Exhibit
10.3


 


EXHIBIT “C”


 


Attached to and
made a part of that certain Offer to Sell Letter Agreement dated

June 7th, 2004 by and between Texas Independent Exploration Limited, et
al, as Seller

and Whittier Energy Company, as Buyer


 


As
additional consideration from Buyer to Seller for the transactions contemplated
in the Agreement to which this Exhibit “C” is attached, Buyer shall carry (at
no cost, risk or expense to Seller) to Casing Point (as hereinafter defined)
Seller in the drilling of the first two (2) wells drilled on the Cameron 137
lease (see Exhibit “A” to said Agreement for description of said lease) after
Closing and in the drilling of the first two (2) wells drilled on the Scott
& Hopper leases (see said Exhibit “A” for descriptions of said leases)
after Closing to the extent of the Retained Interest of Seller (as hereinafter
defined) in the Cameron 137 lease and in the Scott & Hopper leases.


 


As
used herein:


 


(a)                                  The term “Casing Point” shall mean that point
in time after a carried well has reached its required depth as provided below,
all logs and tests required to make a decision regarding completion of such
well have been completed and the logs and results thereof have been furnished
to Seller by Buyer/Operator.


 


(b)                                 The term “Retained Interest of Seller” shall
mean, (i) 25% of the leasehold working (cost bearing) interest of Seller in the
Cameron 137 lease immediately prior to the Closing (being not more than 98.5%)
and (ii) 20% of the leasehold working (cost bearing) interest of Seller in the
Scott & Hopper leases immediately prior to Closing (being not more than
53.089751% on a unit basis, see Gas Unit Designation dated August 29, 1977
and recorded in the Brooks County Deed Records at Book 90, Page 49).


 


(c)                                  The term “Carried Wells” shall mean
collectively the first two wells drilled after Closing on the Cameron 137 lease
and the first two (2) wells drilled after Closing on the Scott & Hopper
leases. Each of such Carried Wells are hereinafter sometimes individually
referred to as a “Carried Well.”


 


(d)                                 The term “Substitute Well” shall mean any
well that is drilled as a replacement for a Carried Well under the terms
hereof.  Any such Substitute Well when
so drilled shall qualify as the Carried Well for which it is a replacement.


 


The
additional terms and conditions governing the carrying by Buyer of the Retained
Interest of Seller in the Carried Wells, including the reassignment of certain
portions of the Properties from Buyer to Seller if Buyer fails to perform as
herein provided, are as follows:


 


Carrying of Retained Interest of
Seller on the Cameron 137 lease


 


i.                                          Buyer shall carry the Retained Interest of
Seller (at no cost, risk or expense to Seller) for any and all costs required
for operations to Casing Point of the first two (2) wells drilled


 


1

















 


on
the Cameron 137 lease after Closing, and Seller shall be responsible for all
costs, risk and expense associated with or pertaining to such Retained Interest
of Seller at and after Casing Point in each well.


 


ii.                                       Buyer commits to drill each of said Carried
Wells on the Cameron 137 lease to a minimum total vertical depth of 9,304’
beneath the surface of the earth with the first Carried Well being spud no
later than 12 months after Closing and the second Carried Well being spud no
later than 24 months after Closing. 
Seller agrees that Seller will not propose any wells on the Cameron 137
lease until the earlier to occur of either (i) thirty (30) days following the
date the first Carried Well on the Cameron 137 lease has been tested after the
drilling and completion of such well or (ii) 12 months after the Closing and so
long thereafter as Buyer takes to drill and complete such first Carried Well
located on the Cameron 137 lease if same is timely spud.


 


iii.                                    If Buyer fails to timely spud and thereafter
drill the first such Carried Well to its required depth with the due diligence
of a prudent operator, then, as the only consequence to Buyer for such failure
and as the sole remedy of Seller against Buyer for such failure, Buyer shall
immediately reassign to Seller all rights that Seller assigned to Buyer in the
Cameron 137 lease, save and except for Buyer’s rights in (i) any of the
wellbores then located on the Cameron 137 lease and (ii) forty (40) acres surrounding
each of such wellbores then producing or capable of producing, such acreage to
be in the form of a square as is reasonably practicable with each side of such
square being equidistant from the particular wellbore surrounded by such
acreage.


 


iv.                                   If Buyer timely spuds and drills the first
Carried Well to its required depth, but Buyer then fails to timely spud and
thereafter drill the second Carried Well to its required depth with the due
diligence of a prudent operator, then, as the only consequence to Buyer for
such failure and as the sole remedy of Seller against Buyer for such failure,
Buyer shall immediately reassign to Seller 50% of the rights that Seller
assigned to Buyer in the Cameron 137 lease, save and except for Buyer’s
rights in (i) any of the wellbores then located on the Cameron 137 lease and
(ii) forty (40) acres surrounding each of such wellbores then producing or
capable of producing, such acreage to be in the form of a square as is
reasonably practicable with each side of such square being equidistant from the
particular wellbore surrounded by such acreage.


 


v.                                      As to any wells drilled on the Cameron 137
lease subsequent to the two Carried Wells, each party will be responsible for
paying its share of costs based on its leasehold interest in the Cameron 137
lease at that time.


 


Carrying of Retained Interest of
Seller on Scott & Hopper leases


 


i.                                          Buyer shall carry the Retained Interest of
Seller (at no cost, risk or expense to Seller) for any and all costs required
for operations to Casing Point of the first two (2) wells drilled on the Scott
& Hopper leases after Closing, and Seller shall be responsible for all
cost, risk and expense associated with or pertaining to such Retained Interest
of Seller at and after Casing Point in each well.


 


2

















 


ii.                                       Buyer commits to drill each of said Carried
Wells on the Scott & Hopper leases to a minimum total vertical depth of
10,000’ beneath the surface of the earth with the first Carried Well being spud
no later than 9 months after Closing and the second Carried Well being spud no
later than 18 months after Closing. 
Seller agrees that Seller will not propose any wells on the Scott &
Hopper leases until the earlier to occur of either (i) thirty (30) days following
the date the first Carried Well on the Scott & Hopper leases has been
tested after the drilling and completion of such well or (ii) 9 months after
the Closing and so long thereafter as Buyer takes to drill and complete such
first Carried Well on the Scott & Hopper leases if same is timely spud.


 


iii.                                    If Buyer fails to timely spud and thereafter
drill the first such Carried Well to its required depth with the due diligence
of a prudent operator, then, as the only consequence to Buyer for such failure and
as the sole remedy of Seller against Buyer for such failure, Buyer shall
immediately reassign to Seller all rights that Seller assigned to Buyer in the
Scott & Hopper leases, save and except for Buyer’s rights in (i) any
of the wellbores then located on the Scott & Hopper leases and (ii) forty
(40) acres surrounding each of such wellbores then producing or capable of
producing, such acreage to be in the form of a square as is reasonably
practicable with each side of such square being equidistant from the particular
wellbore surrounded by such acreage.


 


iv.                                   If Buyer timely spuds and drills the first
Carried Well to its required depth, but Buyer then fails to timely spud and
thereafter drill the second Carried Well to its required depth with the due
diligence of a prudent operator, then, as the only consequence to Buyer for
such failure and as the sole remedy of Seller against Buyer for such failure,
Buyer shall immediately reassign to Seller 50% of the rights that Seller
assigned to Buyer in the Scott & Hopper leases, save and except for
Buyer’s rights in (i) any of the wellbores then located on the Scott &
Hopper leases and (ii) forty (40) acres surrounding each of such wellbores then
producing or capable of producing, such acreage to be in the form of a square
as is reasonably practicable with each side of such square being equidistant
from the particular wellbore surrounded by such acreage.


 


v.                                      As to any wells drilled on the Scott &
Hopper leases subsequent to the two Carried Wells, each party will be responsible
for paying its share of costs based on its leasehold interest in the Scott
& Hopper leases at that time.


 


vi.                                   Within 60 days after the Closing of the
transactions contemplated in the Agreement to which this Exhibit “C” is
attached, Buyer shall file an application with the Texas Railroad Commission
for temporary field rules of 40 acres surrounding each of the wellbores
producing or capable of producing located on the Scott & Hopper
Leases.  Buyer and Seller further agree
that neither of them shall oppose an application for a Statewide Rule 37
exception and/or a Statewide Rule 38 density exception filed by either Buyer or
Seller with respect to wells drilled or to be drilled on the Scott & Hopper
leases.


 


If
while drilling any Carried Well, mechanical difficulties arise or conditions in
such Carried Well render further drilling by ordinary tools impossible or
impractical and such conditions


 


3

















 


would
cause a prudent operator to cease drilling, then Buyer shall have the option to
stop drilling operations on such Carried Well and thereafter elect to drill a
Substitute Well.  Operations for the
drilling of a Substitute Well shall be commenced within thirty (30) days from
the date of plugging and abandonment of such Carried Well due to such
conditions in the hole. The Substitute Well shall be drilled, at a mutually
acceptable location between the Seller and Buyer, in the same manner and to the
same required depth as provided for such Carried Well.


 


In the event a reassignment from
Buyer to Seller is due Seller pursuant to the above terms, and Buyer or its
assigns fails or refuses for any reason after receiving written notice from
Seller to execute and deliver such reassignment to Seller within 45 days from
the date of receipt of such written notice by Buyer, then, in such event and
only in such event, at any time subsequent to such 45 day period, Seller may,
at its election, deem itself agent for Buyer or its assigns with the limited
and specific authority to execute and place of record such reassignment.


 


Seller and Buyer agree that Buyer’s
Carried Well and Reassignment obligations described in the this Exhibit “C”
shall be covenants running with the land and Buyer shall require any transferee
of either the Cameron 137 or the Scott & Hoppers leases to expressly assume
such obligations.


 


4