

11

 

 

B. LIENS AND SECURITY INTERESTS:

 

12

 

 

C. ADVANCES:

 

12

 

 

D. DEFAULTS AND REMEDIES:

 

12

 

 

1. Suspension of Rights

 

13

 

 

2. Suit for Damages

 

13

 

 

3. Deemed Non-Consent

 

13

 

 

4. Advance Payment

 

13

 

 

5. Costs and Attorneys’ Fees

 

13

 

 

E. RENTALS, SHUT-IN WELL PAYMENTS AND MINIMUM ROYALTIES:

 

13

 

 

F. TAXES:

 

13

VIII.

 

ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

 

14

 

 

A. SURRENDER OF LEASES:

 

14

 

 

B. RENEWAL OR EXTENSION OF LEASES:

 

14

 

 

C. ACREAGE OR CASH CONTRIBUTIONS:

 

14

 

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D. ASSIGNMENT; MAINTENANCE OF UNIFORM INTEREST:

 

15

 

 

E. WAIVER OF RIGHTS TO PARTITION:

 

15

IX.

 

INTERNAL REVENUE CODE ELECTION

 

15

X.

 

CLAIMS AND LAWSUITS

 

15

XI.

 

FORCE MAJEURE

 

16

XII.

 

NOTICES

 

16

XIII.

 

TERM OF AGREEMENT

 

16

XIV.

 

COMPLIANCE WITH LAWS AND REGULATIONS

 

16

 

 

A. LAWS, REGULATIONS AND ORDERS:

 

16

 

 

B. GOVERNING LAW:

 

16

 

 

C. REGULATORY AGENCIES:

 

16

XV.

 

MISCELLANEOUS

 

17

 

 

A. EXECUTION:

 

17

 

 

B. SUCCESSORS AND ASSIGNS:

 

17

 

 

C. COUNTERPARTS:

 

17

 

 

D. SEVERABILITY

 

17

XVI.

 

OTHER PROVISIONS

 

17

 

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OPERATING AGREEMENT

 

THIS AGREEMENT, entered into by and between Noble Energy, Inc., hereinafter
designated and referred to as “Operator,” and the signatory party or parties
other than Operator, sometimes hereinafter referred to individually as
“Non-Operator,” and collectively as “Non-Operators.”

 

WITNESSETH:

 

WHEREAS, the parties to this agreement are owners of Oil and Gas Leases and/or
Oil and Gas Interests in the land identified in Exhibit “A,” and the parties
hereto have reached an agreement to explore and develop these Leases and/or Oil
and Gas Interests for the production of Oil and Gas to the extent and as
hereinafter provided,

 

NOW, THEREFORE, it is agreed as follows:

 

ARTICLE I.

DEFINITIONS

 

As used in this agreement, the following words and terms shall have the meanings
here ascribed to them:

 

A.  The term “AFE” shall mean an Authority for Expenditure prepared by a party
to this agreement for the purpose of estimating the costs to be incurred in
conducting an operation hereunder.

 

B.  The term “Completion” or “Complete” shall mean a single operation intended
to complete a well as a producer of Oil and Gas in one or more Zones, including,
but not limited to, the setting of production casing, perforating, well
stimulation and production testing conducted in such operation.

 

C.  The term “Contract Area” shall mean all of the lands, Oil and Gas Leases
and/or Oil and Gas Interests intended to be developed and operated for Oil and
Gas purposes under this agreement.  Such lands, Oil and Gas Leases and Oil and
Gas Interests are described in Exhibit “A.”

 

D.  The term “Deepen” shall mean a single operation whereby a well is drilled to
an objective Zone below the deepest Zone from which the well is or was producing
the Deepest lesser.

 

E.  The terms “Drilling Party” and “Consenting Party” shall mean a party who
agrees to join in and pay its share of the cost of any operation conducted under
the provisions of this agreement.

 

F.  The term “Drilling Unit” shall mean the area fixed for the drilling of one
well by order or rule of any state or federal body having authority.  If a
Drilling Unit is not fixed by any such rule or order, a Drilling Unit shall be
the drilling unit as established by the pattern of drilling in the Contract Area
unless fixed by express agreement of the Drilling Parties.

 

G.  The term “Drillsite” shall mean the Oil and Gas Lease or Oil and Gas
Interest on which a proposed well is to be located.

 

I.  The term “Non-Consent Well” shall mean a well in which less than all parties
have conducted an operation as provided in Article VI.B.2.

 

J.  The terms “Non-Drilling Party” and “Non-Consenting Party” shall mean a party
who elects not to participate in a proposed operation.

 

K.  The term “Oil and Gas” shall mean oil, gas, casinghead gas, gas condensate,
and/or all other liquid or gaseous hydrocarbons and other marketable substances
produced therewith, unless an intent to limit the inclusiveness of this term is
specifically stated.

 

L.  The term “Oil and Gas Interests” or “Interests” shall mean unleased fee and
mineral interests in Oil and Gas in tracts of land lying within the Contract
Area which are owned by parties to this agreement.

 

M.  The terms “Oil and Gas Lease,” “Lease” and “Leasehold” shall mean the oil
and gas leases or interests therein covering tracts of land lying within the
Contract Area which are owned by the parties to this agreement.

 

N.  The term “Plug Back” shall mean a single operation whereby a deeper Zone is
abandoned in order to attempt a Completion in a shallower Zone.

 

O.  The term “Recompletion” or “Recomplete” shall mean an operation whereby a
Completion is attempted in another Zone within the existing wellbore, whether or
not one zone is abandoned at such time.

 

P.  The term “Rework” shall mean an operation conducted in the wellbore of a
well after it is Completed to secure, restore, or improve production in a Zone
which is currently open to production in the wellbore.  Such operations include,
but are not limited to, well stimulation operations including refracturing of a
zone but exclude any routine repair or maintenance work or drilling,
Sidetracking, Deepening, Completing, Recompleting, or Plugging Back of a well.

 

Q.  The term “Sidetrack” shall mean the directional control and intentional
deviation of a well from vertical so as to change the bottom hole location
unless done to straighten the hole or drill around junk in the hole to overcome
other mechanical difficulties.

 

R.  The term “Zone” shall mean a stratum of earth containing or thought to
contain a common accumulation of Oil and Gas separately producible from any
other common accumulation of Oil and Gas.

 

Unless the context otherwise clearly indicates, words used in the singular
include the plural, the word “person” includes natural and artificial persons,
the plural includes the singular, and any gender includes the masculine,
feminine, and neuter.

 

ARTICLE II.

EXHIBITS

 

The following exhibits, as indicated below and attached hereto, are incorporated
in and made a part hereof:

 

X     A.            Exhibit “A,” shall include the following information:

 

(1) Description of lands subject to this agreement,

 

(2) Restrictions, if any, as to depths, formations, or substances,

 

(3) Parties to agreement with addresses and telephone numbers for notice
purposes,

 

(4) Percentages or fractional interests of parties to this agreement,

 

(5) Oil and Gas Leases and/or Oil and Gas Interests subject to this agreement,

 

(6) Burdens on production.

 

X     C.            Exhibit “C,” Accounting Procedure.

 

X     D.            Exhibit “D,” Insurance.

 

X     E.             Exhibit “E,” Gas Balancing Agreement.

 

X     G.            Exhibit “G,” Tax Partnership.

 

X     H.            Other:  Recording Supplement and Financing
Statement/Settlement Agreement

 

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If any provision of any exhibit, except Exhibits “E,” “F” and “G,” is
inconsistent with any provision contained in the body of this agreement, the
provisions in the body of this agreement shall prevail.

 

ARTICLE III.

INTERESTS OF PARTIES

 

B.  Interests of Parties in Costs and Production:

 

Unless changed by other provisions, all costs and liabilities incurred in
operations under this agreement shall be borne and paid, and all equipment and
materials acquired in operations on the Contract Area shall be owned, by the
parties as their interests are set forth in Exhibit “A.”  In the same manner,
the parties shall also own all production of Oil and Gas from the Contract Area
subject, however, to the payment of royalties and other burdens on production as
described hereafter.

 

Regardless of which party has contributed any Oil and Gas Lease or Oil and Gas
Interest on which royalty or other burdens may be payable and except as
otherwise expressly provided in this agreement, each party shall pay or deliver,
or cause to be paid or delivered, all burdens on its share of the production
from the Contract Area up to, but not in excess of, 19% except for the “Low NRI
Leases” as defined in the Acreage Earning Agreement between Teton Energy
Corporation and Noble Energy, Inc. and shall indemnify, defend and hold the
other parties free from any liability therefor. Except as otherwise expressly
provided in this agreement, if any party has contributed hereto any Lease or
Interest which is burdened with any royalty, overriding royalty, production
payment or other burden on production in excess of the amounts stipulated above,
such party so burdened shall assume and alone bear all such excess obligations
and shall indemnify, defend and hold the other parties hereto harmless from any
and all claims attributable to such excess burden.  However, so long as the
Drilling Unit for the productive Zone(s) is identical with the Contract Area,
each party shall pay or deliver, or cause to be paid or delivered, all burdens
on production from the Contract Area due under the terms of the Oil and Gas
Lease(s) which such party has contributed to this agreement, and shall
indemnify, defend and hold the other parties free from any liability therefor.

 

No party shall ever be responsible, on a price basis higher than the price
received by such party, to any other party’s lessor or royalty owner, and if
such other party’s lessor or royalty owner should demand and receive settlement
on a higher price basis, the party contributing the affected Lease shall bear
the additional royalty burden attributable to such higher price.

 

Nothing contained in this Article III.B. shall be deemed an assignment or
cross-assignment of interests covered hereby, and in the event two or more
parties contribute to this agreement jointly owned Leases, the parties’
undivided interests in said Leaseholds shall be deemed separate leasehold
interests for the purposes of this agreement.

 

C.  Subsequently Created Interests:

 

If any party has contributed hereto a Lease or Interest that is burdened with an
assignment of production given as security for the payment of money, or if,
after the date of this agreement, any party creates an overriding royalty,
production payment, net profits interest, assignment of production or other
burden payable out of production attributable to its working interest hereunder,
such burden shall be deemed a “Subsequently Created Interest.”  Further, if any
party has contributed hereto a Lease or Interest burdened with an overriding
royalty, production payment, net profits interests, or other burden payable out
of production created prior to the date of this agreement, and such burden is
not shown on Exhibit “A,” such burden also shall be deemed a Subsequently
Created Interest to the extent such burden causes the burdens on such party’s
Lease or Interest to exceed the amount stipulated in Article III.B. above

 

The party whose interest is burdened with the Subsequently Created Interest (the
“Burdened Party”) shall assume and alone bear, pay and discharge the
Subsequently Created Interest and shall indemnify, defend and hold harmless the
other parties from and against any liability therefor.  Further, if the Burdened
Party fails to pay, when due, its share of expenses chargeable hereunder, all
provisions of Article VII.B. shall be enforceable against the Subsequently
Created Interest in the same manner as they are enforceable against the working
interest of the Burdened Party.  If the Burdened Party is required under this
agreement to assign or relinquish to any other party, or parties, all or a
portion of its working interest and/or the production attributable thereto, said
other party, or parties, shall receive said assignment and/or production free
and clear of said Subsequently Created Interest, and the Burdened Party shall
indemnify, defend and hold harmless said other party, or parties, from any and
all claims and demands for payment asserted by owners of the Subsequently
Created Interest.

 

ARTICLE IV.

TITLES

 

A.  Title Examination:

 

Title examination shall be made on the Drilling Unit of any proposed well prior
to commencement of drilling operations.  The opinion will include the ownership
of the working interest, minerals, royalty, overriding royalty and production
payments under the applicable Leases.  Each party contributing Leases and/or Oil
and Gas Interests to be included in the Drillsite or Drilling Unit, if
appropriate, shall furnish to Operator all abstracts (including federal lease
status reports), title opinions, title papers and curative material in its
possession free of charge.  All such information not in the possession of or
made available to Operator by the parties, but necessary for the examination of
the title, shall be obtained by Operator.  Operator shall cause title to be
examined by attorneys on its staff or by outside attorneys.  Copies of all title
opinions shall be furnished to each Drilling Party.  Costs incurred by Operator
in procuring abstracts, fees paid outside attorneys and other land professionals
for title examination (including preliminary, supplemental, shut-in royalty
opinions and division order title opinions and curative work) and other direct
charges as provided in Exhibit “C” shall be borne by the Drilling Parties in the
proportion that the interest of each Drilling Party bears to the total interest
of all Drilling Parties as such interests appear in Exhibit “A.”  Operator shall
make no charge for services rendered by its staff attorneys or other personnel
in the performance of the above functions.

 

Each party shall be responsible for securing curative matter and pooling
amendments or agreements required in connection with Leases or Oil and Gas
Interests contributed by such party. Unless otherwise agreed Operator shall be
responsible for the preparation and recording of pooling designations or
declarations and communitization agreements as well as the conduct of hearings
before governmental agencies for the securing of spacing or pooling orders or
any other orders necessary or appropriate to the conduct of operations
hereunder.  This shall not prevent any party from appearing on its own behalf at
such hearings. Costs incurred by Operator, including fees paid to outside
attorneys, and other outside professionals which are associated with hearings
before governmental agencies, and which costs are necessary and proper for the
activities contemplated under this agreement, shall be direct charges to the
joint account and shall not be covered by the administrative overhead charges as
provided in Exhibit “C.”

 

2

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Operator shall make no charge for services rendered by its staff attorneys or
other personnel in the performance of the above functions.

 

No well shall be drilled on the Contract Area until after (1) the title to the
Drillsite or Drilling Unit, if appropriate, has been examined as above provided,
and (2) the title has been approved by the examining attorney or title has been
accepted by all of the Drilling Parties in such well.

 

B. Loss or Failure of Title:

 

3. Other Losses: All losses of Leases or Interests committed to this agreement
shall be joint losses and shall be borne by all parties in proportion to their
interests shown on Exhibit “A.”  This shall include but not be limited to the
loss of any Lease or Interest through failure to develop or because express or
implied covenants have not been performed (other than performance which requires
only the payment of money), and the loss of any Lease by expiration at the end
of its primary term if it is not renewed or extended.  There shall be no
readjustment of interests in the remaining portion of the Contract Area on
account of any joint loss.

 

4. Curing Title: In the event of a Failure of Title under Article IV.B.1. or a
loss of title under Article IV.B.2. above, any Lease or Interest acquired by any
party hereto (other than the party whose interest has failed or was lost) during
the ninety (90) day period provided by Article IV.B.1. and Article IV.B.2. above
covering all or a portion of the interest that has failed or was lost shall be
offered at cost to the party whose interest has failed or was lost, and the
provisions of Article VIII.B. shall not apply to such acquisition.

 

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ARTICLE V.

OPERATOR

 

A.  Designation and Responsibilities of Operator:

 

Noble Energy, Inc. shall be the Operator of the Contract Area, and shall conduct
and direct and have full control of all operations on the Contract Area as
permitted and required by, and within the limits of this agreement.  In its
performance of services hereunder for the Non-Operators, Operator shall be an
independent contractor not subject to the control or direction of the
Non-Operators except as to the type of operation to be undertaken in accordance
with the election procedures contained in this agreement.  Operator shall not be
deemed, or hold itself out as, the agent of the Non-Operators with authority to
bind them to any obligation or liability assumed or incurred by Operator as to
any third party.  Operator shall conduct its activities under this agreement as
a reasonable prudent operator, in a good and workmanlike manner, with due
diligence and dispatch, in accordance with good oilfield practice, and in
compliance with applicable law and regulation, but in no event shall it have any
liability as Operator to the other parties for losses sustained or liabilities
incurred except such as may result from gross negligence or willful misconduct.

 

B. Resignation or Removal of Operator and Selection of Successor:

 

1. Resignation or Removal of Operator: Operator may resign at any time by giving
written notice thereof to Non-Operators. If Operator terminates its legal
existence, no longer owns an interest hereunder in the Contract Area, or is no
longer capable of serving as Operator, Operator shall be deemed to have resigned
without any action by Non-Operators, except the selection of a successor. 
Operator may be removed only for good cause by the affirmative vote of
Non-Operators owning a majority interest based on ownership as shown on Exhibit
“A” remaining after excluding the voting interest of Operator; such vote shall
not be deemed effective until a written notice has been delivered to the
Operator by a Non-Operator detailing the alleged default and Operator has failed
to cure the default within thirty (30) days from its receipt of the notice or,
if the default concerns an operation then being conducted, within forty-eight
(48) hours of its receipt of the notice.  For purposes hereof, “good cause”
shall mean not only gross negligence or willful misconduct but also the material
breach of or inability to meet the standards of operation contained in Article
V.A. or material failure or inability to perform its obligations under this
agreement.

 

Subject to Article VII.D.1., such resignation or removal shall not become
effective until 7:00 o’clock A.M. on the first day of the calendar month
following the expiration of ninety (90) days after the giving of notice of
resignation by Operator or action by the Non-Operators to remove Operator,
unless a successor Operator has been selected and assumes the duties of Operator
at an earlier date. Operator, after effective date of resignation or removal,
shall be bound by the terms hereof as a Non-Operator.  A change of a corporate
name or structure of Operator or transfer of Operator’s interest to any single
subsidiary, parent or successor corporation shall not be the basis for removal
of Operator.

 

2.  Selection of Successor Operator: Upon the resignation or removal of Operator
under any provision of this agreement, a successor Operator shall be selected by
the parties.  The successor Operator shall be selected from the parties owning
an interest in the Contract Area at the time such successor Operator is
selected.  The successor Operator shall be selected by the affirmative vote of
two (2) or more parties owning a majority interest based on ownership as shown
on Exhibit “A”; provided, however, if an Operator which has been removed or is
deemed to have resigned fails to vote or votes only to succeed itself, the
successor Operator shall be selected by the affirmative vote of the party or
parties owning a majority interest based on ownership as shown on Exhibit “A”
remaining after excluding the voting interest of the Operator that was removed
or resigned.  The former Operator shall within thirty (30) days after selection
of a successor Operator deliver to the successor Operator all records and data
relating to the operations conducted by the former Operator to the extent such
records and data are not already in the possession of the successor operator. 
Any cost of obtaining or copying the former Operator’s records and data shall be
charged to the joint account.

 

3.  Effect of Bankruptcy: If Operator becomes insolvent, bankrupt or is placed
in receivership, it shall be deemed to have resigned without any action by
Non-Operators, except the selection of a successor.  If a petition for relief
under the federal bankruptcy laws is filed by or against Operator, and the
removal of Operator is prevented by the federal bankruptcy court, all
Non-Operators and Operator shall comprise an interim operating committee to
serve until Operator has elected to reject or assume this agreement pursuant to
the Bankruptcy Code, and an election to reject this agreement by Operator as a
debtor in possession, or by a trustee in bankruptcy, shall be deemed a
resignation as Operator without any action by Non-Operators, except the
selection of a successor.  During the period of time the operating committee
controls operations, all actions shall require the approval of two (2) or more
parties owning a majority interest based on ownership as shown on Exhibit “A.” 
In the event there are only two (2) parties to this agreement, during the period
of time the operating committee controls operations, a third party acceptable to
Operator, Non-Operator and the federal bankruptcy court shall be selected as a
member of the operating committee, and all actions shall require the approval of
two (2) members of the operating committee without regard for their interest in
the Contract Area based on Exhibit “A.”

 

C.  Employees and Contractors:

 

The number of employees or contractors used by Operator in conducting operations
hereunder, their selection, and the hours of labor and the compensation for
services performed shall be determined by Operator, and all such employees or
contractors shall be the employees or contractors of Operator.

 

D.  Rights and Duties of Operator:

 

1. Competitive Rates and Use of Affiliates: All wells drilled on the Contract
Area shall be drilled on a competitive contract basis at the usual rates
prevailing in the area.  If it so desires, Operator may employ its own tools and
equipment in the drilling and all other operations contemplated hereby,
including completion, production, recompletion, reworking and deepening of
wells, but its charges therefor shall not exceed the prevailing rates in the
area and such work shall be performed by Operator under the same terms and
conditions as are customary and usual in the area in contracts of independent
contractors who are doing work of a similar nature.  All work performed or
materials supplied by affiliates or related parties of Operator shall be
performed or supplied at competitive rates, pursuant to written agreement, and
in accordance with customs and standards prevailing in the industry.

 

2. Discharge of Joint Account Obligations: Except as herein otherwise
specifically provided, Operator shall promptly pay and discharge expenses
incurred in the development and operation of the Contract Area pursuant to this
agreement and shall charge each of the parties hereto with their respective
proportionate shares upon the expense basis provided in Exhibit “C.” Operator
shall keep an accurate record of the joint account hereunder, showing expenses
incurred and charges and credits made and received.

 

3. Protection from Liens: Operator shall pay, or cause to be paid, as and when
they become due and payable, all accounts of contractors and suppliers and wages
and salaries for services rendered or performed, and for materials supplied on,
to or in respect of the Contract Area or any operations for the joint account
thereof, and shall keep the Contract Area free from

 

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liens and encumbrances resulting therefrom except for those resulting from a
bona fide dispute as to services rendered or materials supplied.

 

4. Custody of Funds: Operator shall hold for the account of the Non-Operators
any funds of the Non-Operators advanced or paid to the Operator, either for the
conduct of operations hereunder or as a result of the sale of production from
the Contract Area, and such funds shall remain the funds of the Non-Operators on
whose account they are advanced or paid until used for their intended purpose or
otherwise delivered to the Non-Operators or applied toward the payment of debts
as provided in Article VII.B.  Nothing in this paragraph shall be construed to
establish a fiduciary relationship between Operator and Non-Operators for any
purpose other than to account for Non-Operator funds as herein specifically
provided.  Nothing in this paragraph shall require the maintenance by Operator
of separate accounts for the funds of Non-Operators unless the parties otherwise
specifically agree.

 

5. Access to Contract Area and Records: Operator shall, except as otherwise
provided herein, permit each Non-Operator or its duly authorized representative,
at the Non-Operator’s sole risk and cost, full and free access at all reasonable
times to all operations of every kind and character being conducted for the
joint account on the Contract Area and to the records of operations conducted
thereon or production therefrom, including Operator’s books and records relating
thereto.  Such access rights shall not be exercised in a manner interfering with
Operator’s conduct of an operation hereunder and shall not obligate Operator to
furnish any geologic or geophysical data of an interpretive nature unless the
cost of preparation of such interpretive data was charged to the joint account. 
Operator will furnish to each Non-Operator upon request copies of any and all
reports and information obtained by Operator in connection with production and
related items, including, without limitation, meter and chart reports,
production purchaser statements, run tickets and monthly gauge reports, but
excluding purchase contracts and pricing information to the extent not
applicable to the production of the Non-Operator seeking the information.  Any
audit of Operator’s records relating to amounts expended and the appropriateness
of such expenditures shall be conducted in accordance with the audit protocol
specified in Exhibit “C.”

 

6. Filing and Furnishing Governmental Reports: Operator will file, and upon
written request promptly furnish copies to each requesting Non-Operator not in
default of its payment obligations, all operational notices, reports or
applications required to be filed by local, State, Federal or Indian agencies or
authorities having jurisdiction over operations hereunder. Each Non-Operator
shall provide to Operator on a timely basis all information necessary to
Operator to make such filings.

 

7. Drilling and Testing Operations: The following provisions shall apply to each
well drilled hereunder, including but not limited to the Initial Well:

 

(a) Operator will promptly advise Non-Operators of the date on which the well is
spudded, or the date on which drilling operations are commenced.

 

(b) Operator will send to Non-Operators such reports, test results and notices
regarding the progress of operations on the well as the Non-Operators shall
reasonably request, including, but not limited to, daily drilling reports,
completion reports, and well logs.

 

(c) Operator shall adequately test all Zones encountered which may reasonably be
expected to be capable of producing Oil and Gas in paying quantities as a result
of examination of the electric log or any other logs or cores or tests conducted
hereunder.

 

8. Cost Estimates: Upon request of any Consenting Party, Operator shall furnish
estimates of current and cumulative costs incurred for the joint account at
reasonable intervals during the conduct of any operation pursuant to this
agreement. Operator shall not be held liable for errors in such estimates so
long as the estimates are made in good faith.

 

9. Insurance: At all times while operations are conducted hereunder, Operator
shall comply with the workers compensation law of the state where the operations
are being conducted; provided, however, that Operator may be a self- insurer for
liability under said compensation laws in which event the only charge that shall
be made to the joint account shall be as provided in Exhibit “C.”  Operator
shall also carry or provide insurance for the benefit of the joint account of
the parties as outlined in Exhibit “D” attached hereto and made a part hereof. 
Operator shall require all contractors engaged in work on or for the Contract
Area to comply with the workers compensation law of the state where the
operations are being conducted and to maintain such other insurance as Operator
may require.

 

In the event automobile liability insurance is specified in said Exhibit “D,” or
subsequently receives the approval of the parties, no direct charge shall be
made by Operator for premiums paid for such insurance for Operator’s automotive
equipment.

 

ARTICLE VI.

DRILLING AND DEVELOPMENT

 

A.  Initial Well:

 

There shall be no Initial Well in the Contract Area.  In lieu of the Initial
Well, the parties have agreed to drill 10 wells pursuant to the terms of the
Acreage Earning Agreement.

 

Subsequent operations shall be deemed to be the Wells or other operations
conducted after drilling all of the Earning Wells pursuant to the terms of the
Acreage Earning Agreement.

 

B.  Subsequent Operations:

 

1.  Proposed Operations: If any party hereto should desire to drill any well on
the Contract Area other than the Initial Well or if any party should desire to
Rework, Sidetrack, Deepen, Recomplete or Plug Back a well in which such party
has not otherwise relinquished its interest in the proposed objective Zone under
this agreement, the party desiring to drill, Rework, Sidetrack, Deepen,
Recomplete or Plug Back such a well shall give written notice of the proposed
operation to the parties who have not otherwise relinquished their interest in
such objective Zone

 

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under this agreement and to all other parties in the case of a proposal for
Sidetracking or Deepening, specifying the work to be performed, the location,
proposed depth, objective Zone and the estimated cost of the operation.  The
parties to whom such a notice is delivered shall have thirty (30) days after
receipt of the notice within which to notify the party proposing to do the work
whether they elect to participate in the cost of the proposed operation.  If a
drilling rig is on location, notice of a proposal to Rework, Sidetrack,
Recomplete, Plug Back or Deepen may be given by telephone and the response
period shall be limited to forty- eight (48) hours, exclusive of Saturday,
Sunday and legal holidays.  Failure of a party to whom such notice is delivered
to reply within the period above fixed shall constitute an election by that
party not to participate in the cost of the proposed operation. Any proposal by
a party to conduct an operation conflicting with the operation initially
proposed shall be delivered to all parties within the time and in the manner
provided in Article VI.B.6.

 

If all parties to whom such notice is delivered elect to participate in such a
proposed operation, the parties shall be contractually committed to participate
therein provided such operations are commenced within the time period hereafter
set forth, and Operator shall, no later than ninety (90) days after expiration
of the notice period of thirty (30) days (or as promptly as practicable after
the expiration of the forty-eight (48) hour period when a drilling rig is on
location, as the case may be), actually commence the proposed operation and
thereafter complete it with due diligence at the risk and expense of the parties
participating therein; provided, however, said commencement date may be extended
upon written notice of same by Operator to the other parties, for a period of up
to thirty (30) additional days if, in the sole opinion of Operator, such
additional time is reasonably necessary to obtain permits from governmental
authorities, surface rights (including rights-of- way) or appropriate drilling
equipment, or to complete title examination or curative matter required for
title approval or acceptance.  If the actual operation has not been commenced
within the time provided (including any extension thereof as specifically
permitted herein or in the force majeure provisions of Article XI) and if any
party hereto still desires to conduct said operation, written notice proposing
same must be resubmitted to the other parties in accordance herewith as if no
prior proposal had been made.

 

2.  Operations by Less Than All Parties: See also Article XVI.G.

 

(a) Determination of Participation.  If any party to whom such notice is
delivered as provided in Article VI.B.1. elects not to participate in the
proposed operation, then, in order to be entitled to the benefits of this
Article, the party or parties giving the notice and such other parties as shall
elect to participate in the operation shall, no later than ninety (90) days
after the expiration of the notice period of thirty (30) days (or as promptly as
practicable after the expiration of the forty-eight (48) hour period when a
drilling rig is on location, as the case may be) actually commence the proposed
operation and complete it with due diligence.  Operator shall perform all work
for the account of the Consenting Parties; provided, however, if no drilling rig
or other equipment is on location, and if Operator is a Non-Consenting Party,
the Consenting Parties shall either: (i) request Operator to perform the work
required by such proposed operation for the account of the Consenting Parties,
or (ii) designate one of the Consenting Parties as Operator to perform such
work.  The rights and duties granted to and imposed upon the Operator under this
agreement are granted to and imposed upon the party designated as Operator for
an operation in which the original Operator is a Non-Consenting Party. 
Consenting Parties, when conducting operations on the Contract Area pursuant to
this Article VI.B.2., shall comply with all terms and conditions of this
agreement.

 

If less than all parties approve any proposed operation, the proposing party,
immediately after the expiration of the applicable notice period, shall advise
all Parties of the total interest of the parties approving such operation and
its recommendation as to whether the Consenting Parties should proceed with the
operation as proposed.  Each Consenting Party, within forty-eight (48) hours
(exclusive of Saturday, Sunday, and legal holidays) after delivery of such
notice, shall advise the proposing party of its desire to (i) limit
participation to such party’s interest as shown on Exhibit “A” or (ii) carry
only its proportionate part (determined by dividing such party’s interest in the
Contract Area by the interests of all Consenting Parties in the Contract Area)
of Non-Consenting Parties’ interests, or (iii) carry its proportionate part
(determined as provided in (ii)) of Non-Consenting Parties’ interests together
with all or a portion of its proportionate part of any Non-Consenting Parties’
interests that any Consenting Party did not elect to take.  Any interest of
Non-Consenting Parties that is not carried by a Consenting Party shall be deemed
to be carried by the party proposing the operation if such party does not
withdraw its proposal.  Failure to advise the proposing party within the time
required shall be deemed an election under (i). In the event a drilling rig is
on location, notice may be given by telephone, and the time permitted for such a
response shall not exceed a total of forty-eight (48) hours (exclusive of
Saturday, Sunday and legal holidays).  The proposing party, at its election, may
withdraw such proposal if there is less than 100% participation and shall notify
all parties of such decision within ten (10) days, or within twenty-four (24)
hours if a drilling rig is on location, following expiration of the applicable
response period. If 100% subscription to the proposed operation is obtained, the
proposing party shall promptly notify the Consenting Parties of their
proportionate interests in the operation and the party serving as Operator shall
commence such operation within the period provided in Article VI.B.1., subject
to the same extension right as provided therein.

 

(b) Relinquishment of Interest for Non-Participation. The entire cost and risk
of conducting such operations shall be borne by the Consenting Parties in the
proportions they have elected to bear same under the terms of the preceding
paragraph.  Consenting Parties shall keep the leasehold estates involved in such
operations free and clear of all liens and encumbrances of every kind created by
or arising from the operations of the Consenting Parties.  If such an operation
results in a dry hole, then subject to Articles VI.B.6. and VI.E.3., the
Consenting Parties shall plug and abandon the well and restore the surface
location at their sole cost, risk and expense; provided, however, that those
Non-Consenting Parties that participated in the drilling, Deepening or
Sidetracking of the well shall remain liable for, and shall pay, their
proportionate shares of the cost of plugging and abandoning the well and
restoring the surface location insofar only as those costs were not increased by
the subsequent operations of the Consenting Parties.  If any well drilled,
Reworked, Sidetracked, Deepened, Recompleted or Plugged Back under the
provisions of this Article results in a well capable of producing Oil and/or Gas
in paying quantities, the Consenting Parties shall Complete and equip the well
to produce at their sole cost and risk, and the well shall then be turned over
to Operator (if the Operator did not conduct the operation) and shall be
operated by it at the expense and for the account of the Consenting Parties. 
Upon commencement of operations for the drilling, Reworking, Sidetracking,
Recompleting, Deepening or Plugging Back of any such well by Consenting Parties
in accordance with the provisions of this Article, each Non-Consenting Party
shall be deemed to have relinquished to Consenting Parties, and the Consenting
Parties shall own and be entitled to receive, in proportion to their respective
interests, all of such Non- Consenting Party’s interest in the well and share of
production therefrom or, in the case of a Reworking, Sidetracking,

 

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Deepening, Recompleting or Plugging Back, all of such Non-Consenting Party’s
interest in the production obtained from the operation in which the
Non-Consenting Party did not elect to participate.  Such relinquishment shall be
effective until the proceeds of the sale of such share, calculated at the well,
or market value thereof if such share is not sold (after deducting applicable ad
valorem, production, severance, and excise taxes, royalty, overriding royalty
and other interests not excepted by Article III.C. payable out of or measured by
the production from such well accruing with respect to such interest until it
reverts), shall equal the total of the following:

 

(i) 100% of each such Non-Consenting Party’s share of the cost of any newly
acquired surface equipment beyond the wellhead connections (including but not
limited to stock tanks, separators, treaters, pumping equipment and piping),
plus 100% of each such Non-Consenting Party’s share of the cost of operation of
the well commencing with first production and continuing until each such
Non-Consenting Party’s relinquished interest shall revert to it under other
provisions of this Article, it being agreed that each Non-Consenting Party’s
share of such costs and equipment will be that interest which would have been
chargeable to such Non-Consenting Party had it participated in the well from the
beginning of the operations; and

 

(ii) 300% of (a) that portion of the costs and expenses of drilling, Reworking,
Sidetracking, Deepening, Plugging Back, testing, Completing, and Recompleting,
after deducting any cash contributions received under Article VIII.C., and of
(b) that portion of the cost of newly acquired equipment in the well (to and
including the wellhead connections), which would have been chargeable to such
Non-Consenting Party if it had participated therein.

 

Notwithstanding anything to the contrary in this Article VI.B., if the well does
not reach the deepest objective Zone described in the notice proposing the well
for reasons other than the encountering of granite or practically impenetrable
substance or other condition in the hole rendering further operations
impracticable, Operator shall give notice thereof to each Non-Consenting Party
who submitted or voted for an alternative proposal under Article VI.B.6. to
drill the well to a shallower Zone than the deepest objective Zone proposed in
the notice under which the well was drilled, and each such Non- Consenting Party
shall have the option to participate in the initial proposed Completion of the
well by paying its share of the cost of drilling the well to its actual depth,
calculated in the manner provided in Article VI.B.4. (a).  If any such Non-
Consenting Party does not elect to participate in the first Completion proposed
for such well, the relinquishment provisions of this Article VI.B.2. (b) shall
apply to such party’s interest.

 

(c) Reworking, Recompleting or Plugging Back. An election not to participate in
the drilling, Sidetracking or Deepening of a well shall be deemed an election
not to participate in any Reworking or Plugging Back operation proposed in such
a well, or portion thereof, to which the initial non-consent election applied
that is conducted at any time prior to full recovery by the Consenting Parties
of the Non-Consenting Party’s recoupment amount.  Similarly, an election not to
participate in the Completing or Recompleting of a well shall be deemed an
election not to participate in any Reworking operation proposed in such a well,
or portion thereof, to which the initial non-consent election applied that is
conducted at any time prior to full recovery by the Consenting Parties of the
Non-Consenting Party’s recoupment amount.  Any such Reworking, Recompleting or
Plugging Back operation conducted during the recoupment period shall be deemed
part of the 3cost of operation of said well and there shall be added to the sums
to be recouped by the Consenting Parties 300% of that portion of the costs of
the Reworking, Recompleting or Plugging Back operation which would have been
chargeable to such Non-Consenting Party had it participated therein.  If such a
Reworking, Recompleting or Plugging Back operation is proposed during such
recoupment period, the provisions of this Article VI.B. shall be applicable as
between said Consenting Parties in said well.

 

(d) Recoupment Matters. During the period of time Consenting Parties are
entitled to receive Non-Consenting Party’s share of production, or the proceeds
therefrom, Consenting Parties shall be responsible for the payment of all ad
valorem, production, severance, excise, gathering and other taxes, and all
royalty, overriding royalty and other burdens applicable to Non-Consenting
Party’s share of production not excepted by Article III.C.

 

In the case of any Reworking, Sidetracking, Plugging Back, Recompleting or
Deepening operation, the Consenting Parties shall be permitted to use, free of
cost, all casing, tubing and other equipment in the well, but the ownership of
all such equipment shall remain unchanged; and upon abandonment of a well after
such Reworking, Sidetracking, Plugging Back, Recompleting or Deepening, the
Consenting Parties shall account for all such equipment to the owners thereof,
with each party receiving its proportionate part in kind or in value, less cost
of salvage.

 

Within ninety (90) days after the completion of any operation under this
Article, the party conducting the operations for the Consenting Parties shall
furnish each Non-Consenting Party with an inventory of the equipment in and
connected to the well, and an itemized statement of the cost of drilling,
Sidetracking, Deepening, Plugging Back, testing, Completing, Recompleting, and
equipping the well for production; or, at its option, the operating party, in
lieu of an itemized statement of such costs of operation, may submit a detailed
statement of monthly billings.  Each month thereafter, during the time the
Consenting Parties are being reimbursed as provided above, the party conducting
the operations for the Consenting Parties shall furnish the Non-Consenting
Parties with an itemized statement of all costs and liabilities incurred in the
operation of the well, together with a statement of the quantity of Oil and Gas
produced from it and the amount of proceeds realized from the sale of the well’s
working interest production during the preceding month.  In determining the
quantity of Oil and Gas produced during any month, Consenting Parties shall use
industry accepted methods such as but not limited to metering or periodic well
tests.  Any amount realized from the sale or other disposition of equipment
newly acquired in connection with any such operation which would have been owned
by a Non-Consenting Party had it participated therein shall be credited against
the total unreturned costs of the work done and of the equipment purchased in
determining when the interest of such Non-Consenting Party shall revert to it as
above provided; and if there is a credit balance, it shall be paid to such Non-
Consenting Party.

 

If and when the Consenting Parties recover from a Non-Consenting Party’s
relinquished interest the amounts provided for above, the relinquished interests
of such Non-Consenting Party shall automatically revert to it as of 7:00 a.m. on
the 1st day of the month following the day on which such recoupment occurs, and,
from and after such reversion, such Non-Consenting Party shall own the same
interest in such well, the material and equipment in or pertaining thereto, and
the production therefrom as such Non-Consenting Party would have been entitled
to had it participated in the drilling, Sidetracking, Reworking, Deepening,
Recompleting or Plugging Back of said well.  Thereafter, such Non-Consenting
Party shall be charged with and shall pay its proportionate part of the further
costs of the operation of said well in accordance with the terms of this
agreement and Exhibit “C” attached hereto.

 

3. Stand-By Costs: When a well which has been drilled or Deepened has reached
its authorized depth and all tests have been completed and the results thereof
furnished to the parties, or when operations on the well have been otherwise
terminated pursuant to Article VI.F., stand-by costs incurred pending response
to a party’s notice proposing a Reworking,

 

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Sidetracking, Deepening, Recompleting, Plugging Back or Completing operation in
such a well (including the period required under Article VI.B.6. to resolve
competing proposals) shall be charged and borne as part of the drilling or
Deepening operation just completed.  Stand-by costs subsequent to all parties
responding, or expiration of the response time permitted, whichever first
occurs, and prior to agreement as to the participating interests of all
Consenting Parties pursuant to the terms of the second grammatical paragraph of
Article VI.B.2. (a), shall be charged to and borne as part of the proposed
operation, but if the proposal is subsequently withdrawn because of insufficient
participation, such stand-by costs shall be allocated between the Consenting
Parties in the proportion each Consenting Party’s interest as shown on Exhibit
“A” bears to the total interest as shown on Exhibit “A” of all Consenting
Parties.

 

In the event that notice for a Sidetracking operation is given while the
drilling rig to be utilized is on location, any party may request and receive up
to five (5) additional days after expiration of the forty-eight hour response
period specified in Article VI.B.1. within which to respond by paying for all
stand-by costs and other costs incurred during such extended response period;
Operator may require such party to pay the estimated stand-by time in advance as
a condition to extending the response period.  If more than one party elects to
take such additional time to respond to the notice, standby costs shall be
allocated between the parties taking additional time to respond on a day-to-day
basis in the proportion each electing party’s interest as shown on Exhibit “A”
bears to the total interest as shown on Exhibit “A” of all the electing parties.

 

4. Deepening: If less than all parties elect to participate in a drilling,
Sidetracking, or Deepening operation proposed pursuant to Article VI.B.1., the
interest relinquished by the Non-Consenting Parties to the Consenting Parties
under Article VI.B.2. shall relate only and be limited to the lesser of (i) the
total depth actually drilled or (ii) the objective depth or Zone of which the
parties were given notice under Article VI.B.1. (“Initial Objective”).  Such
well shall not be Deepened beyond the Initial Objective without first complying
with this Article to afford the Non-Consenting Parties the opportunity to
participate in the Deepening operation.

 

In the event any Consenting Party desires to drill or Deepen a Non-Consent Well
to a depth below the Initial Objective, such party shall give notice thereof,
complying with the requirements of Article VI.B.1., to all parties (including
Non- Consenting Parties).  Thereupon, Articles VI.B.1. and 2. shall apply and
all parties receiving such notice shall have the right to participate or not
participate in the Deepening of such well pursuant to said Articles VI.B.1. and
2.  If a Deepening operation is approved pursuant to such provisions, and if any
Non-Consenting Party elects to participate in the Deepening operation, such
Non-Consenting party shall pay or make reimbursement (as the case may be) of the
following costs and expenses.

 

(a) If the proposal to Deepen is made prior to the Completion of such well as a
well capable of producing in paying quantities, such Non-Consenting Party shall
pay (or reimburse Consenting Parties for, as the case may be) that share of
costs and expenses incurred in connection with the drilling of said well from
the surface to the Initial Objective which Non- Consenting Party would have paid
had such Non-Consenting Party agreed to participate therein, plus the
Non-Consenting Party’s share of the cost of Deepening and of participating in
any further operations on the well in accordance with the other provisions of
this Agreement; provided, however, all costs for testing and Completion or
attempted Completion of the well incurred by Consenting Parties prior to the
point of actual operations to Deepen beyond the Initial Objective shall be for
the sole account of Consenting Parties.

 

(b) If the proposal is made for a Non-Consent Well that has been previously
Completed as a well capable of producing in paying quantities, but is no longer
capable of producing in paying quantities, such Non-Consenting Party shall pay
(or reimburse Consenting Parties for, as the case may be) its proportionate
share of all costs of drilling, Completing, and equipping said well from the
surface to the Initial Objective, calculated in the manner provided in paragraph
(a) above, less those costs recouped by the Consenting Parties from the sale of
production from the well.  The Non-Consenting Party shall also pay its
proportionate share of all costs of re-entering said well.  The Non-Consenting
Parties’ proportionate part (based on the percentage of such well Non-Consenting
Party would have owned had it previously participated in such Non-Consent Well)
of the costs of salvable materials and equipment remaining in the hole and
salvable surface equipment used in connection with such well shall be determined
in accordance with Exhibit “C.”  If the Consenting Parties have recouped the
cost of drilling, Completing, and equipping the well at the time such Deepening
operation is conducted, then a Non- Consenting Party may participate in the
Deepening of the well with no payment for costs incurred prior to re-entering
the well for Deepening

 

The foregoing shall not imply a right of any Consenting Party to propose any
Deepening for a Non-Consent Well prior to the drilling of such well to its
Initial Objective without the consent of the other Consenting Parties as
provided in Article VI.F.

 

5. Sidetracking: Any party having the right to participate in a proposed
Sidetracking operation that does not own an interest in the affected wellbore at
the time of the notice shall, upon electing to participate, tender to the
wellbore owners its proportionate share (equal to its interest in the
Sidetracking operation) of the value of that portion of the existing wellbore to
be utilized as follows:

 

(a) If the proposal is for Sidetracking an existing dry hole, reimbursement
shall be on the basis of the actual costs incurred in the initial drilling of
the well down to the depth at which the Sidetracking operation is initiated.

 

(b) If the proposal is for Sidetracking a well which has previously produced,
reimbursement shall be on the basis of such party’s proportionate share of
drilling and equipping costs incurred in the initial drilling of the well down
to the depth at which the Sidetracking operation is conducted, calculated in the
manner described in Article VI.B.4(b) above.  Such party’s proportionate share
of the cost of the well’s salvable materials and equipment down to the depth at
which the Sidetracking operation is initiated shall be determined in accordance
with the provisions of Exhibit “C.”

 

6. Order of Preference of Operations. Except as otherwise specifically provided
in this agreement, if any party desires to propose the conduct of an operation
that conflicts with a proposal that has been made by a party under this Article
VI, such party shall have fifteen (15) days from delivery of the initial
proposal, in the case of a proposal to drill a well or to perform an operation
on a well where no drilling rig is on location, or twenty-four (24) hours,
exclusive of Saturday, Sunday and legal holidays, from delivery of the initial
proposal, if a drilling rig is on location for the well on which such operation
is to be conducted, to deliver to all parties entitled to participate in the
proposed operation such party’s alternative proposal, such alternate proposal to
contain the same information required to be included in the initial proposal. 
Each party receiving such proposals shall elect by delivery of notice to
Operator within five (5) days after expiration of the proposal period, or within
twenty-four (24) hours (exclusive of Saturday, Sunday and legal holidays) if a
drilling rig is on location for the well that is the subject of the proposals,
to participate in one of the competing proposals.  Any party not electing within
the time required shall be deemed not to have voted.  The proposal receiving the
vote of parties owning the largest aggregate percentage interest of the parties
voting shall have priority over all other competing proposals; in the case of a
tie vote, the

 

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initial proposal shall prevail. Operator shall deliver notice of such result to
all parties entitled to participate in the operation within five (5) days after
expiration of the election period (or within twenty-four (24) hours, exclusive
of Saturday, Sunday and legal holidays, if a drilling rig is on location).  Each
party shall then have two (2) days (or twenty-four (24) hours if a rig is on
location) from receipt of such notice to elect by delivery of notice to Operator
to participate in such operation or to relinquish interest in the affected well
pursuant to the provisions of Article VI.B.2.; failure by a party to deliver
notice within such period shall be deemed an election not to participate in the
prevailing proposal.

 

7. Conformity to Spacing Pattern. Notwithstanding the provisions of this Article
VI.B.2., it is agreed that no wells shall be proposed to be drilled to or
Completed in or produced from a Zone from which a well located elsewhere on the
Contract Area is producing, unless such well conforms to the then-existing well
spacing pattern for such Zone or for which a variance has been granted by the
appropriate authority.

 

8. Paying Wells. No party shall conduct any Reworking, Deepening, Plugging Back,
Completion, Recompletion, or Sidetracking operation under this agreement with
respect to any well then capable of producing in paying quantities except with
the consent of all parties that have not relinquished interests in the well at
the time of such operation.

 

C.  Completion of Wells; Reworking and Plugging Back:

 

1. Completion: Without the consent of all parties, no well shall be drilled,
Deepened or Sidetracked, except any well drilled, Deepened or Sidetracked
pursuant to the provisions of Article VI.B.2. of this agreement.  Consent to the
drilling, Deepening or Sidetracking shall include:

 

ý    Option No. 1: All necessary expenditures for the drilling, Deepening or
Sidetracking, testing, Completing and equipping of the well, including necessary
tankage and/or surface facilities.

 

2. Rework, Recomplete or Plug Back: No well shall be Reworked, Recompleted or
Plugged Back except a well Reworked, Recompleted, or Plugged Back pursuant to
the provisions of Article VI.B.2. of this agreement.  Consent to the Reworking,
Recompleting or Plugging Back of a well shall include all necessary expenditures
in conducting such operations and Completing and equipping of said well,
including necessary tankage and/or surface facilities.

 

D.  Other Operations:

 

Operator shall not undertake any single project reasonably estimated to require
an expenditure in excess of Twenty-five Thousand Dollars ($25,000.00) except in
connection with the drilling, Sidetracking, Reworking, Deepening, Completing,
Recompleting or Plugging Back of a well that has been previously authorized by
or pursuant to this agreement; provided, however, that, in case of explosion,
fire, flood or other sudden emergency, whether of the same or different nature,
Operator may take such steps and incur such expenses as in its opinion are
required to deal with the emergency to safeguard life and property but Operator,
as promptly as possible, shall report the emergency to the other parties.  If
Operator prepares an AFE for its own use, Operator shall furnish any
Non-Operator so requesting an information copy thereof for any single project
costing in excess of Twenty-five Thousand Dollars ($25,000.00).  Any party who
has not relinquished its interest in a well shall have the right to propose that
Operator perform repair work or undertake the installation of artificial lift
equipment or ancillary production facilities such as salt water disposal wells
or to conduct additional work with respect to a well drilled hereunder or other
similar project (but not including the installation of gathering lines or other
transportation or marketing facilities, the installation of which shall be
governed by separate agreement between the parties) reasonably estimated to
require an expenditure in excess of the amount first set forth above in this
Article VI.D. (except in connection with an operation required to be proposed
under Article VI.B.1., which shall be governed exclusively by that Article). 
Operator shall deliver such proposal to all parties entitled to participate
therein.  If within thirty (30) days thereof Operator secures the written
consent of any party or parties owning at least 50% of the interests of the
parties entitled to participate in such operation, each party having the right
to participate in such project shall be bound by the terms of such proposal and
shall be obligated to pay its proportionate share of the costs of the proposed
project as if it had consented to such project pursuant to the terms of the
proposal or non-consent its interest subject to the provisions of Article
VI.B.2.(b).

 

E.  Abandonment of Wells:

 

1.  Abandonment of Dry Holes: Except for any well drilled or Deepened pursuant
to Article VI.B.2., any well which has been drilled or Deepened under the terms
of this agreement and is proposed to be completed as a dry hole shall not be

 

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plugged and abandoned without the consent of all parties.  Should Operator,
after diligent effort, be unable to contact any party, or should any party fail
to reply within forty-eight (48) hours (exclusive of Saturday, Sunday and legal
holidays) after delivery of notice of the proposal to plug and abandon such
well, such party shall be deemed to have consented to the proposed abandonment. 
All such wells shall be plugged and abandoned in accordance with applicable
regulations and at the cost, risk and expense of the parties who participated in
the cost of drilling or Deepening such well.  Any party who objects to plugging
and abandoning such well by notice delivered to Operator within forty-eight (48)
hours (exclusive of Saturday, Sunday and legal holidays) after delivery of
notice of the proposed plugging shall take over the well as of the end of such
forty-eight (48) hour notice period and conduct further operations in search of
Oil and/or Gas subject to the provisions of Article VI.B.; failure of such party
to provide proof reasonably satisfactory to Operator of its financial capability
to conduct such operations or to take over the well within such period or
thereafter to conduct operations on such well or plug and abandon such well
shall entitle Operator to retain or take possession of the well and plug and
abandon the well.  The party taking over the well shall indemnify Operator (if
Operator is an abandoning party) and the other abandoning parties against
liability for any further operations conducted on such well except for the costs
of plugging and abandoning the well and restoring the surface, for which the
abandoning parties shall remain proportionately liable.

 

2. Abandonment of Wells That Have Produced: Except for any well in which a
Non-Consent operation has been conducted hereunder for which the Consenting
Parties have not been fully reimbursed as herein provided, any well which has
been completed as a producer shall not be plugged and abandoned without the
consent of all parties who participated in the cost of drilling the well.  If
all parties consent to such abandonment, the well shall be plugged and abandoned
in accordance with applicable regulations and at the cost, risk and expense of
all the parties hereto.  Failure of a party to reply within thirty (30) days of
delivery of notice of proposed abandonment shall be deemed an election to
consent to the proposal.  If, within thirty (30) days after delivery of notice
of the proposed abandonment of any well, all parties do not agree to the
abandonment of such well, those wishing to continue its operation from the Zone
then open to production shall be obligated to take over the well as of the
expiration of the applicable notice period and shall indemnify Operator (if
Operator is an abandoning party) and the other abandoning parties against
liability for any further operations on the well conducted by such parties. 
Failure of such party or parties to provide proof reasonably satisfactory to
Operator of their financial capability to conduct such operations or to take
over the well within the required period or thereafter to conduct operations on
such well shall entitle operator to retain or take possession of such well and
plug and abandon the well.

 

Parties taking over a well as provided herein shall tender to each of the other
parties its proportionate share of the value of the well’s salvable material and
equipment, determined in accordance with the provisions of Exhibit “C,” less the
estimated cost of salvaging and the estimated cost of plugging and abandoning
and restoring the surface; provided, however, that in the event the estimated
plugging and abandoning and surface restoration costs and the estimated cost of
salvaging are higher than the value of the well’s salvable material and
equipment, each of the abandoning parties shall tender to the parties continuing
operations their proportionate shares of the estimated excess cost.  Each
abandoning party shall assign to the non-abandoning parties, without warranty,
express or implied, as to title or as to quantity, or fitness for use of the
equipment and material, all of its interest in the wellbore of the well and
related equipment, together with its interest in the Leasehold insofar and only
insofar as such Leasehold covers the right to obtain production from that
wellbore in the Zone then open to production.  If the interest of the abandoning
party is or includes and Oil and Gas Interest, such party shall execute and
deliver to the non-  abandoning party or parties an oil and gas lease, limited
to the wellbore and the Zone then open to production, for a term of one (1) year
and so long thereafter as Oil and/or Gas is produced from the Zone covered
thereby, such lease to be on the form attached as Exhibit “B.”  The assignments
or leases so limited shall encompass the Drilling Unit upon which the well is
located.  The payments by, and the assignments or leases to, the assignees shall
be in a ratio based upon the relationship of their respective percentage of
participation in the Contract Area to the aggregate of the percentages of
participation in the Contract Area of all assignees.  There shall be no
readjustment of interests in the remaining portions of the Contract Area.

 

Thereafter, abandoning parties shall have no further responsibility, liability,
or interest in the operation of or production from the well in the Zone then
open other than the royalties retained in any lease made under the terms of this
Article.  Upon request, Operator shall continue to operate the assigned well for
the account of the non-abandoning parties at the rates and charges contemplated
by this agreement, plus any additional cost and charges which may arise as the
result of the separate ownership of the assigned well.  Upon proposed
abandonment of the producing Zone assigned or leased, the assignor or lessor
shall then have the option to repurchase its prior interest in the well (using
the same valuation formula) and participate in further operations therein
subject to the provisions hereof.

 

3. Abandonment of Non-Consent Operations: The provisions of Article VI.E.1. or
VI.E.2. above shall be applicable as between Consenting Parties in the event of
the proposed abandonment of any well excepted from said Articles; provided,
however, no well shall be permanently plugged and abandoned unless and until all
parties having the right to conduct further operations therein have been
notified of the proposed abandonment and afforded the opportunity to elect to
take over the well in accordance with the provisions of this Article VI.E.; and
provided further, that Non-Consenting Parties who own an interest in a portion
of the well shall pay their proportionate shares of abandonment and surface
restoration cost for such well as provided in Article VI.B.2.(b).  Failure of a
party to make a written election within thirty (30) days will be deemed an
election to consent to the abandonment of the well.

 

F.  Termination of Operations:

 

Upon the commencement of an operation for the drilling, Reworking, Sidetracking,
Plugging Back, Deepening, testing, Completion or plugging of a well, including
but not limited to the Initial Well, such operation shall not be terminated
without consent of parties bearing 60% of the costs of such operation; provided,
however, that in the event granite or other practically impenetrable substance
or condition in the hole is encountered which renders further operations
impractical, Operator may discontinue operations and give notice of such
condition in the manner provided in Article VI.B.1, and the provisions of
Article VI.B. or VI.E. shall thereafter apply to such operation, as appropriate.

 

G.  Taking Production in Kind:

 

ý      Option No. 1: Gas Balancing Agreement Attached

 

Each party shall take in kind or separately dispose of its proportionate share
of all Oil and Gas produced from the Contract Area, exclusive of production
which may be used in development and producing operations and in preparing and
treating Oil and Gas for marketing purposes and production unavoidably lost. 
Any extra expenditure incurred in the taking in kind or separate disposition by
any party of its proportionate share of the production shall be borne by such
party.  Any party taking its share of production in kind shall be required to
pay for only its proportionate share of such part of Operator’s surface
facilities which it uses.

 

Each party shall execute such division orders and contracts as may be necessary
for the sale of its interest in production from the Contract Area, and, except
as provided in Article VII.B., shall be entitled to receive payment

 

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directly from the purchaser thereof for its share of all production.

 

If any party fails to make the arrangements necessary to take in kind or
separately dispose of its proportionate share of the Oil produced from the
Contract Area, Operator shall have the right, subject to the revocation at will
by the party owning it, but not the obligation, to purchase such Oil or sell it
to others at any time and from time to time, for the account of the non-taking
party.  Any such purchase or sale by Operator may be terminated by Operator upon
at least ten (10) days written notice to the owner of said production and shall
be subject always to the right of the owner of the production upon at least ten
(10) days written notice to Operator to exercise at any time its right to take
in kind, or separately dispose of, its share of all Oil not previously delivered
to a purchaser.  Any purchase or sale by Operator of any other party’s share of
Oil shall be only for such reasonable periods of time as are consistent with the
minimum needs of the industry under the particular circumstances, but in no
event for a period in excess of one (1) year.

 

Any such sale by Operator shall be in a manner commercially reasonable under the
circumstances but Operator shall have no duty to share any existing market or to
obtain a price equal to that received under any existing market.  The sale or
delivery by Operator of a non-taking party’s share of Oil under the terms of any
existing contract of Operator shall not give the non-taking party any interest
in or make the non-taking party a party to said contract.  No purchase shall be
made by Operator without first giving the non-taking party at least ten (10)
days written notice of such intended purchase and the price to be paid or the
pricing basis to be used. 

 

All parties shall give timely written notice to Operator of their Gas marketing
arrangements for the following month, excluding price, and shall notify Operator
immediately in the event of a change in such arrangements.  Operator shall
maintain records of all marketing arrangements, and of volumes actually sold or
transported, which records shall be made available to Non-Operators upon
reasonable request.

 

In the event one or more parties’ separate disposition of its share of the Gas
causes split-stream deliveries to separate pipelines and/or deliveries which on
a day-to-day basis for any reason are not exactly equal to a party’s respective
proportion-  ate share of total Gas sales to be allocated to it, the balancing
or accounting between the parties shall be in accordance with any Gas balancing
agreement between the parties hereto, whether such an agreement is attached as
Exhibit “E” or is a separate agreement.  Operator shall give notice to all
parties of the first sales of Gas from any well under this agreement.

 

ARTICLE VII.

EXPENDITURES AND LIABILITY OF PARTIES

 

A.  Liability of Parties:

 

The liability of the parties shall be several, not joint or collective. Each
party shall be responsible only for its obligations, and shall be liable only
for its proportionate share of the costs of developing and operating the
Contract Area.  Accordingly, the liens granted among the parties in Article
VII.B. are given to secure only the debts of each severally, and no party shall
have any liability to third parties hereunder to satisfy the default of any
other party in the payment of any expense or obligation hereunder.  It is not
the intention of the parties to create, nor shall this agreement be construed as
creating, a mining or other partnership, joint venture, agency relationship or
association, or to render the parties liable as partners, co-venturers, or
principals.  In their relations with each other under this agreement, the
parties shall not be considered fiduciaries or to have established a
confidential relationship but rather shall be free to act on an arm’s-length
basis in accordance with their own respective self-interest, subject, however,
to the obligation of the parties to act in good faith in their dealings with
each other with respect to activities hereunder.

 

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B.  Liens and Security Interests:

 

Each party grants to the other parties hereto a lien upon any interest it now
owns or hereafter acquires in Oil and Gas Leases and Oil and Gas Interests in
the Contract Area, and a security interest and/or purchase money security
interest in any interest it now owns or hereafter acquires in the personal
property and fixtures on or used or obtained for use in connection therewith, to
secure performance of all of its obligations under this agreement including but
not limited to payment of expense, interest and fees, the proper disbursement of
all monies paid hereunder, the assignment or relinquishment of interest in Oil
and Gas Leases as required hereunder, and the proper performance of operations
hereunder.  Such lien and security interest granted by each party hereto shall
include such party’s leasehold interests, working interests, operating rights,
and royalty and overriding royalty interests in the Contract Area now owned or
hereafter acquired and in lands pooled or unitized therewith or otherwise
becoming subject to this agreement, the Oil and Gas when extracted therefrom and
equipment situated thereon or used or obtained for use in connection therewith
(including, without limitation, all wells, tools, and tubular goods), and
accounts  (including, without limitation, accounts arising from gas imbalances
or from the sale of Oil and/or Gas at the wellhead), contract rights, inventory
and general intangibles relating thereto or arising therefrom, and all proceeds
and products of the foregoing.

 

To perfect the lien and security agreement provided herein, each party hereto
shall execute and acknowledge the recording supplement and/or any financing
statement prepared and submitted by any party hereto in conjunction herewith or
at any time following execution hereof, and Operator is authorized to file this
agreement or the recording supplement executed herewith as a lien or mortgage in
the applicable real estate records and as a financing statement with the proper
officer under the Uniform Commercial Code in the state in which the Contract
Area is situated and such other states as Operator shall deem appropriate to
perfect the security interest granted hereunder.  Any party may file the
recording supplement executed herewith as a lien or mortgage in the applicable
real estate records and/or a financing statement with the proper officer under
the Uniform Commercial Code.

 

Each party represents and warrants to the other parties hereto that the lien and
security interest granted by such party to the other parties shall be a first
and prior lien, and each party hereby agrees to maintain the priority of said
lien and security interest against all persons acquiring an interest in Oil and
Gas Leases and Interests covered by this agreement by, through or under such
party.  All parties acquiring an interest in Oil and Gas Leases and Oil and Gas
Interests covered by this agreement, whether by assignment, merger, mortgage,
operation of law, or otherwise, shall be deemed to have taken subject to the
lien and security interest granted by this Article VII.B. as to all obligations
attributable to such interest hereunder whether or not such obligations arise
before or after such interest is acquired.

 

To the extent that parties have a security interest under the Uniform Commercial
Code of the state in which the Contract Area is situated, they shall be entitled
to exercise the rights and remedies of a secured party under the Code.  The
bringing of a suit and the obtaining of judgment by a party for the secured
indebtedness shall not be deemed an election of remedies or otherwise affect the
lien rights or security interest as security for the payment thereof.  In
addition, upon default by any party in the payment of its share of expenses,
interests or fees, or upon the improper use of funds by the Operator, the other
parties shall have the right, without prejudice to other rights or remedies, to
collect from the purchaser the proceeds from the sale of such defaulting party’s
share of Oil and Gas until the amount owed by such party, plus interest as
provided in “Exhibit C,” has been received, and shall have the right to offset
the amount owed against the proceeds from the sale of such defaulting party’s
share of Oil and Gas.  All purchasers of production may rely on a notification
of default from the non-defaulting party or parties stating the amount due as a
result of the default, and all parties waive any recourse available against
purchasers for releasing production proceeds as provided in this paragraph.

 

If any party fails to pay its share of cost within one hundred twenty (120) days
after rendition of a statement therefor by Operator, the non-defaulting parties,
including Operator, shall upon request by Operator, pay the unpaid amount in the
proportion that the interest of each such party bears to the interest of all
such parties.  The amount paid by each party so paying its share of the unpaid
amount shall be secured by the liens and security rights described in Article
VII.B., and each paying party may independently pursue any remedy available
hereunder or otherwise.

 

If any party does not perform all of its obligations hereunder, and the failure
to perform subjects such party to foreclosure or execution proceedings pursuant
to the provisions of this agreement, to the extent allowed by governing law, the
defaulting party waives any available right of redemption from and after the
date of judgment, any required valuation or appraisement of the mortgaged or
secured property prior to sale, any available right to stay execution or to
require a marshaling of assets and any required bond in the event a receiver is
appointed.  In addition, to the extent permitted by applicable law, each party
hereby grants to the other parties a power of sale as to any property that is
subject to the lien and security rights granted hereunder, such power to be
exercised in the manner provided by applicable law or otherwise in a
commercially reasonable manner and upon reasonable notice.

 

Each party agrees that the other parties shall be entitled to utilize the
provisions of Oil and Gas lien law or other lien law of any state in which the
Contract Area is situated to enforce the obligations of each party hereunder. 
Without limiting the generality of the foregoing, to the extent permitted by
applicable law, Non-Operators agree that Operator may invoke or utilize the
mechanics’ or materialmen’s lien law of the state in which the Contract Area is
situated in order to secure the payment to Operator of any sum due hereunder for
services performed or materials supplied by Operator.

 

C.  Advances:

 

Operator, at its election, shall have the right from time to time to demand and
receive from one or more of the other parties payment in advance of their
respective shares of the estimated amount of the expense to be incurred in
operations hereunder during the next succeeding month, which right may be
exercised only by submission to each such party of an itemized statement of such
estimated expense, together with an invoice for its share thereof.  Each such
statement and invoice for the payment in advance of estimated expense shall be
submitted on or before the 20th day of the next preceding month.  Each party
shall pay to Operator its proportionate share of such estimate within fifteen
(15) days after such estimate and invoice is received.  If any party fails to
pay its share of said estimate within said time, the amount due shall bear
interest as provided in Exhibit “C” until paid.  Proper adjustment shall be made
monthly between advances and actual expense to the end that each party shall
bear and pay its proportionate share of actual expenses incurred, and no more.

 

D.  Defaults and Remedies:

 

If any party fails to discharge any financial obligation under this agreement,
including without limitation the failure to make any advance under the preceding
Article VII.C. or any other provision of this agreement, within the period
required for such payment hereunder, then in addition to the remedies provided
in Article VII.B. or elsewhere in this agreement, the remedies specified below
shall be applicable.  For purposes of this Article VII.D., all notices and
elections shall be delivered

 

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only by Operator, except that Operator shall deliver any such notice and
election requested by a non-defaulting Non-Operator, and when Operator is the
party in default, the applicable notices and elections can be delivered by any
Non-Operator.  Election of any one or more of the following remedies shall not
preclude the subsequent use of any other remedy specified below or otherwise
available to a non-defaulting party.

 

1. Suspension of Rights: Any party may deliver to the party in default a Notice
of Default, which shall specify the default, specify the action to be taken to
cure the default, and specify that failure to take such action will result in
the exercise of one or more of the remedies provided in this Article.  If the
default is not cured within thirty (30) days of the delivery of such Notice of
Default, all of the rights of the defaulting party granted by this agreement may
upon notice be suspended until the default is cured, without prejudice to the
right of the non-defaulting party or parties to continue to enforce the
obligations of the defaulting party previously accrued or thereafter accruing
under this agreement.  If Operator is the party in default, the Non-Operators
shall have in addition the right, by vote of Non-Operators owning a majority in
interest in the Contract Area after excluding the voting interest of Operator,
to appoint a new Operator effective immediately.  The rights of a defaulting
party that may be suspended hereunder at the election of the non-defaulting
parties shall include, without limitation, the right to receive information as
to any operation conducted hereunder during the period of such default, the
right to elect to participate in an operation proposed under Article VI.B. of
this agreement, the right to participate in an operation being conducted under
this agreement even if the party has previously elected to participate in such
operation, and the right to receive proceeds of production from any well subject
to this agreement.

 

2. Suit for Damages: Non-defaulting parties or Operator for the benefit of
non-defaulting parties may sue (at joint account expense) to collect the amounts
in default, plus interest accruing on the amounts recovered from the date of
default until the date of collection at the rate specified in Exhibit “C”
attached hereto.  Nothing herein shall prevent any party from suing any
defaulting party to collect consequential damages accruing to such party as a
result of the default.

 

3. Deemed Non-Consent: The non-defaulting party (if Operator is the defaulting
party) or Operator for the benefit of the non-defaulting parties may deliver a
written Notice of Non-Consent Election to the defaulting party at any time after
the expiration of the thirty-day cure period following delivery of the Notice of
Default, in which event if the billing is for the drilling a new well or the
Plugging Back, Sidetracking, Reworking or Deepening of a well which is to be or
has been plugged as a dry hole, or for the Completion or Recompletion of any
well, the defaulting party will be conclusively deemed to have elected not to
participate in the operation and to be a Non-Consenting Party with respect
thereto under Article VI.B. or VI.C., as the case may be, to the extent of the
costs unpaid by such party, notwithstanding any election to participate
theretofore made.  If election is made to proceed under this provision, then the
non-defaulting parties may not elect to sue for the unpaid amount pursuant to
Article VII.D.2.

 

Until the delivery of such Notice of Non-Consent Election to the defaulting
party, such party shall have the right to cure its default by paying its unpaid
share of costs plus interest at the rate set forth in Exhibit “C,” provided,
however, such payment shall not prejudice the rights of the non-defaulting
parties to pursue remedies for damages incurred by the non-  defaulting parties
as a result of the default.  Any interest relinquished pursuant to this Article
VII.D.3. shall be offered to the non-defaulting parties in proportion to their
interests, and the non-defaulting parties electing to participate in the
ownership of such interest shall be required to contribute their shares of the
defaulted amount upon their election to participate therein.

 

4. Advance Payment: If a default is not cured within thirty (30) days of the
delivery of a Notice of Default, Operator, or Non-Operators if Operator is the
defaulting party, may thereafter require advance payment from the defaulting
party of such defaulting party’s anticipated share of any item of expense for
which Operator, or Non-Operators, as the case may be, would be entitled to
reimbursement under any provision of this agreement, whether or not such expense
was the subject of the previous default.  Such right includes, but is not
limited to, the right to require advance payment for the estimated costs of
drilling a well or Completion of a well as to which an election to participate
in drilling or Completion has been made.  If the defaulting party fails to pay
the required advance payment, the non-defaulting parties may pursue any of the
remedies provided in the Article VII.D. or any other default remedy provided
elsewhere in this agreement.  Any excess of funds advanced remaining when the
operation is completed and all costs have been paid shall be promptly returned
to the advancing party.

 

5. Costs and Attorneys’ Fees: In the event any party is required to bring legal
proceedings to enforce any financial obligation of a party hereunder, the
prevailing party in such action shall be entitled to recover all court costs,
costs of collection, and a reasonable attorney’s fee, which the lien provided
for herein shall also secure.

 

E.  Rentals, Shut-in Well Payments and Minimum Royalties:

 

Rentals, shut-in well payments and minimum royalties which may be required under
the terms of any lease shall be paid by the party or parties who subjected such
lease to this agreement at its or their expense.  In the event two or more
parties own and have contributed interests in the same lease to this agreement,
such parties may designate one of such parties to make said payments for and on
behalf of all such parties.  Any party may request, and shall be entitled to
receive, proper evidence of all such payments.  In the event of failure to make
proper payment of any rental, shut-in well payment or minimum royalty through
mistake or oversight where such payment is required to continue the lease in
force, any loss which results from such non-payment shall be borne in accordance
with the provisions of Article IV.B.2.

 

Operator shall notify Non-Operators of the anticipated completion of a shut-in
well, or the shutting in or return to production of a producing well, at least
five (5) days (excluding Saturday, Sunday, and legal holidays) prior to taking
such action, or at the earliest opportunity permitted by circumstances, but
assumes no liability for failure to do so.  In the event of failure by Operator
to so notify Non-Operators, the loss of any lease contributed hereto by
Non-Operators for failure to make timely payments of any shut-in well payment
shall be borne jointly by the parties hereto under the provisions of Article
IV.B.3.

 

F.  Taxes:

 

Beginning with the first calendar year after the effective date hereof, Operator
shall render for ad valorem taxation all property subject to this agreement
which by law should be rendered for such taxes, and it shall pay all such taxes
assessed thereon before they become delinquent.  Prior to the rendition date,
each Non-Operator shall furnish Operator information as to burdens (to include,
but not be limited to, royalties, overriding royalties and production payments)
on Leases and Oil and Gas Interests contributed by such Non-Operator.  If the
assessed valuation of any Lease is reduced by reason of its being subject to
outstanding excess royalties, overriding royalties or production payments, the
reduction in ad valorem taxes resulting therefrom shall inure to the benefit of
the owner or owners of such Lease, and Operator shall adjust the charge to such
owner or owners so as to reflect the benefit of such reduction.  If the ad
valorem taxes are based in whole or in part upon separate valuations of each
party’s working interest, then notwithstanding anything to the contrary herein,
charges to the joint account shall be made and paid by the parties hereto in
accordance with the tax value generated by each party’s working interest. 
Operator shall bill the other parties for their proportionate shares of all tax
payments in the manner provided in Exhibit “C.”  Provided, however, if at any
time any party takes its share of production in kind, or separately disposes of
it, such party shall pay or cause to be paid any and all taxes as to such
production.

 

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If Operator considers any tax assessment improper, Operator may, at its
discretion, protest within the time and manner prescribed by law, and prosecute
the protest to a final determination, unless all parties agree to abandon the
protest prior to final determination.  During the pendency of administrative or
judicial proceedings, Operator may elect to pay, under protest, all such taxes
and any interest and penalty.  When any such protested assessment shall have
been finally determined, Operator shall pay the tax for the joint account,
together with any interest and penalty accrued, and the total cost shall then be
assessed against the parties, and be paid by them, as provided in Exhibit “C.”

 

Each party shall pay or cause to be paid all production, severance, excise,
gathering and other taxes imposed upon or with respect to the production or
handling of such party’s share of Oil and Gas produced under the terms of this
agreement.

 

ARTICLE VIII.

ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

 

A.  Surrender of Leases:

 

The Leases covered by this agreement, insofar as they embrace acreage in the
Contract Area, shall not be surrendered in whole or in part unless all parties
consent thereto.

 

However, should any party desire to surrender its interest in any Lease or in
any portion thereof, such party shall give written notice of the proposed
surrender to all parties, and the parties to whom such notice is delivered shall
have thirty (30) days after delivery of the notice within which to notify the
party proposing the surrender whether they elect to consent thereto.  Failure of
a party to whom such notice is delivered to reply within said 30-day period
shall constitute a consent to the surrender of the Leases described in the
notice.  If all parties do not agree or consent thereto, the party desiring to
surrender shall assign, without express or implied warranty of title, all of its
interest in such Lease, or portion thereof, and any well, material and equipment
which may be located thereon and any rights in production thereafter secured, to
the parties not consenting to such surrender.  If the interest of the assigning
party is or includes an Oil and Gas Interest, the assigning party shall execute
and deliver to the party or parties not consenting to such surrender an oil and
gas lease covering such Oil and Gas Interest for a term of one (1) year and so
long thereafter as Oil and/or Gas is produced from the land covered thereby,
such lease to be negotiated.  Upon such assignment or lease, the assigning party
shall be relieved from all obligations thereafter accruing, but not theretofore
accrued, with respect to the interest assigned or leased and the operation of
any well attributable thereto, and the assigning party shall have no further
interest in the assigned or leased premises and its equipment and production
other than the royalties retained in any lease made under the terms of this
Article.  The party assignee or lessee shall pay to the party assignor or lessor
the reasonable salvage value of the latter’s interest in any well’s salvable
materials and equipment attributable to the assigned or leased acreage.  The
value of all salvable materials and equipment shall be determined in accordance
with the provisions of Exhibit “C,” less the estimated cost of salvaging and the
estimated cost of plugging and abandoning and restoring the surface.  If such
value is less than such costs, then the party assignor or lessor shall pay to
the party assignee or lessee the amount of such deficit.  If the assignment or
lease is in favor of more than one party, the interest shall be shared by such
parties in the proportions that the interest of each bears to the total interest
of all such parties.  If the interest of the parties to whom the assignment is
to be made varies according to depth, then the interest assigned shall similarly
reflect such variances.

 

Any assignment, lease or surrender made under this provision shall not reduce or
change the assignor’s, lessor’s or surrendering party’s interest as it was
immediately before the assignment, lease or surrender in the balance of the
Contract Area; and the acreage assigned, leased or surrendered, and subsequent
operations thereon, shall not thereafter be subject to the terms and provisions
of this agreement but shall be deemed subject to an Operating Agreement in the
form of this agreement.

 

B. Renewal or Extension of Leases:

 

If any party secures a renewal or replacement of an Oil and Gas Lease or
Interest subject to this agreement, then all other parties shall be notified
promptly upon such acquisition or, in the case of a replacement Lease taken
before expiration of an existing Lease, promptly upon expiration of the existing
Lease.  The parties notified shall have the right for a period of thirty (30)
days following delivery of such notice in which to elect to participate in the
ownership of the renewal or replacement Lease, insofar as such Lease affects
lands within the Contract Area, by paying to the party who acquired it their
proportionate shares of the acquisition cost allocated to that part of such
Lease within the Contract Area, which shall be in proportion to the interest
held at that time by the parties in the Contract Area.  Each party who
participates in the purchase of a renewal or replacement Lease shall be given an
assignment of its proportionate interest therein by the acquiring party.

 

If some, but less than all, of the parties elect to participate in the purchase
of a renewal or replacement Lease, it shall be owned by the parties who elect to
participate therein, in a ratio based upon the relationship of their respective
percentage of participation in the Contract Area to the aggregate of the
percentages of participation in the Contract Area of all parties participating
in the purchase of such renewal or replacement Lease.  The acquisition of a
renewal or replacement Lease by any or all of the parties hereto shall not cause
a readjustment of the interests of the parties stated in Exhibit “A,” but any
renewal or replacement Lease in which less than all parties elect to participate
shall not be subject to this agreement but shall be deemed subject to a separate
Operating Agreement in the form of this agreement.

 

If the interests of the parties in the Contract Area vary according to depth,
then their right to participate proportionately in renewal or replacement Leases
and their right to receive an assignment of interest shall also reflect such
depth variances.

 

The provisions of this Article shall apply to renewal or replacement Leases
whether they are for the entire interest covered by the expiring Lease or cover
only a portion of its area or an interest therein.  Any renewal or replacement
Lease taken before the expiration of its predecessor Lease, or taken or
contracted for or becoming effective within six (6) months after the expiration
of the existing Lease, shall be subject to this provision so long as this
agreement is in effect at the time of such acquisition or at the time the
renewal or replacement Lease becomes effective; but any Lease taken or
contracted for more than six (6) months after the expiration of an existing
Lease shall not be deemed a renewal or replacement Lease and shall not be
subject to the provisions of this agreement.

 

The provisions in this Article shall also be applicable to extensions of Oil and
Gas Leases.

 

C.  Acreage or Cash Contributions:

 

                While this agreement is in force, if any party contracts for a
contribution of cash towards the drilling of a well or any other operation on
the Contract Area, such contribution shall be paid to the party who conducted
the drilling or other operation and shall be applied by it against the cost of
such drilling or other operation.  If the contribution be in the form of
acreage, the party to whom the contribution is made shall promptly tender an
assignment of the acreage, without warranty of title, to the Drilling Parties in
the proportions said Drilling Parties shared the cost of drilling the well. Such
acreage shall become a separate Contract Area and, to the extent possible, be
governed by provisions identical to this agreement.  Each party shall promptly
notify all other parties of any acreage or cash contributions it may obtain in
support of any well or any other operation on the Contract Area.  The above
provisions shall also be applicable to optional rights to earn acreage outside
the Contract Area which are in support of well drilled inside Contract Area.

 

14

--------------------------------------------------------------------------------

 

If any party contracts for any consideration relating to disposition of such
party’s share of substances produced hereunder,

such consideration shall not be deemed a contribution as contemplated in this
Article VIII.C.

 

D.  Assignment; Maintenance of Uniform Interest:

 

Every sale, encumbrance, transfer or other disposition made by any party shall
be made expressly subject to this agreement and shall be made without prejudice
to the right of the other parties, and any transferee of an ownership interest
in any Oil and Gas Lease or Interest shall be deemed a party to this agreement
as to the interest conveyed from and after the effective date of the transfer of
ownership; provided, however, that the other parties shall not be required to
recognize any such sale, encumbrance, transfer or other disposition for any
purpose hereunder until thirty (30) days after they have received a copy of the
recorded instrument of transfer or other satisfactory evidence thereof in
writing from the transferor or transferee.  No assignment or other disposition
of interest by a party shall relieve such party of obligations previously
incurred by such party hereunder with respect to the interest transferred,
including without limitation the obligation of a party to pay all costs
attributable to an operation conducted hereunder in which such party has agreed
to participate prior to making such assignment, and the lien and security
interest granted by Article VII.B. shall continue to burden the interest
transferred to secure payment of any such obligations.

 

If, at any time the interest of any party is divided among and owned by four or
more co-owners, Operator, at its discretion, may require such co-owners to
appoint a single trustee or agent with full authority to receive notices,
approve expenditures, receive billings for and approve and pay such party’s
share of the joint expenses, and to deal generally with, and with power to bind,
the co-owners of such party’s interest within the scope of the operations
embraced in this agreement; however, all such co-  owners shall have the right
to enter into and execute all contracts or agreements for the disposition of
their respective shares of the Oil and Gas produced from the Contract Area and
they shall have the right to receive, separately, payment of the sale proceeds
thereof.

 

E. Waiver of Rights to Partition:

 

If permitted by the laws of the state or states in which the property covered
hereby is located, each party hereto owning an undivided interest in the
Contract Area waives any and all rights it may have to partition and have set
aside to it in severalty its undivided interest therein.

 

ARTICLE IX.

INTERNAL REVENUE CODE ELECTION

 

If, for federal income tax purposes, this agreement and the operations hereunder
are regarded as a partnership, and if the parties have not otherwise agreed to
form a tax partnership pursuant to Exhibit “G” or other agreement between them,
each party thereby affected elects to be excluded from the application of all of
the provisions of Subchapter “K,” Chapter 1, Subtitle  “A,” of the Internal
Revenue Code of 1986, as amended (“Code”), as permitted and authorized by
Section 761 of the Code and the regulations promulgated thereunder.  Operator is
authorized and directed to execute on behalf of each party hereby affected such
evidence of this election as may be required by the Secretary of the Treasury of
the United States or the Federal Internal Revenue Service, including
specifically, but not by way of limitation, all of the returns, statements, and
the data required by Treasury Regulation §1.761.  Should there be any
requirement that each party hereby affected give further evidence of this
election, each such party shall execute such documents and furnish such other
evidence as may be required by the Federal Internal Revenue Service or as may be
necessary to evidence this election.  No such party shall give any notices or
take any other action inconsistent with the election made hereby.  If any
present or future income tax laws of the state or states in which the Contract
Area is located or any future income tax laws of the United States contain
provisions similar to those in Subchapter “K,” Chapter  1, Subtitle “A,” of the
Code, under which an election similar to that provided by Section 761 of the
Code is permitted, each party hereby affected shall make such election as may be
permitted or required by such laws.  In making the foregoing election, each such
party states that the income derived by such party from operations hereunder can
be adequately determined without the computation of partnership taxable income.

 

ARTICLE X.

CLAIMS AND LAWSUITS

 

Operator may settle any single uninsured third party damage claim or suit
arising from operations hereunder if the expenditure does not exceed Twenty-five
Thousand Dollars ($25,000.00) and if the payment is in complete settlement of
such claim or suit.  If the amount required for settlement exceeds the above
amount, the parties hereto shall assume and take over the further handling of
the claim or suit, unless such authority is delegated to Operator.  All costs
and expenses of handling settling, or otherwise discharging such claim or suit
shall be a the joint expense of the parties participating in the operation from
which the claim or suit arises.  If a claim is made against any party or if any
party is sued on account of any matter arising from operations hereunder over
which such individual has no control because of the rights given Operator by
this agreement, such party shall immediately notify all other parties, and the
claim or suit shall be treated as any other claim or suit involving operations
hereunder.

 

15

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ARTICLE XI.

FORCE MAJEURE

 

If any party is rendered unable, wholly or in part, by force majeure to carry
out its obligations under this agreement, other than the obligation to indemnify
or make money payments or furnish security, that party shall give to all other
parties prompt written notice of the force majeure with reasonably full
particulars concerning it; thereupon, the obligations of the party giving the
notice, so far as they are affected by the force majeure, shall be suspended
during, but no longer than, the continuance of the force majeure.  The term
“force majeure,” as here employed, shall mean an act of God, strike, lockout, or
other industrial disturbance, act of the public enemy, war, blockade, public
riot, lightening, fire, storm, flood or other act of nature, explosion,
governmental action, governmental delay, restraint or inaction, unavailability
of equipment, and any other cause, whether of the kind specifically enumerated
above or otherwise, which is not reasonably within the control of the party
claiming suspension.

 

The affected party shall use all reasonable diligence to remove the force
majeure situation as quickly as practicable. The requirement that any force
majeure shall be remedied with all reasonable dispatch shall not require the
settlement of strikes, lockouts, or other labor difficulty by the party
involved, contrary to its wishes; how all such difficulties shall be handled
shall be entirely within the discretion of the party concerned.

 

ARTICLE XII.

NOTICES

 

All notices authorized or required between the parties by any of the provisions
of this agreement, unless otherwise specifically provided, shall be in writing
and delivered in person or by United States mail, courier service, telegram,
telex, telecopier or any other form of facsimile, postage or charges prepaid,
and addressed to such parties at the addresses listed on Exhibit “A.”  All
telephone or oral notices permitted by this agreement shall be confirmed
immediately thereafter by written notice.  The originating notice given under
any provision hereof shall be deemed delivered only when received by the party
to whom such notice is directed, and the time for such party to deliver any
notice in response thereto shall run from the date the originating notice is
received.  “Receipt” for purposes of this agreement with respect to written
notice delivered hereunder shall be actual delivery of the notice to the address
of the party to be notified specified in accordance with this agreement, or to
the telecopy, facsimile or telex machine of such party.  The second or any
responsive notice shall be deemed delivered when deposited in the United States
mail or at the office of the courier or telegraph service, or upon transmittal
by telex, telecopy or facsimile, or when personally delivered to the party to be
notified, provided, that when response is required within 24 or  48 hours, such
response shall be given orally or by telephone, telex, telecopy or other
facsimile within such period. Each party shall have the right to change its
address at any time, and from time to time, by giving written notice thereof to
all other parties.  If a party is not available to receive notice orally or by
telephone when a party attempts to deliver a notice required to be delivered
within 24 or 48 hours, the notice may be delivered in writing by any other
method specified herein and shall be deemed delivered in the same manner
provided above for any responsive notice.

 

ARTICLE XIII.

TERM OF AGREEMENT

 

This agreement shall remain in full force and effect as to the Oil and Gas
Leases and/or Oil and Gas Interests subject hereto for the period of time
selected below; provided, however, no party hereto shall ever be construed as
having any right, title or interest in or to any Lease or Oil and Gas Interest
contributed by any other party beyond the term of this agreement.

 

ý            Option No. 1: So long as any of the Oil and Gas Leases subject to
this agreement remain or are continued in force as to any part of the Contract
Area, whether by production, extension, renewal or otherwise.

 

The termination of this agreement shall not relieve any party hereto from any
expense, liability or other obligation or any remedy therefor which has accrued
or attached prior to the date of such termination.

 

Upon termination of this agreement and the satisfaction of all obligations
hereunder, in the event a memorandum of this Operating Agreement has been filed
of record, Operator is authorized to file of record in all necessary recording
offices a notice of termination, and each party hereto agrees to execute such a
notice of termination as to Operator’s interest, upon request of Operator, if
Operator has satisfied all its financial obligations.

 

ARTICLE XIV.

COMPLIANCE WITH LAWS AND REGULATIONS

 

A.  Laws, Regulations and Orders:

 

This agreement shall be subject to the applicable laws of the state in which the
Contract Area is located, to the valid rules, regulations, and orders of any
duly constituted regulatory body of said state; and to all other applicable
federal, state, and local laws, ordinances, rules, regulations and orders.

 

B.  Governing Law:

 

This agreement and all matters pertaining hereto, including but not limited to
matters of performance, non-performance, breach, remedies, procedures, rights,
duties, and interpretation or construction, shall be governed and determined by
the law of the state of Colorado.

 

C.  Regulatory Agencies:

 

Nothing herein contained shall grant, or be construed to grant, Operator the
right or authority to waive or release any rights, privileges, or obligations
which Non-Operators may have under federal or state laws or under rules,
regulations or

 

16

--------------------------------------------------------------------------------

 

orders promulgated under such laws in reference to oil, gas and mineral
operations, including the location, operation, or production of wells, on tracts
offsetting or adjacent to the Contract Area.

 

With respect to the operations hereunder, Non-Operators agree to release
Operator from any and all losses, damages, injuries, claims and causes of action
arising out of, incident to or resulting directly or indirectly from Operator’s
interpretation or application of rules, rulings, regulations or orders of the
Department of Energy or Federal Energy Regulatory Commission or predecessor or
successor agencies to the extent such interpretation or application was made in
good faith and does not constitute gross negligence. Each Non-Operator further
agrees to reimburse Operator for such Non-Operator’s share of production or any
refund, fine, levy or other governmental sanction that Operator may be required
to pay as a result of such an incorrect interpretation or application, together
with interest and penalties thereon owing by Operator as a result of such
incorrect interpretation or application.

 

ARTICLE XV.

MISCELLANEOUS

 

A.  Execution:

 

This agreement shall be binding upon each Non-Operator when this agreement or a
counterpart thereof has been executed by such Non-Operator and Operator
notwithstanding that this agreement is not then or thereafter executed by all of
the parties to which it is tendered or which are listed on Exhibit “A” as owning
an interest in the Contract Area or which own, in fact, an interest in the
Contract Area.  Operator may, however, by written notice to all Non-Operators
who have become bound by this agreement as aforesaid, given at any time prior to
the actual spud date of the Initial Well but in no event later than five days
prior to the date specified in Article VI.A. for commencement of the Initial
Well, terminate this agreement if Operator in its sole discretion determines
that there is insufficient participation to justify commencement of drilling
operations.  In the event of such a termination by Operator, all further
obligations of the parties hereunder shall cease as of such termination.  In the
event any Non-Operator has advanced or prepaid any share of drilling or other
costs hereunder, all sums so advanced shall be returned to such Non-Operator
without interest.  In the event Operator proceeds with drilling operations for
the Initial Well without the execution hereof by all persons listed on Exhibit
“A” as having a current working interest in such well, Operator shall indemnify
Non-Operators with respect to all costs incurred for the Initial Well which
would have been charged to such person under this agreement if such person had
executed the same and Operator shall receive all revenues which would have been
received by such person under this agreement if such person had executed the
same.

 

B. Successors and Assigns:

 

This agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, devisees, legal representatives,
successors and assigns, and the terms hereof shall be deemed to run with the
Leases or Interests included within the Contract Area.

 

C. Counterparts:

 

This instrument may be executed in any number of counterparts, each of which
shall be considered an original for all purposes.

 

D.  Severability:

 

For the purposes of assuming or rejecting this agreement as an executory
contract pursuant to federal bankruptcy laws, this agreement shall not be
severable, but rather must be assumed or rejected in its entirety, and the
failure of any party to this agreement to comply with all of its financial
obligations provided herein shall be a material default.

 

ARTICLE XVI.

OTHER PROVISIONS

 

See Additional Provisions attached hereto and by reference made a part hereof.

 

17

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this agreement shall be effective as of the          day
of                                           , 2006.

 

 

ATTEST OR WITNESS:

 

 

OPERATOR

 

 

 

 

 

 

 

 

 

Noble Energy, Inc.

 

 

 

 

 

By

/s/ David W. Siple

 

 

 

 

 

 

David W. Siple

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

Attorney-In-Fact for GWW

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

NON-OPERATORS

 

 

 

 

 

 

Teton DJ LLC,

 

 

 

 

By Teton Energy Corporation, Manager

 

 

 

 

 

By

/s/ Patrick A. Quinn

 

 

 

 

 

 

Patrick A. Quinn

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

Chief Financial Officer

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

18

--------------------------------------------------------------------------------

 

ACKNOWLEDGMENTS

 

Note: The following forms of acknowledgment are the short forms approved by the
Uniform Law on Notarial Acts.

 

The validity and effect of these forms in any state will depend upon the
statutes of that state.

 

Individual acknowledgment:

 

State of

)

 

 

 

) ss.

 

 

County of

)

 

 

This instrument was acknowledged before me on

 

 

 

by

 

 

 

 

 

(Seal, if any)

 

 

 

 

Title (and Rank)

 

 

 

 

My commission expires:

 

 

 

Acknowledgment in representative capacity:

 

State of

Colorado

)

 

 

 

 

) ss.

 

 

County of

Denver

)

 

 

 

This instrument was acknowledged before me on

 

 

 

 

by

David W. Siple

as

 

Attorney-In-Fact of Noble Energy, Inc., a Delaware corporation

 

(Seal, if any)

 

 

 

 

Title (and Rank)

Notary Public

 

 

 

My commission expires:

February 9, 2009

 

State of

Colorado

)

 

 

 

 

) ss.

 

 

County of

Denver

)

 

 

 

This instrument was acknowledged before me on

 

 

 

 

by

Patrick A. Quinn

as

 

President of Teton DJ LLC, a Colorado Limited Liability Company

 

(Seal, if any)

 

 

 

 

Title (and Rank)

Notary Public

 

 

 

My commission expires:

 

 

19

--------------------------------------------------------------------------------

 

A.A.P.L. FORM 610 - 1989

 

MODEL FORM OPERATING AGREEMENT

 

 

OPERATING AGREEMENT

 

DATED

 

 

January 27

,

2006

    ,

 

 

 

year

 

 

OPERATOR

  Noble Energy, Inc.

 

CONTRACT AREA

  Chundy Complex

 

(See legal description below)

 

 

 

 

 

COUNTIES OF

  Sedgwick and Yuma

    STATE OF

  Colorado

 

COUNTIES OF

  Chase and Dundy

  , STATE OF

  Nebraska

 

Township  6  North, Range 39 West, 6th P.M. - ALL

Township  6  North, Range 40 West, 6th P.M. - ALL

Township  6  North, Range 41 West, 6th P.M. - ALL

Township  6  North, Range 42 West, 6th P.M. – (Chase Co., NE) Sections
1,2,11-14,23-26,35-36

Township  6  North, Range 42 West, 6th P.M. - (Sedgwick Co., CO) Sections
4-9,16-21,28-33

Township  5  North, Range 39 West, 6th P.M. - ALL

Township  5  North, Range 40 West, 6th P.M. - ALL

Township  5  North, Range 41 West, 6th P.M. - ALL

Township  5  North, Range 42 West, 6th P.M. - (Chase Co., NE) Sections
1,2,11-14,23-26,35-36

Township  5  North, Range 42 West, 6th P.M. - (Yuma Co., CO) Sections
5-8,17-20,29-32

Township  4  North, Range 40 West, 6th P.M. - ALL

Township  4  North, Range 41 West, 6th P.M. - ALL

Township  4  North, Range 42 West, 6th P.M. - (Dundy Co., NE) Sections
1-3,10-15,22-27,34-36

Township  4  North, Range 42 West, 6th P.M. - (Yuma Co., CO) Sections
3-10,15-22,27-34

Township  3  North, Range 40 West, 6th P.M. - Sections 4-9,16-21,28-33

Township  3  North, Range 41 West, 6th P.M. - ALL

Township  3  North, Range 42 West, 6th P.M. - (Dundy Co., NE) Sections
1-3,10-15,22-27,34-36

Township  3  North, Range 42 West, 6th P.M. - (Yuma Co., CO) Sections 3-10,
15-22,27-34

 

 

COPYRIGHT 1989 – ALL RIGHTS RESERVED
AMERICAN ASSOCIATION OF PETROLEUM
LANDMEN, 4100 FOSSIL CREEK BLVD.
FORT WORTH, TEXAS, 76137, APPROVED FORM.

 

A.A.P.L. NO. 610 –

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

Article

 

Title

 

Page

I.

 

DEFINITIONS

 

1

II.

 

EXHIBITS

 

1

III.

 

INTERESTS OF PARTIES

 

2

 

 

B. INTERESTS OF PARTIES IN COSTS AND PRODUCTION:

 

2

 

 

C. SUBSEQUENTLY CREATED INTERESTS:

 

2

IV.

 

TITLES

 

2

 

 

A. TITLE EXAMINATION:

 

2

 

 

B. LOSS OR FAILURE OF TITLE:

 

3

 

 

1. Failure of Title

 

3

 

 

2. Loss by Non-Payment or Erroneous Payment of Amount Due

 

3

 

 

3. Other Losses

 

3

 

 

4. Curing Title

 

3

V.

 

OPERATOR

 

4

 

 

A. DESIGNATION AND RESPONSIBILITIES OF OPERATOR:

 

4

 

 

B. RESIGNATION OR REMOVAL OF OPERATOR AND SELECTION OF SUCCESSOR:

 

4

 

 

1. Resignation or Removal of Operator

 

4

 

 

2. Selection of Successor Operator

 

4

 

 

3. Effect of Bankruptcy

 

4

 

 

C. EMPLOYEES AND CONTRACTORS:

 

4

 

 

D. RIGHTS AND DUTIES OF OPERATOR:

 

4

 

 

1. Competitive Rates and Use of Affiliates

 

4

 

 

2. Discharge of Joint Account Obligations

 

4

 

 

3. Protection from Liens

 

4

 

 

4. Custody of Funds

 

5

 

 

5. Access to Contract Area and Records

 

5

 

 

6. Filing and Furnishing Governmental Reports

 

5

 

 

7. Drilling and Testing Operations

 

5

 

 

8. Cost Estimates

 

5

 

 

9. Insurance

 

5

VI.

 

DRILLING AND DEVELOPMENT

 

5

 

 

A. INITIAL WELL:

 

5

 

 

B. SUBSEQUENT OPERATIONS:

 

5

 

 

1. Proposed Operations

 

5

 

 

2. Operations by Less Than All Parties

 

6

 

 

3. Stand-By Costs

 

7

 

 

4. Deepening

 

8

 

 

5. Sidetracking

 

8

 

 

6. Order of Preference of Operations

 

8

 

 

7. Conformity to Spacing Pattern

 

9

 

 

8. Paying Wells

 

9

 

 

C. COMPLETION OF WELLS; REWORKING AND PLUGGING BACK:

 

9

 

 

1. Completion

 

9

 

 

2. Rework, Recomplete or Plug Back

 

9

 

 

D. OTHER OPERATIONS:

 

9

 

 

E. ABANDONMENT OF WELLS:

 

9

 

 

1. Abandonment of Dry Holes

 

9

 

 

2. Abandonment of Wells That Have Produced

 

10

 

 

3. Abandonment of Non-Consent Operations

 

10

 

 

F. TERMINATION OF OPERATIONS:

 

10

 

 

G. TAKING PRODUCTION IN KIND:

 

10

 

 

(Option 1) Gas Balancing Agreement

 

10

VII.

 

EXPENDITURES AND LIABILITY OF PARTIES

 

11

 

 

A. LIABILITY OF PARTIES:

 

11

 

 

B. LIENS AND SECURITY INTERESTS:

 

12

 

 

C. ADVANCES:

 

12

 

 

D. DEFAULTS AND REMEDIES:

 

12

 

 

1. Suspension of Rights

 

13

 

 

2. Suit for Damages

 

13

 

 

3. Deemed Non-Consent

 

13

 

 

4. Advance Payment

 

13

 

 

5. Costs and Attorneys’ Fees

 

13

 

 

E. RENTALS, SHUT-IN WELL PAYMENTS AND MINIMUM ROYALTIES:

 

13

 

 

F. TAXES:

 

13

VIII.

 

ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

 

14

 

 

A. SURRENDER OF LEASES:

 

14

 

 

B. RENEWAL OR EXTENSION OF LEASES:

 

14

 

 

C. ACREAGE OR CASH CONTRIBUTIONS:

 

14

 

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D. ASSIGNMENT; MAINTENANCE OF UNIFORM INTEREST:

 

15

 

 

E. WAIVER OF RIGHTS TO PARTITION:

 

15

IX.

 

INTERNAL REVENUE CODE ELECTION

 

15

X.

 

CLAIMS AND LAWSUITS

 

15

XI.

 

FORCE MAJEURE

 

16

XII.

 

NOTICES

 

16

XIII.

 

TERM OF AGREEMENT

 

16

XIV.

 

COMPLIANCE WITH LAWS AND REGULATIONS

 

16

 

 

A. LAWS, REGULATIONS AND ORDERS:

 

16

 

 

B. GOVERNING LAW:

 

16

 

 

C. REGULATORY AGENCIES:

 

16

XV.

 

MISCELLANEOUS

 

17

 

 

A. EXECUTION:

 

17

 

 

B. SUCCESSORS AND ASSIGNS:

 

17

 

 

C. COUNTERPARTS:

 

17

 

 

D. SEVERABILITY

 

17

XVI.

 

OTHER PROVISIONS

 

17

 

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OPERATING AGREEMENT

 

THIS AGREEMENT, entered into by and between Noble Energy, Inc., hereinafter
designated and referred to as “Operator,” and the signatory party or parties
other than Operator, sometimes hereinafter referred to individually as
“Non-Operator,” and collectively as “Non-Operators.”

 

WITNESSETH:

 

WHEREAS, the parties to this agreement are owners of Oil and Gas Leases and/or
Oil and Gas Interests in the land identified in Exhibit “A,” and the parties
hereto have reached an agreement to explore and develop these Leases and/or Oil
and Gas Interests for the production of Oil and Gas to the extent and as
hereinafter provided,

 

NOW, THEREFORE, it is agreed as follows:

 

ARTICLE I.

DEFINITIONS

 

As used in this agreement, the following words and terms shall have the meanings
here ascribed to them:

 

A.  The term “AFE” shall mean an Authority for Expenditure prepared by a party
to this agreement for the purpose of estimating the costs to be incurred in
conducting an operation hereunder.

 

B.  The term “Completion” or “Complete” shall mean a single operation intended
to complete a well as a producer of Oil and Gas in one or more Zones, including,
but not limited to, the setting of production casing, perforating, well
stimulation and production testing conducted in such operation.

 

C.  The term “Contract Area” shall mean all of the lands, Oil and Gas Leases
and/or Oil and Gas Interests intended to be developed and operated for Oil and
Gas purposes under this agreement.  Such lands, Oil and Gas Leases and Oil and
Gas Interests are described in Exhibit “A.”

 

D.  The term “Deepen” shall mean a single operation whereby a well is drilled to
an objective Zone below the deepest Zone from which the well is or was producing
the Deepest lesser.

 

E.  The terms “Drilling Party” and “Consenting Party” shall mean a party who
agrees to join in and pay its share of the cost of any operation conducted under
the provisions of this agreement.

 

F.  The term “Drilling Unit” shall mean the area fixed for the drilling of one
well by order or rule of any state or federal body having authority.  If a
Drilling Unit is not fixed by any such rule or order, a Drilling Unit shall be
the drilling unit as established by the pattern of drilling in the Contract Area
unless fixed by express agreement of the Drilling Parties.

 

G.  The term “Drillsite” shall mean the Oil and Gas Lease or Oil and Gas
Interest on which a proposed well is to be located.

 

I.  The term “Non-Consent Well” shall mean a well in which less than all parties
have conducted an operation as provided in Article VI.B.2.

 

J.  The terms “Non-Drilling Party” and “Non-Consenting Party” shall mean a party
who elects not to participate in a proposed operation.

 

K.  The term “Oil and Gas” shall mean oil, gas, casinghead gas, gas condensate,
and/or all other liquid or gaseous hydrocarbons and other marketable substances
produced therewith, unless an intent to limit the inclusiveness of this term is
specifically stated.

 

L.  The term “Oil and Gas Interests” or “Interests” shall mean unleased fee and
mineral interests in Oil and Gas in tracts of land lying within the Contract
Area which are owned by parties to this agreement.

 

M.  The terms “Oil and Gas Lease,” “Lease” and “Leasehold” shall mean the oil
and gas leases or interests therein covering tracts of land lying within the
Contract Area which are owned by the parties to this agreement.

 

N.  The term “Plug Back” shall mean a single operation whereby a deeper Zone is
abandoned in order to attempt a Completion in a shallower Zone.

 

O.  The term “Recompletion” or “Recomplete” shall mean an operation whereby a
Completion is attempted in another Zone within the existing wellbore, whether or
not one zone is abandoned at such time.

 

P.  The term “Rework” shall mean an operation conducted in the wellbore of a
well after it is Completed to secure, restore, or improve production in a Zone
which is currently open to production in the wellbore.  Such operations include,
but are not limited to, well stimulation operations including refracturing of a
zone but exclude any routine repair or maintenance work or drilling,
Sidetracking, Deepening, Completing, Recompleting, or Plugging Back of a well.

 

Q.  The term “Sidetrack” shall mean the directional control and intentional
deviation of a well from vertical so as to change the bottom hole location
unless done to straighten the hole or drill around junk in the hole to overcome
other mechanical difficulties.

 

R.  The term “Zone” shall mean a stratum of earth containing or thought to
contain a common accumulation of Oil and Gas separately producible from any
other common accumulation of Oil and Gas.

 

Unless the context otherwise clearly indicates, words used in the singular
include the plural, the word “person” includes natural and artificial persons,
the plural includes the singular, and any gender includes the masculine,
feminine, and neuter.

 

ARTICLE II.

EXHIBITS

 

The following exhibits, as indicated below and attached hereto, are incorporated
in and made a part hereof:

 

X     A.            Exhibit “A,” shall include the following information:

 

(1) Description of lands subject to this agreement,

 

(2) Restrictions, if any, as to depths, formations, or substances,

 

(3) Parties to agreement with addresses and telephone numbers for notice
purposes,

 

(4) Percentages or fractional interests of parties to this agreement,

 

(5) Oil and Gas Leases and/or Oil and Gas Interests subject to this agreement,

 

(6) Burdens on production.

 

X     C.            Exhibit “C,” Accounting Procedure.

 

X     D.            Exhibit “D,” Insurance.

 

X     E.             Exhibit “E,” Gas Balancing Agreement.

 

X     G.            Exhibit “G,” Tax Partnership.

 

X     H.            Other:  Recording Supplement and Financing
Statement/Settlement Agreement

 

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If any provision of any exhibit, except Exhibits “E,” “F” and “G,” is
inconsistent with any provision contained in the body of this agreement, the
provisions in the body of this agreement shall prevail.

 

ARTICLE III.

INTERESTS OF PARTIES

 

B.  Interests of Parties in Costs and Production:

 

Unless changed by other provisions, all costs and liabilities incurred in
operations under this agreement shall be borne and paid, and all equipment and
materials acquired in operations on the Contract Area shall be owned, by the
parties as their interests are set forth in Exhibit “A.”  In the same manner,
the parties shall also own all production of Oil and Gas from the Contract Area
subject, however, to the payment of royalties and other burdens on production as
described hereafter.

 

Regardless of which party has contributed any Oil and Gas Lease or Oil and Gas
Interest on which royalty or other burdens may be payable and except as
otherwise expressly provided in this agreement, each party shall pay or deliver,
or cause to be paid or delivered, all burdens on its share of the production
from the Contract Area up to, but not in excess of, 19% except for the “Low NRI
Leases” as defined in the Acreage Earning Agreement between Teton Energy
Corporation and Noble Energy, Inc. and shall indemnify, defend and hold the
other parties free from any liability therefor. Except as otherwise expressly
provided in this agreement, if any party has contributed hereto any Lease or
Interest which is burdened with any royalty, overriding royalty, production
payment or other burden on production in excess of the amounts stipulated above,
such party so burdened shall assume and alone bear all such excess obligations
and shall indemnify, defend and hold the other parties hereto harmless from any
and all claims attributable to such excess burden.  However, so long as the
Drilling Unit for the productive Zone(s) is identical with the Contract Area,
each party shall pay or deliver, or cause to be paid or delivered, all burdens
on production from the Contract Area due under the terms of the Oil and Gas
Lease(s) which such party has contributed to this agreement, and shall
indemnify, defend and hold the other parties free from any liability therefor.

 

No party shall ever be responsible, on a price basis higher than the price
received by such party, to any other party’s lessor or royalty owner, and if
such other party’s lessor or royalty owner should demand and receive settlement
on a higher price basis, the party contributing the affected Lease shall bear
the additional royalty burden attributable to such higher price.

 

Nothing contained in this Article III.B. shall be deemed an assignment or
cross-assignment of interests covered hereby, and in the event two or more
parties contribute to this agreement jointly owned Leases, the parties’
undivided interests in said Leaseholds shall be deemed separate leasehold
interests for the purposes of this agreement.

 

C.  Subsequently Created Interests:

 

If any party has contributed hereto a Lease or Interest that is burdened with an
assignment of production given as security for the payment of money, or if,
after the date of this agreement, any party creates an overriding royalty,
production payment, net profits interest, assignment of production or other
burden payable out of production attributable to its working interest hereunder,
such burden shall be deemed a “Subsequently Created Interest.”  Further, if any
party has contributed hereto a Lease or Interest burdened with an overriding
royalty, production payment, net profits interests, or other burden payable out
of production created prior to the date of this agreement, and such burden is
not shown on Exhibit “A,” such burden also shall be deemed a Subsequently
Created Interest to the extent such burden causes the burdens on such party’s
Lease or Interest to exceed the amount stipulated in Article III.B. above

 

The party whose interest is burdened with the Subsequently Created Interest (the
“Burdened Party”) shall assume and alone bear, pay and discharge the
Subsequently Created Interest and shall indemnify, defend and hold harmless the
other parties from and against any liability therefor.  Further, if the Burdened
Party fails to pay, when due, its share of expenses chargeable hereunder, all
provisions of Article VII.B. shall be enforceable against the Subsequently
Created Interest in the same manner as they are enforceable against the working
interest of the Burdened Party.  If the Burdened Party is required under this
agreement to assign or relinquish to any other party, or parties, all or a
portion of its working interest and/or the production attributable thereto, said
other party, or parties, shall receive said assignment and/or production free
and clear of said Subsequently Created Interest, and the Burdened Party shall
indemnify, defend and hold harmless said other party, or parties, from any and
all claims and demands for payment asserted by owners of the Subsequently
Created Interest.

 

ARTICLE IV.

TITLES

 

A.  Title Examination:

 

Title examination shall be made on the Drilling Unit of any proposed well prior
to commencement of drilling operations.  The opinion will include the ownership
of the working interest, minerals, royalty, overriding royalty and production
payments under the applicable Leases.  Each party contributing Leases and/or Oil
and Gas Interests to be included in the Drillsite or Drilling Unit, if
appropriate, shall furnish to Operator all abstracts (including federal lease
status reports), title opinions, title papers and curative material in its
possession free of charge.  All such information not in the possession of or
made available to Operator by the parties, but necessary for the examination of
the title, shall be obtained by Operator.  Operator shall cause title to be
examined by attorneys on its staff or by outside attorneys.  Copies of all title
opinions shall be furnished to each Drilling Party.  Costs incurred by Operator
in procuring abstracts, fees paid outside attorneys and other land professionals
for title examination (including preliminary, supplemental, shut-in royalty
opinions and division order title opinions and curative work) and other direct
charges as provided in Exhibit “C” shall be borne by the Drilling Parties in the
proportion that the interest of each Drilling Party bears to the total interest
of all Drilling Parties as such interests appear in Exhibit “A.”  Operator shall
make no charge for services rendered by its staff attorneys or other personnel
in the performance of the above functions.

 

Each party shall be responsible for securing curative matter and pooling
amendments or agreements required in connection with Leases or Oil and Gas
Interests contributed by such party. Unless otherwise agreed Operator shall be
responsible for the preparation and recording of pooling designations or
declarations and communitization agreements as well as the conduct of hearings
before governmental agencies for the securing of spacing or pooling orders or
any other orders necessary or appropriate to the conduct of operations
hereunder.  This shall not prevent any party from appearing on its own behalf at
such hearings. Costs incurred by Operator, including fees paid to outside
attorneys, and other outside professionals which are associated with hearings
before governmental agencies, and which costs are necessary and proper for the
activities contemplated under this agreement, shall be direct charges to the
joint account and shall not be covered by the administrative overhead charges as
provided in Exhibit “C.”

 

2

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Operator shall make no charge for services rendered by its staff attorneys or
other personnel in the performance of the above functions.

 

No well shall be drilled on the Contract Area until after (1) the title to the
Drillsite or Drilling Unit, if appropriate, has been examined as above provided,
and (2) the title has been approved by the examining attorney or title has been
accepted by all of the Drilling Parties in such well.

 

B. Loss or Failure of Title:

 

3. Other Losses: All losses of Leases or Interests committed to this agreement
shall be joint losses and shall be borne by all parties in proportion to their
interests shown on Exhibit “A.”  This shall include but not be limited to the
loss of any Lease or Interest through failure to develop or because express or
implied covenants have not been performed (other than performance which requires
only the payment of money), and the loss of any Lease by expiration at the end
of its primary term if it is not renewed or extended.  There shall be no
readjustment of interests in the remaining portion of the Contract Area on
account of any joint loss.

 

4. Curing Title: In the event of a Failure of Title under Article IV.B.1. or a
loss of title under Article IV.B.2. above, any Lease or Interest acquired by any
party hereto (other than the party whose interest has failed or was lost) during
the ninety (90) day period provided by Article IV.B.1. and Article IV.B.2. above
covering all or a portion of the interest that has failed or was lost shall be
offered at cost to the party whose interest has failed or was lost, and the
provisions of Article VIII.B. shall not apply to such acquisition.

 

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ARTICLE V.

OPERATOR

 

A.  Designation and Responsibilities of Operator:

 

Noble Energy, Inc. shall be the Operator of the Contract Area, and shall conduct
and direct and have full control of all operations on the Contract Area as
permitted and required by, and within the limits of this agreement.  In its
performance of services hereunder for the Non-Operators, Operator shall be an
independent contractor not subject to the control or direction of the
Non-Operators except as to the type of operation to be undertaken in accordance
with the election procedures contained in this agreement.  Operator shall not be
deemed, or hold itself out as, the agent of the Non-Operators with authority to
bind them to any obligation or liability assumed or incurred by Operator as to
any third party.  Operator shall conduct its activities under this agreement as
a reasonable prudent operator, in a good and workmanlike manner, with due
diligence and dispatch, in accordance with good oilfield practice, and in
compliance with applicable law and regulation, but in no event shall it have any
liability as Operator to the other parties for losses sustained or liabilities
incurred except such as may result from gross negligence or willful misconduct.

 

B. Resignation or Removal of Operator and Selection of Successor:

 

1. Resignation or Removal of Operator: Operator may resign at any time by giving
written notice thereof to Non-Operators. If Operator terminates its legal
existence, no longer owns an interest hereunder in the Contract Area, or is no
longer capable of serving as Operator, Operator shall be deemed to have resigned
without any action by Non-Operators, except the selection of a successor. 
Operator may be removed only for good cause by the affirmative vote of
Non-Operators owning a majority interest based on ownership as shown on Exhibit
“A” remaining after excluding the voting interest of Operator; such vote shall
not be deemed effective until a written notice has been delivered to the
Operator by a Non-Operator detailing the alleged default and Operator has failed
to cure the default within thirty (30) days from its receipt of the notice or,
if the default concerns an operation then being conducted, within forty-eight
(48) hours of its receipt of the notice.  For purposes hereof, “good cause”
shall mean not only gross negligence or willful misconduct but also the material
breach of or inability to meet the standards of operation contained in Article
V.A. or material failure or inability to perform its obligations under this
agreement.

 

Subject to Article VII.D.1., such resignation or removal shall not become
effective until 7:00 o’clock A.M. on the first day of the calendar month
following the expiration of ninety (90) days after the giving of notice of
resignation by Operator or action by the Non-Operators to remove Operator,
unless a successor Operator has been selected and assumes the duties of Operator
at an earlier date. Operator, after effective date of resignation or removal,
shall be bound by the terms hereof as a Non-Operator.  A change of a corporate
name or structure of Operator or transfer of Operator’s interest to any single
subsidiary, parent or successor corporation shall not be the basis for removal
of Operator.

 

2.  Selection of Successor Operator: Upon the resignation or removal of Operator
under any provision of this agreement, a successor Operator shall be selected by
the parties.  The successor Operator shall be selected from the parties owning
an interest in the Contract Area at the time such successor Operator is
selected.  The successor Operator shall be selected by the affirmative vote of
two (2) or more parties owning a majority interest based on ownership as shown
on Exhibit “A”; provided, however, if an Operator which has been removed or is
deemed to have resigned fails to vote or votes only to succeed itself, the
successor Operator shall be selected by the affirmative vote of the party or
parties owning a majority interest based on ownership as shown on Exhibit “A”
remaining after excluding the voting interest of the Operator that was removed
or resigned.  The former Operator shall within thirty (30) days after selection
of a successor Operator deliver to the successor Operator all records and data
relating to the operations conducted by the former Operator to the extent such
records and data are not already in the possession of the successor operator. 
Any cost of obtaining or copying the former Operator’s records and data shall be
charged to the joint account.

 

3.  Effect of Bankruptcy: If Operator becomes insolvent, bankrupt or is placed
in receivership, it shall be deemed to have resigned without any action by
Non-Operators, except the selection of a successor.  If a petition for relief
under the federal bankruptcy laws is filed by or against Operator, and the
removal of Operator is prevented by the federal bankruptcy court, all
Non-Operators and Operator shall comprise an interim operating committee to
serve until Operator has elected to reject or assume this agreement pursuant to
the Bankruptcy Code, and an election to reject this agreement by Operator as a
debtor in possession, or by a trustee in bankruptcy, shall be deemed a
resignation as Operator without any action by Non-Operators, except the
selection of a successor.  During the period of time the operating committee
controls operations, all actions shall require the approval of two (2) or more
parties owning a majority interest based on ownership as shown on Exhibit “A.” 
In the event there are only two (2) parties to this agreement, during the period
of time the operating committee controls operations, a third party acceptable to
Operator, Non-Operator and the federal bankruptcy court shall be selected as a
member of the operating committee, and all actions shall require the approval of
two (2) members of the operating committee without regard for their interest in
the Contract Area based on Exhibit “A.”

 

C.  Employees and Contractors:

 

The number of employees or contractors used by Operator in conducting operations
hereunder, their selection, and the hours of labor and the compensation for
services performed shall be determined by Operator, and all such employees or
contractors shall be the employees or contractors of Operator.

 

D.  Rights and Duties of Operator:

 

1. Competitive Rates and Use of Affiliates: All wells drilled on the Contract
Area shall be drilled on a competitive contract basis at the usual rates
prevailing in the area.  If it so desires, Operator may employ its own tools and
equipment in the drilling and all other operations contemplated hereby,
including completion, production, recompletion, reworking and deepening of
wells, but its charges therefor shall not exceed the prevailing rates in the
area and such work shall be performed by Operator under the same terms and
conditions as are customary and usual in the area in contracts of independent
contractors who are doing work of a similar nature.  All work performed or
materials supplied by affiliates or related parties of Operator shall be
performed or supplied at competitive rates, pursuant to written agreement, and
in accordance with customs and standards prevailing in the industry.

 

2. Discharge of Joint Account Obligations: Except as herein otherwise
specifically provided, Operator shall promptly pay and discharge expenses
incurred in the development and operation of the Contract Area pursuant to this
agreement and shall charge each of the parties hereto with their respective
proportionate shares upon the expense basis provided in Exhibit “C.” Operator
shall keep an accurate record of the joint account hereunder, showing expenses
incurred and charges and credits made and received.

 

3. Protection from Liens: Operator shall pay, or cause to be paid, as and when
they become due and payable, all accounts of contractors and suppliers and wages
and salaries for services rendered or performed, and for materials supplied on,
to or in respect of the Contract Area or any operations for the joint account
thereof, and shall keep the Contract Area free from

 

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liens and encumbrances resulting therefrom except for those resulting from a
bona fide dispute as to services rendered or materials supplied.

 

4. Custody of Funds: Operator shall hold for the account of the Non-Operators
any funds of the Non-Operators advanced or paid to the Operator, either for the
conduct of operations hereunder or as a result of the sale of production from
the Contract Area, and such funds shall remain the funds of the Non-Operators on
whose account they are advanced or paid until used for their intended purpose or
otherwise delivered to the Non-Operators or applied toward the payment of debts
as provided in Article VII.B.  Nothing in this paragraph shall be construed to
establish a fiduciary relationship between Operator and Non-Operators for any
purpose other than to account for Non-Operator funds as herein specifically
provided.  Nothing in this paragraph shall require the maintenance by Operator
of separate accounts for the funds of Non-Operators unless the parties otherwise
specifically agree.

 

5. Access to Contract Area and Records: Operator shall, except as otherwise
provided herein, permit each Non-Operator or its duly authorized representative,
at the Non-Operator’s sole risk and cost, full and free access at all reasonable
times to all operations of every kind and character being conducted for the
joint account on the Contract Area and to the records of operations conducted
thereon or production therefrom, including Operator’s books and records relating
thereto.  Such access rights shall not be exercised in a manner interfering with
Operator’s conduct of an operation hereunder and shall not obligate Operator to
furnish any geologic or geophysical data of an interpretive nature unless the
cost of preparation of such interpretive data was charged to the joint account. 
Operator will furnish to each Non-Operator upon request copies of any and all
reports and information obtained by Operator in connection with production and
related items, including, without limitation, meter and chart reports,
production purchaser statements, run tickets and monthly gauge reports, but
excluding purchase contracts and pricing information to the extent not
applicable to the production of the Non-Operator seeking the information.  Any
audit of Operator’s records relating to amounts expended and the appropriateness
of such expenditures shall be conducted in accordance with the audit protocol
specified in Exhibit “C.”

 

6. Filing and Furnishing Governmental Reports: Operator will file, and upon
written request promptly furnish copies to each requesting Non-Operator not in
default of its payment obligations, all operational notices, reports or
applications required to be filed by local, State, Federal or Indian agencies or
authorities having jurisdiction over operations hereunder. Each Non-Operator
shall provide to Operator on a timely basis all information necessary to
Operator to make such filings.

 

7. Drilling and Testing Operations: The following provisions shall apply to each
well drilled hereunder, including but not limited to the Initial Well:

 

(a) Operator will promptly advise Non-Operators of the date on which the well is
spudded, or the date on which drilling operations are commenced.

 

(b) Operator will send to Non-Operators such reports, test results and notices
regarding the progress of operations on the well as the Non-Operators shall
reasonably request, including, but not limited to, daily drilling reports,
completion reports, and well logs.

 

(c) Operator shall adequately test all Zones encountered which may reasonably be
expected to be capable of producing Oil and Gas in paying quantities as a result
of examination of the electric log or any other logs or cores or tests conducted
hereunder.

 

8. Cost Estimates: Upon request of any Consenting Party, Operator shall furnish
estimates of current and cumulative costs incurred for the joint account at
reasonable intervals during the conduct of any operation pursuant to this
agreement. Operator shall not be held liable for errors in such estimates so
long as the estimates are made in good faith.

 

9. Insurance: At all times while operations are conducted hereunder, Operator
shall comply with the workers compensation law of the state where the operations
are being conducted; provided, however, that Operator may be a self- insurer for
liability under said compensation laws in which event the only charge that shall
be made to the joint account shall be as provided in Exhibit “C.”  Operator
shall also carry or provide insurance for the benefit of the joint account of
the parties as outlined in Exhibit “D” attached hereto and made a part hereof. 
Operator shall require all contractors engaged in work on or for the Contract
Area to comply with the workers compensation law of the state where the
operations are being conducted and to maintain such other insurance as Operator
may require.

 

In the event automobile liability insurance is specified in said Exhibit “D,” or
subsequently receives the approval of the parties, no direct charge shall be
made by Operator for premiums paid for such insurance for Operator’s automotive
equipment.

 

ARTICLE VI.

DRILLING AND DEVELOPMENT

 

A.  Initial Well:

 

There shall be no Initial Well in the Contract Area.  In lieu of the Initial
Well, the parties have agreed to drill 10 wells pursuant to the terms of the
Acreage Earning Agreement.

 

Subsequent operations shall be deemed to be the Wells or other operations
conducted after drilling all of the Earning Wells pursuant to the terms of the
Acreage Earning Agreement.

 

B.  Subsequent Operations:

 

1.  Proposed Operations: If any party hereto should desire to drill any well on
the Contract Area other than the Initial Well or if any party should desire to
Rework, Sidetrack, Deepen, Recomplete or Plug Back a well in which such party
has not otherwise relinquished its interest in the proposed objective Zone under
this agreement, the party desiring to drill, Rework, Sidetrack, Deepen,
Recomplete or Plug Back such a well shall give written notice of the proposed
operation to the parties who have not otherwise relinquished their interest in
such objective Zone

 

5

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under this agreement and to all other parties in the case of a proposal for
Sidetracking or Deepening, specifying the work to be performed, the location,
proposed depth, objective Zone and the estimated cost of the operation.  The
parties to whom such a notice is delivered shall have thirty (30) days after
receipt of the notice within which to notify the party proposing to do the work
whether they elect to participate in the cost of the proposed operation.  If a
drilling rig is on location, notice of a proposal to Rework, Sidetrack,
Recomplete, Plug Back or Deepen may be given by telephone and the response
period shall be limited to forty- eight (48) hours, exclusive of Saturday,
Sunday and legal holidays.  Failure of a party to whom such notice is delivered
to reply within the period above fixed shall constitute an election by that
party not to participate in the cost of the proposed operation. Any proposal by
a party to conduct an operation conflicting with the operation initially
proposed shall be delivered to all parties within the time and in the manner
provided in Article VI.B.6.

 

If all parties to whom such notice is delivered elect to participate in such a
proposed operation, the parties shall be contractually committed to participate
therein provided such operations are commenced within the time period hereafter
set forth, and Operator shall, no later than ninety (90) days after expiration
of the notice period of thirty (30) days (or as promptly as practicable after
the expiration of the forty-eight (48) hour period when a drilling rig is on
location, as the case may be), actually commence the proposed operation and
thereafter complete it with due diligence at the risk and expense of the parties
participating therein; provided, however, said commencement date may be extended
upon written notice of same by Operator to the other parties, for a period of up
to thirty (30) additional days if, in the sole opinion of Operator, such
additional time is reasonably necessary to obtain permits from governmental
authorities, surface rights (including rights-of- way) or appropriate drilling
equipment, or to complete title examination or curative matter required for
title approval or acceptance.  If the actual operation has not been commenced
within the time provided (including any extension thereof as specifically
permitted herein or in the force majeure provisions of Article XI) and if any
party hereto still desires to conduct said operation, written notice proposing
same must be resubmitted to the other parties in accordance herewith as if no
prior proposal had been made.

 

2.  Operations by Less Than All Parties: See also Article XVI.G.

 

(a) Determination of Participation.  If any party to whom such notice is
delivered as provided in Article VI.B.1. elects not to participate in the
proposed operation, then, in order to be entitled to the benefits of this
Article, the party or parties giving the notice and such other parties as shall
elect to participate in the operation shall, no later than ninety (90) days
after the expiration of the notice period of thirty (30) days (or as promptly as
practicable after the expiration of the forty-eight (48) hour period when a
drilling rig is on location, as the case may be) actually commence the proposed
operation and complete it with due diligence.  Operator shall perform all work
for the account of the Consenting Parties; provided, however, if no drilling rig
or other equipment is on location, and if Operator is a Non-Consenting Party,
the Consenting Parties shall either: (i) request Operator to perform the work
required by such proposed operation for the account of the Consenting Parties,
or (ii) designate one of the Consenting Parties as Operator to perform such
work.  The rights and duties granted to and imposed upon the Operator under this
agreement are granted to and imposed upon the party designated as Operator for
an operation in which the original Operator is a Non-Consenting Party. 
Consenting Parties, when conducting operations on the Contract Area pursuant to
this Article VI.B.2., shall comply with all terms and conditions of this
agreement.

 

If less than all parties approve any proposed operation, the proposing party,
immediately after the expiration of the applicable notice period, shall advise
all Parties of the total interest of the parties approving such operation and
its recommendation as to whether the Consenting Parties should proceed with the
operation as proposed.  Each Consenting Party, within forty-eight (48) hours
(exclusive of Saturday, Sunday, and legal holidays) after delivery of such
notice, shall advise the proposing party of its desire to (i) limit
participation to such party’s interest as shown on Exhibit “A” or (ii) carry
only its proportionate part (determined by dividing such party’s interest in the
Contract Area by the interests of all Consenting Parties in the Contract Area)
of Non-Consenting Parties’ interests, or (iii) carry its proportionate part
(determined as provided in (ii)) of Non-Consenting Parties’ interests together
with all or a portion of its proportionate part of any Non-Consenting Parties’
interests that any Consenting Party did not elect to take.  Any interest of
Non-Consenting Parties that is not carried by a Consenting Party shall be deemed
to be carried by the party proposing the operation if such party does not
withdraw its proposal.  Failure to advise the proposing party within the time
required shall be deemed an election under (i). In the event a drilling rig is
on location, notice may be given by telephone, and the time permitted for such a
response shall not exceed a total of forty-eight (48) hours (exclusive of
Saturday, Sunday and legal holidays).  The proposing party, at its election, may
withdraw such proposal if there is less than 100% participation and shall notify
all parties of such decision within ten (10) days, or within twenty-four (24)
hours if a drilling rig is on location, following expiration of the applicable
response period. If 100% subscription to the proposed operation is obtained, the
proposing party shall promptly notify the Consenting Parties of their
proportionate interests in the operation and the party serving as Operator shall
commence such operation within the period provided in Article VI.B.1., subject
to the same extension right as provided therein.

 

(b) Relinquishment of Interest for Non-Participation. The entire cost and risk
of conducting such operations shall be borne by the Consenting Parties in the
proportions they have elected to bear same under the terms of the preceding
paragraph.  Consenting Parties shall keep the leasehold estates involved in such
operations free and clear of all liens and encumbrances of every kind created by
or arising from the operations of the Consenting Parties.  If such an operation
results in a dry hole, then subject to Articles VI.B.6. and VI.E.3., the
Consenting Parties shall plug and abandon the well and restore the surface
location at their sole cost, risk and expense; provided, however, that those
Non-Consenting Parties that participated in the drilling, Deepening or
Sidetracking of the well shall remain liable for, and shall pay, their
proportionate shares of the cost of plugging and abandoning the well and
restoring the surface location insofar only as those costs were not increased by
the subsequent operations of the Consenting Parties.  If any well drilled,
Reworked, Sidetracked, Deepened, Recompleted or Plugged Back under the
provisions of this Article results in a well capable of producing Oil and/or Gas
in paying quantities, the Consenting Parties shall Complete and equip the well
to produce at their sole cost and risk, and the well shall then be turned over
to Operator (if the Operator did not conduct the operation) and shall be
operated by it at the expense and for the account of the Consenting Parties. 
Upon commencement of operations for the drilling, Reworking, Sidetracking,
Recompleting, Deepening or Plugging Back of any such well by Consenting Parties
in accordance with the provisions of this Article, each Non-Consenting Party
shall be deemed to have relinquished to Consenting Parties, and the Consenting
Parties shall own and be entitled to receive, in proportion to their respective
interests, all of such Non- Consenting Party’s interest in the well and share of
production therefrom or, in the case of a Reworking, Sidetracking,

 

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Deepening, Recompleting or Plugging Back, all of such Non-Consenting Party’s
interest in the production obtained from the operation in which the
Non-Consenting Party did not elect to participate.  Such relinquishment shall be
effective until the proceeds of the sale of such share, calculated at the well,
or market value thereof if such share is not sold (after deducting applicable ad
valorem, production, severance, and excise taxes, royalty, overriding royalty
and other interests not excepted by Article III.C. payable out of or measured by
the production from such well accruing with respect to such interest until it
reverts), shall equal the total of the following:

 

(i) 100% of each such Non-Consenting Party’s share of the cost of any newly
acquired surface equipment beyond the wellhead connections (including but not
limited to stock tanks, separators, treaters, pumping equipment and piping),
plus 100% of each such Non-Consenting Party’s share of the cost of operation of
the well commencing with first production and continuing until each such
Non-Consenting Party’s relinquished interest shall revert to it under other
provisions of this Article, it being agreed that each Non-Consenting Party’s
share of such costs and equipment will be that interest which would have been
chargeable to such Non-Consenting Party had it participated in the well from the
beginning of the operations; and

 

(ii) 300% of (a) that portion of the costs and expenses of drilling, Reworking,
Sidetracking, Deepening, Plugging Back, testing, Completing, and Recompleting,
after deducting any cash contributions received under Article VIII.C., and of
(b) that portion of the cost of newly acquired equipment in the well (to and
including the wellhead connections), which would have been chargeable to such
Non-Consenting Party if it had participated therein.

 

Notwithstanding anything to the contrary in this Article VI.B., if the well does
not reach the deepest objective Zone described in the notice proposing the well
for reasons other than the encountering of granite or practically impenetrable
substance or other condition in the hole rendering further operations
impracticable, Operator shall give notice thereof to each Non-Consenting Party
who submitted or voted for an alternative proposal under Article VI.B.6. to
drill the well to a shallower Zone than the deepest objective Zone proposed in
the notice under which the well was drilled, and each such Non- Consenting Party
shall have the option to participate in the initial proposed Completion of the
well by paying its share of the cost of drilling the well to its actual depth,
calculated in the manner provided in Article VI.B.4. (a).  If any such Non-
Consenting Party does not elect to participate in the first Completion proposed
for such well, the relinquishment provisions of this Article VI.B.2. (b) shall
apply to such party’s interest.

 

(c) Reworking, Recompleting or Plugging Back. An election not to participate in
the drilling, Sidetracking or Deepening of a well shall be deemed an election
not to participate in any Reworking or Plugging Back operation proposed in such
a well, or portion thereof, to which the initial non-consent election applied
that is conducted at any time prior to full recovery by the Consenting Parties
of the Non-Consenting Party’s recoupment amount.  Similarly, an election not to
participate in the Completing or Recompleting of a well shall be deemed an
election not to participate in any Reworking operation proposed in such a well,
or portion thereof, to which the initial non-consent election applied that is
conducted at any time prior to full recovery by the Consenting Parties of the
Non-Consenting Party’s recoupment amount.  Any such Reworking, Recompleting or
Plugging Back operation conducted during the recoupment period shall be deemed
part of the 3cost of operation of said well and there shall be added to the sums
to be recouped by the Consenting Parties 300% of that portion of the costs of
the Reworking, Recompleting or Plugging Back operation which would have been
chargeable to such Non-Consenting Party had it participated therein.  If such a
Reworking, Recompleting or Plugging Back operation is proposed during such
recoupment period, the provisions of this Article VI.B. shall be applicable as
between said Consenting Parties in said well.

 

(d) Recoupment Matters. During the period of time Consenting Parties are
entitled to receive Non-Consenting Party’s share of production, or the proceeds
therefrom, Consenting Parties shall be responsible for the payment of all ad
valorem, production, severance, excise, gathering and other taxes, and all
royalty, overriding royalty and other burdens applicable to Non-Consenting
Party’s share of production not excepted by Article III.C.

 

In the case of any Reworking, Sidetracking, Plugging Back, Recompleting or
Deepening operation, the Consenting Parties shall be permitted to use, free of
cost, all casing, tubing and other equipment in the well, but the ownership of
all such equipment shall remain unchanged; and upon abandonment of a well after
such Reworking, Sidetracking, Plugging Back, Recompleting or Deepening, the
Consenting Parties shall account for all such equipment to the owners thereof,
with each party receiving its proportionate part in kind or in value, less cost
of salvage.

 

Within ninety (90) days after the completion of any operation under this
Article, the party conducting the operations for the Consenting Parties shall
furnish each Non-Consenting Party with an inventory of the equipment in and
connected to the well, and an itemized statement of the cost of drilling,
Sidetracking, Deepening, Plugging Back, testing, Completing, Recompleting, and
equipping the well for production; or, at its option, the operating party, in
lieu of an itemized statement of such costs of operation, may submit a detailed
statement of monthly billings.  Each month thereafter, during the time the
Consenting Parties are being reimbursed as provided above, the party conducting
the operations for the Consenting Parties shall furnish the Non-Consenting
Parties with an itemized statement of all costs and liabilities incurred in the
operation of the well, together with a statement of the quantity of Oil and Gas
produced from it and the amount of proceeds realized from the sale of the well’s
working interest production during the preceding month.  In determining the
quantity of Oil and Gas produced during any month, Consenting Parties shall use
industry accepted methods such as but not limited to metering or periodic well
tests.  Any amount realized from the sale or other disposition of equipment
newly acquired in connection with any such operation which would have been owned
by a Non-Consenting Party had it participated therein shall be credited against
the total unreturned costs of the work done and of the equipment purchased in
determining when the interest of such Non-Consenting Party shall revert to it as
above provided; and if there is a credit balance, it shall be paid to such Non-
Consenting Party.

 

If and when the Consenting Parties recover from a Non-Consenting Party’s
relinquished interest the amounts provided for above, the relinquished interests
of such Non-Consenting Party shall automatically revert to it as of 7:00 a.m. on
the 1st day of the month following the day on which such recoupment occurs, and,
from and after such reversion, such Non-Consenting Party shall own the same
interest in such well, the material and equipment in or pertaining thereto, and
the production therefrom as such Non-Consenting Party would have been entitled
to had it participated in the drilling, Sidetracking, Reworking, Deepening,
Recompleting or Plugging Back of said well.  Thereafter, such Non-Consenting
Party shall be charged with and shall pay its proportionate part of the further
costs of the operation of said well in accordance with the terms of this
agreement and Exhibit “C” attached hereto.

 

3. Stand-By Costs: When a well which has been drilled or Deepened has reached
its authorized depth and all tests have been completed and the results thereof
furnished to the parties, or when operations on the well have been otherwise
terminated pursuant to Article VI.F., stand-by costs incurred pending response
to a party’s notice proposing a Reworking,

 

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Sidetracking, Deepening, Recompleting, Plugging Back or Completing operation in
such a well (including the period required under Article VI.B.6. to resolve
competing proposals) shall be charged and borne as part of the drilling or
Deepening operation just completed.  Stand-by costs subsequent to all parties
responding, or expiration of the response time permitted, whichever first
occurs, and prior to agreement as to the participating interests of all
Consenting Parties pursuant to the terms of the second grammatical paragraph of
Article VI.B.2. (a), shall be charged to and borne as part of the proposed
operation, but if the proposal is subsequently withdrawn because of insufficient
participation, such stand-by costs shall be allocated between the Consenting
Parties in the proportion each Consenting Party’s interest as shown on Exhibit
“A” bears to the total interest as shown on Exhibit “A” of all Consenting
Parties.

 

In the event that notice for a Sidetracking operation is given while the
drilling rig to be utilized is on location, any party may request and receive up
to five (5) additional days after expiration of the forty-eight hour response
period specified in Article VI.B.1. within which to respond by paying for all
stand-by costs and other costs incurred during such extended response period;
Operator may require such party to pay the estimated stand-by time in advance as
a condition to extending the response period.  If more than one party elects to
take such additional time to respond to the notice, standby costs shall be
allocated between the parties taking additional time to respond on a day-to-day
basis in the proportion each electing party’s interest as shown on Exhibit “A”
bears to the total interest as shown on Exhibit “A” of all the electing parties.

 

4. Deepening: If less than all parties elect to participate in a drilling,
Sidetracking, or Deepening operation proposed pursuant to Article VI.B.1., the
interest relinquished by the Non-Consenting Parties to the Consenting Parties
under Article VI.B.2. shall relate only and be limited to the lesser of (i) the
total depth actually drilled or (ii) the objective depth or Zone of which the
parties were given notice under Article VI.B.1. (“Initial Objective”).  Such
well shall not be Deepened beyond the Initial Objective without first complying
with this Article to afford the Non-Consenting Parties the opportunity to
participate in the Deepening operation.

 

In the event any Consenting Party desires to drill or Deepen a Non-Consent Well
to a depth below the Initial Objective, such party shall give notice thereof,
complying with the requirements of Article VI.B.1., to all parties (including
Non- Consenting Parties).  Thereupon, Articles VI.B.1. and 2. shall apply and
all parties receiving such notice shall have the right to participate or not
participate in the Deepening of such well pursuant to said Articles VI.B.1. and
2.  If a Deepening operation is approved pursuant to such provisions, and if any
Non-Consenting Party elects to participate in the Deepening operation, such
Non-Consenting party shall pay or make reimbursement (as the case may be) of the
following costs and expenses.

 

(a) If the proposal to Deepen is made prior to the Completion of such well as a
well capable of producing in paying quantities, such Non-Consenting Party shall
pay (or reimburse Consenting Parties for, as the case may be) that share of
costs and expenses incurred in connection with the drilling of said well from
the surface to the Initial Objective which Non- Consenting Party would have paid
had such Non-Consenting Party agreed to participate therein, plus the
Non-Consenting Party’s share of the cost of Deepening and of participating in
any further operations on the well in accordance with the other provisions of
this Agreement; provided, however, all costs for testing and Completion or
attempted Completion of the well incurred by Consenting Parties prior to the
point of actual operations to Deepen beyond the Initial Objective shall be for
the sole account of Consenting Parties.

 

(b) If the proposal is made for a Non-Consent Well that has been previously
Completed as a well capable of producing in paying quantities, but is no longer
capable of producing in paying quantities, such Non-Consenting Party shall pay
(or reimburse Consenting Parties for, as the case may be) its proportionate
share of all costs of drilling, Completing, and equipping said well from the
surface to the Initial Objective, calculated in the manner provided in paragraph
(a) above, less those costs recouped by the Consenting Parties from the sale of
production from the well.  The Non-Consenting Party shall also pay its
proportionate share of all costs of re-entering said well.  The Non-Consenting
Parties’ proportionate part (based on the percentage of such well Non-Consenting
Party would have owned had it previously participated in such Non-Consent Well)
of the costs of salvable materials and equipment remaining in the hole and
salvable surface equipment used in connection with such well shall be determined
in accordance with Exhibit “C.”  If the Consenting Parties have recouped the
cost of drilling, Completing, and equipping the well at the time such Deepening
operation is conducted, then a Non- Consenting Party may participate in the
Deepening of the well with no payment for costs incurred prior to re-entering
the well for Deepening

 

The foregoing shall not imply a right of any Consenting Party to propose any
Deepening for a Non-Consent Well prior to the drilling of such well to its
Initial Objective without the consent of the other Consenting Parties as
provided in Article VI.F.

 

5. Sidetracking: Any party having the right to participate in a proposed
Sidetracking operation that does not own an interest in the affected wellbore at
the time of the notice shall, upon electing to participate, tender to the
wellbore owners its proportionate share (equal to its interest in the
Sidetracking operation) of the value of that portion of the existing wellbore to
be utilized as follows:

 

(a) If the proposal is for Sidetracking an existing dry hole, reimbursement
shall be on the basis of the actual costs incurred in the initial drilling of
the well down to the depth at which the Sidetracking operation is initiated.

 

(b) If the proposal is for Sidetracking a well which has previously produced,
reimbursement shall be on the basis of such party’s proportionate share of
drilling and equipping costs incurred in the initial drilling of the well down
to the depth at which the Sidetracking operation is conducted, calculated in the
manner described in Article VI.B.4(b) above.  Such party’s proportionate share
of the cost of the well’s salvable materials and equipment down to the depth at
which the Sidetracking operation is initiated shall be determined in accordance
with the provisions of Exhibit “C.”

 

6. Order of Preference of Operations. Except as otherwise specifically provided
in this agreement, if any party desires to propose the conduct of an operation
that conflicts with a proposal that has been made by a party under this Article
VI, such party shall have fifteen (15) days from delivery of the initial
proposal, in the case of a proposal to drill a well or to perform an operation
on a well where no drilling rig is on location, or twenty-four (24) hours,
exclusive of Saturday, Sunday and legal holidays, from delivery of the initial
proposal, if a drilling rig is on location for the well on which such operation
is to be conducted, to deliver to all parties entitled to participate in the
proposed operation such party’s alternative proposal, such alternate proposal to
contain the same information required to be included in the initial proposal. 
Each party receiving such proposals shall elect by delivery of notice to
Operator within five (5) days after expiration of the proposal period, or within
twenty-four (24) hours (exclusive of Saturday, Sunday and legal holidays) if a
drilling rig is on location for the well that is the subject of the proposals,
to participate in one of the competing proposals.  Any party not electing within
the time required shall be deemed not to have voted.  The proposal receiving the
vote of parties owning the largest aggregate percentage interest of the parties
voting shall have priority over all other competing proposals; in the case of a
tie vote, the

 

8

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initial proposal shall prevail. Operator shall deliver notice of such result to
all parties entitled to participate in the operation within five (5) days after
expiration of the election period (or within twenty-four (24) hours, exclusive
of Saturday, Sunday and legal holidays, if a drilling rig is on location).  Each
party shall then have two (2) days (or twenty-four (24) hours if a rig is on
location) from receipt of such notice to elect by delivery of notice to Operator
to participate in such operation or to relinquish interest in the affected well
pursuant to the provisions of Article VI.B.2.; failure by a party to deliver
notice within such period shall be deemed an election not to participate in the
prevailing proposal.

 

7. Conformity to Spacing Pattern. Notwithstanding the provisions of this Article
VI.B.2., it is agreed that no wells shall be proposed to be drilled to or
Completed in or produced from a Zone from which a well located elsewhere on the
Contract Area is producing, unless such well conforms to the then-existing well
spacing pattern for such Zone or for which a variance has been granted by the
appropriate authority.

 

8. Paying Wells. No party shall conduct any Reworking, Deepening, Plugging Back,
Completion, Recompletion, or Sidetracking operation under this agreement with
respect to any well then capable of producing in paying quantities except with
the consent of all parties that have not relinquished interests in the well at
the time of such operation.

 

C.  Completion of Wells; Reworking and Plugging Back:

 

1. Completion: Without the consent of all parties, no well shall be drilled,
Deepened or Sidetracked, except any well drilled, Deepened or Sidetracked
pursuant to the provisions of Article VI.B.2. of this agreement.  Consent to the
drilling, Deepening or Sidetracking shall include:

 

ý    Option No. 1: All necessary expenditures for the drilling, Deepening or
Sidetracking, testing, Completing and equipping of the well, including necessary
tankage and/or surface facilities.

 

2. Rework, Recomplete or Plug Back: No well shall be Reworked, Recompleted or
Plugged Back except a well Reworked, Recompleted, or Plugged Back pursuant to
the provisions of Article VI.B.2. of this agreement.  Consent to the Reworking,
Recompleting or Plugging Back of a well shall include all necessary expenditures
in conducting such operations and Completing and equipping of said well,
including necessary tankage and/or surface facilities.

 

D.  Other Operations:

 

Operator shall not undertake any single project reasonably estimated to require
an expenditure in excess of Twenty-five Thousand Dollars ($25,000.00) except in
connection with the drilling, Sidetracking, Reworking, Deepening, Completing,
Recompleting or Plugging Back of a well that has been previously authorized by
or pursuant to this agreement; provided, however, that, in case of explosion,
fire, flood or other sudden emergency, whether of the same or different nature,
Operator may take such steps and incur such expenses as in its opinion are
required to deal with the emergency to safeguard life and property but Operator,
as promptly as possible, shall report the emergency to the other parties.  If
Operator prepares an AFE for its own use, Operator shall furnish any
Non-Operator so requesting an information copy thereof for any single project
costing in excess of Twenty-five Thousand Dollars ($25,000.00).  Any party who
has not relinquished its interest in a well shall have the right to propose that
Operator perform repair work or undertake the installation of artificial lift
equipment or ancillary production facilities such as salt water disposal wells
or to conduct additional work with respect to a well drilled hereunder or other
similar project (but not including the installation of gathering lines or other
transportation or marketing facilities, the installation of which shall be
governed by separate agreement between the parties) reasonably estimated to
require an expenditure in excess of the amount first set forth above in this
Article VI.D. (except in connection with an operation required to be proposed
under Article VI.B.1., which shall be governed exclusively by that Article). 
Operator shall deliver such proposal to all parties entitled to participate
therein.  If within thirty (30) days thereof Operator secures the written
consent of any party or parties owning at least 50% of the interests of the
parties entitled to participate in such operation, each party having the right
to participate in such project shall be bound by the terms of such proposal and
shall be obligated to pay its proportionate share of the costs of the proposed
project as if it had consented to such project pursuant to the terms of the
proposal or non-consent its interest subject to the provisions of Article
VI.B.2.(b).

 

E.  Abandonment of Wells:

 

1.  Abandonment of Dry Holes: Except for any well drilled or Deepened pursuant
to Article VI.B.2., any well which has been drilled or Deepened under the terms
of this agreement and is proposed to be completed as a dry hole shall not be

 

9

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plugged and abandoned without the consent of all parties.  Should Operator,
after diligent effort, be unable to contact any party, or should any party fail
to reply within forty-eight (48) hours (exclusive of Saturday, Sunday and legal
holidays) after delivery of notice of the proposal to plug and abandon such
well, such party shall be deemed to have consented to the proposed abandonment. 
All such wells shall be plugged and abandoned in accordance with applicable
regulations and at the cost, risk and expense of the parties who participated in
the cost of drilling or Deepening such well.  Any party who objects to plugging
and abandoning such well by notice delivered to Operator within forty-eight (48)
hours (exclusive of Saturday, Sunday and legal holidays) after delivery of
notice of the proposed plugging shall take over the well as of the end of such
forty-eight (48) hour notice period and conduct further operations in search of
Oil and/or Gas subject to the provisions of Article VI.B.; failure of such party
to provide proof reasonably satisfactory to Operator of its financial capability
to conduct such operations or to take over the well within such period or
thereafter to conduct operations on such well or plug and abandon such well
shall entitle Operator to retain or take possession of the well and plug and
abandon the well.  The party taking over the well shall indemnify Operator (if
Operator is an abandoning party) and the other abandoning parties against
liability for any further operations conducted on such well except for the costs
of plugging and abandoning the well and restoring the surface, for which the
abandoning parties shall remain proportionately liable.

 

2. Abandonment of Wells That Have Produced: Except for any well in which a
Non-Consent operation has been conducted hereunder for which the Consenting
Parties have not been fully reimbursed as herein provided, any well which has
been completed as a producer shall not be plugged and abandoned without the
consent of all parties who participated in the cost of drilling the well.  If
all parties consent to such abandonment, the well shall be plugged and abandoned
in accordance with applicable regulations and at the cost, risk and expense of
all the parties hereto.  Failure of a party to reply within thirty (30) days of
delivery of notice of proposed abandonment shall be deemed an election to
consent to the proposal.  If, within thirty (30) days after delivery of notice
of the proposed abandonment of any well, all parties do not agree to the
abandonment of such well, those wishing to continue its operation from the Zone
then open to production shall be obligated to take over the well as of the
expiration of the applicable notice period and shall indemnify Operator (if
Operator is an abandoning party) and the other abandoning parties against
liability for any further operations on the well conducted by such parties. 
Failure of such party or parties to provide proof reasonably satisfactory to
Operator of their financial capability to conduct such operations or to take
over the well within the required period or thereafter to conduct operations on
such well shall entitle operator to retain or take possession of such well and
plug and abandon the well.

 

Parties taking over a well as provided herein shall tender to each of the other
parties its proportionate share of the value of the well’s salvable material and
equipment, determined in accordance with the provisions of Exhibit “C,” less the
estimated cost of salvaging and the estimated cost of plugging and abandoning
and restoring the surface; provided, however, that in the event the estimated
plugging and abandoning and surface restoration costs and the estimated cost of
salvaging are higher than the value of the well’s salvable material and
equipment, each of the abandoning parties shall tender to the parties continuing
operations their proportionate shares of the estimated excess cost.  Each
abandoning party shall assign to the non-abandoning parties, without warranty,
express or implied, as to title or as to quantity, or fitness for use of the
equipment and material, all of its interest in the wellbore of the well and
related equipment, together with its interest in the Leasehold insofar and only
insofar as such Leasehold covers the right to obtain production from that
wellbore in the Zone then open to production.  If the interest of the abandoning
party is or includes and Oil and Gas Interest, such party shall execute and
deliver to the non-  abandoning party or parties an oil and gas lease, limited
to the wellbore and the Zone then open to production, for a term of one (1) year
and so long thereafter as Oil and/or Gas is produced from the Zone covered
thereby, such lease to be on the form attached as Exhibit “B.”  The assignments
or leases so limited shall encompass the Drilling Unit upon which the well is
located.  The payments by, and the assignments or leases to, the assignees shall
be in a ratio based upon the relationship of their respective percentage of
participation in the Contract Area to the aggregate of the percentages of
participation in the Contract Area of all assignees.  There shall be no
readjustment of interests in the remaining portions of the Contract Area.

 

Thereafter, abandoning parties shall have no further responsibility, liability,
or interest in the operation of or production from the well in the Zone then
open other than the royalties retained in any lease made under the terms of this
Article.  Upon request, Operator shall continue to operate the assigned well for
the account of the non-abandoning parties at the rates and charges contemplated
by this agreement, plus any additional cost and charges which may arise as the
result of the separate ownership of the assigned well.  Upon proposed
abandonment of the producing Zone assigned or leased, the assignor or lessor
shall then have the option to repurchase its prior interest in the well (using
the same valuation formula) and participate in further operations therein
subject to the provisions hereof.

 

3. Abandonment of Non-Consent Operations: The provisions of Article VI.E.1. or
VI.E.2. above shall be applicable as between Consenting Parties in the event of
the proposed abandonment of any well excepted from said Articles; provided,
however, no well shall be permanently plugged and abandoned unless and until all
parties having the right to conduct further operations therein have been
notified of the proposed abandonment and afforded the opportunity to elect to
take over the well in accordance with the provisions of this Article VI.E.; and
provided further, that Non-Consenting Parties who own an interest in a portion
of the well shall pay their proportionate shares of abandonment and surface
restoration cost for such well as provided in Article VI.B.2.(b).  Failure of a
party to make a written election within thirty (30) days will be deemed an
election to consent to the abandonment of the well.

 

F.  Termination of Operations:

 

Upon the commencement of an operation for the drilling, Reworking, Sidetracking,
Plugging Back, Deepening, testing, Completion or plugging of a well, including
but not limited to the Initial Well, such operation shall not be terminated
without consent of parties bearing 60% of the costs of such operation; provided,
however, that in the event granite or other practically impenetrable substance
or condition in the hole is encountered which renders further operations
impractical, Operator may discontinue operations and give notice of such
condition in the manner provided in Article VI.B.1, and the provisions of
Article VI.B. or VI.E. shall thereafter apply to such operation, as appropriate.

 

G.  Taking Production in Kind:

 

ý      Option No. 1: Gas Balancing Agreement Attached

 

Each party shall take in kind or separately dispose of its proportionate share
of all Oil and Gas produced from the Contract Area, exclusive of production
which may be used in development and producing operations and in preparing and
treating Oil and Gas for marketing purposes and production unavoidably lost. 
Any extra expenditure incurred in the taking in kind or separate disposition by
any party of its proportionate share of the production shall be borne by such
party.  Any party taking its share of production in kind shall be required to
pay for only its proportionate share of such part of Operator’s surface
facilities which it uses.

 

Each party shall execute such division orders and contracts as may be necessary
for the sale of its interest in production from the Contract Area, and, except
as provided in Article VII.B., shall be entitled to receive payment

 

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directly from the purchaser thereof for its share of all production.

 

If any party fails to make the arrangements necessary to take in kind or
separately dispose of its proportionate share of the Oil produced from the
Contract Area, Operator shall have the right, subject to the revocation at will
by the party owning it, but not the obligation, to purchase such Oil or sell it
to others at any time and from time to time, for the account of the non-taking
party.  Any such purchase or sale by Operator may be terminated by Operator upon
at least ten (10) days written notice to the owner of said production and shall
be subject always to the right of the owner of the production upon at least ten
(10) days written notice to Operator to exercise at any time its right to take
in kind, or separately dispose of, its share of all Oil not previously delivered
to a purchaser.  Any purchase or sale by Operator of any other party’s share of
Oil shall be only for such reasonable periods of time as are consistent with the
minimum needs of the industry under the particular circumstances, but in no
event for a period in excess of one (1) year.

 

Any such sale by Operator shall be in a manner commercially reasonable under the
circumstances but Operator shall have no duty to share any existing market or to
obtain a price equal to that received under any existing market.  The sale or
delivery by Operator of a non-taking party’s share of Oil under the terms of any
existing contract of Operator shall not give the non-taking party any interest
in or make the non-taking party a party to said contract.  No purchase shall be
made by Operator without first giving the non-taking party at least ten (10)
days written notice of such intended purchase and the price to be paid or the
pricing basis to be used. 

 

All parties shall give timely written notice to Operator of their Gas marketing
arrangements for the following month, excluding price, and shall notify Operator
immediately in the event of a change in such arrangements.  Operator shall
maintain records of all marketing arrangements, and of volumes actually sold or
transported, which records shall be made available to Non-Operators upon
reasonable request.

 

In the event one or more parties’ separate disposition of its share of the Gas
causes split-stream deliveries to separate pipelines and/or deliveries which on
a day-to-day basis for any reason are not exactly equal to a party’s respective
proportion-  ate share of total Gas sales to be allocated to it, the balancing
or accounting between the parties shall be in accordance with any Gas balancing
agreement between the parties hereto, whether such an agreement is attached as
Exhibit “E” or is a separate agreement.  Operator shall give notice to all
parties of the first sales of Gas from any well under this agreement.

 

ARTICLE VII.

EXPENDITURES AND LIABILITY OF PARTIES

 

A.  Liability of Parties:

 

The liability of the parties shall be several, not joint or collective. Each
party shall be responsible only for its obligations, and shall be liable only
for its proportionate share of the costs of developing and operating the
Contract Area.  Accordingly, the liens granted among the parties in Article
VII.B. are given to secure only the debts of each severally, and no party shall
have any liability to third parties hereunder to satisfy the default of any
other party in the payment of any expense or obligation hereunder.  It is not
the intention of the parties to create, nor shall this agreement be construed as
creating, a mining or other partnership, joint venture, agency relationship or
association, or to render the parties liable as partners, co-venturers, or
principals.  In their relations with each other under this agreement, the
parties shall not be considered fiduciaries or to have established a
confidential relationship but rather shall be free to act on an arm’s-length
basis in accordance with their own respective self-interest, subject, however,
to the obligation of the parties to act in good faith in their dealings with
each other with respect to activities hereunder.

 

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B.  Liens and Security Interests:

 

Each party grants to the other parties hereto a lien upon any interest it now
owns or hereafter acquires in Oil and Gas Leases and Oil and Gas Interests in
the Contract Area, and a security interest and/or purchase money security
interest in any interest it now owns or hereafter acquires in the personal
property and fixtures on or used or obtained for use in connection therewith, to
secure performance of all of its obligations under this agreement including but
not limited to payment of expense, interest and fees, the proper disbursement of
all monies paid hereunder, the assignment or relinquishment of interest in Oil
and Gas Leases as required hereunder, and the proper performance of operations
hereunder.  Such lien and security interest granted by each party hereto shall
include such party’s leasehold interests, working interests, operating rights,
and royalty and overriding royalty interests in the Contract Area now owned or
hereafter acquired and in lands pooled or unitized therewith or otherwise
becoming subject to this agreement, the Oil and Gas when extracted therefrom and
equipment situated thereon or used or obtained for use in connection therewith
(including, without limitation, all wells, tools, and tubular goods), and
accounts  (including, without limitation, accounts arising from gas imbalances
or from the sale of Oil and/or Gas at the wellhead), contract rights, inventory
and general intangibles relating thereto or arising therefrom, and all proceeds
and products of the foregoing.

 

To perfect the lien and security agreement provided herein, each party hereto
shall execute and acknowledge the recording supplement and/or any financing
statement prepared and submitted by any party hereto in conjunction herewith or
at any time following execution hereof, and Operator is authorized to file this
agreement or the recording supplement executed herewith as a lien or mortgage in
the applicable real estate records and as a financing statement with the proper
officer under the Uniform Commercial Code in the state in which the Contract
Area is situated and such other states as Operator shall deem appropriate to
perfect the security interest granted hereunder.  Any party may file the
recording supplement executed herewith as a lien or mortgage in the applicable
real estate records and/or a financing statement with the proper officer under
the Uniform Commercial Code.

 

Each party represents and warrants to the other parties hereto that the lien and
security interest granted by such party to the other parties shall be a first
and prior lien, and each party hereby agrees to maintain the priority of said
lien and security interest against all persons acquiring an interest in Oil and
Gas Leases and Interests covered by this agreement by, through or under such
party.  All parties acquiring an interest in Oil and Gas Leases and Oil and Gas
Interests covered by this agreement, whether by assignment, merger, mortgage,
operation of law, or otherwise, shall be deemed to have taken subject to the
lien and security interest granted by this Article VII.B. as to all obligations
attributable to such interest hereunder whether or not such obligations arise
before or after such interest is acquired.

 

To the extent that parties have a security interest under the Uniform Commercial
Code of the state in which the Contract Area is situated, they shall be entitled
to exercise the rights and remedies of a secured party under the Code.  The
bringing of a suit and the obtaining of judgment by a party for the secured
indebtedness shall not be deemed an election of remedies or otherwise affect the
lien rights or security interest as security for the payment thereof.  In
addition, upon default by any party in the payment of its share of expenses,
interests or fees, or upon the improper use of funds by the Operator, the other
parties shall have the right, without prejudice to other rights or remedies, to
collect from the purchaser the proceeds from the sale of such defaulting party’s
share of Oil and Gas until the amount owed by such party, plus interest as
provided in “Exhibit C,” has been received, and shall have the right to offset
the amount owed against the proceeds from the sale of such defaulting party’s
share of Oil and Gas.  All purchasers of production may rely on a notification
of default from the non-defaulting party or parties stating the amount due as a
result of the default, and all parties waive any recourse available against
purchasers for releasing production proceeds as provided in this paragraph.

 

If any party fails to pay its share of cost within one hundred twenty (120) days
after rendition of a statement therefor by Operator, the non-defaulting parties,
including Operator, shall upon request by Operator, pay the unpaid amount in the
proportion that the interest of each such party bears to the interest of all
such parties.  The amount paid by each party so paying its share of the unpaid
amount shall be secured by the liens and security rights described in Article
VII.B., and each paying party may independently pursue any remedy available
hereunder or otherwise.

 

If any party does not perform all of its obligations hereunder, and the failure
to perform subjects such party to foreclosure or execution proceedings pursuant
to the provisions of this agreement, to the extent allowed by governing law, the
defaulting party waives any available right of redemption from and after the
date of judgment, any required valuation or appraisement of the mortgaged or
secured property prior to sale, any available right to stay execution or to
require a marshaling of assets and any required bond in the event a receiver is
appointed.  In addition, to the extent permitted by applicable law, each party
hereby grants to the other parties a power of sale as to any property that is
subject to the lien and security rights granted hereunder, such power to be
exercised in the manner provided by applicable law or otherwise in a
commercially reasonable manner and upon reasonable notice.

 

Each party agrees that the other parties shall be entitled to utilize the
provisions of Oil and Gas lien law or other lien law of any state in which the
Contract Area is situated to enforce the obligations of each party hereunder. 
Without limiting the generality of the foregoing, to the extent permitted by
applicable law, Non-Operators agree that Operator may invoke or utilize the
mechanics’ or materialmen’s lien law of the state in which the Contract Area is
situated in order to secure the payment to Operator of any sum due hereunder for
services performed or materials supplied by Operator.

 

C.  Advances:

 

Operator, at its election, shall have the right from time to time to demand and
receive from one or more of the other parties payment in advance of their
respective shares of the estimated amount of the expense to be incurred in
operations hereunder during the next succeeding month, which right may be
exercised only by submission to each such party of an itemized statement of such
estimated expense, together with an invoice for its share thereof.  Each such
statement and invoice for the payment in advance of estimated expense shall be
submitted on or before the 20th day of the next preceding month.  Each party
shall pay to Operator its proportionate share of such estimate within fifteen
(15) days after such estimate and invoice is received.  If any party fails to
pay its share of said estimate within said time, the amount due shall bear
interest as provided in Exhibit “C” until paid.  Proper adjustment shall be made
monthly between advances and actual expense to the end that each party shall
bear and pay its proportionate share of actual expenses incurred, and no more.

 

D.  Defaults and Remedies:

 

If any party fails to discharge any financial obligation under this agreement,
including without limitation the failure to make any advance under the preceding
Article VII.C. or any other provision of this agreement, within the period
required for such payment hereunder, then in addition to the remedies provided
in Article VII.B. or elsewhere in this agreement, the remedies specified below
shall be applicable.  For purposes of this Article VII.D., all notices and
elections shall be delivered

 

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only by Operator, except that Operator shall deliver any such notice and
election requested by a non-defaulting Non-Operator, and when Operator is the
party in default, the applicable notices and elections can be delivered by any
Non-Operator.  Election of any one or more of the following remedies shall not
preclude the subsequent use of any other remedy specified below or otherwise
available to a non-defaulting party.

 

1. Suspension of Rights: Any party may deliver to the party in default a Notice
of Default, which shall specify the default, specify the action to be taken to
cure the default, and specify that failure to take such action will result in
the exercise of one or more of the remedies provided in this Article.  If the
default is not cured within thirty (30) days of the delivery of such Notice of
Default, all of the rights of the defaulting party granted by this agreement may
upon notice be suspended until the default is cured, without prejudice to the
right of the non-defaulting party or parties to continue to enforce the
obligations of the defaulting party previously accrued or thereafter accruing
under this agreement.  If Operator is the party in default, the Non-Operators
shall have in addition the right, by vote of Non-Operators owning a majority in
interest in the Contract Area after excluding the voting interest of Operator,
to appoint a new Operator effective immediately.  The rights of a defaulting
party that may be suspended hereunder at the election of the non-defaulting
parties shall include, without limitation, the right to receive information as
to any operation conducted hereunder during the period of such default, the
right to elect to participate in an operation proposed under Article VI.B. of
this agreement, the right to participate in an operation being conducted under
this agreement even if the party has previously elected to participate in such
operation, and the right to receive proceeds of production from any well subject
to this agreement.

 

2. Suit for Damages: Non-defaulting parties or Operator for the benefit of
non-defaulting parties may sue (at joint account expense) to collect the amounts
in default, plus interest accruing on the amounts recovered from the date of
default until the date of collection at the rate specified in Exhibit “C”
attached hereto.  Nothing herein shall prevent any party from suing any
defaulting party to collect consequential damages accruing to such party as a
result of the default.

 

3. Deemed Non-Consent: The non-defaulting party (if Operator is the defaulting
party) or Operator for the benefit of the non-defaulting parties may deliver a
written Notice of Non-Consent Election to the defaulting party at any time after
the expiration of the thirty-day cure period following delivery of the Notice of
Default, in which event if the billing is for the drilling a new well or the
Plugging Back, Sidetracking, Reworking or Deepening of a well which is to be or
has been plugged as a dry hole, or for the Completion or Recompletion of any
well, the defaulting party will be conclusively deemed to have elected not to
participate in the operation and to be a Non-Consenting Party with respect
thereto under Article VI.B. or VI.C., as the case may be, to the extent of the
costs unpaid by such party, notwithstanding any election to participate
theretofore made.  If election is made to proceed under this provision, then the
non-defaulting parties may not elect to sue for the unpaid amount pursuant to
Article VII.D.2.

 

Until the delivery of such Notice of Non-Consent Election to the defaulting
party, such party shall have the right to cure its default by paying its unpaid
share of costs plus interest at the rate set forth in Exhibit “C,” provided,
however, such payment shall not prejudice the rights of the non-defaulting
parties to pursue remedies for damages incurred by the non-  defaulting parties
as a result of the default.  Any interest relinquished pursuant to this Article
VII.D.3. shall be offered to the non-defaulting parties in proportion to their
interests, and the non-defaulting parties electing to participate in the
ownership of such interest shall be required to contribute their shares of the
defaulted amount upon their election to participate therein.

 

4. Advance Payment: If a default is not cured within thirty (30) days of the
delivery of a Notice of Default, Operator, or Non-Operators if Operator is the
defaulting party, may thereafter require advance payment from the defaulting
party of such defaulting party’s anticipated share of any item of expense for
which Operator, or Non-Operators, as the case may be, would be entitled to
reimbursement under any provision of this agreement, whether or not such expense
was the subject of the previous default.  Such right includes, but is not
limited to, the right to require advance payment for the estimated costs of
drilling a well or Completion of a well as to which an election to participate
in drilling or Completion has been made.  If the defaulting party fails to pay
the required advance payment, the non-defaulting parties may pursue any of the
remedies provided in the Article VII.D. or any other default remedy provided
elsewhere in this agreement.  Any excess of funds advanced remaining when the
operation is completed and all costs have been paid shall be promptly returned
to the advancing party.

 

5. Costs and Attorneys’ Fees: In the event any party is required to bring legal
proceedings to enforce any financial obligation of a party hereunder, the
prevailing party in such action shall be entitled to recover all court costs,
costs of collection, and a reasonable attorney’s fee, which the lien provided
for herein shall also secure.

 

E.  Rentals, Shut-in Well Payments and Minimum Royalties:

 

Rentals, shut-in well payments and minimum royalties which may be required under
the terms of any lease shall be paid by the party or parties who subjected such
lease to this agreement at its or their expense.  In the event two or more
parties own and have contributed interests in the same lease to this agreement,
such parties may designate one of such parties to make said payments for and on
behalf of all such parties.  Any party may request, and shall be entitled to
receive, proper evidence of all such payments.  In the event of failure to make
proper payment of any rental, shut-in well payment or minimum royalty through
mistake or oversight where such payment is required to continue the lease in
force, any loss which results from such non-payment shall be borne in accordance
with the provisions of Article IV.B.2.

 

Operator shall notify Non-Operators of the anticipated completion of a shut-in
well, or the shutting in or return to production of a producing well, at least
five (5) days (excluding Saturday, Sunday, and legal holidays) prior to taking
such action, or at the earliest opportunity permitted by circumstances, but
assumes no liability for failure to do so.  In the event of failure by Operator
to so notify Non-Operators, the loss of any lease contributed hereto by
Non-Operators for failure to make timely payments of any shut-in well payment
shall be borne jointly by the parties hereto under the provisions of Article
IV.B.3.

 

F.  Taxes:

 

Beginning with the first calendar year after the effective date hereof, Operator
shall render for ad valorem taxation all property subject to this agreement
which by law should be rendered for such taxes, and it shall pay all such taxes
assessed thereon before they become delinquent.  Prior to the rendition date,
each Non-Operator shall furnish Operator information as to burdens (to include,
but not be limited to, royalties, overriding royalties and production payments)
on Leases and Oil and Gas Interests contributed by such Non-Operator.  If the
assessed valuation of any Lease is reduced by reason of its being subject to
outstanding excess royalties, overriding royalties or production payments, the
reduction in ad valorem taxes resulting therefrom shall inure to the benefit of
the owner or owners of such Lease, and Operator shall adjust the charge to such
owner or owners so as to reflect the benefit of such reduction.  If the ad
valorem taxes are based in whole or in part upon separate valuations of each
party’s working interest, then notwithstanding anything to the contrary herein,
charges to the joint account shall be made and paid by the parties hereto in
accordance with the tax value generated by each party’s working interest. 
Operator shall bill the other parties for their proportionate shares of all tax
payments in the manner provided in Exhibit “C.”  Provided, however, if at any
time any party takes its share of production in kind, or separately disposes of
it, such party shall pay or cause to be paid any and all taxes as to such
production.

 

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If Operator considers any tax assessment improper, Operator may, at its
discretion, protest within the time and manner prescribed by law, and prosecute
the protest to a final determination, unless all parties agree to abandon the
protest prior to final determination.  During the pendency of administrative or
judicial proceedings, Operator may elect to pay, under protest, all such taxes
and any interest and penalty.  When any such protested assessment shall have
been finally determined, Operator shall pay the tax for the joint account,
together with any interest and penalty accrued, and the total cost shall then be
assessed against the parties, and be paid by them, as provided in Exhibit “C.”

 

Each party shall pay or cause to be paid all production, severance, excise,
gathering and other taxes imposed upon or with respect to the production or
handling of such party’s share of Oil and Gas produced under the terms of this
agreement.

 

ARTICLE VIII.

ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

 

A.  Surrender of Leases:

 

The Leases covered by this agreement, insofar as they embrace acreage in the
Contract Area, shall not be surrendered in whole or in part unless all parties
consent thereto.

 

However, should any party desire to surrender its interest in any Lease or in
any portion thereof, such party shall give written notice of the proposed
surrender to all parties, and the parties to whom such notice is delivered shall
have thirty (30) days after delivery of the notice within which to notify the
party proposing the surrender whether they elect to consent thereto.  Failure of
a party to whom such notice is delivered to reply within said 30-day period
shall constitute a consent to the surrender of the Leases described in the
notice.  If all parties do not agree or consent thereto, the party desiring to
surrender shall assign, without express or implied warranty of title, all of its
interest in such Lease, or portion thereof, and any well, material and equipment
which may be located thereon and any rights in production thereafter secured, to
the parties not consenting to such surrender.  If the interest of the assigning
party is or includes an Oil and Gas Interest, the assigning party shall execute
and deliver to the party or parties not consenting to such surrender an oil and
gas lease covering such Oil and Gas Interest for a term of one (1) year and so
long thereafter as Oil and/or Gas is produced from the land covered thereby,
such lease to be negotiated.  Upon such assignment or lease, the assigning party
shall be relieved from all obligations thereafter accruing, but not theretofore
accrued, with respect to the interest assigned or leased and the operation of
any well attributable thereto, and the assigning party shall have no further
interest in the assigned or leased premises and its equipment and production
other than the royalties retained in any lease made under the terms of this
Article.  The party assignee or lessee shall pay to the party assignor or lessor
the reasonable salvage value of the latter’s interest in any well’s salvable
materials and equipment attributable to the assigned or leased acreage.  The
value of all salvable materials and equipment shall be determined in accordance
with the provisions of Exhibit “C,” less the estimated cost of salvaging and the
estimated cost of plugging and abandoning and restoring the surface.  If such
value is less than such costs, then the party assignor or lessor shall pay to
the party assignee or lessee the amount of such deficit.  If the assignment or
lease is in favor of more than one party, the interest shall be shared by such
parties in the proportions that the interest of each bears to the total interest
of all such parties.  If the interest of the parties to whom the assignment is
to be made varies according to depth, then the interest assigned shall similarly
reflect such variances.

 

Any assignment, lease or surrender made under this provision shall not reduce or
change the assignor’s, lessor’s or surrendering party’s interest as it was
immediately before the assignment, lease or surrender in the balance of the
Contract Area; and the acreage assigned, leased or surrendered, and subsequent
operations thereon, shall not thereafter be subject to the terms and provisions
of this agreement but shall be deemed subject to an Operating Agreement in the
form of this agreement.

 

B. Renewal or Extension of Leases:

 

If any party secures a renewal or replacement of an Oil and Gas Lease or
Interest subject to this agreement, then all other parties shall be notified
promptly upon such acquisition or, in the case of a replacement Lease taken
before expiration of an existing Lease, promptly upon expiration of the existing
Lease.  The parties notified shall have the right for a period of thirty (30)
days following delivery of such notice in which to elect to participate in the
ownership of the renewal or replacement Lease, insofar as such Lease affects
lands within the Contract Area, by paying to the party who acquired it their
proportionate shares of the acquisition cost allocated to that part of such
Lease within the Contract Area, which shall be in proportion to the interest
held at that time by the parties in the Contract Area.  Each party who
participates in the purchase of a renewal or replacement Lease shall be given an
assignment of its proportionate interest therein by the acquiring party.

 

If some, but less than all, of the parties elect to participate in the purchase
of a renewal or replacement Lease, it shall be owned by the parties who elect to
participate therein, in a ratio based upon the relationship of their respective
percentage of participation in the Contract Area to the aggregate of the
percentages of participation in the Contract Area of all parties participating
in the purchase of such renewal or replacement Lease.  The acquisition of a
renewal or replacement Lease by any or all of the parties hereto shall not cause
a readjustment of the interests of the parties stated in Exhibit “A,” but any
renewal or replacement Lease in which less than all parties elect to participate
shall not be subject to this agreement but shall be deemed subject to a separate
Operating Agreement in the form of this agreement.

 

If the interests of the parties in the Contract Area vary according to depth,
then their right to participate proportionately in renewal or replacement Leases
and their right to receive an assignment of interest shall also reflect such
depth variances.

 

The provisions of this Article shall apply to renewal or replacement Leases
whether they are for the entire interest covered by the expiring Lease or cover
only a portion of its area or an interest therein.  Any renewal or replacement
Lease taken before the expiration of its predecessor Lease, or taken or
contracted for or becoming effective within six (6) months after the expiration
of the existing Lease, shall be subject to this provision so long as this
agreement is in effect at the time of such acquisition or at the time the
renewal or replacement Lease becomes effective; but any Lease taken or
contracted for more than six (6) months after the expiration of an existing
Lease shall not be deemed a renewal or replacement Lease and shall not be
subject to the provisions of this agreement.

 

The provisions in this Article shall also be applicable to extensions of Oil and
Gas Leases.

 

C.  Acreage or Cash Contributions:

 

                                                While this agreement is in
force, if any party contracts for a contribution of cash towards the drilling of
a well or any other operation on the Contract Area, such contribution shall be
paid to the party who conducted the drilling or other operation and shall be
applied by it against the cost of such drilling or other operation.  If the
contribution be in the form of acreage, the party to whom the contribution is
made shall promptly tender an assignment of the acreage, without warranty of
title, to the Drilling Parties in the proportions said Drilling Parties shared
the cost of drilling the well. Such acreage shall become a separate Contract
Area and, to the extent possible, be governed by provisions identical to this
agreement.  Each party shall promptly notify all other parties of any acreage or
cash contributions it may obtain in support of any well or any other operation
on the Contract Area.  The above provisions shall also be applicable to optional
rights to earn acreage outside the Contract Area which are in support of well
drilled inside Contract Area.

 

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If any party contracts for any consideration relating to disposition of such
party’s share of substances produced hereunder,

such consideration shall not be deemed a contribution as contemplated in this
Article VIII.C.

 

D.  Assignment; Maintenance of Uniform Interest:

 

Every sale, encumbrance, transfer or other disposition made by any party shall
be made expressly subject to this agreement and shall be made without prejudice
to the right of the other parties, and any transferee of an ownership interest
in any Oil and Gas Lease or Interest shall be deemed a party to this agreement
as to the interest conveyed from and after the effective date of the transfer of
ownership; provided, however, that the other parties shall not be required to
recognize any such sale, encumbrance, transfer or other disposition for any
purpose hereunder until thirty (30) days after they have received a copy of the
recorded instrument of transfer or other satisfactory evidence thereof in
writing from the transferor or transferee.  No assignment or other disposition
of interest by a party shall relieve such party of obligations previously
incurred by such party hereunder with respect to the interest transferred,
including without limitation the obligation of a party to pay all costs
attributable to an operation conducted hereunder in which such party has agreed
to participate prior to making such assignment, and the lien and security
interest granted by Article VII.B. shall continue to burden the interest
transferred to secure payment of any such obligations.

 

If, at any time the interest of any party is divided among and owned by four or
more co-owners, Operator, at its discretion, may require such co-owners to
appoint a single trustee or agent with full authority to receive notices,
approve expenditures, receive billings for and approve and pay such party’s
share of the joint expenses, and to deal generally with, and with power to bind,
the co-owners of such party’s interest within the scope of the operations
embraced in this agreement; however, all such co-  owners shall have the right
to enter into and execute all contracts or agreements for the disposition of
their respective shares of the Oil and Gas produced from the Contract Area and
they shall have the right to receive, separately, payment of the sale proceeds
thereof.

 

E. Waiver of Rights to Partition:

 

If permitted by the laws of the state or states in which the property covered
hereby is located, each party hereto owning an undivided interest in the
Contract Area waives any and all rights it may have to partition and have set
aside to it in severalty its undivided interest therein.

 

ARTICLE IX.

INTERNAL REVENUE CODE ELECTION

 

If, for federal income tax purposes, this agreement and the operations hereunder
are regarded as a partnership, and if the parties have not otherwise agreed to
form a tax partnership pursuant to Exhibit “G” or other agreement between them,
each party thereby affected elects to be excluded from the application of all of
the provisions of Subchapter “K,” Chapter 1, Subtitle  “A,” of the Internal
Revenue Code of 1986, as amended (“Code”), as permitted and authorized by
Section 761 of the Code and the regulations promulgated thereunder.  Operator is
authorized and directed to execute on behalf of each party hereby affected such
evidence of this election as may be required by the Secretary of the Treasury of
the United States or the Federal Internal Revenue Service, including
specifically, but not by way of limitation, all of the returns, statements, and
the data required by Treasury Regulation §1.761.  Should there be any
requirement that each party hereby affected give further evidence of this
election, each such party shall execute such documents and furnish such other
evidence as may be required by the Federal Internal Revenue Service or as may be
necessary to evidence this election.  No such party shall give any notices or
take any other action inconsistent with the election made hereby.  If any
present or future income tax laws of the state or states in which the Contract
Area is located or any future income tax laws of the United States contain
provisions similar to those in Subchapter “K,” Chapter  1, Subtitle “A,” of the
Code, under which an election similar to that provided by Section 761 of the
Code is permitted, each party hereby affected shall make such election as may be
permitted or required by such laws.  In making the foregoing election, each such
party states that the income derived by such party from operations hereunder can
be adequately determined without the computation of partnership taxable income.

 

ARTICLE X.

CLAIMS AND LAWSUITS

 

Operator may settle any single uninsured third party damage claim or suit
arising from operations hereunder if the expenditure does not exceed Twenty-five
Thousand Dollars ($25,000.00) and if the payment is in complete settlement of
such claim or suit.  If the amount required for settlement exceeds the above
amount, the parties hereto shall assume and take over the further handling of
the claim or suit, unless such authority is delegated to Operator.  All costs
and expenses of handling settling, or otherwise discharging such claim or suit
shall be a the joint expense of the parties participating in the operation from
which the claim or suit arises.  If a claim is made against any party or if any
party is sued on account of any matter arising from operations hereunder over
which such individual has no control because of the rights given Operator by
this agreement, such party shall immediately notify all other parties, and the
claim or suit shall be treated as any other claim or suit involving operations
hereunder.

 

15

--------------------------------------------------------------------------------

 

ARTICLE XI.

FORCE MAJEURE

 

If any party is rendered unable, wholly or in part, by force majeure to carry
out its obligations under this agreement, other than the obligation to indemnify
or make money payments or furnish security, that party shall give to all other
parties prompt written notice of the force majeure with reasonably full
particulars concerning it; thereupon, the obligations of the party giving the
notice, so far as they are affected by the force majeure, shall be suspended
during, but no longer than, the continuance of the force majeure.  The term
“force majeure,” as here employed, shall mean an act of God, strike, lockout, or
other industrial disturbance, act of the public enemy, war, blockade, public
riot, lightening, fire, storm, flood or other act of nature, explosion,
governmental action, governmental delay, restraint or inaction, unavailability
of equipment, and any other cause, whether of the kind specifically enumerated
above or otherwise, which is not reasonably within the control of the party
claiming suspension.

 

The affected party shall use all reasonable diligence to remove the force
majeure situation as quickly as practicable. The requirement that any force
majeure shall be remedied with all reasonable dispatch shall not require the
settlement of strikes, lockouts, or other labor difficulty by the party
involved, contrary to its wishes; how all such difficulties shall be handled
shall be entirely within the discretion of the party concerned.

 

ARTICLE XII.

NOTICES

 

All notices authorized or required between the parties by any of the provisions
of this agreement, unless otherwise specifically provided, shall be in writing
and delivered in person or by United States mail, courier service, telegram,
telex, telecopier or any other form of facsimile, postage or charges prepaid,
and addressed to such parties at the addresses listed on Exhibit “A.”  All
telephone or oral notices permitted by this agreement shall be confirmed
immediately thereafter by written notice.  The originating notice given under
any provision hereof shall be deemed delivered only when received by the party
to whom such notice is directed, and the time for such party to deliver any
notice in response thereto shall run from the date the originating notice is
received.  “Receipt” for purposes of this agreement with respect to written
notice delivered hereunder shall be actual delivery of the notice to the address
of the party to be notified specified in accordance with this agreement, or to
the telecopy, facsimile or telex machine of such party.  The second or any
responsive notice shall be deemed delivered when deposited in the United States
mail or at the office of the courier or telegraph service, or upon transmittal
by telex, telecopy or facsimile, or when personally delivered to the party to be
notified, provided, that when response is required within 24 or  48 hours, such
response shall be given orally or by telephone, telex, telecopy or other
facsimile within such period. Each party shall have the right to change its
address at any time, and from time to time, by giving written notice thereof to
all other parties.  If a party is not available to receive notice orally or by
telephone when a party attempts to deliver a notice required to be delivered
within 24 or 48 hours, the notice may be delivered in writing by any other
method specified herein and shall be deemed delivered in the same manner
provided above for any responsive notice.

 

ARTICLE XIII.

TERM OF AGREEMENT

 

This agreement shall remain in full force and effect as to the Oil and Gas
Leases and/or Oil and Gas Interests subject hereto for the period of time
selected below; provided, however, no party hereto shall ever be construed as
having any right, title or interest in or to any Lease or Oil and Gas Interest
contributed by any other party beyond the term of this agreement.

 

ý            Option No. 1: So long as any of the Oil and Gas Leases subject to
this agreement remain or are continued in force as to any part of the Contract
Area, whether by production, extension, renewal or otherwise.

 

The termination of this agreement shall not relieve any party hereto from any
expense, liability or other obligation or any remedy therefor which has accrued
or attached prior to the date of such termination.

 

Upon termination of this agreement and the satisfaction of all obligations
hereunder, in the event a memorandum of this Operating Agreement has been filed
of record, Operator is authorized to file of record in all necessary recording
offices a notice of termination, and each party hereto agrees to execute such a
notice of termination as to Operator’s interest, upon request of Operator, if
Operator has satisfied all its financial obligations.

 

ARTICLE XIV.

COMPLIANCE WITH LAWS AND REGULATIONS

 

A.  Laws, Regulations and Orders:

 

This agreement shall be subject to the applicable laws of the state in which the
Contract Area is located, to the valid rules, regulations, and orders of any
duly constituted regulatory body of said state; and to all other applicable
federal, state, and local laws, ordinances, rules, regulations and orders.

 

B.  Governing Law:

 

This agreement and all matters pertaining hereto, including but not limited to
matters of performance, non-performance, breach, remedies, procedures, rights,
duties, and interpretation or construction, shall be governed and determined by
the law of the state of Colorado.

 

C.  Regulatory Agencies:

 

Nothing herein contained shall grant, or be construed to grant, Operator the
right or authority to waive or release any rights, privileges, or obligations
which Non-Operators may have under federal or state laws or under rules,
regulations or

 

16

--------------------------------------------------------------------------------

 

orders promulgated under such laws in reference to oil, gas and mineral
operations, including the location, operation, or production of wells, on tracts
offsetting or adjacent to the Contract Area.

 

With respect to the operations hereunder, Non-Operators agree to release
Operator from any and all losses, damages, injuries, claims and causes of action
arising out of, incident to or resulting directly or indirectly from Operator’s
interpretation or application of rules, rulings, regulations or orders of the
Department of Energy or Federal Energy Regulatory Commission or predecessor or
successor agencies to the extent such interpretation or application was made in
good faith and does not constitute gross negligence. Each Non-Operator further
agrees to reimburse Operator for such Non-Operator’s share of production or any
refund, fine, levy or other governmental sanction that Operator may be required
to pay as a result of such an incorrect interpretation or application, together
with interest and penalties thereon owing by Operator as a result of such
incorrect interpretation or application.

 

ARTICLE XV.

MISCELLANEOUS

 

A.  Execution:

 

This agreement shall be binding upon each Non-Operator when this agreement or a
counterpart thereof has been executed by such Non-Operator and Operator
notwithstanding that this agreement is not then or thereafter executed by all of
the parties to which it is tendered or which are listed on Exhibit “A” as owning
an interest in the Contract Area or which own, in fact, an interest in the
Contract Area.  Operator may, however, by written notice to all Non-Operators
who have become bound by this agreement as aforesaid, given at any time prior to
the actual spud date of the Initial Well but in no event later than five days
prior to the date specified in Article VI.A. for commencement of the Initial
Well, terminate this agreement if Operator in its sole discretion determines
that there is insufficient participation to justify commencement of drilling
operations.  In the event of such a termination by Operator, all further
obligations of the parties hereunder shall cease as of such termination.  In the
event any Non-Operator has advanced or prepaid any share of drilling or other
costs hereunder, all sums so advanced shall be returned to such Non-Operator
without interest.  In the event Operator proceeds with drilling operations for
the Initial Well without the execution hereof by all persons listed on Exhibit
“A” as having a current working interest in such well, Operator shall indemnify
Non-Operators with respect to all costs incurred for the Initial Well which
would have been charged to such person under this agreement if such person had
executed the same and Operator shall receive all revenues which would have been
received by such person under this agreement if such person had executed the
same.

 

B. Successors and Assigns:

 

This agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, devisees, legal representatives,
successors and assigns, and the terms hereof shall be deemed to run with the
Leases or Interests included within the Contract Area.

 

C. Counterparts:

 

This instrument may be executed in any number of counterparts, each of which
shall be considered an original for all purposes.

 

D.  Severability:

 

For the purposes of assuming or rejecting this agreement as an executory
contract pursuant to federal bankruptcy laws, this agreement shall not be
severable, but rather must be assumed or rejected in its entirety, and the
failure of any party to this agreement to comply with all of its financial
obligations provided herein shall be a material default.

 

ARTICLE XVI.

OTHER PROVISIONS

 

See Additional Provisions attached hereto and by reference made a part hereof.

 

17

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this agreement shall be effective as of the          day
of                                           , 2006.

 

 

ATTEST OR WITNESS:

 

 

OPERATOR

 

 

 

 

 

 

 

 

 

Noble Energy, Inc.

 

 

 

 

 

 

By

/s/ David W. Siple

 

 

 

 

 

 

David W. Siple

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

Attorney-In-Fact for GWW

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

NON-OPERATORS

 

 

 

 

 

 

Teton DJ LLC,

 

 

 

 

By Teton Energy Corporation, Manager

 

 

 

 

 

By

/s/ Patrick A. Quinn

 

 

 

 

 

 

Patrick A. Quinn

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

Chief Financial Officer

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

18

--------------------------------------------------------------------------------

 

ACKNOWLEDGMENTS

 

Note: The following forms of acknowledgment are the short forms approved by the
Uniform Law on Notarial Acts.

 

The validity and effect of these forms in any state will depend upon the
statutes of that state.

 

Individual acknowledgment:

 

State of

)

 

 

 

) ss.

 

 

County of

)

 

 

This instrument was acknowledged before me on

 

 

 

by

 

 

 

 

 

(Seal, if any)

 

 

 

 

Title (and Rank)

 

 

 

 

My commission expires:

 

 

 

Acknowledgment in representative capacity:

 

State of

Colorado

)

 

 

 

 

) ss.

 

 

County of

Denver

)

 

 

 

This instrument was acknowledged before me on

 

 

 

 

by

David W. Siple

as

 

Attorney-In-Fact of Noble Energy, Inc., a Delaware corporation

 

(Seal, if any)

 

 

 

 

Title (and Rank)

Notary Public

 

 

 

My commission expires:

February 9, 2009

 

State of

Colorado

)

 

 

 

 

) ss.

 

 

County of

Denver

)

 

 

 

This instrument was acknowledged before me on

 

 

 

 

by

Patrick A. Quinn

as

 

President of Teton DJ LLC, a Colorado Limited Liability Company

 

(Seal, if any)

 

 

 

 

Title (and Rank)

Notary Public

 

 

 

My commission expires:

 

 

19

--------------------------------------------------------------------------------

 

A.A.P.L. FORM 610 - 1989

 

MODEL FORM OPERATING AGREEMENT

 

 

OPERATING AGREEMENT

 

DATED

 

 

January 27

,

2006

    ,

 

 

 

year

 

 

OPERATOR

  Noble Energy, Inc.

 

CONTRACT AREA

  East Big Springs Complex

 

(See legal description below)

 

 

 

 

 

COUNTIES OF

  Sedgwick

    STATE OF

  Colorado

 

COUNTIES OF

  Keith, Duell and Perkins

  , STATE OF

  Nebraska

 

Township 15 North, Range 40 West, 6th P.M. - ALL

Township 15 North, Range 41 West, 6th P.M. - ALL

Township 14 North, Range 40 West, 6th P.M. - ALL

Township 14 North, Range 41 West, 6th P.M. - ALL

Township 13 North, Range 40 West, 6th P.M. - ALL

Township 13 North, Range 41 West, 6th P.M. - ALL

Township 12 North, Range 40 West, 6th P.M. - Sections 1-21, 28-33

Township 12 North, Range 41 West, 6th P.M. - ALL

Township 12 North, Range 42 West, 6th P.M. - (Duell Co., NE) Sections
1-3,10-15,22-24

Township 12 North, Range 42 West, 6th P.M. - (Sedgwick Co., CO) Sections
19,20,29-32 (ALL)

Township 12 North, Range 43 West, 6th P.M. - (Sedgwick Co., CO) Sections
23-26,35,36

Township 11 North, Range 41 West, 6th P.M. - ALL

Township 11 North, Range 42 West, 6th P.M. - (Sedgwick Co., CO) Sections
5-8,17-20,29-32(ALL)

Township 11 North, Range 43 West, 6th P.M. - (Sedgwick Co., CO) Sections
1,2,11-14,23-26,35,36

Township 10 North, Range 42 West, 6th P.M. - (Sedgwick Co., CO) Sections 5,6

Township 10 North, Range 43 West, 6th P.M. - (Sedgwick Co., CO) Sections 1,2

 

 

COPYRIGHT 1989 – ALL RIGHTS RESERVED
AMERICAN ASSOCIATION OF PETROLEUM
LANDMEN, 4100 FOSSIL CREEK BLVD.
FORT WORTH, TEXAS, 76137, APPROVED FORM.

 

A.A.P.L. NO. 610 – 1989

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

Article

 

Title

 

Page

I.

 

DEFINITIONS

 

1

II.

 

EXHIBITS

 

1

III.

 

INTERESTS OF PARTIES

 

2

 

 

B. INTERESTS OF PARTIES IN COSTS AND PRODUCTION:

 

2

 

 

C. SUBSEQUENTLY CREATED INTERESTS:

 

2

IV.

 

TITLES

 

2

 

 

A. TITLE EXAMINATION:

 

2

 

 

B. LOSS OR FAILURE OF TITLE:

 

3

 

 

1. Failure of Title

 

3

 

 

2. Loss by Non-Payment or Erroneous Payment of Amount Due

 

3

 

 

3. Other Losses

 

3

 

 

4. Curing Title

 

3

V.

 

OPERATOR

 

4

 

 

A. DESIGNATION AND RESPONSIBILITIES OF OPERATOR:

 

4

 

 

B. RESIGNATION OR REMOVAL OF OPERATOR AND SELECTION OF SUCCESSOR:

 

4

 

 

1. Resignation or Removal of Operator

 

4

 

 

2. Selection of Successor Operator

 

4

 

 

3. Effect of Bankruptcy

 

4

 

 

C. EMPLOYEES AND CONTRACTORS:

 

4

 

 

D. RIGHTS AND DUTIES OF OPERATOR:

 

4

 

 

1. Competitive Rates and Use of Affiliates

 

4

 

 

2. Discharge of Joint Account Obligations

 

4

 

 

3. Protection from Liens

 

4

 

 

4. Custody of Funds

 

5

 

 

5. Access to Contract Area and Records

 

5

 

 

6. Filing and Furnishing Governmental Reports

 

5

 

 

7. Drilling and Testing Operations

 

5

 

 

8. Cost Estimates

 

5

 

 

9. Insurance

 

5

VI.

 

DRILLING AND DEVELOPMENT

 

5

 

 

A. INITIAL WELL:

 

5

 

 

B. SUBSEQUENT OPERATIONS:

 

5

 

 

1. Proposed Operations

 

5

 

 

2. Operations by Less Than All Parties

 

6

 

 

3. Stand-By Costs

 

7

 

 

4. Deepening

 

8

 

 

5. Sidetracking

 

8

 

 

6. Order of Preference of Operations

 

8

 

 

7. Conformity to Spacing Pattern

 

9

 

 

8. Paying Wells

 

9

 

 

C. COMPLETION OF WELLS; REWORKING AND PLUGGING BACK:

 

9

 

 

1. Completion

 

9

 

 

2. Rework, Recomplete or Plug Back

 

9

 

 

D. OTHER OPERATIONS:

 

9

 

 

E. ABANDONMENT OF WELLS:

 

9

 

 

1. Abandonment of Dry Holes

 

9

 

 

2. Abandonment of Wells That Have Produced

 

10

 

 

3. Abandonment of Non-Consent Operations

 

10

 

 

F. TERMINATION OF OPERATIONS:

 

10

 

 

G. TAKING PRODUCTION IN KIND:

 

10

 

 

(Option 1) Gas Balancing Agreement

 

10

VII.

 

EXPENDITURES AND LIABILITY OF PARTIES

 

11

 

 

A. LIABILITY OF PARTIES:

 

11

 

 

B. LIENS AND SECURITY INTERESTS:

 

12

 

 

C. ADVANCES:

 

12

 

 

D. DEFAULTS AND REMEDIES:

 

12

 

 

1. Suspension of Rights

 

13

 

 

2. Suit for Damages

 

13

 

 

3. Deemed Non-Consent

 

13

 

 

4. Advance Payment

 

13

 

 

5. Costs and Attorneys’ Fees

 

13

 

 

E. RENTALS, SHUT-IN WELL PAYMENTS AND MINIMUM ROYALTIES:

 

13

 

 

F. TAXES:

 

13

VIII.

 

ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

 

14

 

 

A. SURRENDER OF LEASES:

 

14

 

 

B. RENEWAL OR EXTENSION OF LEASES:

 

14

 

 

C. ACREAGE OR CASH CONTRIBUTIONS:

 

14

 

i

--------------------------------------------------------------------------------

 

 

 

D. ASSIGNMENT; MAINTENANCE OF UNIFORM INTEREST:

 

15

 

 

E. WAIVER OF RIGHTS TO PARTITION:

 

15

IX.

 

INTERNAL REVENUE CODE ELECTION

 

15

X.

 

CLAIMS AND LAWSUITS

 

15

XI.

 

FORCE MAJEURE

 

16

XII.

 

NOTICES

 

16

XIII.

 

TERM OF AGREEMENT

 

16

XIV.

 

COMPLIANCE WITH LAWS AND REGULATIONS

 

16

 

 

A. LAWS, REGULATIONS AND ORDERS:

 

16

 

 

B. GOVERNING LAW:

 

16

 

 

C. REGULATORY AGENCIES:

 

16

XV.

 

MISCELLANEOUS

 

17

 

 

A. EXECUTION:

 

17

 

 

B. SUCCESSORS AND ASSIGNS:

 

17

 

 

C. COUNTERPARTS:

 

17

 

 

D. SEVERABILITY

 

17

XVI.

 

OTHER PROVISIONS

 

17

 

ii

--------------------------------------------------------------------------------

 

OPERATING AGREEMENT

 

THIS AGREEMENT, entered into by and between Noble Energy, Inc., hereinafter
designated and referred to as “Operator,” and the signatory party or parties
other than Operator, sometimes hereinafter referred to individually as
“Non-Operator,” and collectively as “Non-Operators.”

 

WITNESSETH:

 

WHEREAS, the parties to this agreement are owners of Oil and Gas Leases and/or
Oil and Gas Interests in the land identified in Exhibit “A,” and the parties
hereto have reached an agreement to explore and develop these Leases and/or Oil
and Gas Interests for the production of Oil and Gas to the extent and as
hereinafter provided,

 

NOW, THEREFORE, it is agreed as follows:

 

ARTICLE I.

DEFINITIONS

 

As used in this agreement, the following words and terms shall have the meanings
here ascribed to them:

 

A.  The term “AFE” shall mean an Authority for Expenditure prepared by a party
to this agreement for the purpose of estimating the costs to be incurred in
conducting an operation hereunder.

 

B.  The term “Completion” or “Complete” shall mean a single operation intended
to complete a well as a producer of Oil and Gas in one or more Zones, including,
but not limited to, the setting of production casing, perforating, well
stimulation and production testing conducted in such operation.

 

C.  The term “Contract Area” shall mean all of the lands, Oil and Gas Leases
and/or Oil and Gas Interests intended to be developed and operated for Oil and
Gas purposes under this agreement.  Such lands, Oil and Gas Leases and Oil and
Gas Interests are described in Exhibit “A.”

 

D.  The term “Deepen” shall mean a single operation whereby a well is drilled to
an objective Zone below the deepest Zone from which the well is or was producing
the Deepest lesser.

 

E.  The terms “Drilling Party” and “Consenting Party” shall mean a party who
agrees to join in and pay its share of the cost of any operation conducted under
the provisions of this agreement.

 

F.  The term “Drilling Unit” shall mean the area fixed for the drilling of one
well by order or rule of any state or federal body having authority.  If a
Drilling Unit is not fixed by any such rule or order, a Drilling Unit shall be
the drilling unit as established by the pattern of drilling in the Contract Area
unless fixed by express agreement of the Drilling Parties.

 

G.  The term “Drillsite” shall mean the Oil and Gas Lease or Oil and Gas
Interest on which a proposed well is to be located.

 

I.  The term “Non-Consent Well” shall mean a well in which less than all parties
have conducted an operation as provided in Article VI.B.2.

 

J.  The terms “Non-Drilling Party” and “Non-Consenting Party” shall mean a party
who elects not to participate in a proposed operation.

 

K.  The term “Oil and Gas” shall mean oil, gas, casinghead gas, gas condensate,
and/or all other liquid or gaseous hydrocarbons and other marketable substances
produced therewith, unless an intent to limit the inclusiveness of this term is
specifically stated.

 

L.  The term “Oil and Gas Interests” or “Interests” shall mean unleased fee and
mineral interests in Oil and Gas in tracts of land lying within the Contract
Area which are owned by parties to this agreement.

 

M.  The terms “Oil and Gas Lease,” “Lease” and “Leasehold” shall mean the oil
and gas leases or interests therein covering tracts of land lying within the
Contract Area which are owned by the parties to this agreement.

 

N.  The term “Plug Back” shall mean a single operation whereby a deeper Zone is
abandoned in order to attempt a Completion in a shallower Zone.

 

O.  The term “Recompletion” or “Recomplete” shall mean an operation whereby a
Completion is attempted in another Zone within the existing wellbore, whether or
not one zone is abandoned at such time.

 

P.  The term “Rework” shall mean an operation conducted in the wellbore of a
well after it is Completed to secure, restore, or improve production in a Zone
which is currently open to production in the wellbore.  Such operations include,
but are not limited to, well stimulation operations including refracturing of a
zone but exclude any routine repair or maintenance work or drilling,
Sidetracking, Deepening, Completing, Recompleting, or Plugging Back of a well.

 

Q.  The term “Sidetrack” shall mean the directional control and intentional
deviation of a well from vertical so as to change the bottom hole location
unless done to straighten the hole or drill around junk in the hole to overcome
other mechanical difficulties.

 

R.  The term “Zone” shall mean a stratum of earth containing or thought to
contain a common accumulation of Oil and Gas separately producible from any
other common accumulation of Oil and Gas.

 

Unless the context otherwise clearly indicates, words used in the singular
include the plural, the word “person” includes natural and artificial persons,
the plural includes the singular, and any gender includes the masculine,
feminine, and neuter.

 

ARTICLE II.

EXHIBITS

 

The following exhibits, as indicated below and attached hereto, are incorporated
in and made a part hereof:

 

X     A.            Exhibit “A,” shall include the following information:

 

(1) Description of lands subject to this agreement,

 

(2) Restrictions, if any, as to depths, formations, or substances,

 

(3) Parties to agreement with addresses and telephone numbers for notice
purposes,

 

(4) Percentages or fractional interests of parties to this agreement,

 

(5) Oil and Gas Leases and/or Oil and Gas Interests subject to this agreement,

 

(6) Burdens on production.

 

X     C.            Exhibit “C,” Accounting Procedure.

 

X     D.            Exhibit “D,” Insurance.

 

X     E.             Exhibit “E,” Gas Balancing Agreement.

 

X     G.            Exhibit “G,” Tax Partnership.

 

X     H.            Other:  Recording Supplement and Financing
Statement/Settlement Agreement

 

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If any provision of any exhibit, except Exhibits “E,” “F” and “G,” is
inconsistent with any provision contained in the body of this agreement, the
provisions in the body of this agreement shall prevail.

 

ARTICLE III.

INTERESTS OF PARTIES

 

B.  Interests of Parties in Costs and Production:

 

Unless changed by other provisions, all costs and liabilities incurred in
operations under this agreement shall be borne and paid, and all equipment and
materials acquired in operations on the Contract Area shall be owned, by the
parties as their interests are set forth in Exhibit “A.”  In the same manner,
the parties shall also own all production of Oil and Gas from the Contract Area
subject, however, to the payment of royalties and other burdens on production as
described hereafter.

 

Regardless of which party has contributed any Oil and Gas Lease or Oil and Gas
Interest on which royalty or other burdens may be payable and except as
otherwise expressly provided in this agreement, each party shall pay or deliver,
or cause to be paid or delivered, all burdens on its share of the production
from the Contract Area up to, but not in excess of, 19% except for the “Low NRI
Leases” as defined in the Acreage Earning Agreement between Teton Energy
Corporation and Noble Energy, Inc. and shall indemnify, defend and hold the
other parties free from any liability therefor. Except as otherwise expressly
provided in this agreement, if any party has contributed hereto any Lease or
Interest which is burdened with any royalty, overriding royalty, production
payment or other burden on production in excess of the amounts stipulated above,
such party so burdened shall assume and alone bear all such excess obligations
and shall indemnify, defend and hold the other parties hereto harmless from any
and all claims attributable to such excess burden.  However, so long as the
Drilling Unit for the productive Zone(s) is identical with the Contract Area,
each party shall pay or deliver, or cause to be paid or delivered, all burdens
on production from the Contract Area due under the terms of the Oil and Gas
Lease(s) which such party has contributed to this agreement, and shall
indemnify, defend and hold the other parties free from any liability therefor.

 

No party shall ever be responsible, on a price basis higher than the price
received by such party, to any other party’s lessor or royalty owner, and if
such other party’s lessor or royalty owner should demand and receive settlement
on a higher price basis, the party contributing the affected Lease shall bear
the additional royalty burden attributable to such higher price.

 

Nothing contained in this Article III.B. shall be deemed an assignment or
cross-assignment of interests covered hereby, and in the event two or more
parties contribute to this agreement jointly owned Leases, the parties’
undivided interests in said Leaseholds shall be deemed separate leasehold
interests for the purposes of this agreement.

 

C.  Subsequently Created Interests:

 

If any party has contributed hereto a Lease or Interest that is burdened with an
assignment of production given as security for the payment of money, or if,
after the date of this agreement, any party creates an overriding royalty,
production payment, net profits interest, assignment of production or other
burden payable out of production attributable to its working interest hereunder,
such burden shall be deemed a “Subsequently Created Interest.”  Further, if any
party has contributed hereto a Lease or Interest burdened with an overriding
royalty, production payment, net profits interests, or other burden payable out
of production created prior to the date of this agreement, and such burden is
not shown on Exhibit “A,” such burden also shall be deemed a Subsequently
Created Interest to the extent such burden causes the burdens on such party’s
Lease or Interest to exceed the amount stipulated in Article III.B. above

 

The party whose interest is burdened with the Subsequently Created Interest (the
“Burdened Party”) shall assume and alone bear, pay and discharge the
Subsequently Created Interest and shall indemnify, defend and hold harmless the
other parties from and against any liability therefor.  Further, if the Burdened
Party fails to pay, when due, its share of expenses chargeable hereunder, all
provisions of Article VII.B. shall be enforceable against the Subsequently
Created Interest in the same manner as they are enforceable against the working
interest of the Burdened Party.  If the Burdened Party is required under this
agreement to assign or relinquish to any other party, or parties, all or a
portion of its working interest and/or the production attributable thereto, said
other party, or parties, shall receive said assignment and/or production free
and clear of said Subsequently Created Interest, and the Burdened Party shall
indemnify, defend and hold harmless said other party, or parties, from any and
all claims and demands for payment asserted by owners of the Subsequently
Created Interest.

 

ARTICLE IV.

TITLES

 

A.  Title Examination:

 

Title examination shall be made on the Drilling Unit of any proposed well prior
to commencement of drilling operations.  The opinion will include the ownership
of the working interest, minerals, royalty, overriding royalty and production
payments under the applicable Leases.  Each party contributing Leases and/or Oil
and Gas Interests to be included in the Drillsite or Drilling Unit, if
appropriate, shall furnish to Operator all abstracts (including federal lease
status reports), title opinions, title papers and curative material in its
possession free of charge.  All such information not in the possession of or
made available to Operator by the parties, but necessary for the examination of
the title, shall be obtained by Operator.  Operator shall cause title to be
examined by attorneys on its staff or by outside attorneys.  Copies of all title
opinions shall be furnished to each Drilling Party.  Costs incurred by Operator
in procuring abstracts, fees paid outside attorneys and other land professionals
for title examination (including preliminary, supplemental, shut-in royalty
opinions and division order title opinions and curative work) and other direct
charges as provided in Exhibit “C” shall be borne by the Drilling Parties in the
proportion that the interest of each Drilling Party bears to the total interest
of all Drilling Parties as such interests appear in Exhibit “A.”  Operator shall
make no charge for services rendered by its staff attorneys or other personnel
in the performance of the above functions.

 

Each party shall be responsible for securing curative matter and pooling
amendments or agreements required in connection with Leases or Oil and Gas
Interests contributed by such party. Unless otherwise agreed Operator shall be
responsible for the preparation and recording of pooling designations or
declarations and communitization agreements as well as the conduct of hearings
before governmental agencies for the securing of spacing or pooling orders or
any other orders necessary or appropriate to the conduct of operations
hereunder.  This shall not prevent any party from appearing on its own behalf at
such hearings. Costs incurred by Operator, including fees paid to outside
attorneys, and other outside professionals which are associated with hearings
before governmental agencies, and which costs are necessary and proper for the
activities contemplated under this agreement, shall be direct charges to the
joint account and shall not be covered by the administrative overhead charges as
provided in Exhibit “C.”

 

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Operator shall make no charge for services rendered by its staff attorneys or
other personnel in the performance of the above functions.

 

No well shall be drilled on the Contract Area until after (1) the title to the
Drillsite or Drilling Unit, if appropriate, has been examined as above provided,
and (2) the title has been approved by the examining attorney or title has been
accepted by all of the Drilling Parties in such well.

 

B. Loss or Failure of Title:

 

3. Other Losses: All losses of Leases or Interests committed to this agreement
shall be joint losses and shall be borne by all parties in proportion to their
interests shown on Exhibit “A.”  This shall include but not be limited to the
loss of any Lease or Interest through failure to develop or because express or
implied covenants have not been performed (other than performance which requires
only the payment of money), and the loss of any Lease by expiration at the end
of its primary term if it is not renewed or extended.  There shall be no
readjustment of interests in the remaining portion of the Contract Area on
account of any joint loss.

 

4. Curing Title: In the event of a Failure of Title under Article IV.B.1. or a
loss of title under Article IV.B.2. above, any Lease or Interest acquired by any
party hereto (other than the party whose interest has failed or was lost) during
the ninety (90) day period provided by Article IV.B.1. and Article IV.B.2. above
covering all or a portion of the interest that has failed or was lost shall be
offered at cost to the party whose interest has failed or was lost, and the
provisions of Article VIII.B. shall not apply to such acquisition.

 

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ARTICLE V.

OPERATOR

 

A.  Designation and Responsibilities of Operator:

 

Noble Energy, Inc. shall be the Operator of the Contract Area, and shall conduct
and direct and have full control of all operations on the Contract Area as
permitted and required by, and within the limits of this agreement.  In its
performance of services hereunder for the Non-Operators, Operator shall be an
independent contractor not subject to the control or direction of the
Non-Operators except as to the type of operation to be undertaken in accordance
with the election procedures contained in this agreement.  Operator shall not be
deemed, or hold itself out as, the agent of the Non-Operators with authority to
bind them to any obligation or liability assumed or incurred by Operator as to
any third party.  Operator shall conduct its activities under this agreement as
a reasonable prudent operator, in a good and workmanlike manner, with due
diligence and dispatch, in accordance with good oilfield practice, and in
compliance with applicable law and regulation, but in no event shall it have any
liability as Operator to the other parties for losses sustained or liabilities
incurred except such as may result from gross negligence or willful misconduct.

 

B. Resignation or Removal of Operator and Selection of Successor:

 

1. Resignation or Removal of Operator: Operator may resign at any time by giving
written notice thereof to Non-Operators. If Operator terminates its legal
existence, no longer owns an interest hereunder in the Contract Area, or is no
longer capable of serving as Operator, Operator shall be deemed to have resigned
without any action by Non-Operators, except the selection of a successor. 
Operator may be removed only for good cause by the affirmative vote of
Non-Operators owning a majority interest based on ownership as shown on Exhibit
“A” remaining after excluding the voting interest of Operator; such vote shall
not be deemed effective until a written notice has been delivered to the
Operator by a Non-Operator detailing the alleged default and Operator has failed
to cure the default within thirty (30) days from its receipt of the notice or,
if the default concerns an operation then being conducted, within forty-eight
(48) hours of its receipt of the notice.  For purposes hereof, “good cause”
shall mean not only gross negligence or willful misconduct but also the material
breach of or inability to meet the standards of operation contained in Article
V.A. or material failure or inability to perform its obligations under this
agreement.

 

Subject to Article VII.D.1., such resignation or removal shall not become
effective until 7:00 o’clock A.M. on the first day of the calendar month
following the expiration of ninety (90) days after the giving of notice of
resignation by Operator or action by the Non-Operators to remove Operator,
unless a successor Operator has been selected and assumes the duties of Operator
at an earlier date. Operator, after effective date of resignation or removal,
shall be bound by the terms hereof as a Non-Operator.  A change of a corporate
name or structure of Operator or transfer of Operator’s interest to any single
subsidiary, parent or successor corporation shall not be the basis for removal
of Operator.

 

2.  Selection of Successor Operator: Upon the resignation or removal of Operator
under any provision of this agreement, a successor Operator shall be selected by
the parties.  The successor Operator shall be selected from the parties owning
an interest in the Contract Area at the time such successor Operator is
selected.  The successor Operator shall be selected by the affirmative vote of
two (2) or more parties owning a majority interest based on ownership as shown
on Exhibit “A”; provided, however, if an Operator which has been removed or is
deemed to have resigned fails to vote or votes only to succeed itself, the
successor Operator shall be selected by the affirmative vote of the party or
parties owning a majority interest based on ownership as shown on Exhibit “A”
remaining after excluding the voting interest of the Operator that was removed
or resigned.  The former Operator shall within thirty (30) days after selection
of a successor Operator deliver to the successor Operator all records and data
relating to the operations conducted by the former Operator to the extent such
records and data are not already in the possession of the successor operator. 
Any cost of obtaining or copying the former Operator’s records and data shall be
charged to the joint account.

 

3.  Effect of Bankruptcy: If Operator becomes insolvent, bankrupt or is placed
in receivership, it shall be deemed to have resigned without any action by
Non-Operators, except the selection of a successor.  If a petition for relief
under the federal bankruptcy laws is filed by or against Operator, and the
removal of Operator is prevented by the federal bankruptcy court, all
Non-Operators and Operator shall comprise an interim operating committee to
serve until Operator has elected to reject or assume this agreement pursuant to
the Bankruptcy Code, and an election to reject this agreement by Operator as a
debtor in possession, or by a trustee in bankruptcy, shall be deemed a
resignation as Operator without any action by Non-Operators, except the
selection of a successor.  During the period of time the operating committee
controls operations, all actions shall require the approval of two (2) or more
parties owning a majority interest based on ownership as shown on Exhibit “A.” 
In the event there are only two (2) parties to this agreement, during the period
of time the operating committee controls operations, a third party acceptable to
Operator, Non-Operator and the federal bankruptcy court shall be selected as a
member of the operating committee, and all actions shall require the approval of
two (2) members of the operating committee without regard for their interest in
the Contract Area based on Exhibit “A.”

 

C.  Employees and Contractors:

 

The number of employees or contractors used by Operator in conducting operations
hereunder, their selection, and the hours of labor and the compensation for
services performed shall be determined by Operator, and all such employees or
contractors shall be the employees or contractors of Operator.

 

D.  Rights and Duties of Operator:

 

1. Competitive Rates and Use of Affiliates: All wells drilled on the Contract
Area shall be drilled on a competitive contract basis at the usual rates
prevailing in the area.  If it so desires, Operator may employ its own tools and
equipment in the drilling and all other operations contemplated hereby,
including completion, production, recompletion, reworking and deepening of
wells, but its charges therefor shall not exceed the prevailing rates in the
area and such work shall be performed by Operator under the same terms and
conditions as are customary and usual in the area in contracts of independent
contractors who are doing work of a similar nature.  All work performed or
materials supplied by affiliates or related parties of Operator shall be
performed or supplied at competitive rates, pursuant to written agreement, and
in accordance with customs and standards prevailing in the industry.

 

2. Discharge of Joint Account Obligations: Except as herein otherwise
specifically provided, Operator shall promptly pay and discharge expenses
incurred in the development and operation of the Contract Area pursuant to this
agreement and shall charge each of the parties hereto with their respective
proportionate shares upon the expense basis provided in Exhibit “C.” Operator
shall keep an accurate record of the joint account hereunder, showing expenses
incurred and charges and credits made and received.

 

3. Protection from Liens: Operator shall pay, or cause to be paid, as and when
they become due and payable, all accounts of contractors and suppliers and wages
and salaries for services rendered or performed, and for materials supplied on,
to or in respect of the Contract Area or any operations for the joint account
thereof, and shall keep the Contract Area free from

 

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liens and encumbrances resulting therefrom except for those resulting from a
bona fide dispute as to services rendered or materials supplied.

 

4. Custody of Funds: Operator shall hold for the account of the Non-Operators
any funds of the Non-Operators advanced or paid to the Operator, either for the
conduct of operations hereunder or as a result of the sale of production from
the Contract Area, and such funds shall remain the funds of the Non-Operators on
whose account they are advanced or paid until used for their intended purpose or
otherwise delivered to the Non-Operators or applied toward the payment of debts
as provided in Article VII.B.  Nothing in this paragraph shall be construed to
establish a fiduciary relationship between Operator and Non-Operators for any
purpose other than to account for Non-Operator funds as herein specifically
provided.  Nothing in this paragraph shall require the maintenance by Operator
of separate accounts for the funds of Non-Operators unless the parties otherwise
specifically agree.

 

5. Access to Contract Area and Records: Operator shall, except as otherwise
provided herein, permit each Non-Operator or its duly authorized representative,
at the Non-Operator’s sole risk and cost, full and free access at all reasonable
times to all operations of every kind and character being conducted for the
joint account on the Contract Area and to the records of operations conducted
thereon or production therefrom, including Operator’s books and records relating
thereto.  Such access rights shall not be exercised in a manner interfering with
Operator’s conduct of an operation hereunder and shall not obligate Operator to
furnish any geologic or geophysical data of an interpretive nature unless the
cost of preparation of such interpretive data was charged to the joint account. 
Operator will furnish to each Non-Operator upon request copies of any and all
reports and information obtained by Operator in connection with production and
related items, including, without limitation, meter and chart reports,
production purchaser statements, run tickets and monthly gauge reports, but
excluding purchase contracts and pricing information to the extent not
applicable to the production of the Non-Operator seeking the information.  Any
audit of Operator’s records relating to amounts expended and the appropriateness
of such expenditures shall be conducted in accordance with the audit protocol
specified in Exhibit “C.”

 

6. Filing and Furnishing Governmental Reports: Operator will file, and upon
written request promptly furnish copies to each requesting Non-Operator not in
default of its payment obligations, all operational notices, reports or
applications required to be filed by local, State, Federal or Indian agencies or
authorities having jurisdiction over operations hereunder. Each Non-Operator
shall provide to Operator on a timely basis all information necessary to
Operator to make such filings.

 

7. Drilling and Testing Operations: The following provisions shall apply to each
well drilled hereunder, including but not limited to the Initial Well:

 

(a) Operator will promptly advise Non-Operators of the date on which the well is
spudded, or the date on which drilling operations are commenced.

 

(b) Operator will send to Non-Operators such reports, test results and notices
regarding the progress of operations on the well as the Non-Operators shall
reasonably request, including, but not limited to, daily drilling reports,
completion reports, and well logs.

 

(c) Operator shall adequately test all Zones encountered which may reasonably be
expected to be capable of producing Oil and Gas in paying quantities as a result
of examination of the electric log or any other logs or cores or tests conducted
hereunder.

 

8. Cost Estimates: Upon request of any Consenting Party, Operator shall furnish
estimates of current and cumulative costs incurred for the joint account at
reasonable intervals during the conduct of any operation pursuant to this
agreement. Operator shall not be held liable for errors in such estimates so
long as the estimates are made in good faith.

 

9. Insurance: At all times while operations are conducted hereunder, Operator
shall comply with the workers compensation law of the state where the operations
are being conducted; provided, however, that Operator may be a self- insurer for
liability under said compensation laws in which event the only charge that shall
be made to the joint account shall be as provided in Exhibit “C.”  Operator
shall also carry or provide insurance for the benefit of the joint account of
the parties as outlined in Exhibit “D” attached hereto and made a part hereof. 
Operator shall require all contractors engaged in work on or for the Contract
Area to comply with the workers compensation law of the state where the
operations are being conducted and to maintain such other insurance as Operator
may require.

 

In the event automobile liability insurance is specified in said Exhibit “D,” or
subsequently receives the approval of the parties, no direct charge shall be
made by Operator for premiums paid for such insurance for Operator’s automotive
equipment.

 

ARTICLE VI.

DRILLING AND DEVELOPMENT

 

A.  Initial Well:

 

There shall be no Initial Well in the Contract Area.  In lieu of the Initial
Well, the parties have agreed to drill 10 wells pursuant to the terms of the
Acreage Earning Agreement.

 

Subsequent operations shall be deemed to be the Wells or other operations
conducted after drilling all of the Earning Wells pursuant to the terms of the
Acreage Earning Agreement.

 

B.  Subsequent Operations:

 

1.  Proposed Operations: If any party hereto should desire to drill any well on
the Contract Area other than the Initial Well or if any party should desire to
Rework, Sidetrack, Deepen, Recomplete or Plug Back a well in which such party
has not otherwise relinquished its interest in the proposed objective Zone under
this agreement, the party desiring to drill, Rework, Sidetrack, Deepen,
Recomplete or Plug Back such a well shall give written notice of the proposed
operation to the parties who have not otherwise relinquished their interest in
such objective Zone

 

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under this agreement and to all other parties in the case of a proposal for
Sidetracking or Deepening, specifying the work to be performed, the location,
proposed depth, objective Zone and the estimated cost of the operation.  The
parties to whom such a notice is delivered shall have thirty (30) days after
receipt of the notice within which to notify the party proposing to do the work
whether they elect to participate in the cost of the proposed operation.  If a
drilling rig is on location, notice of a proposal to Rework, Sidetrack,
Recomplete, Plug Back or Deepen may be given by telephone and the response
period shall be limited to forty- eight (48) hours, exclusive of Saturday,
Sunday and legal holidays.  Failure of a party to whom such notice is delivered
to reply within the period above fixed shall constitute an election by that
party not to participate in the cost of the proposed operation. Any proposal by
a party to conduct an operation conflicting with the operation initially
proposed shall be delivered to all parties within the time and in the manner
provided in Article VI.B.6.

 

If all parties to whom such notice is delivered elect to participate in such a
proposed operation, the parties shall be contractually committed to participate
therein provided such operations are commenced within the time period hereafter
set forth, and Operator shall, no later than ninety (90) days after expiration
of the notice period of thirty (30) days (or as promptly as practicable after
the expiration of the forty-eight (48) hour period when a drilling rig is on
location, as the case may be), actually commence the proposed operation and
thereafter complete it with due diligence at the risk and expense of the parties
participating therein; provided, however, said commencement date may be extended
upon written notice of same by Operator to the other parties, for a period of up
to thirty (30) additional days if, in the sole opinion of Operator, such
additional time is reasonably necessary to obtain permits from governmental
authorities, surface rights (including rights-of- way) or appropriate drilling
equipment, or to complete title examination or curative matter required for
title approval or acceptance.  If the actual operation has not been commenced
within the time provided (including any extension thereof as specifically
permitted herein or in the force majeure provisions of Article XI) and if any
party hereto still desires to conduct said operation, written notice proposing
same must be resubmitted to the other parties in accordance herewith as if no
prior proposal had been made.

 

2.  Operations by Less Than All Parties: See also Article XVI.G.

 

(a) Determination of Participation.  If any party to whom such notice is
delivered as provided in Article VI.B.1. elects not to participate in the
proposed operation, then, in order to be entitled to the benefits of this
Article, the party or parties giving the notice and such other parties as shall
elect to participate in the operation shall, no later than ninety (90) days
after the expiration of the notice period of thirty (30) days (or as promptly as
practicable after the expiration of the forty-eight (48) hour period when a
drilling rig is on location, as the case may be) actually commence the proposed
operation and complete it with due diligence.  Operator shall perform all work
for the account of the Consenting Parties; provided, however, if no drilling rig
or other equipment is on location, and if Operator is a Non-Consenting Party,
the Consenting Parties shall either: (i) request Operator to perform the work
required by such proposed operation for the account of the Consenting Parties,
or (ii) designate one of the Consenting Parties as Operator to perform such
work.  The rights and duties granted to and imposed upon the Operator under this
agreement are granted to and imposed upon the party designated as Operator for
an operation in which the original Operator is a Non-Consenting Party. 
Consenting Parties, when conducting operations on the Contract Area pursuant to
this Article VI.B.2., shall comply with all terms and conditions of this
agreement.

 

If less than all parties approve any proposed operation, the proposing party,
immediately after the expiration of the applicable notice period, shall advise
all Parties of the total interest of the parties approving such operation and
its recommendation as to whether the Consenting Parties should proceed with the
operation as proposed.  Each Consenting Party, within forty-eight (48) hours
(exclusive of Saturday, Sunday, and legal holidays) after delivery of such
notice, shall advise the proposing party of its desire to (i) limit
participation to such party’s interest as shown on Exhibit “A” or (ii) carry
only its proportionate part (determined by dividing such party’s interest in the
Contract Area by the interests of all Consenting Parties in the Contract Area)
of Non-Consenting Parties’ interests, or (iii) carry its proportionate part
(determined as provided in (ii)) of Non-Consenting Parties’ interests together
with all or a portion of its proportionate part of any Non-Consenting Parties’
interests that any Consenting Party did not elect to take.  Any interest of
Non-Consenting Parties that is not carried by a Consenting Party shall be deemed
to be carried by the party proposing the operation if such party does not
withdraw its proposal.  Failure to advise the proposing party within the time
required shall be deemed an election under (i). In the event a drilling rig is
on location, notice may be given by telephone, and the time permitted for such a
response shall not exceed a total of forty-eight (48) hours (exclusive of
Saturday, Sunday and legal holidays).  The proposing party, at its election, may
withdraw such proposal if there is less than 100% participation and shall notify
all parties of such decision within ten (10) days, or within twenty-four (24)
hours if a drilling rig is on location, following expiration of the applicable
response period. If 100% subscription to the proposed operation is obtained, the
proposing party shall promptly notify the Consenting Parties of their
proportionate interests in the operation and the party serving as Operator shall
commence such operation within the period provided in Article VI.B.1., subject
to the same extension right as provided therein.

 

(b) Relinquishment of Interest for Non-Participation. The entire cost and risk
of conducting such operations shall be borne by the Consenting Parties in the
proportions they have elected to bear same under the terms of the preceding
paragraph.  Consenting Parties shall keep the leasehold estates involved in such
operations free and clear of all liens and encumbrances of every kind created by
or arising from the operations of the Consenting Parties.  If such an operation
results in a dry hole, then subject to Articles VI.B.6. and VI.E.3., the
Consenting Parties shall plug and abandon the well and restore the surface
location at their sole cost, risk and expense; provided, however, that those
Non-Consenting Parties that participated in the drilling, Deepening or
Sidetracking of the well shall remain liable for, and shall pay, their
proportionate shares of the cost of plugging and abandoning the well and
restoring the surface location insofar only as those costs were not increased by
the subsequent operations of the Consenting Parties.  If any well drilled,
Reworked, Sidetracked, Deepened, Recompleted or Plugged Back under the
provisions of this Article results in a well capable of producing Oil and/or Gas
in paying quantities, the Consenting Parties shall Complete and equip the well
to produce at their sole cost and risk, and the well shall then be turned over
to Operator (if the Operator did not conduct the operation) and shall be
operated by it at the expense and for the account of the Consenting Parties. 
Upon commencement of operations for the drilling, Reworking, Sidetracking,
Recompleting, Deepening or Plugging Back of any such well by Consenting Parties
in accordance with the provisions of this Article, each Non-Consenting Party
shall be deemed to have relinquished to Consenting Parties, and the Consenting
Parties shall own and be entitled to receive, in proportion to their respective
interests, all of such Non- Consenting Party’s interest in the well and share of
production therefrom or, in the case of a Reworking, Sidetracking,

 

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Deepening, Recompleting or Plugging Back, all of such Non-Consenting Party’s
interest in the production obtained from the operation in which the
Non-Consenting Party did not elect to participate.  Such relinquishment shall be
effective until the proceeds of the sale of such share, calculated at the well,
or market value thereof if such share is not sold (after deducting applicable ad
valorem, production, severance, and excise taxes, royalty, overriding royalty
and other interests not excepted by Article III.C. payable out of or measured by
the production from such well accruing with respect to such interest until it
reverts), shall equal the total of the following:

 

(i) 100% of each such Non-Consenting Party’s share of the cost of any newly
acquired surface equipment beyond the wellhead connections (including but not
limited to stock tanks, separators, treaters, pumping equipment and piping),
plus 100% of each such Non-Consenting Party’s share of the cost of operation of
the well commencing with first production and continuing until each such
Non-Consenting Party’s relinquished interest shall revert to it under other
provisions of this Article, it being agreed that each Non-Consenting Party’s
share of such costs and equipment will be that interest which would have been
chargeable to such Non-Consenting Party had it participated in the well from the
beginning of the operations; and

 

(ii) 300% of (a) that portion of the costs and expenses of drilling, Reworking,
Sidetracking, Deepening, Plugging Back, testing, Completing, and Recompleting,
after deducting any cash contributions received under Article VIII.C., and of
(b) that portion of the cost of newly acquired equipment in the well (to and
including the wellhead connections), which would have been chargeable to such
Non-Consenting Party if it had participated therein.

 

Notwithstanding anything to the contrary in this Article VI.B., if the well does
not reach the deepest objective Zone described in the notice proposing the well
for reasons other than the encountering of granite or practically impenetrable
substance or other condition in the hole rendering further operations
impracticable, Operator shall give notice thereof to each Non-Consenting Party
who submitted or voted for an alternative proposal under Article VI.B.6. to
drill the well to a shallower Zone than the deepest objective Zone proposed in
the notice under which the well was drilled, and each such Non- Consenting Party
shall have the option to participate in the initial proposed Completion of the
well by paying its share of the cost of drilling the well to its actual depth,
calculated in the manner provided in Article VI.B.4. (a).  If any such Non-
Consenting Party does not elect to participate in the first Completion proposed
for such well, the relinquishment provisions of this Article VI.B.2. (b) shall
apply to such party’s interest.

 

(c) Reworking, Recompleting or Plugging Back. An election not to participate in
the drilling, Sidetracking or Deepening of a well shall be deemed an election
not to participate in any Reworking or Plugging Back operation proposed in such
a well, or portion thereof, to which the initial non-consent election applied
that is conducted at any time prior to full recovery by the Consenting Parties
of the Non-Consenting Party’s recoupment amount.  Similarly, an election not to
participate in the Completing or Recompleting of a well shall be deemed an
election not to participate in any Reworking operation proposed in such a well,
or portion thereof, to which the initial non-consent election applied that is
conducted at any time prior to full recovery by the Consenting Parties of the
Non-Consenting Party’s recoupment amount.  Any such Reworking, Recompleting or
Plugging Back operation conducted during the recoupment period shall be deemed
part of the 3cost of operation of said well and there shall be added to the sums
to be recouped by the Consenting Parties 300% of that portion of the costs of
the Reworking, Recompleting or Plugging Back operation which would have been
chargeable to such Non-Consenting Party had it participated therein.  If such a
Reworking, Recompleting or Plugging Back operation is proposed during such
recoupment period, the provisions of this Article VI.B. shall be applicable as
between said Consenting Parties in said well.

 

(d) Recoupment Matters. During the period of time Consenting Parties are
entitled to receive Non-Consenting Party’s share of production, or the proceeds
therefrom, Consenting Parties shall be responsible for the payment of all ad
valorem, production, severance, excise, gathering and other taxes, and all
royalty, overriding royalty and other burdens applicable to Non-Consenting
Party’s share of production not excepted by Article III.C.

 

In the case of any Reworking, Sidetracking, Plugging Back, Recompleting or
Deepening operation, the Consenting Parties shall be permitted to use, free of
cost, all casing, tubing and other equipment in the well, but the ownership of
all such equipment shall remain unchanged; and upon abandonment of a well after
such Reworking, Sidetracking, Plugging Back, Recompleting or Deepening, the
Consenting Parties shall account for all such equipment to the owners thereof,
with each party receiving its proportionate part in kind or in value, less cost
of salvage.

 

Within ninety (90) days after the completion of any operation under this
Article, the party conducting the operations for the Consenting Parties shall
furnish each Non-Consenting Party with an inventory of the equipment in and
connected to the well, and an itemized statement of the cost of drilling,
Sidetracking, Deepening, Plugging Back, testing, Completing, Recompleting, and
equipping the well for production; or, at its option, the operating party, in
lieu of an itemized statement of such costs of operation, may submit a detailed
statement of monthly billings.  Each month thereafter, during the time the
Consenting Parties are being reimbursed as provided above, the party conducting
the operations for the Consenting Parties shall furnish the Non-Consenting
Parties with an itemized statement of all costs and liabilities incurred in the
operation of the well, together with a statement of the quantity of Oil and Gas
produced from it and the amount of proceeds realized from the sale of the well’s
working interest production during the preceding month.  In determining the
quantity of Oil and Gas produced during any month, Consenting Parties shall use
industry accepted methods such as but not limited to metering or periodic well
tests.  Any amount realized from the sale or other disposition of equipment
newly acquired in connection with any such operation which would have been owned
by a Non-Consenting Party had it participated therein shall be credited against
the total unreturned costs of the work done and of the equipment purchased in
determining when the interest of such Non-Consenting Party shall revert to it as
above provided; and if there is a credit balance, it shall be paid to such Non-
Consenting Party.

 

If and when the Consenting Parties recover from a Non-Consenting Party’s
relinquished interest the amounts provided for above, the relinquished interests
of such Non-Consenting Party shall automatically revert to it as of 7:00 a.m. on
the 1st day of the month following the day on which such recoupment occurs, and,
from and after such reversion, such Non-Consenting Party shall own the same
interest in such well, the material and equipment in or pertaining thereto, and
the production therefrom as such Non-Consenting Party would have been entitled
to had it participated in the drilling, Sidetracking, Reworking, Deepening,
Recompleting or Plugging Back of said well.  Thereafter, such Non-Consenting
Party shall be charged with and shall pay its proportionate part of the further
costs of the operation of said well in accordance with the terms of this
agreement and Exhibit “C” attached hereto.

 

3. Stand-By Costs: When a well which has been drilled or Deepened has reached
its authorized depth and all tests have been completed and the results thereof
furnished to the parties, or when operations on the well have been otherwise
terminated pursuant to Article VI.F., stand-by costs incurred pending response
to a party’s notice proposing a Reworking,

 

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Sidetracking, Deepening, Recompleting, Plugging Back or Completing operation in
such a well (including the period required under Article VI.B.6. to resolve
competing proposals) shall be charged and borne as part of the drilling or
Deepening operation just completed.  Stand-by costs subsequent to all parties
responding, or expiration of the response time permitted, whichever first
occurs, and prior to agreement as to the participating interests of all
Consenting Parties pursuant to the terms of the second grammatical paragraph of
Article VI.B.2. (a), shall be charged to and borne as part of the proposed
operation, but if the proposal is subsequently withdrawn because of insufficient
participation, such stand-by costs shall be allocated between the Consenting
Parties in the proportion each Consenting Party’s interest as shown on Exhibit
“A” bears to the total interest as shown on Exhibit “A” of all Consenting
Parties.

 

In the event that notice for a Sidetracking operation is given while the
drilling rig to be utilized is on location, any party may request and receive up
to five (5) additional days after expiration of the forty-eight hour response
period specified in Article VI.B.1. within which to respond by paying for all
stand-by costs and other costs incurred during such extended response period;
Operator may require such party to pay the estimated stand-by time in advance as
a condition to extending the response period.  If more than one party elects to
take such additional time to respond to the notice, standby costs shall be
allocated between the parties taking additional time to respond on a day-to-day
basis in the proportion each electing party’s interest as shown on Exhibit “A”
bears to the total interest as shown on Exhibit “A” of all the electing parties.

 

4. Deepening: If less than all parties elect to participate in a drilling,
Sidetracking, or Deepening operation proposed pursuant to Article VI.B.1., the
interest relinquished by the Non-Consenting Parties to the Consenting Parties
under Article VI.B.2. shall relate only and be limited to the lesser of (i) the
total depth actually drilled or (ii) the objective depth or Zone of which the
parties were given notice under Article VI.B.1. (“Initial Objective”).  Such
well shall not be Deepened beyond the Initial Objective without first complying
with this Article to afford the Non-Consenting Parties the opportunity to
participate in the Deepening operation.

 

In the event any Consenting Party desires to drill or Deepen a Non-Consent Well
to a depth below the Initial Objective, such party shall give notice thereof,
complying with the requirements of Article VI.B.1., to all parties (including
Non- Consenting Parties).  Thereupon, Articles VI.B.1. and 2. shall apply and
all parties receiving such notice shall have the right to participate or not
participate in the Deepening of such well pursuant to said Articles VI.B.1. and
2.  If a Deepening operation is approved pursuant to such provisions, and if any
Non-Consenting Party elects to participate in the Deepening operation, such
Non-Consenting party shall pay or make reimbursement (as the case may be) of the
following costs and expenses.

 

(a) If the proposal to Deepen is made prior to the Completion of such well as a
well capable of producing in paying quantities, such Non-Consenting Party shall
pay (or reimburse Consenting Parties for, as the case may be) that share of
costs and expenses incurred in connection with the drilling of said well from
the surface to the Initial Objective which Non- Consenting Party would have paid
had such Non-Consenting Party agreed to participate therein, plus the
Non-Consenting Party’s share of the cost of Deepening and of participating in
any further operations on the well in accordance with the other provisions of
this Agreement; provided, however, all costs for testing and Completion or
attempted Completion of the well incurred by Consenting Parties prior to the
point of actual operations to Deepen beyond the Initial Objective shall be for
the sole account of Consenting Parties.

 

(b) If the proposal is made for a Non-Consent Well that has been previously
Completed as a well capable of producing in paying quantities, but is no longer
capable of producing in paying quantities, such Non-Consenting Party shall pay
(or reimburse Consenting Parties for, as the case may be) its proportionate
share of all costs of drilling, Completing, and equipping said well from the
surface to the Initial Objective, calculated in the manner provided in paragraph
(a) above, less those costs recouped by the Consenting Parties from the sale of
production from the well.  The Non-Consenting Party shall also pay its
proportionate share of all costs of re-entering said well.  The Non-Consenting
Parties’ proportionate part (based on the percentage of such well Non-Consenting
Party would have owned had it previously participated in such Non-Consent Well)
of the costs of salvable materials and equipment remaining in the hole and
salvable surface equipment used in connection with such well shall be determined
in accordance with Exhibit “C.”  If the Consenting Parties have recouped the
cost of drilling, Completing, and equipping the well at the time such Deepening
operation is conducted, then a Non- Consenting Party may participate in the
Deepening of the well with no payment for costs incurred prior to re-entering
the well for Deepening

 

The foregoing shall not imply a right of any Consenting Party to propose any
Deepening for a Non-Consent Well prior to the drilling of such well to its
Initial Objective without the consent of the other Consenting Parties as
provided in Article VI.F.

 

5. Sidetracking: Any party having the right to participate in a proposed
Sidetracking operation that does not own an interest in the affected wellbore at
the time of the notice shall, upon electing to participate, tender to the
wellbore owners its proportionate share (equal to its interest in the
Sidetracking operation) of the value of that portion of the existing wellbore to
be utilized as follows:

 

(a) If the proposal is for Sidetracking an existing dry hole, reimbursement
shall be on the basis of the actual costs incurred in the initial drilling of
the well down to the depth at which the Sidetracking operation is initiated.

 

(b) If the proposal is for Sidetracking a well which has previously produced,
reimbursement shall be on the basis of such party’s proportionate share of
drilling and equipping costs incurred in the initial drilling of the well down
to the depth at which the Sidetracking operation is conducted, calculated in the
manner described in Article VI.B.4(b) above.  Such party’s proportionate share
of the cost of the well’s salvable materials and equipment down to the depth at
which the Sidetracking operation is initiated shall be determined in accordance
with the provisions of Exhibit “C.”

 

6. Order of Preference of Operations. Except as otherwise specifically provided
in this agreement, if any party desires to propose the conduct of an operation
that conflicts with a proposal that has been made by a party under this Article
VI, such party shall have fifteen (15) days from delivery of the initial
proposal, in the case of a proposal to drill a well or to perform an operation
on a well where no drilling rig is on location, or twenty-four (24) hours,
exclusive of Saturday, Sunday and legal holidays, from delivery of the initial
proposal, if a drilling rig is on location for the well on which such operation
is to be conducted, to deliver to all parties entitled to participate in the
proposed operation such party’s alternative proposal, such alternate proposal to
contain the same information required to be included in the initial proposal. 
Each party receiving such proposals shall elect by delivery of notice to
Operator within five (5) days after expiration of the proposal period, or within
twenty-four (24) hours (exclusive of Saturday, Sunday and legal holidays) if a
drilling rig is on location for the well that is the subject of the proposals,
to participate in one of the competing proposals.  Any party not electing within
the time required shall be deemed not to have voted.  The proposal receiving the
vote of parties owning the largest aggregate percentage interest of the parties
voting shall have priority over all other competing proposals; in the case of a
tie vote, the

 

8

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initial proposal shall prevail. Operator shall deliver notice of such result to
all parties entitled to participate in the operation within five (5) days after
expiration of the election period (or within twenty-four (24) hours, exclusive
of Saturday, Sunday and legal holidays, if a drilling rig is on location).  Each
party shall then have two (2) days (or twenty-four (24) hours if a rig is on
location) from receipt of such notice to elect by delivery of notice to Operator
to participate in such operation or to relinquish interest in the affected well
pursuant to the provisions of Article VI.B.2.; failure by a party to deliver
notice within such period shall be deemed an election not to participate in the
prevailing proposal.

 

7. Conformity to Spacing Pattern. Notwithstanding the provisions of this Article
VI.B.2., it is agreed that no wells shall be proposed to be drilled to or
Completed in or produced from a Zone from which a well located elsewhere on the
Contract Area is producing, unless such well conforms to the then-existing well
spacing pattern for such Zone or for which a variance has been granted by the
appropriate authority.

 

8. Paying Wells. No party shall conduct any Reworking, Deepening, Plugging Back,
Completion, Recompletion, or Sidetracking operation under this agreement with
respect to any well then capable of producing in paying quantities except with
the consent of all parties that have not relinquished interests in the well at
the time of such operation.

 

C.  Completion of Wells; Reworking and Plugging Back:

 

1. Completion: Without the consent of all parties, no well shall be drilled,
Deepened or Sidetracked, except any well drilled, Deepened or Sidetracked
pursuant to the provisions of Article VI.B.2. of this agreement.  Consent to the
drilling, Deepening or Sidetracking shall include:

 

ý    Option No. 1: All necessary expenditures for the drilling, Deepening or
Sidetracking, testing, Completing and equipping of the well, including necessary
tankage and/or surface facilities.

 

2. Rework, Recomplete or Plug Back: No well shall be Reworked, Recompleted or
Plugged Back except a well Reworked, Recompleted, or Plugged Back pursuant to
the provisions of Article VI.B.2. of this agreement.  Consent to the Reworking,
Recompleting or Plugging Back of a well shall include all necessary expenditures
in conducting such operations and Completing and equipping of said well,
including necessary tankage and/or surface facilities.

 

D.  Other Operations:

 

Operator shall not undertake any single project reasonably estimated to require
an expenditure in excess of Twenty-five Thousand Dollars ($25,000.00) except in
connection with the drilling, Sidetracking, Reworking, Deepening, Completing,
Recompleting or Plugging Back of a well that has been previously authorized by
or pursuant to this agreement; provided, however, that, in case of explosion,
fire, flood or other sudden emergency, whether of the same or different nature,
Operator may take such steps and incur such expenses as in its opinion are
required to deal with the emergency to safeguard life and property but Operator,
as promptly as possible, shall report the emergency to the other parties.  If
Operator prepares an AFE for its own use, Operator shall furnish any
Non-Operator so requesting an information copy thereof for any single project
costing in excess of Twenty-five Thousand Dollars ($25,000.00).  Any party who
has not relinquished its interest in a well shall have the right to propose that
Operator perform repair work or undertake the installation of artificial lift
equipment or ancillary production facilities such as salt water disposal wells
or to conduct additional work with respect to a well drilled hereunder or other
similar project (but not including the installation of gathering lines or other
transportation or marketing facilities, the installation of which shall be
governed by separate agreement between the parties) reasonably estimated to
require an expenditure in excess of the amount first set forth above in this
Article VI.D. (except in connection with an operation required to be proposed
under Article VI.B.1., which shall be governed exclusively by that Article). 
Operator shall deliver such proposal to all parties entitled to participate
therein.  If within thirty (30) days thereof Operator secures the written
consent of any party or parties owning at least 50% of the interests of the
parties entitled to participate in such operation, each party having the right
to participate in such project shall be bound by the terms of such proposal and
shall be obligated to pay its proportionate share of the costs of the proposed
project as if it had consented to such project pursuant to the terms of the
proposal or non-consent its interest subject to the provisions of Article
VI.B.2.(b).

 

E.  Abandonment of Wells:

 

1.  Abandonment of Dry Holes: Except for any well drilled or Deepened pursuant
to Article VI.B.2., any well which has been drilled or Deepened under the terms
of this agreement and is proposed to be completed as a dry hole shall not be

 

9

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plugged and abandoned without the consent of all parties.  Should Operator,
after diligent effort, be unable to contact any party, or should any party fail
to reply within forty-eight (48) hours (exclusive of Saturday, Sunday and legal
holidays) after delivery of notice of the proposal to plug and abandon such
well, such party shall be deemed to have consented to the proposed abandonment. 
All such wells shall be plugged and abandoned in accordance with applicable
regulations and at the cost, risk and expense of the parties who participated in
the cost of drilling or Deepening such well.  Any party who objects to plugging
and abandoning such well by notice delivered to Operator within forty-eight (48)
hours (exclusive of Saturday, Sunday and legal holidays) after delivery of
notice of the proposed plugging shall take over the well as of the end of such
forty-eight (48) hour notice period and conduct further operations in search of
Oil and/or Gas subject to the provisions of Article VI.B.; failure of such party
to provide proof reasonably satisfactory to Operator of its financial capability
to conduct such operations or to take over the well within such period or
thereafter to conduct operations on such well or plug and abandon such well
shall entitle Operator to retain or take possession of the well and plug and
abandon the well.  The party taking over the well shall indemnify Operator (if
Operator is an abandoning party) and the other abandoning parties against
liability for any further operations conducted on such well except for the costs
of plugging and abandoning the well and restoring the surface, for which the
abandoning parties shall remain proportionately liable.

 

2. Abandonment of Wells That Have Produced: Except for any well in which a
Non-Consent operation has been conducted hereunder for which the Consenting
Parties have not been fully reimbursed as herein provided, any well which has
been completed as a producer shall not be plugged and abandoned without the
consent of all parties who participated in the cost of drilling the well.  If
all parties consent to such abandonment, the well shall be plugged and abandoned
in accordance with applicable regulations and at the cost, risk and expense of
all the parties hereto.  Failure of a party to reply within thirty (30) days of
delivery of notice of proposed abandonment shall be deemed an election to
consent to the proposal.  If, within thirty (30) days after delivery of notice
of the proposed abandonment of any well, all parties do not agree to the
abandonment of such well, those wishing to continue its operation from the Zone
then open to production shall be obligated to take over the well as of the
expiration of the applicable notice period and shall indemnify Operator (if
Operator is an abandoning party) and the other abandoning parties against
liability for any further operations on the well conducted by such parties. 
Failure of such party or parties to provide proof reasonably satisfactory to
Operator of their financial capability to conduct such operations or to take
over the well within the required period or thereafter to conduct operations on
such well shall entitle operator to retain or take possession of such well and
plug and abandon the well.

 

Parties taking over a well as provided herein shall tender to each of the other
parties its proportionate share of the value of the well’s salvable material and
equipment, determined in accordance with the provisions of Exhibit “C,” less the
estimated cost of salvaging and the estimated cost of plugging and abandoning
and restoring the surface; provided, however, that in the event the estimated
plugging and abandoning and surface restoration costs and the estimated cost of
salvaging are higher than the value of the well’s salvable material and
equipment, each of the abandoning parties shall tender to the parties continuing
operations their proportionate shares of the estimated excess cost.  Each
abandoning party shall assign to the non-abandoning parties, without warranty,
express or implied, as to title or as to quantity, or fitness for use of the
equipment and material, all of its interest in the wellbore of the well and
related equipment, together with its interest in the Leasehold insofar and only
insofar as such Leasehold covers the right to obtain production from that
wellbore in the Zone then open to production.  If the interest of the abandoning
party is or includes and Oil and Gas Interest, such party shall execute and
deliver to the non-  abandoning party or parties an oil and gas lease, limited
to the wellbore and the Zone then open to production, for a term of one (1) year
and so long thereafter as Oil and/or Gas is produced from the Zone covered
thereby, such lease to be on the form attached as Exhibit “B.”  The assignments
or leases so limited shall encompass the Drilling Unit upon which the well is
located.  The payments by, and the assignments or leases to, the assignees shall
be in a ratio based upon the relationship of their respective percentage of
participation in the Contract Area to the aggregate of the percentages of
participation in the Contract Area of all assignees.  There shall be no
readjustment of interests in the remaining portions of the Contract Area.

 

Thereafter, abandoning parties shall have no further responsibility, liability,
or interest in the operation of or production from the well in the Zone then
open other than the royalties retained in any lease made under the terms of this
Article.  Upon request, Operator shall continue to operate the assigned well for
the account of the non-abandoning parties at the rates and charges contemplated
by this agreement, plus any additional cost and charges which may arise as the
result of the separate ownership of the assigned well.  Upon proposed
abandonment of the producing Zone assigned or leased, the assignor or lessor
shall then have the option to repurchase its prior interest in the well (using
the same valuation formula) and participate in further operations therein
subject to the provisions hereof.

 

3. Abandonment of Non-Consent Operations: The provisions of Article VI.E.1. or
VI.E.2. above shall be applicable as between Consenting Parties in the event of
the proposed abandonment of any well excepted from said Articles; provided,
however, no well shall be permanently plugged and abandoned unless and until all
parties having the right to conduct further operations therein have been
notified of the proposed abandonment and afforded the opportunity to elect to
take over the well in accordance with the provisions of this Article VI.E.; and
provided further, that Non-Consenting Parties who own an interest in a portion
of the well shall pay their proportionate shares of abandonment and surface
restoration cost for such well as provided in Article VI.B.2.(b).  Failure of a
party to make a written election within thirty (30) days will be deemed an
election to consent to the abandonment of the well.

 

F.  Termination of Operations:

 

Upon the commencement of an operation for the drilling, Reworking, Sidetracking,
Plugging Back, Deepening, testing, Completion or plugging of a well, including
but not limited to the Initial Well, such operation shall not be terminated
without consent of parties bearing 60% of the costs of such operation; provided,
however, that in the event granite or other practically impenetrable substance
or condition in the hole is encountered which renders further operations
impractical, Operator may discontinue operations and give notice of such
condition in the manner provided in Article VI.B.1, and the provisions of
Article VI.B. or VI.E. shall thereafter apply to such operation, as appropriate.

 

G.  Taking Production in Kind:

 

ý      Option No. 1: Gas Balancing Agreement Attached

 

Each party shall take in kind or separately dispose of its proportionate share
of all Oil and Gas produced from the Contract Area, exclusive of production
which may be used in development and producing operations and in preparing and
treating Oil and Gas for marketing purposes and production unavoidably lost. 
Any extra expenditure incurred in the taking in kind or separate disposition by
any party of its proportionate share of the production shall be borne by such
party.  Any party taking its share of production in kind shall be required to
pay for only its proportionate share of such part of Operator’s surface
facilities which it uses.

 

Each party shall execute such division orders and contracts as may be necessary
for the sale of its interest in production from the Contract Area, and, except
as provided in Article VII.B., shall be entitled to receive payment

 

10

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directly from the purchaser thereof for its share of all production.

 

If any party fails to make the arrangements necessary to take in kind or
separately dispose of its proportionate share of the Oil produced from the
Contract Area, Operator shall have the right, subject to the revocation at will
by the party owning it, but not the obligation, to purchase such Oil or sell it
to others at any time and from time to time, for the account of the non-taking
party.  Any such purchase or sale by Operator may be terminated by Operator upon
at least ten (10) days written notice to the owner of said production and shall
be subject always to the right of the owner of the production upon at least ten
(10) days written notice to Operator to exercise at any time its right to take
in kind, or separately dispose of, its share of all Oil not previously delivered
to a purchaser.  Any purchase or sale by Operator of any other party’s share of
Oil shall be only for such reasonable periods of time as are consistent with the
minimum needs of the industry under the particular circumstances, but in no
event for a period in excess of one (1) year.

 

Any such sale by Operator shall be in a manner commercially reasonable under the
circumstances but Operator shall have no duty to share any existing market or to
obtain a price equal to that received under any existing market.  The sale or
delivery by Operator of a non-taking party’s share of Oil under the terms of any
existing contract of Operator shall not give the non-taking party any interest
in or make the non-taking party a party to said contract.  No purchase shall be
made by Operator without first giving the non-taking party at least ten (10)
days written notice of such intended purchase and the price to be paid or the
pricing basis to be used. 

 

All parties shall give timely written notice to Operator of their Gas marketing
arrangements for the following month, excluding price, and shall notify Operator
immediately in the event of a change in such arrangements.  Operator shall
maintain records of all marketing arrangements, and of volumes actually sold or
transported, which records shall be made available to Non-Operators upon
reasonable request.

 

In the event one or more parties’ separate disposition of its share of the Gas
causes split-stream deliveries to separate pipelines and/or deliveries which on
a day-to-day basis for any reason are not exactly equal to a party’s respective
proportion-  ate share of total Gas sales to be allocated to it, the balancing
or accounting between the parties shall be in accordance with any Gas balancing
agreement between the parties hereto, whether such an agreement is attached as
Exhibit “E” or is a separate agreement.  Operator shall give notice to all
parties of the first sales of Gas from any well under this agreement.

 

ARTICLE VII.

EXPENDITURES AND LIABILITY OF PARTIES

 

A.  Liability of Parties:

 

The liability of the parties shall be several, not joint or collective. Each
party shall be responsible only for its obligations, and shall be liable only
for its proportionate share of the costs of developing and operating the
Contract Area.  Accordingly, the liens granted among the parties in Article
VII.B. are given to secure only the debts of each severally, and no party shall
have any liability to third parties hereunder to satisfy the default of any
other party in the payment of any expense or obligation hereunder.  It is not
the intention of the parties to create, nor shall this agreement be construed as
creating, a mining or other partnership, joint venture, agency relationship or
association, or to render the parties liable as partners, co-venturers, or
principals.  In their relations with each other under this agreement, the
parties shall not be considered fiduciaries or to have established a
confidential relationship but rather shall be free to act on an arm’s-length
basis in accordance with their own respective self-interest, subject, however,
to the obligation of the parties to act in good faith in their dealings with
each other with respect to activities hereunder.

 

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B.  Liens and Security Interests:

 

Each party grants to the other parties hereto a lien upon any interest it now
owns or hereafter acquires in Oil and Gas Leases and Oil and Gas Interests in
the Contract Area, and a security interest and/or purchase money security
interest in any interest it now owns or hereafter acquires in the personal
property and fixtures on or used or obtained for use in connection therewith, to
secure performance of all of its obligations under this agreement including but
not limited to payment of expense, interest and fees, the proper disbursement of
all monies paid hereunder, the assignment or relinquishment of interest in Oil
and Gas Leases as required hereunder, and the proper performance of operations
hereunder.  Such lien and security interest granted by each party hereto shall
include such party’s leasehold interests, working interests, operating rights,
and royalty and overriding royalty interests in the Contract Area now owned or
hereafter acquired and in lands pooled or unitized therewith or otherwise
becoming subject to this agreement, the Oil and Gas when extracted therefrom and
equipment situated thereon or used or obtained for use in connection therewith
(including, without limitation, all wells, tools, and tubular goods), and
accounts  (including, without limitation, accounts arising from gas imbalances
or from the sale of Oil and/or Gas at the wellhead), contract rights, inventory
and general intangibles relating thereto or arising therefrom, and all proceeds
and products of the foregoing.

 

To perfect the lien and security agreement provided herein, each party hereto
shall execute and acknowledge the recording supplement and/or any financing
statement prepared and submitted by any party hereto in conjunction herewith or
at any time following execution hereof, and Operator is authorized to file this
agreement or the recording supplement executed herewith as a lien or mortgage in
the applicable real estate records and as a financing statement with the proper
officer under the Uniform Commercial Code in the state in which the Contract
Area is situated and such other states as Operator shall deem appropriate to
perfect the security interest granted hereunder.  Any party may file the
recording supplement executed herewith as a lien or mortgage in the applicable
real estate records and/or a financing statement with the proper officer under
the Uniform Commercial Code.

 

Each party represents and warrants to the other parties hereto that the lien and
security interest granted by such party to the other parties shall be a first
and prior lien, and each party hereby agrees to maintain the priority of said
lien and security interest against all persons acquiring an interest in Oil and
Gas Leases and Interests covered by this agreement by, through or under such
party.  All parties acquiring an interest in Oil and Gas Leases and Oil and Gas
Interests covered by this agreement, whether by assignment, merger, mortgage,
operation of law, or otherwise, shall be deemed to have taken subject to the
lien and security interest granted by this Article VII.B. as to all obligations
attributable to such interest hereunder whether or not such obligations arise
before or after such interest is acquired.

 

To the extent that parties have a security interest under the Uniform Commercial
Code of the state in which the Contract Area is situated, they shall be entitled
to exercise the rights and remedies of a secured party under the Code.  The
bringing of a suit and the obtaining of judgment by a party for the secured
indebtedness shall not be deemed an election of remedies or otherwise affect the
lien rights or security interest as security for the payment thereof.  In
addition, upon default by any party in the payment of its share of expenses,
interests or fees, or upon the improper use of funds by the Operator, the other
parties shall have the right, without prejudice to other rights or remedies, to
collect from the purchaser the proceeds from the sale of such defaulting party’s
share of Oil and Gas until the amount owed by such party, plus interest as
provided in “Exhibit C,” has been received, and shall have the right to offset
the amount owed against the proceeds from the sale of such defaulting party’s
share of Oil and Gas.  All purchasers of production may rely on a notification
of default from the non-defaulting party or parties stating the amount due as a
result of the default, and all parties waive any recourse available against
purchasers for releasing production proceeds as provided in this paragraph.

 

If any party fails to pay its share of cost within one hundred twenty (120) days
after rendition of a statement therefor by Operator, the non-defaulting parties,
including Operator, shall upon request by Operator, pay the unpaid amount in the
proportion that the interest of each such party bears to the interest of all
such parties.  The amount paid by each party so paying its share of the unpaid
amount shall be secured by the liens and security rights described in Article
VII.B., and each paying party may independently pursue any remedy available
hereunder or otherwise.

 

If any party does not perform all of its obligations hereunder, and the failure
to perform subjects such party to foreclosure or execution proceedings pursuant
to the provisions of this agreement, to the extent allowed by governing law, the
defaulting party waives any available right of redemption from and after the
date of judgment, any required valuation or appraisement of the mortgaged or
secured property prior to sale, any available right to stay execution or to
require a marshaling of assets and any required bond in the event a receiver is
appointed.  In addition, to the extent permitted by applicable law, each party
hereby grants to the other parties a power of sale as to any property that is
subject to the lien and security rights granted hereunder, such power to be
exercised in the manner provided by applicable law or otherwise in a
commercially reasonable manner and upon reasonable notice.

 

Each party agrees that the other parties shall be entitled to utilize the
provisions of Oil and Gas lien law or other lien law of any state in which the
Contract Area is situated to enforce the obligations of each party hereunder. 
Without limiting the generality of the foregoing, to the extent permitted by
applicable law, Non-Operators agree that Operator may invoke or utilize the
mechanics’ or materialmen’s lien law of the state in which the Contract Area is
situated in order to secure the payment to Operator of any sum due hereunder for
services performed or materials supplied by Operator.

 

C.  Advances:

 

Operator, at its election, shall have the right from time to time to demand and
receive from one or more of the other parties payment in advance of their
respective shares of the estimated amount of the expense to be incurred in
operations hereunder during the next succeeding month, which right may be
exercised only by submission to each such party of an itemized statement of such
estimated expense, together with an invoice for its share thereof.  Each such
statement and invoice for the payment in advance of estimated expense shall be
submitted on or before the 20th day of the next preceding month.  Each party
shall pay to Operator its proportionate share of such estimate within fifteen
(15) days after such estimate and invoice is received.  If any party fails to
pay its share of said estimate within said time, the amount due shall bear
interest as provided in Exhibit “C” until paid.  Proper adjustment shall be made
monthly between advances and actual expense to the end that each party shall
bear and pay its proportionate share of actual expenses incurred, and no more.

 

D.  Defaults and Remedies:

 

If any party fails to discharge any financial obligation under this agreement,
including without limitation the failure to make any advance under the preceding
Article VII.C. or any other provision of this agreement, within the period
required for such payment hereunder, then in addition to the remedies provided
in Article VII.B. or elsewhere in this agreement, the remedies specified below
shall be applicable.  For purposes of this Article VII.D., all notices and
elections shall be delivered

 

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only by Operator, except that Operator shall deliver any such notice and
election requested by a non-defaulting Non-Operator, and when Operator is the
party in default, the applicable notices and elections can be delivered by any
Non-Operator.  Election of any one or more of the following remedies shall not
preclude the subsequent use of any other remedy specified below or otherwise
available to a non-defaulting party.

 

1. Suspension of Rights: Any party may deliver to the party in default a Notice
of Default, which shall specify the default, specify the action to be taken to
cure the default, and specify that failure to take such action will result in
the exercise of one or more of the remedies provided in this Article.  If the
default is not cured within thirty (30) days of the delivery of such Notice of
Default, all of the rights of the defaulting party granted by this agreement may
upon notice be suspended until the default is cured, without prejudice to the
right of the non-defaulting party or parties to continue to enforce the
obligations of the defaulting party previously accrued or thereafter accruing
under this agreement.  If Operator is the party in default, the Non-Operators
shall have in addition the right, by vote of Non-Operators owning a majority in
interest in the Contract Area after excluding the voting interest of Operator,
to appoint a new Operator effective immediately.  The rights of a defaulting
party that may be suspended hereunder at the election of the non-defaulting
parties shall include, without limitation, the right to receive information as
to any operation conducted hereunder during the period of such default, the
right to elect to participate in an operation proposed under Article VI.B. of
this agreement, the right to participate in an operation being conducted under
this agreement even if the party has previously elected to participate in such
operation, and the right to receive proceeds of production from any well subject
to this agreement.

 

2. Suit for Damages: Non-defaulting parties or Operator for the benefit of
non-defaulting parties may sue (at joint account expense) to collect the amounts
in default, plus interest accruing on the amounts recovered from the date of
default until the date of collection at the rate specified in Exhibit “C”
attached hereto.  Nothing herein shall prevent any party from suing any
defaulting party to collect consequential damages accruing to such party as a
result of the default.

 

3. Deemed Non-Consent: The non-defaulting party (if Operator is the defaulting
party) or Operator for the benefit of the non-defaulting parties may deliver a
written Notice of Non-Consent Election to the defaulting party at any time after
the expiration of the thirty-day cure period following delivery of the Notice of
Default, in which event if the billing is for the drilling a new well or the
Plugging Back, Sidetracking, Reworking or Deepening of a well which is to be or
has been plugged as a dry hole, or for the Completion or Recompletion of any
well, the defaulting party will be conclusively deemed to have elected not to
participate in the operation and to be a Non-Consenting Party with respect
thereto under Article VI.B. or VI.C., as the case may be, to the extent of the
costs unpaid by such party, notwithstanding any election to participate
theretofore made.  If election is made to proceed under this provision, then the
non-defaulting parties may not elect to sue for the unpaid amount pursuant to
Article VII.D.2.

 

Until the delivery of such Notice of Non-Consent Election to the defaulting
party, such party shall have the right to cure its default by paying its unpaid
share of costs plus interest at the rate set forth in Exhibit “C,” provided,
however, such payment shall not prejudice the rights of the non-defaulting
parties to pursue remedies for damages incurred by the non-  defaulting parties
as a result of the default.  Any interest relinquished pursuant to this Article
VII.D.3. shall be offered to the non-defaulting parties in proportion to their
interests, and the non-defaulting parties electing to participate in the
ownership of such interest shall be required to contribute their shares of the
defaulted amount upon their election to participate therein.

 

4. Advance Payment: If a default is not cured within thirty (30) days of the
delivery of a Notice of Default, Operator, or Non-Operators if Operator is the
defaulting party, may thereafter require advance payment from the defaulting
party of such defaulting party’s anticipated share of any item of expense for
which Operator, or Non-Operators, as the case may be, would be entitled to
reimbursement under any provision of this agreement, whether or not such expense
was the subject of the previous default.  Such right includes, but is not
limited to, the right to require advance payment for the estimated costs of
drilling a well or Completion of a well as to which an election to participate
in drilling or Completion has been made.  If the defaulting party fails to pay
the required advance payment, the non-defaulting parties may pursue any of the
remedies provided in the Article VII.D. or any other default remedy provided
elsewhere in this agreement.  Any excess of funds advanced remaining when the
operation is completed and all costs have been paid shall be promptly returned
to the advancing party.

 

5. Costs and Attorneys’ Fees: In the event any party is required to bring legal
proceedings to enforce any financial obligation of a party hereunder, the
prevailing party in such action shall be entitled to recover all court costs,
costs of collection, and a reasonable attorney’s fee, which the lien provided
for herein shall also secure.

 

E.  Rentals, Shut-in Well Payments and Minimum Royalties:

 

Rentals, shut-in well payments and minimum royalties which may be required under
the terms of any lease shall be paid by the party or parties who subjected such
lease to this agreement at its or their expense.  In the event two or more
parties own and have contributed interests in the same lease to this agreement,
such parties may designate one of such parties to make said payments for and on
behalf of all such parties.  Any party may request, and shall be entitled to
receive, proper evidence of all such payments.  In the event of failure to make
proper payment of any rental, shut-in well payment or minimum royalty through
mistake or oversight where such payment is required to continue the lease in
force, any loss which results from such non-payment shall be borne in accordance
with the provisions of Article IV.B.2.

 

Operator shall notify Non-Operators of the anticipated completion of a shut-in
well, or the shutting in or return to production of a producing well, at least
five (5) days (excluding Saturday, Sunday, and legal holidays) prior to taking
such action, or at the earliest opportunity permitted by circumstances, but
assumes no liability for failure to do so.  In the event of failure by Operator
to so notify Non-Operators, the loss of any lease contributed hereto by
Non-Operators for failure to make timely payments of any shut-in well payment
shall be borne jointly by the parties hereto under the provisions of Article
IV.B.3.

 

F.  Taxes:

 

Beginning with the first calendar year after the effective date hereof, Operator
shall render for ad valorem taxation all property subject to this agreement
which by law should be rendered for such taxes, and it shall pay all such taxes
assessed thereon before they become delinquent.  Prior to the rendition date,
each Non-Operator shall furnish Operator information as to burdens (to include,
but not be limited to, royalties, overriding royalties and production payments)
on Leases and Oil and Gas Interests contributed by such Non-Operator.  If the
assessed valuation of any Lease is reduced by reason of its being subject to
outstanding excess royalties, overriding royalties or production payments, the
reduction in ad valorem taxes resulting therefrom shall inure to the benefit of
the owner or owners of such Lease, and Operator shall adjust the charge to such
owner or owners so as to reflect the benefit of such reduction.  If the ad
valorem taxes are based in whole or in part upon separate valuations of each
party’s working interest, then notwithstanding anything to the contrary herein,
charges to the joint account shall be made and paid by the parties hereto in
accordance with the tax value generated by each party’s working interest. 
Operator shall bill the other parties for their proportionate shares of all tax
payments in the manner provided in Exhibit “C.”  Provided, however, if at any
time any party takes its share of production in kind, or separately disposes of
it, such party shall pay or cause to be paid any and all taxes as to such
production.

 

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If Operator considers any tax assessment improper, Operator may, at its
discretion, protest within the time and manner prescribed by law, and prosecute
the protest to a final determination, unless all parties agree to abandon the
protest prior to final determination.  During the pendency of administrative or
judicial proceedings, Operator may elect to pay, under protest, all such taxes
and any interest and penalty.  When any such protested assessment shall have
been finally determined, Operator shall pay the tax for the joint account,
together with any interest and penalty accrued, and the total cost shall then be
assessed against the parties, and be paid by them, as provided in Exhibit “C.”

 

Each party shall pay or cause to be paid all production, severance, excise,
gathering and other taxes imposed upon or with respect to the production or
handling of such party’s share of Oil and Gas produced under the terms of this
agreement.

 

ARTICLE VIII.

ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

 

A.  Surrender of Leases:

 

The Leases covered by this agreement, insofar as they embrace acreage in the
Contract Area, shall not be surrendered in whole or in part unless all parties
consent thereto.

 

However, should any party desire to surrender its interest in any Lease or in
any portion thereof, such party shall give written notice of the proposed
surrender to all parties, and the parties to whom such notice is delivered shall
have thirty (30) days after delivery of the notice within which to notify the
party proposing the surrender whether they elect to consent thereto.  Failure of
a party to whom such notice is delivered to reply within said 30-day period
shall constitute a consent to the surrender of the Leases described in the
notice.  If all parties do not agree or consent thereto, the party desiring to
surrender shall assign, without express or implied warranty of title, all of its
interest in such Lease, or portion thereof, and any well, material and equipment
which may be located thereon and any rights in production thereafter secured, to
the parties not consenting to such surrender.  If the interest of the assigning
party is or includes an Oil and Gas Interest, the assigning party shall execute
and deliver to the party or parties not consenting to such surrender an oil and
gas lease covering such Oil and Gas Interest for a term of one (1) year and so
long thereafter as Oil and/or Gas is produced from the land covered thereby,
such lease to be negotiated.  Upon such assignment or lease, the assigning party
shall be relieved from all obligations thereafter accruing, but not theretofore
accrued, with respect to the interest assigned or leased and the operation of
any well attributable thereto, and the assigning party shall have no further
interest in the assigned or leased premises and its equipment and production
other than the royalties retained in any lease made under the terms of this
Article.  The party assignee or lessee shall pay to the party assignor or lessor
the reasonable salvage value of the latter’s interest in any well’s salvable
materials and equipment attributable to the assigned or leased acreage.  The
value of all salvable materials and equipment shall be determined in accordance
with the provisions of Exhibit “C,” less the estimated cost of salvaging and the
estimated cost of plugging and abandoning and restoring the surface.  If such
value is less than such costs, then the party assignor or lessor shall pay to
the party assignee or lessee the amount of such deficit.  If the assignment or
lease is in favor of more than one party, the interest shall be shared by such
parties in the proportions that the interest of each bears to the total interest
of all such parties.  If the interest of the parties to whom the assignment is
to be made varies according to depth, then the interest assigned shall similarly
reflect such variances.

 

Any assignment, lease or surrender made under this provision shall not reduce or
change the assignor’s, lessor’s or surrendering party’s interest as it was
immediately before the assignment, lease or surrender in the balance of the
Contract Area; and the acreage assigned, leased or surrendered, and subsequent
operations thereon, shall not thereafter be subject to the terms and provisions
of this agreement but shall be deemed subject to an Operating Agreement in the
form of this agreement.

 

B. Renewal or Extension of Leases:

 

If any party secures a renewal or replacement of an Oil and Gas Lease or
Interest subject to this agreement, then all other parties shall be notified
promptly upon such acquisition or, in the case of a replacement Lease taken
before expiration of an existing Lease, promptly upon expiration of the existing
Lease.  The parties notified shall have the right for a period of thirty (30)
days following delivery of such notice in which to elect to participate in the
ownership of the renewal or replacement Lease, insofar as such Lease affects
lands within the Contract Area, by paying to the party who acquired it their
proportionate shares of the acquisition cost allocated to that part of such
Lease within the Contract Area, which shall be in proportion to the interest
held at that time by the parties in the Contract Area.  Each party who
participates in the purchase of a renewal or replacement Lease shall be given an
assignment of its proportionate interest therein by the acquiring party.

 

If some, but less than all, of the parties elect to participate in the purchase
of a renewal or replacement Lease, it shall be owned by the parties who elect to
participate therein, in a ratio based upon the relationship of their respective
percentage of participation in the Contract Area to the aggregate of the
percentages of participation in the Contract Area of all parties participating
in the purchase of such renewal or replacement Lease.  The acquisition of a
renewal or replacement Lease by any or all of the parties hereto shall not cause
a readjustment of the interests of the parties stated in Exhibit “A,” but any
renewal or replacement Lease in which less than all parties elect to participate
shall not be subject to this agreement but shall be deemed subject to a separate
Operating Agreement in the form of this agreement.

 

If the interests of the parties in the Contract Area vary according to depth,
then their right to participate proportionately in renewal or replacement Leases
and their right to receive an assignment of interest shall also reflect such
depth variances.

 

The provisions of this Article shall apply to renewal or replacement Leases
whether they are for the entire interest covered by the expiring Lease or cover
only a portion of its area or an interest therein.  Any renewal or replacement
Lease taken before the expiration of its predecessor Lease, or taken or
contracted for or becoming effective within six (6) months after the expiration
of the existing Lease, shall be subject to this provision so long as this
agreement is in effect at the time of such acquisition or at the time the
renewal or replacement Lease becomes effective; but any Lease taken or
contracted for more than six (6) months after the expiration of an existing
Lease shall not be deemed a renewal or replacement Lease and shall not be
subject to the provisions of this agreement.

 

The provisions in this Article shall also be applicable to extensions of Oil and
Gas Leases.

 

C.  Acreage or Cash Contributions:

 

                                                While this agreement is in
force, if any party contracts for a contribution of cash towards the drilling of
a well or any other operation on the Contract Area, such contribution shall be
paid to the party who conducted the drilling or other operation and shall be
applied by it against the cost of such drilling or other operation.  If the
contribution be in the form of acreage, the party to whom the contribution is
made shall promptly tender an assignment of the acreage, without warranty of
title, to the Drilling Parties in the proportions said Drilling Parties shared
the cost of drilling the well. Such acreage shall become a separate Contract
Area and, to the extent possible, be governed by provisions identical to this
agreement.  Each party shall promptly notify all other parties of any acreage or
cash contributions it may obtain in support of any well or any other operation
on the Contract Area.  The above provisions shall also be applicable to optional
rights to earn acreage outside the Contract Area which are in support of well
drilled inside Contract Area.

 

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If any party contracts for any consideration relating to disposition of such
party’s share of substances produced hereunder,

such consideration shall not be deemed a contribution as contemplated in this
Article VIII.C.

 

D.  Assignment; Maintenance of Uniform Interest:

 

Every sale, encumbrance, transfer or other disposition made by any party shall
be made expressly subject to this agreement and shall be made without prejudice
to the right of the other parties, and any transferee of an ownership interest
in any Oil and Gas Lease or Interest shall be deemed a party to this agreement
as to the interest conveyed from and after the effective date of the transfer of
ownership; provided, however, that the other parties shall not be required to
recognize any such sale, encumbrance, transfer or other disposition for any
purpose hereunder until thirty (30) days after they have received a copy of the
recorded instrument of transfer or other satisfactory evidence thereof in
writing from the transferor or transferee.  No assignment or other disposition
of interest by a party shall relieve such party of obligations previously
incurred by such party hereunder with respect to the interest transferred,
including without limitation the obligation of a party to pay all costs
attributable to an operation conducted hereunder in which such party has agreed
to participate prior to making such assignment, and the lien and security
interest granted by Article VII.B. shall continue to burden the interest
transferred to secure payment of any such obligations.

 

If, at any time the interest of any party is divided among and owned by four or
more co-owners, Operator, at its discretion, may require such co-owners to
appoint a single trustee or agent with full authority to receive notices,
approve expenditures, receive billings for and approve and pay such party’s
share of the joint expenses, and to deal generally with, and with power to bind,
the co-owners of such party’s interest within the scope of the operations
embraced in this agreement; however, all such co-  owners shall have the right
to enter into and execute all contracts or agreements for the disposition of
their respective shares of the Oil and Gas produced from the Contract Area and
they shall have the right to receive, separately, payment of the sale proceeds
thereof.

 

E. Waiver of Rights to Partition:

 

If permitted by the laws of the state or states in which the property covered
hereby is located, each party hereto owning an undivided interest in the
Contract Area waives any and all rights it may have to partition and have set
aside to it in severalty its undivided interest therein.

 

ARTICLE IX.

INTERNAL REVENUE CODE ELECTION

 

If, for federal income tax purposes, this agreement and the operations hereunder
are regarded as a partnership, and if the parties have not otherwise agreed to
form a tax partnership pursuant to Exhibit “G” or other agreement between them,
each party thereby affected elects to be excluded from the application of all of
the provisions of Subchapter “K,” Chapter 1, Subtitle  “A,” of the Internal
Revenue Code of 1986, as amended (“Code”), as permitted and authorized by
Section 761 of the Code and the regulations promulgated thereunder.  Operator is
authorized and directed to execute on behalf of each party hereby affected such
evidence of this election as may be required by the Secretary of the Treasury of
the United States or the Federal Internal Revenue Service, including
specifically, but not by way of limitation, all of the returns, statements, and
the data required by Treasury Regulation §1.761.  Should there be any
requirement that each party hereby affected give further evidence of this
election, each such party shall execute such documents and furnish such other
evidence as may be required by the Federal Internal Revenue Service or as may be
necessary to evidence this election.  No such party shall give any notices or
take any other action inconsistent with the election made hereby.  If any
present or future income tax laws of the state or states in which the Contract
Area is located or any future income tax laws of the United States contain
provisions similar to those in Subchapter “K,” Chapter  1, Subtitle “A,” of the
Code, under which an election similar to that provided by Section 761 of the
Code is permitted, each party hereby affected shall make such election as may be
permitted or required by such laws.  In making the foregoing election, each such
party states that the income derived by such party from operations hereunder can
be adequately determined without the computation of partnership taxable income.

 

ARTICLE X.

CLAIMS AND LAWSUITS

 

Operator may settle any single uninsured third party damage claim or suit
arising from operations hereunder if the expenditure does not exceed Twenty-five
Thousand Dollars ($25,000.00) and if the payment is in complete settlement of
such claim or suit.  If the amount required for settlement exceeds the above
amount, the parties hereto shall assume and take over the further handling of
the claim or suit, unless such authority is delegated to Operator.  All costs
and expenses of handling settling, or otherwise discharging such claim or suit
shall be a the joint expense of the parties participating in the operation from
which the claim or suit arises.  If a claim is made against any party or if any
party is sued on account of any matter arising from operations hereunder over
which such individual has no control because of the rights given Operator by
this agreement, such party shall immediately notify all other parties, and the
claim or suit shall be treated as any other claim or suit involving operations
hereunder.

 

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ARTICLE XI.

FORCE MAJEURE

 

If any party is rendered unable, wholly or in part, by force majeure to carry
out its obligations under this agreement, other than the obligation to indemnify
or make money payments or furnish security, that party shall give to all other
parties prompt written notice of the force majeure with reasonably full
particulars concerning it; thereupon, the obligations of the party giving the
notice, so far as they are affected by the force majeure, shall be suspended
during, but no longer than, the continuance of the force majeure.  The term
“force majeure,” as here employed, shall mean an act of God, strike, lockout, or
other industrial disturbance, act of the public enemy, war, blockade, public
riot, lightening, fire, storm, flood or other act of nature, explosion,
governmental action, governmental delay, restraint or inaction, unavailability
of equipment, and any other cause, whether of the kind specifically enumerated
above or otherwise, which is not reasonably within the control of the party
claiming suspension.

 

The affected party shall use all reasonable diligence to remove the force
majeure situation as quickly as practicable. The requirement that any force
majeure shall be remedied with all reasonable dispatch shall not require the
settlement of strikes, lockouts, or other labor difficulty by the party
involved, contrary to its wishes; how all such difficulties shall be handled
shall be entirely within the discretion of the party concerned.

 

ARTICLE XII.

NOTICES

 

All notices authorized or required between the parties by any of the provisions
of this agreement, unless otherwise specifically provided, shall be in writing
and delivered in person or by United States mail, courier service, telegram,
telex, telecopier or any other form of facsimile, postage or charges prepaid,
and addressed to such parties at the addresses listed on Exhibit “A.”  All
telephone or oral notices permitted by this agreement shall be confirmed
immediately thereafter by written notice.  The originating notice given under
any provision hereof shall be deemed delivered only when received by the party
to whom such notice is directed, and the time for such party to deliver any
notice in response thereto shall run from the date the originating notice is
received.  “Receipt” for purposes of this agreement with respect to written
notice delivered hereunder shall be actual delivery of the notice to the address
of the party to be notified specified in accordance with this agreement, or to
the telecopy, facsimile or telex machine of such party.  The second or any
responsive notice shall be deemed delivered when deposited in the United States
mail or at the office of the courier or telegraph service, or upon transmittal
by telex, telecopy or facsimile, or when personally delivered to the party to be
notified, provided, that when response is required within 24 or  48 hours, such
response shall be given orally or by telephone, telex, telecopy or other
facsimile within such period. Each party shall have the right to change its
address at any time, and from time to time, by giving written notice thereof to
all other parties.  If a party is not available to receive notice orally or by
telephone when a party attempts to deliver a notice required to be delivered
within 24 or 48 hours, the notice may be delivered in writing by any other
method specified herein and shall be deemed delivered in the same manner
provided above for any responsive notice.

 

ARTICLE XIII.

TERM OF AGREEMENT

 

This agreement shall remain in full force and effect as to the Oil and Gas
Leases and/or Oil and Gas Interests subject hereto for the period of time
selected below; provided, however, no party hereto shall ever be construed as
having any right, title or interest in or to any Lease or Oil and Gas Interest
contributed by any other party beyond the term of this agreement.

 

ý            Option No. 1: So long as any of the Oil and Gas Leases subject to
this agreement remain or are continued in force as to any part of the Contract
Area, whether by production, extension, renewal or otherwise.

 

The termination of this agreement shall not relieve any party hereto from any
expense, liability or other obligation or any remedy therefor which has accrued
or attached prior to the date of such termination.

 

Upon termination of this agreement and the satisfaction of all obligations
hereunder, in the event a memorandum of this Operating Agreement has been filed
of record, Operator is authorized to file of record in all necessary recording
offices a notice of termination, and each party hereto agrees to execute such a
notice of termination as to Operator’s interest, upon request of Operator, if
Operator has satisfied all its financial obligations.

 

ARTICLE XIV.

COMPLIANCE WITH LAWS AND REGULATIONS

 

A.  Laws, Regulations and Orders:

 

This agreement shall be subject to the applicable laws of the state in which the
Contract Area is located, to the valid rules, regulations, and orders of any
duly constituted regulatory body of said state; and to all other applicable
federal, state, and local laws, ordinances, rules, regulations and orders.

 

B.  Governing Law:

 

This agreement and all matters pertaining hereto, including but not limited to
matters of performance, non-performance, breach, remedies, procedures, rights,
duties, and interpretation or construction, shall be governed and determined by
the law of the state of Colorado.

 

C.  Regulatory Agencies:

 

Nothing herein contained shall grant, or be construed to grant, Operator the
right or authority to waive or release any rights, privileges, or obligations
which Non-Operators may have under federal or state laws or under rules,
regulations or

 

16

--------------------------------------------------------------------------------

 

orders promulgated under such laws in reference to oil, gas and mineral
operations, including the location, operation, or production of wells, on tracts
offsetting or adjacent to the Contract Area.

 

With respect to the operations hereunder, Non-Operators agree to release
Operator from any and all losses, damages, injuries, claims and causes of action
arising out of, incident to or resulting directly or indirectly from Operator’s
interpretation or application of rules, rulings, regulations or orders of the
Department of Energy or Federal Energy Regulatory Commission or predecessor or
successor agencies to the extent such interpretation or application was made in
good faith and does not constitute gross negligence. Each Non-Operator further
agrees to reimburse Operator for such Non-Operator’s share of production or any
refund, fine, levy or other governmental sanction that Operator may be required
to pay as a result of such an incorrect interpretation or application, together
with interest and penalties thereon owing by Operator as a result of such
incorrect interpretation or application.

 

ARTICLE XV.

MISCELLANEOUS

 

A.  Execution:

 

This agreement shall be binding upon each Non-Operator when this agreement or a
counterpart thereof has been executed by such Non-Operator and Operator
notwithstanding that this agreement is not then or thereafter executed by all of
the parties to which it is tendered or which are listed on Exhibit “A” as owning
an interest in the Contract Area or which own, in fact, an interest in the
Contract Area.  Operator may, however, by written notice to all Non-Operators
who have become bound by this agreement as aforesaid, given at any time prior to
the actual spud date of the Initial Well but in no event later than five days
prior to the date specified in Article VI.A. for commencement of the Initial
Well, terminate this agreement if Operator in its sole discretion determines
that there is insufficient participation to justify commencement of drilling
operations.  In the event of such a termination by Operator, all further
obligations of the parties hereunder shall cease as of such termination.  In the
event any Non-Operator has advanced or prepaid any share of drilling or other
costs hereunder, all sums so advanced shall be returned to such Non-Operator
without interest.  In the event Operator proceeds with drilling operations for
the Initial Well without the execution hereof by all persons listed on Exhibit
“A” as having a current working interest in such well, Operator shall indemnify
Non-Operators with respect to all costs incurred for the Initial Well which
would have been charged to such person under this agreement if such person had
executed the same and Operator shall receive all revenues which would have been
received by such person under this agreement if such person had executed the
same.

 

B. Successors and Assigns:

 

This agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, devisees, legal representatives,
successors and assigns, and the terms hereof shall be deemed to run with the
Leases or Interests included within the Contract Area.

 

C. Counterparts:

 

This instrument may be executed in any number of counterparts, each of which
shall be considered an original for all purposes.

 

D.  Severability:

 

For the purposes of assuming or rejecting this agreement as an executory
contract pursuant to federal bankruptcy laws, this agreement shall not be
severable, but rather must be assumed or rejected in its entirety, and the
failure of any party to this agreement to comply with all of its financial
obligations provided herein shall be a material default.

 

ARTICLE XVI.

OTHER PROVISIONS

 

See Additional Provisions attached hereto and by reference made a part hereof.

 

17

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this agreement shall be effective as of the          day
of                                           , 2006.

 

 

ATTEST OR WITNESS:

 

 

OPERATOR

 

 

 

 

 

 

 

 

 

Noble Energy, Inc.

 

 

 

 

 

 

By

/s/ David W. Siple

 

 

 

 

 

 

David W. Siple

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

Attorney-In-Fact for GWW

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

NON-OPERATORS

 

 

 

 

 

 

Teton DJ LLC,

 

 

 

 

By Teton Energy Corporation, Manager

 

 

 

 

 

By

/s/ Patrick A. Quinn

 

 

 

 

 

 

Patrick A. Quinn

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

Chief Financial Officer

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

 

 

 

 

 

 

 

By

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Tax ID or S.S. No.

 

 

18

--------------------------------------------------------------------------------

 

ACKNOWLEDGMENTS

 

Note: The following forms of acknowledgment are the short forms approved by the
Uniform Law on Notarial Acts.

 

The validity and effect of these forms in any state will depend upon the
statutes of that state.

 

Individual acknowledgment:

 

State of

)

 

 

 

) ss.

 

 

County of

)

 

 

This instrument was acknowledged before me on

 

 

 

by

 

 

 

 

 

(Seal, if any)

 

 

 

 

Title (and Rank)

 

 

 

 

My commission expires:

 

 

 

Acknowledgment in representative capacity:

 

State of

Colorado

)

 

 

 

 

) ss.

 

 

County of

Denver

)

 

 

 

This instrument was acknowledged before me on

 

 

 

 

by

David W. Siple

as

 

Attorney-In-Fact of Noble Energy, Inc., a Delaware corporation

 

(Seal, if any)

 

 

 

 

Title (and Rank)

Notary Public

 

 

 

My commission expires:

February 9, 2009

 

State of

Colorado

)

 

 

 

 

) ss.

 

 

County of

Denver

)

 

 

 

This instrument was acknowledged before me on

 

 

 

 

by

Patrick A. Quinn

as

 

President of Teton DJ LLC, a Colorado Limited Liability Company

 

(Seal, if any)

 

 

 

 

Title (and Rank)

Notary Public

 

 

 

My commission expires:

 

 

19

--------------------------------------------------------------------------------

 

ARTICLE XVI

ADDITIONAL PROVISIONS

 

A.            Acreage Earning Agreement. This Model Form Operating Agreement
(“JOA”) is executed pursuant to the terms of the Acreage Earning Agreement dated
effective December 31, 2005 between Noble Energy, Inc. and Teton Energy
Corporation (the “Acreage Earning Agreement”). If there is a conflict between
the terms of the JOA and the Acreage Earning Agreement, the terms of the Acreage
Earning Agreement shall control to the extent of the conflict.

 

B.            Disbursement of Royalty and Other Burdens/Taking in Kind

 

1.             Selling Production Under the Terms of the JOA. If the
non-operating working interest owners elect not to take their share of Oil and
Gas in kind, Operator agrees to market such non-operators share of Oil and Gas
on the same terms and conditions that Operator receives for its share of Oil and
Gas. Operator further agrees to disburse all revenues attributable to the non
operator’s Oil and Gas to the non-operator and the owners of royalty, overriding
royalty, production payment or other similar burdens; provided however, in that
event, Operator will use its commercially reasonable efforts to make
disbursements correctly, but will be liable for incorrect disbursements only in
the event of gross negligence or willful misconduct.

 

2.             Taking in Kind. Under the provisions of Article VI. G. of this
JOA, if any party elects to take in kind or separately dispose of its
proportionate share of Oil and Gas produced from the Contract Area, the other
party expressly disclaims responsibility for the disbursement of revenues to any
royalty, overriding royalty, production payment or other burdens out of the
working interest. Operator agrees to provide, without cost to Non-Operator, a
100 percent division of interest to each working interest owner and first
purchaser after receipt of a division order title opinion, and updated ownership
information thereafter as may be compiled in the normal course of business,
sufficient to all the parties to determine the manner in which revenue
distributions should be made. Notwithstanding Article VII.F. of this JOA, if a
Non-Operator separately disposes of its production, it shall be entitled to
withhold all estimated taxes on production and Operator and others will not be
entitled to withhold taxes for such periods. Non-Operator shall tender such
withheld funds to Operator within 60 days such taxes are due and payable.

 

C.            Volume Pricing and Discounts. In addition to the terms set forth
in the attached Exhibit “C”, COPAS Accounting Procedure, Joint Operations, if
Operator receives a volume discount or other price reduction for any operations
conducted or for any goods purchased, Non-Operator shall be entitled to such
discount or reduction.

 

D.            Supplemental Authorizations. As to any operations which may be
proposed under Articles VI and VII herein the Proposing Party will furnish
detailed Authority for Expenditures (AFEs) for each proposed operation.

 

E.             Order of Election. The parties agree that an election by any
party hereto to complete a well at the original objective depth or horizon of
any operations conducted hereunder, whether such operation be the drilling of a
new well or the re-entering, deepening, sidetracking or plugging back of a well,
shall take precedence over an election to complete a well at a lesser depth than
the original objective depth or drill the well to a deeper depth. No well
capable of producing in paying quantities shall be plugged back, reworked or
deepened without the consent of 100% of the applicable working interest
ownership.

 

17(a)

--------------------------------------------------------------------------------

 

F.             Insurance. Except as provided in Exhibit “D”, all damage or
injury to the Contract Area and property thereon shall be borne by the parties
hereto in proportion to their cost bearing interest at the time of the damage or
injury. The liability, if any, of the parties hereto in damages for claims
growing out of personal injury to or destruction of property of third parties
resulting from operations conducted hereunder shall be borne in proportion to
their cost bearing interests in the Contract Area at the time of the incident or
action giving rise to the liability. Each party individually may acquire such
insurance as it deems proper to protect itself against such claims.

 

G.            The Earning Wells. As set forth in the Acreage Earning Agreement,
Noble has agreed to drill 20 wells to Target Depth as more particularly set
forth in the Acreage Earning Agreement. Noble’s failure to drill the Earning
Wells is addressed in the Acreage Earning Agreement and not in the terms of this
JOA.

 

H.            Production Infrastructure. The parties have agreed to construct
the “Production Infrastructure as set forth in the Acreage Earning Agreement.
The planning and construction of the Production Infrastructure shall be
considered to be Major Construction for the purposes of calculating the Overhead
rates pursuant to the term of the Accounting Procedure – Joint Operations
attached as Exhibit C.

 

17(b)

--------------------------------------------------------------------------------

 

EXHIBIT “A”

 

Attached to and made a part of that certain Operating Agreement

dated January 27, 2006, by and between Noble Energy, Inc.,

as Operator, and Teton DJ LLC, as Non-Operator

 

1.             Description of Lands Subject to this Agreement

 

Grant Complex – Perkins and Chase Counties, Nebraska

 

Township 12 North, Range 37 West, 6th P.M. - Sections 19-22,27-34

Township 12 North, Range 38 West, 6th P.M. - Sections 19-36

Township 12 North, Range 39 West, 6th P.M. - Sections 19-36

Township 12 North, Range 40 West, 6th P.M. - Sections 22-27,34-36

Township 11 North, Range 37 West, 6th P.M. - Sections 3-10,15-22,27-34

Township 11 North, Range 38 West, 6th P.M. - ALL

Township 11 North, Range 39 West, 6th P.M. - ALL

Township 11 North, Range 40 West, 6th P.M. - ALL

Township 10 North, Range 37 West, 6th P.M. - Sections 3-10,15-22,22-34

Township 10 North, Range 38 West, 6th P.M. - ALL

Township 10 North, Range 39 West, 6th P.M. - ALL

Township 10 North, Range 40 West, 6th P.M. - ALL

Township  9  North, Range 37 West, 6th P.M. - Sections 5-8,17-20,29-32

Township  9  North, Range 38 West, 6th P.M. - ALL

Township  9  North, Range 39 West, 6th P.M. - ALL

Township  9  North, Range 40 West, 6th P.M. - ALL

Township  8  North, Range 38 West, 6th P.M. - Sections 4-9,16-21,28-33

Township  8  North, Range 39 West, 6th P.M. - ALL

Township  8  North, Range 40 West, 6th P.M. - ALL

Township  8  North, Range 41 West, 6th P.M. - Sections 1-3,10-15,22-27,34-36

Township  7  North, Range 39 West, 6th P.M. - ALL

Township  7  North, Range 40 West, 6th P.M. - ALL

Township  7  North, Range 41 West, 6th P.M. – ALL

 

2.             Restrictions as to Depths, Formations or Substances

 

There are no restrictions as to depths, formations or substances.

 

3.             Parties to this Agreement

 

Noble Energy, Inc.

 

1625 Broadway, Suite 2000

 

Denver, CO 80202

 

Telephone:

303-228-4000

Fax:

303-228-4280

 

 

Teton DJ LLC

 

410 17th Street, Suite 1850

 

Denver, CO 80202

 

Telephone:

303-565-4604

Fax:

303-565-4606

 

4.             Percentage Working Interests of the Parties (Subject to the terms
of the Acreage Earning Agreement)

 

Noble Energy, Inc.

75.00

%

Teton Energy Corporation

25.00

%

 

--------------------------------------------------------------------------------

 

5.             Oil and Gas Leases subject to this Agreement

 

See attached Exhibits A-1, A-2 and A-3 to the extent the leases are included in
the Grant Complex. (A Grant Complex lease schedule will be substituted when
completed.)

 

--------------------------------------------------------------------------------

 

ARTICLE XVI

ADDITIONAL PROVISIONS

 

A.            Acreage Earning Agreement. This Model Form Operating Agreement
(“JOA”) is executed pursuant to the terms of the Acreage Earning Agreement dated
effective December 31, 2005 between Noble Energy, Inc. and Teton Energy
Corporation (the “Acreage Earning Agreement”). If there is a conflict between
the terms of the JOA and the Acreage Earning Agreement, the terms of the Acreage
Earning Agreement shall control to the extent of the conflict.

 

B.            Disbursement of Royalty and Other Burdens/Taking in Kind

 

1.             Selling Production Under the Terms of the JOA. If the
non-operating working interest owners elect not to take their share of Oil and
Gas in kind, Operator agrees to market such non-operators share of Oil and Gas
on the same terms and conditions that Operator receives for its share of Oil and
Gas. Operator further agrees to disburse all revenues attributable to the non
operator’s Oil and Gas to the non-operator and the owners of royalty, overriding
royalty, production payment or other similar burdens; provided however, in that
event, Operator will use its commercially reasonable efforts to make
disbursements correctly, but will be liable for incorrect disbursements only in
the event of gross negligence or willful misconduct.

 

2.             Taking in Kind. Under the provisions of Article VI. G. of this
JOA, if any party elects to take in kind or separately dispose of its
proportionate share of Oil and Gas produced from the Contract Area, the other
party expressly disclaims responsibility for the disbursement of revenues to any
royalty, overriding royalty, production payment or other burdens out of the
working interest. Operator agrees to provide, without cost to Non-Operator, a
100 percent division of interest to each working interest owner and first
purchaser after receipt of a division order title opinion, and updated ownership
information thereafter as may be compiled in the normal course of business,
sufficient to all the parties to determine the manner in which revenue
distributions should be made. Notwithstanding Article VII.F. of this JOA, if a
Non-Operator separately disposes of its production, it shall be entitled to
withhold all estimated taxes on production and Operator and others will not be
entitled to withhold taxes for such periods. Non-Operator shall tender such
withheld funds to Operator within 60 days such taxes are due and payable.

 

C.            Volume Pricing and Discounts. In addition to the terms set forth
in the attached Exhibit “C”, COPAS Accounting Procedure, Joint Operations, if
Operator receives a volume discount or other price reduction for any operations
conducted or for any goods purchased, Non-Operator shall be entitled to such
discount or reduction.

 

D.            Supplemental Authorizations. As to any operations which may be
proposed under Articles VI and VII herein the Proposing Party will furnish
detailed Authority for Expenditures (AFEs) for each proposed operation.

 

E.             Order of Election. The parties agree that an election by any
party hereto to complete a well at the original objective depth or horizon of
any operations conducted hereunder, whether such operation be the drilling of a
new well or the re-entering, deepening, sidetracking or plugging back of a well,
shall take precedence over an election to complete a well at a lesser depth than
the original objective depth or drill the well to a deeper depth. No well
capable of producing in paying quantities shall be plugged back, reworked or
deepened without the consent of 100% of the applicable working interest
ownership.

 

17(a)

--------------------------------------------------------------------------------

 

F.             Insurance. Except as provided in Exhibit “D”, all damage or
injury to the Contract Area and property thereon shall be borne by the parties
hereto in proportion to their cost bearing interest at the time of the damage or
injury. The liability, if any, of the parties hereto in damages for claims
growing out of personal injury to or destruction of property of third parties
resulting from operations conducted hereunder shall be borne in proportion to
their cost bearing interests in the Contract Area at the time of the incident or
action giving rise to the liability. Each party individually may acquire such
insurance as it deems proper to protect itself against such claims.

 

G.            The Earning Wells. As set forth in the Acreage Earning Agreement,
Noble has agreed to drill 20 wells to Target Depth as more particularly set
forth in the Acreage Earning Agreement. Noble’s failure to drill the Earning
Wells is addressed in the Acreage Earning Agreement and not in the terms of this
JOA.

 

H.            Production Infrastructure. The parties have agreed to construct
the “Production Infrastructure as set forth in the Acreage Earning Agreement.
The planning and construction of the Production Infrastructure shall be
considered to be Major Construction for the purposes of calculating the Overhead
rates pursuant to the term of the Accounting Procedure – Joint Operations
attached as Exhibit C.

 

17(b)

--------------------------------------------------------------------------------

 

EXHIBIT “A”

 

Attached to and made a part of that certain Operating Agreement

dated January 27, 2006, by and between Noble Energy, Inc.,

as Operator, and Teton DJ LLC, as Non-Operator

 

1.             Description of Lands Subject to this Agreement

 

Chundy Complex,  Chase and Dundy Counties, Nebraska; Sedgwick and Yuma Counties,
Colorado

 

Township  6  North, Range 39 West, 6th P.M. - ALL

Township  6  North, Range 40 West, 6th P.M. - ALL

Township  6  North, Range 41 West, 6th P.M. - ALL

Township  6  North, Range 42 West, 6th P.M. – (Chase Co., NE) Sections
1,2,11-14,23-26,35-36

Township  6  North, Range 42 West, 6th P.M. - (Sedgwick Co., CO) Sections
4-9,16-21,28-33

Township  5  North, Range 39 West, 6th P.M. - ALL

Township  5  North, Range 40 West, 6th P.M. - ALL

Township  5  North, Range 41 West, 6th P.M. - ALL

Township  5  North, Range 42 West, 6th P.M. - (Chase Co., NE) Sections
1,2,11-14,23-26,35-36

Township  5  North, Range 42 West, 6th P.M. - (Yuma Co., CO) Sections
5-8,17-20,29-32

Township  4  North, Range 40 West, 6th P.M. - ALL

Township  4  North, Range 41 West, 6th P.M. - ALL

Township  4  North, Range 42 West, 6th P.M. - (Dundy Co., NE) Sections
1-3,10-15,22-27,34-36

Township  4  North, Range 42 West, 6th P.M. - (Yuma Co., CO) Sections
3-10,15-22,27-34

Township  3  North, Range 40 West, 6th P.M. - Sections 4-9,16-21,28-33

Township  3  North, Range 41 West, 6th P.M. - ALL

Township  3  North, Range 42 West, 6th P.M. - (Dundy Co., NE) Sections
1-3,10-15,22-27,34-36

Township  3  North, Range 42 West, 6th P.M. - (Yuma Co., CO) Sections 3-10,
15-22,27-

 

2.             Restrictions as to Depths, Formations or Substances

 

There are no restrictions as to depths, formations or substances.

 

3.             Parties to this Agreement

 

Noble Energy, Inc.

 

1625 Broadway, Suite 2000

 

Denver, CO 80202

 

Telephone:

303-228-4000

Fax:

303-228-4280

 

 

Teton DJ LLC

 

410 17th Street, Suite 1850

 

Denver, CO 80202

 

Telephone:

303-565-4604

Fax:

303-565-4606

 

4.             Percentage Working Interests of the Parties (Subject to the terms
of the Acreage Earning Agreement)

 

Noble Energy, Inc.

75.00

%

Teton Energy Corporation

25.00

%

 

5.             Oil and Gas Leases subject to this Agreement

 

See attached Exhibits A-1, A-2 and A-3 to the extent the leases are included in
the Chundy Complex. (A Chundy Complex lease schedule will be substituted when
completed.)

 

--------------------------------------------------------------------------------

 

ARTICLE XVI

ADDITIONAL PROVISIONS

 

A.            Acreage Earning Agreement. This Model Form Operating Agreement
(“JOA”) is executed pursuant to the terms of the Acreage Earning Agreement dated
effective December 31, 2005 between Noble Energy, Inc. and Teton Energy
Corporation (the “Acreage Earning Agreement”). If there is a conflict between
the terms of the JOA and the Acreage Earning Agreement, the terms of the Acreage
Earning Agreement shall control to the extent of the conflict.

 

B.            Disbursement of Royalty and Other Burdens/Taking in Kind

 

1.             Selling Production Under the Terms of the JOA. If the
non-operating working interest owners elect not to take their share of Oil and
Gas in kind, Operator agrees to market such non-operators share of Oil and Gas
on the same terms and conditions that Operator receives for its share of Oil and
Gas. Operator further agrees to disburse all revenues attributable to the non
operator’s Oil and Gas to the non-operator and the owners of royalty, overriding
royalty, production payment or other similar burdens; provided however, in that
event, Operator will use its commercially reasonable efforts to make
disbursements correctly, but will be liable for incorrect disbursements only in
the event of gross negligence or willful misconduct.

 

2.             Taking in Kind. Under the provisions of Article VI. G. of this
JOA, if any party elects to take in kind or separately dispose of its
proportionate share of Oil and Gas produced from the Contract Area, the other
party expressly disclaims responsibility for the disbursement of revenues to any
royalty, overriding royalty, production payment or other burdens out of the
working interest. Operator agrees to provide, without cost to Non-Operator, a
100 percent division of interest to each working interest owner and first
purchaser after receipt of a division order title opinion, and updated ownership
information thereafter as may be compiled in the normal course of business,
sufficient to all the parties to determine the manner in which revenue
distributions should be made. Notwithstanding Article VII.F. of this JOA, if a
Non-Operator separately disposes of its production, it shall be entitled to
withhold all estimated taxes on production and Operator and others will not be
entitled to withhold taxes for such periods. Non-Operator shall tender such
withheld funds to Operator within 60 days such taxes are due and payable.

 

C.            Volume Pricing and Discounts. In addition to the terms set forth
in the attached Exhibit “C”, COPAS Accounting Procedure, Joint Operations, if
Operator receives a volume discount or other price reduction for any operations
conducted or for any goods purchased, Non-Operator shall be entitled to such
discount or reduction.

 

D.            Supplemental Authorizations. As to any operations which may be
proposed under Articles VI and VII herein the Proposing Party will furnish
detailed Authority for Expenditures (AFEs) for each proposed operation.

 

E.             Order of Election. The parties agree that an election by any
party hereto to complete a well at the original objective depth or horizon of
any operations conducted hereunder, whether such operation be the drilling of a
new well or the re-entering, deepening, sidetracking or plugging back of a well,
shall take precedence over an election to complete a well at a lesser depth than
the original objective depth or drill the well to a deeper depth. No well
capable of producing in paying quantities shall be plugged back, reworked or
deepened without the consent of 100% of the applicable working interest
ownership.

 

17(a)

--------------------------------------------------------------------------------

 

F.             Insurance. Except as provided in Exhibit “D”, all damage or
injury to the Contract Area and property thereon shall be borne by the parties
hereto in proportion to their cost bearing interest at the time of the damage or
injury. The liability, if any, of the parties hereto in damages for claims
growing out of personal injury to or destruction of property of third parties
resulting from operations conducted hereunder shall be borne in proportion to
their cost bearing interests in the Contract Area at the time of the incident or
action giving rise to the liability. Each party individually may acquire such
insurance as it deems proper to protect itself against such claims.

 

G.            The Earning Wells. As set forth in the Acreage Earning Agreement,
Noble has agreed to drill 20 wells to Target Depth as more particularly set
forth in the Acreage Earning Agreement. Noble’s failure to drill the Earning
Wells is addressed in the Acreage Earning Agreement and not in the terms of this
JOA.

 

H.            Production Infrastructure. The parties have agreed to construct
the “Production Infrastructure as set forth in the Acreage Earning Agreement.
The planning and construction of the Production Infrastructure shall be
considered to be Major Construction for the purposes of calculating the Overhead
rates pursuant to the term of the Accounting Procedure – Joint Operations
attached as Exhibit C.

 

17(b)

--------------------------------------------------------------------------------

 

EXHIBIT “A”

 

Attached to and made a part of that certain Operating Agreement

dated January 27, 2006, by and between Noble Energy, Inc.,

as Operator, and Teton DJ LLC, as Non-Operator

 

1.             Description of Lands Subject to this Agreement

 

East Big Springs Complex – Keith, Duell and Perkins Counties, Nebraska and
Sedgwick County, Colorado

 

Township 15 North, Range 40 West, 6th P.M. - ALL

Township 15 North, Range 41 West, 6th P.M. - ALL

Township 14 North, Range 40 West, 6th P.M. - ALL

Township 14 North, Range 41 West, 6th P.M. - ALL

Township 13 North, Range 40 West, 6th P.M. - ALL

Township 13 North, Range 41 West, 6th P.M. - ALL

Township 12 North, Range 40 West, 6th P.M. - Sections 1-21, 28-33

Township 12 North, Range 41 West, 6th P.M. - ALL

Township 12 North, Range 42 West, 6th P.M. - (Duell Co., NE) Sections
1-3,10-15,22-24

Township 12 North, Range 42 West, 6th P.M. - (Sedgwick Co., CO) Sections
19,20,29-32 (ALL)

Township 12 North, Range 43 West, 6th P.M. - (Sedgwick Co., CO) Sections
23-26,35,36

Township 11 North, Range 41 West, 6th P.M. - ALL

Township 11 North, Range 42 West, 6th P.M. - (Sedgwick Co., CO) Sections
5-8,17-20,29-32(ALL)

Township 11 North, Range 43 West, 6th P.M. - (Sedgwick Co., CO) Sections
1,2,11-14,23-26,35,36

Township 10 North, Range 42 West, 6th P.M. - (Sedgwick Co., CO) Sections 5,6

Township 10 North, Range 43 West, 6th P.M. - (Sedgwick Co., CO) Sections 1,2

 

2.             Restrictions as to Depths, Formations or Substances

 

There are no restrictions as to depths, formations or substances.

 

3.             Parties to this Agreement

 

Noble Energy, Inc.

 

1625 Broadway, Suite 2000

 

Denver, CO 80202

 

Telephone:

303-228-4000

Fax:

303-228-4280

 

 

Teton DJ LLC

 

410 17th Street, Suite 1850

 

Denver, CO 80202

 

Telephone:

303-565-4604

Fax:

303-565-4606

 

4.             Percentage Working Interests of the Parties (Subject to the terms
of the Acreage Earning Agreement)

 

Noble Energy, Inc.

75.00

%

Teton Energy Corporation

25.00

%

 

5.             Oil and Gas Leases subject to this Agreement

 

See attached Exhibits A-1, A-2 and A-3 to the extent the leases are included in
the East Big Springs Complex. (An East Big Springs Complex lease schedule will
be substituted when completed.)

 

--------------------------------------------------------------------------------

 

Exhibit “A-1” - Low NRI Leases

ACREAGE EARNING AGREEMENT

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease Effective Date

 

Recording Data

 

Expiration
Date

 

County

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net
Acres

 

Total
Annual
Rental

 

Net
Revenue
Interest

 

12858

 

B

 

Robert Dean Wilson, a married man dealing in his sole and separate property, an
Heir to the Estate of Mabel Wilson, deceased

 

LoneTree Energy, Inc.

 

03/29/00

 

60-243

 

03/29/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 35: S/2

 

16.67

%

320.00

 

0.00000

 

53.33440

 

$

0.00

 

80

%

12858

 

C

 

James Clyde Wilson, a married man dealing in his sole and separate property, an
heir to the Estate of Mabel Wilson, deceased

 

LoneTree Energy, Inc.

 

03/29/00

 

60-241

 

03/29/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 35: S2

 

16.67

%

320.00

 

0.00000

 

53.33440

 

$

0.00

 

80

%

12858

 

D

 

Kenneth Rex Wilson, a married man dealing in his sole and separate property, an
heir to the Estate of Mable Wilson, deceased

 

LoneTree Energy, Inc.

 

03/29/00

 

60-242

 

03/29/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 35: S2

 

16.67

%

320.00

 

0.00000

 

53.33440

 

$

0.00

 

80

%

12972

 

 

 

Jane Svoboda, a single woman

 

Apollo Energy, LLC

 

09/10/03

 

63-253

 

09/10/08

 

Perkins

 

Township 12 North, Range 40 West, 6th P.M.
Section 24:  SE

 

100.00

%

160.47

 

160.47000

 

160.47000

 

$

0.00

 

79.50

%

13008

 

 

 

State of Nebraska # 7249

 

Apollo Energy, LLC

 

11/14/03

 

16-295

 

11/14/08

 

Chase

 

Township 5 North, Range 41 West, 6th P.M.
Section 16:  All

 

100.00

%

640.00

 

640.00000

 

640.00000

 

$

1,280.00

 

79.50

%

13009

 

 

 

State of Nebraska # 7257

 

Apollo Energy, LLC

 

11/14/03

 

36-183

 

11/14/08

 

Dundy

 

Township 4 North, Range 41 West, 6th P.M.
Section 16:  All

 

100.00

%

639.48

 

639.48000

 

639.48000

 

$

1,278.96

 

79.50

%

13038

 

 

 

Frank B. Svoboda and Anne Marie Svoboda, husband and wife

 

Apollo Energy, LLC

 

11/12/03

 

64-29

 

11/12/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 10:  N2

 

100.00

%

304.01

 

304.01000

 

304.01000

 

$

0.00

 

79.50

%

13073

 

 

 

Donald A. Welch and Cassie L. Welsh, husband and wife

 

LoneTree Energy, Inc.

 

05/14/00

 

76-222

 

05/14/10

 

Keith

 

Township 13 North, Range 36 West, 6th P.M.
Section 21:  A 5.00 acre tract conveyed by Deed recorded in Book 59 Deeds,
Page 213 described as beginning at a point on the East line of the Northeast
Quarter (NE/4) of Section Twenty-one (21) at a distance S 0degrees 00 minutes E
1527.54 feet from the Northeast corner thereof; thence, along said East line, S
0 degrees 00 minutes E 514.20 feet; thence, N 90 degrees 00 minutes W 425.00
feet; thence N 0 degrees 19 minutes E 514.20 feet; thence N 90 degrees 00
minutes E 422.14 feet to the point of beginning.

 

100.00

%

5.00

 

5.00000

 

5.00000

 

$

0.00

 

80

%

13074

 

A

 

Victor W. Haarberg and M. Kathleen Haarberg, individually, and as husband and
wife

 

LoneTree Energy, Inc.

 

02/12/01

 

15-301

 

02/12/06

 

Chase

 

Tract 1
Township 5 North, Range 37 West, 6th P.M.
Section 34:  E/2, SW4
Tract 2
Township 5 North, Range 37 West, 6th P.M.
Section 35:  W/2

 

TR 1-100

TR 2-50

%

%

800.00

 

800.00000

 

640.00000

 

$

0.00

 

80

%

13074

 

B

 

Jon S. Haarberg and Reita Haarberg, husband and wife

 

LoneTree Energy, Inc.

 

02/12/01

 

15-298

 

02/12/06

 

Chase

 

Township 5 North, Range 37 West, 6th P.M.
Section 35:  W/2

 

50.00

%

320.00

 

0.00000

 

160.00000

 

$

0.00

 

80

%

13075

 

 

 

Victor W. Haarberg and Mary Kathleen Haarberg, Individually and as husband and
wife

 

LoneTree Energy, Inc.

 

07/12/01

 

15-330

 

07/12/06

 

Chase

 

Township 5 North, Range 37 West, 6th P.M.
Section 22:  E/2

 

100.00

%

320.00

 

320.00000

 

320.00000

 

$

0.00

 

80

%

13076

 

 

 

Ronald Hanson and Marily Hanson, individually, and as husband and wife

 

LoneTree Energy, Inc.

 

08/02/01

 

15-321

 

08/02/06

 

Chase

 

Township 5 North, Range 37 West, 6th P.M.
Section 35:  SE4

 

100.00

%

160.00

 

160.00000

 

160.00000

 

$

0.00

 

80

%

13077

 

 

 

Milo Smith, also known as Milo Orson Smith, a single man

 

LoneTree Energy, Inc.

 

04/04/00

 

60-238

 

04/04/10

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 24:  W2NE4

 

100.00

%

80.24

 

80.24000

 

80.24000

 

$

0.00

 

80

%

13078

 

A

 

Kenneth E. Goertzen, a married man dealing in his sole and separate property

 

LoneTree Energy, Inc.

 

04/14/00

 

60-216

 

04/14/10

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 24:  S2

 

33.33

%

322.69

 

322.69000

 

107.56333

 

$

0.00

 

80

%

13078

 

C

 

Ardean R. Goertzen, a married man dealing in his sole and separate property

 

LoneTree Energy, Inc.

 

04/14/00

 

60-214

 

04/14/10

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 24:  S2

 

33.33

%

322.69

 

0.00000

 

107.56334

 

$

0.00

 

80

%

13078

 

B

 

Donald L. Goertzen, a married man dealing in his sole and separate property.

 

LoneTree Energy, Inc.

 

04/14/00

 

60-215

 

04/14/10

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 24:  S/2

 

33.33

%

322.69

 

0.00000

 

107.56333

 

$

0.00

 

80

%

13083

 

A

 

Charles V. Sheldon, a married man dealing in his sole and separate property

 

LoneTree Energy, Inc.

 

07/17/00

 

93-97

 

07/17/10

 

Dundy

 

Township 4 North, Range 41 West, 6th P.M.
Section 2:  SE4
Section 11:  NE4

 

16.67

%

320.00

 

320.00000

 

53.32800

 

$

0.00

 

80

%

13083

 

B

 

Harold Sheldon, a married man dealing in his sole and separate property

 

LoneTree Energy, Inc.

 

07/17/00

 

33-338

 

07/17/10

 

Dundy

 

Township 4 North, Range 41 West, 6th P.M.
Section 2:  SE4
Section 11:  NE4

 

16.67

%

320.00

 

0.00000

 

53.32800

 

$

0.00

 

80

%

13085

 

 

 

Daniel D. Mullanix and Janie Mullanix, husband and wife

 

LoneTree Energy, Inc.

 

03/17/00

 

15-90

 

03/17/10

 

Chase

 

Township 8 North, Range 39 West, 6th P.M.
Section 27:  E2
Section 34:  N2, SE4

 

100.00

%

800.00

 

800.00000

 

800.00000

 

$

800.00

 

80

%

13086

 

 

 

Howard Surber and Norma Surber, Individually and as husband and wife

 

LoneTree Energy, Inc.

 

03/19/00

 

15-96

 

03/19/10

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 4:  Lots 3,4, S2NW4
Section 5:  Lots 1,2,3,4, S2N2

 

100.00

%

477.31

 

477.31000

 

477.31000

 

$

477.31

 

80

%

13087

 

 

 

Leaveta Bremer, a widow and Jerry D. Bremer and Jean Bremer, individually and as
husband and wife

 

LoneTree Energy, Inc.

 

03/17/00

 

15-71

 

03/17/10

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 5:  SW4
Section 8:  W2E2, W2

 

100.00

%

640.00

 

640.00000

 

640.00000

 

$

640.00

 

80

%

13088

 

 

 

Joe Weiss, Successor Trustee of the George L. Weiss and Goldie G. Weiss Trust,
dated July 17, 1990

 

LoneTree Energy, Inc.

 

03/19/00

 

15-99

 

03/19/10

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 4:  NE4
Township 8 North, Range 39 West, 6th P.M.
Section 33:  S2SE4

 

100.00

%

238.77

 

238.77000

 

238.77000

 

$

240.00

 

80

%

13089

 

 

 

Jerry D. Whips, a widower

 

LoneTree Energy, Inc.

 

03/18/00

 

15-102

 

03/18/10

 

Chase

 

Township 8 North, Range 39 West, 6th P.M.
Section 27:  W2
Section 28:  NE4

 

100.00

%

480.00

 

480.00000

 

480.00000

 

$

480.00

 

80

%

 

1

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease Effective Date

 

Recording Data

 

Expiration
Date

 

County

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net
Acres

 

Total
Annual
Rental

 

Net
Revenue
Interest

 

13090

 

 

 

Daniel Kunnemann, a single man

 

LoneTree Energy, Inc.

 

05/03/00

 

15-81

 

05/03/10

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 7:  NE4

 

100.00

%

160.00

 

160.00000

 

160.00000

 

$

160.00

 

80

%

13091

 

A

 

Marlon K. Kunnemann and Deborah K. Kunnemann, individually and as husband and
wife, and Myron K. Kunnemann, a single man

 

LoneTree Energy, Inc.

 

05/04/00

 

15-87

 

05/04/10

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 5:  SE4

 

50.00

%

160.00

 

160.00000

 

80.00000

 

$

80.00

 

80

%

13095

 

 

 

Kermit T. Schilke and Doris J. Schilke, individually and as husband and wife

 

LoneTree Energy, Inc.

 

12/15/00

 

15-230

 

12/15/10

 

Chase

 

Township 8 North, Range 39 West, 6th P.M.
Section 35:  All

 

100.00

%

640.00

 

640.00000

 

640.00000

 

$

640.00

 

80

%

13096

 

 

 

John P. Jaeger, a widower

 

LoneTree Energy, Inc.

 

02/13/01

 

15-221

 

02/13/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 6:  SE4
Section 7:  Lots 1 (40.98), 2 (41.22), 3 (41.46), 4 (41.70), E2W2

 

100.00

%

485.36

 

485.36000

 

485.36000

 

$

485.36

 

80

%

13097

 

 

 

Marlon K. Kunnemann and Deborah K. Kunnemann, Individually, and as Husband and
Wife, and Myron K. Kunnemann, a single person

 

LoneTree Energy, Inc.

 

01/10/01

 

15-224

 

01/10/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 8:  E2E2

 

50.00

%

160.00

 

160.00000

 

80.00000

 

$

80.00

 

80

%

13098

 

 

 

Orville Kunneman and Arleen Kunneman, Individually and as husband and wife

 

LoneTree Energy, Inc.

 

02/08/01

 

15-227

 

02/08/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 7:  SE4
Section 19:  SE4
Section 20:  SW4

 

100.00

%

480.00

 

480.00000

 

480.00000

 

$

480.00

 

80

%

13099

 

 

 

Stanley R. Smith, as Trustee of the Stanley R. Smith Trust dated October 15,
1999, and Shirley A. Smith, as Trustee of the Shirley A. Smith Trust dated
October 15, 1999

 

LoneTree Energy, Inc.

 

02/08/01

 

15-233

 

02/08/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 19:  NE4

 

100.00

%

160.00

 

160.00000

 

160.00000

 

$

160.00

 

80

%

13100

 

 

 

Robert Brenden Barger and Margaret B. Barger, Individually, and as husband and
wife

 

LoneTree Energy, Inc.

 

02/08/01

 

15-218

 

02/08/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 18:  Lots 1 (41.58), 2 (41.93), 3 (41.99), 4 (42.07), E2W2, SE4
Section 19:  Lots 1 (42.18), 2 (42.33), E2NW4, NE4SW4

 

100.00

%

692.35

 

692.35000

 

692.35000

 

$

692.09

 

80

%

13101

 

 

 

Gilbert Brandt and Pauline Brandt, as Trustees of the Bilbert and Pauline Brand
Trust, dated June 20, 1992

 

LoneTree Energy, Inc.

 

02/15/01

 

15-274

 

02/15/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 20:  SE4
Section 28:  SW4
Section 29:  N2

 

100.00

%

640.00

 

640.00000

 

640.00000

 

$

640.00

 

80

%

13102

 

 

 

Pflum Farms, Inc., a Nebraska Corporation

 

LoneTree Energy, Inc.

 

02/12/01

 

15-280

 

02/12/06

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 23:  W2NE4, SE4, W2

 

100.00

%

560.00

 

560.00000

 

560.00000

 

$

560.00

 

80

%

13103

 

 

 

Lloyd A. Pflum Jr., and Donna Pflum Individually and has husband and wife

 

LoneTree Energy, Inc.

 

02/10/01

 

15-277

 

02/10/06

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 24:  N2
Section 26:  NE4

 

100.00

%

480.43

 

480.43000

 

480.43000

 

$

480.00

 

80

%

13104

 

 

 

Terryberry Farms, Inc., a Nebraska Corporation

 

LoneTree Energy, Inc.

 

02/14/01

 

15-292

 

02/14/06

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 12:  NE4
Section 24:  E2W2SE4, E2SE4

 

100.00

%

279.91

 

279.91000

 

279.91000

 

$

280.00

 

80

%

13105

 

A

 

John I. Schilke, a married person dealing in his sole and separate property

 

LoneTree Energy, Inc.

 

02/13/01

 

15-283

 

02/13/06

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 12:  S2

 

50.00

%

319.89

 

319.89000

 

159.94500

 

$

160.00

 

80

%

13105

 

B

 

Timothy T. Schilke, a married person dealing in his sole and separate property

 

LoneTree Energy, Inc.

 

02/13/01

 

15-286

 

02/13/06

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 12:  S2

 

50.00

%

319.89

 

0.00000

 

159.94500

 

$

160.00

 

80

%

13106

 

A

 

Terryberry Properties, Inc., a Nebraska Corporation

 

LoneTree Energy, Inc.

 

02/14/01

 

15-295

 

02/14/06

 

Chase

 

Tract 1
Township 7 North, Range 39 West, 6th P.M.
Section 20:  NW4
Township 7 North, Range 40 West, 6th P.M.
Section 25:  NW4
Tract 2
Township 7 North, Range 40 West, 6th P.M.
Section 24:  SW4 except an 8.03 acre tract loacted in the SW4, W2W2SE4 except a
3.00 acre cemetery tract located in the southwest corner of the SE4

 

TR 1-100

TR 2-50

%

%

508.97

 

508.97000

 

414.48500

 

$

414.49

 

80

%

13107

 

A

 

Terryberry Farms, a General Partnership

 

LoneTree Energy, Inc.

 

02/14/01

 

15-289

 

02/14/06

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 24:  an 8.03 acre tract located in the SW4 more fully described by metes
and bounds in Deeds Book 27, Page 261

 

50.00

%

8.03

 

8.03000

 

4.02000

 

$

4.02

 

80

%

13108

 

 

 

Steven H. Foley and Denise J. Foley, husband and wife

 

LoneTree Energy, Inc.

 

02/08/01

 

15-306

 

02/08/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 19:  SE4SW4

 

100.00

%

40.00

 

40.00000

 

40.00000

 

$

40.00

 

80

%

13109

 

 

 

Bremer and Greene Farms, Inc., a Nebraska Corporation

 

LoneTree Energy, Inc.

 

08/06/01

 

15-309

 

08/06/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 30:  SE4

 

100.00

%

156.90

 

156.90000

 

156.90000

 

$

160.00

 

80

%

13110

 

A

 

Jerome Lattimer and Glenda L. Lattimer, husband and wife

 

LoneTree Energy, Inc.

 

08/13/01

 

15-312

 

08/13/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 19:  Lots 3 and 4, also described as W2SW4

 

33.33

%

85.13

 

85.13000

 

28.37666

 

$

0.00

 

80

%

13110

 

B

 

Eva La Rene Lytle, a widow and Sole Heir of the Estate of Archie W. Lytle,
deceased

 

LoneTree Energy, Inc.

 

08/13/01

 

15-315

 

08/13/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 19:  Lots 3 and 4, also described as W2SW4

 

33.33

%

85.13

 

0.00000

 

28.37666

 

$

0.00

 

80

%

13110

 

C

 

Doyle D. Lytle and Gwen E. Lytle, husband and wife

 

LoneTree Energy, Inc.

 

08/13/01

 

15-324

 

08/13/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 19:  Lots 3 and 4, also described as W2SW4

 

33.33

%

85.13

 

0.00000

 

28.37666

 

$

0.00

 

80

%

13111

 

 

 

Steven E. Schilke and Deborah J. Schilke, husband and wife; Lois L. Schilke, a
widow

 

LoneTree Energy, Inc.

 

10/04/01

 

15-327

 

10/04/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 20:  NE4

 

100.00

%

160.00

 

160.00000

 

160.00000

 

$

0.00

 

80

%

 

2

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease Effective Date

 

Recording Data

 

Expiration
Date

 

County

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net
Acres

 

Total
Annual
Rental

 

Net
Revenue
Interest

 

13112

 

A

 

Diann L. Schilke, as Trustee of the Diann L. Schilke Trust, dated February 14,
1997

 

LoneTree Energy, Inc.

 

12/07/01

 

15-390

 

12/07/06

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 13:  N2

 

50.00

%

320.00

 

320.00000

 

160.00000

 

$

0.00

 

80

%

13112

 

B

 

Larry J. Schilke, as Trustee of the Larry J. Schilke Trust, dated February 14,
1997

 

LoneTree Energy, Inc.

 

12/07/01

 

15-386

 

12/07/06

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 13:  N2

 

50.00

%

320.00

 

0.00000

 

160.00000

 

$

0.00

 

80

%

13113

 

 

 

Dale A. Large and Sylvia A. Large, husband and wife

 

LoneTree Energy, Inc.

 

12/17/01

 

15-383

 

12/17/06

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 30:  Lots 1,2, E2NW4, NE4, less and except a 12.09 acre tract in the
E/2NW4, more particularly described in Miscellaneous Book 10, Page 324

 

100.00

%

313.91

 

313.91000

 

313.91000

 

$

0.00

 

80

%

13114

 

A

 

Bernice E. Haggard, a widow, by James E. Haggard, Attorney in Fact

 

LoneTree Energy, Inc.

 

03/19/00

 

15-74

 

03/19/10

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 9:  E2, SW4
Section 10:  SW4

 

50.00

%

640.00

 

640.00000

 

320.00000

 

$

320.00

 

80

%

13114

 

B

 

James E. Haggard and Kenneth W. Haggard, Trustees of the Wendell F. Haggard
Family Trust

 

LoneTree Energy, Inc.

 

03/19/00

 

15-77

 

03/19/10

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 9:  E2, SW4
Section 10:  SW4

 

50.00

%

640.00

 

0.00000

 

320.00000

 

$

320.00

 

80

%

13115

 

 

 

Bremer & Greene Farms, Inc., a Nebraska Corporation

 

LoneTree Energy, Inc.

 

03/19/00

 

15-68

 

03/19/10

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 3:  Lots 1,2,3,4, S2N2,S2

 

100.00

%

638.28

 

638.28000

 

638.28000

 

$

638.28

 

80

%

13116

 

 

 

Kenneth H. Kunnemann and Kathryn C. Kunnemann, individually and as husband and
wife

 

LoneTree Energy, Inc.

 

04/25/00

 

15-84

 

04/25/10

 

Chase

 

Township 7 North, Range 39 West, 6th P.M.
Section 10:  S2NW4

 

100.00

%

80.00

 

80.00000

 

80.00000

 

$

80.00

 

80

%

13117

 

 

 

Wilbur D. Nelson and Shirley F. Nelson, individually and as husband and wife

 

LoneTree Energy, Inc.

 

05/01/00

 

15-93

 

05/01/10

 

Chase

 

Township 7 North, Rnage 39 West, 6th P.M.
Section 4:  SE4, less and except a tract of land in the SE4SE4, more
particularly described in that certain Deed from Sarah Imig and William Imig
et-al, as Grantors to David L. Anderson and Judy E. Anderson, husband and wife,
Grantees, dated 7/19/96 and recorded in the County records of Chase County,
Nebraska, in Book 36 at Page 2

 

100.00

%

155.05

 

155.05000

 

155.05000

 

$

155.05

 

80

%

13125

 

 

 

Frank B. Svoboda and Anne Marie Svoboda, husband and wife

 

Apollo Energy, LLC

 

11/06/03

 

63-334

 

11/06/08

 

Perkins

 

Township 11 North, Range 39 West, 6th P.M.
Section 7:  NE4

 

100.00

%

160.69

 

160.69000

 

160.69000

 

$

0.00

 

79.50

%

13147

 

 

 

I.F. LLC, a Nebraska Limited Liability Company

 

Apollo Energy, LLC

 

01/28/04

 

64-30

 

01/28/09

 

Perkins

 

Township 11 North, Range 41 West, 6th P.M.
Section 21:  SW4

 

100.00

%

159.58

 

159.58000

 

159.58000

 

$

0.00

 

79.50

%

13149

 

A

 

Gerald Ambrosek and Eva E. Ambrosek, husband and wife

 

Thomas B. Lee
(Locator’s Oil and Gas, Inc.)

 

02/07/75

 

36-671

 

02/07/85 (HBP)

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 6:  SE4
Limited to and include those horizons from the surface of the Earth down to the
stratigraphic equivalent of 150 feet below the top of the Niobrara formation as
found in the Lion Oil Company #1 Earl well located in the NE4NE4 of Section 1,
Township 4 North, Range 41 West, 6th P.M., Dundy County, Nebraska (top of the
Niobrara formation in said well being defined as 1,896 feet subsurface)

 

100

%

160.00

 

160.00

 

80.00000

 

$

320.00

 

78

%

 

3

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12826

 

 

 

Imogene Welch and Donald F. Welch, wife and husband

 

Apollo Energy, LLC

 

03/04/03

 

35-460

 

03/04/08

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 8: S2SW4, SE4

 

100.00

%

240.00000

 

240.00000

 

240.00000

 

$

0.00

 

12830

 

A

 

Kent Kroeker and Rhonda Kroeker, husband and wife

 

Apollo Energy, LLC

 

03/19/03

 

62-192

 

03/19/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 24: SW4 less a 5.209 acre tract described in Book 59, Page 42

 

50.00

%

154.79000

 

154.79000

 

77.39550

 

$

77.40

 

12830

 

B

 

Kenneth Lee, aka Kenneth W. Lee, General Partner of Lee Children Limited
Partnership and as President of K&E Lee Family Corporation as General Partner of
Lee Children Limited Partnership

 

Apollo Energy, LLC

 

03/17/03

 

62-193

 

03/17/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 24: SW4 less a 5.209 acre tract described in Book 59, Page 42

 

50.00

%

154.79000

 

0.00000

 

77.39950

 

$

77.40

 

12831

 

 

 

Lucille L. Richmond, Trustee of the Floyd K. Richmond Trust

 

Apollo Energy, LLC

 

05/16/03

 

62-194

 

05/16/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 4:  NE
Township 11 North, Range 38 West, 6th P.M.
Section 31:  SE

 

100.00

%

312.97000

 

312.97000

 

312.97000

 

$

320.00

 

12832

 

 

 

Bill D. Richmond, also known as Bill Richmond and Billy D. Richmond, and Carmen
M. Richmond, husband and wife

 

Apollo Energy, LLC

 

03/25/03

 

62-195

 

03/25/08

 

Perkins

 

Tract 1
Township 9 North, Range 39 West, 6th P.M.
Section 4:  S2
Section 9:  NW4, SE4
Township 10 North, Range 39 West, 6th P.M.
Section 11:  W2, W2NE4
Section 33:  SE4
Township 11 North, Range 38 West, 6th P.M.
Section 32:  SW4
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 10:  East 100 acres of SE4
Tract 3
Township 10 North, Range 39 West, 6th P.M.
Section 14:  Portion of NW4 lying North of RR
Section 15:  Portion of NE4 lying North of RR

 

TR 1-100

TR 2-50

TR 3-96.875

 

%

%

%

1,650.75000

 

1,650.75000

 

1,592.69900

 

$

1,434.58

 

12833

 

A

 

Don Hajek, General Partner of Hajek Partnership

 

Apollo Energy, LLC

 

03/28/03

 

62-196

 

03/28/08

 

Perkins

 

Tract 1
Township 9 North, Range 38 West, 6th P.M.
Section 5:  NW4
Township 10 North, Range 38 West, 6th P.M.
Section 32:  SE4
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 27:  SW4
Section 34:  NW4

 

TR 1-100

TR 2-50

%

%

638.94000

 

638.94000

 

476.76500

 

$

474.38

 

12834

 

A

 

John E. Sexson and Ardith L. Sexson, Husband and Wife

 

Apollo Energy, LLC

 

03/17/03

 

62-197

 

03/17/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 27:  NW4

 

25.00

%

162.58000

 

162.58000

 

40.64500

 

$

40.00

 

12835

 

A

 

Willie Mizner, dealing on his own life estate and as Trustee of Willie Mizner
Trust

 

Apollo Energy, LLC

 

03/17/03

 

62-198

 

03/17/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 34:  SW4

 

50.00

%

159.72000

 

159.72000

 

79.86000

 

$

80.00

 

12836

 

 

 

Charles C. Milner, a single man

 

Apollo Energy, LLC

 

04/02/03

 

62-199

 

04/02/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 33:  N2

 

100.00

%

321.75000

 

321.75000

 

321.75000

 

$

320.00

 

12837

 

 

 

Charles C. Milner, a single man

 

Apollo Energy, LLC

 

04/02/03

 

62-200

 

04/02/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 15:  That portion of N2 lying South of State Highway 23 as more fully
described in Book 56, Page 69

 

100.00

%

273.26000

 

273.26000

 

273.26000

 

$

273.00

 

12838

 

 

 

Nebraska and Western Co., a Nebraska Corporation

 

Apollo Energy, LLC

 

04/07/03

 

35-88

 

04/07/08

 

Dundy

 

Township 3 North, Range 40 West, 6th P.M.
Section 6: SW4
Section 7:  NW4
Township 3 North, Range 41 West, 6th P.M.
Section 1:  SE4
Section 11:  E2
Section 12:  NE4, E2NW4, S2

 

100.00

%

1,380.99000

 

1,380.99000

 

1,380.99000

 

$

1,380.99

 

12839

 

 

 

Robert L. Seward, a married man dealing on his own separate non-homestead
property

 

Apollo Energy, LLC

 

04/06/03

 

35-84

 

04/06/08

 

Dundy

 

Township 3 North, Range 41 West, 6th P.M.
Section 10:  That portion of the SE4 lying East of County road as presently laid
out and traveled
Section 11:  NW4, W2W2W2SW4

 

100.00

%

335.00000

 

335.00000

 

335.00000

 

$

335.00

 

12840

 

A

 

Robert L. Seward, a married man dealing on his own separate non-homestead
property

 

Apollo Energy, LLC

 

04/06/03

 

35-86

 

04/06/08

 

Dundy

 

Township 4 North, Range 41 West, 6th P.M.
Section 8:  W2NE4, W2, SE4
Section 17:  NE4

 

25.00

%

720.00000

 

720.00000

 

180.00000

 

$

180.00

 

 

1

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12841

 

 

 

Bruce D. Young, also known as Bruce Young, and Donna R. Young, also known as
Donna Young, husband and wife

 

Apollo Energy, LLC

 

04/04/03

 

62-201

 

04/04/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 20:  SE
Section 21:  E2
Section 30:  Lots 1 and 2, E2NW
Township 11 North, Range 38 West, 6th P.M.
Section 20:  NW

 

100.00

%

800.28000

 

800.28000

 

800.28000

 

$

790.85

 

12842

 

 

 

Leo J. Colson, a married man dealing on his own separate non-homestead property

 

Apollo Energy, LLC

 

04/03/03

 

62-202

 

04/03/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 19:  Lots 3 and 4, E2SW4

 

100.00

%

166.99000

 

166.99000

 

166.99000

 

$

162.74

 

12843

 

 

 

Jimmie D. Kemling, also known as Jim D. Kemling and Jim Kemling, and Starlene M.
Kemling, also known as Starlene Kemling, husband and wife

 

Apollo Energy, LLC

 

04/08/03

 

62-203

 

04/08/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 19:  E2

 

100.00

%

318.69000

 

318.69000

 

318.69000

 

$

320.00

 

12844

 

 

 

Calvin J. Young and Irma Young, also known as  Irma M. Young, husband and wife

 

Apollo Energy, LLC

 

04/04/03

 

62-204

 

04/04/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 30:  E2

 

100.00

%

318.04000

 

318.04000

 

318.04000

 

$

320.00

 

12845

 

 

 

Donald Michael Svoboda, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

03/01/03

 

62-205

 

03/01/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 27:  E2

 

100.00

%

328.30000

 

328.30000

 

328.30000

 

$

0.00

 

12846

 

 

 

George L. Seward and Debra D. Seward, husband and wife

 

Apollo Energy, LLC

 

04/17/03

 

35-82

 

04/17/08

 

Dundy

 

Township 3 North, Range 41 West, 6th P.M.
Section 7:  E2
Section 18:  Lots 1,2,3,4, E2

 

100.00

%

849.64000

 

849.64000

 

849.64000

 

$

849.64

 

12847

 

 

 

George L. Seward and Debra D. Seward, husband and wife

 

Apollo Energy, LLC

 

04/17/03

 

35-74

 

04/17/08

 

Dundy

 

Township 3 North, Range 41 West, 6th P.M.
Section 9:  N2NW4, S2SW4

 

100.00

%

160.00000

 

160.00000

 

160.00000

 

$

160.00

 

12848

 

 

 

George L. Seward and Debra D. Seward, husband and wife

 

Apollo Energy, LLC

 

04/17/03

 

35-76

 

04/17/08

 

Dundy

 

Township 3 North, Range 41 West, 6th P.M.
Section 31:  Lots 3 and 4, E2

 

100.00

%

418.80000

 

418.80000

 

418.80000

 

$

418.80

 

12849

 

 

 

George L. Seward and Debra D. Seward

 

Apollo Energy, LLC

 

04/17/03

 

35-78

 

04/17/08

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 29:  SW4
Section 31:  Lots 1 and 2, E2NW4, NE4, less and except a 4 acre tract

 

100.00

%

482.34000

 

482.34000

 

482.34000

 

$

483.30

 

12850

 

 

 

George L. Seward and Debra D. Seward, husband and wife

 

Apollo Energy, LLC

 

04/17/03

 

35-80

 

04/17/08

 

Dundy

 

Township 3 North, Range 42 West, 6th P.M.
Section 1:  Lots 1,2,3,4, S2N2, SE4
Section 12:  NE4

 

100.00

%

637.10000

 

637.10000

 

637.10000

 

$

637.10

 

12852

 

 

 

George L. Seward and Debra D. Seward, husband and wife

 

Apollo Energy, LLC

 

04/17/03

 

35-66

 

04/17/08

 

Dundy

 

Township 4 North, Range 41 West, 6th P.M.
Section 27:  That part of SW4 lying West of County Road
Section 28:  SE4

 

75.00

%

239.00000

 

239.00000

 

179.25000

 

$

179.25

 

12853

 

 

 

George L. Seward and Debra D. Seward, husband and wife

 

Apollo Energy, LLC

 

04/17/03

 

35-68

 

04/17/08

 

Dundy

 

Tract 1
Township 4 North, Range 41 West, 6th P.M.
Section 22:  E2NW, NE
Section 23:  W2, W2NE4
Tract 2
Township 4 North, Range 41 West, 6th P.M.
Section 22:  W2NW

 

TR 1-100

TR 2-25

%

%

720.00000

 

720.00000

 

660.00000

 

$

660.00

 

12854

 

 

 

George L. Seward and Debra D. Seward, husband and wife

 

Apollo Energy, LLC

 

04/17/03

 

35-70

 

04/17/08

 

Dundy

 

Tract 1
Township 4 North, Range 41 West, 6th P.M.
Section 33:  SE, E2SW4
Tract 2
Township 4 North, Range 41 West, 6th P.M.
Section 33:  NE
Section 34:  That part of NW4 lying West of County Road

 

TR 1-100

TR 2-75

%

%

536.85000

 

536.85000

 

459.71000

 

$

459.73

 

12855

 

 

 

George L. Seward and Debra D. Seward, husband and wife

 

Apollo Energy, LLC

 

04/17/03

 

35-72

 

04/17/08

 

Dundy

 

Township 3 North, Range 40 West, 6th P.M.
Section 6:  Part of NW4 more fully described in Book 50, Page 18
Township 3 North, Range 41 West, 6th P.M.
Section 1:  Lots 1 and 2, S2NE4

 

100.00

%

305.34000

 

305.34000

 

305.34000

 

$

305.34

 

12856

 

 

 

Robert L. Seward, a married man dealing in his own separate non-homestead
property

 

Apollo Energy, LLC

 

04/17/03

 

35-64

 

04/17/08

 

Dundy

 

Township 3 North, Range 41 West, 6th P.M.
Section 10:  NE4 less 2.06 acres more fully described in Book 40, Page 68

 

100.00

%

157.94000

 

157.94000

 

157.94000

 

$

157.94

 

12858

 

A

 

Richmond Farms, Inc., A Nebraska Corporation

 

Apollo Energy, LLC

 

03/25/03

 

62-206

 

03/25/08

 

Perkins

 

Tract 1
Township 9 North, Range 39 West, 6th P.M.
Section 2:  All
Section 3:  All
Township 10 North, Range 39 West, 6th P.M.
Section 35:  S2, a five sided tract in NW4 more fully described in Book 38,
Page 390
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 34:  E2

 

TR 1-100

TR 2-50

%

%

1,926.02000

 

1,926.02000

 

1,607.02000

 

$

1,612.88

 

 

2

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12860

 

 

 

Richard H. Hoch, President of and Sole Successor of Eagle Oil & Gas
Company, Inc. and Pioneer Oil & Gas, Inc., defunct Nebraska Corporations

 

Apollo Energy, LLC

 

04/22/03

 

35-110

 

04/22/08

 

Dundy

 

Township 4 North, Range 41 West, 6th P.M.
A tract of land situated in the W2 of Section 17 and the W2 of Section 20, more
fully described in Book 47 at Page 312 and including additional land in the NW4
of Section 29 more fully described in Book 47 at Page 309 in the records of
Dundy County, Nebraska

 

100.00

%

492.94870

 

492.94870

 

492.94870

 

$

492.95

 

12861

 

 

 

5 W Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

04/22/03

 

35-60

 

04/22/08

 

Dundy

 

Township 3 North, Range 41 West, 6th P.M.
Section 15:  That part of the S2 lying West of the County Road as presently laid
out and traveled
Section 21:  SE4
Section 22:  N2, N2SE4, SW4

 

100.00

%

1,012.00000

 

1,012.00000

 

1,012.00000

 

$

1,012.00

 

12862

 

 

 

7 A Inc., a Nebraska corporation

 

Apollo Energy, LLC

 

04/23/03

 

35-62

 

04/23/08

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 3:  Lot 4(30.48), SW4NW4, W2SW4, NE4SW4
Section 4:  Lot 1(31.12), 2(31.89), 3(32.66), 4(33.43), S2NE4, S2NW4, S2
Section 5:  Lot 1(34.23), 2(35.02), 3(35.81), 4(36.60), S2NE4, S2NW4, S2

 

100.00

%

1,421.24000

 

1,421.24000

 

1,421.24000

 

$

0.00

 

12863

 

 

 

7 A Inc., a Nebraska corporation

 

Apollo Energy, LLC

 

04/23/03

 

35-108

 

04/23/08

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 19:  That portion of the S2S2 lying east of the existing fence line
which is located in the E2S2SW4
Section 29:  That portion of the NW4 lying West of the center of the County Road
Section 30:  That portion of Section 30 more particularly described as follows: 
Refer to the SE corner of Section 30, T4N, R40W, as the point of beginning; Go
thence North 00 degrees 26 minutes West along the East line of Section 30 for
5,287.26 feet; Go thence South 88 degrees 54 minutes West along the North line
of Section 30 for 2,918.46 feet; Go thence South 01 degrees 34 minutes 01 second
East along a fence line for 5,286.26 feet; Go thence North 88 degrees 55 minutes
East along the South Line of Section 30 for 2,813.85 feet to the SE corner of
Section 30 to the point of beginning.

 

100.00

%

560.49000

 

560.49000

 

560.49000

 

$

0.00

 

12864

 

A

 

Beverly J. Kinney, dealing on her own behalf and as Trustee of Beverly J. Kinney
Trust

 

Apollo Energy, LLC

 

03/20/03

 

62-207

 

03/20/08

 

Perkins

 

Tract 1
Township 10 North, Range 39 West, 6th P.M.
Section 5:  SW4
Section 28:  NW4, S2
Tract 2
Township 10 North, Range 40 West, 6th P.M.
Section 21:  E2

 

TR 1-100

TR 2-50

%

%

962.97000

 

962.97000

 

803.83500

 

$

800.00

 

12864

 

B

 

Evan W. Kinney, a married man dealing on his own separate non-homestead property

 

Apollo Energy, LLC

 

03/22/03

 

62-208

 

03/22/08

 

Perkins

 

Township 10 North, Range 40 West, 6th P.M.
Section 21:  NE4

 

50.00

%

159.17000

 

0.00000

 

79.58500

 

$

80.00

 

12864

 

C

 

Bryan D. Kinney, a married man dealing on his own separate non-homestead
property

 

Apollo Energy, LLC

 

03/22/03

 

62-209

 

03/22/08

 

Perkins

 

Township 10 North, Range 40 West, 6th P.M.
Section 21:  SE4

 

50.00

%

159.10000

 

0.00000

 

79.55000

 

$

80.00

 

12870

 

 

 

Michael Olson and Linda Shuster Olson, husband and wife

 

Apollo Energy, LLC

 

05/09/03

 

35-106

 

05/09/08

 

Dundy

 

Township 3 North, Range 40 West, 6th P.M.
Section 6:  Part of N2 more fully described in Book 48, Page 275 in the records
of Dundy County.
Township 3 North, Range 41 West, 6th P.M.
Section 5:  Part of NE4 more fully described in Book 48, Page 126 in the records
of Dundy County.
Township 4 North, Range 40 West, 6th P.M.
Section 31:  Part of S2 more fully described in records of Dundy County.
Section 32:  Part of SW4 more fully described in Book 48, Page 277 in the
records of Dundy County.
Township 4 North, Range 41 West, 6th P.M.
Section 32:  Part of SE4 and Part of W2 more fully described in Book 48,
Page 126 of records of Dundy County.

 

100.00

%

583.59800

 

583.59800

 

583.59800

 

$

0.00

 

12871

 

 

 

Olson Livestock & Seed Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

05/09/03

 

35-102

 

05/09/08

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 32:  Part of SE4 more fully described in Book 52, Page 463 in the
records of Dundy County.

 

100.00

%

118.00000

 

118.00000

 

118.00000

 

$

0.00

 

12872

 

 

 

Belva E. Olson, a widow, dealing on her own behalf and as Personal
Representative of the Estate of Clifford E. Olson, deceased

 

Apollo Energy, LLC

 

05/09/03

 

35-104

 

05/09/08

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 31:  Part of S2 more fully described in Book 48, Page 281 in the records
of Dundy County.

 

100.00

%

156.40000

 

156.40000

 

156.40000

 

$

0.00

 

 

3

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12873

 

 

 

Arthur L. Silvester, also known as Art Silvester, individually and as Trustee of
the Mule’s Trust

 

Apollo Energy, LLC

 

05/07/03

 

16-192

 

05/07/08

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section 4:  Lots 1(40.35), 2(40.26), also described as N2NE4, S2NE4, SE4
Township 6 North, Range 40 West, 6th P.M.
Section 34:  SW4

 

100.00

%

480.13000

 

480.13000

 

480.13000

 

$

0.00

 

12874

 

 

 

Briggs Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

05/07/03

 

16-194

 

05/07/08

 

Chase

 

Township 8 North, Range 40 West, 6th P.M.
Section 27:  N2

 

100.00

%

320.00000

 

320.00000

 

320.00000

 

$

0.00

 

12875

 

A

 

George W. Gengenbach, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

05/03/03

 

62-210

 

05/03/08

 

Perkins

 

Tract 1
Township 9 North, Range 38 West, 6th P.M.
Section 19:  NE
Tract 2
Township 9 North, Range 38 West, 6th P.M.
Section 6:  Lots 1(38.42), 2(38.87), 3(39.32), 4(40.43), 5(40.60), S2NE, SENW
Section 17:  SW
Township 9 North, Range 39 West, 6th P.M.
Section 1:  Lot 1(39.97), SENE, SE
Section 24:  NW

 

TR 1-100

TR 2-50

%

%

1,038.73000

 

1,038.73000

 

598.87000

 

$

598.81

 

12875

 

B

 

Randall R. Gengenbach and Mary Jo Gengenbach, individually, and as husband and
wife

 

Apollo Energy, LLC

 

09/23/03

 

63-277

 

09/23/08

 

Perkins

 

Tract 1
Township 9 North, Range 38 West, 6th P.M.
Section 7:  Lots 1,2, E2NW4, NE4
Tract 2
Township 9 North, Range 39 West, 6th P.M.
Section 24:  NW4

 

TR 1-100

TR 2-50

%

%

470.42000

 

309.50000

 

235.21000

 

$

0.00

 

12876

 

 

 

Robert D. Milner, a married man dealing on his own separate non-homestead
property, and Delmer Milner, dealing on his own behalf and as Trustee of the
Delmer Milner Trust dated April 10, 1991, and Wilma R. Milner, dealing on her
own behalf and as Trustee of the Wilma R. Milner Trust dated April 10, 1991

 

Apollo Energy, LLC

 

05/12/03

 

35-100

 

05/12/08

 

Dundy

 

Township 4 North, Range 42 West, 6th P.M.
Section 1:  Lots 3 & 4, S2NW4, SW4

 

100.00

%

271.75000

 

271.75000

 

271.75000

 

$

0.00

 

12877

 

 

 

Robert D. Milner, a married man dealing on his own separate non-homestead
property, and Delmer Milner, dealing on his own behalf and as Trustee of the
Delmer Milner Trust dated April 10, 1991, and Wilma R. Milner, dealing on her
own behalf and as Trustee of the Wilma R. Milner Trust dated April 10, 1991.

 

Apollo Energy, LLC

 

05/12/03

 

16-196

 

05/12/08

 

Chase

 

Township 5 North, Range 41 West, 6th P.M.
Section 31:  Lots 1,2,3,4, E2NW, E2SW

 

100.00

%

319.76000

 

319.76000

 

319.76000

 

$

0.00

 

12878

 

 

 

Robert D. Milner, a married man dealing on his own separate non-homestead
property, and Delmer Milner, dealing on his own behalf and as Trustee of the
Delmer Milner Trust dated April 10, 1991, and Wilma R. Milner, dealing on her
own behalf and as Trustee of the Wilma R. Milner Trust dated April 10, 1991.

 

Apollo Energy, LLC

 

05/12/03

 

16-198

 

05/12/08

 

Chase

 

Township 5 North, Range 42 West, 6th P.M.
Section 35:  Lots 1 (58.01), 2 (58.06), 3 (58.11), 4 (58.16), less and except a
tract in Lots 1 and 2 being more particularly described as:  Beginning at a
point on the Colorado-Nebraska State line and the west line of Section 35 from
which point the SW Corner of said Section 35 bears South 3867.68’, then from
said Point of Beginning, North 500.00’, then East 500.00’, then South 500.00’,
then West 500.00’ to said Point of Beginning, containing 5.379 acres, more or
less.

 

100.00

%

226.60100

 

226.60100

 

226.60100

 

$

0.00

 

12879

 

 

 

Robert D. Milner, a married man dealing on his own separate non-homestead
property, and Delmer Milner, dealing on his own behalf and as Trustee of the
Delmer Milner Trust dated April 10, 1991, and Wilma R. Milner, dealing on her
own behalf and as Trustee of the Wilma R. Milner Trust dated April 10, 1991

 

Apollo Energy, LLC

 

05/12/03

 

16-200

 

05/12/08

 

Chase

 

Township 5 North, Range 42 West, 6th P.M.
Section 26:  Lots 2-4

 

100.00

%

172.71000

 

172.71000

 

172.71000

 

$

0.00

 

12880

 

 

 

Robert D. Milner, a married man dealing on his own separate non-homestead
property, and Delmer Milner, dealing on his own behalf and as Trustee of the
Delmer Milner Trust dated April 10, 1991, and Wilma R. Milner, dealing on her
own behalf and as Trustee of the Wilma R. Milner Trust dated April 10, 1991.

 

Apollo Energy, LLC

 

05/12/03

 

35-98

 

05/12/08

 

Dundy

 

Township 4 North, Range 42 West, 6th P.M.
Section 2:  Lots 1 (15.31), 2 (16.23), 3 (17.15), 4 (18.07)
Section 3:  Lots 1 (16.32), 2 (6.70)

 

100.00

%

89.78000

 

89.78000

 

89.78000

 

$

0.00

 

 

4

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12881

 

 

 

L. Dean Burtis, Trustee of the L. Dean Burtis Trust, dated April 25, 1990 and
Roma Jean Burtis,Trustee of the Roma Jean Burtis Trust, dated April 25, 1990

 

Apollo Energy, LLC

 

05/13/03

 

16-218

 

05/13/08

 

Chase

 

Township 8 North, Range 40 West, 6th P.M.
Section 25:  All
Section 26:  E2
Section 35:  NE4
Township 8 North, Range 39 West, 6th P.M.
Section 30:  Lot 1 (38.93), 2 (39.06), 3 (39.20), 4 (39.33), E2W2

 

100.00

%

1,436.52000

 

1,436.52000

 

1,436.52000

 

$

0.00

 

12882

 

 

 

Kenneth H. Kunnemann and Kathryn C. Kunneman, husband and wife

 

Apollo Energy, LLC

 

05/13/03

 

16-220

 

05/13/08

 

Chase

 

Township 8 North, Range 39 West, 6th P.M.
Section 31:  Lots 1 (39.43), 2 (39.49), 3 (39.55), 4 (39.61), E2W2, E2
Township 7 North, Range 40 West, 6th P.M.
Section 2:  Lots 1 (40.38), 2 (40.33), 3 (40.29), 4 (40.24), S2N2
Section 11:  NE4
Township 7 North, Range 39 West, 6th P.M.
Section 10:  N2NW4

 

100.00

%

1,199.32000

 

1,199.32000

 

1,199.32000

 

$

0.00

 

12883

 

 

 

Valley View Ranch, Inc., a Nebraska Corporation, C/O Mr. Thomas L. Schroder

 

Apollo Energy, LLC

 

05/02/03

 

62-211

 

05/02/08

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 7:  Lots 3 (41.29), 4 (41.61), E2SW, SE
Section 18:  NE, Lots 1 (41.74, 2 (41.65), E2NW
Township 9 North, Range 39 West, 6th P.M.
Section 1:  Lots 4 (39.82), SWNW, SW less and except a 3.4 acre tract and a 5.9
acre tract, being more particularly described in Book 37 of Deeds at Page 77;
also less and except a 7.4 acre tract, being more particularly described in Book
37 of Deeds, at Page 79.
Section 12:  E2, SW
Section 13:  N2

 

100.00

%

1,673.85000

 

1,673.85000

 

1,673.85000

 

$

1,669.41

 

12884

 

 

 

Dale E. Kemling, a single man

 

Apollo Energy, LLC

 

05/16/03

 

62-157

 

05/16/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 17:  N2

 

100.00

%

273.96000

 

273.96000

 

273.96000

 

$

273.96

 

12885

 

 

 

Robert D. Milner, a married man dealing on his own separate non-homestead
property, and Delmer Milner, dealing on his own behalf and as Trustee of the
Delmer Milner Trust dated April 10, 1991, and Wilma R. Milner, dealing on her
own behalf and as Trustee of the Wilma R. Milner Turst dated April 10, 1991.

 

Apollo Energy, LLC

 

05/12/03

 

16-202

 

05/12/08

 

Chase

 

Township 5 North, Range 42 West, 6th P.M.
Section 25:  All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

0.00

 

12886

 

 

 

William L. Vondrell, trustee of the William L. Vondrell Revocable Trust

 

Apollo Energy, LLC

 

05/07/03

 

35-96

 

05/07/08

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 28:  All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

640.00

 

12887

 

 

 

Donald Michael Svoboda, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

05/12/03

 

62-158

 

05/12/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 26:  W2
Section 35:  NW less and except a 5 sided tract more particularly described in
Book 38 at Page 390

 

100.00

%

439.57000

 

439.57000

 

439.57000

 

$

0.00

 

12888

 

 

 

Delwyn V. Reed and Clarabel R. Reed, Co-Trustees of the Reed Family Trust

 

Apollo Energy, LLC

 

05/14/03

 

62-159

 

05/14/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 31:  NE, Lots 3 (40.94), 4 (40.77), E2SW4

 

100.00

%

319.36000

 

319.36000

 

319.36000

 

$

321.71

 

12889

 

 

 

George W. Gengenbach, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

05/15/03

 

62-160

 

05/15/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 18:  N2SW, and all of the NW lying south of Hwy. 23-73.01 acres
S2SW less 1.43 acre tract
Section 19:  Part of the N2NW-45.81 acres
Township 9 North, Range 38 West, 6th P.M.
Section 28:  N2NE
Township 9 North, Range 39 West, 6th P.M.
Section 30:  Lots 1,2,3,4, E2W2

 

100.00

%

683.09000

 

683.09000

 

683.09000

 

$

678.98

 

12890

 

 

 

Richmond Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

05/19/03

 

62-163

 

05/19/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 4:  NW

 

100.00

%

151.78000

 

151.78000

 

151.78000

 

$

156.15

 

12891

 

 

 

Noel W. Bullock, a married man dealing on his own separate non-homestead
property

 

Apollo Energy, LLC

 

05/19/03

 

62-164

 

05/19/08

 

Perkins

 

Tract 1
Township 10 North, Range 39 West, 6th P.M.
Section 8:  NW
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 21:  W2

 

TR 1-100

TR 2-43.75

%

%

479.56000

 

479.56000

 

297.73187

 

$

300.00

 

 

5

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12892

 

 

 

Kent A. Kroeker, aka Kent Kroeker and Rhonda R. Kroeker, aka Rhonda Kroeker,
individually and as husband and wife

 

Apollo Energy, LLC

 

05/22/03

 

62-165

 

05/22/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 25: SE
Township 9 North, Range 38 West, 6th P.M.
Section 29:  SW
Section 30:  Lots 1,2,3,4, E2W2
Section 31:  Lots 1,2,3,4, E2W2, less and except a parcel of land, more
particularly described as follows: Beginning at a point on the west line of
Section 31 at a distance South 0 degree 17 minutes East 472.30 feet from the NW
corner thereof; thence along said west line, South 0 degrees 17 minutes East
1,419.80 feet to its intersection with a fence; thence, along said fence, North
29 degrees 05 minutes East 376.43 feet, North 54 degrees 04 minutes east 241.93
feet, North 52 degrees, 18 minutes East 124.27 feet, North 63 degrees 27
minutest East 288.34 feet, North 0 degrees 40 minutes 20 seconds West 740.46
feet and North 89 degrees 44 minutes West 733.37 feet to the point of beginning.
Section 32: W2

 

100.00

%

1,258.40000

 

1,258.40000

 

1,258.40000

 

$

1,270.18

 

12893

 

 

 

Kenneth W. Lee, also known as Kenneth Lee, and Eris V. Lee, also known as Eris
Lee, husband and wife, dealing on their own behalf and as General Partners of
Lee Children Limited Partnership and President and Vice President of K&E Lee
Family Corporation, a Nebraska Corporation

 

Apollo Energy, LLC

 

05/21/03

 

62-178

 

05/21/08

 

Perkins

 

Tract 1
Township 10 North, Range 38 West, 6th P.M.
Section 18:  That part of NE lying North of Hwy.
Section 28:  NE
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 3:  NE4
Section 25: NW4

 

TR 1-100

TR 2-50

%

%

531.24000

 

531.24000

 

376.43500

 

$

379.46

 

12894

 

A

 

Michael Lee, also known as Michael D. Lee, a single man

 

Apollo Energy, LLC

 

05/20/03

 

62-179

 

05/20/08

 

Perkins

 

Tract 1
Township 9 North, Range 38 West, 6th P.M.
Section 4:Lots 3&4, E2NW4
Township 9 North, Range 38 West, 6th P.M.
Section 4:  SW4
Tract 2
Township 10 North, Range 38 West, 6th P.M.
Section 31:  SE

 

TR 1-25

TR 2-100

%

%

474.65000

 

474.65000

 

239.81500

 

$

239.69

 

12899

 

 

 

Leon K. Lee, dealing on his own behalf and as attorney-in-fact for Connie L.
Lee, his wife

 

Apollo Energy, LLC

 

05/20/03

 

62-180

 

05/20/08

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 3:  SW4
Section 4:  SE4
Township 10 North, Range 38 West, 6th P.M.
Section 17:  S2
Section 20:  NW4
Section 24:  SE4
Section 28:  NW4
Township 10 North, Range 37 West, 6th P.M.
Section 19:  SE4
Township 11 North, Range 38 West, 6th P.M.
Section 31:  N2

 

100.00

%

1,620.65000

 

1,620.65000

 

1,620.65000

 

$

1,600.00

 

12900

 

 

 

Henry J. Stumpf, also known as Henry Stumpf, a single man and Marvin Stumpf, a
married man dealing on his own separate non-homestead property

 

Apollo Energy, LLC

 

05/30/03

 

62-181

 

05/30/08

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 1:  S2SW4
Section 2:  NE4
Section 7:  SE4
Section 10:  SW4
Section 11:  All
Township 11 North, Range 39 West, 6th P.M.
Section 12:  SE4, E2SW4
Section 25:  S2S2NW4, SW4
Section 34:  NW4
Section 35:  NE4
Township 12 North, Range 38 West, 6th P.M.
Section 34:  NE4

 

100.00

%

2,121.09000

 

2,121.09000

 

2,121.09000

 

$

2,111.75

 

 

6

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12901

 

 

 

Marvin Stumpf and Pearl C. Stumpf, also known as Pearl Stumpf, formerly known as
Pearl Peterson and Pearl C. Peterson, husband and wife

 

Apollo Energy, LLC

 

05/30/03

 

62-182

 

05/30/08

 

Perkins

 

TRACT 1
Township 10 North, Range 38 West, 6th P.M.
Section 2:  S2
Section 3:  E2
Section 8:  E2
Section 9:  E2NE, S2
Section 10:  All
Section 11:  All
Section 12:  All
Township 10 North, Range 39 West, 6th P.M.
Section 12:  NE4, N2SE4
Township 11 North, Range 36 West, 6th P.M.
Section 32:  E2, S2NW4, SW4
TRACT 2
Township 10 North, Range 38 West, 6th P.M.
Section 7:  All

 

TR 1-100

TR 2-25

%

%

4,559.57000

 

4,559.57000

 

4,520.34000

 

$

4,623.28

 

12902

 

 

 

Martin Farms, LLC

 

Apollo Energy, LLC

 

05/29/03

 

16-204

 

05/29/08

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section 8:  S2
Section 9:  SW4

 

100.00

%

480.00000

 

480.00000

 

480.00000

 

$

0.00

 

12903

 

 

 

Louis C. Statz and Sharon Statz, husband and wife

 

Apollo Energy, LLC

 

05/02/03

 

16-206

 

05/02/08

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 31:  SE4

 

100.00

%

160.00000

 

160.00000

 

160.00000

 

$

160.00

 

12904

 

A

 

Brice Exploration Company, an Iowa Corporation

 

Apollo Energy, LLC

 

05/28/03

 

16-305
35-92
35-462

 

05/28/08

 

Chase / Dundy

 

Township 3 North, Range 39 West, 6th P.M.
Section 14:  NE4
Township 3 North, Range 41 West, 6th P.M.
Section 1:  NW4, W2SW4
Section 2:  SE4
Section 12:  W2NW4
Township 4 North, Range 41 West, 6th P.M.
Section 11:  SW4
Section 14:  NW4
Section 23:  E2NE4
Section 24:  W2NW4
Township 5 North, Range 40 West, 6th P.M.
Section 21:  SE4
Township 6 North, Range 41 West, 6th P.M.
Section 31:  E2SE4
Section 32:  S2SW4

 

60.00

%

1,434.33000

 

1,434.33000

 

860.59800

 

$

0.00

 

12904

 

B

 

Virginia M. Hendriks, Trustee

 

Apollo Energy, LLC

 

06/19/03

 

16-307
35-94
35-464

 

06/19/08

 

Chase / Dundy

 

Chase County
Township 5 North, Range 40 West, 6th P.M.
Section 21:  SE
Township 6 North, Range 41 West, 6th P.M.
Section 31:  E2SE
Section 32:  S2SW
Dundy County
Township 3 North, Range 39 West, 6th P.M.
Section 14:  NE
Township 4 North, Range 41 West, 6th P.M.
Section 11:  SW
Section 14:  NW
Section 23:  E2NE
Section 24:  W2NW

 

40.00

%

640.00000

 

0.00000

 

256.00000

 

$

0.00

 

12905

 

 

 

Donald Hajek, also known as Donald R. Hajek and Tracey Hajek, also known as
Tracey D. Hajek, husband and wife

 

Apollo Energy, LLC

 

06/04/03

 

62-188

 

06/04/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 14:  NW4
Section 17:  E2

 

100.00

%

487.01000

 

487.01000

 

487.01000

 

$

480.00

 

12906

 

A

 

Evelyn L. Gengenbach, a married woman dealing in her sole and separate property

 

Apollo Energy, LLC

 

06/04/03

 

62-187

 

06/04/08

 

Perkins

 

Tract 1
Township 10 North, Range 38 West, 6th P.M.
Section 28:  S2
Township 10 North, Range 39 West, 6th P.M.
Section 5:  NE4
Section 31: S2SW4
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 4:  SW4

 

TR 1-100

TR 2-50

%

%

731.44000

 

731.44000

 

650.71500

 

$

640.00

 

 

7

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12907

 

A

 

Daniel P. Gengenbach, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

06/04/03

 

62-186

 

06/04/08

 

Perkins

 

Tract 1
Township 10 North, Range 39 West, 6th P.M.
Section 31:  N2SW4
Township 10 North, Range 38 West, 6th P.M.
Section 27:  SW4
Section 29:  NE4, N2SW4
Township 9 North, Range 38 West, 6th P.M.
Section 10:  E2SW4
Section 15:  W2, S2SE4
Section 22:  NW4, S2NE4
Section 28:  S2SE4
Tract 2
Township 9 North, Range 38 West, 6th P.M.
Section 26:  NE4
Township 9 North, Range 39 West, 6th P.M.
Section 10:  SW4

 

TR 1-100

TR 2-50

%

%

1,572.12000

 

1,572.12000

 

1,334.26500

 

$

1,428.55

 

12907

 

B

 

Harold C. Gengenbach, as Trustee of the Harold C. Gengenbach Trust, dated
March 25, 1991

 

Apollo Energy, LLC

 

06/03/03

 

63-250

 

06/03/08

 

Perkins

 

Tract 1
Township 9 North, Range 38 West, 6th P.M.
Section 12:  SE4
Section 21:  SE4
Section 22:  N2NE4
Section 24:  All
Section 28:  N2SE4, S2NE4
Township 10 North, Range 38 West, 6th P.M.
Section 29:  SE4
Township 10 North, Range 39 West, 6th P.M.
Section 31:  SE4
Tract 2
Township 9 North, Range 39 West, 6th P.M.
Section 10:  SW
Township 9 North, Range 38 West, 6th P.M.
Section 26:  NE

 

TR 1-50

R 2-100

%

%

1,826.41000

 

1,509.55000

 

1,747.41000

 

$

1,674.91

 

12908

 

 

 

Lottie E. Gengenbach, as Trustee of the Lottie E. Gengenbach Trust, dated
March 25, 1991

 

Apollo Energy, LLC

 

06/03/03

 

62-185

 

06/03/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 15:  NW4
Township 9 North, Range 38 West, 6th P.M.
Section 20:  NW4

 

100.00

%

317.42000

 

317.42000

 

317.42000

 

$

320.00

 

12909

 

 

 

Arlene Kurkowski, a single woman

 

Apollo Energy, LLC

 

06/05/03

 

62-184

 

06/05/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 29:  S2SW4

 

100.00

%

79.66000

 

79.66000

 

79.66000

 

$

80.00

 

12910

 

A

 

Dorothy Keuten, a single woman

 

Apollo Energy, LLC

 

06/05/03

 

62-183

 

06/05/08

 

Perkins

 

Tract 1
Township 10 North, Range 39 West, 6th P.M.
Section 4:  SW4
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 5:  SE4

 

TR 1-50

TR 2-100

%

%

320.94000

 

320.94000

 

239.23500

 

$

240.00

 

12911

 

 

 

Bonita J. Brown, as Trustee of the J. Harrold Brown Family Trust

 

Apollo Energy, LLC

 

05/23/03

 

62-189

 

05/23/08

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 20:  E2

 

100.00

%

320.17000

 

320.17000

 

320.17000

 

$

320.00

 

12912

 

 

 

Dennis L. Moskal Revocable Trust dated 12/18/00 and Joy M. Moskal Revocable
Trust dated 12/18/00

 

Apollo Energy, LLC

 

05/14/03

 

16-208

 

05/14/08

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section 9:  The South 26 acres of the NE4, SE4

 

100.00

%

184.15000

 

184.15000

 

184.15000

 

$

0.00

 

12913

 

 

 

Eric B. Allen and Barbara S. Allen, husband and wife

 

Apollo Energy, LLC

 

05/19/03

 

16-210

 

05/19/08

 

Chase

 

Township 8 North, Range 40 West, 6th P.M.
Section 34:  SW4

 

100.00

%

160.00000

 

160.00000

 

160.00000

 

$

0.00

 

12914

 

 

 

Terryberry Properties, Inc.

 

Apollo Energy, LLC

 

05/30/03

 

16-212

 

05/30/08

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 3:  E2SW4, W2SE4

 

100.00

%

160.00000

 

160.00000

 

160.00000

 

$

0.00

 

12915

 

A

 

Terryberry Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

05/30/03

 

16-214

 

05/30/08

 

Chase

 

Township 8 North, Range 40 West, 6th P.M.
Section 33:  NE4

 

100.00

%

153.70000

 

153.70000

 

153.70000

 

$

0.00

 

12917

 

A

 

Madam Company, a Nebraska Corporation

 

Apollo Energy, LLC

 

06/12/03

 

62-190

 

06/12/08

 

Perkins

 

Tract 1
Township 10 North, Range 38 West, 6th P.M.
Section 30:  Lots 3 and 4, E2SW
Tract 2
Township 10 North, Range 38 West, 6th P.M.
Section 31:  Lots 1 and 2, E2NW

 

TR 1-50

TR 2-100

%

%

324.21000

 

324.21000

 

243.08000

 

$

243.08

 

12917

 

B

 

AG Star, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

08/07/03

 

62-191

 

08/07/08

 

Perkins

 

Tract 1
Township 10 North, Range 38 West, 6th P.M.
Section 30:  SW
Tract 2
Township 9 North, Range 39 West, 6th P.M.
Section 8:  NW
Section 25:  NE, SW

 

TR 1-50

TR 2-100

%

%

645.28000

 

483.02000

 

564.15000

 

$

0.00

 

 

8

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12918

 

 

 

Schroder Acres, Inc.

 

Apollo Energy, LLC

 

06/25/03

 

62-166

 

06/25/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 26:  All
Township 9 North, Range 38 West, 6th P.M.
Section 8:  W2SW
Section 17:  NW
Section 19:  Lots 3,4, E2SW, SE
Section 30:  NE

 

100.00

%

1,355.18000

 

1,355.18000

 

1,355.18000

 

$

1,356.65

 

12919

 

 

 

Graydon E. Robinson, Trustee under the Last Will and Testament of Hoyt H.
Hendricks, deceased

 

Apollo Energy, LLC

 

07/01/03

 

62-167

 

07/01/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 19:  Lots 1,2,3,4, E2W2, SE
Section 28:  NE, S2

 

100.00

%

979.97000

 

979.97000

 

979.97000

 

$

963.22

 

12920

 

 

 

Turzah A. Michael, formerly known as Turzah A. Hendricks, a married woman
dealing in her sole and separate property

 

Apollo Energy, LLC

 

07/01/03

 

62-168

 

07/01/08

 

Perkins

 

Tract 1
Township 9 North, Range 39 West, 6th P.M.
Section 20:  E2
Section 21:  SW
Section 28:  NW
Section 29:  NE, NW
Section 30:  E2
Tract 2
Township 9 North, Range 39 West, 6th P.M.
Section 29:  SW

 

TR 1-100

TR 2-50

%

%

1,455.62000

 

1,455.62000

 

1,373.70500

 

$

1,360.00

 

12921

 

 

 

Cecil Hendricks and Beverly J. Hendricks, husband and wife

 

Apollo Energy, LLC

 

07/01/03

 

62-169

 

07/01/08

 

Perkins

 

Tract 1
Township 9 North, Range 39 West, 6th P.M.
Section 17:  W2
Section 21:  NW
Tract 2
Township 9 North, Range 39 West, 6th P.M.
Section 29:  SE, less a 10.29375 acre tract

 

TR 1-100

TR 2-93.5664

%

%

656.74000

 

656.74000

 

656.74000

 

$

629.71

 

12922

 

A

 

Violet M. Brown Trust, Trustee of the Violet M. Brown Trust

 

Apollo Energy, LLC

 

06/11/03

 

35-112

 

06/11/08

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 18:  Lots 1(41.40), 2(41.64), and a tract of land situated in the NW4SW4
more particularly described in Book 42 at Page 153
Township 4 North, Range 41 West, 6th P.M.
Section 13:  NE, and a tract of land situated in the SE more particularly
described in Book 42 at Page 153

 

50.00

%

325.41800

 

325.41800

 

162.70900

 

$

0.00

 

12922

 

B

 

Violet M. Brown, Trustee of the Leo B. Brown Trust

 

Apollo Energy, LLC

 

06/11/03

 

35-115

 

06/11/08

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section 18:  Lots 1(41.40), 2(41.64), and a tract of land situated in the NW4SW4
more particularly described in Book 42 at Page 153
Township 4 North, Range 41 West, 6th P.M.
Section 13:  NE, and a tract of land situated in the SE4 more particularly
described in Book 42 at Page 153

 

50.00

%

325.41800

 

0.00000

 

162.70900

 

$

0.00

 

12923

 

 

 

Douglas D. Tatum, also known as Doug Tatum, also known as Douglas Tatum, and
Sharon K. Tatum, also known as Sharon Tatum, husband and wife

 

Apollo Energy, LLC

 

06/09/03

 

62-170

 

06/09/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 5:  N2, SW4

 

100.00

%

464.63000

 

464.63000

 

464.63000

 

$

480.00

 

12924

 

 

 

Dean L. Hatch and Dorothy M. Hatch, as Trustees of the Dean L. Hatch and Dorothy
M. Hatch Revocable Trust dated 4/21/98

 

Apollo Energy, LLC

 

06/18/03

 

62-171

 

06/18/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 20: SW4

 

100.00

%

163.43000

 

163.43000

 

163.43000

 

$

160.00

 

12925

 

 

 

Lillian K. Logsdon, a single woman

 

Apollo Energy, LLC

 

06/03/03

 

62-172

 

06/03/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 10:  N2
Township 9 North, Range 38 West, 6th P.M.
Section 29:  NE
Township 10 North, Range 40 West, 6th P.M.
Section 35:  NE

 

100.00

%

634.25000

 

634.25000

 

634.25000

 

$

640.00

 

12916

 

A

 

THT Farms, a partnership

 

Apollo Energy, LLC

 

05/30/03

 

16-216

 

05/30/08

 

Chase

 

Tract 1
Township 8 North, Range 40 West, 6th P.M.
Section 23:  NE4
Township 7 North, Range 40 West, 6th P.M.
Section 9:  N2
Tract 2
Township 8 North, Range 40 West, 6th P.M.
Section 23:  SW, less and except a tract of land containing 11.93 acres

 

TR 1-50

TR 2-100

%

%

629.91000

 

629.91000

 

388.99000

 

$

0.00

 

 

9

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12926

 

A

 

Prevailing Winds

 

Apollo Energy, LLC

 

07/10/03

 

62-173

 

07/10/08

 

Perkins

 

Tract 1
Township 10 North, Range 39 West, 6th P.M.
Section 3:  NW
Section 13: SW
Township 9 North, Range 37 West, 6th P.M.
Section 6:  S2
Township 10 North, Range 38 West, 6th P.M.
Section 13:  W2
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 23:  S2NE, S2

 

100.00

%

1,324.92000

 

1,324.92000

 

1,129.51500

 

$

0.00

 

12926

 

B

 

Ann F. Schmitt and Leonard Schmitt, husband and wife

 

High Plains Energy Co.

 

06/09/05

 

65-166

 

06/09/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 23: SW/4, SE/4 less a 5.00 acre tract described in WD 38-550, S/2NE/4

 

4.1667

%

388.31000

 

0.00000

 

16.17971

 

$

0.00

 

12926

 

C

 

Elsie B. Bernasek

 

High Plains Energy Co.

 

06/09/05

 

 

 

06/09/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 23: SW/4, SE/4 less a 5.00 acre tract described in WD 38-550, S/2NE/4

 

4.1667

%

388.31000

 

0.00000

 

16.17971

 

$

0.00

 

12926

 

D

 

Martha T. Sejkora, a widow

 

High Plains Energy Co.

 

06/28/05

 

65-167

 

06/28/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 23: W/2, SE/4 less a 5.00 acre tract described in WD 38-550, S/2NE/4

 

37.5
(NW/4
16.6667
(S/2, S/2NE/4

%
)
%

)%

545.65000

 

0.00000

 

123.72096

 

$

124.72

 

12926

 

E

 

John B. Pierce and Claire Pierce, husband and wife

 

High Plains Energy Co.

 

06/23/05

 

 

 

06/23/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 23: W/2, SE/4, S/2NE/4

 

0.6940

%

550.65000

 

0.00000

 

3.82154

 

$

0.00

 

12926

 

F

 

Ted Edward Duff, Trustee of the T.E. Duff Trust

 

High Plains Energy Co.

 

06/21/05

 

65-169

 

06/21/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 23: W/2, SE/4, S/2NE/4

 

6.2500

%

550.65000

 

0.00000

 

34.41563

 

$

0.00

 

12926

 

G

 

Judith Dianne Duff Leach, Trustee of the Duff-Leach Family Trust

 

High Plains Energy Co.

 

06/21/05

 

65-168

 

06/21/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 23: W/2, SE/4, S/2NE/4

 

6.2500

%

550.65000

 

0.00000

 

34.41563

 

$

0.00

 

12926

 

H

 

Scott Walton and Barbara Ann Walton, Husband and Wife

 

High Plains Energy Co.

 

07/18/05

 

65-172

 

07/18/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 23: W/2, SE/4, S/2NE/4

 

6.2500

%

550.65000

 

0.00000

 

34.41563

 

$

0.00

 

12927

 

A

 

Dennis C. Pankonin, aka Dennis Pankonin, and Sharyl R. Pankonin, aka Sharyl
Pankonin, husband and wife

 

Apollo Energy, LLC

 

07/11/03

 

62-174

 

07/11/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 15:  SW,that part of NW lying South of Railroad

 

50.00

%

196.43000

 

196.43000

 

98.21500

 

$

98.22

 

12927

 

B

 

James Stuart, a married man dealing in his sole and separate property

 

High Plains Energy Co.

 

06/28/05

 

65-165

 

06/28/10

 

Perkins

 

Tract 1
Township 10 North, Range 39 West, 6th P.M.
Section 15: W/2
Section 22: E/2
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 14: SW/4
Section 27: W/2
Section 28: NE/4
Section 34: NW/4, E/2

 

7.5000

%

1,750.09000

 

0.00000

 

84.24225

 

$

0.00

 

12927

 

C

 

Mary Anne Martin, a single woman, and an heir of Bennett S. Martin, by and
through her attorney-in-fact, Patricia Savory

 

 

 

 

 

65-164

 

 

 

Perkins

 

Tract 1
Township 10 North, Range 39 West, 6th P.M.
Section 15: W/2
Section 22: E/2
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 14: SW/4
Section 27: W/2
Section 28: NE/4
Section 34: NW/4, E/2

 

2.5000

%

1,750.09000

 

0.00000

 

28.08075

 

$

0.00

 

12928

 

 

 

Dorothy E. Mahnken, a single woman

 

Apollo Energy, LLC

 

07/10/03

 

62-175

 

07/10/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 14:  SW

 

100.00

%

155.96000

 

155.96000

 

77.98000

 

$

160.00

 

12929

 

 

 

Lyle Maley and Nancy L. Maley, husband and wife

 

Apollo Energy, LLC

 

07/16/03

 

62-176

 

07/16/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 24:  NE

 

100.00

%

112.73000

 

112.73000

 

112.73000

 

$

112.73

 

12930

 

 

 

Milford Krajewski, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

07/20/03

 

62-177

 

07/20/08

 

Perkins

 

Township 10 North, Range 40 West, 6th P.M.
Section 9:  N2
Section 10:  W2

 

100.00

%

640.12000

 

640.12000

 

640.12000

 

$

0.00

 

 

10

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12931

 

 

 

Patricia Schroeder, also known as Patricia D. Kucera Schroeder, dealing on her
sole and separate property

 

Apollo Energy, LLC

 

07/30/03

 

62-141
16-631

 

07/30/08

 

Perkins / Chase

 

Tract 1
Chase County
Township 8 North, Range 40 West, 6th P.M.
Section 11:  SE
Section 12:  SW
Section 13:  All
Perkins County
Township 9 North, Range 38 West, 6th P.M.
Section 8:  E2SW, NW, NE less tract sold to State of Nebraska by WD and more
fully described in Book 33 at Page 134
Tract 2
Perkins County
Township 10 North, Range 39 West, 6th P.M.
Section 15:  That part of NW lying North of Railroad

 

TR 1-100

TR 2-50

%

%

1,456.92000

 

1,456.92000

 

1,403.32000

 

$

1,403.33

 

12932

 

 

 

Wolvin Farms, Inc., a corporation

 

Apollo Energy, LLC

 

09/19/03

 

16-303

 

09/19/08

 

Chase

 

Township 8 North, Range 40 West, 6th P.M.
Section 33:  SW

 

100.00

%

158.70000

 

158.70000

 

158.70000

 

$

0.00

 

12933

 

 

 

Donald Svoboda, a married man dealing in his sole and separate property

 

Apollo Energy, LlC

 

05/25/03

 

62-142

 

05/25/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 32:  NE

 

100.00

%

155.80000

 

155.80000

 

155.80000

 

$

0.00

 

12934

 

 

 

Regier Radials, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

07/21/03

 

62-140

 

07/21/08

 

Perkins

 

TRACT 1
Township 10 North, Range 38 West, 6th P.M.
Section 6:  All
Township 10 North, Range 37 West, 6th P.M.
Section 10:  That part of NW lying North of St. HWY. 23
Section 21:  NE, N2SE
Township 10 North, Range 39 West, 6th P.M.
Section 1:  Lots 1 & 2, S2NE
Township 11 North, Range 38 West, 6th P.M.
Section 31:  SW
TRACT 2
Township 11 North, Range 37 West, 6th P.M.
Section 28:  NW
Township 11 North, Range 38 West, 6th P.M.
Section 26:  NE

 

TR 1-50

TR 2-100

%

%

1,408.93000

 

1,408.93000

 

867.07000

 

$

0.00

 

12935

 

 

 

Dennis C. Pankonin, also known as Dennis Pankonin, and Sharyl Pankonin, husband
and wife, General Partners of Dennis C. Pankonin Limited Partnership

 

Apollo Energy, LLC

 

06/23/03

 

62-143

 

06/23/08

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 29:  W2

 

100.00

%

319.14000

 

319.14000

 

319.14000

 

$

320.00

 

12936

 

A

 

Norma Jean Kroeker, Trustee of the Harold R. Kroeker Family Trust and dealing on
her own behalf on her sole and separate property

 

Apollo Energy, LLC

 

06/26/03

 

62-144

 

06/26/08

 

Perkins

 

TRACT 1
Township 10 North, Range 38 West, 6th P.M.
Section 3:  NW
Section 35:  S2
Township 11 North, Range 37 West, 6th P.M.
Section 17:  E2
Section 30:  SW
Township 11 North, Range 38 West, 6th P.M.
Section 25:  S2
Section 33:  E2
Township 12 North, Range 37 West, 6th P.M.
Section 29:  SW
TRACT 2
Township 10 North, Range 38 West, 6th P.M.
Section 4:  NE
TRACT 3
Township 10 North, Range 39 West, 6th P.M.
Section 25:  NW

 

TR 1-100

TR 2-75

TR 3-50

 

%

%

%

2,075.84000

 

2,075.84000

 

1,961.24500

 

$

1,200.00

 

 

11

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12941

 

A

 

Western Agri-Management Company

 

Apollo Energy, LLC

 

07/28/03

 

35-466

 

07/28/08

 

Dundy

 

Tract 1
Township 3 North, Range 41 West, 6th P.M.
Section 1:  E2SW
Township 4 North, Range 41 West, 6th P.M.
Section 17:  N2NW No of
Cty Rd
Section 18:  N2NE No of
Cty Rd.
Township 4 North, Range 42 West, 6th P.M.
Section 13:  N2SW
Tract 2
Township 4 North, Range 42 West, 6th P.M.
Section 13:  A tract of land in S2SE of Section 13, more particularly described
as follows:  Refer to the SE corner of Sec. 13, thence No 00 deg 34 mins 15 secs
West along the East line of the S2SE of said Section a distance of 890.98 feet
to the pt of beginning, thence South 89 deg 08 mins 05 secs West 890.98 feet
North of and parallel to the South line of Sec. 13 for a distance of 2,642.79
feet, thence North 00 degs 34 mins 15 secs West for a distance of 432.16 feet to
a point on the North line of the S2SE of Sec. 13, thence North 89 degs 07 mins
30 secs East along the North line of the S2SE for a distance of 2,642.79 feet to
a point on the East line of the S2SE thence South 00 degs 34 mins 15 secs East
along the East line of the S2SE of Section 13 a distance of 432.60 feet to the
point of beginning, containing 26.25acres, more or less AND a tract of land in
the N2 of Section 19 and the SW of Section 18, Township 4 North, Range 41 West
of the 6th P.M. and the N2 of Section 24, Township 4 North, Range 42 West of the
6th P.M., more particularly described as follows:  Refer to the East quarter
corner of Section 24, Township 4 North, Range 42 West, the point of beginning;
thence South 89 degs 8 mins West along the South line of the N2 of Section 24,
Township 4 North, Range 42 West for a distance of 1254.15 feet, more or less to
the arc of a circle having a radius of 1900 feet and know as circle #60.33;
thence N'wstrly along the arc of a circle having a radius of 1900 feet, a
central angle of 67 degs and a chord distance of 2097.36 feet which bears North
56 degs 20 mins West for a distance of 2223.0 feet; thence North 45 degs 46 Mins
East for a distance of 102.456 feet to a point on the South line of Circles
#60.12 and 60.13; thence South 75 degs 00 Mins East for a distance of 2310.0
feet; thence North 30 degs 30 Mins East for a distance of 1300.00 feet; thence
North 89 degs 10 Mins East for a distance of 139.32 feet to a point on the East
line of Section 24, Township 4 North, Range 42 West; thence North 00 degs 38
Mins 35 secs West for a distance of 944.93 feet to the Northeast corner of
Section 24, Township 4 North, Range 42 West; thence North 00 degs 34 Mins 15
Secs West along the West line of Section 18, Township 4 North, Range 41 West a
distance of 1354.30 feet; thence South 86 degs 59 Mins 25 Secs East for a
distance of 1915.62 feet; thence South 00 Degs 34 Mins 15 Secs East along the
West line of Circle #60.15 for a distance of 1354.30 feet to a point on the
South line of Section 18; thence South 88 Degs 23 Mins 04 Secs East along the
South line of Section 18 for a distance of 38.3 feet; thence South 00 Degs 16
Mins 33 Secs East along the West line of Circle #60.15 for a distance of 776.15
feet; thence South 88 Degs 09 Mins 29 Secs East for a distance of 45.15 feet;
thence South 00 Degs 12 Mins 47 Secs East along the West line of Circle #60.25
for a distance of 1760.61 fee to a point on the South line of the N2 of Section
19, Township 4 North, Range 41 West; thence North 88 Degs 09 Mins 30 Secs West
along the South line of the N2 of Section 19, Township 4 North, Range 41 West
for a distance of 1960.45 feet to the West quarter corner of Section 19,
Township 4 North, Range 41 West, the point of beginning, containing 200 acres,
more or less.

 

TR 1-100

TR 2-50

%

%

466.25000

 

466.25000

 

353.13000

 

$

0.00

 

12942

 

 

 

Billy Daiss, Trustee of the Attebery Family Trust, dated February 7, 1984

 

Apollo Energy, LLC

 

07/30/03

 

62-145

 

07/30/08

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 5:  NE
Township 10 North, Range 38 West, 6th P.M.
Section 33:  S2, except a tract of land described on Book 57, Page 324 of the
Deed records of Perkins County, NE
Section 34:  SE

 

100.00

%

615.84000

 

615.84000

 

615.84000

 

$

615.84

 

12943

 

 

 

Daiss Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

07/30/03

 

62-146

 

07/30/08

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 10:  SE
Section 14:  S2, NW, except tracts of land described on Book 55, 59 & 60,
Pages 216 ,112& 339
Section 15:  NE
Section 23:  All

 

100.00

%

1,385.97000

 

1,385.97000

 

1,385.97000

 

$

1,392.18

 

12944

 

A

 

Wilhelm Company, a Colorado Corporation

 

Apollo Energy, LLC

 

06/25/03

 

35-469

 

06/25/08

 

Dundy

 

Township 4 North, Range 41 West, 6th P.M.
Section 7:  Lots 1 (21.00), 2 (20.77), 3 (20.40), 4 (20.20), NE, E2NW, E2SW, SE
Section 21:  E2, E2W2
Section 22:  W2NW, S2
Section 27:  N2
Section 28:  NE
Township 4 North, Range 42 West, 6th P.M.
Section 12:  E2

 

25.00

%

2,246.70000

 

2,246.70000

 

561.67500

 

$

0.00

 

12945

 

 

 

Loyal B. Thompson, also known as Loyal Thompson and Ina Faye Thompson, also
known as Ina F. Thompson, husband and wife

 

Apollo Energy, LLC

 

08/08/03

 

62-147

 

08/08/08

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 9: All, except tracts of land for road purposes
Section 10: NW, W2SW

 

100.00

%

854.44000

 

854.44000

 

854.44000

 

$

849.44

 

12946

 

A

 

Timothy J. Hendricks and Judy M. Hendricks, husband and wife

 

Apollo Energy, LLC

 

08/05/03

 

62-148

 

08/05/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 21:  NE, except a tract of land described in Book 61, Page 70

 

50.00

%

48.65000

 

48.65000

 

24.32500

 

$

24.32

 

12947

 

 

 

Barkley Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

07/21/03

 

62-149

 

07/21/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 22:  W2

 

100.00

%

323.83000

 

323.83000

 

323.83000

 

$

0.00

 

12948

 

 

 

Herman L. Regier, individually and as Trustee of the Herman L Reiger Trust dated
4/5/95 and Sarah G. Regier, individually and as Trustee of the Sarah G. Regier
Trust dated 4/5/95

 

Apollo Energy, LLC

 

07/21/03

 

62-150

 

07/21/08

 

Perkins

 

Township 10 North, Range 37 West, 6th P.M.
Section 21:  N2SE
Township 10 North, Range 39 West, 6th P.M.
Section 24:  NW, less a 4.69 acre tract

 

100.00

%

234.06000

 

234.06000

 

234.06000

 

$

0.00

 

12949

 

A

 

Richard L. Salsman and Cindy L. Salsman, husband and wife

 

Apollo Energy, LLC

 

08/07/03

 

62-151

 

08/07/08

 

Perkins

 

TRACT 1
Township 10 North, Range 39 West, 6th P.M.
Section 25:  SE
TRACT 2
Township 10 North, Range 39 West, 6th P.M.
Section 25:  SW

 

TR 1-100

TR 2-50

%

%

325.21000

 

325.21000

 

243.59000

 

$

0.00

 

12949

 

B

 

Betty J. Nash, Trustee under that certain Declaration of Trust dated March 19,
1997

 

High Plains Energy Co.

 

06/10/05

 

65-171

 

06/10/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 25: SW/4

 

50.0000

%

163.24000

 

0.00000

 

81.62000

 

$

81.62

 

 

12

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12953

 

 

 

Harold R. Kampfe Trust, Harold R. Kampfe, Trustee, and Beatrice L. Kampfe Trust,
Beatrice L. Kampfe, Trustee

 

Apollo Energy, LLC

 

08/16/03

 

80-140
63-249

 

08/16/08

 

Keith / Perkins

 

Tract 1-Keith County, NE
Township 12 North, Range 41 West, 6th P.M.
Section 15:  All
Tract 2-Perkins  County, NE
Township 12 North, Range 41 West, 6th P.M.
Section 23:  NW

 

100.00

%

800.00000

 

800.00000

 

799.75000

 

$

800.00

 

12954

 

 

 

Sheldon Geisbrecht (###-##-####) and Tammy Giesbrecht, husband and wife and
Clayton Giesbrecht (###-##-####) and Karen Giesbrecht, husband and wife

 

Apollo Energy, LLC

 

08/16/03

 

62-152

 

08/16/08

 

Perkins

 

Township 9 North, Range 40 West, 6th P.M.
Section 12:  NE

 

100.00

%

161.61000

 

161.61000

 

161.61000

 

$

161.61

 

12955

 

 

 

Irene Giesbrecht, also known as Ella I. Giesbrecht

 

Apollo Energy, LLC

 

08/16/03

 

62-153

 

08/16/08

 

Perkins

 

TRACT 1
Township 9 North, Range 39 West, 6th P.M.
Section 18:  NE, SW
TRACT 2
Township 9 North, Range 39 West, 6th P.M.
Section 18:  SE

 

TR 1-100

TR 2-33.3333

%

%

491.05000

 

491.05000

 

382.38000

 

$

382.38

 

12956

 

 

 

Edgar C. and Loree E. Klemme, Co-Trustees of the Klemme Family Trust, dated
April 23, 1991

 

Apollo Energy, LLC

 

08/06/03

 

79-63

 

08/06/08

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 9: W2

 

100.00

%

317.78000

 

317.78000

 

317.78000

 

$

317.78

 

12957

 

 

 

Barbara J. Bock-Mavis, Trustee

 

Apollo Energy, LLC

 

07/24/03

 

62-154

 

07/24/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 20:  SW
Section 29:  NW

 

100.00

%

327.43000

 

327.43000

 

327.43000

 

$

0.00

 

12958

 

 

 

Robert Karre and Norma Karre, husband and wife

 

Apollo Energy, LLC

 

07/24/03

 

62-155

 

07/24/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 26:  NE

 

100.00

%

155.10000

 

155.10000

 

155.10000

 

$

0.00

 

12959

 

 

 

Richard W. Newman, also known as Richard William Newman, individually and as
Attorney-in-Fact for Evelyn K. Newman and William L. Newman

 

Apollo Energy, LLC

 

08/28/03

 

79-156

 

08/28/08

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 8:  S2
Section 17:  N2, SW

 

100.00

%

783.68000

 

783.68000

 

636.74000

 

$

783.68

 

12960

 

 

 

Louis C. Statz and Sharon Statz, husband and wife

 

Apollo Energy, LLC

 

09/02/03

 

16-309

 

09/02/08

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 20:  SENW, SW
Section 21:  W2NE, W2
Section 29:  NW

 

100.00

%

760.00000

 

760.00000

 

760.00000

 

$

0.00

 

12961

 

 

 

Freedom Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

09/03/03

 

63-244

 

09/03/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 35:  All

 

100.00

%

636.55000

 

636.55000

 

636.55000

 

$

0.00

 

12962

 

 

 

Freedom Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

09/03/03

 

63-243

 

09/03/08

 

Perkins

 

Township 12 North, Range 39 West, 6th P.M.
Section 30:  S2
Section 31:  W2

 

100.00

%

619.85000

 

619.85000

 

619.85000

 

$

0.00

 

12963

 

 

 

Freedom Farms, Inc., A Nebraska Corporation

 

Apollo Energy, LLC

 

09/03/03

 

63-242

 

09/03/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 33:  NW

 

100.00

%

163.46000

 

163.46000

 

163.46000

 

$

0.00

 

12964

 

 

 

Freedom Farms, Inc.

 

Apollo Energy, LLC

 

09/03/03

 

63-241

 

09/03/08

 

Perkins

 

Township 10 North, Range 40 West, 6th P.M.
Section 22:  All, less part of NE and part of SWSW

 

100.00

%

608.12000

 

608.12000

 

608.12000

 

$

0.00

 

12965

 

 

 

Frank B. Svoboda and Anne M. Svoboda, husband and wife

 

Apollo Energy, LLC

 

09/03/03

 

63-240

 

09/03/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 33:  NE

 

100.00

%

155.44000

 

155.44000

 

155.44000

 

$

0.00

 

12966

 

 

 

Harold M. McCain, Successor Trustee of Francis L. Richards Trust

 

Apollo Energy, LLC

 

06/29/03

 

64-77

 

06/29/08

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 21:  S2
Section 28:  NE

 

100.00

%

482.56000

 

482.56000

 

482.56000

 

$

480.00

 

12967

 

 

 

Harold M. McCain, dealing on his own separate property and Kenneth B. McCain,
dealing on his own separate property and George R. McCain, dealing on his own
separate property

 

Apollo Energy, LLC

 

07/01/03

 

64-78

 

07/01/08

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 21:  N2
Section 22:  SE

 

100.00

%

482.62000

 

482.62000

 

482.62000

 

$

482.62

 

12968

 

A

 

Rosella J. Jessen, Trustee of the Rosella J. Jessen Revocable Living Trust

 

Apollo Energy, LLC

 

09/02/03

 

79-143

 

09/02/08

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 6:  Lots 1-5, SENW, aka N2NE, NW

 

50.00

%

241.32000

 

241.32000

 

120.66000

 

$

120.66

 

12969

 

A

 

Stretesky Farms, Inc., A Nebraska Corporation

 

Apollo Energy, LLC

 

09/12/03

 

63-271

 

09/12/08

 

Perkins

 

TRACT 1
Township 12 North, Range 41 West, 6th P.M.
Section 29:  NW
TRACT 2
Township 12 North, Range 41 West, 6th P.M.
Section 19: Pt of W2
TRACT 3
Township 12 North, Range 41 West, 6th P.M.
Section 19:  NE, SE

 

TR 1-100

TR 3-25

TR 2-50

%

%

%

739.51000

 

739.51000

 

368.76500

 

$

0.00

 

 

13

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12969

 

B

 

Randall L. Schlake dealing in his sole and separate property

 

Apollo Energy, LLC

 

10/15/03

 

63-239

 

10/15/08

 

Perkins

 

Tract 1
Township 12 North, Range 41 West, 6th P.M.
Section 19:  SW/4 a 48.02 acre tract
Tract 2
Township 12 North, Range 41 West, 6th P.M.
Section 19: W2 less a 48.02 acre tract
Tract 3
Township 12 North, Range 41 West, 6th P.M.
Section 19:  E2

 

TR 1-100

TR 2-50

TR 3-25

%

%

%

627.72000

 

48.02000

 

256.97500

 

$

0.00

 

12970

 

 

 

Stretesky Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

09/12/03

 

190270

 

09/12/08

 

Sedgwick

 

Township 11 North, Range 43 West, 6th P.M.
Section 24:  NE
Township 12 North, Range 42 West, 6th P.M.
Section 32:  Lots 1-4

 

100.00

%

288.49000

 

288.49000

 

288.49000

 

$

0.00

 

12971

 

A

 

Donald A. Stratesky, aka Donald Stretesky and Virginia L. Stretesky, aka
Virginia Stretesky, husband and wife

 

Apollo Energy, LLC

 

09/12/03

 

190269

 

09/12/08

 

Sedgwick

 

Tract 1
Township 11 North, Range 42 West, 6th P.M.
Section 5:  Lots 1 and 2
Section 6:  NE, W2
Township 12 North, Range 42 West, 6th P.M.
Section 31:  W2
Township 11 North, Range 43 West, 6th P.M.
Section 2:  SW
Section 11:  NW
Section 13:  NW
Section 14:  NE
Tract 2
Township 10 North, Range 43 West, 6th P.M.
Section 1:  S2
Tract 3
Township 12 North, Range 43 West, 6th P.M.
Section 26:  S2

 

TR 1-100

TR 2-37.50

TR 3-50

%

%

%

2,129.50000

 

2,129.50000

 

1,770.75000

 

$

0.00

 

12973

 

 

 

Lloyd C. Peterson, Trustee of the Lloyd C. Peterson Trust

 

Apollo Energy, LLC

 

09/09/03

 

79-145

 

09/09/08

 

Keith

 

Township 13 North, Range 41 West, 6th P.M.
Section 33:  SE

 

50.00

%

160.19000

 

160.19000

 

80.09500

 

$

0.00

 

12974

 

 

 

Lloyd C. Peterson and Rose Marie Peterson, individually and as husband and wife

 

Apollo Energy, LLC

 

09/09/03

 

79-146
64-182

 

09/09/08

 

Keith / Perkins

 

Keith County, Nebraska
Township 13 North, Range 41 West, 6th P.M.
Section 32:  SW
Section 35:  SE
Township 12 North, Range 41 West, 6th P.M.
Section 3:  E2NW
Section 5:  A tract of land in the E2SW
Section 6:  S/2NE, W2SE and that part of E2SW
Section 7:  Part of E2W2
Perkins County, Nebraska
Township 12 North, Range 41 West, 6th P.M.
Section 21:  SE

 

100.00

%

1,006.94000

 

1,006.94000

 

1,006.94000

 

$

0.00

 

12975

 

A

 

Bruce S. Holcombe, aka Bruce Holcombe, a married man dealing on his own separate
non-homestead property

 

Apollo Energy, LLC

 

09/17/03

 

190268

 

09/17/08

 

Sedgwick

 

Township 11 North, Range 42 West, 6th P.M.
Section 30:  SW

 

50.00

%

162.96000

 

162.96000

 

81.48000

 

$

0.00

 

12975

 

B

 

Kay Hicks, also known as Kay Lynette Hicks, a married woman dealing on her own
separate non-homestead property

 

Apollo Energy, LLC

 

09/22/03

 

190267

 

09/22/08

 

Sedgwick

 

Township 11 North, Range 42 West, 6th P.M.
Section 30:  SW4

 

50.00

%

162.96000

 

0.00000

 

81.48000

 

$

0.00

 

12976

 

A

 

Dayton Ballantine and Carolyn Ballentine individually and as husband and wife

 

Apollo Energy, LLC

 

09/18/03

 

79-346

 

09/18/08

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 5:  A parcel of land located in the E2 and N2NW, more particularly
described in deed recorded in Book 89, Page 119
Township 13 North, Range 41 West, 6th P.M.
Section 27:  Lots 5,6,7 and 8, except tract ROW Interstate 80
Section 28:  Lots 6,7 and 8, except tract ROW Interstate 80

 

50.00

%

316.60000

 

316.60000

 

158.30000

 

$

0.00

 

12976

 

B

 

Nancy Sharbonno, a widow

 

High Plains Energy Co.

 

06/22/05

 

80-478

 

06/22/10

 

Keith

 

Township 13 North, Range 41 West, 6th P.M.
Section 27: Lots 5, 6, 7 and 8, except tract right-of-way Interstate 80
Section 28: Lots 6, 7 and 8, except tract right-of-way Interstate 80

 

16.6666

%

612.69000

 

0.00000

 

110.60600

 

$

110.61

 

12976

 

C

 

Jack R. Harvey and Donna Harvey, husband and wife

 

High Plains Energy Co.

 

06/22/05

 

80-479

 

06/22/10

 

Keith

 

Township 13 North, Range 41 West, 6th P.M.
Section 27: Lots 5, 6, 7 and 8, except tract right-of-way Interstate 80
Section 28: Lots 6, 7 and 8, except tract right-of-way Interstate 80

 

16.6667

%

612.69000

 

0.00000

 

110.60600

 

$

110.61

 

 

14

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

12977

 

 

 

Donald C. Haldeen, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

09/10/03

 

79-152

 

09/10/08

 

Keith

 

Township 13 North, Range 41 West, 6th P.M.
Section 35:  NE, except Interstate 80, more particularly described in Deeds
recorded in Book 24 of miscellaneous, Page 161 and Book 37, Page 369 of the
records of Keith County.

 

100.00

%

158.41000

 

158.41000

 

158.41000

 

$

0.00

 

12978

 

 

 

Donald C. Haldeen, a married man dealing in his sole and separate property and
Harold D. Haldeen, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

09/10/03

 

79-154

 

09/10/08

 

Keith

 

Tract 1
Township 12 North, Range 41 West, 6th P.M.
Section 3:  W2NW
Tract 2
Township 12 North, Range 41 West, 6th P.M.
Section 4:  SE, SW lying North of the ditch containing 36.53 acres

 

TR 1-100

TR 2-50

%

%

283.29000

 

283.29000

 

265.02500

 

$

0.00

 

12979

 

 

 

Haldeen Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

09/10/03

 

79-150

 

09/10/08

 

Keith

 

TRACT 1
Township 12 North, Range 41 West, 6th P.M.
Section 9:  E2
TRACT 2
Township 12 North, Range 41 West, 6th P.M.
Section 10:  NW
Township 13 North, Range 41 West, 6th P.M.
Section 35:  SW

 

TR 1-50

TR 2-100

%

%

641.23000

 

641.23000

 

481.82500

 

$

0.00

 

12980

 

 

 

Megan M. Zabel, a single woman

 

Apollo Energy, LLC

 

09/09/03

 

79-144

 

09/09/08

 

Keith

 

Township 13 North, Range 41 West, 6th P.M.
Section 32:  SE

 

100.00

%

159.14000

 

159.14000

 

159.14000

 

$

0.00

 

12981

 

 

 

Ardell Brown and Berniece Brown, husband and wife

 

Apollo Energy, LLC

 

08/12/03

 

62-156

 

08/12/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 21:  NW

 

100.00

%

154.67000

 

154.67000

 

154.67000

 

$

0.00

 

12984

 

 

 

Minnie K. Splitter and Harm Delmont Splitter, Co-Trustees of the Minnie K.
Splitter Trust

 

Apollo Energy, LLC

 

08/16/03

 

80-137
63-299

 

08/16/08

 

Keith / Perkins

 

Keith County
TRACT 1
Township 12 North, Range 41 West, 6th P.M.
Section 5:  SW4, except a tract in the E2SW4, described in Book T at Page 475 in
Keith County Clerk and Recorder’s Office
Section 8:  N/2
TRACT 2
Perkins County
Township 12 North, Range 41 West, 6th P.M.
Section 22:  All
TRACT 3
Township 12 North, Range 41 West, 6th P.M.
Section 24:  SW/4

 

TR 1-75

TR 2-58.33

TR 3-100

%

%

%

1,215.52000

 

1,215.52000

 

1,215.52000

 

$

1,221.52

 

12985

 

 

 

Thomas L. Goding and Jane C. Goding, husband and wife

 

Apollo Energy, LLC

 

08/01/03

 

79-148

 

08/01/08

 

Keith

 

Township 13 North, Range 41 West, 6th P.M.
Section 33:  NE/4

 

100.00

%

152.89000

 

152.89000

 

152.89000

 

$

152.89

 

12986

 

 

 

George M. Anderson and Annette G. Anderson, husband and wife

 

Apollo Energy, LLC

 

09/16/03

 

79-158

 

09/16/08

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 5:  E/2

 

100.00

%

331.55000

 

331.55000

 

331.55000

 

$

0.00

 

12989

 

 

 

Louise C. Tietjen, a married woman dealing on her sole and separate property

 

Apollo Energy, LLC

 

09/25/03

 

63-245

 

09/25/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 18:  SE4, that part of NE4 lying So. Of Hwy.

 

100.00

%

222.55000

 

222.55000

 

222.55000

 

$

0.00

 

12991

 

 

 

Michael L. Kimberly and Kay Kimberly, husband and wife

 

Apollo Energy, LLC

 

08/19/03

 

79-147

 

08/19/08

 

Keith

 

Township 13 North, Range 41 West, 6th P.M.
Section 34:  NW4

 

100.00

%

160.59000

 

160.59000

 

160.59000

 

$

0.00

 

12992

 

 

 

Bernard E. Deaver, dealing in  his sole and separate property

 

Apollo Energy, LLC

 

09/24/03

 

63-296

 

09/24/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 22:  NE4
Section 33:  S2SE4

 

100.00

%

240.20000

 

240.20000

 

240.20000

 

$

0.00

 

12993

 

 

 

James A. Deaver and Virginia A. Deaver, husband and wife

 

Apollo Energy, LLC

 

10/07/03

 

63-297

 

10/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 31:  All

 

100.00

%

634.16000

 

634.16000

 

634.16000

 

$

0.00

 

12994

 

 

 

Christine J. Svoboda, Trustee of the Christine J. Svoboda Trust

 

Apollo Energy, LLC

 

09/23/03

 

63-252

 

09/23/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 15:  SE4
Township 11 North, Range 41 West, 6th P.M.
Section 5:  NE4

 

100.00

%

320.12000

 

320.12000

 

320.12000

 

$

0.00

 

12995

 

 

 

Roth Family Living Trust

 

Gene F. Lang & CO.

 

06/28/03

 

63-124

 

06/28/08

 

Perkins

 

Township 11 North, Range 39 West, 6th P.M.
Section 3:  SE4

 

100.00

%

159.40000

 

159.40000

 

159.40000

 

$

160.00

 

12996

 

 

 

Lyle Maley and Nancy L. Maley, husband and wife

 

Gene F. Lang & CO.

 

07/18/03

 

63-123

 

07/18/08

 

Perkins

 

Township 12 North, Range 38 West, 6th P.M.
Section 19:  W2

 

100.00

%

307.50000

 

307.50000

 

307.50000

 

$

0.00

 

12997

 

 

 

Sandra Nelson, dealing in her sole and separate property

 

Gene F. Lang & CO.

 

07/20/03

 

63-121

 

07/20/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 11:  SE4

 

100.00

%

144.96000

 

144.96000

 

144.96000

 

$

0.00

 

12998

 

 

 

Sara F. Stewart, dealing in her sole and separate property

 

Gene F. Lang & CO.

 

07/20/03

 

63-120

 

07/20/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 21:  NE4

 

100.00

%

168.16000

 

168.16000

 

168.16000

 

$

0.00

 

12999

 

 

 

Gaylord Velte

 

Gene F. Lang & CO.

 

07/20/03

 

63-122

 

07/20/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 1:  NE4

 

100.00

%

157.35000

 

157.35000

 

157.35000

 

$

0.00

 

13000

 

 

 

John W. Hoffert, dealing on his own sole and separate property

 

Gene F. Lang & CO.

 

07/21/03

 

63-119

 

07/21/08

 

Perkins

 

Township 12 North, Range 38 West, 6th P.M.
Section 35:  SW4

 

100.00

%

161.48000

 

161.48000

 

161.48000

 

$

0.00

 

13001

 

 

 

Thomas W. Kosmicki and Marlea M. Kosmicki, husband and wife

 

Gene F. Lang & CO.

 

07/21/03

 

63-118

 

07/21/08

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 5:  SW4
Section 7:  SW4
Section 8:  NW4

 

100.00

%

465.65000

 

465.65000

 

464.65000

 

$

0.00

 

 

15

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13002

 

 

 

Norman J. Duba and Rhonda I. Duba, husband and wife

 

Gene F. Lang & CO.

 

07/21/03

 

63-117

 

07/21/08

 

Perkins

 

Township 12 North, Range 38 West, 6th P.M.
Section 25:  NE4

 

100.00

%

159.32000

 

159.32000

 

159.32000

 

$

0.00

 

13003

 

 

 

David L. Hoffert and Janet D. Hoffert, husband and wife

 

Gene F. Lang & CO.

 

07/21/03

 

63-116

 

07/21/08

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 1:  NE4
Township 12 North, Range 38 West, 6th P.M.
Section 35:  NW4

 

100.00

%

323.28000

 

323.28000

 

323.28000

 

$

0.00

 

13004

 

 

 

Connie Eckhardt and Benjamin Eckhardt

 

Gene F. Lang & CO.

 

07/23/03

 

63-112

 

07/23/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 21:  SE4

 

100.00

%

167.87000

 

167.87000

 

167.87000

 

$

0.00

 

13005

 

 

 

Mike Hagan and LuRae Hagan, husband and wife

 

Gene F. Lang & CO.

 

08/18/03

 

63-115

 

08/18/08

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 4:  S2, S2NE4

 

100.00

%

406.94000

 

406.94000

 

406.94000

 

$

0.00

 

13006

 

 

 

Darrell C. Hagan, aka Darrell Hagan, and Helen G. Hagan, aka Helen Hagan,
husband and wife

 

Gene F. Lang & CO.

 

08/26/03

 

63-114

 

08/26/08

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 3:  SE4
Section 4:  NW4
Section 10:  NE4, SE4 less 11.02 acres
Section 12:  SE4
Section 22:  SW4
Township 12 North, Range 39 West, 6th P.M.
Section 29:  NW4

 

100.00

%

1,110.94000

 

1,110.94000

 

1,110.94000

 

$

0.00

 

13007

 

 

 

Rick Nelson, Inc.

 

Gene F. Lang & CO.

 

09/30/03

 

63-113

 

09/30/08

 

Perkins

 

Township 11 North, Range 41 West, 6th P.M.
Section 19:  Lots 1,2, E2NW4

 

100.00

%

158.61000

 

158.61000

 

158.61000

 

$

0.00

 

13010

 

 

 

State of Nebraska # 7260

 

Apollo Energy, LLC

 

11/14/03

 

63-268

 

11/14/08

 

Perkins

 

Township 11 North, Range 39 West, 6th P.M.
Section 16:  All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13011

 

 

 

State of Nebraska # 7261

 

Apollo Energy, LLC

 

11/14/03

 

63-267

 

11/14/08

 

Perkins

 

Township 11 North, Range 39 West, 6th P.M.
Section 36:  All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13012

 

 

 

State of Nebraska # 7264

 

Apollo Energy, LLC

 

11/14/03

 

63-266

 

11/14/08

 

Perkins

 

Township 10 North, Range 40 West, 6th P.M.
Section 36:  All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13013

 

 

 

State of Nebraska # 7265

 

Apollo Energy, LLC

 

11/14/03

 

63-265

 

11/14/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 16:  All

 

100.00

%

671.60000

 

671.60000

 

671.60000

 

$

1,343.20

 

13014

 

 

 

State of Nebraska # 7266

 

Apollo Energy, LLC

 

11/14/03

 

63-264

 

11/14/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 23:  N2

 

100.00

%

315.93000

 

315.93000

 

315.93000

 

$

631.86

 

13015

 

 

 

State of Nebraska # 7267

 

Apollo Energy, LLC

 

11/14/03

 

63-263

 

11/14/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 36:  All

 

100.00

%

631.45000

 

631.45000

 

631.45000

 

$

1,262.90

 

13016

 

 

 

State of Nebraska # 7268

 

Apollo Energy, LLC

 

11/14/03

 

63-248

 

11/14/08

 

Perkins

 

Township 12 North, Range 40 West, 6th P.M.
Section 36:  All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13017

 

 

 

State of Nebraska # 7269

 

Apollo Energy, LLC

 

11/14/03

 

63-247

 

11/14/08

 

Perkins

 

Township 11 North, Range 41 West, 6th P.M.
Section 16:  All

 

100.00

%

635.00000

 

635.00000

 

635.00000

 

$

1,270.00

 

13018

 

 

 

Jack V. Stoker and Rosemary Stoker, individually, and as husband and wife

 

Apollo Energy, LLC

 

09/30/03

 

63-251

 

09/30/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 11:  N2

 

100.00

%

316.02000

 

316.02000

 

316.02000

 

$

0.00

 

13019

 

A

 

Kevin Schrotberger, dealing in his sole and separate property

 

Apollo Energy, LLC

 

09/30/03

 

63-246

 

09/30/08

 

Perkins

 

Tract 1
Township 9 North, Range 39 West, 6th P.M.
Section 21:  Part of the
NE4-110.54 Acres
Tract 2
Township 9 North, Range 39 West, 6th P.M.
Section 18:  Lots 1,2, E2NW4

 

TR 1-50

TR 2-100

%

%

274.60000

 

274.60000

 

219.33000

 

$

0.00

 

13020

 

A

 

Daniel Burge, dealing in his sole and separate property

 

Apollo Energy, LLC

 

10/01/03

 

63-270

 

10/01/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 7:  Lots 1,2,3,4, E2W2, E2

 

50.00

%

685.54000

 

685.54000

 

342.77000

 

$

0.00

 

13020

 

B

 

Wayne A. Burge and Nancy J. Burge, individually and as husband and wife

 

Apollo Energy, LLC

 

10/01/03

 

63-262

 

10/01/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 7:  Lots 1,2,3,4, E2W2, E2

 

50.00

%

685.54000

 

0.00000

 

342.77000

 

$

0.00

 

13021

 

 

 

Lynn D. Wedel and DeAnna S. Wedel, individually and as husband and wife

 

Apollo Energy, LLC

 

09/30/03

 

63-261

 

09/30/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 21:  SE4
Section 22:  NW4

 

50.00

%

319.25000

 

319.25000

 

159.63000

 

$

0.00

 

13022

 

 

 

Marion L. Hoover, aka Marion L. “Bunny” Hoover as Trustee of the Marion Hoover
Revocable Living Trust dated 6/13/01

 

Apollo Energy, LLC

 

09/30/03

 

63-287

 

09/30/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 23:  SE4

 

100.00

%

161.55000

 

161.55000

 

161.55000

 

$

0.00

 

13023

 

 

 

Phillip J. Armstrong and Barbara E. Armstrong, individually, and as  husband and
wife

 

Apollo Energy, LLC

 

10/07/03

 

80-134
63-319

 

10/07/08

 

Keith / Perkins

 

Keith County
Township 12 North, Range 41 West, 6th P.M.
Section 10:  NE4, S2
Perkins County
Township 12 North, Range 41 West, 6th P.M.
Section 24:  N2, SE4

 

100.00

%

964.09000

 

964.09000

 

964.09000

 

$

0.00

 

13024

 

 

 

Phillip J. Armstrong and Barbara E. Armstrong, individually, and as husband and
wife

 

Apollo Energy, LLC

 

10/07/03

 

63-318

 

10/07/08

 

Perkins

 

Township 12 North, Range 40 West, 6th P.M.
Section 30:  Lots 1,2,3,4, E2W2

 

100.00

%

305.18000

 

305.18000

 

305.18000

 

$

0.00

 

13025

 

 

 

Bobby G. Martin and Emile Martin, husband and wife, and Betty J. Lance and Lloyd
Lance, wife and husband, and Bobby G. Martin and Emile Martin, as the sole heirs
of Lucy V. Martin, deceased

 

Apollo Energy, LLC

 

10/01/03

 

63-269

 

10/01/08

 

Perkins

 

Township 12 North, Range 41 West, 6th P.M.
Section 28:  E2

 

100.00

%

319.35000

 

319.35000

 

319.35000

 

$

0.00

 

 

16

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13026

 

A

 

Kenneth E. Goertzen, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

10/07/03

 

63-256

 

10/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 11:  SE4

 

33.33

%

158.40000

 

158.40000

 

52.79999

 

$

0.00

 

13026

 

B

 

Ardeen R. Goertzen, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

10/07/03

 

63-255

 

10/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 11:  SE4

 

33.33

%

158.40000

 

0.00000

 

52.79999

 

$

0.00

 

13026

 

C

 

Donald L. Goertzen, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

10/07/03

 

63-254

 

10/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 11:  SE4

 

33.33

%

158.40000

 

0.00000

 

52.79999

 

$

0.00

 

13027

 

A

 

Milton Rogers and Anita Rogers, individually, and as husband and wife

 

Gene F. Lang & CO.

 

10/04/03

 

63-236

 

10/04/08

 

Perkins

 

Tract 1
Township 11 North, Range 41 West, 6th P.M.
Section 9:  SE
Tract 2
Township 11 North, Range 41 West, 6th P.M.
Section 9:  SW

 

TR 1-33.33

TR 2-100

%

%

319.78000

 

319.78000

 

213.46000

 

$

0.00

 

13032

 

 

 

William Kunnemann, dealing in his sole and separate property

 

Apollo Energy, LLC

 

10/21/03

 

16-301

 

10/21/08

 

Chase

 

Township 7 North, Range 40 West, 6th P.M.
Section 2:  S2
Section 11:  NW4
Section 23:  E2NE4

 

100.00

%

560.00000

 

560.00000

 

560.00000

 

$

0.00

 

13033

 

 

 

Steven C. Loeffler and Christine K. Loeffler, husband and wife

 

Apollo Energy, LLC

 

11/07/03

 

63-257

 

11/07/08

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 5:  NW4
Section 6:  NE4
Section 7:  NE4
Township 11 North, Range 39 West, 6th P.M.
Section 32:  S2

 

100.00

%

790.27000

 

790.27000

 

790.27000

 

$

0.00

 

13034

 

 

 

Richard Stewart, dealing in his sole and separate property

 

Apollo Energy, LLC

 

11/07/03

 

63-274

 

11/07/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 29:  E2
Section 31:  NE4

 

100.00

%

471.81000

 

471.81000

 

471.81000

 

$

0.00

 

13035

 

 

 

Vilas Smith Land and Cattle Co., Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

11/05/03

 

16-297

 

11/05/08

 

Chase

 

Township 5 North, Range 39 West, 6th P.M.
Section 14:  S2
Section 23:  N2, SE4
Section 24:  E2
Township 6 North, Range 40 West, 6th P.M.
Section 7:  All
Section 12:  S2
Section 13:  All
Township 6 North, Range 39 West, 6th P.M.
Section 7:  All less 0.5 acres in SE4
Section 8:  Part of NW4SW4

 

100.00

%

3,342.86000

 

3,342.86000

 

3,342.86000

 

$

0.00

 

13036

 

 

 

Ronald Armstrong, Trustee of The Betty Amrstrong Trust

 

Apollo Energy, LLC

 

10/09/03

 

79-230

 

10/09/08

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 12:  SW4
Section 13:  NW4
Section 14:  NE4, S2, and tract of land in the SW4NW4

 

100.00

%

824.39000

 

824.39000

 

824.39000

 

$

0.00

 

13037

 

A

 

Philip J. Armstrong and Barbara E. Armstrong, individually and as husband and
wife

 

Apollo Energy, LLC

 

10/30/03

 

63-258

 

10/30/08

 

Perkins

 

Township 11 North, Range 41 West, 6th P.M.
Section 18:  Lots 1,2, E2NW4, ada NW4

 

37.50

%

156.44000

 

156.44000

 

58.66500

 

$

0.00

 

13039

 

 

 

Vinton A. Kimberling, Trustee of the Vinton A. Kimberling Trust, and Fauniel I.
Kimberling, Trustee of the Fauniel I. Kimberling Trust

 

Apollo Energy, LLC

 

11/18/03

 

16-299

 

11/18/08

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 17:  S2SW4
Section 18:  SE4
Section 20:  E2, NE4NW4, Pt of W/2NW4
Section 28:  NW4, S2
Section 29:  NE4
Section 33:  Pt of SE4, W2

 

100.00

%

1,741.21000

 

1,741.21000

 

1,741.21000

 

$

0.00

 

13040

 

 

 

Erma Holcombe, also known as Erma L. Holcome, a single woman

 

Apollo Energy, LLC

 

09/17/03

 

190467

 

09/17/08

 

Sedgwick

 

Township 11 North, Range 42 West, 6th P.M.
Section 29:  Lots 1,2,3,4
Section 30:  E2

 

100.00

%

432.40000

 

432.40000

 

432.40000

 

$

0.00

 

13041

 

A

 

Howard Dean Stephens, dealing in his sole and separate property

 

Apollo Energy, LLC

 

11/01/03

 

63-259

 

11/01/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 11:  SW4

 

50.00

%

158.19000

 

158.19000

 

79.09500

 

$

0.00

 

13041

 

B

 

Jerry Lee Stephens, dealing in his sole and separate property

 

Apollo Energy, LLC

 

11/01/03

 

63-260

 

11/01/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 11:  SW4

 

50.00

%

158.19000

 

0.00000

 

79.09500

 

$

0.00

 

13042

 

 

 

George W. Gengenbach, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

05/15/03

 

63-328

 

05/15/08

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 12:  SW4
Section 13:  All

 

100.00

%

815.90000

 

815.90000

 

815.90000

 

$

815.90

 

13043

 

 

 

Ahrens Farms Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

11/19/03

 

16-358

 

11/19/08

 

Chase

 

Township 5 North, Range 39 West, 6th P.M.
Section 15:  SW4
Section 20:  NE4
Section 23:  SW4

 

100.00

%

481.57000

 

481.57000

 

481.57000

 

$

0.00

 

13044

 

 

 

Burnetta M. Ahrens and Robert J. Ahrens, Trustees of the Burnetta M. Ahrens
Trust No. 1 dated April 1, 1996

 

Apollo Energy, LLC

 

11/19/03

 

16-361

 

11/19/08

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section 3:  Lots 3,4, S2NW4, S2

 

100.00

%

480.23000

 

480.23000

 

480.23000

 

$

0.00

 

 

17

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13045

 

 

 

Burnetta M. Ahrens and Robert J. Ahrens, Trustees of the Burnetta M. Ahrens
Trust No. 1 dated April 1, 1996

 

Apollo Energy, LLC

 

11/19/03

 

16-364

 

11/19/08

 

Chase

 

Township 5 North, Range 39 West, 6th P.M.
Section 22:  SE4

 

100.00

%

159.97000

 

159.97000

 

159.97000

 

$

0.00

 

13046

 

A

 

William J. Wilcynski Trust, C/O W. Joseph Wilcynski, Jr.

 

Gene F. Lang & CO.

 

07/20/03

 

63-235

 

07/20/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 2:  NE4

 

50.00

%

165.16000

 

165.16000

 

82.58000

 

$

0.00

 

13046

 

B

 

Margaret K. Ralston, a widow

 

Gene F. Lang & CO.

 

11/18/03

 

63-237

 

11/18/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 2:  NE4

 

50.00

%

165.16000

 

0.00000

 

82.58000

 

$

0.00

 

13047

 

 

 

Donald T. Svoboda and Delores A. Svoboda, also known as Dolores A. Svoboda,
husband and wife and Dove Valley Estates, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

11/14/03

 

63-238

 

11/14/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 9:  S2

 

100.00

%

394.92000

 

394.92000

 

394.92000

 

$

0.00

 

13048

 

 

 

Bart Stromberger, also known as Bart J. Stromberger and Bart Jay Stromberger,
and Sheila Stromberger, also known as Sheila K. Stromberger, husband and wife

 

Apollo Energy, LLC

 

11/19/03

 

16-371

 

11/19/08

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 22:  SW4
Section 23:  Part of SW4
Section 30:  Part of NE4
Section 32:  NE4
Section 33:  NE4

 

100.00

%

611.14000

 

611.14000

 

611.14000

 

$

0.00

 

13049

 

 

 

Wilma E. Stromberger, dealing on her sole and separate property

 

Apollo Energy, LLC

 

11/19/03

 

16-447

 

11/19/08

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 21:  SE4

 

100.00

%

160.00000

 

160.00000

 

160.00000

 

$

0.00

 

13050

 

 

 

Stromberger Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

11/19/03

 

16-373

 

11/19/08

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 26:  S2
Section 27:  W2
Section 29:  S2
Section 32:  NW4
Section 34:  NE4

 

100.00

%

1,280.00000

 

1,280.00000

 

1,280.00000

 

$

0.00

 

13051

 

A

 

Wilma E. Stromberger

 

Apollo Energy, LLC

 

11/01/03

 

16-293

 

11/01/08

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section 1:  That part of the E2, described in Book 31, Page 587 of the records
in the Clerk and Recorders Office, Chase County, Nebraska

 

50.00

%

156.93000

 

156.93000

 

156.93000

 

$

0.00

 

13052

 

A

 

Myron K. Kunnemann and Marlon K. Kunnemann, dealing in their sole and separate
property

 

Apollo Energy, LLC

 

11/20/03

 

16-379

 

11/20/08

 

Chase

 

Township 8 North, Range 40 West, 6th P.M.
Section 26: W2, less 8.018 acres, more or less

 

50.00

%

323.30000

 

323.30000

 

161.65000

 

$

0.00

 

13052

 

B

 

Fern Kunnemann, a single woman, and Delores A. Francis, a single woman

 

Apollo Energy, LLC

 

11/13/03

 

16-377

 

11/13/08

 

Chase

 

Township 8 North, Range 40 West, 6th P.M.
Section 26: W2, less 8.018 acres, more or less

 

50.00

%

323.30000

 

0.00000

 

161.65000

 

$

0.00

 

13053

 

 

 

Terryberry Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

11/11/03

 

16-367

 

11/11/08

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section 11:  NW4, and that part of the SE4
Section 13:  That part more particularly described in Deed
Section 14:  That part of the E/2

 

100.00

%

967.02000

 

967.02000

 

967.02000

 

$

0.00

 

13054

 

 

 

Beard Farms, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

11/19/03

 

16-417

 

11/19/08

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 19:  All
Section 20:  Part of W2NW4

 

100.00

%

673.35000

 

673.35000

 

673.35000

 

$

0.00

 

13056

 

 

 

Erma C. Hulinsky, individually and as Personal Representative of the Estate of
Laddie J. Hulinsky, deceased

 

Apollo Energy, LLC

 

11/25/03

 

79-252
79-338
63-332

 

11/25/08

 

Keith / Perkins

 

Tract 1
Perkins County
Township 12 North, Range 41 West, 6th P.M.
Section 20:  E2, SW4
Section 29:  NE4
Keith County
Township 12 North, Range 41 West, 6th P.M.
Section 13:  SE4
Section 17:  SE4
Tract 2
Township 12 North, Range 41 West, 6th P.M.
Section 13:  NE4

 

TR 1-100

TR 2-75

%

%

1,117.53000

 

1,117.53000

 

1,077.38500

 

$

0.00

 

13057

 

 

 

THT Farms, a Partnership

 

Apollo Energy, LLC

 

11/11/03

 

16-356

 

11/11/08

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section 1:  That part of the S/2
Section 2:  SE4
Section 11:  That part of the NE4
Section 12:  That part of the N2 and SW4
Section 15:  NE4

 

100.00

%

910.13000

 

910.13000

 

910.13000

 

$

0.00

 

13058

 

 

 

Lucille Johns Mowrer

 

Apollo Energy, LLC

 

11/07/03

 

63-355

 

11/07/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 26:  W2

 

100.00

%

323.25000

 

323.25000

 

323.25000

 

$

0.00

 

13059

 

 

 

Donn Gengenbach, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

11/07/03

 

64-31

 

11/07/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 19:  S2NW4

 

100.00

%

82.36000

 

82.36000

 

82.36000

 

$

0.00

 

13060

 

A

 

Kenneth E. Goertzen

 

Apollo Energy, LLC

 

11/07/03

 

63-299

 

11/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 13:  SE4
Township 10 North, Range 37 West, 6th P.M.
Section 26:  SW4

 

16.67

%

319.64000

 

319.64000

 

53.27330

 

$

0.00

 

 

18

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13060

 

B

 

Leverna Hufford

 

Apollo Energy, LLC

 

11/07/03

 

63-290

 

11/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 13:  SE4
Township 10 North, Range 37 West, 6th P.M.
Section 26:  SW4

 

16.67

%

319.64000

 

0.00000

 

53.27330

 

$

0.00

 

13060

 

C

 

Donald L. Goertzen, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

11/07/03

 

63-291

 

11/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 13:  SE4
Township 10 North, Range 37 West, 6th P.M.
Section 26:  SW4

 

16.67

%

319.64000

 

0.00000

 

53.27330

 

$

0.00

 

13060

 

D

 

Ardean R. Goertzen, a married man dealing in his sole and separate property

 

Apollo Energy, LLC

 

11/07/03

 

63-292

 

11/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 13:  SE4
Township 10 North, Range 37 West, 6th P.M.
Section 26:  SW4

 

16.67

%

319.64000

 

0.00000

 

53.27330

 

$

0.00

 

13060

 

E

 

Marilyn Rugh, a single woman dealing in her sole and separate property

 

Apollo Energy, LLC

 

11/07/03

 

63-293

 

11/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 13:  SE4
Township 10 North, Range 37 West, 6th P.M.
Section 26:  SW4

 

16.67

%

319.64000

 

0.00000

 

53.27330

 

$

0.00

 

13060

 

F

 

Mary Strauss, a married woman dealing in her sole and separate property

 

Apollo Energy, LLC

 

11/07/03

 

63-294

 

11/07/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 13:  SE4
Township 10 North, Range 37 West, 6th P.M.
Section 26:  SW4

 

16.67

%

319.64000

 

0.00000

 

53.27330

 

$

0.00

 

13062

 

 

 

Synergetic Corporation, a Nebraska Corporation

 

Apollo Energy, LLC

 

11/05/03

 

16-354

 

11/05/08

 

Chase

 

Township 6 North, Range 39 West, 6th P.M.
Section 17:  All
Section 18:  All
Section 19:  N2, N2SW4
Section 20:  NW4

 

100.00

%

1,854.95000

 

1,854.95000

 

1,854.95000

 

$

0.00

 

13063

 

 

 

Mer-Dell Enterprises, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

11/18/03

 

16-369

 

11/18/08

 

Chase

 

Township 6 North, Range 39 West, 6th P.M.
Section 2:  SW4, W2SE4
Section 3:  All less 1.82 acres in SW4
Township 7 North, Range 39 West, 6th P.M.
Section 28:  S2S2NE4, Part of SE4
Section 33:  Part of W2NE4, Part of E2NW4

 

100.00

%

1,232.42000

 

1,232.42000

 

1,232.42000

 

$

0.00

 

13064

 

 

 

Bart J. and Sheila K. Stromberger, husband and wife

 

Apollo Energy, LLC

 

12/02/03

 

16-375

 

12/02/08

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section 1:  Part of W2

 

100.00

%

153.49000

 

153.49000

 

153.49000

 

$

0.00

 

13065

 

 

 

Richard E. and Dorothy S. Deuser Agency, Farmers National Company Agent, Oil and
Gas Dept.

 

Apollo Energy, LLC

 

11/24/03

 

63-339

 

11/24/08

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 18:  NE4

 

100.00

%

131.92000

 

131.92000

 

131.92000

 

$

0.00

 

13066

 

 

 

Tony L. and Patricia A. Brown Agency, Farmers National Company Agent, Oil and
Gas Dept.

 

Apollo Energy, LLC

 

11/24/03

 

63-338

 

11/24/08

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 20:  NE4

 

100.00

%

152.81000

 

152.81000

 

152.81000

 

$

0.00

 

13067

 

 

 

Jeffrey David Wright Agency, Farmers National Company Agent, Oil and Gas Dept.

 

Apollo Energy, LLC

 

11/24/03

 

63-337

 

11/24/08

 

Perkins

 

Township 12 North, Range 39 West, 6th P.M.
Section 21:  SE4, E2SW4

 

100.00

%

242.64000

 

242.64000

 

242.64000

 

$

0.00

 

13068

 

 

 

James A. Walter, dealing in his sole and separate property

 

Apollo Energy, LLC

 

11/01/03

 

63-336

 

11/01/08

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 22:  S2

 

100.00

%

325.71000

 

325.71000

 

325.71000

 

$

0.00

 

13069

 

 

 

Stephen M. Bull and Terese Svoboda, husband and wife

 

Apollo Energy, LLC

 

11/12/03

 

63-333

 

11/12/08

 

Perkins

 

Township 12 North, Range 39 West, 6th P.M.
Section 28:  NE

 

100.00

%

161.07000

 

161.07000

 

80.53500

 

$

0.00

 

13126

 

 

 

Fern L. Armstrong, Trustee of the Fern L. Armstrong Trust, dated September 6,
1986

 

Apollo Energy, LLC

 

10/22/03

 

79-232

 

10/22/08

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 2:  W2NW4

 

100.00

%

83.64000

 

83.64000

 

83.64000

 

$

0.00

 

13127

 

 

 

Donna M. Day and Doris D. Leland, Co-Trustees under Trust dated April, 1983

 

Gene F. Lang & CO.

 

12/04/03

 

16-317

 

12/04/08

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section 19:  Lot 3 (39.32), Lot 4 (39.51), E2SW4
Section 30:  Lot 1 (24.60), Lot 2 (24.20), Lot 3 (23.80), Lot 4 (23.40), E2W2
Township 5 North, Range 41 West, 6th P.M.
Section 24:  E2W2, SE4
Section 25:  All

 

100.00

%

1,427.23000

 

1,427.23000

 

1,427.23000

 

$

0.00

 

13128

 

 

 

Dale A. Large and Sylvia K. Large, husband and wife

 

Apollo Energy, LLC

 

12/04/03

 

16-419

 

12/04/08

 

Chase

 

Township 6 North, Range 39 West, 6th P.M.
Section 6:  Part of NW4, Part of S/2

 

100.00

%

488.68000

 

488.68000

 

488.68000

 

$

0.00

 

13129

 

A

 

Howard R. Levy and Donna Levy, individually, and as husband and wife

 

Apollo Energy, LLC

 

01/18/04

 

16-414

 

01/18/09

 

Chase

 

Tract 1
Township 6 North, Range 40 West, 6th P.M.
Section 12:  NE4
Section 14:  E2
Section 23:  NE4
Tract 2
Township 7 North, Range 39 West, 6th P.M.
Section 6:  N2, SW4

 

TR 1-100

TR 2-50

%

%

1,121.58980

 

1,121.58980

 

880.79500

 

$

0.00

 

 

19

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13130

 

 

 

Apple A, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

01/18/04

 

16-411

 

01/18/09

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 1:  SE4, W/2
Section 12:  NW4

 

100.00

%

640.84000

 

640.84000

 

327.50000

 

$

0.00

 

13132

 

 

 

Rhonda Smith and Julie Way as Attorney-in-Fact for Roberta Frosh, Trustee of the
Elmo J. Frosh Marital Trust

 

Apollo Energy, LLC

 

01/18/04

 

16-405

 

01/18/09

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 8:  E2, NW4, Part of SW4

 

100.00

%

635.00000

 

635.00000

 

635.00000

 

$

0.00

 

13133

 

 

 

Rhonda Smith and Julie Way, as Attorney in Fact for Roberta Frosh, Trustee of
the Elmo J. Frosh Family Trust

 

Apollo Energy, LLC

 

01/18/04

 

16-408

 

01/18/09

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 10:  W2, Part of the SE/4

 

100.00

%

476.44000

 

476.44000

 

476.44000

 

$

0.00

 

13145

 

 

 

Armstrong Land & Cattle Co., a Nebraska Corporation

 

Apollo Energy, LLC

 

01/13/04

 

79-260

 

01/13/09

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 2:  Tracts of land located in the E2 and SW4 more particularly described
in Book 93, Page 106 and Book 87, Page 380 of the Clerk and Recorder’s office
Section 3:  S2

 

100.00

%

348.90000

 

348.90000

 

268.72000

 

$

0.00

 

13146

 

 

 

Darrell L. Armstrong and Darlene Armstrong, individually and as husband and wife

 

Apollo Energy, LLC

 

01/13/04

 

79-258

 

01/13/09

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 2:  E2NW4, NE4, S2 except tracts in Book 93, Page 106 and Book 87,
Page 380
Section 14:  NW4

 

100.00

%

684.46000

 

684.46000

 

684.46000

 

$

0.00

 

13148

 

A

 

Jack Lee, aka John E. Lee and Betty Lee, individually and as husband and wife

 

Thomas B. Lee
(Locator’s Oil and Gas, Inc.)

 

06/21/75

 

6-27
8-561

 

6/21/1985
(HBP)

 

Chase / Dundy

 

Tract 1
Township 5 North, Range 40 West, 6th P.M.
Section 29: SW4NW4, W2SW4
Section 30:  SE4
Section 31:  Lots 1 and 2, E2NW4, NE4
Section 32:  N2
Chase County
Township 4 North, Range 40 West, 6th P.M.
Section 7:  Lots 1-4, E2W2, NE4
Section 8:  S2NW4, N2SW4
Section 18:  W2NE4, E2NW4
Township 4 North, Range 41 West, 6th P.M.
Section 2:  Lots 1,2,S2NE4
Section 12:  E2
Dundy County
Tract 2
Township 5 North, Range 40 West, 6th P.M.
Section 31:  Lots 3 and 4, E2SW4, SE4
Section 32:  S2
Chase County
Township 4 North, Range 40 West, 6th P.M.
Section 6:  Lots 3-7, SE4NW4, E2SW4
Township 4 North, Range 41 West, 6th P.M.
Section 1: Lots 3 and 4, SE4
Dundy County
Limited to and include those horizons from the surface of the Earth down to the
stratigraphic equivalent of 150 feet below the top of the Niobrara formation as
found in the Lion Oil Company #1 Earl well located in the NE4NE4 of Section 1,
Township 4 North, Range 41 West, 6th P.M., Dundy County, Nebraska (top of the
Niobrara formation in said well being defined

 

TR 1-100

TR 2-50

%

%

3,399.70000

 

3,399.70000

 

2,722.39000

 

$

3,555.45

 

13151

 

 

 

Clayton C. Cole, also known as Clayton Cole, and Irl D. Cole, also known as Irl
Cole, husband and wife

 

Apollo Energy, LLC

 

03/11/04

 

79-345

 

03/11/09

 

Keith

 

Township 14 North, Range 40 West, 6th P.M.
Section 19:  All
Section 30:  SE4, W2
Section 31:  All
Township 14 North, Range 41 West, 6th P.M.
Section 24:  Part of N/2
Section 25:  Part of E/2
Township 15 North, Range 41 West, 6th P.M.
Section 35:  All

 

100.00

%

2,548.26000

 

2,548.26000

 

2,548.26000

 

$

2,548.26

 

 

20

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13152

 

 

 

Belmar Ranch Company, a Nebraska Corporation

 

Apollo Energy, LLC

 

02/23/04

 

79-344

 

02/23/09

 

Keith

 

Township 14 North, Range 41 West, 6th P.M.
Section 1:  All
Township 15 North, Range 40 West, 6th P.M.
Section 31:  All
Township 15 North, Range 41 West, 6th P.M.
Section 10:  All South of CNPP and ID Contour
Section 13:  All except CNPP and ID
Section 14:  All South of CNPP and ID
Section 15:  All South of CNPP and ID Contour
Section 22:  All
Section 23:  All
Section 24:  All
Section 25:  All
Section 26:  All
Section 27:  All

 

100.00

%

6,376.18000

 

6,376.18000

 

6,294.76000

 

$

6,376.18

 

13153

 

 

 

Mika, Inc. a Nebraska Corporation

 

Apollo Energy, LLC

 

03/02/04

 

79-254

 

03/02/09

 

Keith

 

Township 14 North, Range 40 West, 6th P.M.
Section 10:  All, less tracts (4.26 acres)
Section 15:  NE4
Township 13 North, Range 41 West, 6th P.M.
Section 12:  NE4

 

100.00

%

944.86000

 

944.86000

 

944.86000

 

$

944.86

 

13155

 

 

 

Kim L. Hothan, dealing on his own separate property

 

Apollo Energy, LLC

 

02/25/04

 

79-255

 

02/25/09

 

Keith

 

Township 14 North, Range 41 West, 6th P.M.
Section 34:  NW4

 

100.00

%

160.20000

 

160.20000

 

160.20000

 

$

160.20

 

13156

 

A

 

Timothy Wayne Frates, dealing on his own separate property

 

Apollo Energy, LLC

 

03/01/04

 

79-256

 

03/01/09

 

Keith

 

Township 15 North, Range 40 West, 6th P.M.
Section 33:  W2

 

50.00

%

319.68000

 

319.68000

 

159.84000

 

$

159.84

 

13157

 

A

 

Jerry Waterman, also known as Jerry L. Waterman, dealing on his own separate
property

 

Apollo Energy, LLC

 

03/02/04

 

79-257

 

03/02/09

 

Keith

 

Tract 1
Township 13 North, Range 41 West, 6th P.M.
Section 2:  Lots 2,3,4, SW4NE4, S2NW4, SW4, S2SE4
Township 14 North, Range 41 West, 6th P.M.
Section 27:  SW4
Section 34:  SE4
Tract 2
Township 14 North, Range 41 West, 6th P.M.
Section 35:  SW4

 

TR 1-100

TR 2-50

%

%

967.13000

 

967.13000

 

887.14000

 

$

887.14

 

13158

 

 

 

Harms Incorporated, a Nebraska Corporation

 

Apollo Energy, LLC

 

03/02/04

 

79-343

 

03/02/09

 

Keith

 

Tract 1
Township 13 North, Range 40 West, 6th P.M.
Section 11:  N2
Tract 2
Township 13 North, Range 40 West, 6th P.M.
Section 4:  All
Section 9:  E2, NWNW, NENW4

 

TR 1-100

TR 2-36

%

%

1,355.96000

 

1,355.96000

 

693.48960

 

$

693.49

 

13174

 

 

 

Jeff Koenig and Kelli Koenig, individually and as husband and wife

 

Apollo Energy, LLC

 

03/11/04

 

64-79

 

03/11/09

 

Perkins

 

Township 11 North, Range 41 West, 6th P.M.
Section 15:  NW4

 

100.00

%

159.27000

 

159.27000

 

159.27000

 

$

0.00

 

13175

 

 

 

Kimberly Farms, Inc.

 

Apollo Energy, LLC

 

03/11/04

 

64-80

 

03/11/09

 

Perkins

 

Township 11 North, Range 41 West, 6th P.M.
Section 32:  NW4

 

100.00

%

155.99000

 

155.99000

 

155.99000

 

$

0.00

 

13176

 

 

 

Bauman Partnership

 

Apollo Energy, LLC

 

03/11/04

 

64-81

 

03/11/09

 

Perkins

 

Township 12 North, Range 41 West, 6th P.M.
Section 20:  NW

 

100.00

%

159.06000

 

159.06000

 

159.06000

 

$

0.00

 

13177

 

 

 

Kenneth A. Hagge and Dorothy Anne Hagge, individually, and as husband and wife

 

Apollo Energy, LLC

 

12/01/03

 

64-82

 

12/01/08

 

Perkins

 

Township 12 North, Range 38 West, 6th P.M.
Section 24:  SE4
Section 28:  SW4
Section 29:  W2
Section 30:  SW4
Township 12 North, Range 39 West, 6th P.M.
Section 19:  SE4

 

100.00

%

947.57000

 

947.57000

 

947.57000

 

$

0.00

 

13178

 

 

 

Donald B. Hink, dealing on his own separate property and Elaine E. Hink, dealing
on her own separate property

 

Apollo Energy, LLC

 

11/29/03

 

16-449

 

11/29/08

 

Chase

 

Township 6 North, Range 39 West, 6th P.M.
Section 20:  W2NE4
Section 26:  SE4SE4
Township 6 North, Range 40 West, 6th P.M.
Section 35:  All

 

100.00

%

760.34000

 

760.34000

 

760.34000

 

$

0.00

 

13179

 

 

 

Kathleen A. Baker, dealing in her sole and separate property

 

Apollo Energy, LLC

 

03/11/04

 

64-72

 

03/11/09

 

Perkins

 

Township 11 North, Range 41 West, 6th P.M.
Section 8:  N2SE
Section 9:  S2NW
Section 18:  E2SW
Section 26:  N2NW

 

100.00

%

319.60000

 

319.60000

 

319.60000

 

$

0.00

 

13180

 

 

 

John A. and Sharon G. Arkles, individually and as husband and wife

 

Apollo Energy, LLC

 

03/11/04

 

64-73

 

03/11/09

 

Perkins

 

Township 11 North, Range 41 West, 6th P.M.
Section 8:  S2SE4
Section 9:  N2NW4
Section 18:  W2SW4
Section 26:  S2NW4

 

100.00

%

319.66000

 

319.66000

 

319.66000

 

$

0.00

 

 

21

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13181

 

 

 

Benny A. Adamson a/k/a Benny Anthony Adamson

 

Apollo Energy, LLC

 

03/11/04

 

64-74

 

03/11/09

 

Perkins

 

Township 12 North, Range 41 West, 6th P.M.
Section 28:  NW4

 

100.00

%

159.54000

 

159.54000

 

159.54000

 

$

0.00

 

13182

 

 

 

Melinda K. Nelson, dealing in her sole and separate property

 

Apollo Energy, LLC

 

03/11/04

 

64-75

 

03/11/09

 

Perkins

 

Township 11 North, Range 41 West, 6th P.M.
Section 10:  SE

 

100.00

%

160.38000

 

160.38000

 

160.38000

 

$

0.00

 

13183

 

 

 

Joan A. Parks, dealing on her own separate property

 

Apollo Energy, LLC

 

02/20/04

 

79-336

 

02/20/09

 

Keith

 

Township 15 North, Range 40 West, 6th P.M.
Section 34:  All
Township 14 North, Range 40 West, 6th P.M.
Section 3:  All
Section 4:  All
Section 9:  a 2.02 acre tract in NE4NE4

 

100.00

%

1,929.30000

 

1,929.30000

 

1,929.30000

 

$

1,929.30

 

13184

 

 

 

Kevin C. Cole and Tammy K. Cole, husband and wife

 

Apollo Energy, LLC

 

03/31/04

 

79-337

 

03/31/09

 

Keith

 

Township 14 North, Range 40 West
Section 14:  S2
Section 30:  NE

 

100.00

%

482.05000

 

482.05000

 

482.05000

 

$

482.05

 

13189

 

 

 

Maralyn M. Mercer, Sheralee Rae McLaughlin and Shellee S. Robison, dealing in
their sole and separate property

 

Apollo Energy, LLC

 

03/16/04

 

64-76

 

03/16/09

 

Perkins

 

Township 12 North, Range 40 West, 6th P.M.
Section 31:  NE

 

100.00

%

160.31000

 

160.31000

 

120.23250

 

$

0.00

 

13228

 

 

 

Leon O. Shaw, dealing in his sole and separate property

 

Apollo Energy, LLC

 

01/14/05

 

64-186

 

01/14/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 14: SE4
Section 24: NW4 less a 1.56 acre tract

 

100.00

%

322.16000

 

322.16000

 

322.16000

 

$

966.48

 

13229

 

 

 

Leland Spanjer, dealing in his sole and separate property

 

Apollo Energy, LLC

 

01/14/05

 

64-187

 

01/14/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 14: SW4
Section 15: SE4
Section 22: NE4
Section 23: E2, SW4
Section 26: SW4

 

100.00

%

1,095.47000

 

1,095.47000

 

1,095.47000

 

$

3,286.41

 

13230

 

 

 

Burton A. Bogaert, dealing in his sole and separate property

 

Apollo Energy, LLC

 

01/14/05

 

64-188

 

01/14/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 26: SE4

 

100.00

%

157.83000

 

157.83000

 

157.83000

 

$

787.15

 

13231

 

A

 

Betty Jane Alexander, dealing in her sole and separate property

 

Apollo Energy, LLC

 

01/14/05

 

64-189

 

01/14/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 8:  NW4

 

50.00

%

150.40000

 

150.40000

 

75.20000

 

$

0.00

 

13232

 

 

 

Michael J. Cockrill, dealing in his sole and separate property

 

Apollo Energy, LLC

 

01/17/05

 

64-190

 

01/17/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 34: SW4

 

100.00

%

152.29000

 

152.29000

 

152.29000

 

$

0.00

 

13233

 

 

 

Jerald Harms and Carolyn Harms, individually, and as husband and wife

 

Apollo Energy, LLC

 

01/17/05

 

64-191

 

01/17/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 27: SE4

 

100.00

%

161.63000

 

161.63000

 

161.63000

 

$

0.00

 

13234

 

 

 

Robert H. McCaffree and Inez A. McCaffree, individually, and as husband and
wife, by Inez A. McCaffree, attorney in fact for Robert H. McCaffree

 

Apollo Energy, LLC

 

01/17/05

 

64-192

 

01/17/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 32: S2NW4, S2N2NW4

 

100.00

%

120.75000

 

120.75000

 

120.75000

 

$

0.00

 

13235

 

 

 

Y-AG Corp., Inc. C/O Calvin Young

 

Apollo Energy, LLC

 

01/17/05

 

64-251

 

01/17/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 14:  NE4, W2
Section 15:  NE4
Section 24:  E2

 

Tract 1-100

Tract 2-50

%

%

963.01000

 

963.01000

 

641.67500

 

$

0.00

 

13236

 

 

 

Violet V. Kosmicki, dealing in her sole and separate property

 

Apollo Energy, LLC

 

01/14/05

 

64-195

 

01/14/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 25:  W2

 

100.00

%

316.70000

 

316.70000

 

316.70000

 

$

315.70

 

13237

 

 

 

Triangle C Farms & Ranches, Inc., a Nebraska Corporation

 

Apollo Energy, LLC

 

01/17/05

 

64-193

 

01/17/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 12:  N2, SW4 less tract in SE4SW4 9.89 acres
Section 13:  NW4

 

100.00

%

624.48000

 

624.48000

 

625.48000

 

$

0.00

 

13238

 

 

 

Courtney Shrotberger and Dee Ann Schrotberger, individually, and as husband and
wife

 

Apollo Energy, LLC

 

01/17/05

 

64-194

 

01/17/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 28:  W2

 

100.00

%

320.07000

 

320.07000

 

320.07000

 

$

0.00

 

13239

 

 

 

Bruce D. Young dealing in his sole and separate property

 

Apollo Energy, LLC

 

01/20/05

 

64-196

 

01/20/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 15:  SW4 less tract in SW4SW4
Section 22:  W2NW4
Township 10 North, Range 38 West, 6th P.M.
Section 13:  E2

 

100.00

%

551.62000

 

551.62000

 

551.62000

 

$

551.62

 

13240

 

 

 

Jim D. Kemling and Starlene M. Kemling, individually, and as huband and wife

 

Apollo Energy, LLC

 

01/14/05

 

64-197

 

01/14/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 24:  NE4

 

100.00

%

160.70000

 

160.70000

 

160.70000

 

$

0.00

 

13241

 

 

 

Daniel W. Burge, dealing in his sole and separate property

 

Apollo Energy, LLC

 

01/14/05

 

64-199

 

01/14/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 24:  SW4

 

100.00

%

157.46000

 

157.46000

 

157.46000

 

$

0.00

 

13242

 

 

 

Bryan S. Kroeker and Patsy J. Kroeker, individually, and as husband and wife

 

Apollo Energy, LLC

 

01/14/05

 

64-198

 

01/14/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 5:  SE4

 

100.00

%

154.23000

 

154.23000

 

154.23000

 

$

0.00

 

13243

 

 

 

Marilyn McDonald, dealing in her sole and separate property

 

Apollo Energy, LLC

 

01/17/05

 

64-200

 

01/17/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 35:  NW4

 

100.00

%

161.73000

 

161.73000

 

161.73000

 

$

0.00

 

13244

 

 

 

Bernita Lampmann, dealing in her sole and separate property

 

Apollo Energy, LLC

 

01/17/05

 

64-201

 

01/17/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 35:  NE4

 

100.00

%

160.75000

 

160.75000

 

160.75000

 

$

0.00

 

13245

 

 

 

Wayne A. Burge and Nancy Burge, individually, and as husband and wife

 

Apollo Energy, LLC

 

01/17/05

 

64-202

 

01/17/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 27:  NW4

 

100.00

%

161.84000

 

161.84000

 

161.84000

 

$

0.00

 

 

22

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13247

 

 

 

John W. Long and Kristie Jo Long, individually, and as husband and wife

 

Apollo Energy, LLC

 

01/17/05

 

64-204

 

01/17/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 13:  NE4

 

100.00

%

158.72000

 

158.72000

 

158.72000

 

$

0.00

 

13253

 

 

 

Everett R. Smith and JoAnn D. Smith, individually, and as husband and wife

 

Apollo Energy, LLC

 

01/17/05

 

64-205

 

01/17/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 13:  SW4
Section 14:  SE4
Section 20:  NE4

 

100.00

%

480.30000

 

480.30000

 

480.30000

 

$

0.00

 

13254

 

 

 

Jane Tjaden, dealing in her sole and separate property

 

Apollo Energy, LLC

 

01/17/05

 

64-206

 

01/17/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 1:  S2

 

100.00

%

322.26000

 

322.26000

 

322.26000

 

$

0.00

 

13255

 

 

 

Edwin F. Friehauf and Frances A. Friehauf, individually, as as trustees of the
Friehauf Living Trust

 

Apollo Energy, LLC

 

01/29/05

 

64-207

 

01/29/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 34:  NW4
Township 9 North, Range 38 West, 6th P.M.
Section 3:  SE4

 

100.00

%

310.32000

 

310.32000

 

310.32000

 

$

0.00

 

13256

 

 

 

Wiebe Family Investments, LLC, a Nebraska Limited Liability Company

 

Apollo Energy, LLC

 

01/17/05

 

64-208

 

01/17/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 25:  NE4

 

100.00

%

159.93000

 

159.93000

 

159.93000

 

$

0.00

 

13259

 

 

 

Jacob and Mildred Friesen Trust, Jacob Friesen, Trustee and Mildred Friesen,
Trustee

 

Apollo Energy, LLC

 

01/14/05

 

64-209

 

01/14/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 25:  E2, less a 7.29 acre tract

 

100.00

%

307.49000

 

307.49000

 

307.49000

 

$

307.49

 

13306

 

 

 

Everett R. Smith and Jo Ann D. Smith, Individually, and as husband and wife

 

Apollo Energy, LLC

 

02/14/05

 

64-210

 

02/14/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 8:  SW4

 

100.00

%

156.38000

 

156.38000

 

156.38000

 

$

0.00

 

13307

 

 

 

Bonita J. Brown, as trustee of the Bonita J. Brown Trust

 

Apollo Energy, LLC

 

03/05/05

 

64-218

 

03/05/10

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 21:  SW4

 

100.00

%

161.44000

 

161.44000

 

161.44000

 

$

0.00

 

13308

 

 

 

Kenneth Twerwilliger, individually, and as husband and wife

 

Apollo Energy, LLC

 

03/05/05

 

64-220

 

03/05/10

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 28:  W2

 

100.00

%

321.65000

 

321.65000

 

321.65000

 

$

0.00

 

13309

 

 

 

Estaline Wilma Cockrill, Trustee

 

Apollo Energy, LLC

 

03/05/05

 

64-248

 

03/05/10

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 3:  NE4 less tract

 

100.00

%

154.72000

 

154.72000

 

154.72000

 

$

0.00

 

13310

 

 

 

Vernon Lee Pankonin

 

Apollo Energy, LLC

 

03/10/05

 

64-217

 

03/10/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 19:  W2
Section 23:  NE4

 

100.00

%

490.54000

 

490.54000

 

490.54000

 

$

0.00

 

13311

 

 

 

Alexander Brian Pankonin, dealing in his sole and separate property

 

Apollo Energy, LLC

 

03/10/05

 

64-247

 

03/10/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 23:  SE4

 

100.00

%

161.16000

 

161.16000

 

161.16000

 

$

0.00

 

13312

 

 

 

Edwin Martens, a widower

 

Apollo Energy, LLC

 

03/11/05

 

64-246

 

03/11/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 13:  SE4

 

100.00

%

159.83000

 

159.83000

 

159.83000

 

$

0.00

 

13313

 

 

 

Donald W. Hamm, dealing in his sole and separate property

 

Apollo Energy, LLC

 

03/05/05

 

64-216

 

03/05/10

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 21:  N2

 

100.00

%

320.00000

 

320.00000

 

320.00000

 

$

0.00

 

13314

 

 

 

Janet Schroeder, as trustee of the Lowell M. Schroeder Family Trust

 

Apollo Energy, LLC

 

03/05/05

 

64-252

 

03/05/10

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 32:  NE4 (Tr. 1)
Section 33:  NW4 (Tr. 2)

 

Tr. 1 -100

Tr. 2 - 50

%

%

318.65000

 

318.65000

 

238.55000

 

$

0.00

 

13315

 

 

 

Janet Schroeder, dealing in her sole and separate property

 

Apollo Energy, LLC

 

03/05/05

 

64-219

 

03/05/10

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 29:  SE4
Section 33:  SW4

 

100.00

%

320.75000

 

320.75000

 

320.75000

 

$

0.00

 

13316

 

 

 

Michael J. Cockrill, dealing in his sole and separate property

 

Apollo Energy, LLC

 

03/05/05

 

64-215

 

03/05/10

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 3:  NW4

 

100.00

%

163.25000

 

163.25000

 

163.25000

 

$

0.00

 

13317

 

 

 

Grapes Family Farms, a Nebraska Corporation

 

Apollo Energy, LLC

 

03/11/05

 

80-403

 

03/11/10

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 11:  All

 

100.00

%

630.42000

 

630.42000

 

315.21000

 

$

0.00

 

13328

 

 

 

Diane C. Pankonin, dealing in her sole and separate property

 

Apollo Energy, LLC

 

03/28/05

 

64-239

 

03/28/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 18:  SW4

 

100.00

%

137.78000

 

137.78000

 

137.78000

 

$

0.00

 

13329

 

 

 

Kathryn Brown, dealing in her sole and separate property

 

Apollo Energy, LLC

 

03/02/05

 

64-240

 

03/02/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 31:  N2

 

100.00

%

317.39000

 

317.39000

 

317.39000

 

$

0.00

 

13330

 

 

 

Ruby V. Schroder as trustee of the Clark H. Schroder Family Trust

 

Apollo Energy, LLC

 

03/05/05

 

64-241

 

03/05/10

 

Perkins

 

Township 9 North, Range 38 West, 6th P.M.
Section 20:  SW4

 

100.00

%

159.83000

 

159.83000

 

159.83000

 

$

0.00

 

13332

 

 

 

BAUMANN PARTNERSHIP, a Nebraska Partnership

 

Apollo Energy, LLC

 

03/11/05

 

80-252

 

03/11/10

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 7:  E2
Section 18:  Lots 1,2,3,4, E2W2, E2

 

100.00

%

945.68000

 

945.68000

 

945.68000

 

$

0.00

 

 

23

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13333

 

A

 

JOE VAK FARMS, INC., a Nebraska Corporation, and Joseph R. Vak and Julie A. Vak,
individually and as husband and wife

 

Apollo Energy, LLC

 

03/28/05

 

64-249

 

03/28/10

 

Perkins

 

Township 11 North, Range 40 West, 6th P.M.
Section 25: W2
Township 11 North, Range 39 West, 6th P.M.
Section 11: S2 less 5.52 acre tract Book 33 at page 205 Of the records of
Perkins County, Nebraska
Section 13: NW4 less 8.70 acre tract Book 37 at page 136 Of the records of
Perkins County, Nebraska
Township 10 North, Range 39 West, 6th P.M.
Section  1: S2
Section  6: SE4
Section  7: SE4 less 1 acre tract described in Book 38 at page 297 Of the
records of Perkins County, Nebraska
Section  8: NE4
Township 10 North, Range 38 West, 6th P.M.
Section  8: SW4
Section  9: W2NE4, NW4
Township 10 North, Range 37 West, 6th P.M.
Section  3: S2
Township 11 North, Range 37 West, 6th P.M.
Section 34: SE4
Township 9 North, Range 37 West, 6th P.M.
Section 18: S2SE4, SE4SW4
Section 19: NE4, S2
Section 20: S2SW4
Section 29: NW4, N2SW4
Section 30: N2, N2S2
Township 10 North, Range 36 West, 6th P.M.
Section 18: NW4, SE4
Township 12 North, Range 35 West, 6th P.M.
Section 28: N2, SE4

 

98.75

%

4,602.95000

 

4,602.95000

 

4,545.64000

 

$

0.00

 

13334

 

 

 

COOPER FARMS LIMITED a Nebraska Limited Partnership

 

Apollo Energy, LLC

 

03/28/05

 

NA

 

03/28/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 32: All
Section 33:  SW4
Township 9 North, Range 39 West, 6th P.M.
Section 5:  Lots 1,2, S2NE, S2 except a tract particularly described in Book 59
of Deed at Page 141 of the records of Perkins County, Nebraska
Section 8:  SW4
Township 9 North, Range 38 West, 6th P.M.
Section 18:  Lots 3, 4, E2SW4, SE4
Section 19:  Lots 1, 2, E2NW4

 

100.00

%

1,947.70000

 

1,947.70000

 

1,947.70000

 

$

0.00

 

13335

 

 

 

Jim A. Cooper, also known as Jim Cooper, dealing in his sole and separate
property

 

Apollo Energy, LLC

 

03/28/05

 

64-250

 

03/28/10

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 5:  NW4
Section 8:  E2

 

100.00

%

487.34000

 

487.34000

 

487.34000

 

$

0.00

 

13339

 

 

 

E. R. P., Inc., a Nebraska Corporation, C/O Larry Pankonin

 

Apollo Energy, LLC

 

03/28/05

 

64-242

 

03/28/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 15:  NW4
Section 22:  NE4, E2NW4
Section 24:  SW4
Section 25:  NW4
Section 28:  SE4

 

100.00

%

886.81000

 

886.81000

 

886.81000

 

$

0.00

 

13351

 

 

 

Diana Pankonin and Rosalie Gregerson, Co-Trustees of the Albert A. Brown Trust

 

Apollo Energy, LLC

 

03/02/05

 

64-243

 

03/02/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 18: N2, SE4

 

100.00

%

456.54000

 

456.54000

 

456.54000

 

$

0.00

 

13352

 

A

 

Leroy F. Nikkel and Carol Nikkel, individually and as husband and wife

 

Apollo Energy, LLC

 

03/02/05

 

64-244

 

03/02/10

 

Perkins

 

Tract 1
Township 10 North, Range 39 West, 6th P.M.
Section 20: SE4
Tract 2
Township 9 North, Range 38 West, 6th P.M.
Section 10: NE4

 

Tr. 1 - 50

Tr. 2 - 100

%

%

324.18000

 

324.18000

 

243.80500

 

$

0.00

 

13353

 

 

 

Charles E. Jackman Trust, Roger E. Jackman, Trustee

 

Apollo Energy, LLC

 

03/28/05

 

65-136

 

03/28/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section 18:  N2, SE4

 

100.00

%

484.20000

 

484.20000

 

484.20000

 

$

0.00

 

13354

 

 

 

Ray Stephenson Farms, Inc. a Nebraska Corporation

 

Apollo Energy, LLC

 

03/28/05

 

65-135

 

03/28/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 23:  Part of the N2NE4
Section 24:  E2

 

100.00

%

395.02000

 

395.02000

 

395.02000

 

$

0.00

 

13355

 

 

 

Ryan M. Hendricks and Shawnda B. Hendricks, individually, and dealing in their
sole and separate property

 

Apollo Energy, LLC

 

03/19/05

 

64-245

 

03/19/10

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section 15: SW4

 

100.00

%

158.96000

 

158.96000

 

158.96000

 

$

0.00

 

13381

 

 

 

State of Nebraska #7281

 

Apollo Energy, LLC

 

05/13/05

 

16-733

 

05/13/10

 

Chase

 

Township 5 North, Range 40 West, 6th P.M.
Section  16: All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

 

24

--------------------------------------------------------------------------------

 

Apollo
Lease #

 

 

 

Lessor

 

Lessee

 

Lease
Eff
Date

 

Recording
Data
Book - Page

 

Exp
Date

 

County,
State

 

Description

 

Lessor
Interest
(All Tracts)

 

New Gross

 

New Added
Gross

 

New Net Acres

 

Total
Annual
Rental

 

13382

 

 

 

State of Nebraska #7282

 

Apollo Energy, LLC

 

05/13/05

 

16-731

 

05/13/10

 

Chase

 

Township 6 North, Range 40 West, 6th P.M.
Section 16: All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13383

 

 

 

State of Nebraska #7291

 

Apollo Energy, LLC

 

05/13/05

 

80-455

 

05/13/10

 

Keith

 

Township 14 North, Range 40 West, 6th P.M.
Section  16: All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13384

 

 

 

State of Nebraska #7292

 

Apollo Energy, LLC

 

05/13/05

 

80-454

 

05/13/10

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 16: All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13385

 

 

 

State of Nebraska #7294

 

Apollo Energy, LLC

 

05/13/05

 

80-453

 

05/13/10

 

Keith

 

Township 15 North, Range 41 West, 6th P.M.
Section 36: All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13386

 

 

 

State of Nebraska #7295

 

Apollo Energy, LLC

 

05/13/05

 

54-157

 

05/13/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 16: All

 

100.00

%

617.89000

 

639.36000

 

639.36000

 

$

1,235.78

 

13387

 

 

 

State of Nebraska #7296

 

Apollo Energy, LLC

 

05/13/05

 

65-156

 

05/13/10

 

Perkins

 

Township 11 North, Range 38 West, 6th P.M.
Section  16: All

 

100.00

%

639.36000

 

639.36000

 

639.36000

 

$

1,278.72

 

13388

 

 

 

State of Nebraska #7297

 

Apollo Energy, LLC

 

05/13/05

 

65-155

 

05/13/10

 

Perkins

 

Township 12 North, Range 38 West, 6th P.M.
Section 36: All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13389

 

 

 

State of Nebraska #7298

 

Apollo Energy, LLC

 

05/13/05

 

65-154

 

05/13/10

 

Perkins

 

Township 9 North, Range 39 West, 6th P.M.
Section  16: All

 

100.00

%

640.00000

 

640.00000

 

640.00000

 

$

1,280.00

 

13390

 

A

 

Malmkar LTD

 

High Plains Energy Co.

 

06/08/05

 

65-174

 

06/08/10

 

Perkins

 

Tract 1
Township 10 North, Range 39 West, 6th P.M.
Section 15: SE/4
Tract 2
Township 10 North, Range 39 West, 6th P.M.
Section 22: E/2

 

Tr 1-50

Tr 2-100

%

%

471.94000

 

471.94000

 

397.58500

 

$

0.00

 

13391

 

A

 

Todd Arthur Lowther and Paula Breeden Lowther, husband and wife

 

High Plains Energy Co.

 

08/02/05

 

37-692

 

08/02/10

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section  7: SE/4

 

25.0000

%

160.00000

 

160.00000

 

40.00000

 

$

0.00

 

13391

 

B

 

Willis Henry Lowther and Janet Kay Lowther, husband and wife

 

High Plains Energy Co.

 

08/02/05

 

37-694

 

08/02/10

 

Dundy

 

Township 4 North, Range 40 West, 6th P.M.
Section  7: SE/4

 

25.0000

%

160.00000

 

0.00000

 

40.00000

 

$

0.00

 

13392

 

 

 

George E. Reitz and Carol Ann Reitz, husband and wife

 

High Plains Energy Co.

 

06/24/05

 

65-170

 

06/24/10

 

Perkins

 

Township 10 North, Range 39 West, 6th P.M.
Section 15: A tract of land in the SE/4

 

50.0000

%

9.91000

 

9.91000

 

4.95500

 

$

0.00

 

13393

 

 

 

Dudden Implement Company, Inc., A Nebraska Corporation

 

High Plains Energy Co.

 

06/16/05

 

 

 

06/16/10

 

Perkins

 

Township 10 North, Range 38 West, 6th P.M.
Section 21: A part of the SE/4 more particularly described as beginning at the
Southwest corner of the Southeast Quarter of Section 21; thence along the West
line thereof, N 0°36’ W 774.58 feet; thence S 42°55’ E 1096.48 feet; thence, S
4°46’ W 33.00 feet to a point on the South line of said Section 21; thence,
along said South line, N 85°14’ W 738.33 feet to the point of beginning,
containing 6.83 acres of land
Township 10 North, Range 39 West, 6th P.M.
Section 13: Beginning at the southwest corner of the Northwest Quarter of said
Section 13, and running East along the half section line 498 feet; thence North
at right angles 700 feet; thence West at right angles 498 feet; thence South at
right angles 700 feet to the point of the beginning.
Section 13: Beginning at the northwest corner of the Southwest Quarter of
Section 13; thence along the north line of said quarter, S 89 degrees, 12
minutes, 40 seconds E 825.59 feet; thence S 47 degrees, 59 minutes, 30 seconds W
1 1,111.44 feet to a point on the west line of said quarter; thence alond said
west line N 0 degrees, 01 minutes, 30 seconds E 755.20 feet to the point of the
beginning.

 

100.0000

%

21.45000

 

21.45000

 

21.45000

 

$

0.00

 

13396

 

 

 

James R. Marsh, a single man

 

High Plains Energy Co.

 

07/15/05

 

 

 

07/15/10

 

Keith

 

Township 12 North, Range 41 West, 6th P.M.
Section 13: SW/4
Township 13 North, Range 41 West, 6th P.M.
Section 33: W/2 except that portion acquired by the State of Nebraska for
Interstate Highway Right-of-way purposes, and except a tract described in WD
92-191, containing 10.00 acres.

 

100.0000

%

447.79000

 

447.79000

 

447.79000

 

$

447.79

 

 

25

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EXHIBIT A-3

 

[g164171kg11i001.jpg]

 

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There is no Exhibit “B” to this Agreement.

 

--------------------------------------------------------------------------------

 

 

COPAS 1984 ONSHORE

 

Recommended by the Council

 

of Petroleum Accountants

 

Societies

 

EXHIBIT  “ C ”

 

Attached to and made a part of that certain Operating Agreement dated January
27, 2006, by and between Noble Energy, Inc., as Operator, and Teton DJ LLC, as
Non-Operator

 

ACCOUNTING PROCEDURE

 

JOINT OPERATIONS

 

I. GENERAL PROVISIONS

 

1.             Definitions

 

“Joint Property” shall mean the real and personal property subject to the
agreement to which this Accounting Procedure is attached.

 

“Joint Operations” shall mean all operations necessary or proper for the
development, operation, protection and maintenance of the Joint Property.

 

“Joint Account” shall mean the account showing the charges paid and credits
received in the conduct of the Joint Operations and which are to be shared by
the Parties.

 

“Operator” shall mean the party designated to conduct the Joint Operations.

 

“Non-Operators” shall mean the Parties to this agreement other than the
Operator.

 

“Parties” shall mean Operator and Non-Operators.

 

“First Level Supervisors” shall mean those employees whose primary function in
Joint Operations is the direct supervision of other employees and/or contract
labor directly employed on the Joint Property in a field operating capacity.

 

“Technical Employees” shall mean those employees having special and specific
engineering, geological or other professional skills, and whose primary function
in Joint Operations is the handling of specific operating conditions and
problems for the benefit of the Joint Property.

 

“Personal Expenses” shall mean travel and other reasonable reimbursable expenses
of Operator’s employees.

 

“Material” shall mean personal property, equipment or supplies acquired or held
for use on the Joint Property.

 

“Controllable Material” shall mean Material which at the time is so classified
in the Material Classification Manual as most recently recommended by the
Council or Petroleum Accountants Societies.

 

2.             Statement and Billings

 

Operator shall bill Non-Operators on or before the last day of each month for
their proportionate share of the Joint Account for the preceding month. Such
bills will be accompanied by statements which identify the authority for
expenditure, lease or facility, and all charges and credits summarized by
appropriate classifications of investment and expense except that items of
Controllable Material and unusual charges and credits shall be separately
identified and fully described in detail.

 

3.             Advances and Payments by Non-Operators

 

A.            Unless otherwise provided for in the agreement, the Operator may
require the Non-Operators to advance their share of estimated cash outlay for
the succeeding month’s operation within fifteen (15) days after receipt of the
billing or by the first day of the month for which the advance is required,
whichever is later. Operator shall adjust each monthly billing to reflect
advances received from the Non-Operators.

 

B.            Each Non-Operator shall pay its proportion of all bills within
fifteen (15) days after receipt. If payment is not made within such time, the
unpaid balance shall bear interest monthly at the prime rate in effect at Chase
Manhattan Bank on the first day of the month in which delinquency occurs plus 1%
or the maximum contract rate permitted by the applicable usury laws in the state
in which the Joint Property is located, whichever is the lesser, plus attorney’s
fees, court costs, and other costs in connection with the collection of unpaid
amounts.

 

4.             Adjustments

 

Payment of any such bills shall not prejudice the right of any Non-Operator to
protest or question the correctness thereof; provided, however, all bills and
statements rendered to Non-Operators by Operator during any calendar year shall
conclusively be presumed to be true and correct after twenty-four (24) months
following the end of any such calendar year, unless within the said twenty-four
(24) month period a Non-Operator takes written exception thereto and makes claim
on Operator for adjustment. No adjustment favorable to Operator shall be made
unless it is made within the same prescribed period. The provisions of this
paragraph shall not prevent adjustments resulting from a physical inventory of
Controllable Material as provided for in Section V.

 

COPYRIGHT © 1985 by the Council of Petroleum Accountants Societies.

 

1

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5.             Audits

 

A.            A Non-Operator, upon notice in writing to Operator and all other
Non-Operators, shall have the right to audit Operator’s accounts and records
relating to the Joint Account for any calendar year within the twenty-four (24)
month period following the end of such calendar year; provided, however, the
making of an audit shall not extend the time for the taking of written exception
to and the adjustments of accounts as provided for in Paragraph 4 of this
Section I. Where there are two or more Non-Operators, the Non-Operators shall
make every reasonable effort to conduct a joint audit in a manner which will
result in a minimum of inconvenience to the Operator. Operator shall bear no
portion of the Non-Operators’ audit cost incurred under this paragraph unless
agreed to by the Operator. The audits shall not be conducted more than once each
year without prior approval of Operator, except upon the resignation or removal
of the Operator, and shall be made at the expense of those Non-Operators
approving such audit.

 

B.            The Operator shall reply in writing to an audit report within 180
days after receipt of such report.

 

6.             Approval By Non-Operators

 

Where an approval or other agreement of the Parties or Non-Operators is
expressly required under other sections of this Accounting Procedure and if the
agreement to which this Accounting Procedure is attached contains no contrary
provisions in regard thereto, Operator shall notify all Non-Operators of the
Operator’s proposal, and theagreement or approval of a majority in interest of
the Non-Operators shall be controlling on all Non-Operators.

 

II. DIRECT CHARGES

 

Operator shall charge the Joint Account with the following items:

 

1.             Ecological and Environmental

 

Costs incurred for the benefit of the Joint Property as a result of governmental
or regulatory requirements to satisfy environmental considerations applicable to
the Joint Operations. Such costs may include surveys of an ecological or
archaeological nature and pollution control procedures as required by applicable
laws and regulations.

 

2.             Rentals and Royalties

 

Lease rentals and royalties paid by Operator for the Joint Operations.

 

3.             Labor

 

A.            (1)           Salaries and wages of Operator’s field employees
directly employed on the Joint Property in the conduct of               Joint
Operations.

 

(2)           Salaries of First level Supervisors in the field.

 

(3)           Salaries and wages of Technical Employees directly employed on the
Joint Property if such charges are excluded from the overhead rates.

 

(4)           Salaries and wages of Technical Employees either temporarily or
permanently assigned to and directly employed in the operation or the Joint
Property if such charges are excluded from the overhead rates.

 

B.            Operator’s cost of holiday, vacation, sickness and disability
benefits and other customary allowances paid to employees whose salaries and
wages are chargeable to the Joint Account under Paragraph 3A of this Section II.
Such costs under this Paragraph 3B may be charged on a “when and as paid basis”
or by “percentage assessment” on the amount of salaries and wages chargeable to
the Joint Account under Paragraph 3A of this Section II. If percentage
assessment is used, the rate shall be based on the Operator’s cost experience.

 

C.            Expenditures or contributions made pursuant to assessments imposed
by governmental authority which are applicable to Operator’s costs chargeable to
the Joint Account under Paragraphs 3A and 3B of this Section II.

 

D.            Personal Expenses of those employees whose salaries and wages are
chargeable to the Joint Account under Paragraphs 3A and 3B of this Section II.

 

4.             Employee Benefits

 

Operator’s current costs or established plans for employees’ group life
insurance, hospitalization, pension, retirement, stock purchase, thrift, bonus,
and other benefit plans of a like nature, applicable to Operator’s labor cost
chargeable to the Joint Account under Paragraphs 3A and 3B of this Section II
shall be Operator’s actual cost not to exceed the percent most recently
recommended by the Council of Petroleum Accountants Societies.

 

2

--------------------------------------------------------------------------------

 

5.             Material

 

Material purchased or furnished by Operator for use on the Joint Property as
provided under Section IV. Only such Material shall be purchased for or
transferred to the Joint Property as may be required for immediate use and is
reasonably practical and consistent with efficient and economical operations.
The accumulation of surplus stocks shall be avoided.

 

6.             Transportation

 

Transportation of employees and Material necessary for the Joint Operations but
subject to the following limitations:

 

A.            If Material is moved to the Joint Property from the Operator’s
warehouse or other properties, no charge shall be made to the Joint Account for
a distance greater than the distance from the nearest reliable supply store
where likematerial is normally available or railway receiving point nearest the
Joint Property unless agreed to by the Parties.

 

B.            If surplus Material is moved to Operator’s warehouse or other
storage point, no charge shall be made to the Joint Account for a distance
greater than the distance to the nearest reliable supply store where like
material is normallyavailable, or railway receiving point nearest the Joint
Property unless agreed to by the Parties. No charge shall bemade to the Joint
Account for moving Material to other properties belonging to Operator, unless
agreed to by theParties.

 

C.            In the application of subparagraphs A and B above, the option to
equalize or charge actual trucking cost is available when the actual charge is
$400 or less excluding accessorial charges. The $400 will be adjusted to the
amount most recently recommended by the Council of Petroleum Accountants
Societies.

 

7.             Services

 

The cost of contract services, equipment and utilities provided by outside
sources, except services excluded by Paragraph 10 of Section II and Paragraph i,
ii, and iii, of Section III. The cost of professional consultant services and
contractservices of technical personnel directly engaged on the Joint Property
if such charges are excluded from the overheadrates. The cost of professional
consultant services or contract services of technical personnel not directly
engaged on the Joint Property shall not be charged to the Joint Account unless
previously agreed to by the Parties.

 

8.             Equipment and Facilities Furnished By Operator

 

A.            Operator shall charge the Joint Account for use of Operator owned
equipment and facilities at rates commensurate with costs of ownership and
operation. Such rates shall include costs of maintenance, repairs, other
operating expense, insurance, taxes, depreciation, and interest on gross
investment less accumulated depreciation not to exceed
Twenty                 percent (          20         %) per annum. Such rates
shall not exceed average commercial rates currently prevailing in the immediate
area of the Joint Property.

 

B.            In lieu of charges in Paragraph 8A above, Operator may elect to
use average commercial rates prevailing in the immediate area of the Joint
Property less 20%. For automotive equipment, Operator may elect to use rates
published by the Petroleum Motor Transport Association.

 

9.             Damages and Losses to Joint Property

 

All costs or expenses necessary for the repair or replacement of Joint Property
made necessary because of damages or losses incurred by fire, flood, storm,
theft, accident, or other cause, except those resulting from Operator’s gross
negligence or willful misconduct. Operator shall furnish Non-Operator written
notice of damages or losses incurred assoon as practicable after a report
thereof has been received by Operator.

 

10.          Legal Expense

 

Expense of handling, investigating and settling litigation or claims,
discharging of liens, payment of judgments and amounts paid for settlement of
claims incurred in or resulting from operations under the agreement or necessary
to protect or recover the Joint Property, except that no charge for services of
Operator’s legal staff or fees or expense ofoutside attorneys shall be made
unless previously agreed to by the Parties. All other legal expense is
considered to be covered by the overhead provisions of Section III unless
otherwise agreed to by the Parties, except as provided in Section I, Paragraph
3.

 

11.          Taxes

 

All taxes of every kind and nature assessed or levied upon or in connection with
the Joint Property, the operation thereof, or the production therefrom, and
which taxes have been paid by the Operator for the benefit of the Parties. If
the advalorem taxes are based in whole or in part upon separate valuations of
each party’s working interest, then notwithstanding anything to the contrary
herein, charges to the Joint Account shall be made and paid by the Parties
hereto in accordance with the tax value generated by each party’s working
interest.

 

3

--------------------------------------------------------------------------------

 

12.          Insurance

 

Net premiums paid for insurance required to be carried for the Joint Operations
for the protection of the Parties. In the event Joint Operations are conducted
in a state in which Operator may act as self-insurer for Worker’s Compensation
and/or Employers Liability under the respective state’s laws, Operator may, at
its election, include the risk under its self- insurance program and in that
event, Operator shall include a charge at Operator’s cost not to exceed manual
rates.

 

13.          Abandonment and Reclamation

 

Costs incurred for abandonment of the Joint Property, including costs required
by governmental or other regulatory authority.

 

14.          Communications

 

Cost of acquiring, leasing, installing, operating, repairing and maintaining
communication systems, including radio and microwave facilities directly serving
the Joint Property. In the event communication facilities/systems serving the
JointProperty are Operator owned, charges to the Joint Account shall be made as
provided in Paragraph 8 of this Section II.

 

15.          Other Expenditures

 

Any other expenditure not covered or dealt with in the foregoing provisions of
this Section II, or in Section III and which is of direct benefit to the Joint
Property and is incurred by the Operator in the necessary and proper conduct of
the Joint Operations.

 

III. OVERHEAD

 

1.             Overhead - Drilling and Producing Operations

 

i.              As compensation for administrative, supervision, office services
and warehousing costs, Operator shall charge drilling and producing operations
on either:

 

( ý )  Fixed Rate Basis, Paragraph lA, or

( o )  Percentage Basis, Paragraph lB

 

Unless otherwise agreed to by the Parties, such charge shall be in lieu of costs
and expenses of all offices and salaries or wages plus applicable burdens and
expenses of all personnel, except those directly chargeable under Paragraph 3A,
Section II. The cost and expense of services from outside sources in connection
with matters of taxation, traffic, accounting or matters before or involving
governmental agencies shall be considered as included inthe overhead rates
provided for in the above selected Paragraph of this Section III unless such
cost and expense areagreed to by the Parties as a direct charge to the Joint
Account.

 

ii.             The cost of professional consultant services and contract
services of technical personnel directly employed on the Joint Property:

 

( o )  shall be covered by the overhead rates, or

( ý )  shall not be covered by the overhead rates.

 

iii.            The cost of professional consultant services and contract
services of technical personnel either temporarily or permanently assigned to
and directly employed in the operation of the Joint Property:

 

( o )  shall be covered by the overhead rates, or

( ý )  shall not be covered by the overhead rates.

 

A.                    Overhead - Fixed Rate Basis

 

(1)   Operator shall charge the Joint Account at the following rates per well
per month:

 

Drilling Well Rate $3,000.00

(Prorated for less than a full month)

 

Producing Well Rate $300.00

 

(2)   Application of Overhead - Fixed Rate Basis shall be as follows:

 

(a)   Drilling Well Rate

 

(1)   Charges for drilling wells shall begin on the date the well is spudded and
terminate on the date the drilling rig, completion rig, or other units used in
completion of the well is released, whichever

 

4

--------------------------------------------------------------------------------

 

is later, except that no charge shall be made during suspension of drilling or
completion operations for fifteen (15) or more consecutive calendar days.

 

(2)   Charges for wells undergoing any type of workover or recompletion for a
period of five (5) consecutive work days or more shall be made at the drilling
well rate. Such charges shall be applied for the period from date workover
operations, with rig or other units used in workover, commence through date of
rig or other unit release, except that no charge shall be made during suspension
of operations for fifteen (15) or more consecutive calendar days.

 

(b)   Producing Well Rates

 

(1)   An active well either produced or injected into for any portion of the
month shall be considered as a one-well charge for the entire month.

 

(2)   Each active completion in a multi-completed well in which production is
not commingled down hole shall be considered as a one-well charge providing each
completion is considered a separate well by the governing regulatory authority.

 

(3)   An inactive gas well shut in because of overproduction or failure of
purchaser to take the production shall be considered as a one-well charge
providing the gas well is directly connected to a permanent sales outlet.

 

(4)   A one-well charge shall be made for the month in which plugging and
abandonment operations are completed on any well. This one-well charge shall be
made whether or not the well has produced except when drilling well rate
applies.

 

(5)   All other inactive wells (including but not limited to inactive wells
covered by unit allowable, lease allowable, transferred allowable, etc.) shall
not qualify for an overhead charge.

 

(3)   The well rates shall be adjusted as of the first day of April each year
following the effective date of the agreement to which this Accounting Procedure
is attached. The adjustment shall be computed by multiplying the rate currently
in use by the percentage increase or decrease in the average weekly earnings of
Crude Petroleum and Gas Production Workers for the last calendar year compared
to the calendar year preceding as shown by the index of average weekly earnings
of Crude Petroleum and Gas Production Workers as published by the United States
Department of Labor, Bureau of Labor Statistics, or the equivalent Canadian
index as published by Statistics Canada, as applicable. The adjusted rates shall
be the rates currently in use, plus or minus the computed adjustment.

 

2.             Overhead - Major Construction

 

To compensate Operator for overhead costs incurred in the construction and
installation of fixed assets, the expansion of fixed assets, and any other
project clearly discernible as a fixed asset required for the development and
operation of theJoint Property, Operator shall either negotiate a rate prior to
the beginning of construction, or shall charge the Joint

 

5

--------------------------------------------------------------------------------

 

Account for overhead based on the following rates for any Major Construction
project in excess of $50,000.00:

 

A.            4% of first $100,000 or total cost if less, plus

 

B.            3% of costs in excess of $100,000 but less than $1,000,000, plus

 

C.            2% of costs in excess of $1,000,000.

 

Total cost shall mean the gross cost of any one project. For the purpose of this
paragraph, the component parts of a single project shall not be treated
separately and the cost of drilling and workover wells and artificial lift
equipment shall be excluded.

 

3.             Catastrophe Overhead

 

To compensate Operator for overhead costs incurred in the event of expenditures
resulting from a single occurrence due to oil spill, blowout, explosion, fire,
storm, hurricane, or other catastrophes as agreed to by the Parties, which are
necessary to restore the Joint Property to the equivalent condition that existed
prior to the event causing the expenditures, Operator shall either negotiate a
rate prior to charging the Joint Account or shall charge the Joint Account for
overhead based on the following rates:

 

A.            4% of total costs through $100,000; plus

 

B.            3% of total costs in excess of $100,000 but less than $1,000,000;
plus

 

C.            2% of total costs in excess of $1,000,000.

 

Expenditures subject to the overheads above will not be reduced by insurance
recoveries, and no other overhead provisions of this Section III shall apply.

 

4.             Amendment of Rates

 

The overhead rates provided for in this Section III may be amended from time to
time only by mutual agreement between the Parties hereto if, in practice, the
rates are found to be insufficient or excessive.

 

IV.           PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND
DISPOSITIONS

 

Operator is responsible for Joint Account Material and shall make proper and
timely charges and credits for all Material movements affecting the Joint
Property. Operator shall provide all Material for use on the Joint Property;
however, at Operator’s option, such Material may be supplied by the
Non-Operator. Operator shall make timely disposition of idle and/or surplus
Material, such disposal being made either through sale to Operator or
Non-Operator, division in kind, or sale to outsiders. Operator may purchase, but
shall be under no obligation to purchase, interest of Non-Operators in surplus
condition A or B Material. The disposal of surplus Controllable Material not
purchased by the Operator shall be agreed to by the Parties.

 

1.             Purchases

 

Material purchased shall be charged at the price paid by Operator after
deduction of all discounts received. In case of Material found to be defective
or returned to vendor for any other reasons, credit shall be passed to the Joint
Account when adjustment has been received by the Operator.

 

2.             Transfers and Dispositions

 

Material furnished to the Joint Property and Material transferred from the Joint
Property or disposed of by the Operator, unless otherwise agreed to by the
Parties, shall be priced on the following basis exclusive of cash discounts:

 

A.    New Material (Condition A)

 

(1)   Tubular Goods Other than Line Pipe

 

(a)   Tubular goods, sized 2 3/8 inches OD and larger, except line pipe, shall
be priced at Eastern mill published carload base prices effective as of date of
movement plus transportation cost using the 80,000 pound carload weight basis to
the railway receiving point nearest the Joint Property for which published rail
rates for tubular goods exist. If the 80,000 pound rail rate is not offered, the
70,000 pound or 90,000 pound rail rate may be used. Freight charges for tubing
will be calculated from Lorain, Ohio and casing from Youngstown, Ohio.

 

(b)   For grades which are special to one mill only, prices shall be computed at
the mill base of that mill plus transportation cost from that mill to the
railway receiving point nearest the Joint Property as provided above in
Paragraph 2.A.(1)(a). For transportation cost from points other than Eastern
mills, the 30,000

 

6

--------------------------------------------------------------------------------

 

pound Oil Field Haulers Association interstate truck rate shall be used.

 

(c)   Special end finish tubular goods shall be priced at the lowest published
out-of-stock price, f.o.b. Houston, Texas, plus transportation cost, using Oil
Field Haulers Association interstate 30,000 pound truck rate, to the railway
receiving point nearest the Joint Property.

 

(d)   Macaroni tubing (size less than 2 3/8 inch OD) shall be priced at the
lowest published out-of-stock prices f.o.b. the supplier plus transportation
costs, using the Oil Field Haulers Association interstate truck rate per weight
of tubing transferred, to the railway receiving point nearest the Joint
Property.

 

(2)   Line Pipe

 

(a)   Line pipe movements (except size 24 inch OD and larger with walls ¾ inch
and over) 30,000 pounds or more shall be priced under provisions of tubular
goods pricing in Paragraph A.(l)(a) as provided above. Freight charges shall be
calculated from Lorain, Ohio.

 

(b)   Line Pipe movements (except size 24 inch OD) and larger with walls ¾ inch
and over) less than 30,000 pounds shall be priced at Eastern mill published
carload base prices effective as of date of shipment, plus 20 percent, plus
transportation costs based on freight rates as set forth under provisions of
tubular goods pricing in Paragraph A.(1)(a) as provided above. Freight charges
shall be calculated from Lorain, Ohio.

 

(c)   Line pipe 24 inch OD and over and ¾ inch wall and larger shall be priced
f.o.b. the point of manufacture at current new published prices plus
transportation cost to the railway receiving point nearest the Joint Property.

 

(d)   Line pipe, including fabricated line pipe, drive pipe and conduit not
listed on published price lists shall be priced at quoted prices plus freight to
the railway receiving point nearest the Joint Property or at prices agreed to by
the Parties.

 

(3)   Other Material shall be priced at the current new price, in effect at date
of movement, as listed by a reliable supply store nearest the Joint Property, or
point of manufacture, plus transportation costs, if applicable, to the railway
receiving point nearest the Joint Property.

 

(4)   Unused new Material, except tubular goods, moved from the Joint Property
shall be priced at the current new price, in effect on date of movement, as
listed by a reliable supply store nearest the Joint Property, or point of
manufacture, plus transportation costs, if applicable, to the railway receiving
point nearest the Joint Property. Unused new tubulars will be priced as provided
above in Paragraph 2.A.(l) and (2).

 

B.    Good Used Material (Condition B)

 

Material in sound and serviceable condition and suitable for reuse without
reconditioning:

 

(1)   Material moved to the Joint Property

 

At seventy-five percent (75%) of current new price, as determined by Paragraph
A.

 

(2)   Material used on and moved from the Joint Property

 

(a)   At seventy-five percent (75%) of current new price, as determined by
Paragraph A, if Material was originally charged to the Joint Account as new
Material or

 

(b)   At sixty-five percent (65%) of current new price, as determined by
Paragraph A, if Material was originally charged to the Joint Account as used
Material

 

(3)   Material not used on and moved from the Joint Property

 

At seventy-five percent (75%) of current new price as determined by Paragraph A.

 

The cost of reconditioning, if any, shall be absorbed by the transferring
property.

 

C.    Other Used Material

 

(1)   Condition C

 

Material which is not in sound and serviceable condition and not suitable for
its original function until after reconditioning shall be priced at fifty
percent (50%) of current new price as determined by Paragraph A. The cost of
reconditioning shall be charged to the receiving property, provided Condition C
value plus cost of reconditioning does not exceed Condition B value.

 

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(2)   Condition D

 

Material, excluding junk, no longer suitable for its original purpose, but
usable for some other purpose shall be priced on a basis commensurate with its
use. Operator may dispose of Condition D Material under procedures normally used
by Operator without prior approval of Non-Operators.

 

(a)   Casing, tubing, or drill pipe used as line pipe shall be priced as Grade A
and B seamless line pipe of comparable size and weight. Used casing, tubing or
drill pipe utilized as line pipe shall be priced at used line pipe prices.

 

(b)   Casing, tubing or drill pipe used as higher pressure service lines than
standard line pipe, e.g. power oil lines, shall be priced under normal pricing
procedures for casing, tubing, or drill pipe. Upset tubular goods shall be
priced on a non upset basis.

 

(3)   Condition E

 

Junk shall be priced at prevailing prices. Operator may dispose of Condition E
Material under procedures normally utilized by Operator without prior approval
of Non-Operators.

 

D.    Obsolete Material

 

Material which is serviceable and usable for its original function but condition
and/or value of such Material is not equivalent to that which would justify a
price as provided above may be specially priced as agreed to by the Parties.
Such price should result in the Joint Account being charged with the value of
the service rendered by such Material.

 

E.     Pricing Conditions

 

(1)   Loading or unloading costs may be charged to the Joint Account at the rate
of twenty-five cents (25¢) per hundred weight on all tubular goods movements, in
lieu of actual loading or unloading costs sustained at the stocking point. The
above rate shall be adjusted as of the first day of April each year following
January 1, 1985 by the same percentage increase or decrease used to adjust
overhead rates in Section III, Paragraph 1.A.(3). Each year, the rate calculated
shall be rounded to the nearest cent and shall be the rate in effect until the
first day of April next year. Such rate shall be published each year by the
Council of Petroleum Accountants Societies.

 

(2)   Material involving erection costs shall be charged at applicable
percentage of the current knocked-down price of new Material.

 

3.             Premium Prices

 

Whenever Material is not readily obtainable at published or listed prices
because of national emergencies. strikes or other unusual causes over which the
Operator has no control, the Operator may charge the Joint Account for the
required Material at the Operator’s actual cost incurred in providing such
Material, in making it suitable for use, and in moving it to the Joint Property;
provided notice in writing is furnished to Non-Operators of the proposed charge
prior to billingNon-Operators for such Material. Each Non-Operator shall have
the right, by so electing and notifying Operator withinten days after receiving
notice from Operator, to furnish in kind all or part of his share of such
Material suitable for use and acceptable to Operator.

 

4.             Warranty of Material Furnished By Operator

 

Operator does not warrant the Material furnished. In case of defective Material,
credit shall not be passed to the Joint Account until adjustment has been
received by Operator from the manufacturers or their agents.

 

V. INVENTORIES

 

The Operator shall maintain detailed records of Controllable Material.

 

1.             Periodic Inventories, Notice and Representation

 

At reasonable intervals, inventories shall be taken by Operator of the Joint
Account Controllable Material. Written notice of intention to take inventory
shall be given by Operator at least thirty (30) days before any inventory is to
begin so thatNon-Operators may be represented when any inventory is taken.
Failure of Non-Operators to be represented at aninventory shall bind
Non-Operators to accept the inventory taken by Operator.

 

2.             Reconciliation and Adjustment of Inventories

 

Adjustments to the Joint Account resulting from the reconciliation of a physical
inventory shall be made within six months following the taking of the inventory.
Inventory adjustments shall be made by Operator to the Joint Account for

 

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overages and shortages, but, Operator shall be held accountable only for
shortages due to lack of reasonable diligence.

 

3.             Special Inventories

 

Special inventories may be taken whenever there is any sale, change of interest,
or change of Operator in the Joint Property. It shall be the duty of the party
selling to notify all other Parties as quickly as possible after the transfer of
interest takes place. In such cases, both the seller and the purchaser shall be
governed by such inventory. In cases involving a change of Operator, all Parties
shall be governed by such inventory.

 

4.             Expense of Conducting Inventories

 

A.    The expense of conducting periodic inventories shall not be charged to the
Joint Account unless agreed to by the Parties.

 

B.    The expense of conducting special inventories shall be charged to the
Parties requesting such inventories, except inventories required due to change
of Operator shall be charged to the Joint Account.

 

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EXHIBIT “D”

 

Attached to and made a part of that certain Operating Agreement

dated January 27, 2006, by and between Noble Energy, Inc.,

as Operator, and Teton DJ LLC, as Non-Operator

 

Operator shall maintain the following insurance with respect to operations
conducted under the Operating Agreement to which this Exhibit is attached, and
shall charge premiums for such coverage to the Joint Account.

 

1.     Workers’ Compensation and Employer’s Liability Insurance

 

a.     Statutory Workers’ Compensation coverage as required by the laws of the
state in which operations are conducted.

 

b.     Employer’s Liability limits of $1,000,000 each accident, $1,000,000 each
employee/disease, and $1,000,000 policy limit.

 

2.     Commercial General Liability Insurance

 

$1,000,000 limit per occurrence and general aggregate to cover damages to third
parties because of bodily injury or property damage caused by an occurrence.

 

3.     Business Automobile Liability Insurance

 

$1,000,000 limit per accident combined single limit for bodily injury and/or
property damage to third parties covering owned, leased, hired and non-owned
vehicles used in the joint operations.

 

Operator may determine, in its sole discretion, that well control insurance,
property insurance or other similar coverages are necessary for production,
drilling, completion or workover operations conducted by it under the terms of
the Operating Agreement. In that event, premiums for such coverage will be
charged to the Joint Account.

 

Each Non-Operator agrees to be liable for and insure (or self-insure) its
proportionate share of Operator’s deductible or self-insured retention with
respect to each of the coverages set forth above, it being the intent of the
parties to the Operating Agreement that Operator shall not act as an insurer for
the joint account to the extent of its deductible or self-insured retention.

 

Each party to the Operating Agreement shall have the right to acquire at its own
expense such additional insurance coverage as it desires to protect itself
against any liability not covered by the insurance described above which is
maintained by Operator for the joint account. All insurance maintained by any
party to this Operating Agreement shall contain a waiver by the insurance
company of all rights of subrogation in favor of the parties to the Operating
Agreement.

 

Operator shall never be held responsible for the financial solvency of any
insurance carrier. Operator shall not be liable for inability to obtain or
maintain the insurance coverage set out above due to unavailability or excessive
cost. In such event, Operator shall promptly advise Non-Operator(s).

 

Nothing contained in this Exhibit shall operate as a limitation on a party’s
proportionate liability under the Operating Agreement and all losses not covered
by the above-specified policies shall be borne by the Operator and Non-Operators
in proportion to their cost bearing interest at the time of any loss.

 

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EXHIBIT “E”

 

GAS BALANCING AGREEMENT (“AGREEMENT”)

 

ATTACHED TO AND MADE PART OF THAT CERTAIN

 

OPERATING AGREEMENT DATED JANUARY 27, 2006

 

BY AND BETWEEN NOBLE ENERGY, INC.

 

AND TETON DJ LLC (“OPERATING AGREEMENT”)

 

RELATING TO THE CHUNDY COMPLEX AREA, CHASE AND DUNDY COUNTIES, NEBRASKA;
SEDGWICK AND YUMA COUNTIES, COLORADO

 

1. DEFINITIONS

 

The following definitions shall apply to this Agreement:

 

1.01         “Arm’s Length Agreement” shall mean any gas sales agreement with an
unaffiliated purchaser or any gas sales agreement with an affiliated purchaser
where the sales price and delivery conditions under such agreement are
representative of prices and delivery conditions existing under other similar
agreements in the area between unaffiliated parties at the same time for natural
gas of comparable quality and quantity.

 

1.02         “Balancing Area” shall mean each well subject to the Operating
Agreement that produces Gas or is allocated a share of Gas production. If a
single well is completed in two or more producing intervals, each producing
interval from which the Gas production is not commingled in the wellbore shall
be considered a separate well. If more than one well, with each Party having the
same decimal interest in the wells, is producing from a common source, then all
such wells producing from the same common source shall be treated as one well
for the purposes of this Agreement.

 

1.03         “Full Share of Current Production” shall mean the Gross Working
Interest of each Party in the Gas actually produced from the Balancing Area
during each month.

 

1.04         “Gas” shall mean all hydrocarbons produced or producible from the
Balancing Area, whether from a well classified as an oil well or gas well by the
regulatory agency having jurisdiction in such matters, which are or may be made
available for sale or separate disposition by the Parties, excluding oil,
condensate and other liquids recovered by field equipment operated for the joint
account. “Gas” does not include gas used in joint operations, such as for fuel,
recycling or re-injection, or which is vented or lost prior to its sale or
delivery from the Balancing Area.

 

1.05         “Makeup Gas” shall mean any Gas taken by an Under-produced Party
from the Balancing Area in excess if its Full Share of Current Production,
whether pursuant to Section 3.3 or Section 4.1 hereof.

 

1.06         “Mcf” shall mean one thousand cubic feet. A cubic foot of Gas shall
mean the volume of gas contained in one cubic foot of space at a standard
pressure base and at a standard temperature base.

 

1.07         “MMBtu” shall mean one million British Thermal Units. A British
Thermal Unit shall mean the quantity of heat required to raise one pound
avoirdupois of pure water from 58.5 degrees Fahrenheit to 59.5 degrees
Fahrenheit at a constant pressure of 14.73 pounds per square inch absolute.

 

1.08         “Operator” shall mean the individual or entity designated under the
terms of the Operating Agreement or, in the event this Agreement is not employed
in connection with an operating agreement, the individual or entity designated
as the operator of the well(s) located in the Balancing Area.

 

1.09         “Overproduced Party” shall mean any Party having taken a greater
quantity of Gas from the Balancing Area than the Division Order (GWI) Interest
of such Party in the cumulative quantity of all Gas produced from the Balancing
Area.

 

1.10         “Overproduction” shall mean the cumulative quantity of Gas taken by
a Party in excess of its Percentage Interest in the cumulative quantity of all
Gas produced from the Balancing Area.

 

1.11         “Party” shall mean those individuals or entities subject to this
Agreement, and their respective heirs, successors, transferees and assigns.

 

1.12         “Percentage Interest” shall mean the percentage or decimal interest
of each Party in the Gas produced from the Balancing Area pursuant to the
Operating Agreement covering the Balancing Area.

 

1.13         “Royalty” shall mean payments on production of Gas from the
Balancing Area to all owners of royalties, overriding royalties, production
payments or similar interests.

 

1.14         “Under-produced Party” shall mean any Party having taken a lesser
quantity of Gas from the Balancing Area than the Percentage Interest of such
Party in the cumulative quantity of all Gas produced from the Balancing Area.

 

1.15         “Underproduction” shall mean the deficiency between the cumulative
quantity of Gas taken by a Party and its Percentage Interest in the cumulative
quantity of all Gas produced from the Balancing Area.

 

1.16         “Winter Period” shall mean the months of November, December,
January and February in one calendar year.

 

2. BALANCING AREA

 

2.1           If this Agreement covers more than one Balancing Area, it shall be
applied as if each Balancing Area were covered by separate but identical
agreements. All balancing hereunder shall be on the basis of Gas taken from the
Balancing Area measured in MMBtus.

 

2.2           In the event that all or part of the Gas deliverable from a
Balancing Area is or becomes subject to one or more maximum lawful prices, any
Gas not subject to price controls shall be considered as produced from a Single
Balancing Area and Gas subject to each maximum lawful price category shall be
considered produced from a separate Balancing Area.

 

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3. RIGHT OF PARTIES TO TAKE GAS

 

3.1           Each Party desiring to take Gas will notify the Operator, or cause
the Operator to be notified of the volumes nominated, the name of the
transporting pipeline and the pipeline contract number (if available) and meter
station relating to such delivery, sufficiently in advance for the Operator,
acting with reasonable diligence, to meet all nomination and other requirements.
Operator is authorized to deliver the volumes so nominated and confirmed (if
confirmation is required) to the transporting pipeline in accordance with the
terms of this Agreement.

 

3.2           Each Party shall make a reasonable, good faith effort to take its
Full Share of Current Production each month, to the extent that such production
is required to maintain leases in effect, to protect the producing capacity of a
well or reservoir, to preserve correlative rights, or to maintain oil
production.

 

3.3           When a Party fails for any reason to take its Full Share of
Current Production (as such Share may be reduced by the right of the other
Parties to make up for Underproduction as provided herein), the other Parties
shall be entitled to take any Gas which such Party fails to take. To the extent
practicable, such Gas shall be made available initially to each Under-produced
Party in the proportion that its Percentage Interest in the Balancing Area bears
to the total Percentage Interests of all Under-produced Parties desiring to take
such Gas. If all such Gas is not taken by the Under-produced Parties, the
portion not taken shall then be made available to the other Parties in the
proportion that their respective Percentage Interests in the Balancing Area bear
to the total Percentage Interests of such Parties.

 

3.4           All Gas taken by a Party in accordance with the provisions of this
Agreement, regardless of whether such Party is under-produced or overproduced,
shall be regarded as Gas taken for its own account with title thereto being in
such taking Party.

 

3.5           Notwithstanding the provisions of Section 3.3 hereof, no
Overproduced Party shall be entitled in any month to take any Gas in excess of
three hundred percent (300%) of its Percentage Interest of the Balancing Area’s
then current Maximum Monthly Availability: provided, however, that this
limitation shall not apply to the extent that it would preclude production that
is required to maintain leases in effect, to protect the producing capacity of a
well or reservoir, to reserve correlative rights, or to maintain oil production.
“Maximum Monthly Availability” shall mean the maximum average monthly rate of
production at which Gas can be delivered from the Balancing Area, as determined
by the Operator, considering the maximum efficient well rate for each well
within the Balancing Area, mode of operations, production facility capabilities
and pipeline pressures.

 

3.6           In the event that a Party fails to make arrangements to take its
full share of Current Production required to be produced to maintain leases in
effect, to protect the producing capacity of a well or reservoir, to preserve
correlative rights, or to maintain oil production. The Operator may sell any
part of such Party’s Full Share of Current Production that such Party fails to
take for the account of such Party and render to such Party, on a current basis,
the full proceeds of the sale, less any reasonable marketing, compression,
treating, gathering or transportation costs incurred directly in connection with
the sale of such Full Share of Current Production. In making the sale
contemplated herein, the Operator shall be obligated only to obtain such price
and conditions of the sale as are reasonable under the circumstances and shall
not be obligated to share any of its markets. Any such sale by Operator under
the terms hereof shall be only for such reasonable periods of time as are
consistent with the minimum needs of the industry under the particular
circumstances, but in no event for a period in excess of one year.
Notwithstanding the provisions of article 3.4 hereof, Gas sold by Operator for a
Party under the provisions hereof shall be deemed to be Gas taken for the
account of such Party.

 

4. IN-KIND BALANCING

 

4.1           Effective the first day of any calendar month following at least
thirty (30) days’ prior written notice to the Operator, any Under-produced Party
may begin taking, in addition to its Full Share of Current Production and any
Makeup Gas taken pursuant to Section 3.3 of this Agreement, a share of current
production determined by multiplying fifty percent (50%) of the Full Shares of
Current Production of all Overproduced Parties by a fraction, the numerator of
which is the Percentage Interest of such Under-produced Party and the
denominator of which is the total of the Percentage Interests of all
Under-produced Parties desiring to take Makeup Gas. In no event will an
Overproduced Party be required to provide more than fifty percent (50%) of its
Full Share of Current Production for Makeup Gas. The Operator will promptly
notify all Overproduced Parties of the election of an Under-produced Party to
begin taking Makeup Gas.

 

4.2           Notwithstanding the provisions of Section 4.1, no Overproduced
Party will be required to provide more than twelve and one half percent (12.5%)
of its Full Share of Current Production for Makeup Gas during the Winter Period.

 

4.3           Notwithstanding anything herein to the contrary no Underproduced
Party which is a Non-Consenting Party under the current Operating Agreement and
is not then entitled to participate in any operation: regarding a Balancing Area
shall be entitled to take gas from said Balancing Area for which it is a
Non-Consenting Party.

 

5. STATEMENT OF GAS BALANCES

 

5.1           The Operator will maintain appropriate accounting on a monthly and
cumulative basis of the volumes of Gas that each Party is entitled to receive
and the volumes of Gas actually taken or sold for each Party’s account. Within
forty-five (45) days after the month of production, the Operator will furnish a
statement for such month showing (1) each Party’s Full Share of Current
Production, (2) the total volume of Gas actually taken or sold for each Party’s
account, (3) the difference between the volume taken by each Party and that
Party’s Full Share of Current Production, (4) the Overproduction or
Underproduction of each Party, and (5) other data as recommended by the
provisions of the Council of Petroleum Accountants Societies Bulletin No. 24, as
amended or supplemented hereafter. Each Party taking Gas will promptly provide
to the Operator any data required by the Operator for preparation of the
statements required hereunder.

 

5.2           If any Party fails to provide the data required herein for four
(4) consecutive production months, the 0perator, or where the Operator has
failed to provide data, another Party, may audit the production and Gas sales
and transportation volumes of the non-reporting Party to provide the required
data. Such audit shall be conducted only after reasonable notice and during
normal business hours in the office of the Party whose records are being
audited. All costs associated with such audit will be charged to the account of
the Party failing to provide the required data..

 

6. PAYMENTS ON PRODUCTION

 

6.1           Each Party taking Gas shall pay or cause to be paid all production
and severance taxes due on all volumes of Gas actually taken by such Party.

 

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6.2           Each Party shall pay or cause to be paid all Royalty due with
respect to Royalty owners to whom it is accountable as if such Party were taking
its Full Share, of Current Production, and only its Full Share of Current
Production.

 

6.3           In the event that any governmental authority requires that Royalty
payments be made on any other basis than that provided for in this Section 6,
each Party agrees to make such Royalty payments accordingly, commencing on the
effective date required by such governmental authority, and the method provided
for herein shall be thereby superseded.

 

7. CASH SETTLEMENTS

 

7.1           Upon the earlier of the plugging and abandonment of the last
producing interval in the Balancing Area, the termination of the Operating
Agreement or any pooling or unit agreement covering the Balancing Area, or at
any time no Gas is taken from the Balancing Area for a period of twelve (12)
consecutive months, any Party may give written notice calling for cash
settlement of the Gas production imbalances among the Parties. Such notice shall
be given to all Parties in the Balancing Area.

 

7.2           Within sixty (60) days after the notice calling for cash
settlement under Section 7.1, the Operator will distribute to each Party a Final
Gas Settlement Statement detailing the quantity of Overproduction owed by each
Overproduced Party to each Under-produced Party and identifying the month to
which such Overproduction is attributed, pursuant to the methodology set out in
Section 7.4.

 

7.3           Within sixty (60) days after receipt of the Final Gas Settlement
Statement, each Overproduced Party will pay to each Underproduced Party entitled
to settlement the appropriate cash settlement accompanied by appropriate
accounting detail. At the time of payment, the Overproduced Party will notify
the Operator of the Gas imbalance settled by the Overproduced Party’s payment.

 

7.4           The amount of the cash settlement will be based on the proceeds
received by the Overproduced Party under an Arm’s Length Agreement for the Gas
taken from time to time by the Overproduced Parry in excess of the Overproduced
Party’s Full Share of Current Production. Any Makeup Gas taken by the
Under-produced Party prior to monetary settlement hereunder will be applied to
offset Overproduction chronologically in the order of accrual.

 

7.5           The values used for calculating the cash settlement under Section
7.4 will include all proceeds received for the sale of the Gas by the
Overproduced Party calculated at the Balancing Area, after deducting any
production or severance taxes paid and any Royalty actually paid by the
Overproduced Party to an Under-produced Party’s Royalty owner(s), to the extent
said payments amounted to a discharge of said Under-produced Party’s Royalty
obligation, as well as any reasonable compression, treating, gathering or
transportation costs incurred directly in connection with the sale of the
Overproduction.

 

7.5.1        For Overproduction sold under a Gas Purchase Contract providing for
payment based on a percentage of the proceeds obtained by the Purchaser upon
resale of residue gas and liquid or liquefiable hydrocarbons extracted at a gas
processing plant, the value used for calculating cash settlement will include
proceeds received by the Overproduced Party for both the liquid hydrocarbons
(including liquefiable hydrocarbons) and the residue gas attributable to the
Overproduction.

 

7.5.2        For Overproduction processed for the account of the Overproduced
Party at a gas processing plant for the extraction of liquid hydrocarbons, where
settlement for the gas so processed was on a basis other than percentage of the
proceeds, the values used for calculating cash settlement will include the
proceeds received by the Overproduced Party for the sale of the liquid
hydrocarbons extracted from the Overproduction, less the actual reasonable costs
incurred by the Overproduced Party to process the Overproduction and to
transport, fractionate and handle the liquid hydrocarbons extracted therefrom
prior to sale.

 

7.6           To the extent the Overproduced Party did not sell all
Overproduction under an Arm’s Length Agreement, the cash settlement will be
based on the weighted average price received by the Overproduced Party for any
Gas sold from the Balancing Area under Arm’s Length Agreements during the months
to which such Overproduction is attributed. In the event that no sales under
Arm’s Length Agreements were made during any such month, the cash settlement for
such month will be based on the spot sales prices published for the applicable
geographic area during such month in a mutually acceptable pricing bulletin.

 

7.7           Interest compounded at the maximum lawful rate of interest
applicable to the Balancing Area, will accrue for all amounts due under Section
7.1 beginning the first day following the date payment is due pursuant to
Section 7.3. Such interest shall be borne by the Operator or any Overproduced
Party in the proportion that their respective delays beyond the deadlines set
out in Sections 7.2 and 7.3 contributed to the accrual of the interest.

 

7.8           In lieu of the cash settlement required by Section 7.3, an
Overproduced Party may deliver to the Under-produced Party an offer to settle
its Overproduction in-kind and at such rates, quantities, times and sources as
may be agreed upon by the Under-produced Party. If the Parties are unable to
agree upon the manner in which such in-kind settlement gas will be furnished
within sixty (60) days after the Overproduced Party’s offer to settle in kind,
which period may be extended by agreement of said Parties, the Overproduced
Party shall make a cash settlement as provided in Section 7.3. The making of an
in-kind settlement offer under this Section 7.8 will not delay the accrual of
interest on the cash settlement should the Parties fail to reach agreement on an
in-kind settlement.

 

7.9           That portion of any monies collected by an Overproduced Party for
Overproduction which is subject to refund by orders of the Federal Energy
Regulatory Commission or other governmental authority may be withheld by the
Overproduced Party until such prices are finally approved by such governmental
authority, unless the Underproduced Party furnishes a corporate undertaking,
acceptable to the Overproduced Party, agreeing to hold the Overproduced Party
harmless from financial loss due to refund orders by such governmental
authority.

 

8. TESTING

 

Notwithstanding any provision of this Agreement to the contrary, any Party shall
have the right, from time to time, to produce and take up to one hundred percent
(100%) of a well’s entire Gas stream to meet the reasonable deliverability
test(s) required by such Party’s Gas purchaser, and the right to take any Makeup
Gas shall be subordinate to the right of any Party to conduct such tests;
provided, however, that such tests shall be conducted in accordance with prudent
operating practices only after fifteen (15) days’ prior written notice to the
Operator and shall last no longer than seventy-two (72) hours.

 

9. OPERATING COSTS

 

Nothing in this Agreement shall change or affect any Party’s obligation to pay
its proportionate share of all costs and liabilities incurred in operations on
or in connection with the Balancing Area, as its share thereof is set forth in
the Operating Agreement, irrespective of whether any Party is at any time
selling and using Gas or whether such sales or use are in proportion to its
Percentage Interest in the Balancing Area.

 

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10. LIQUIDS

 

The Parties shall share proportionately in and own all liquid hydrocarbons
recovered with Gas by field equipment operated for the joint account in
accordance with their Percentage Interests in the Balancing Area.

 

11. AUDIT RIGHTS

 

Notwithstanding any provision in this Agreement or any other agreement between
the Parties hereto, and further notwithstanding any termination or cancellation
of this Agreement, for a period of two (2) years from the end of the calendar
year in which any information to be furnished under Section 5 or 7 hereof is
supplied, any Party shall have the right to audit the records of any other Party
regarding quantity, including but not limited to information regarding
Btu-content. Any Under-produced Party shall have the right for a period of two
(2) years from the end of the calendar year in which any cash settlement is
received pursuant to Section 7 to audit the records of any Overproduced Party as
to all matters concerning values, including but not limited to information
regarding prices and disposition of Gas from the Balancing Area. Any such audit
shall be conducted at the expense of the Parry or Parties desiring such audit,
and shall be conducted, after reasonable notice, during normal business hours in
the office of the Party whose records are being audited. Each Party hereto
agrees to maintain records as to the volumes and prices of Gas sold each month
and the volumes of Gas used in its own operations, along with the Royalty paid
on any such Gas used by a Party in its own operations. The audit rights provided
for in this Section 11 shall be in addition to those provided for in Section 5.2
of this Agreement.

 

12. MISCELLANEOUS

 

12.1         As between the Parties, in the event of any conflict between the
provisions of this Agreement and the provisions of any gas sales contract, or in
the event of any conflict between the provisions of this Agreement and the
provisions of the Operating Agreement, the provisions of this Agreement shall
govern.

 

12.2         Each Party agrees to defend, indemnity and hold harmless all other
Parties from and against any and all liability for any claims, which may be
asserted by any third party which now or hereafter stands in a contractual
relationship with such indemnifying Party and which arise out of the operation
of this Agreement or any activities of such indemnifying Party under other
Parties harmless from all judgments or damages sustained and costs incurred in
connection therewith.

 

12.3         Except as otherwise provided in this Agreement, Operator is
authorized to administer the provisions of this Agreement, but shall have no
liability to the other Parties for losses sustained or liability incurred which
arise out of or in connection with the performance of Operator’s duties
hereunder, except such as may result from Operator’s gross negligence or willful
misconduct. Operator shall not be liable to any Under-produced Party for the
failure of any Overproduced Party (other than Operator) to pay any amounts owed
pursuant to the terms hereof.

 

12.4         This Agreement shall remain in full force and effect for as long as
the Operating Agreement shall remain in force and effect as to the Balancing
Area, and thereafter until the Gas accounts between the Parties are settled in
full and shall inure to the benefit of and be binding upon the Parties hereto,
and their respective heirs, successors, legal representatives and assigns, if
any. The Parties hereto agree to give notice of the existence of this Agreement
to any successor in interest of any such Party and to provide that any such
successor shall be bound by this Agreement, and shall further make any transfer
of any interest subject to the Operating Agreement, or any part thereof, also
subject to the terms of this Agreement.

 

12.5         Unless the context clearly indicates otherwise, words used in the
singular include the plural the plural includes the singular, and the neuter
gender includes the masculine and the feminine.

 

12.6         This Agreement shall bind the Parties in accordance with the
provisions hereof, and nothing herein shall be construed or interpreted as
creating any rights in any person or entity not a signatory hereto, or as being
a stipulation in favor of any such person or entity.

 

12.7         If contemporaneously with this Agreement becoming effective, or
thereafter, any Party requests that any other Party execute an appropriate
memorandum or notice of this Agreement in order to give third parties notice of
record of same and submits same for execution in recordable form, such
memorandum or notice shall be duly executed by the Party to which such request
is made and delivered promptly thereafter to the Party making the request. Upon
receipt, the Party making the request shall cause the memorandum or notice to be
duly recorded in the appropriate real property or other records affecting the
Balancing Area.

 

12.8         With respect to accounting treatment of any Gas Imbalances as may
exist, the Parties agree to use the “cumulative method” (as defined in Income
Tax Regulation 1.761-2 (d) (4) of accounting for federal income tax purposes.
The “entitlements method” shall not be used for reporting gas sales from the
properties subject hereto.

 

13. ASSIGNMENT AND RIGHTS UPON ASSIGNMENT

 

13.1         Subject to the provisions of Sections 13.2 and 13.3 hereof, and
notwithstanding anything in this Agreement or in the Operating Agreement to the
contrary, if any Party assigns (inducting any sale, exchange or other transfer)
any of its working interest in the Balancing Area when such Party is an
Under-produced or Overproduced Party, the assignment or other act of transfer
shall, insofar as the Parties hereto are concerned, include all interest of the
assigning or transferring Party in the Gas, all rights to receive or obligations
to provide or take Makeup Gas and all rights to receive or obligations to make
any monetary payment which may ultimately be due hereunder, as applicable.
Operator and each of the other Parties hereto shall thereafter treat the
assignment accordingly, and the assigning or transferring Parry shall look
solely to its assignee or other transferee for any interest in the Gas or
monetary payment that such Party may have or to which it may be entitled, and
shall cause its assignee or other transferee to assume its obligations
hereunder.

 

13.2         The provisions of this Section 13 shall not be applicable in the
event any Party mortgages its interest or disposes of its interest by merger,
reorganization, consolidation or sale of substantially all of its assets to a
subsidiary or parent company, or to any company in which any parent or
subsidiary of such Party owns a majority of the stock of such company.

 

4

--------------------------------------------------------------------------------

 

ATTEST OR WITNESS:

 

OPERATOR

 

 

 

 

 

 

 

 

 

NOBLE ENERGY, INC.

 

 

 

 

 

 

 

 

 

 

 

BY:

/s/ DAVID W. SIPLE

 

 

 

 

 

 

DAVID W. SIPLE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title ATTORNEY-IN-FACT for GWW

 

 

 

 

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-OPERATORS

 

 

 

 

 

 

 

 

 

 

 

TETON DJ LLC

 

 

 

 

 

BY TETON ENERGY CORPORATION

 

 

 

 

 

 

 

 

 

 

 

BY:

/s/ PATRICK A. QUINN

 

 

 

 

 

 

PATRICK A. QUINN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Type or print name

 

 

 

 

 

 

 

 

 

 

 

Title CHIEF FINANCIAL OFFICER

 

 

 

 

 

 

 

 

 

 

 

Date

 

 

 

 

5

--------------------------------------------------------------------------------

 

EXHIBIT “E”

 

GAS BALANCING AGREEMENT (“AGREEMENT”)

 

ATTACHED TO AND MADE PART OF THAT CERTAIN

 

OPERATING AGREEMENT DATED JANUARY 27, 2006

 

BY AND BETWEEN NOBLE ENERGY, INC.

 

AND TETON DJ LLC (“OPERATING AGREEMENT”)

 

RELATING TO THE GRANT COMPLEX AREA, PERKINS AND CHASE COUNTIES, NEBRASKA

 

1. DEFINITIONS

 

The following definitions shall apply to this Agreement:

 

1.01         “Arm’s Length Agreement” shall mean any gas sales agreement with an
unaffiliated purchaser or any gas sales agreement with an affiliated purchaser
where the sales price and delivery conditions under such agreement are
representative of prices and delivery conditions existing under other similar
agreements in the area between unaffiliated parties at the same time for natural
gas of comparable quality and quantity.

 

1.02         “Balancing Area” shall mean each well subject to the Operating
Agreement that produces Gas or is allocated a share of Gas production. If a
single well is completed in two or more producing intervals, each producing
interval from which the Gas production is not commingled in the wellbore shall
be considered a separate well. If more than one well, with each Party having the
same decimal interest in the wells, is producing from a common source, then all
such wells producing from the same common source shall be treated as one well
for the purposes of this Agreement.

 

 1.03        “Full Share of Current Production” shall mean the Gross Working
Interest of each Party in the Gas actually produced from the Balancing Area
during each month.

 

1.04         “Gas” shall mean all hydrocarbons produced or producible from the
Balancing Area, whether from a well classified as an oil well or gas well by the
regulatory agency having jurisdiction in such matters, which are or may be made
available for sale or separate disposition by the Parties, excluding oil,
condensate and other liquids recovered by field equipment operated for the joint
account. “Gas” does not include gas used in joint operations, such as for fuel,
recycling or re-injection, or which is vented or lost prior to its sale or
delivery from the Balancing Area.

 

1.05         “Makeup Gas” shall mean any Gas taken by an Under-produced Party
from the Balancing Area in excess if its Full Share of Current Production,
whether pursuant to Section 3.3 or Section 4.1 hereof.

 

1.06         “Mcf” shall mean one thousand cubic feet. A cubic foot of Gas shall
mean the volume of gas contained in one cubic foot of space at a standard
pressure base and at a standard temperature base.

 

1.07         “MMBtu” shall mean one million British Thermal Units. A British
Thermal Unit shall mean the quantity of heat required to raise one pound
avoirdupois of pure water from 58.5 degrees Fahrenheit to 59.5 degrees
Fahrenheit at a constant pressure of 14.73 pounds per square inch absolute.

 

1.08         “Operator” shall mean the individual or entity designated under the
terms of the Operating Agreement or, in the event this Agreement is not employed
in connection with an operating agreement, the individual or entity designated
as the operator of the well(s) located in the Balancing Area.

 

1.09         “Overproduced Party” shall mean any Party having taken a greater
quantity of Gas from the Balancing Area than the Division Order (GWI) Interest
of such Party in the cumulative quantity of all Gas produced from the Balancing
Area.

 

1.10         “Overproduction” shall mean the cumulative quantity of Gas taken by
a Party in excess of its Percentage Interest in the cumulative quantity of all
Gas produced from the Balancing Area.

 

1.11         “Party” shall mean those individuals or entities subject to this
Agreement, and their respective heirs, successors, transferees and assigns.

 

1.12         “Percentage Interest” shall mean the percentage or decimal interest
of each Party in the Gas produced from the Balancing Area pursuant to the
Operating Agreement covering the Balancing Area.

 

1.13         “Royalty” shall mean payments on production of Gas from the
Balancing Area to all owners of royalties, overriding royalties, production
payments or similar interests.

 

1.14         “Under-produced Party” shall mean any Party having taken a lesser
quantity of Gas from the Balancing Area than the Percentage Interest of such
Party in the cumulative quantity of all Gas produced from the Balancing Area.

 

1.15         “Underproduction” shall mean the deficiency between the cumulative
quantity of Gas taken by a Party and its Percentage Interest in the cumulative
quantity of all Gas produced from the Balancing Area.

 

1.16         “Winter Period” shall mean the months of November, December,
January and February in one calendar year.

 

2. BALANCING AREA

 

2.1           If this Agreement covers more than one Balancing Area, it shall be
applied as if each Balancing Area were covered by separate but identical
agreements. All balancing hereunder shall be on the basis of Gas taken from the
Balancing Area measured in MMBtus.

 

2.2           In the event that all or part of the Gas deliverable from a
Balancing Area is or becomes subject to one or more maximum lawful prices, any
Gas not subject to price controls shall be considered as produced from a Single
Balancing Area and Gas subject to each maximum lawful price category shall be
considered produced from a separate Balancing Area.

 

6

--------------------------------------------------------------------------------

 

EXHIBIT “E”

 

GAS BALANCING AGREEMENT (“AGREEMENT”)

 

ATTACHED TO AND MADE PART OF THAT CERTAIN

 

OPERATING AGREEMENT DATED JANUARY 27, 2006

 

BY AND BETWEEN NOBLE ENERGY, INC.

 

AND TETON DJ LLC (“OPERATING AGREEMENT”)

 

RELATING TO THE EAST BIG SPRINGS COMPLEX AREA, KEITH, DUELL AND PERKINS
COUNTIES, NEBRASKA AND SEDGWICK COUNTY, COLORADO

 

1. DEFINITIONS

 

The following definitions shall apply to this Agreement:

 

1.01         “Arm’s Length Agreement” shall mean any gas sales agreement with an
unaffiliated purchaser or any gas sales agreement with an affiliated purchaser
where the sales price and delivery conditions under such agreement are
representative of prices and delivery conditions existing under other similar
agreements in the area between unaffiliated parties at the same time for natural
gas of comparable quality and quantity.

 

1.02         “Balancing Area” shall mean each well subject to the Operating
Agreement that produces Gas or is allocated a share of Gas production. If a
single well is completed in two or more producing intervals, each producing
interval from which the Gas production is not commingled in the wellbore shall
be considered a separate well. If more than one well, with each Party having the
same decimal interest in the wells, is producing from a common source, then all
such wells producing from the same common source shall be treated as one well
for the purposes of this Agreement.

 

1.03         “Full Share of Current Production” shall mean the Gross Working
Interest of each Party in the Gas actually produced from the Balancing Area
during each month.

 

1.04         “Gas” shall mean all hydrocarbons produced or producible from the
Balancing Area, whether from a well classified as an oil well or gas well by the
regulatory agency having jurisdiction in such matters, which are or may be made
available for sale or separate disposition by the Parties, excluding oil,
condensate and other liquids recovered by field equipment operated for the joint
account. “Gas” does not include gas used in joint operations, such as for fuel,
recycling or re-injection, or which is vented or lost prior to its sale or
delivery from the Balancing Area.

 

1.05         “Makeup Gas” shall mean any Gas taken by an Under-produced Party
from the Balancing Area in excess if its Full Share of Current Production,
whether pursuant to Section 3.3 or Section 4.1 hereof.

 

1.06         “Mcf” shall mean one thousand cubic feet. A cubic foot of Gas shall
mean the volume of gas contained in one cubic foot of space at a standard
pressure base and at a standard temperature base.

 

1.07         “MMBtu” shall mean one million British Thermal Units. A British
Thermal Unit shall mean the quantity of heat required to raise one pound
avoirdupois of pure water from 58.5 degrees Fahrenheit to 59.5 degrees
Fahrenheit at a constant pressure of 14.73 pounds per square inch absolute.

 

1.08         “Operator” shall mean the individual or entity designated under the
terms of the Operating Agreement or, in the event this Agreement is not employed
in connection with an operating agreement, the individual or entity designated
as the operator of the well(s) located in the Balancing Area.

 

1.09         “Overproduced Party” shall mean any Party having taken a greater
quantity of Gas from the Balancing Area than the Division Order (GWI) Interest
of such Party in the cumulative quantity of all Gas produced from the Balancing
Area.

 

1.10         “Overproduction” shall mean the cumulative quantity of Gas taken by
a Party in excess of its Percentage Interest in the cumulative quantity of all
Gas produced from the Balancing Area.

 

1.11         “Party” shall mean those individuals or entities subject to this
Agreement, and their respective heirs, successors, transferees and assigns.

 

1.12         “Percentage Interest” shall mean the percentage or decimal interest
of each Party in the Gas produced from the Balancing Area pursuant to the
Operating Agreement covering the Balancing Area.

 

1.13         “Royalty” shall mean payments on production of Gas from the
Balancing Area to all owners of royalties, overriding royalties, production
payments or similar interests.

 

1.14         “Under-produced Party” shall mean any Party having taken a lesser
quantity of Gas from the Balancing Area than the Percentage Interest of such
Party in the cumulative quantity of all Gas produced from the Balancing Area.

 

1.15         “Underproduction” shall mean the deficiency between the cumulative
quantity of Gas taken by a Party and its Percentage Interest in the cumulative
quantity of all Gas produced from the Balancing Area.

 

1.16         “Winter Period” shall mean the months of November, December,
January and February in one calendar year.

 

2. BALANCING AREA

 

2.1           If this Agreement covers more than one Balancing Area, it shall be
applied as if each Balancing Area were covered by separate but identical
agreements. All balancing hereunder shall be on the basis of Gas taken from the
Balancing Area measured in MMBtus.

 

2.2           In the event that all or part of the Gas deliverable from a
Balancing Area is or becomes subject to one or more maximum lawful prices, any
Gas not subject to price controls shall be considered as produced from a Single
Balancing Area and Gas subject to each maximum lawful price category shall be
considered produced from a separate Balancing Area.

 

7

--------------------------------------------------------------------------------

 

There is no Exhibit “F” to this Agreement.

 

--------------------------------------------------------------------------------

 

Exhibit G to

Model Form Operating Agreement between Noble Energy, Inc. as Operator
and Teton DJ, LLC, as Non-Operator dated effective December 31, 2005

 

TAX PARTNERSHIP PROVISIONS

 

(For Name of Tax Reporting Partner and Special Elections, See Secs. 8 and 9)

 

Table of Contents

 

1. GENERAL PROVISIONS

2

 

 

1.1 DESIGNATION OF DOCUMENTS.

2

 

 

1.2 RELATIONSHIP OF THE PARTIES.

2

 

 

1.3 PRIORITY OF PROVISIONS OF THIS EXHIBIT.

3

 

 

1.4 SURVIVORSHIP.

3

 

 

2. TAX REPORTING PARTNER AND TAX MATTERS PARTNER

3

 

 

2.1 TAX REPORTING PARTNER.

3

 

 

2.2 IF SMALL PARTNERSHIP EXCEPTION FROM TEFRA NOT APPLICABLE.

4

 

 

3. INCOME TAX COMPLIANCE AND CAPITAL ACCOUNTS

5

 

 

3.1 TAX RETURNS.

5

 

 

3.2 FAIR MARKET VALUE CAPITAL ACCOUNTS.

5

 

 

3.3 INFORMATION REQUESTS.

5

 

 

3.4 BEST EFFORTS WITHOUT LIABILITY.

5

 

 

4. TAX AND FMV CAPITAL ACCOUNT ELECTIONS

5

 

 

4.1 GENERAL ELECTIONS.

6

 

 

4.2 DEPLETION.

6

 

 

4.3 ELECTION OUT UNDER CODE §761(a).

6

 

 

4.4 CONSENT REQUIREMENTS FOR SUBSEQUENT TAX OR FMV CAPITAL ACCOUNT ELECTIONS.

7

 

 

5. CAPITAL CONTRIBUTIONS AND FMV CAPITAL ACCOUNTS

7

 

 

5.1 CAPITAL CONTRIBUTIONS.

7

 

 

5.2 FMV CAPITAL ACCOUNTS.

7

 

 

6. PARTNERSHIP ALLOCATIONS

8

 

 

6.1 FMV CAPITAL ACCOUNT ALLOCATIONS.

8

 

 

6.2 TAX RETURN AND TAX BASIS CAPITAL ACCOUNT ALLOCATIONS.

10

 

 

7. TERMINATION AND LIQUIDATING DISTRIBUTION

12

 

 

7.1 TERMINATION OF THE PARTNERSHIP.

12

 

 

7.2 BALANCING OF FMV CAPITAL ACCOUNTS.

12

 

 

7.3 DEEMED SALE GAIN/LOSS CHARGE BACK.

12

 

 

7.4 DEFICIT MAKE-UP OBLIGATION AND BALANCING CASH CONTRIBUTIONS.

13

 

--------------------------------------------------------------------------------

 

7.5 DISTRIBUTION TO BALANCE CAPITAL ACCOUNTS.

13

 

 

7.6 FMV DETERMINATION.

13

 

 

7.7 FINAL DISTRIBUTION.

13

 

 

8. TRANSFERS, INDEMNIFICATION, AND CORRESPONDENCE

13

 

 

8.1 TRANSFER OF PARTNERSHIP INTERESTS.

13

 

 

8.2 CORRESPONDENCE.

14

 

 

9. ELECTIONS AND CHANGES TO ABOVE PROVISIONS

14

 

 

9.1 OPERATOR NOT THE TRP.

14

 

 

9.2 SPECIAL TAX ELECTIONS.

14

 

 

9.3 CHANGE OF MAJORITY FOR OTHER TAX ELECTIONS.

15

 

1.             GENERAL PROVISIONS

 

1.1           DESIGNATION OF DOCUMENTS.

 

This exhibit is referred to in, and is part of, that Agreement identified above
and, if so provided, a part of any agreement to which the Agreement is an
exhibit. Such agreement(s) (including all exhibits thereto, other than this
exhibit) shall be hereinafter referred to as the “Agreement;” and this exhibit
is hereinafter referred to as the “Exhibit” or the “Tax Partnership Provisions”
(the “TPPs”). Except as may be otherwise provided in this Exhibit, terms defined
and used in the Agreement shall have the same meaning when used herein.

 

1.2           RELATIONSHIP OF THE PARTIES.

 

The parties to the Agreement shall be hereinafter referred to as “Party” or
“Parties.” The Parties understand and agree that the arrangement and
undertakings evidenced by the Agreement result in a partnership for purposes of
Federal income taxation and certain State income tax laws which incorporate or
follow Federal income tax principles as to tax partnerships. Such partnership
for tax purposes is hereinafter referred to as the “Tax Partnership.” For every
other purpose of the Agreement the Parties understand and agree that their legal
relationship to each other under applicable State law with respect to all
property subject to the Agreement is one of tenants in common, or undivided
interest owners, or lessee(s)-sublessee(s) and not a partnership; that the
liabilities of the Parties shall be several and not joint or collective; and
that each Party shall be responsible solely for its own obligations.

 

2

--------------------------------------------------------------------------------

 

1.3           PRIORITY OF PROVISIONS OF THIS EXHIBIT.

 

If there is a conflict or inconsistency, whether direct or indirect, actual or
apparent, between the terms and conditions of this Exhibit and the terms and
conditions of the Agreement, or any other exhibit or any part thereof, the terms
and conditions of this Exhibit shall govern and control.

 

1.4           SURVIVORSHIP.

 

1.4.1        ANY TERMINATION OF THE AGREEMENT SHALL NOT AFFECT THE CONTINUING
APPLICATION OF THE TPPS FOR THE TERMINATION AND LIQUIDATION.

 

1.4.2        ANY TERMINATION OF THE AGREEMENT SHALL NOT AFFECT THE CONTINUING
APPLICATION OF THE TPPS FOR THE RESOLUTION OF ALL MATTERS REGARDING FEDERAL AND
STATE INCOME REPORTING.

 

1.4.3        THESE TPPS SHALL INURE TO THE BENEFIT OF, AND BE BINDING UPON, THE
PARTIES HERETO AND THEIR SUCCESSORS AND ASSIGNS.

 

1.4.4        THE EFFECTIVE DATE OF THE AGREEMENT SHALL BE THE EFFECTIVE DATE OF
THESE TPPS. THE TAX PARTNERSHIP SHALL CONTINUE IN FULL FORCE AND EFFECT FROM,
AND AFTER SUCH DATE, UNTIL TERMINATION AND LIQUIDATION.

 

2.             TAX REPORTING PARTNER AND TAX MATTERS PARTNER

 

2.1           TAX REPORTING PARTNER.

 

The Operator (or the Party listed in Sec. 9.1) as the Tax Reporting Partner
(“TRP”) is responsible for compliance with all tax reporting obligations of the
Tax Partnership, see Sec. 3.1, below. The TRP shall be solely responsible for
all of the costs and expenses associated with this Tax Partnership and
performing its duties as TRP, or TMP as the case may be, and shall not bill or
charge the Non-Operating Working Interest Owners for such costs and expenses. In
the event of any change in the TRP, the Party serving as TRP at the beginning of
a given taxable year shall continue as TRP with respect to all matters
concerning such year.

 

2.2           2.2           IF SMALL PARTNERSHIP EXCEPTION FROM TEFRA NOT
APPLICABLE.

 

If the Tax Partnership does not qualify for the “small partnership exception”
from, or if the Tax Partnership elects (see infra elections at Secs. 4.1 and
9.2) to be subject to, §§6221 et seq., Subchapter C of Chapter 53 of Subtitle A
(the “TEFRA rules”) of the Internal Revenue Code (the “Code”) the TRP shall also
be the tax

 

3

--------------------------------------------------------------------------------

 

matters partner as defined in Code §6231(a) (the “TMP”) and references to the
TRP shall then include references to the TMP and vice versa.

 

2.2.1        2.2.1        THE TMP SHALL NOT BE REQUIRED TO INCUR ANY EXPENSES
FOR THE PREPARATION FOR, OR PURSUANCE OF, ADMINISTRATIVE OR JUDICIAL
PROCEEDINGS, UNLESS THE PARTIES AGREE ON A METHOD FOR SHARING SUCH EXPENSES.

 

2.2.2        2.2.2        THE PARTIES SHALL FURNISH THE TMP, WITHIN TWO WEEKS
FROM THE RECEIPT OF THE REQUEST, THE INFORMATION THE TMP MAY REASONABLY REQUEST
TO COMPLY WITH THE REQUIREMENTS ON FURNISHING INFORMATION TO THE INTERNAL
REVENUE SERVICE.

 

2.2.3        2.2.3        THE TMP SHALL NOT AGREE TO ANY EXTENSION OF THE
STATUTE OF LIMITATIONS FOR MAKING ASSESSMENTS ON BEHALF OF THE TAX PARTNERSHIP
WITHOUT FIRST OBTAINING THE WRITTEN CONSENT OF ALL PARTIES. THE TMP SHALL NOT
BIND ANY OTHER PARTY TO A SETTLEMENT AGREEMENT IN TAX AUDITS WITHOUT OBTAINING
THE WRITTEN CONCURRENCE OF ANY SUCH PARTY.

 

2.2.4        2.2.4        ANY OTHER PARTY WHO ENTERS IN A SETTLEMENT AGREEMENT
WITH THE SECRETARY OF THE TREASURY WITH RESPECT TO ANY PARTNERSHIP ITEMS, AS
DEFINED IN CODE §6231(A)(3), SHALL NOTIFY THE OTHER PARTIES OF THE TERMS WITHIN
NINETY (90) DAYS FROM THE DATE OF SUCH SETTLEMENT.

 

2.2.5        2.2.5        IF ANY PARTY INTENDS TO FILE A NOTICE OF INCONSISTENT
TREATMENT UNDER CODE §6222(B), SUCH PARTY SHALL, PRIOR TO THE FILING OF SUCH
NOTICE, NOTIFY THE TMP OF THE (ACTUAL OR POTENTIAL) INCONSISTENCY OF THE PARTY’S
INTENDED TREATMENT OF A PARTNERSHIP ITEM WITH THE TREATMENT OF THAT ITEM BY THE
TAX PARTNERSHIP. WITHIN ONE WEEK OF RECEIPT THE TMP SHALL REMIT COPIES OF SUCH
NOTIFICATION TO THE OTHER PARTIES. IF AN INCONSISTENCY NOTICE IS FILED SOLELY
BECAUSE A PARTY HAS NOT RECEIVED A SCHEDULE K-1 IN TIME FOR FILING OF ITS INCOME
TAX RETURN, THE TMP NEED NOT BE NOTIFIED.

 

2.2.6        2.2.6        NO PARTY SHALL FILE PURSUANT TO CODE §6227 A REQUEST
FOR AN ADMINISTRATIVE ADJUSTMENT OF PARTNERSHIP ITEMS (THE “RFAA”) WITHOUT FIRST
NOTIFYING ALL OTHER PARTIES. IF ALL OTHER PARTIES AGREE WITH THE REQUESTED
ADJUSTMENT, THE TMP SHALL FILE THE RFAA ON BEHALF OF THE TAX PARTNERSHIP. IF
UNANIMOUS CONSENT IS NOT OBTAINED WITHIN THIRTY (30) DAYS FROM SUCH NOTICE, OR
WITHIN THE PERIOD REQUIRED TO TIMELY FILE THE RFAA, IF SHORTER, ANY PARTY,
INCLUDING THE TMP, MAY FILE A RFAA ON ITS OWN BEHALF.

 

2.2.7        2.2.7        ANY PARTY INTENDING TO FILE WITH RESPECT TO ANY
PARTNERSHIP ITEM, OR ANY OTHER TAX MATTER INVOLVING THE TAX PARTNERSHIP, A
PETITION UNDER CODE §§6226, 6228, OR ANY OTHER PROVISION, SHALL NOTIFY THE OTHER
PARTIES PRIOR TO SUCH FILING OF THE NATURE OF THE CONTEMPLATED PROCEEDING. IN
THE CASE WHERE THE TMP IS THE PARTY INTENDING TO FILE SUCH PETITION, SUCH NOTICE
SHALL BE GIVEN WITHIN A REASONABLE TIME TO ALLOW THE OTHER PARTIES TO
PARTICIPATE IN THE CHOICE OF THE FORUM FOR SUCH PETITION. IF THE PARTIES DO NOT
AGREE ON THE APPROPRIATE FORUM, THEN THE FORUM SHALL

 

4

--------------------------------------------------------------------------------

 

BE CHOSEN BY MAJORITY VOTE. EACH PARTY SHALL HAVE A VOTE IN ACCORDANCE WITH ITS
PERCENTAGE INTEREST IN THE TAX PARTNERSHIP FOR THE YEAR UNDER AUDIT. IF A
MAJORITY CANNOT AGREE, THE TMP SHALL CHOOSE THE FORUM. IF A PARTY INTENDS TO
SEEK REVIEW OF ANY COURT DECISION RENDERED AS A RESULT OF SUCH PROCEEDING, THE
PARTY SHALL NOTIFY THE OTHER PARTIES PRIOR TO SEEKING SUCH REVIEW.

 

3.             INCOME TAX COMPLIANCE AND CAPITAL ACCOUNTS

 

3.1           TAX RETURNS.

 

The TRP shall prepare and file all required Federal and State partnership income
tax returns. Not less than thirty (30) days prior to the return due date
(including extensions), the TRP shall submit to each Party for review a copy of
the return as proposed.

 

3.2           FAIR MARKET VALUE CAPITAL ACCOUNTS.

 

The TRP shall establish and maintain for each Party fair market value (“FMV”)
capital accounts and tax basis capital accounts. Upon request, the TRP shall
submit to each Party along with a copy of any proposed partnership income tax
return an accounting of such Party’s FMV capital accounts as of the end of the
return period.

 

3.3           INFORMATION REQUESTS.

 

In addition to any obligation under Sec. 2.2.2, each Party agrees to furnish to
the TRP not later than sixty (60) days before the return due date (including
extensions) such information relating to the operations conducted under the
Agreement as may be required for the proper preparation of such returns.
Similarly, each Party agrees to furnish timely to the TRP, as requested, any
information and data necessary for the preparation and/or filing of other
required reports and notifications, and for the computation of the capital
accounts. As provided in Code §6050K(c), a Party transferring its interest must
notify the TRP to allow compliance with Code §6050K(a) (see also Sec. 8.1).

 

3.4           BEST EFFORTS WITHOUT LIABILITY.

 

The TRP and the other Party(ies) shall use its/their best efforts to comply with
responsibilities outlined in this Section, and with respect to the Service as
TMP as outlined Sec. 2.2 and in doing so shall incur no liability to any other
Party.

 

5

--------------------------------------------------------------------------------

 

4.             TAX AND FMV CAPITAL ACCOUNT ELECTIONS

 

4.1           GENERAL ELECTIONS.

 

For both income tax return and capital account purposes, the Tax Partnership
shall elect:

 

a)              to deduct when incurred intangible drilling and development
costs (“IDC”);

 

b)             to use the maximum allowable accelerated tax method and the
shortest permissible tax life for depreciation

 

c)              the accrual method of accounting;

 

d)             to report income on a calendar year basis;

 

e)              and the Tax Partnership shall also make any elections as
specially noted in Sec. 9.2, below.

 

4.2           DEPLETION.

 

Solely for FMV capital account purposes, depletion shall be calculated by using
simulated cost depletion within the meaning of Treas.
Reg.§1.704-1(b)(2)(iv)(k)(2), unless the use of simulated percentage depletion
is elected in Sec. 9.2, below. The simulated cost depletion allowance shall be
determined under the principles of Code §612 and be based on the FMV capital
account basis of each Lease. Solely for purposes of this calculation, remaining
reserves shall be determined consistently by the TRP.

 

4.3           ELECTION OUT UNDER CODE §761(A).

 

4.3.1        THE TRP SHALL NOTIFY ALL PARTIES OF AN INTENDED ELECTION TO BE
EXCLUDED FROM THE APPLICATION OF SUBCHAPTER K OF CHAPTER 1 OF THE CODE NOT LATER
THAN SIXTY (60) DAYS PRIOR TO THE FILING DATE OR THE DUE DATE (INCLUDING
EXTENSIONS) FOR THE FEDERAL PARTNERSHIP INCOME TAX RETURN, WHICHEVER COMES
EARLIER. ANY PARTY THAT DOES NOT CONSENT MUST PROVIDE THE TRP WITH WRITTEN
OBJECTION WITHIN THIRTY (30) DAYS OF SUCH NOTICE. EVEN AFTER AN EFFECTIVE
ELECTION-OUT THE TRP’S RIGHTS AND OBLIGATIONS, OTHER THAN THE RELIEF FROM TAX
RETURN FILING OBLIGATIONS OF THE PARTNERSHIP, CONTINUE.

 

4.3.2        AFTER AN ELECTION-OUT, TO AVOID AN UNINTENDED IMPAIRMENT OF THE
ELECTION-OUT: THE PARTIES WILL AVOID, WITHOUT PRIOR COORDINATION, ANY
OPERATIONAL CHANGES WHICH WOULD TERMINATE THE QUALIFICATION FOR THE ELECTION-OUT
STATUS; ALL PARTIES WILL MONITOR THE CONTINUING QUALIFICATION OF THE TAX

 

6

--------------------------------------------------------------------------------

 

PARTNERSHIP FOR THE ELECTION-OUT STATUS AND WILL NOTIFY THE OTHER PARTIES IF, IN
THEIR OPINION, A CHANGE IN OPERATIONS WILL JEOPARDIZE THE ELECTION-OUT; AND, ALL
PARTIES WILL USE, UNLESS AGREED TO BY THEM OTHERWISE, THE CUMULATIVE GAS
BALANCING METHOD AS DESCRIBED IN TREAS. REG. §1.761-2(D)(2).

 

4.4           CONSENT REQUIREMENTS FOR SUBSEQUENT TAX OR FMV CAPITAL ACCOUNT
ELECTIONS.

 

Unless stipulated differently in Sec. 9.3, future elections, in addition to or
in amendment of those in this agreement, must be approved by the affirmative
vote of two (2) or more Parties owning a majority of the working interest based
upon post-Payout ownership.

 

5.             CAPITAL CONTRIBUTIONS AND FMV CAPITAL ACCOUNTS

 

The provisions of this Sec. 5 and any other provisions of the TPPs relating to
the maintenance of the capital accounts are intended to comply with Treas. Reg.
§1.704-1(b) and shall be interpreted and applied in a manner consistent with
such regulations.

 

5.1           CAPITAL CONTRIBUTIONS.

 

The respective capital contributions of each Party to the Tax Partnership shall
be (a) each Party’s interest in the oil and gas lease(s), including all
associated lease and well equipment, committed to the Tax Partnership, and (b)
all amounts of money paid by each Party in connection with the acquisition,
exploration, development, and operation of the lease(s), and all other costs
characterized as contributions or expenses borne by such Party under the
Agreement. The contribution of the leases and any other properties committed to
the Tax Partnership shall be made by each Party’s agreement to hold legal title
to its interest in such leases or other property as nominee of the Tax
Partnership.

 

5.2           FMV CAPITAL ACCOUNTS.

 

The FMV capital accounts shall be increased and decreased as follows:

 

5.2.1        THE FMV CAPITAL ACCOUNT OF A PARTY SHALL BE INCREASED BY:

 

(i) the amount of money and the FMV (as of the date of contribution) of any
property contributed by such Party to the Tax Partnership (net of liabilities
assumed by the Tax Partnership or to which the contributed property is subject);

 

7

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(ii) that Party’s share of Tax Partnership items of income or gain, allocated in
accordance with Sec. 6.1; and

 

(iii) that Party’s share of any Code §705(a)(1)(B)item.

 

5.2.2        THE FMV CAPITAL ACCOUNT OF A PARTY SHALL BE DECREASED BY:

 

(i) the amount of money and the FMV of property distributed to a Party (net of
liabilities assumed by such Party or to which the property is subject);

 

(ii) that Party’s Sec. 6.1 allocated share of Tax Partnership loss and
deductions, or items thereof; and,

 

(iii) that Party’s share of any Code §705(a)(2)(B) item.

 

5.2.3        “FMV” WHEN IT APPLIES TO PROPERTY CONTRIBUTED BY A PARTY TO THE TAX
PARTNERSHIP SHALL BE ASSUMED, FOR PURPOSES OF 5.2.1, TO EQUAL THE ADJUSTED TAX
BASIS, AS DEFINED IN CODE §1011, OF THAT PROPERTY UNLESS THE PARTIES AGREE
OTHERWISE AS INDICATED IN SEC. 9.2.

 

5.2.4       AS PROVIDED IN TREAS. REG. §1.704-1(B)(2)(IV)(E), UPON DISTRIBUTION
OF TAX PARTNERSHIP PROPERTY TO A PARTY THE CAPITAL ACCOUNTS WILL BE ADJUSTED TO
REFLECT THE MANNER IN WHICH THE UNREALIZED INCOME, GAIN, LOSS AND DEDUCTION
INHERENT IN DISTRIBUTED PROPERTY (NOT PREVIOUSLY REFLECTED IN THE CAPITAL
ACCOUNTS) WOULD BE ALLOCATED AMONG THE PARTIES IF THERE WERE A DISPOSITION OF
SUCH PROPERTY AT ITS FMV AS OF THE TIME OF DISTRIBUTION. FURTHERMORE, IF SO
AGREED TO IN SEC. 9.2, UNDER THE RULES OF TREAS. REG. § 1.704-1(B)(2)(IV)(F),
THE FMV CAPITAL ACCOUNTS SHALL BE REVALUED AT CERTAIN TIMES TO REFLECT VALUE
CHANGES OF THE TAX PARTNERSHIP PROPERTY.

 

6.             TAX PARTNERSHIP ALLOCATIONS

 

6.1           FMV CAPITAL ACCOUNT ALLOCATIONS.

 

Each item of income, gain, loss, or deduction shall be allocated to each Party
as follows:

 

6.1.1        ACTUAL OR DEEMED INCOME FROM THE SALE, EXCHANGE, DISTRIBUTION OR
OTHER DISPOSITION OF PRODUCTION SHALL BE ALLOCATED TO THE PARTY ENTITLED TO SUCH
PRODUCTION OR THE PROCEEDS FROM THE SALE OF SUCH PRODUCTION. THE AMOUNT RECEIVED
FROM THE SALE OF PRODUCTION AND THE AMOUNT OF THE FMV OF PRODUCTION TAKEN IN
KIND BY THE PARTIES ARE DEEMED TO BE IDENTICAL; ACCORDINGLY, SUCH ITEMS MAY BE
OMITTED FROM THE ADJUSTMENTS MADE TO THE PARTIES’ FMV CAPITAL ACCOUNTS.

 

8

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6.1.2        EXPLORATION COST, IDC, OPERATING AND MAINTENANCE COST SHALL BE
ALLOCATED TO EACH PARTY IN ACCORDANCE WITH ITS RESPECTIVE CONTRIBUTION, OR
OBLIGATION TO CONTRIBUTE, TO SUCH COST.

 

6.1.3        DEPRECIATION SHALL BE ALLOCATED TO EACH PARTY IN ACCORDANCE WITH
ITS CONTRIBUTION, OR OBLIGATION TO CONTRIBUTE, TO THE COST OF THE UNDERLYING
ASSET.

 

6.1.4        SIMULATED DEPLETION SHALL BE ALLOCATED TO EACH PARTY IN ACCORDANCE
WITH ITS FMV CAPITAL ACCOUNT ADJUSTED BASIS IN EACH OIL AND GAS PROPERTY OF THE
TAX PARTNERSHIP.

 

6.1.5        LOSS (OR SIMULATED LOSS) UPON THE SALE, EXCHANGE, DISTRIBUTION,
ABANDONMENT OR OTHER DISPOSITION OF DEPRECIABLE OR DEPLETABLE PROPERTY SHALL BE
ALLOCATED TO THE PARTIES IN THE RATIO OF THEIR RESPECTIVE FMV CAPITAL ACCOUNT
ADJUSTED BASES IN THE DEPRECIABLE OR DEPLETABLE PROPERTY.

 

6.1.6        GAIN (OR SIMULATED GAIN) UPON THE SALE, EXCHANGE, DISTRIBUTION, OR
OTHER DISPOSITION OF DEPRECIABLE OR DEPLETABLE PROPERTY SHALL BE ALLOCATED TO
THE PARTIES SO THAT THE FMV CAPITAL ACCOUNT BALANCES OF THE PARTIES WILL MOST
CLOSELY REFLECT THEIR RESPECTIVE PERCENTAGE OR FRACTIONAL INTERESTS UNDER THE
AGREEMENT (DETERMINED WITHOUT REGARD TO THIS EXHIBIT).

 

6.1.7        COSTS OR EXPENSES OF ANY OTHER KIND SHALL BE ALLOCATED TO EACH
PARTY IN ACCORDANCE WITH ITS RESPECTIVE CONTRIBUTION, OR OBLIGATION TO
CONTRIBUTE, TO SUCH COSTS OR EXPENSE.

 

6.1.8        ANY OTHER INCOME ITEM SHALL BE ALLOCATED TO THE PARTIES IN
ACCORDANCE WITH THE MANNER IN WHICH SUCH INCOME IS REALIZED BY EACH PARTY.

 

6.1.9        Special Allocations

 

6.1.9.1     Notwithstanding the other provisions of this Section 6.1, if any
Party unexpectedly receives any adjustments, allocations or distributions
described in Treas. Reg. §1.704-1(b)(2)(ii)(d)(4), (5) or (6), which reduces the
Party’s adjusted FMV capital account balance to below zero, gross income and
gain shall be specially allocated to such Party in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations, the
FMV capital account deficit of such party as quickly as possible. For purposes
of this Section 6.1.9, a Party’s adjusted FMV capital account balance shall be
the same as the Party’s FMV capital account

 

9

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balance increased by the sum of (i) the amount, if any, which the Party is
unconditionally obligated to contribute to the Tax Partnership, and (ii) the
amount, if any, which the Party is deemed to be obligated to contribute to the
Tax Partnership under Treasury Regulations under Section 704(b) of the Code.

 

6.1.9.2 If any Party would be allocated an item of deduction or loss that would
reduce its adjusted FMV capital account balance to below zero, the Party shall
be allocated only the amount of such item that would reduce its adjusted capital
account balance to zero, and any remaining amount of such item shall be
allocated to the other Parties following the principles of the allocations under
Sections 6.1.1 through 6.1.8.

 

6.1.9.3 The foregoing allocations set forth in this Section 6.1.9 (the
Regulatory Allocations”) are intended to comply with certain requirements of
Treasury Regulations. It is the intent of the Parties that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of income,
gain, loss or deduction pursuant to this Section. Therefore, notwithstanding any
other provisions of this Section 6 (other than the Regulatory Allocations), the
TRP shall make such offsetting special allocations of income, gain, loss or
deduction in whatever manner it determines appropriate so that, after such
offsetting allocations are made, each Party’s FMV capital account balance is, to
the extent possible, equal to the FMV capital account balance such Party would
have had if the Regulatory Allocations were not part of the TPPs and all items
were allocated pursuant to Section 6.1 without regard to the Regulatory
Allocations. The TRP shall have the discretion to administer this Section
6.1.9.3 in any reasonable manner that eliminates, to the extent reasonably
feasible, any character discrepancy between the amounts allocated under the
other Sections of this Section 6.1.9 and the corresponding amounts allocated
under this Section 6.1.9.3.

 

6.2           TAX RETURN AND TAX BASIS CAPITAL ACCOUNT ALLOCATIONS.

 

6.2.1        UNLESS OTHERWISE EXPRESSLY PROVIDED IN THIS SEC. 6.2, THE
ALLOCATIONS OF THE TAX PARTNERSHIP’S ITEMS OF INCOME, GAIN, LOSS, OR DEDUCTION
FOR TAX RETURN AND TAX BASIS CAPITAL ACCOUNT PURPOSES SHALL FOLLOW THE
PRINCIPLES OF THE ALLOCATIONS UNDER SEC. 6.1. HOWEVER, THE TAX PARTNERSHIP’S
GAIN OR LOSS ON THE TAXABLE DISPOSITION OF A TAX PARTNERSHIP PROPERTY IN EXCESS
OF THE GAIN OR

 

10

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LOSS UNDER SEC. 6.1, IF ANY, IS ALLOCATED TO THE CONTRIBUTING PARTY TO THE
EXTENT OF SUCH PARTY’S PRE-CONTRIBUTION GAIN OR LOSS.

 

6.2.2        THE PARTIES RECOGNIZE THAT UNDER CODE §613A(C)(7)(D) THE DEPLETION
ALLOWANCE IS TO BE COMPUTED SEPARATELY BY EACH PARTY. FOR THIS PURPOSE, EACH
PARTY’S SHARE OF THE ADJUSTED TAX BASIS IN EACH OIL AND GAS PROPERTY SHALL BE
EQUAL TO ITS CONTRIBUTION TO THE ADJUSTED TAX BASIS OF SUCH PROPERTY.

 

6.2.3        UNDER CODE §613A(C)(7)(D) GAIN OR LOSS ON THE DISPOSITION OF AN OIL
AND GAS PROPERTY IS TO BE COMPUTED SEPARATELY BY EACH PARTY. ACCORDING TO TREAS.
REG. §1.704-1(B)(4)(V), THE AMOUNT REALIZED SHALL BE ALLOCATED AS FOLLOWS: (I)
AN AMOUNT THAT REPRESENTS RECOVERY OF ADJUSTED SIMULATED DEPLETION BASIS IS
ALLOCATED (WITHOUT BEING CREDITED TO THE CAPITAL ACCOUNTS) TO THE PARTIES IN THE
SAME PROPORTION AS THE AGGREGATE SIMULATED DEPLETION BASIS WAS ALLOCATED TO SUCH
PARTIES UNDER SEC. 5.2; AND (II) ANY REMAINING REALIZATION IS ALLOCATED IN
ACCORDANCE WITH SEC. 6.1.6.

 

6.2.4        DEPRECIATION SHALL BE ALLOCATED TO EACH PARTY IN ACCORDANCE WITH
ITS CONTRIBUTION TO THE ADJUSTED TAX BASIS OF THE DEPRECIABLE ASSET.

 

6.2.5        IN ACCORDANCE WITH TREAS. REG. §1.1245-1(E), DEPRECIATION RECAPTURE
SHALL BE ALLOCATED, TO THE EXTENT POSSIBLE, AMONG THE PARTIES TO REFLECT THEIR
PRIOR SHARING OF THE DEPRECIATION.

 

6.2.6        IN ACCORDANCE WITH THE PRINCIPLES OF TREAS. REG. §1.1254-5, ANY
RECAPTURE OF IDC IS DETERMINED AND REPORTED BY EACH PARTY SEPARATELY. SIMILARLY,
ANY RECAPTURE OF DEPLETION SHALL BE COMPUTED SEPARATELY BY EACH PARTY, IN
ACCORDANCE WITH ITS DEPLETION ALLOWANCE COMPUTED PURSUANT TO SEC. 6.2.2.

 

6.2.7        FOR TAX PARTNERSHIP PROPERTIES WITH FMV CAPITAL ACCOUNT VALUES
DIFFERENT FROM THEIR ADJUSTED TAX BASES THE PARTIES INTEND THAT THE ALLOCATIONS
DESCRIBED IN THIS SECTION 6.2 CONSTITUTE A “REASONABLE METHOD” OF ALLOCATING
GAIN OR LOSS UNDER TREAS. REG. §1.704-3(A)(1).

 

6.2.8        TAKE-IN-KIND.

 

If checked “Yes” in Sec. 9.2, below, each Party has the right to determine the
market for its proportionate share of production. All items of income,
deductions, and credits arising from such marketing of production shall be
recognized by the Tax Partnership and shall be allocated to the Party whose

 

11

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production is so marketed.

 

7.             TERMINATION AND LIQUIDATING DISTRIBUTION

 

7.1           TERMINATION OF THE TAX PARTNERSHIP.

 

7.1.1        UPON TERMINATION, AS PROVIDED IN CODE §708(B)(1)(A), THE BUSINESS
SHALL BE WOUND-UP AND CONCLUDED, AND THE ASSETS SHALL BE DISTRIBUTED TO THE
PARTIES AS DESCRIBED BELOW BY THE END OF SUCH CALENDAR YEAR (OR, IF LATER,
WITHIN NINETY (90) DAYS AFTER THE DATE OF SUCH TERMINATION). THE ASSETS SHALL BE
VALUED AND DISTRIBUTED TO THE PARTIES IN THE ORDER PROVIDED IN SECS. 7.1.2, 7.5,
AND 7.7. UPON TERMINATION, AS PROVIDED IN CODE §708(B)(1)(B), THE ASSETS OF THE
TAX PARTNERSHIP SHALL BE DEEMED TO BE CONTRIBUTED TO A NEW TAX PARTNERSHIP,
INTERESTS IN WHICH SHALL BE TREATED AS DISTRIBUTED TO THE PARTIES, AND THE NEW
TAX PARTNERSHIP SHALL BE SUBJECT TO THE PROVISIONS OF THIS AGREEMENT.

 

7.1.2        FIRST, ALL CASH REPRESENTING UNEXPENDED CONTRIBUTIONS BY ANY PARTY
AND ANY PROPERTY IN WHICH NO INTEREST HAS BEEN EARNED BY ANY OTHER PARTY UNDER
THE AGREEMENT SHALL BE RETURNED TO THE CONTRIBUTOR.

 

7.2           BALANCING OF FMV CAPITAL ACCOUNTS.

 

Second, the FMV capital accounts of the Parties shall be determined as described
hereafter. The TRP shall take the actions specified under Secs. 7.2 through 7.5
in order to cause the ratios of the Parties’ FMV capital accounts to reflect as
closely as possible their interests under the Agreement. The ratio of a Party’s
FMV capital account is represented by a fraction, the numerator of which is the
Party’s FMV capital account balance and the denominator of which is the sum of
all Parties’ FMV capital account balances. This is hereafter referred to as the
“balancing of the FMV capital accounts” and, when completed, the FMV capital
accounts of the Parties shall be referred to as “balanced.”

 

7.3           DEEMED SALE GAIN/LOSS CHARGE BACK.

 

The FMV of all Tax Partnership properties shall be determined and the gain or
loss for each property, which would have resulted if sold at such FMV, shall be
allocated in accordance with Secs. 6.1.5 and 6.1.6.

 

12

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7.4           DEFICIT MAKE-UP OBLIGATION AND BALANCING CASH CONTRIBUTIONS.

 

If hereafter a Party has a negative FMV capital account balance, that is a
balance of less than zero, in accordance with of Treas. Reg.
§1.704-1(b)(2)(ii)(b)(3) such Party shall not be obligated to contribute an
amount of money to the Tax Partnership sufficient to achieve a zero balance FMV
capital account (the “Deficit Make-Up Obligation”). Any Party may contribute an
amount of cash to the Tax Partnership to facilitate the balancing of the FMV
capital accounts. If after these adjustments the FMV capital accounts are not
balanced, Secs. 7.5 shall apply.

 

7.5           DISTRIBUTION TO BALANCE CAPITAL ACCOUNTS.

 

7.5.1        IF ALL PARTIES AGREE, ANY CASH OR AN UNDIVIDED INTEREST IN CERTAIN
SELECTED PROPERTIES SHALL BE DISTRIBUTED TO ONE OR MORE PARTIES AS NECESSARY FOR
THE PURPOSE OF BALANCING THE FMV CAPITAL ACCOUNTS.

 

7.5.2        DISTRIBUTION OF UNDIVIDED INTERESTS.

 

Unless Sec.7.5.1 applies, an undivided interest in each and every property shall
be distributed to one or more Parties in accordance with the ratios of their FMV
capital accounts.

 

7.6           FMV DETERMINATION.

 

If a property is to be valued for purposes of balancing the capital accounts and
making a distributions under this Sec. 7, the Parties must first attempt to
agree on the FMV of the property; failing such an agreement, the TRP shall cause
a nationally recognized independent engineering firm to prepare an appraisal of
the FMV of such property.

 

7.7           FINAL DISTRIBUTION.

 

After the FMV capital accounts of the Parties have been adjusted pursuant to
Secs.7.2 to 7.5, all remaining property and interests then held by the Tax
Partnership shall be distributed to the Parties in accordance with their
positive FMV capital account balances.

 

8.             TRANSFERS, INDEMNIFICATION, AND CORRESPONDENCE

 

8.1           TRANSFER OF TAX PARTNERSHIP INTERESTS.

 

Transfers of Tax Partnership interests shall be governed by the Agreement. A
Party transferring its interest, or any part thereof, shall notify the TRP in
writing within two weeks after such transfer.

 

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8.2           CORRESPONDENCE.

 

All correspondence relating to the preparation and filing of the Tax
Partnership’s income tax returns and capital accounts shall be sent to:

 

(Attach separate list, if necessary)

 

TRP

 

“Att to:” reference

Noble Energy, Inc.

 

Jerry Williams

110 West Broadway, P.O. Box 909

 

 

Ardmore, OK 73401 - 6227

 

 

 

 

 

Other Parties:

 

 

 

 

 

Teton DJ, LLC

 

Pat Quinn

410 Seventeenth Street, Suite 1850

 

 

Denver, Colorado 80202

 

 

 

9.             ELECTIONS AND CHANGES TO ABOVE PROVISIONS

 

9.1           OPERATOR NOT THE TRP.

 

With respect to Sec. 2.1, (insert name of Party to be TRP instead of Operator,
or indicate “N/A”) N/A.

 

9.2           SPECIAL TAX ELECTIONS.

 

With respect to Sec. 4.1, the Parties agree (if not applicable insert “N/A” or
strike):

 

 

 

Yes

e) that the Tax Partnership shall elect to account for dispositions of
depreciable assets under the general asset method to the extent permitted by
Code §168(i)(4);

 

N/A

 

 

 

f) that, on the request of a Party, the Tax Partnership shall elect under Code
§754 to adjust the basis of Tax Partnership property, with the adjustments
provided in Code §734 for a distribution of property and in Code §743 for a
transfer of a partnership interest. In case of distribution of property the TRP
shall adjust all tax basis capital accounts. In the case of a transfer of a
partnership interest the acquiring party(ies) shall establish and maintain its
(their) tax basis capital account(s);

 

Yes

 

 

 

g) that the Tax Partnership shall elect under Code §6231 to be subject to the
TEFRA rules.

 

N/A

 

14

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With respect to Sec. 4.2, Depletion the Parties agree that the Tax Partnership
shall use simulated percentage depletion instead of simulated cost depletion.

 

N/A

 

 

 

With respect to Sec.5.2.4, under the rules of Treas. Reg. § 1.704-1(b)(2)(iv)(f)
the Parties agree that the FMV capital accounts shall be revalued to reflect
value changes of the Tax Partnership property upon the occurrence of the events
specified in (5)(i) through (iii) of said -1(b)(2)(iv)(f) regulations.

 

N/A

 

 

 

With respect to Sec. 6.2.8, the income attributable to take-in-kind production
will be reflected on the tax return.

 

N/A

 

With respect to Sec. 5.2.3 the FMV for the listed properties are determined as
follows (mark as “N/A” if not applicable; use separate sheet if necessary)

 

Property Description

 

FMV

N/A

 

 

 

 

 

 

 

 

 

9.3           CHANGE OF MAJORITY FOR OTHER TAX ELECTIONS.

 

Instead of the Sec. 4.4 majority for other tax elections, a majority shall be
considered if consisting of (specify or line out blanks). N/A

 

THE END

 

15

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EXHIBIT “H”

 

Attached to and made a part of that certain Operating Agreement dated     , by
and between Noble Energy, Inc., as Operator, and Teton DJ LLC, as Non-Operator

 

MODEL FORM RECORDING SUPPLEMENT TO

OPERATING AGREEMENT AND FINANCING STATEMENT

 

THIS AGREEMENT, entered into by and between Noble Energy, Inc., hereinafter
referred to as “Operator,” and the signatory party or parties other than
Operator, hereinafter referred to individually as “Non-Operator,” and
collectively as “Non-Operators.”

 

WHEREAS, the parties to this agreement are owners of Oil and Gas Leases and/or
Oil and Gas Interests in the land identified in Exhibit “A” (said land, Leases
and Interests being hereinafter called the “Contract Area”), and in any instance
in which the Leases or Interests of a party are not of record, the record owner
and the party hereto that owns the interest or rights therein are reflected on
Exhibit “A”;

 

WHEREAS, the parties hereto have executed an Operating Agreement dated January
27, 2006 (herein the “Operating Agreement”), covering the Contract Area for the
purpose of exploring and developing such lands, Leases and Interests for Oil and
Gas; and

 

WHEREAS, the parties hereto have executed this agreement for the purpose of
imparting notice to all persons of the rights and obligations of the parties
under the Operating Agreement and for the further purpose of perfecting those
rights capable of perfection.

 

NOW, THEREFORE, in consideration of the mutual rights and obligations of the
parties hereto, it is agreed as follows:

 

1.             This agreement supplements the Operating Agreement, which
Agreement in its entirety is incorporated herein by reference, and all terms
used herein shall have the meaning ascribed to them in the Operating Agreement.

 

2.             The parties do hereby agree that:

 

A.    The Oil and Gas Leases and/or Oil and Gas Interests of the parties
comprising the Contract Area shall be subject to and burdened with the terms and
provisions of this agreement and the Operating Agreement, and the parties do
hereby commit such Leases and Interests to the performance thereof.

 

B.    The exploration and development of the Contract Area for Oil and Gas shall
be governed by the terms and provisions of the Operating Agreement, as
supplemented by this agreement.

 

C.    All costs and liabilities incurred in operations under this agreement and
the Operating Agreement shall be borne and paid, and all equipment and materials
acquired in operations on the Contract Area shall be owned, by the parties
hereto, as provided in the Operating Agreement.

 

D.    Regardless of the record title ownership to the Oil and Gas Leases and/or
Oil and Gas Interests identified on Exhibit “A,” all production of Oil and Gas
from the Contract Area shall be owned by the parties as provided in the
Operating Agreement; provided nothing contained in this agreement shall be
deemed an assignment or cross-assignment of interests covered hereby.

 

E.     Each party shall pay or deliver, or cause to be paid or delivered, all
burdens on its share of the production from the Contract Area as provided in the
Operating Agreement.

 

F.     An overriding royalty, production payment, net profits interest or other
burden payable out of production hereafter created, assignments of production
given as security for the payment of money and those overriding royalties,
production payments and other burdens payable out of production heretofore
created and defined as Subsequently Created Interests in the Operating Agreement
shall be (i) borne solely by the party whose interest is burdened therewith,
(ii) subject to suspension if a party is required to assign or relinquish to
another party an interest which is subject to such burden, and (iii) subject to
the lien and security interest hereinafter provided if the party subject to such
burden fails to pay its share of expenses chargeable hereunder and under the
Operating Agreement, all upon the terms and provisions and in the times and
manner provided by the Operating Agreement.

 

G.    The Oil and Gas Leases and/or Oil and Gas Interests which are subject
hereto may not be assigned or transferred except in accordance with those terms,
provisions and restrictions in the Operating Agreement regulating such
transfers.

 

This agreement and the Operating Agreement shall be binding upon and shall inure
to the benefit of the parties hereto, and their respective heirs, devisees,
legal representatives, and assigns, and the terms hereof shall be deemed to run
with the leases or interests included within the lease Contract Area.

 

H.    The parties shall have the right to acquire an interest in renewal,
extension and replacement leases, leases proposed to be surrendered, wells
proposed to be abandoned, and interests to be relinquished as a result of
non-participation in subsequent operations, all in accordance with the terms and
provisions of the Operating Agreement.

 

I.      The rights and obligations of the parties and the adjustment of
interests among them in the event of a failure or loss of title, each party’s
right to propose operations, obligations with respect to participation in
operations on the Contract Area and the consequences of a failure to participate
in operations, the rights and obligations of the parties regarding the marketing
of production, and the rights and remedies of the parties for failure to comply
with financial obligations shall be as provided in the Operating Agreement.

 

J.     Each party’s interest under this agreement and under the Operating
Agreement shall be subject to relinquishment for its failure to participate in
subsequent operations and each party’s share of production and costs shall be
reallocated on the basis of such relinquishment, all upon the terms and
provisions provided in the Operating Agreement.

 

K.    All other matters with respect to exploration and development of the
Contract Area and the ownership and transfer of the Oil and Gas Leases and/or
Oil and Gas Interest therein shall be governed by the terms and provisions of
the Operating Agreement.

 

3.             The parties hereby grant reciprocal liens and security interests
as follows:

 

A.    Each party grants to the other parties to the Operating Agreement a lien
upon any interest it now owns or hereafter acquires in Oil and Gas Leases and
Oil and Gas Interests in the Contract Area, and a security interest and/or
purchase money security interest in any interest it now owns or hereafter
acquires in the personal property and fixtures on or used or obtained for use in
connection therewith, to secure performance of all of its obligations under this
agreement and the Operating Agreement including but not limited to payment of
expense, interest and fees, the proper disbursement of all monies paid under
this agreement and the Operating Agreement, the assignment or relinquishment of
interest in Oil and Gas Leases as required under this agreement and the
Operating Agreement, and the proper performance of operations under this
agreement and the Operating Agreement. Such lien and security interest granted
by each party hereto shall include such party’s leasehold interests, working
interests, operating rights, and royalty and overriding royalty interests in the
Contract Area now owned or hereafter acquired and in lands pooled or unitized
therewith or otherwise becoming subject to this agreement and the Operating
Agreement, the Oil and Gas when extracted therefrom and equipment situated
thereon or used or

 

--------------------------------------------------------------------------------

 

obtained for use in connection therewith (including, without limitation, all
wells, tools, and tubular goods), and accounts (including, without limitation,
accounts arising from the sale of production at the wellhead), contract rights,
inventory and general intangibles relating thereto or arising therefrom, and all
proceeds and products of the foregoing.

 

B.    Each party represents and warrants to the other parties hereto that the
lien and security interest granted by such party to the other parties shall be a
first and prior lien, and each party hereby agrees to maintain the priority of
said lien and security interest against all persons acquiring an interest in Oil
and Gas Leases and Interests covered by this agreement and the Operating
Agreement by, through or under such party. All parties acquiring an interest in
Oil and Gas Leases and Oil and Gas Interests covered by this agreement and the
Operating Agreement, whether by assignment, merger, mortgage, operation of law,
or otherwise, shall be deemed to have taken subject to the lien and security
interest granted by the Operating Agreement and this instrument as to all
obligations attributable to such interest under this agreement and the Operating
Agreement whether or not such obligations arise before or after such interest is
acquired.

 

C.    To the extent that the parties have a security interest under the Uniform
Commercial Code of the state in which the Contract Area is situated, they shall
be entitled to exercise the rights and remedies of a secured party under the
Code. The bringing of a suit and the obtaining of judgment by a party for the
secured indebtedness shall not be deemed an election of remedies or otherwise
affect the lien rights or security interest as security for the payment thereof.
In addition, upon default by any party in the payment of its share of expenses,
interest or fees, or upon the improper use of funds by the Operator, the other
parties shall have the right, without prejudice to other rights or remedies, to
collect from the purchaser the proceeds from the sale of such defaulting party’s
share of Oil and Gas until the amount owed by such party, plus interest, has
been received, and shall have the right to offset the amount owed against the
proceeds from the sale of such defaulting party’s share of Oil and Gas. All
purchasers of production may rely on a notification of default from the
non-defaulting party or parties stating the amount due as a result of the
default, and all parties waive any recourse available against purchasers for
releasing production proceeds as provided in this paragraph.

 

D.    If any party fails to pay its share of expenses within sixty (60) days
after rendition of a statement therefor by Operator the non-defaulting parties,
including Operator, shall, upon request by Operator, pay the unpaid amount in
the proportion that the interest of each such party bears to the interest of all
such parties. The amount paid by each party so paying its share of the unpaid
amount shall be secured by the liens and security rights described in this
paragraph 3 and in the Operating Agreement, and accept as otherwise limited in
the Operating Agreement each paying party may independently pursue any remedy
available under the Operating Agreement or otherwise.

 

E.     If any party does not perform all of its obligations under this agreement
or the Operating Agreement, and the failure to perform subjects such party to
foreclosure or execution proceedings pursuant to the provisions of this
agreement or the Operating Agreement, to the extent allowed by governing law,
the defaulting party waives any available right of redemption from and after the
date of judgment, any required valuation or appraisement of the mortgaged or
secured property prior to sale, any available right to stay execution or to
require a marshalling of assets and any required bond in the event a receiver is
appointed. In addition, to the extent permitted by applicable law, each party
hereby grants to the other parties a power of sale as to any property that is
subject to the lien and security rights granted hereunder or under the Operating
Agreement, such power to be exercised in the manner provided by applicable law
or otherwise in a commercially reasonable manner and upon reasonable notice.

 

F.     The lien and security interest granted in this paragraph 3 supplements
identical rights granted under the Operating Agreement.

 

G.    To the extent permitted by applicable law, Non-Operators agree that
Operator may invoke or utilize the mechanics’ or materialmen’s lien law of the
state in which the Contract Area is situated in order to secure the payment to
Operator of any sum due under this agreement and the Operating Agreement for
services performed or materials supplied by Operator.

 

H.    The above described security will be financed at the wellhead of the well
or wells located on the Contract Area and this Recording Supplement may be filed
in the land records in the County or Parish in which the Contract Area is
located, and as a financing statement in all recording offices required under
the Uniform Commercial Code or other applicable state statutes to perfect the
above-described security interest, and any party hereto may file a continuation
statement as necessary under the Uniform Commercial Code, or other state laws.

 

4.     This agreement shall be effective as of the date of the Operating
Agreement as above recited. Upon termination of this agreement and the Operating
Agreement and the satisfaction of all obligations thereunder, Operator is
authorized to file of record in all necessary recording offices a notice of
termination, and each party hereto agrees to execute such a notice of
termination as to Operator’s interest, upon the request of Operator, if Operator
has complied with all of its financial obligations.

 

5.     This agreement and the Operating Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
devisees, legal representatives, successors and assigns. No sale, encumbrance,
transfer or other disposition shall be made by any party of any interest in the
Leases or Interests subject hereto except as expressly permitted under the
Operating Agreement and, if permitted, shall be made expressly subject to this
agreement and the Operating Agreement and without prejudice to the rights of the
other parties. If the transfer is permitted, the assignee of an ownership
interest in any Oil and Gas Lease shall be deemed a party to this agreement and
the Operating Agreement as to the interest assigned from and after the effective
date of the transfer of ownership; provided, however, that the other parties
shall not be required to recognize any such sale, encumbrance, transfer or other
disposition for any purpose hereunder until thirty (30) days after they have
received a copy of the recorded instrument of transfer or other satisfactory
evidence thereof in writing from the transferor or transferee. No assignment or
other disposition of interest by a party shall relieve such party of obligations
previously incurred by such party under this agreement or the Operating
Agreement with respect to the interest transferred, including without limitation
the obligation of a party to pay all costs attributable to an operation
conducted under this agreement and the Operating Agreement in which such party
has agreed to participate prior to making such assignment, and the lien and
security interest granted by Article VII.B. of the Operating Agreement and
hereby shall continue to burden the interest transferred to secure payment of
any such obligations.

 

6.             In the event of a conflict between the terms and provisions of
this agreement and the terms and provisions of the Operating Agreement, then, as
between the parties, the terms and provisions of the Operating Agreement shall
control.

 

7.             This agreement shall be binding upon each Non-Operator when this
agreement or a counterpart thereof has been executed by such Non-Operator and
Operator notwithstanding that this agreement is not then or thereafter executed
by all of the parties to which it is tendered or which are listed on Exhibit “A”
as owning an interest in the Contract Area or which own, in fact, an interest in
the Contract Area. In the event that any provision herein is illegal or
unenforceable, the remaining provisions shall not be affected, and shall be
enforced as if the illegal or unenforceable provision did not appear herein.

 

8.             Other provisions. The Operating Agreement contains the rights and
remedies of the parties thereto in the event of a default under the terms of the
Operating Agreement or a default under any third party obligation, i.e.
mortgage, including the preferential right to purchase the defaulting party’s
interest in the Contract Area prior to foreclosure or an in lieu transfer; the
right of subrogation; and the right to assume, release or redeem the defaulting
party’s interest which is subject to lien or foreclosure.

 

In the event of a default by a Non-Operator under any third party obligation,
Operator shall be entitled to notice prior to any foreclosure action and an
opportunity to cure such default. In the event a foreclosure action is
commenced, Operator shall be entitled to notice and due process.

 

2

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See attached legal description.

 

IN WITNESS WHEREOF, this agreement shall be effective as of the        day
of                       , 2006.

 

OPERATOR

 

ATTEST OR WITNESS

Noble Energy, Inc.

 

 

 

 

 

 

 

 

 

/s/ David W. Siple

 

 

 

By:

 

David W. Siple

 

 

 

 

 

 

 

 

 

Type or Print Name

 

 

 

 

 

Title:

 

Attorney-In-Fact for GWW

 

 

 

Date:

 

 

 

 

Address:

 

1625 Broadway, Suite 2000, Denver, Colorado 80202

 

 

 

NON-OPERATORS

 

ATTEST OR WITNESS

Teton DJ LLC

 

 

 

 

By Teton Energy Corporation, Manager

 

 

 

/s/ Patrick A. Quinn

 

 

 

By:

 

Patrick A. Quinn

 

 

 

 

 

 

 

 

 

Type or Print Name

 

 

 

 

 

Title:

 

Chief Financial Officer

 

 

 

Date:

 

 

 

 

Address:

 

410 17th Street, Suite 1800, Denver, Colorado 80202

 

 

 

 

 

 

ATTEST OR WITNESS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

Type or Print Name

 

 

 

 

 

 

 

Title:

 

 

 

 

 

Date:

 

 

 

 

Address:

 

 

 

ATTEST OR WITNESS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

Type or Print Name

 

 

 

 

 

 

 

Title:

 

 

 

 

 

Date:

 

 

 

 

Address:

 

 

 

 

3

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ACKNOWLEDGMENTS

 

NOTE:

 

The following forms of acknowledgment are the short forms approved by the
Uniform Law on Notarial Acts. The validity and effect of these forms in any
state will depend upon the statutes of that state.

 

Individual Acknowledgment

 

State of                              

§

 

 

 

§ ss.

 

 

County of                          

§

 

This instrument was acknowledged before me
on                                                                                                                     
 by

 

(Seal, if any)

                                                              

 

 

 

Title (and Rank)                                                  

 

 

 

My commission expires:                                     

 

Acknowledgment in Representative Capacity

 

State of Colorado

§

 

 

City and

§ ss.

 

 

County of Denver

§

 

This instrument was acknowledged before me
on                                                                                     
by David W. Siple as Attorney-In-Fact of Noble Energy, Inc..

 

(Seal, if any)

                                                                    

 

/s/ Dianne F. LaGrange

 

Title (and Rank) Notary Public

 

 

 

My commission expires: December 23, 2007

 

State of Colorado

§

 

 

City and

§ ss.

 

 

County of Denver

§

 

This instrument was acknowledged before me on January 27, 2006 by Patrick A.
Quinn as Chief Financial Officer of Teton DJ LLC, a Colorado limited liability
company.

 

(Seal, if any)

 

 

/s/ Dianne F. LaGrange

 

Title (and Rank): Notary Public

 

 

 

My commission expires: December 23, 2007

 

4

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