Document:

Exhibit
10.2

 

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

 

MODEL FORM
OPERATING AGREEMENT

 

 

OPERATING
AGREEMENT

 

DATED

 

February
1, 2005,

 

	
  OPERATOR

  	
  Piceance Gas Fesources, LLC, and its designated Contract Operator,

  
	
   

  	
  Orion Energy Partners, L.P.

  
	
   

  
	
  CONTRACT AREA

  
	
   

  
	
   

  
	
   

  

COUNTY OR PARISH OF Garfield, STATE OF Colorado

 

	
   

  	
  CONFIDENTIAL

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  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

  
	
   

  	
   

  	
  A. OIL AND GAS INTERESTS:

  	
   

  	
  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

  
	
   

  	
   

  	
   

  	
  (Option 2) No Gas Balancing Agreement

  	
   

  	
  11

  
	
  VII. 

  	
   

  	
  EXPENDITURES AND LIABILITY OF PARTIES

  	
   

  	
  11

  
	
   

  	
   

  	
  A. LIABILITY OF PARTIES:

  	
   

  	
  11

  
	
   

  	
   

  	
  B. LIENS AND SECURITY INTERESTS:

  	
   

  	
  11

  
	
   

  	
   

  	
  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

  
	
   

  	
   

  	
  F. PREFERENTIAL RIGHT TO PURCHASE:

  	
   

  	
  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 Orion Energy Partners, L.P. 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 in which the well was previously drilled, or below the Deepest
Zone proposed in the associated AFE, whichever is the 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.

 

H. The term “Initial Well”
shall mean the well required to be drilled by the parties hereto as provided in
Article VI.A.

 

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 in one Zone is
abandoned in order to attempt a Completion in a different Zone within the
existing wellbore.

 

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 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 to 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.

  
	
  o

  	
  B.

  	
  Exhibit “B,” Form of Lease.

  
	
  ý

  	
  C.

  	
  Exhibit “C,” Accounting Procedure.

  
	
  ý

  	
  D.

  	
  Exhibit “D,” Insurance.

  
	
  ý

  	
  E.

  	
  Exhibit “E,” Gas Balancing Agreement.

  
	
  o

  	
  F.

  	
  Exhibit “F,” Non-Discrimination and Certification of Non-Segregated
  Facilities.

  
	
  o

  	
  G.

  	
  Exhibit “G,” Tax Partnership.

  
	
  o

  	
  H.

  	
  Other:

  

 

1

 

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

 

A.  Oil and Gas Interests:

 

If any party owns an Oil and
Gas Interest in the Contract Area, that interest shall be treated for all
purposes of this agreement and during the term hereof as if it were covered by
the form of Oil and Gas Lease attached hereto as Exhibit “B”, and the owner
thereof shall be deemed to own both royalty interest in such lease and the
interest of the lessee thereunder.

 

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, 18.75% royalty and 2.5% interest in proceeds (or
equivalent 2.5% overriding royalty interest) in favor of Lynx Energy Company,
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 interest in said
Leaseholds shall be deemed separate leasehold interests for the purpose 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 interest, or order 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 Drillsite of any proposed well prior to commencement of drilling
operations and, if a majority in interest of the Drilling Parties so request or
Operator so elects, title examination shall be made on the entire Drilling
Unit, or any portion of The Contract Area as deemed appropriate by the
Operator. 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 for title examination (including preliminary,
supplemental, shut-in royalty opinions and division order title opinions) 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. Operator shall be responsible for the preparation and recording of
pooling designations or declarations and communitization agreements as well as
the conduct of the 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, 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

 

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.l. 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.l. 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.

 

3

 

ARTICLE
V.

OPERATOR

 

A. Designation and Responsibilities
of Operator:

 

Orion Energy Partners, L.P. 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 Vll.D.l.,
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 promptly 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
of wells, but its charges therefor shall not exceed the prevailing rates in the
area and the rate of such charges shall be agreed upon by the parties in
writing before drilling operations are commenced, 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

 

4

 

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” within the Contract Area. All Wells within the Contract Area will be
drilled pursuant to the terms of Article VI.B.

 

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 dry hole or a well no longer capable of
producing in paying quantities 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

 

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 or 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:

 

(a) Determination of
Participation. If any party to whom such notice is delivered as provided in
Article VI.B.1. (Also see Article XVI.E) 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,

 

6

 

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) 150% 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 cost 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 day 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,

 

7

 

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 the parties elect to participate in a drilling, Sidetracking, or
Deepening operation proposed pursuant to Article VI.B.l., 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.l. (“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.l., to all parties (including Non-Consenting Parties).
Thereupon, Articles VI.B.l. 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

 

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.

 

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
FIFTY THOUSAND Dollars ($50,000) 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 FIFTY
THOUSAND Dollars ($50,000). 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 Articles VI.B.l. 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 51% 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.

 

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

 

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.
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 sixty
(60) days of delivery of notice of proposed abandonment shall be deemed an
election to consent to the proposal. If, within sixty (60) 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 an 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.l. 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 costs for
such well as provided in Article VI.B.2.(b).

 

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 51% 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

 

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.

 

Alt 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 proportionate
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.

 

11

 

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 this agreement, the recording
supplement executed herewith, or such other documents as it deems necessary 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
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, 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.
of 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

 

12

 

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 is a result of the default.

 

3. Deemed Non-Consent:
The non-defaulting party 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 of 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 this 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.”

 

13

 

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 on the form attached hereto as Exhibit “B.” 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 interests 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 the 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
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 severally its
undivided interest therein.

 

F. Preferential Right to
Purchase:

 

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 Regulations §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 FIFTY THOUSAND Dollars ($50,000)
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 at 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 suite 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, lightning,
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
PAGE 17a

 

17

 

                                                IN
WITNESS WHEREOF, this agreement shall be effective as of the             day
of                   19    .

 

	
  ATTEST OR WITNESS:

  	
   

  	
  OPERATOR

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Type or print name

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
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  Tax ID or S.S. No.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  NON-OPERATORS

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
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  Tax ID or S.S. No.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  Type or print name

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
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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                        )

 

                                    )
ss.

 

County of                   )

 

This instrument
was acknowledged before me on

 

                                                             by                                                 as                                      of                                             

 

	
  (Seal, if any)

  	
   

  
	
   

  	
   

  
	
   

  	
  Title (and Rank)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  My commission expires:

  	
   

  
					

 

19

 

Article XVI

OTHER PROVISIONS

 

A.                                   Order
of Election. It is irrevocably stipulated 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 or
horizon than the original objective depth or horizon or drill the well to a
deeper depth or horizon.

 

B.                                     Revenue
Distribution. At the option of the Non-Operators, Operator will make disbursements
of all royalties, overriding royalties and other payments out of, or with respect
to, production which are attributable to the Contract Area at Non-Operator’s direction,
provided Non-Operator shall execute such documents as may be necessary in the
opinion of Operator to enable Operator to receive all payments for oil, gas or
other hydrocarbons directly from said purchaser. In that event, Operator will
use its best efforts to make disbursements correctly, but will be liable for
incorrect disbursements only in the event of gross negligence or willful
misconduct.

 

C.                                     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 interests therein. 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 an operation conducted hereunder shall be borne
in proportion to the Parties interest in the operation conducted; it being
specifically understood that a Party that has gone non-consent on an operation
shall not have any liability or responsibility for the cost of or liabilities
associated with such operation. Each Party, individually, may acquire such
insurance as it deems proper to protect itself against such claims.

 

D.                                    Mandatory
Operations. The Parties agree to drill and complete 8 wells on the leases
owned by Piccance Gas Resources, LLC during 2005, with the first well being
located on the lease in T5S-R96W. In addition, the Parties agree to participate
for a 20% interest in the Garden Gulch Road as described in that January 17,
2005 ChevronTexaco/PDC letter agreement. Failure by any Party to fund its share
of the Mandatory Operations will result in the defaulting Party’s forfeiture to
PGR Partners of Piccance Gas Resources, LLC of all of its Membership Interest
in PGR; provided however, if PGR Partners is the defaulting Party, PGR Partners
shall forfeit its Membership interest to the funding Parties prorata. The
Mandatory Operations will be subject to the force majeure provisions in Article XI.

 

17a

 

E.                                      Drilling
Non-Consents after the Mandatory Operations.

 

1.                                       Drilling
of the First Well. Notwithstanding the provisions of Article VI. to
the contrary, should any party to this Agreement elect to not participate in the
drilling of the first well to be drilled in the Contract Area (the “First Well”),
then upon commencement of operations for the drilling of the First Well by the
Consenting Parties in accordance with the provisions of Article VI., each
Non-Consenting Party shall be deemed to have permanently relinquished to the
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 First Well and in the Contract Area.

 

2.                                       Drilling
of the Second Well. Notwithstanding the provisions of Article VI. to
the contrary, should any party to this Agreement that participated in the drilling
of the First Well elect to not participate in the drilling of the second well
drilled at a location on the Contract Area following the drilling of the First
Well (hereinafter referred to as the “Second Well”), then upon commencement of
operations for the drilling of the Second Well by the Consenting Parties in
accordance with the provisions of Article VI., each Non-Consenting Party
shall be deemed to have permanently relinquished to the 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 Second
Well and in the Contract Area, however retaining unto each Non-Consenting Party
their respective interest in the First Well and the wellbore and equipment and facilities
appurtenant thereto.

 

3.                                       Subsequent
Wells. Notwithstanding the provisions Article VI. to the contrary,
should any Party that participated in the drilling of the First Well and Second
Well elect to not participate in any well drilled on the Contract Area
following the drilling of the Second Well (hereinafter referred to as the “Subsequent
Well”), then upon commencement of operations for the drilling of the Subsequent
Well by the Consenting Parties in accordance with the provisions of Article VI.,
each Non- Consenting Party shall be deemed to have permanently relinquished to
the 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 Subsequent Well and the wellbore and
equipment and facilities appurtenant thereto. The non-consent penalty described
in this Article XVI.E.3. shall apply to each Subsequent Well drilled, on a
well-by-well basis.

 

F.                                      Operator.
The right to operate cannot be assigned by the Operator. Orion will be contract
operator, so long as Orion retains a minimum 25% interest in the Contract Area.

 

17a

 

 

 

	
   

  	
  COPAS - 1984 - ONSHORE

  
	
   

  	
   

  
	
   

  	
  Recommended
  by the Council

  
	
  Kraftbill 601, BOX 800

  	
  of Petroleum
  Accountants

  
	
  TULSA OK 74101

  	
  Societies

  

 

 

EXHIBIT “C”

 

Attached to and made a part of
                                             

 

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 of
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 Wells Fargo Bank, Denver, Colorado 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

 

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 the agreement 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 and 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 like material 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 normally available,
or railway receiving point nearest the Joint Property unless agreed to by the Parties.
No charge shall be made to the Joint Account for moving Material to other
properties belonging to Operator, unless agreed to by the Parties.

 

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
contract services of technical personnel directly engaged on the Joint Property
if such charges are excluded from the overhead rates. 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
rate shall include costs of maintenance, repairs, other operating expense,
insurance, taxes, depreciation, and interest on gross investment less
accumulated depreciation not to exceed eight percent (8.0%) 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 as soon 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 judgements 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
of outside 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 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.

 

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 Joint
Property 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 1A, or

o Percentage
Basis, Paragraph 1B

 

Unless otherwise
agreed to by the Parties, such charge shall be in the 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 in the overhead
rates provided for in the above selected Paragraph of this Section III
unless such cost and expense are agreed to by the Parties as a direct charge to
the Joint Account.

 

ii.                                       The
salaries, wages and Personal Expenses of Technical Employees and/or 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
salaries, wages and Personal Expenses of Technical Employees and/or costs 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:

 

ý shall be
covered by the overhead rates, or

o 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
$ 7,000.00

(Prorated
for less than a full month)

 

Producing Well
Rate $ see page 4a

 

(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

 

Producing
Well Rates

 

	
  Number of Producing Wells

  Located on Leases Owned by

  Piceance Gas Resources, LLC

  	
   

  	
  Overhead
  Rate

  Per Well Per Month

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  0-50

  	
   

  	
  $

  	
  700

  	
   

  
	
  51-100

  	
   

  	
  $

  	
  600

  	
   

  
	
  101-150

  	
   

  	
  $

  	
  500

  	
   

  
	
  >150

  	
   

  	
  $

  	
  400

  	
   

  

 

4a

 

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 the Joint
Property, Operator shall either negotiate a rate prior to the beginning of
construction, or shall charge the Joint

 

5

 

To be negotiated on a
Project by Project basis.

 

Account for
overhead based on the following rates for any Major Construction project in
excess of $ N/A:

 

A. N/A% of first
$100,000 or total cost if less, plus

 

B. N/A% of costs
in excess of $100,000 but less than $1,000,000, plus

 

C. N/A% 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. N/A% of total
costs through $100,000; plus

 

A. N/A% of total
costs in excess of $100,000 but less than $1,000,000; plus

 

A. N/A% 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 23/8 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.(l)(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 7 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 3/4 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 3/4 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.(l)(a) as provided
above. Freight charges shall be calculated from Lorain, Ohio.

 

(c)                                  Line
pipe 24 inch OD and over and 3/4 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.(1) 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.

 

7

 

(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 l.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 billing Non-Operators for such Material. Each Non-Operator
shall have the right, by so electing and notifying Operator within ten 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 that Non-Operators may be
represented when any inventory is taken. Failure of Non-Operators to be represented
at an inventory 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

 

8

 

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.

 

9

 

EXHIBIT “D”

 

Attached to and made a part of that certain Joint Operating
Agreement

dated effective February 1, 2005,

by and among Orion Energy Partners, L.P., as Contract Operator for

Piceance Gas Resources, LLC and Piceance Gas Resources, LLC

and its Members, as Non-Operators

 

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.

 

4.              Umbrella or Excess
Liability Insurance

 

$1,000,000 per occurrence and general aggregate in excess of Employer’s
Liability, Commercial General Liability, and Business Automobile Liability.

 

Operator may determine,
in its sole discretion, that well control insurance or other similar coverage
is needed for drilling and completion operations conducted by it under the
terms of the Operating Agreement. In that event, a Non-Operator’s option(s)
with respect to that coverage will be set out in the AFE proposing such
operations. In no event will coverage be provided to the Non-Operators for
production operations or workovers.

 

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 interest at the time of any loss.

 

 

EXHIBIT “E”

 

Attached to and made a part of that certain Joint Operating
Agreement

dated effective February 1, 2005,

by and among Orion Energy Partners, L.P., as Contract Operator for

Piceance Gas Resources, LLC and Piceance Gas Resources, LLC

and its Members, as Non-Operators

 

GAS BALANCING AGREEMENT

 

If
any of the Parties to the JOA (collectively, the “Parties” and individually a “Party”)
is not taking or marketing its full share of gas produced from the Contract
Area, the terms of this Gas Balancing Agreement (this “Agreement”) shall
automatically become effective.

 

1.                                       Production
from the Contract Area. Each month, each Party intends to take its full proportionate
share of gas produced from the Wells within the Contract Area (“Well(s)”) (i.e.
its proportionate share of the “MER” (as defined below)). Nothing herein shall
be construed to deny any Party the right to produce and take or deliver to its
purchaser the full amount of its proportionate share of gas production. If a
Party is not taking or marketing its full share of gas produced from the Wells
and therefore is unable to take its pro rata share of its MER, during that period(s),
the other Parties having an interest in the Well may produce each month,
either (i) 100% of the gas that may be produced up to the “MER” (as
defined below) or, (ii) if a gas allowable is assigned, 100% of the
allowable gas production assigned to the Well by the appropriate regulatory body
having jurisdiction, and such Parties shall be entitled to take or deliver to
their purchaser their pro rata share of all such gas production.

 

a.                                      “MER”                                 The
term “MER” shall mean the total daily maximum efficient rate of hydrocarbon
withdrawal from each separately produced producing interval which if exceeded
for a sustained period of time, would lead to underground waste in the form of
reduced ultimate recovery from each producing interval. A Party’s pro rata
share shall be based on the ratio of such Party’s interest in the Well to the
total interests of all Parties then taking gas from the Well as determined in
accordance with the terms of the JOA.

 

b.                                     Liquids.                             All
Parties having an interest in the Well shall share in and own any liquid
hydrocarbons recovered from the gas produced from such Well by lease equipment on
a pro rata basis in accordance with their respective interests in such Well and
subject to the JOA, but the Parties taking or marketing the gas shall own all
of the gas taken or delivered to their respective purchasers and shall own and
shall have the right to all liquids removed from the gas by off lease
processing.

 

2.                                       The
Underproduced Party. On a cumulative basis, each Party not taking or marketing
its full share of the gas produced from the Well (the “Underproduced Party”)
shall be credited with a volume of gas equal to its full share of the gas
produced from such Well, less (i) its share of gas used in its lease
operations, (ii) gas vented or unavoidably lost, and (iii) that
portion

 

1

 

such Party took or
delivered to its purchaser. Each Party taking gas shall furnish, or cause to be
furnished, to the Operator a monthly statement of gas taken.

 

3.                                       Monthly
Gas Balancing Statements. The Operator will maintain a current account of
the gas balance between the Parties for each Well and will furnish all Parties
having an interest in such Well and their purchasers monthly statements showing
the total quantity of gas produced, the amount used in lease operations, vented
and unavoidably lost, the total quantity of liquid hydrocarbons recovered
therefrom, and the monthly and cumulative over and under account of each Party.

 

4.                                       Payments
to Third Parties/Royalties/Taxes.

 

a.                                       Royalty
Payments. Each Party taking or delivering gas to its purchaser shall pay
any and all associated royalties and overriding royalties to the royalty
owners. The term “royalty owner” shall include owners of royalties, overriding
royalties, and other payments out of or in lieu of production for which each
Party is responsible, including the Lynx Energy Company, Inc. Proceeds
Interest.

 

b.                                      Taxes.
Each Party taking or delivering gas to its purchaser shall pay any and all
production taxes, due on such gas.

 

5.                                       Commingled
Intervals. This Agreement shall constitute a separate agreement as to each
producing interval in a Well. Where production from two or more producing
intervals is commingled in the Wellbore so that the gas from each such interval
cannot be separately metered, the commingled producing intervals shall then be
considered to be a single interval.

 

6.                                       Make
Up of Gas by the Underproduced Party. On written notice at least 30 days prior
to the beginning of a month from any Underproduced Party to the Operator and to
each Party that has taken or delivered to its purchaser more than its full
share of gas (“Overproduced Party”), the Underproduced Party may, commencing on
the first day of the month after such notice is given, begin taking or
delivering to its purchaser, its full share of gas produced from the Well less
such Party’s share of gas used in lease operations, vented and unavoidably lost
(net share of gas produced), plus its “Make Up Volume.” The term Make Up Volume
means that volume of gas from the Well: (i) during the months of January,
February, March, November and December, 25% of each Overproduced Party’s
net share of gas produced from the Well, and (ii) during the remaining
months, 50% of each Overproduced Party’s net share of gas produced from the
Well. However, in no event shall such Make Up Volume for any month exceed 50%
of the Underproduced Party’s net share of gas produced from the Well. If more
than one Underproduced Party are balancing their gas accounts, each
Underproduced Party may take or deliver to its purchaser that share of the
additional gas as determined herein in proportion to its interest in such Well
to all of the Underproduced Parties’ interests in such Well then balancing
their gas accounts. Any such additional gas taken or delivered to an
Underproduced Party’s purchaser shall be credited against such Underproduced
Party’s Underproduced volume of gas in storage in the order of accrual.

 

2

 

7.                                       Timing
of Make Up. At the end of each calendar year, the Overproduced and Underproduced
Parties shall enter into a cash settlement for the volume of gas, if any,
remaining in imbalance. The Operator shall determine the final accounting of
underproduction and overproduction. In making such cash settlement, each
Overproduced Party shall remit to the Operator a sum of money attributable to
the amount actually or constructively received by such Overproduced Party from
sale or utilization of overproduction which remains accrued to such Party, less
applicable taxes and royalties, and other costs actually paid by the
Overproduced Party in connection with the sale of such gas. The Operator shall
distribute the total of such amounts so collected among the Underproduced Parties
in the proportion of such latter Parties’ underproduction. The “amount actually
or constructively received” shall then be that overproduction remaining
following application of the above rule and valued at the price in effect
at the time such overproduction occurred.

 

(a)                                  During
periods in which a Party is taking gas for its own use and making no sales, gas
so taken will be valued at the maximum price which such Party could have
received for such gas if actually delivered under such Party’s contract, or, if
none, the weighted average price received simultaneously by all other Parties
for gas sold from the Well. In either such instance the value so determined for
gas so used will be deemed to have been constructively received by such using
Party.

 

(b)                                 If
refunds are later required by any governmental authority, each Party shall be
accountable for such refunds on the basis of its share of gas produced and
finally balanced hereunder.

 

(c)                                  If
gas is processed for the recovery of liquifiable hydrocarbons, the gas value will
be based on the amount which would have been received for the sale of such gas
(adjusted for actual Btu content) without processing. Anything herein to the
contrary notwithstanding, the Underproduced Party shall not be entitled to
receive from the Overproduced Party a payment greater than the amount the Underproduced
Party would have been entitled to receive if the sale had been made under the
contract of the Underproduced Party, if any.

 

(d)                                 Each
Party agrees to maintain complete records of gas sold and price received so
Operator’s computations can be made. Operator shall rely on statements
furnished and have no liability with respect to correctness of proceeds
received and distributed.

 

8.                                      Costs
and Expenses. Nothing herein shall change or affect each Party’s
obligations to pay its proportionate share of all costs and liabilities
incurred in any Well pursuant to the Operating Agreement to which this
Agreement is attached.

 

9.                                      Term.
This Agreement shall become effective in accordance with its terms and shall
remain in force and effect as long as the Operating Agreement to which it is
attached remains in effect, and shall inure to the benefit of and be binding
upon the Parties hereto, their successors, legal representatives and assigns.

 

10.                                Liabilities
and Obligations/Indemnity. Each Party hereby indemnifies the other Parties
hereto against all liability for and agrees to defend the Parties hereto
against all claims which

 

3

 

may be asserted by
third parties who now or hereafter stand in contractual relationship with such
indemnifying Party whenever such claims are based upon said contractual
relationship and arise out of the operation of this Agreement or activities of
any Party under its provisions, and further agrees to save the other Parties
hereto harmless from all judgements or damages sustained and costs incurred in
connection herewith.

 

11.                                Role
of the Operator. The Operator under the Operating Agreement is authorized
to carry out the provisions of this Agreement, but shall not be liable for its
failure to do so as long as it acts in good faith and as would a reasonably
prudent Operator in the same or similar circumstances.

 

12.                                Audit.
Notwithstanding any provision to the contrary in this or any other agreement, any
Underproduced Party shall have the right for a period of two (2) years
after the date that gas accounts are settled, to audit an Overproduced Party’s
records as to volumes and prices received for gas produced from the applicable
area, and any Overproduced Party shall have the right for a period of two (2) years
after the gas accounts are settled, to audit any Underproduced Party’s records
as to volumes.

 

13.                                Effective
Time. This Agreement shall be effective as of February 1, 2005.

 

4Exhibit 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

 

 

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

 

1

 

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

 

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.

 

3

 

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

 

4

 

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

 

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,

 

6

 

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,

 

7

 

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

 

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

 

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

 

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.

 

11

 

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

 

12

 

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.

 

13

 

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

 

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

  

 

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

 

1

 

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

 

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.

 

3

 

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

 

4

 

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

 

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,

 

6

 

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,

 

7

 

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

 

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

 

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

 

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.

 

11

 

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

 

12

 

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.

 

13

 

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

 

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

 

1

 

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

 

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.

 

3

 

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

 

4

 

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

 

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,

 

6

 

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,

 

7

 

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

 

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

 

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

 

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.

 

11

 

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

 

12

 

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.

 

13

 

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

 

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

EXHIBIT A-3

 

 

 

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

 

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 3⁄4 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 3⁄4 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 3⁄4 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.

 

7

 

(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

 

8

 

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.

 

9

 

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.

 

 

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.

 

 

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.

 

2

 

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.

 

3

 

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

 

(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

 

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

 

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

 

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

 

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

 

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.

 

13

 

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

 

	
  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

 

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

 

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

 

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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