exv10w7



 





Exhibit 10.7




OMNIBUS OPERATING AGREEMENT




     This Omnibus Operating Agreement (this “Agreement”) is made and entered
into this ___day of ___, 2007, by and between Pioneer Natural Resources USA,
Inc., a Delaware corporation (“Pioneer USA”), and Pioneer Southwest Energy
Partners USA LLC, a Texas limited liability company (“PSE USA”). Pioneer USA
and PSE USA are sometimes hereinafter referred to individually as a “Party” and
collectively as the “Parties.”



     In consideration of the premises, the covenants set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:



ARTICLE I

DEFINITIONS




     As used in this Agreement, the following terms shall have the
respective meanings set forth below:



     “AAA” means the American Arbitration Association.



     “Applicable Wellbore” means (a) with respect to a Replacement Well, the
Wellbore in replacement of which such Replacement Well was drilled, as described below
in the definition of “Replacement Well,” and (b) with respect to a Down-Spaced Well,
the previously existing Wellbore associated with such Down-Spaced Well, as described
below in the definition of “Down-Spaced Well.”



     “Down-Spaced Well” means an additional well authorized or permitted by
the Texas Railroad Commission to be drilled and produced from a location within the
same forty (40) acre, quarter-quarter section of land as the bottom hole location of a
Wellbore or Replacement Well which is then completed in and producing from the
interval defined in the Spraberry (Trend Area) special field rules. In no event shall
PSE USA propose a Down-Spaced Well to be drilled, deepened, sidetracked, or completed
to a depth below the deepest perforation producing in the Applicable Wellbore.



     “Existing Production Facility” means any Production Facility currently
handling production from one or more Wellbores.



     “Expanded Production Facility” means an Existing Production Facility
which has been expanded to increase capacity in order to accommodate production from
Pioneer Wells, as more particularly described in Section 6.06.



     “Governmental Body” — any:




	 	(a)	 	nation, state, county, city, town, village, district, or
other jurisdiction of any nature;




 









 






	 	(b)	 	federal, state, local, municipal, foreign, or other
government;
	 
	 	(c)	 	governmental or quasi-governmental authority of any nature
(including any Governmental Body, branch, department, official, or entity
and any court or other tribunal);
	 
	 	(d)	 	multi-national organization or body; or
	 
	 	(e)	 	body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.





     “New Production Test Equipment” means the test separator(s), production
separator, header, pumps, and lines or such other equipment added at an Existing
Production Facility solely to measure, separate, and allocate/transfer production
to/from the Pioneer Wells, as more particularly described in Section 6.06(a).



     “Omnibus Agreement” means that certain Omnibus Agreement dated ___,
2007, by and among Pioneer Southwest Energy Partners L.P., Pioneer Natural Resources
GP LLC, Pioneer Natural Resources Company, Pioneer USA, and Pioneer Southwest Energy
Partners USA LLC.



     “Person” means an individual, corporation, partnership, joint venture,
trust, limited liability company, unincorporated organization, or any other entity.



     “Pioneer Operating Agreement” has the meaning assigned thereto in Section
2.03.



     “Pioneer Wells” means both (a) wells operated by Pioneer USA, and (b)
wells that Pioneer USA owns a working interest in but does not operate, other than (in
both cases (a) and (b)) the Wellbores, Replacement Wells, and Down-Spaced Wells.



     “Production Facility” means the surface equipment beyond the wellhead
connections, including stock tanks, separators, treaters, pumping equipment, saltwater
disposal wells (excluding salt water disposal facilities jointly owned by Pioneer USA
and third party(ies)), and associated equipment, handling the production from one or
more Wellbores.



     “Replacement Well” means any well drilled at a location within the same
forty (40) acre, quarter-quarter section of land upon which the surface location of a
Wellbore or Down-Spaced Well is physically located or within one hundred feet (100’)
of such surface location in the event such quarter-quarter section cannot be
reasonably determined, and which is drilled in replacement of such Wellbore or
Down-Spaced Well as a result of the temporary or permanent plugging and abandonment of
such Wellbore or Down-Spaced Well due to mechanical failure and not due to depletion
in the then producing perforations. In no event shall PSE USA propose a Replacement
Well to be drilled, deepened, sidetracked, or completed to a depth below the deepest
perforation producing in the Applicable Wellbore immediately prior to the mechanical



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failure of the Applicable Wellbore. Within the same limitations, a Replacement Well
may also be drilled in replacement of a previously drilled Replacement Well.



     “Rules” means the Commercial Arbitration Rules of the AAA.



     “Third Party Operating Agreement” has the meaning assigned thereto in
Section 2.02.



     “Wellbores” means all of those certain wellbores described in the Omnibus
Agreement.



ARTICLE II

RECITALS




     2.01. Pursuant to the transactions referred to in the Omnibus Agreement, PSE USA
has acquired, or is or will be acquiring, an undivided interest in and to the
Wellbores.



     2.02. With respect to certain Wellbores, operating agreements between Pioneer
USA, as operator, and third parties, as non-operators (the “Third Party Operating
Agreements”), are already in place.



     2.03 With respect to those Wellbores that are not presently subject to a Third
Party Operating Agreement, the Parties are entering into an operating agreement of
even date herewith, with Pioneer USA as operator and PSE USA as non-operator (the
“Pioneer Operating Agreement”).



     2.04. The Parties desire to enter into this Agreement to set forth their
understanding and agreement with respect to certain restrictions and limitations on
the rights of PSE USA and the further rights of the Parties under the Pioneer
Operating Agreement and the Third Party Operating Agreements.



ARTICLE III

TERM




     This Agreement shall remain in effect until the earlier to occur of the
following: (a) the termination of the Pioneer Operating Agreement and all Third Party
Operating Agreements; or (b) the termination of this Agreement by the mutual written
consent of the Parties. In addition, if Pioneer USA resigns as operator under the
Pioneer Operating Agreement or any Third Party Operating Agreement (or is no longer
the operator under any Third Party Operating Agreement for any reason), this Agreement
shall terminate, insofar and only insofar as it applies to any then-existing
Wellbores, Replacement Wells, and Down-Spaced Wells covered by such operating
agreement(s) under which Pioneer USA has resigned as or is no longer operator, when
such resignation or other termination of operatorship becomes effective; however, this
Agreement shall continue in effect insofar as it applies to any subsequently proposed
Replacement Wells or Down-Spaced Wells for the Applicable Wellbores. Notwithstanding
the termination of this Agreement: (a) Pioneer USA shall continue to have the rights
set forth below in Section 6.06 for so long as necessary, in its sole discretion, to
utilize Existing Production Facilities or Expanded Production Facilities for the
delivery and handling of production from Pioneer Wells; (b) PSE



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USA shall continue to have the right to propose, participate, and/or go non-consent in
Replacement Wells and Down-Spaced Wells indefinitely; and (c) Pioneer USA shall
continue to have the rights set forth below in Section 6.07 indefinitely.



ARTICLE IV

SPECIAL PROVISIONS REGARDING THE PIONEER OPERATING AGREEMENT




       Notwithstanding anything to the contrary contained in the Pioneer
Operating Agreement, the Parties agree as follows:



     4.01. PSE USA shall not have the right to remove Pioneer USA as the operator
under the Pioneer Operating Agreement; however, if Pioneer USA resigns as the
operator, or sells all of its interest in the area covered by the Pioneer Operating
Agreement to a third party, PSE USA shall have the right to vote for the selection of
a successor operator pursuant to the terms and conditions of Article V.B.2 of the
Pioneer Operating Agreement.



     4.02. PSE USA shall have the right, along with Pioneer USA, to propose (subject
to the limitation in the following sentence), participate, and/or go non-consent in
subsequent operations in the Wellbores and the drilling of Replacement Wells and/or
Down-Spaced Wells pursuant to the terms and conditions of Article VI.B of the Pioneer
Operating Agreement; however, if a subsequent operation proposal by PSE USA conflicts
with a subsequent operation proposal by Pioneer USA (regardless of which proposal
preceded the other), PSE USA shall withdraw its proposal in favor of Pioneer USA’s
proposal. PSE USA shall not propose the drilling of a Down-Spaced Well with less than
twenty (20) acre density.



     4.03. With respect to any Replacement Well or Down-Spaced Well for which the
Applicable Wellbore is subject to the Pioneer Operating Agreement:




     (a) PSE USA shall not propose any Replacement Well or Down-Spaced Well to
a depth below the deepest producing perforation in the Applicable Wellbore.




     (b) If Pioneer USA proposes a Replacement Well or Down-Spaced Well to be
both (i) drilled and completed in an objective depth and/or interval that is
deeper than the deepest producing perforation in the Applicable Wellbore, and
(ii) dually completed in or commingled with production from a producing
perforation in the Applicable Wellbore, PSE USA shall have the right to
participate in such proposal.




     (c) If PSE USA participates in the drilling of any Replacement Well or
Down-Spaced Well, then, following the completion of such Replacement Well or
Down-Spaced Well, Pioneer USA shall execute and deliver (or cause to be
executed and delivered) to PSE USA a recordable assignment and bill of sale and
such other documents (comparable to those executed in conjunction with the
Wellbores, and containing a comparable title indemnity) as necessary to convey
to PSE USA an undivided interest in the wellbore of the Replacement Well or
Down-Spaced Well from the surface to the deepest producing perforation in the
Replacement Well or Down-Spaced Well, as the case may be (together with an
easement for operating purposes extending an additional one hundred feet (100’)
in depth), which undivided interest shall be in such amount that the ratio of
PSE USA’s interest to Pioneer USA’s interest is the same in the Replacement
Well or Down-Spaced



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Well as it is in the Applicable Wellbore. Prior to the spudding of any
Replacement Well or Down-Spaced Well that is proposed under Section 4.03(b) to
be drilled and completed in a deeper objective depth and/or interval than the
deepest producing perforation in the Applicable Wellbore, and in consideration
of the rights to participate in such well and to receive such assignment and
bill of sale, PSE USA shall pay to Pioneer USA its working interest share of
the fair market value of such objective depth and/or interval that is deeper
than the deepest producing perforation in the Applicable Wellbore, as mutually
agreed by Pioneer USA and PSE USA. If the Parties are unable to reach an
agreement on the fair market value of such objective depth and/or interval,
then the Parties shall select an independent appraiser to make such
determination. If the Parties are unable to agree on an independent appraiser,
each Party shall select one independent appraiser, and the two appraisers so
selected shall select a third independent appraiser, who shall make the
determination of fair market value. The independent appraiser’s determination
will be binding on the Parties.




     (d) If no Replacement Well is proposed by Pioneer USA or PSE USA, but
Pioneer USA subsequently drills and completes a well in which PSE USA does not
have the right to participate as a producer or a dry hole at a deeper depth
than the deepest existing perforation in the Applicable Wellbore within the
limited area of land specified in the definitions of “Replacement Well” or
“Down-Spaced Well” in Article I above, and Pioneer USA thereafter proposes a
plugback of such subsequent well as a Replacement Well or Down-Spaced Well, PSE
USA shall have the right to participate in such plugback attempt, subject to a
well cost adjustment to be calculated in a manner consistent with the well cost
adjustment mechanisms set forth in Article VI.B.4(a) or VI.B.4(b) of the
Pioneer Operating Agreement, as applicable. If PSE USA participates in such
plugback attempt, Pioneer USA shall execute and deliver (or cause to be
executed and delivered) to PSE USA a recordable assignment and bill of sale
conveying to PSE USA an undivided interest in the Replacement Well or
Down-Spaced Well from the surface to the deepest producing perforation in such
well (together with an easement for operating purposes extending an additional
one hundred feet (100’) in depth), which undivided interest shall be in such
amount that the ratio of PSE USA’s interest to Pioneer USA’s interest is the
same in the Replacement Well and Down-Spaced Well as it is in the Applicable
Wellbore.




     (e) Following each transaction described in subsection 4.03(c) or (d)
above, the Parties shall amend Exhibit A-1 to the Pioneer Operating Agreement
to reflect the Parties’ respective interests in the Replacement Well or
Down-Spaced Well from the surface to the deepest producing perforation in such
Replacement Well or Down-Spaced Well.



     4.04 Pioneer USA shall have the right to take over Wellbores, Replacement Wells,
and Down-Spaced Wells agreed to be permanently plugged and abandoned by the Parties
for Pioneer USA’s exclusive use. If Pioneer USA elects to exercise such right, it
shall pay PSE USA for its pro-rata share of the value of the salvable material and
equipment, less its pro-rata shares of the estimated costs of salvaging, plugging and
abandoning, and restoring the surface. If, however, such plugging and restoration
costs are higher than the salvage value, PSE USA shall tender its pro-rata share of
such excess to Pioneer USA. If Pioneer USA exercises this right to take over a
Wellbore, Replacement Well, or Down-Spaced Well, PSE USA shall execute and deliver (or
cause to be executed and delivered) to Pioneer USA a recordable assignment and bill of
sale



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conveying to Pioneer USA all of PSE USA’s interest in such Wellbore, Replacement
Well, or Down-Spaced Well. Pioneer USA shall fully protect, defend, indemnify, and
hold PSE USA harmless from and against all losses, costs, claims, demands, expenses,
damages, liabilities, suits, actions, judgments, and decrees arising out of,
attributable to, or resulting from Pioneer USA’s subsequent operations on and in such
Wellbore, Replacement Well, or Down-Spaced Well.



ARTICLE V

SPECIAL PROVISIONS REGARDING THE THIRD PARTY OPERATING

AGREEMENTS




     Notwithstanding anything to the contrary contained in any Third Party
Operating Agreement, the Parties agree as follows:



     5.01. PSE USA shall never vote to remove Pioneer USA as operator.



     5.02 PSE USA shall have the right (along with other parties to the Third Party
Operating Agreements) to propose, participate, and/or go non-consent in subsequent
operations in the Wellbores and the drilling of Replacement Wells and/or Down-Spaced
Wells, pursuant to the terms of such applicable Third Party Operating Agreement,
subject to the following restrictions:




     (a) If a subsequent operation proposal by PSE USA conflicts with a
subsequent operation proposal by Pioneer USA (regardless of which proposal
preceded the other), PSE USA shall withdraw its proposal in favor of Pioneer
USA’s proposal.




     (b) If a subsequent operation proposal by Pioneer USA conflicts with a
subsequent operation proposal by a third party Non-Operator, PSE USA shall vote
in favor of Pioneer USA’s proposal.



     5.03 With respect to any Replacement Well or Down-Spaced Well for which the
Applicable Wellbore is subject to a Third Party Operating Agreement:




     (a) PSE USA shall not propose any Replacement Well or Down-Spaced Well to
a depth below the deepest producing perforation in the Applicable Wellbore.




     (b) If Pioneer USA or any third party non-operator proposes a Replacement
Well or Down-Spaced Well to be both (i) drilled and completed in an objective
depth and/or interval that is deeper than the deepest producing perforation in
the Applicable Wellbore, and (ii) dually completed in or commingled with
production from a producing perforation in the Applicable Wellbore, then PSE
USA shall have the right to participate in such proposal.




     (c) If PSE USA participates in any proposal to drill a Replacement Well or
Down-Spaced Well, then, following the completion of such Replacement Well or
Down-Spaced Well, the Parties shall prepare and execute (or cause to be
executed) such documents (comparable to those executed in conjunction with the
Wellbores, and containing a comparable title indemnity) as are necessary for
PSE USA to acquire an undivided interest in the wellbore of the Replacement
Well or Down-Spaced Well from



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the surface to the deepest producing perforation in the Replacement Well
or Down-Spaced Well, as the case may be (together with an easement for
operating purposes extending an additional one hundred feet (100’) in depth),
which undivided interest shall be in such amount that the ratio of PSE USA’s
interest to Pioneer USA’s interest is the same in the Replacement Well and
Down-Spaced Well as it is in the Applicable Wellbore. Prior to the spudding of
any Replacement Well or Down-Spaced Well that is proposed to be drilled and
completed in a deeper objective depth and/or interval than the deepest
producing perforation in the Applicable Wellbore, and in consideration of the
rights to participate in such well and to acquire such interest, PSE USA shall
pay to Pioneer USA its working interest share of the fair market value of such
objective depth and/or interval that is deeper than the deepest producing
perforation in the Applicable Wellbore, as mutually agreed by Pioneer USA and
PSE USA. If the Parties are unable to reach an agreement on the fair market
value of such objective depth and/or interval, then the fair market value shall
be determined by an independent appraiser as described above in Section
4.03(c).




     (d) If no Replacement Well is proposed by any party, but Pioneer USA or
any other party to a Third Party Operating Agreement subsequently drills and
completes a well in which PSE USA does not have the right to participate as a
producer or a dry hole at a deeper depth than the deepest existing perforation
in the Applicable Wellbore within the limited area of land specified in the
definitions of “Replacement Well” or “Down-Spaced Well” in Article I above, and
Pioneer USA or any other party to such Third Party Operating Agreement
thereafter proposes a plugback of such subsequent well as a Replacement Well or
Down-Spaced Well, PSE USA shall have the right to participate in such plugback
attempt, subject to (i) the approval of the other parties to such Third Party
Operating Agreement, (ii) a well cost adjustment to be calculated in a manner
consistent with the well cost adjustment mechanisms set forth in such Third
Party Operating Agreement, as applicable, and (iii) if applicable, recovery of
the nonconsent penalty under such Third Party Operating Agreement. If PSE USA
participates in such plugback attempt, the Parties shall prepare and execute
(or cause to be executed) such documents as are necessary for PSE USA to
acquire an undivided interest in the Replacement Well or Down-Spaced Well from
the surface to the deepest producing perforation in such well (together with an
easement for operating purposes extending an additional one hundred feet (100’)
in depth), which undivided interest shall be in such amount that the ratio of
PSE USA’s interest to Pioneer USA’s interest is the same in the Replacement
Well or Down-Spaced Well as it is in the Applicable Wellbore.




     (e) Following each transaction described in subsection 5.03(c) or (d)
above, Pioneer USA shall prepare and circulate to the other parties to the
applicable Third Party Operating Agreement an amended Exhibit “A-1” (or other
applicable exhibit) to such Third Party Operating Agreement to reflect the
respective interests of the Parties and the other parties to such Third Party
Operating Agreement in the Replacement Well or Down-Spaced Well from the
surface to the deepest producing perforation in such Replacement Well or
Down-Spaced Well.



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ARTICLE VI

SPECIAL PROVISIONS REGARDING BOTH THE PIONEER OPERATING

AGREEMENT AND THE THIRD PARTY OPERATING AGREEMENTS




     Notwithstanding anything to the contrary contained in either the Pioneer
Operating Agreement or any Third Party Operating Agreement, the Parties agree as
follows:



     6.01. PSE USA shall have the right to take its share of production under any
Third Party Operating Agreement in kind pursuant to terms and conditions substantially
similar to those applicable to PSE USA in Article VI.G of the Pioneer Operating
Agreement.



     6.02 Subject to PSE USA’s right to take in kind as set forth above in Section
6.01 and in Article VI.G of the Pioneer Operating Agreement, for so long as Pioneer
USA owns an interest in the Wellbores, Replacement Wells, and/or Down-Spaced Wells,
Pioneer USA shall market all of PSE USA’s production on behalf of PSE USA from such
Wellbores, Replacement Wells, and/or Down-Spaced Wells under the same terms and
conditions as Pioneer USA markets its own production. While this right to market may
include arrangements for processing gas, PSE USA shall be responsible for all
applicable processing fees and charges and shall not share in plant revenues,
discounts, or benefits derived from or attributable to Pioneer USA’s ownership in any
such processing plant or facilities. Pioneer USA shall disburse (or cause to be
disbursed) revenues to PSE USA and the other owners of production, including the
royalty owners. Pioneer USA shall not have any liability to PSE USA for the failure
to timely or properly pay any such disbursements to the other owners of production, or
for any penalties and/or interest resulting therefrom.



     6.03. If a lease is lost due to title failure or by operation of its terms, PSE
USA shall be allowed to participate under the renewal provision but INSOFAR AND ONLY
INSOFAR as to the productive interval or behind-pipe intervals in the existing
Wellbores, Replacement Wells, or Down-Spaced Wells, as the case may be. PSE USA shall
reimburse Pioneer USA for its pro-rata share (being equal to its working interest in
the well affected by the failure, or its weighted working interest, if more than one
well is affected) of the actual leasing costs incurred by Pioneer USA.



     6.04. PSE USA shall neither (a) make any application before a Governmental Body,
including applications regarding spacing, down-spacing, density, special field rules,
or allowables, except as hereinafter provided in this Section 6.04, nor (b) object to
any such application made by Pioneer USA. Further, upon the request of Pioneer USA,
PSE USA will affirmatively waive any objections to any such application by Pioneer
USA. Notwithstanding anything in this paragraph to the contrary, PSE USA shall have
the right to make application before a Governmental Body for exceptions to the
Spraberry (Trend Area) special field rules for down-spacing to no less than twenty
(20) acre density. If revised proration unit plats, Railroad Commission of Texas
Forms P-15, and/or similar filings are needed in Pioneer USA’s sole judgment for any
purpose, Pioneer USA shall prepare such proration unit plats, Railroad Commission of
Texas Forms P-15, and/or similar filings for the Parties and submit same to the
appropriate Governmental Body.



     6.05. Pioneer USA shall tender all lease maintenance payments, if any, on behalf
of PSE USA, subject to reimbursement from PSE USA. Pioneer USA shall retain and
maintain all division of interest and revenue decks, and all well, lease, and contract
files. Pioneer USA shall not have any liability to PSE USA for the failure to timely
or properly tender any such lease maintenance payments, unless such failure results
from the gross negligence or willful misconduct of Pioneer USA.



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     6.06. Subject to the further terms and conditions set forth below, PSE USA
authorizes Pioneer USA to utilize the Existing Production Facilities as necessary in
Pioneer USA’s sole discretion for separating, storing, handling, compressing,
dehydrating, treating, and delivering oil, gas, and water from Pioneer Wells. Pioneer
USA recognizes, however, that the Existing Production Facilities may be limited by
physical restrictions from accepting some or all of the production from the Pioneer
Wells, such that Pioneer USA may be required to construct its own Production
Facilities.




     (a) If Pioneer USA, as operator of the Existing Production Facilities,
determines, in its sole discretion, that there is sufficient capacity (physical
and contractual) at an Existing Production Facility to accommodate separately
metered production from Pioneer Wells, Pioneer USA is authorized to construct,
maintain, and operate gathering lines to deliver production from the Pioneer
Wells to such Existing Production Facility. If the production from the Pioneer
Wells will not be metered prior to being delivered to the Existing Production
Facility, Pioneer USA shall install New Production Test Equipment to measure
the production from the Pioneer Well(s). Pioneer USA shall pay for one hundred
percent (100%) where no third party owners exist, and its pro-rata share (which
shall include PSE USA’s share) where third party owners exist, of the costs of
connecting the Pioneer Wells to the Existing Production Facility, including all
costs associated with the installation of the New Production Test Equipment.
Pioneer USA shall have no liability to PSE USA if the connection of a Pioneer
Well to an Existing Production Facility requires or results in the temporary
interruption of production delivered from other Wellbores, Replacement Wells,
or Down-Spaced Wells connected to such Existing Production Facility. Further,
Pioneer USA shall bear its proportionate share of the cost of maintaining and
operating each Existing Production Facility, including any New Production Test
Equipment — such proportionate share to be determined by dividing the total
number of Pioneer Wells utilizing the Existing Production Facility by the total
number of all wells utilizing such Existing Production Facility. After
installation, the New Production Test Equipment shall be owned by the
then-current owners and maintained and operated by the then-current operator of
the Existing Production Facility.




     (b) If Pioneer USA determines, in its sole discretion, that there is
insufficient capacity (physical or contractual) at an Existing Production
Facility to handle production from any Pioneer Well, Pioneer USA may elect to
expand an Existing Production Facility to increase its capacity in order to
handle such production. Pioneer USA shall pay for one hundred percent (100%)
where no third party owners exist, and its pro-rata share (which shall include
PSE USA’s share) where third party owners exist, of the expansion costs and the
costs to subsequently connect the Pioneer Wells to the Expanded Production
Facility. Pioneer USA shall have no liability to PSE USA if the expansion of
an Existing Production Facility results in the temporary interruption of
production from other Wellbores, Replacement Wells, or Down-Spaced Wells
connected to such Existing Production Facility. Further, Pioneer USA shall
bear its proportionate share of the cost of maintaining and operating the
Expanded Production Facility — such proportionate share to be determined by
dividing the total number of Pioneer Wells utilizing the Expanded Production
Facility by the total number of all wells utilizing such Expanded Production
Facility. After installation, the Expanded Production Facility shall be owned
by the then-



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current owners and maintained and operated by the then-current operator of
the applicable Existing Production Facility.




     (c) Nothing herein shall be construed to impart, transfer, or convey any
additional ownership or liability in an Existing Production Facility or
Expanded Production Facility to Pioneer USA.



     6.07 If Pioneer USA resigns as operator under the Pioneer Operating Agreement or
any Third Party Operating Agreement (or is no longer the operator under any Third
Party Operating Agreement for any reason), then any successor operator shall, upon the
request of Pioneer USA, prepare and file with the appropriate Governmental Body such
revised proration unit plats, Railroad Commission of Texas Forms P-15, and/or similar
filings as may be necessary in Pioneer USA’s sole judgment for any purpose.



ARTICLE VII

MISCELLANEOUS PROVISIONS




     7.01. Notices. All notices, requests, or consents provided for or permitted to
be given pursuant to this Agreement must be in writing and must be given by depositing
same in the United States mail, addressed to the Party to be notified, postpaid, and
registered or certified with return receipt requested, or by delivering such notice in
person or by telecopier or telegram to such Party. Notice given by personal delivery
or mail shall be effective upon actual receipt. Notice given by telegram or
telecopier shall be effective upon actual receipt if received during the recipient’s
normal business hours, or at the beginning of the recipient’s next business day after
receipt if not received during the recipient’s normal business hours. All notices to
be sent to a Party pursuant to this Agreement shall be sent to or made to the
attention of such Party at the address set forth below or at such other address as
such Party may stipulate to the other Parties in the manner provided in this Section
7.01.


PIONEER USA:



5205 N. O’Connor Blvd., Suite 200

Irving, Texas 75039

Phone: (972) 444-9001

Fax: (972) 969-3587

Attention: General Counsel



PSE USA:



c/o Pioneer Natural Resources GP LLC

5205 N. O’Connor Blvd., Suite 200

Irving, Texas 75039

Phone: (972) 444-9001

Fax: (972) 969-3587

Attention: General Counsel




     7.02. Additional Properties. If the Parties acquire additional properties that
they desire to be subject to this Agreement, they agree that Pioneer USA shall be the
operator of such



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properties (unless the properties are subject to an operating agreement under which a
third party is operator and will continue as operator), and agree to make such
amendments to this Agreement (and, if applicable, the Pioneer Operating Agreement) as
are necessary for this Agreement (and, if applicable, the Pioneer Operating Agreement)
to apply to such additional properties.



     7.03. Jurisdiction; Service of Process. Without limiting the Parties’ agreement
to arbitrate in Section 7.17, any action
or proceeding seeking a temporary or
preliminary injunction to enforce any
provision of, or based on any right
arising out of, this Agreement must be
brought against any of the Parties in
the courts of the State of Texas, County
of Dallas, or, if it has or can acquire
jurisdiction, in the United States
District Court for the Northern District
of Texas (Dallas Division), and each of
the Parties consents to the jurisdiction
of such courts (and of the appropriate
appellate courts) for such limited
purpose in any such action or proceeding
and waives any objection to venue laid
therein for such limited purpose.
Process in any action or proceeding
referred to in the preceding sentence
may be served on any Party anywhere in
the world.



     7.04. Further Action. In connection with this Agreement and all transactions contemplated by this
Agreement, each Party agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or appropriate to
effectuate, carry out, and perform all of the terms, provisions, and conditions of
this Agreement and all such transactions.



     7.05. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Parties and their heirs, executors,
administrators, successors, legal representatives,
and permitted assigns, as well as any Persons
asserting rights or claims on behalf of any of the
foregoing Persons. Without limiting the preceding
sentence, if Pioneer USA resigns as operator under
the Pioneer Operating Agreement or any Third Party
Operating Agreement (or is no longer the operator
under any Third Party Operating Agreement for any
reason), the Parties shall cause the successor
operator to be subject to and bound by the terms of
this Agreement.



     7.06. Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or of any breach or default by
the other Party in the performance by such Party of its obligations hereunder shall be
deemed or construed to be a consent or waiver to or of any other breach or default in
the performance by such Party of the same or any other obligations of such Party
hereunder. Failure on the part of a Party to complain of any act of the other Party or
to declare any Party in default, irrespective of how long such failure continues, shall
not constitute a waiver by such Party of its rights hereunder until the applicable
statute of limitations period has run.



     7.07. Counterparts. This Agreement may be executed in counterparts, each of
which together shall constitute an agreement binding on both Parties, notwithstanding
that both Parties are not signatories to the original or the same counterpart. Each
Party shall become bound by this Agreement immediately upon affixing its signature
hereto.



     7.08. Invalidity of Provisions. If any provision of this Agreement or the application thereof to any Party or
circumstance shall be held invalid or unenforceable to any extent, the remainder of
this Agreement and the application of such provision to the other Party or other



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circumstances shall not be affected thereby and shall be enforced to the greatest
extent permitted by law.



     7.09. Amendment or Restatements. This Agreement may be amended or restated only
by a written instrument executed by each of the Parties; provided, however, that after
the completion of the initial public offering of units by Pioneer Southwest Energy
Partners L.P., PSE USA may not, without the prior approval of the conflicts committee
of the board of directors of Pioneer Natural Resources GP LLC, or, if there is no such
committee, the independent members of such board of directors, agree to any amendment
or modification of this Agreement that Pioneer Natural Resources GP LLC determines
will adversely affect the holders of such units .



     7.10. Assignment. Neither Party may assign all or any portion of its rights, nor
delegate all nor any portion of its duties, hereunder, unless it continues to remain
liable for the performance of its obligations hereunder, and obtains the prior written
consent of the other Party, which consent shall not be unreasonably withheld;
provided, however, a merger shall not be deemed to be an assignment and a transfer of
the rights and an assumption of the obligations under this Agreement; provided
further, however, that the transfer of all or substantially all of the assets of a
Party shall not be deemed an assignment of such rights or obligations of such Party to
this Agreement if the assignee assumes all of the obligations under this Agreement.
Nothing contained in this Agreement, express or implied, shall confer on any person
other than the Parties or their respective successors and permitted assigns, any
rights, remedies, obligations, or liabilities under or by reason of this Agreement.
If PSE USA makes a permitted conveyance of interests in a Wellbore, Replacement Well,
or Down-Spaced Well, it shall, at Pioneer USA’s request, take such actions as
necessary to bind the assignee of such conveyance to this Agreement.



     7.11. Direct or Indirect Action. Where any provision of this Agreement refers to action to be taken by any Party,
or which such Party is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Party, including actions
taken by or on behalf of any affiliate of such Party.



     7.12. Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no Party shall be
required to take any act, or fail to take any act, under this Agreement if the effect
thereof would be to cause such Party to be in violation of any applicable law, statute,
rule or regulation.



     7.13. No Recourse Against Officers, Directors, Managers, or Employees. For the avoidance of doubt, the provisions of this Agreement shall not give rise
to any right of recourse against any officer, director, manager, or employee of any
Party or any officer, director or employee of any affiliate of any Party.



     7.14. Negation of Rights of Third Parties. The provisions of this Agreement are
enforceable solely by the Parties, and
no shareholder, member, or assignee of
any Party shall have the right,
separate and apart from such Party, to
enforce any provision of this
Agreement or to compel any Party to
comply with the terms of this
Agreement.



     7.15. Construction. Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include
the corresponding masculine, feminine or neuter forms, and the singular form of nouns,
pronouns and verbs shall include the plural and vice versa; (b) references to Articles
and Sections refer to Articles and Sections of this Agreement; (c) references to



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Exhibits refer to the Exhibits attached to this Agreement, each of which is made a
part hereof for all purposes; (d) the terms “include,” “includes,” “including” and
words of like import shall be deemed to be followed by the words “without limitation”;
(e) the terms “hereof,” “herein” and “hereunder” refer to this Agreement as a whole
and not to any particular provision of this Agreement; and (f) references to money
refer to legal currency of the United States of America. The table of contents and
headings contained in this Agreement are for reference purposes only, and shall not
affect in any way the meaning or interpretation of this Agreement.



     7.16. Choice of Law. This Agreement shall be subject to and governed by the laws
of the State of Texas, excluding any conflicts-of-law rule or principle that might
refer the construction or interpretation of this Agreement to the laws of another
state, except that the law of another jurisdiction shall apply to this Agreement
insofar as this Agreement covers or relates to additional properties that become
subject to this Agreement under Section 7.02 above for which it is mandatory that the
law of another jurisdiction, wherein or adjacent to which such part of the Assets are
located, shall apply.



     7.17. Arbitration. Any disputes regarding fair market value under Sections
4.03(c) and 5.03(c) shall be resolved as provided in such sections. Any other claim,
counterclaim, demand, cause of action, dispute, or any other controversy arising out
of or relating in any way to this Agreement or to the subject matter of this Agreement
or to any relationship created thereby (each a “Dispute”) shall be resolved by binding
arbitration. A Dispute must be resolved through arbitration regardless of whether the
Dispute involves claims that this Agreement is unlawful, unenforceable, void, or
voidable, or involves claims sounding in tort, contract, statute, or common law. This
Section 7.17 shall be binding on and shall inure to the benefit of the Parties and
their respective affiliates and subsidiaries. The validity, construction, and
interpretation of this agreement to arbitrate, and all other procedural aspects of the
arbitration conducted pursuant hereto, shall be decided by the arbitral tribunal. Any
arbitration under this Agreement shall be administered by the AAA and conducted in
accordance with the Rules in existence at the time of the arbitration. In resolving
any Dispute, the arbitral tribunal shall refer to the governing law as specified in
Section 7.16 of this Agreement. The arbitral tribunal shall not be empowered to award
exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple,
or special damages, and the Parties and their affiliates and subsidiaries waive any
right they may have to recover such damages from one another. The arbitral tribunal
shall not be empowered to decide any dispute ex aequo et bono or amiable compositeur.
The seat (or legal place) and venue of the arbitration shall be in Dallas, Texas. The
arbitration shall be conducted in the English language. The Dispute shall be decided
by a panel of three neutral arbitrators. The claimant or claimants shall nominate an
arbitrator at the time of service of a request for arbitration. The respondent or
respondents shall nominate an arbitrator at the time of service of the response to
the request for arbitration. If the claimant(s) or respondent(s) fail to appoint an
arbitrator, then that arbitrator shall be appointed in accordance with the Rules. The
two appointed arbitrators shall together agree upon a third arbitrator to recommend to
the AAA to chair the arbitration. If the two party-appointed arbitrators are unable to
agree upon an arbitrator within fifteen (15) days of the respondent’s appointment of
an arbitrator, then the chairman shall be chosen according to the Rules.
Notwithstanding the foregoing, if two or more respondents have interests with regard
to a Dispute that are not completely common, then all arbitrators shall be appointed
in accordance with the Rules and not by nomination or appointment by the Parties. Any
arbitration award may be enforced by the courts sitting in Dallas, Texas, or any other
court of competent



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subject matter jurisdiction (including any jurisdiction in which a
Party holds or keeps assets). Any action to challenge, vacate, or set aside the award
in whole or in part must be brought in the courts sitting in Dallas, Texas. The
Parties and their affiliates and subsidiaries agree to waive any objections they may
have to personal jurisdiction, venue, or forum non-conveniens for any action brought
to enforce the award in the courts sitting in Dallas, Texas, or any other jurisdiction
where a party against which enforcement of the award is sought holds or keeps assets.



     7.18. Entire Agreement. This Agreement constitutes the entire agreement of the
Parties relating to the matters contained herein, superseding all prior contracts or
agreements, whether oral or written, relating to the matters contained herein. No
representation, promise, inducement, or statement of intention with respect to the
subject matter of this Agreement has been made by either Party which is not embodied
in this Agreement together with the documents, instruments, and writings that are
delivered pursuant hereto, and neither Party shall be bound by or liable for any
alleged representation, promise, inducement, or statement of intention not so set
forth.



     7.19. No Partnership Intended. If, for federal income tax purposes, this
Agreement and the operations hereunder are regarded as a partnership, each Party
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. Pioneer USA is authorized and directed to execute on behalf of each Party
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 all
of the returns, statements, and the data required by Treasury Regulation § 1.761.
Should there be any requirement that each Party give further evidence of this
election, each 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. Neither 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 any Wellbore, Down-Spaced Well, or Replacement Well 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
shall make such election as may be permitted or required by such laws. In making the
foregoing election, each party states that the income derived by such party from
operations hereunder can be adequately determined without the computation of
partnership taxable income.



     7.20. Rule Against Perpetuities. It is not the intent of the Parties that any
provision herein violate any applicable law regarding the rule against perpetuities,
and this Agreement shall be construed as not violating such rule to the extent the
same can be construed consistent with the expressed intent of the Parties as set forth
in this Agreement. In the event, however, that any provision of this Agreement is
determined to violate such rule, then such provision shall nevertheless be effective
for the maximum period (but not longer than the maximum period) permitted by such rule
that will result in no such violation. To the extent such maximum period is permitted
to be determined by reference to lives in being, the Parties agree that “lives in
being” shall refer to the lifetime of the last to die of the now living lineal
descendants of the late Joseph



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P. Kennedy, father of the late John F. Kennedy, the
35th President of the United States of America.



[Signature Page Follows]




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EXECUTED as of the date hereof.




	 	 	 	 	 
	 	 	Pioneer Natural Resources, USA, Inc.
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	Pioneer Southwest Energy Partners USA LLC
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 






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