Document:

Exhibit 4.3

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION
RIGHTS AGREEMENT (this “Agreement”),
dated as of November 2, 2007, by and among Cano Petroleum, Inc., a
Delaware corporation, with headquarters located at 801 Cherry St., Suite 3200,
Fort Worth, Texas 76102 (the “Company”),
and the undersigned buyers (each, a “Buyer”,
and collectively, the “Buyers”).

 

WHEREAS:

 

A.            In connection with the Securities
Purchase Agreement by and among the parties hereto of even date herewith (the “Securities Purchase Agreement”), the Company has agreed,
upon the terms and subject to the conditions set forth in the Securities
Purchase Agreement, to issue and sell to each Buyer shares (the “Common Shares”) of the Company’s common
stock, par value $0.0001 per share (the “Common Stock”).

 

B.            In accordance with the terms of the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities
laws.

 

NOW,
THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:

 

1.     Definitions.

 

Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings set
forth in the Securities Purchase Agreement. 
As used in this Agreement, the following terms shall have the following
meanings:

 

a.     “Additional Effectiveness
Date” means the date the Additional Registration Statement is
declared effective by the SEC.

 

b.     “Additional Effectiveness
Deadline” means the date which is forty five (45) calendar days
after the earlier of the Additional Filing Date and the Additional Filing
Deadline or in the event that the Registration Statement is subject to any
review by the SEC pursuant to which the SEC issues comments, seventy five (75)
calendar days after the earlier of the Additional Filing Date and the
Additional Filing Deadline.

 

c.     “Additional Filing Date”
means the date on which the Additional Registration Statement is filed with the
SEC.

 

d.     “Additional Filing Deadline”
means if Cutback Shares are required to be included in the Additional
Registration Statement, the later of (i) the date sixty (60) days after
the date substantially all of the Registrable Securities registered under the
immediately preceding Registration Statement are sold and (ii) the date
six (6) months from the Initial Effective Date or the last Additional
Effective Date, as applicable.

 

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e.     “Additional Registrable
Securities” means, (i) any Cutback Shares not previously
included on a Registration Statement and (ii) any capital stock of the
Company issued or issuable with respect to the Common Shares or Cutback Shares,
as applicable, as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise.

 

f.      “Additional Registration
Statement” means a registration statement or registration statements
of the Company filed under the 1933 Act covering any Additional Registrable
Securities.

 

g.     “Additional
Required Registration Amount” means any Cutback Shares not
previously included on a Registration Statement.

 

h.     “Business
Day” means any day other than Saturday, Sunday or any other day on
which commercial banks in the City of New York are authorized or required by
law to remain closed.

 

i.      “Closing
Date” shall have the meaning set forth in the Securities Purchase
Agreement.

 

j.      “Cutback Shares”
means any of the Initial Required Registration Amount (without regard to clause
(II) in the definition thereof) of Registrable Securities not included in
all Registration Statements previously declared effective hereunder as a result
of a limitation on the maximum number of shares of Common Stock of the Company
permitted to be registered by the staff of the SEC pursuant to Rule 415.

 

k.     “Effective
Date” means the Initial Effective Date and the Additional Effective
Date, as applicable.

 

l.      “Effectiveness
Deadline” means the Initial Effectiveness Deadline and the
Additional Effectiveness Deadline, as applicable.

 

m.    “Filing
Deadline” means the Initial Filing Deadline and the Additional
Filing Deadline, as applicable.

 

n.     “Initial Effective Date”
means the date that the Initial Registration Statement has been declared
effective by the SEC.

 

o.     “Initial Effectiveness
Deadline” means the date which is (i) in the event that the
Registration Statement is not subject to any review by the SEC pursuant to
which the SEC issues comments, ninety (90) days after the Closing Date or (ii) in
the event that the Registration Statement is subject to any review by the SEC
pursuant to which the SEC issues comments, one hundred twenty (120) days after
the Closing Date.

 

p.     “Initial Filing Deadline”
means the date that is forty five (45) days after the Closing Date.

 

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q.     “Initial Registrable
Securities” means (i) the Common Shares and (ii) any
capital stock of the Company issued or issuable with respect to the Common
Shares as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise.

 

r.      “Initial Registration
Statement” means a registration statement or registration statements
of the Company filed under the 1933 Act covering the Initial Registrable
Securities.

 

s.     “Initial
Required Registration Amount” means (I) 100% of the number of
Common Shares issued or (II) such other amount as may be required by
the staff of the SEC pursuant to Rule 415 with any cutback applied pro
rata to all Registrable Securities.

 

t.      “Investor”
means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9 and any transferee or assignee
thereof to whom a transferee or assignee assigns its rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.

 

u.     “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.

 

v.     “register,”
“registered,” and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements (as
defined below) in compliance with the 1933 Act and pursuant to Rule 415,
and the declaration or ordering of effectiveness of such Registration Statement(s) by
the SEC.

 

w.    “Registrable
Securities” means the Initial Registrable Securities and the
Additional Registrable Securities.

 

x.     “Registration
Statement” means a registration statement or registration statements
of the Company filed under the 1933 Act covering the Registrable Securities.

 

y.     “Required
Holders” means the holders of at least a majority of the Registrable
Securities.

 

z.     “Required
Registration Amount” means either the Initial Required Registration
Amount or the Additional Required Registration Amount, as applicable.

 

aa.   “Rule 415”
means Rule 415 under the 1933 Act or any successor rule providing for
offering securities on a continuous or delayed basis.

 

bb.  “SEC”
means the United States Securities and Exchange Commission.

 

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2.     Registration.

 

a.     Initial Mandatory Registration.  The Company shall prepare, and, as soon as
practicable, but in no event later than the Initial Filing Deadline, file with
the SEC the Initial Registration Statement on Form S-3 covering the resale
of all of the Initial Registrable Securities. 
In the event that Form S-3 is unavailable for such a registration,
the Company shall use Form S-1 or such other form as is available for such
a registration on another appropriate form reasonably acceptable to the
Required Holders.  The Initial
Registration Statement prepared pursuant hereto shall register for resale at
least the number of shares of Common Stock equal to the Initial Required
Registration Amount determined as of the date the Initial Registration
Statement is initially filed with the SEC. 
The Initial Registration Statement shall contain (except if otherwise
directed by the Required Holders) the “Selling Stockholders” and “Plan
of Distribution” sections in substantially the form attached hereto as Exhibit B.  The Company shall use its best efforts to
have the Initial Registration Statement declared effective by the SEC as soon
as practicable, but in no event later than the Initial Effectiveness
Deadline.  By 9:30 a.m. New York
time on the Business Day following the Initial Effective Date, the Company
shall file with the SEC in accordance with Rule 424 under the 1933 Act the
final prospectus to be used in connection with sales pursuant to such Initial
Registration Statement.

 

b.     Additional Mandatory Registrations.  The Company shall prepare, and, as soon as
practicable but in no event later than the Additional Filing Deadline, file with
the SEC an Additional Registration Statement on Form S-3 covering the
resale of all of the Additional Registrable Securities not previously
registered on an Additional Registration Statement hereunder.  To the extent the staff of the SEC does not
permit the Additional Required Registration Amount to be registered on an
Additional Registration Statement, the Company shall file Additional
Registration Statements successively trying to register on each such Additional
Registration Statement the maximum number of remaining Additional Registrable
Securities until the Additional Required Registration Amount has been
registered with the SEC.  In the event
that Form S-3 is unavailable for such a registration, the Company shall
use such other form as is available for such a registration on another
appropriate form reasonably acceptable to the Required Holders.  Each Additional Registration Statement
prepared pursuant hereto shall register for resale at least that number of shares
of Common Stock equal to the Additional Required Registration Amount determined
as of the date such Additional Registration Statement is initially filed with
the SEC.  Each Additional Registration
Statement shall contain (except if otherwise directed by the Required Holders)
the “Selling Stockholders” and “Plan of Distribution” sections in
substantially the form attached hereto as Exhibit B.  The Company shall use its best efforts to
have each Additional Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the Additional Effectiveness
Deadline.  By 9:30 a.m. New York time on the Business Day
following the Additional Effective Date, the Company shall file with the SEC in
accordance with Rule 424 under the 1933 Act the final prospectus to be used
in connection with sales pursuant to such Additional Registration Statement..

 

c.     Allocation of Registrable Securities.  The initial number of Registrable Securities
included in any Registration Statement and any increase or decrease in the
number of Registrable Securities included therein shall be allocated pro rata
among the Investors based on the number of Registrable Securities held by each
Investor at the time the Registration Statement covering such initial number of
Registrable Securities or increase or decrease thereof is declared

 

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effective by the SEC.  In the event that an Investor sells or
otherwise transfers any of such Investor’s Registrable Securities, each
transferee shall be allocated a pro rata portion of the then remaining number
of Registrable Securities included in such Registration Statement for such
transferor.  In no event shall the
Company include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required
Holders.

 

d.     Legal Counsel.  Subject to Section 5 hereof, the
Required Holders shall have the right to select one legal counsel to review and
oversee any registration pursuant to this Section 2 (“Legal Counsel”), which shall be Schulte
Roth & Zabel LLP or such other counsel as thereafter designated by the
Required Holders.  The Company and Legal
Counsel shall reasonably cooperate with each other in performing the Company’s
obligations under this Agreement.

 

e.     Ineligibility for Form S-3.  In the event that Form S-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the Required
Holders and (ii) undertake to register the Registrable Securities on Form S-3
as soon as such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable Securities has
been declared effective by the SEC.

 

f.      Effect of Failure to File and Obtain
and Maintain Effectiveness of Registration Statement.  If (i) a Registration Statement covering
all of the Registrable Securities required to be covered thereby and required
to be filed by the Company pursuant to this Agreement is (A) not filed
with the SEC on or before the respective Filing Deadline (a “Filing Failure”) or (B) not declared effective by the
SEC on or before the respective Effectiveness Deadline (an “Effectiveness Failure”) or (ii) on any day after the
Effective Date sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(r)) pursuant to such
Registration Statement (including, without limitation, because of a failure to
keep such Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement, to
register a sufficient number of shares of Common Stock or to maintain the
listing of the Common Stock) (a “Maintenance Failure”)
then, as partial relief for the damages to any holder by reason of any such
delay in or reduction of its ability to sell the underlying shares of Common
Stock and not as a penalty (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each holder
of Registrable Securities relating to such Registration Statement an amount in
cash equal to one percent (1.0%) of the aggregate Purchase Price (as such term
is defined in the Securities Purchase Agreement) of such Investor’s Registrable
Securities included in such Registration Statement on each of the following
dates:  (i) the day of a Filing
Failure; (ii) the day of an Effectiveness Failure; (iii) the initial
day of a Maintenance Failure; (iv) on every thirtieth day after the day of
a Filing Failure and thereafter (pro rated for periods totaling less than
thirty days) until such Filing Failure is cured; (v) on every thirtieth
day after the day of an Effectiveness Failure and thereafter (pro rated for
periods totaling less than thirty days) until such Effectiveness Failure is
cured; and (vi) on every thirtieth day after the initial day of a

 

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Maintenance Failure and
thereafter (pro rated for periods totaling less than thirty days) until such
Maintenance Failure is cured.  The
payments to which a holder shall be entitled pursuant to this Section 2(f) are
referred to herein as “Registration Delay Payments.”  Registration Delay Payments shall be paid on
the earlier of (I) the dates set forth above and (II) the third
Business Day after the event or failure giving rise to the Registration Delay
Payments is cured.  In the event the
Company fails to make Registration Delay Payments in a timely manner, such
Registration Delay Payments shall bear interest at the rate of one and one-half
percent (1.5%) per month (prorated for partial months) until paid in full.  Notwithstanding anything herein or in the
Securities Purchase Agreement to the contrary in no event shall the aggregate
amount of Registration Delay Payments (other than Registration Delay Payments
payable pursuant to events that are within the control of the Company, such as
solely for the purposes of an example, failure to file any registration
statement required hereby) exceed, in the aggregate, 10% of the aggregate
Purchase Price.

 

3.     Related Obligations.

 

At such time as the Company
is obligated to file a Registration Statement with the SEC pursuant to Section 2(a),
2(b) or 2(e), the Company will use its best efforts to effect the
registration of the Registrable Securities in accordance with the intended
method of disposition thereof and, pursuant thereto, the Company shall have the
following obligations:

 

a.     The Company shall promptly prepare and file
with the SEC a Registration Statement with respect to the Registrable Securities
and use its best efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as practicable after such
filing (but in no event later than the Effectiveness Deadline).  The Company shall keep each Registration
Statement effective pursuant to Rule 415 at all times until the earlier of
(i) the date as of which the Investors may sell all of the Registrable
Securities covered by such Registration Statement without restriction pursuant
to Rule 144(k) (or any successor thereto) promulgated under the 1933
Act or (ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement (the “Registration Period”).  The Company shall ensure that each
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein (in the case of prospectuses, in
the light of the circumstances in which they were made) not misleading.  The term “best efforts” shall mean, among
other things, that the Company shall submit to the SEC, within three (3) Business
Days after the later of the date that (i) the Company learns that no
review of a particular Registration Statement will be made by the staff of the
SEC or that the staff has no further comments on a particular Registration
Statement, as the case may be and (ii) the approval of Legal Counsel
pursuant to Section 3(c) (which approval is immediately sought and
shall not be unreasonably withheld or delayed), a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
48 hours after the submission of such request.

 

b.     The Company shall prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such

 

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Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration
Statement until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof as set forth in such Registration Statement.  In the case of amendments and supplements to
a Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company filing
a report on Form 10-Q, Form 10-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall have incorporated such report by
reference into such Registration Statement, if applicable, or shall file such
amendments or supplements with the SEC within one (1) Business Day after
the day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.

 

c.     The Company shall (A) permit Legal
Counsel to review and comment upon (i) a Registration Statement at least
five (5) Business Days prior to its filing with the SEC and (ii) all
amendments and supplements to all Registration Statements (except for Annual
Reports on Form 10-K or Form 10-KSB, Quarterly Reports on Form 10-Q
or Form 10-QSB, Current Reports on Form 8-K, and any similar or
successor reports) within a reasonable number of days prior to their filing with
the SEC, and (B) not file any Registration Statement or amendment or
supplement thereto in a form to which Legal Counsel reasonably objects.  The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which
consent shall not be unreasonably withheld or delayed.  The Company shall furnish to Legal Counsel,
without charge, (i) copies of any correspondence from the SEC or the staff
of the SEC to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the
SEC, one copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated
therein by reference, if requested by an Investor, and all exhibits and (iii) upon
the effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto.  The Company shall reasonably
cooperate with Legal Counsel in performing the Company’s obligations pursuant
to this Section 3.

 

d.     The Company shall furnish to each Investor
whose Registrable Securities are included in any Registration Statement,
without charge, (i) promptly after the same is prepared and filed with the
SEC, at least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference, and, if requested by an Investor, all exhibits and each
preliminary prospectus, (ii) upon the effectiveness of any Registration
Statement, ten (10) copies of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.

 

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e.     Neither the Company nor any Subsidiary (as
defined in the Securities Purchase Agreement) nor affiliate thereof shall
identify any Buyer as an underwriter in any public disclosure or filing with
the SEC or any Principal Market (as defined in the Securities Purchase
Agreement) or any Eligible Market (as defined in the Securities Purchase
Agreement) and any Buyer being deemed an underwriter by the SEC shall not
relieve the Company of any obligations it has under this Agreement or any other
Transaction Document (as defined in the Securities Purchase Agreement) provided,
however, that the foregoing shall not prohibit the Company from including
the disclosure found in the “Plan of Distribution” section attached hereto as Exhibit B
in the Registration Statement.  In
addition, if any Buyer is an underwriter or deemed an underwriter by the SEC rules and
such Buyer refuses to be identified as an underwriter or deemed underwriter in
the Registration Statement, such Buyer’s Registrable Securities shall not be
included in the Registration Statement and the Company shall not be treated as
if it did not register the Initial Registrable Securities or Additional
Registrable Securities, as applicable, due to such Buyer’s refusal and the
Buyer not be entitled to any Registration Delay Payments.

 

f.      The Company shall use its best efforts to (i) register
and qualify, unless an exemption from registration and qualification applies,
the resale by Investors of the Registrable Securities covered by a Registration
Statement under such other securities or “blue sky” laws of all applicable
jurisdictions in the United States, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to (x) qualify
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(f), (y) subject itself to general taxation
in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction.  The
Company shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue sky” laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.

 

g.     The Company shall notify Legal Counsel and
each Investor in writing of the happening of any event, as promptly as
practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, nonpublic
information), and, subject to Section 3(r), promptly prepare a supplement
or amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to
Legal Counsel and each Investor (or such other number of copies as Legal
Counsel or such Investor may reasonably request).  The Company shall also promptly notify Legal
Counsel and each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when

 

8

 

a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by
facsimile or e-mail on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and (iii) of
the Company’s reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.

 

h.     The Company shall use its best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of
a Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.

 

i.      Upon the written request of any Investor
in connection with such Investor’s due diligence requirements, if any, the
Company shall make available for inspection by (i) any Investor, (ii) Legal
Counsel and (iii) one firm of accountants or other agents retained by the
Investors (collectively, the “Inspectors”),
all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each
Inspector, and cause the Company’s officers, directors and employees, counsel
and the Company’s independent certified public accountants to supply all
information which may be necessary and any Inspector may reasonably request;
provided, however, that each Inspector shall agree to hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be confidential,
and of which determination the Inspectors are so notified, unless (a) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement or is otherwise required under the 1933
Act, (b) the release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
Agreement.  Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. 
Nothing herein (or in any other confidentiality agreement between the
Company and any Investor) shall be deemed to limit the Investors’ ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

 

j.      The Company shall hold in confidence and
not make any disclosure of information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this Agreement or any other agreement.  The Company agrees that it shall, upon
learning that

 

9

 

disclosure of such
information concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Investor and allow such Investor, at the Investor’s expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.

 

k.     The Company shall use its reasonable best
efforts either to (i) cause all of the Registrable Securities covered by a
Registration Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed,
if any, if the listing of such Registrable Securities is then permitted under
the rules of such exchange or (ii) secure the inclusion for quotation
of all of the Registrable Securities on The American Stock Exchange, or (iii) if,
despite the Company’s reasonable best efforts to satisfy the preceding clauses (i) and
(ii) the Company is unsuccessful in satisfying the preceding clauses (i) and
(ii), to secure the inclusion for quotation on The New York Stock Exchange, The
NASDAQ Global Market, The NASDAQ Global Select Market or the NASDAQ Capital
Market for such Registrable Securities and, without limiting the generality of
the foregoing, to use its best efforts to arrange for at least two market
makers to register with the Financial Industry Regulatory Authority (“FINRA”)
as such with respect to such Registrable Securities.  The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section 3(k).

 

l.      The Company shall cooperate with the
Investors who hold Registrable Securities being offered and, to the extent
applicable, facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend) representing the Registrable Securities to be
offered pursuant to a Registration Statement and enable such certificates to be
in such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may request.

 

m.    If requested by an Investor,
the Company (i) shall as soon as practicable but in no event later than (a) five
(5) days after the receipt of notice from such Investor, incorporate in a
prospectus supplement or (b) forty-five days after the receipt of notice
from such Investor incorporate into a post-effective amendment such information
as an Investor reasonably requests to be included therein relating to the sale
and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered
or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) shall
make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) shall
supplement or make amendments to any Registration Statement if reasonably
requested by an Investor holding any Registrable Securities.

 

n.     The Company shall use its best efforts to
cause the Registrable Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.

 

o.     The Company shall make generally available
to its security holders as soon as practical, including via the EDGAR system of
the SEC or via a public announcement, but not later than ninety (90) days after
the close of the period covered thereby, an earnings

 

10

 

statement (in form complying
with, and in the manner provided by, the provisions of Rule 158 under the
1933 Act) covering a twelve-month period beginning not later than the first day
of the Company’s fiscal quarter next following the Effective Date of a
Registration Statement.

 

p.     The Company shall otherwise use its best
efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.

 

q.     Within two (2) Business Days after a
Registration Statement which covers Registrable Securities is ordered effective
by the SEC, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) confirmation that such Registration Statement has been
declared effective by the SEC in the form attached hereto as Exhibit A.

 

r.      Notwithstanding anything to the contrary
herein, at any time after the Effective Date, the Company may delay the
disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company and its counsel, in the best interest of the
Company and, in the opinion of counsel to the Company, otherwise required (a “Grace Period”); provided, that the Company
shall promptly (i) notify the Investors in writing of the existence of
material, non-public information giving rise to a Grace Period (provided that
in each notice the Company will not disclose the content of such material,
non-public information to the Investors) and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on which
the Grace Period ends; and, provided further, that no Grace Period shall exceed
twelve (12) consecutive days and during any three hundred sixty five (365) day
period such Grace Periods shall not exceed an aggregate of twenty-five (25)
days and the first day of any Grace Period must be at least five (5) trading
days after the last day of any prior Grace Period (each, an “Allowable Grace Period”).  For purposes of determining the length of a
Grace Period above, the Grace Period shall begin on and include the date the
Investors receive the notice referred to in clause (i) and shall end on
and include the later of the date the Investors receive the notice referred to
in clause (ii) and the date referred to in such notice.  The provisions of Section 3(g) hereof
shall not be applicable during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, the
Company shall again be bound by the first sentence of Section 3(g) with
respect to the information giving rise thereto unless such material, non-public
information is no longer applicable. 
Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement
in connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale, and delivered a copy of the
prospectus included as part of the applicable Registration Statement (unless an
exemption from such delivery requirement exists), prior to the Investor’s
receipt of the notice of a Grace Period and for which the Investor has not yet
settled.

 

4.     Obligations of the Investors.

 

a.     At least ten (10) Business Days prior
to the first anticipated filing date of a Registration Statement, the Company
shall notify each Investor in writing of the information the Company requires
from each such Investor if such Investor elects to have any of such

 

11

 

Investor’s Registrable
Securities included in such Registration Statement.  It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect and maintain the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.

 

b.     Each Investor, by such Investor’s
acceptance of the Registrable Securities, agrees to cooperate with the Company
as reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor’s election to exclude all of
such Investor’s Registrable Securities from such Registration Statement.

 

c.     Each Investor agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 3(h) or the first sentence of 3(g), such Investor will
immediately discontinue disposition of Registrable Securities pursuant to any
Registration Statement(s) covering such Registrable Securities until with
regard to a discontinuance pursuant to Section 3(h), such Investor’s
receipt of a written notice from the Company that there is no further event
under Section 3(h) in effect and with regard to a discontinuance
pursuant to the first sentence of Section 3(g), such Investor’s receipt of
the copies of the supplemented or amended prospectus contemplated by the first
sentence of 3(g) or receipt of notice that no supplement or amendment is
required.  Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver unlegended
shares of Common Stock to a transferee of an Investor in accordance with the
terms of the Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor’s receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(h) or
the first sentence of 3(g) and for which the Investor has not yet settled.

 

d.     Each Investor covenants and agrees that it will comply
with the prospectus delivery requirements of the 1933 Act as applicable to it
or an exemption therefrom in connection with sales of Registrable Securities
pursuant to the Registration Statement.

 

5.     Expenses of Registration.

 

All reasonable expenses,
other than underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company shall be paid by the Company. 
The Company shall also reimburse the Investors for the fees and
disbursements of Legal Counsel in connection with registration, filing or
qualification pursuant to Sections 2 and 3 of this Agreement which amount shall
be limited to $15,000 for each such registration, filing or qualification.

 

12

 

6.     Indemnification.

 

In the event any Registrable
Securities are included in a Registration Statement under this Agreement:

 

a.     To the fullest extent permitted by law, the
Company will, and hereby does, indemnify, hold harmless and defend each
Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor within
the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or
several, other than consequential, indirect or incidental damages
(collectively, “Claims”) incurred
in investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified Damages”),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon:  (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
“blue sky” laws of any jurisdiction in which Registrable Securities are offered
(“Blue Sky Filing”), or the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act,
any other law, including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable Securities
pursuant to a Registration Statement or (iv) any violation of this
Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, “Violations”).  Subject to Section 6(c), the Company
shall reimburse the Indemnified Persons, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such
Claim.  Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this Section 6(a):  (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for
use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was timely
made available by the Company pursuant to Section 3(d) and (ii) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. 
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section 9.

 

13

 

b.     In connection with any Registration
Statement in which an Investor is participating, each such Investor agrees to
severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement and each Person, if any, who controls the Company within the meaning
of the 1933 Act or the 1934 Act (each, an “Indemnified
Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor
will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b) and
the agreement with respect to contribution contained in Section 7 shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld or delayed; provided, further, however, that
the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to
such Registration Statement.  Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer
of the Registrable Securities by the Investors pursuant to Section 9.

 

c.     Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the
commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party
shall, if a Claim in respect thereof is to be made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written
notice of the commencement thereof, and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume control
of the defense thereof with counsel mutually satisfactory to the indemnifying
party and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses of not more than
one counsel for such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding.  In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority  in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates.  The Indemnified Party or Indemnified Person
shall cooperate reasonably with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably
available to the Indemnified Party or Indemnified Person which relates to such
action or Claim.  The indemnifying party
shall keep the Indemnified Party or Indemnified Person fully apprised at all
times as to the status of the defense or any settlement

 

14

 

negotiations with respect
thereto.  No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent.  No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent
to entry of any judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party or Indemnified Person of a release from all
liability in respect to such Claim or litigation, and such settlement shall not
include any admission as to fault on the part of the Indemnified Party or the
Indemnified Person.  Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made.  The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under
this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.

 

d.     The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Indemnified
Damages are incurred.

 

e.     The indemnity agreements contained herein
shall be in addition to (i) any cause of action or similar right of the
Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.

 

7.     Contribution.

 

To the extent any
indemnification by an indemnifying party is prohibited or limited by law, the
indemnifying party agrees to make the maximum contribution with respect to any
amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that:  (i) no Person involved in the sale of
Registrable Securities which Person is guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) in connection
with such sale shall be entitled to contribution from any Person involved in
such sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities pursuant to such Registration
Statement.

 

8.     Reports Under the 1934 Act.

 

With a view to making
available to the Investors the benefits of Rule 144 promulgated under the
1933 Act or any other similar rule or regulation of the SEC that may at
any time permit the Investors to sell securities of the Company to the public
without registration (“Rule 144”),
the Company agrees to:

 

15

 

a.     make and keep public information available,
as those terms are understood and defined in Rule 144;

 

b.     file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
1934 Act so long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company’s obligations under Section 4(c) of
the Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

 

c.     furnish to each Investor so long as such
Investor owns Registrable Securities, promptly upon request, (i) a written
statement by the Company, if true, that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.

 

9.     Assignment of Registration Rights.

 

The rights under this
Agreement shall be automatically assignable by the Investors to any transferee
of all or any portion of such Investor’s Registrable Securities if:  (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment; (ii) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee
or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act or
applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by
all of the provisions contained herein; and (v) such transfer shall have
been made in accordance with the applicable requirements of the Securities
Purchase Agreement.

 

10.   Amendment of Registration Rights.

 

Provisions of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Required Holders.  Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and
the Company.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities.  No consideration
shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.

 

11.   Miscellaneous.

 

a.     A Person is deemed to be a holder of
Registrable Securities whenever such Person owns or is deemed to own of record
such Registrable Securities.  If the
Company receives conflicting instructions, notices or elections from two or
more Persons with respect to

 

16

 

the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the such record owner of such Registrable Securities.

 

b.     Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after
deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same.  The addresses and facsimile numbers for such
communications shall be:

 

If
to the Company:

 

Cano
Petroleum, Inc.

801 Cherry Street

Suite 3200

Fort
Worth, Texas 76102

Telephone:            (817) 698-0900

Facsimile:               (817) 334-0222

Attention:              Morris B. Smith and Phillip Feiner

 

With a copy to:

 

W.
Bruce Newsome

Haynes
and Boone, LLP

901
Main St., Suite 3100

Dallas,
TX 75202

Telephone:            (214) 651-5119

Facsimile:               (214) 200-0636

 

If to Legal Counsel:

 

Schulte
Roth & Zabel LLP

919
Third Avenue

New
York, New York  10022

Telephone:  (212) 756-2000

Facsimile:  (212) 593-5955

Attention:  Eleazer N. Klein, Esq.

 

If to a Buyer, to its address and facsimile
number set forth on the Schedule of Buyers attached hereto, with copies to such
Buyer’s representatives as set forth on the Schedule of Buyers, or to such
other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party pursuant to this Section. 
Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of

 

17

 

such transmission or (C) provided by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

 

c.     Failure of any party to exercise any right
or remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof.

 

d.     All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

e.     If any provision of this Agreement is
prohibited by law or otherwise determined to be invalid or unenforceable by a
court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the
remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the
parties as to the subject matter hereof and the prohibited nature, invalidity
or unenforceability of the provision(s) in question does not substantially
impair the respective expectations or reciprocal obligations of the parties or
the practical realization of the benefits that would otherwise be conferred
upon the parties.  The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or
unenforceable provision(s) with a valid provision(s), the effect of which
comes as close as possible to that of the prohibited, invalid or unenforceable
provision(s).

 

f.      This Agreement, the other Transaction
Documents (as defined in the Securities Purchase Agreement) and the instruments
referenced herein and therein constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or

 

18

 

referred to herein and
therein.  This Agreement, the other Transaction
Documents and the instruments referenced herein and therein supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.

 

g.     Subject to the requirements of Section 9,
this Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.

 

h.     The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

i.      This Agreement may be executed in
identical counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement.  This Agreement, once executed by a party, may
be delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.

 

j.      Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

k.     All consents and other determinations
required to be made by the Investors pursuant to this Agreement shall be made,
unless otherwise specified in this Agreement, by the Required Holders.

 

l.      The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent and no rules of strict construction will be applied against any
party.

 

m.    This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

 

n.     Notwithstanding anything to the contrary
contained herein, no Buyer or holder of Registrable Securities shall be
entitled to consequential, indirect or incidental damages hereunder.  However, the foregoing shall not in any way
limit a Buyer or holder of Registrable Securities from being reimbursed for its
costs, fees or expenses, including, without limitation, reasonable attorneys’
fees and disbursements in connection with any of its rights and remedies
hereunder.

 

o.     The obligations of each Investor hereunder
are several and not joint with the obligations of any other Investor, and no
provision of this Agreement is intended to confer any obligations on any
Investor vis-à-vis any other Investor. 
Nothing contained herein, and no action taken by any Investor pursuant
hereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a

 

19

 

presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated herein.

 

* * * * * *

 

20

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their respective signature page to
this Registration Rights Agreement to be duly executed as of the date first
written above.

 

	
   

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CANO
  PETROLEUM, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  S. Jeffrey Johnson

  
	
   

  	
   

  	
   

  	
  Name:

  	
  S.
  Jeffrey Johnson

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chairman
  and CEO

  

 

21

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

 

	
   

  	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CALM
  WATERS PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Richard S. Strong

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Richard
  S. Strong

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing
  Partner

  

 

22

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  GEORGE
  WEISS ASSOCIATES INC.  

  PROFIT
  SHARING PLAN  

   

  IOU
  LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steven C. Kleinman

  
	
   

  	
   

  	
  Name:

  	
  Steven
  C. Kleinman

  
	
   

  	
   

  	
  Title:

  	
  Authorized
  Signatory

  
					

 

23

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  HARRY-ANNA
  INVESTMENT FUND, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard S. Spencer

  
	
   

  	
   

  	
  Name:

  	
  Richard
  S. Spencer

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member of

  
	
   

  	
   

  	
   

  	
  Westcliff
  Capital Management, LLC,

  
	
   

  	
   

  	
   

  	
  the
  Investment Advisor

  

 

24

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  COMPASS
  SAV, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard S. Spencer

  
	
   

  	
   

  	
  Name:

  	
  Richard
  S. Spencer

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member of

  
	
   

  	
   

  	
   

  	
  Westcliff
  Capital Management, LLC,

  
	
   

  	
   

  	
   

  	
  the
  Investment Advisor

  

 

25

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  US
  DOLLAR CLASS CELL OF

  
	
   

  	
  COMPASS
  OFFSHORE SAV PCC, LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard S. Spencer

  
	
   

  	
   

  	
  Name:

  	
  Richard
  S. Spencer

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member of

  
	
   

  	
   

  	
   

  	
  Westcliff
  Capital Management, LLC,

  
	
   

  	
   

  	
   

  	
  the
  Investment Advisor

  

 

26

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  QUEENSCARE

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard S. Spencer

  
	
   

  	
   

  	
  Name:

  	
  Richard
  S. Spencer

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member of

  
	
   

  	
   

  	
   

  	
  Westcliff
  Capital Management, LLC,

  
	
   

  	
   

  	
   

  	
  the
  Investment Advisor

  

 

27

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  ASHDON
  SELECT MANAGER TRUST —

  
	
   

  	
  ASHDON
  INVESTMENT, LLC MASTER TRUST

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard S. Spencer

  
	
   

  	
   

  	
  Name:

  	
  Richard
  S. Spencer

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member of

  
	
   

  	
   

  	
   

  	
  Westcliff
  Capital Management, LLC,

  
	
   

  	
   

  	
   

  	
  the
  Investment Advisor

  

 

28

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  DAIMLER
  CHRYSLER CORPORATION

  
	
   

  	
  MASTER
  RETIREMENT TRUST

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard S. Spencer

  
	
   

  	
   

  	
  Name:

  	
  Richard
  S. Spencer

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member of

  
	
   

  	
   

  	
   

  	
  Westcliff
  Capital Management, LLC,

  
	
   

  	
   

  	
   

  	
  the
  Investment Advisor

  

 

29

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  WESTCLIFF
  FUND, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard S. Spencer

  
	
   

  	
   

  	
  Name:

  	
  Richard
  S. Spencer

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member of

  
	
   

  	
   

  	
   

  	
  Westcliff
  Capital Management, LLC,

  
	
   

  	
   

  	
   

  	
  the
  General Partner

  

 

30

 

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  UBS
  O’CONNOR LLC F/B/O:

  
	
   

  	
  O’CONNOR
  PIPES CORPORATE

  
	
   

  	
  STRATEGIES
  MASTER LIMITED

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeffrey Putman

  
	
   

  	
   

  	
  Name:  
  Jeffrey Putman

  
	
   

  	
   

  	
  Title:    
  Portfolio Manager

  

 

31

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  TRAPEZE
  CAPITAL CORP., on behalf of

  managed
  accounts

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Adam Abramson

  
	
   

  	
   

  	
  Name:  
  Adam Abramson

  
	
   

  	
   

  	
  Title:    
  Vice President

  

 

32

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  TRAPEZE
  ASSET MANAGEMENT INC., on behalf of managed accounts

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Adam Abramson

  
	
   

  	
   

  	
  Name:  
  Adam Abramson

  
	
   

  	
   

  	
  Title:    
  Vice President

  

 

33

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed
as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  HUDSON
  BAY FUND LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Yoav Roth

  
	
   

  	
   

  	
  Name:  
  Yoav Roth

  
	
   

  	
   

  	
  Title:    
  Principal and Portfolio Manager

  

 

34

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  HUDSON
  BAY OVERSEES FUND LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Yoav Roth

  
	
   

  	
   

  	
  Name:  
  Yoav Roth

  
	
   

  	
   

  	
  Title:    
  Principal and Portfolio Manager

  

 

35

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  CRESTVIEW
  CAPITAL MASTER, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Crestview
  Capital Partners, LLC,

  
	
   

  	
   

  	
  its
  sole manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Stewart Flink

  
	
   

  	
   

  	
  Name:  
  Stewart Flink

  
	
   

  	
   

  	
  Title:    
  Manager

  

 

36

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  ARGONAUT
  VENTURES I, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jason Martin

  
	
   

  	
   

  	
  Name:  
  Jason Martin

  
	
   

  	
   

  	
  Title:    
  Authorized Agent

  

 

37

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  CARLYLE
  MULTI-STRATEGY

  MASTER
  FUND

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ralph Reynolds

  
	
   

  	
   

  	
  Name:  
  Ralph Reynolds

  
	
   

  	
   

  	
  Title:    
  Chief Investment Officer

  

 

38

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  INDUSTRIAL HARVEST PARTNERS
  MASTER FUND, LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Todd McElroy

  
	
   

  	
   

  	
  Name:

  	
  Todd
  McElroy

  
	
   

  	
   

  	
  Title:

  	
  CFO,
  Investment Manager

  

 

39

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  ING
  GLOBAL RESOURCES PORTFOLIO

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Anthony Socci

  
	
   

  	
   

  	
  Name:

  	
  Anthony
  Socci

  
	
   

  	
   

  	
  Title:

  	
  VP
  Senior Research Analyst 

  on behalf of ING Investment

  Management
  Co.

  

 

40

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  ING
  GLOBAL NATURAL RESOURCES FUND

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Anthony Socci

  
	
   

  	
   

  	
  Name:

  	
  Anthony
  Socci

  
	
   

  	
   

  	
  Title:

  	
  VP
  Senior Research Analyst

  on behalf of ING Investment

  Management
  Co.

  

 

41

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  ING
  RISK MANAGED NATURAL RESOURCES FUND

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Anthony Socci

  
	
   

  	
   

  	
  Name:

  	
  Anthony
  Socci

  
	
   

  	
   

  	
  Title:

  	
  VP
  Senior Research Analyst

  on behalf of ING Investment

  Management
  Co.

  

 

42

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  GLOBAL
  NATURAL RESOURCES TRUST FUND

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Anthony Socci

  
	
   

  	
   

  	
  Name:

  	
  Anthony
  Socci

  
	
   

  	
   

  	
  Title:

  	
  VP
  Senior Research Analyst

  on behalf of ING Investment

  Management
  Co.

  

 

43

 

IN WITNESS WHEREOF, each Buyer and the Company
have caused their respective signature page to this Registration Rights
Agreement to be duly executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  GLG
  NORTH AMERICAN OPPORTUNITY FUND

  
	
   

  	
   

  
	
   

  	
  By:

  	
  GLG
  Partners L.P., as investment manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tim Kuschill

  
	
   

  	
   

  	
  Name:

  	
  Tim
  Kuschill

  
	
   

  	
   

  	
  Title:

  	
  Legal
  Counsel for GLG Partners L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Victoria Parry

  
	
   

  	
   

  	
  Name:

  	
  Victoria
  Parry

  
	
   

  	
   

  	
  Title:

  	
  Senior
  Legal Counsel for GLG

  Partners
  L.P.

  

 

44

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  HARBOUR
  HOLDING LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Pamela A. Cavanaugh

  
	
   

  	
   

  	
  Name:

  	
  Pamela
  A. Cavanaugh

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

45

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  SKYLANDS
  SPECIAL INVESTMENT LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Pamela A. Cavanaugh

  
	
   

  	
   

  	
  Name:

  	
  Pamela
  A. Cavanaugh

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President — Skylands Capital, LLC, Managing

  Member
  of Skylands Special Investment LLC

  

 

46

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  SKYLANDS
  QUEST LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Pamela A. Cavanaugh

  
	
   

  	
   

  	
  Name:

  	
  Pamela
  A. Cavanaugh

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President — Skylands Capital, LLC, Managing

  Member
  of Skylands Quest LLC

  

 

47

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  SKYLANDS
  SPECIAL INVESTMENT II LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Pamela A. Cavanaugh

  
	
   

  	
   

  	
  Name:

  	
  Pamela
  A. Cavanaugh

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President — Skylands Capital, LLC, Managing

  Member
  of Skylands Special Investment II LLC

  

 

48

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  ENABLE
  GROWTH PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Brendan O’Neil

  
	
   

  	
   

  	
  Name:

  	
  Brendan
  O’Neil

  
	
   

  	
   

  	
  Title:

  	
  Principal
  and Portfolio Manager

  

 

49

 

SCHEDULE OF BUYERS

 

 

	
  Buyer

  	
   

  	
  Address
  and

  Facsimile Number

  
	
  Calm
  Waters Partnership

  	
   

  	
  115
  S. 84th Street, Suite 200

  Milwaukee, WI 53214

  
	
  George
  Weiss Associates Inc. Profit Sharing Plan

  	
   

  	
  One
  State Street, 20th Floor

  Hartford, CT 06103

  
	
  IOU
  Limited Partnership

  	
   

  	
  One
  State Street, 20th Floor

  Hartford, CT 06103

  
	
  Harry-Anna
  Investment Fund

  	
   

  	
  200
  7th Avenue, Suite 106

  Santa Cruz, CA 95062

  Attn: M. Hinz

  
	
  Compass
  SAV, LLC

  	
   

  	
  200
  7th Avenue, Suite 106

  Santa Cruz, CA 95062

  Attn: M. Hinz

  
	
  US
  Dollar Class Cell of Compass Offshore SAV PCC, Ltd.

  	
   

  	
  200
  7th Avenue, Suite 106

  Santa Cruz, CA 95062

  Attn: M. Hinz

  
	
  QueensCare

  	
   

  	
  200
  7th Avenue, Suite 106

  Santa Cruz, CA 95062

  Attn: M. Hinz

  
	
  Westcliff
  Fund, LP

  	
   

  	
  200
  7th Avenue, Suite 106

  Santa Cruz, CA 95062

  Attn: M. Hinz

  
	
  Ashdon
  Select Manager Trust — Ashdon Investment Management, LLC Master Trust

  	
   

  	
  200
  7th Avenue, Suite 106

  Santa Cruz, CA 95062

  Attn: M. Hinz

  
	
  Daimler
  Chrysler Corporation Master Retirement Trust

  	
   

  	
  200
  7th Avenue, Suite 106

  Santa Cruz, CA 95062

  Attn: M. Hinz

  
	
  UBS
  O’Connor LLC F/B/O: O’Connor PIPES Corporate Strategies Master Limited

  	
   

  	
  One
  North Wacker Dr.

  32nd Floor

  c/o UBS O’Connor

  Chicago, IL 60606

  Attn: Robert Murray

  

 

50

 

	
  Buyer

  	
   

  	
  Address
  and

  Facsimile Number

  
	
  Trapeze
  Capital Corp., on behalf of managed accounts Investor Company

  	
   

  	
  77
  Bloor Street West

  2nd Floor

  Toronto, ON

  CANADA M5S1M2

  
	
  Trapeze
  Asset Management, Inc., on behalf of managed accounts Investor Company

  	
   

  	
  77
  Bloor Street West

  2nd Floor

  Toronto, ON

  CANADA M5S1M2

  
	
  on
  behalf of managed accounts BMO Nesbitt Burns ITF Millenium Partners, LLP

  	
   

  	
  1
  First Canadian Place

  35th Floor

  Toronto, ON

  CANADA M5X1H3

  
	
  on
  behalf of managed accounts Roytor & Co.

  	
   

  	
  200
  Bay Street

  SL Level

  Toronto, ON

  CANADA M5J2J5

  
	
  Hudson
  Bay Fund LP

  	
   

  	
  120
  Broadway

  40th Floor

  New York, NY 10271

  
	
  Hudson
  Bay Oversees Fund LTD.

  	
   

  	
  120
  Broadway

  40th Floor

  New York, NY 10271

  
	
  Crestview
  Capital Funds

  	
   

  	
  95
  Revere Drive, Suite A

  Northbrook, IL 60062

  
	
  Argonaut
  Ventures I, LLC

  	
   

  	
  6733
  S. Yale

  Tulsa, OK 74136

  
	
  Carlyle
  Multi-Strategy Master Fund

  	
   

  	
  1177
  Avenue of the Americas, 16th Floor

  c/o Carlyle-Blue Wave Partners Management, LP

  New York, NY 10036

  
	
  Industrial
  Harvest Partners Master Fund, Ltd.

  	
   

  	
  220
  East 42nd Street

  29th Floor

  New York, NY 10017

  
	
  ING
  Global Resources Portfolio

  	
   

  	
  c/o
  ING Investment Management Company

  230 Park Avenue

  New York, NY 10169

  

 

51

 

	
  Buyer

  	
   

  	
  Address
  and

  Facsimile Number

  
	
  ING
  Global Natural Resources Fund

  	
   

  	
  c/o
  ING Investment Management Company

  230 Park Avenue

  New York, NY 10169

  
	
  ING
  Risk Managed Natural Resources Fund

  	
   

  	
  c/o
  ING Investment Management Company

  230 Park Avenue

  New York, NY 10169

  
	
  Global
  Natural Resources Trust Fund

  	
   

  	
  c/o
  ING Investment Management Company

  230 Park Avenue

  New York, NY 10169

  
	
  GLG
  North American Opportunity Fund

  	
   

  	
  Walker
  House

  87 Mary Street

  George Town

  Grand Cayman

  Cayman Islands KY1-9002

   

  c/o
  GLG Partners LP

  Attn: Legal Department

  One Curzon Street

  London, England W1J5HB

  
	
  Harbour
  Holdings Ltd.

  	
   

  	
  c/o
  Skylands Capital, LLC

  1200 N. Mayfair Road

  Suite 250

  Milwaukee, WI 53213

  
	
  Skylands
  Special Investment LLC.

  	
   

  	
  c/o
  Skylands Capital, LLC

  1200 N. Mayfair Road

  Suite 250

  Milwaukee, WI 53213

  
	
  Skylands
  Quest LLC.

  	
   

  	
  c/o
  Skylands Capital, LLC

  1200 N. Mayfair Road

  Suite 250

  Milwaukee, WI 53213

  
	
  Skylands
  Special Investment II LLC.

  	
   

  	
  c/o
  Skylands Capital, LLC

  1200 N. Mayfair Road

  Suite 250

  Milwaukee, WI 53213

  
	
  Enable
  Growth Partners LP

  	
   

  	
  One
  Ferry Building

  Suite 255

  San Francisco, CA 94111

  

 

52

 

EXHIBIT A

 

NOTICE OF
EFFECTIVENESS

OF
REGISTRATION STATEMENT

 

              
    , 2007

 

Via FedEx

 

Interwest Transfer Company

1981 East Murray Holladay Rd., Suite 100

Salt Lake City, Utah 84117

ATTN:                  Lorraine Smith

 

Re:               Cano Petroleum, Inc.

 

Ladies
and Gentlemen:

 

We
are counsel to Cano Petroleum, Inc., a Delaware corporation (the “Company”), and have represented the Company
in connection with that certain Securities Purchase Agreement, dated as of October     ,
2007 (the “Securities  Purchase Agreement”), entered into by and
among the Company and the buyers named therein (collectively, the “Holders”) pursuant to which the Company
issued to the Holders its shares of the Company’s Common Stock, par value
$0.0001 per share (the “Common Stock”).  Pursuant to the Securities Purchase
Agreement, the Company also has entered into a Registration Rights Agreement
with the Holders (the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other
things, to register the resale of the Registrable Securities (as defined in the
Registration Rights Agreement) under the Securities Act of 1933, as amended
(the “1933 Act”).  In connection with the Company’s obligations
under the Registration Rights Agreement, on               
    , 2007, the Company filed a Registration Statement on Form S-3
(File No. 333-            )
(the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each
of the Holders as a selling stockholder thereunder.

 

In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at          P.M.
EST on                   
     , 2007 and we have no knowledge, after
telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

 

A-1

 

Subject to the specific
prohibitions contained in the Registration Rights Agreement regarding the
inability to use the Registration Statement under specific circumstances (the “Registration Statement Limitations”) and in reliance upon
the Holder’s representations and covenants in Section 2(g) of the
Securities Purchase Agreement, this letter
shall serve as our standing instruction to you that the shares of Common Stock
are freely transferable by the Holders pursuant to the Registration Statement
provided that the prospectus delivery requirements, if any, are complied with.  Subject to the Registration Statement
Limitations, you need not require further letters from us to effect any future
legend-free issuance or reissuance of shares of Common Stock to the Holders as
contemplated by the Company’s Transfer Agent Instructions dated October     ,
2007.  This letter shall serve as our
standing instruction with regard to this matter.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  HAYNES AND BOONE, LLP

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  W.
  Bruce Newsome

  

 

 

cc:                                                         [Buyers]

 

A-2

 

EXHIBIT B

 

SELLING
STOCKHOLDERS

 

The
shares of Common Stock being offered by the Selling Stockholders are those
previously issued to the Selling Stockholders. 
For additional information regarding the issuance of those shares of
Common Stock, see “Private Placement of Common Shares” above.  We are registering the shares of Common Stock
in order to permit the selling stockholders to offer the shares for resale from
time to time.  Except for [        ][Discuss
necessary relationships] and the ownership of the shares of Common Stock issued
pursuant to the Securities Purchase Agreement, the selling stockholders have
not had any material relationship with us within the past three years.

 

The
table below lists the Selling Stockholders and other information regarding the
beneficial ownership of the shares of Common Stock by each of the Selling
Stockholders.  The second column lists
the number of shares of Common Stock beneficially owned by each Selling
Stockholder, based on its ownership of the shares of Common Stock and any
securities exercisable into or convertible into Common Stock, as of                      ,
200  .

 

The
third column lists the shares of Common Stock being offered by this prospectus
by the Selling Stockholders.

 

In
accordance with the terms of a registration rights agreement with the selling
stockholders, this prospectus generally covers the resale of 100% of the number
of shares of Common Stock issued as of the trading day immediately preceding
the date the registration statement is initially filed with the SEC.  The fourth column assumes
the sale of all of the shares offered by the Selling Stockholders pursuant to
this prospectus.

 

The
Selling Stockholders may sell all, some or none of their shares in this
offering.  See “Plan of Distribution.”

 

B - 1

 

	
  Name
  of Selling Stockholder

  	
   

  	
  Number
  of Shares

  Beneficially Owned Prior to Offering

  	
   

  	
  Maximum
  Number of

  Shares to be Sold Pursuant

  to this Prospectus

  	
   

  	
  Number of Shares
  

  Beneficially Owned After 

  Offering

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Buyer] (1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Other Buyers]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(1)

 

B - 2

 

PLAN OF DISTRIBUTION

 

We
are registering the shares of Common Stock previously issued to permit the
resale of these shares of Common Stock by the holders of the Common Stock from
time to time after the date of this prospectus. 
We will not receive any of the proceeds from the sale by the selling
stockholders of the shares of Common Stock. 
We will bear all fees and expenses incident to our obligation to
register the shares of Common Stock.

 

The
selling stockholders may sell all or a portion of the shares of Common Stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents.  If the shares of Common Stock are sold
through underwriters or broker-dealers, the selling stockholders will be
responsible for underwriting discounts or commissions or agent’s
commissions.  The shares of Common Stock
may be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of the sale, at varying prices determined at the time of
sale, or at negotiated prices.  These
sales may be effected in transactions, which may involve crosses or block
transactions,

 

·                  on any national securities exchange or
quotation service on which the securities may be listed or quoted at the time
of sale;

 

·                  in the over-the-counter market;

 

·                  in transactions otherwise than on these
exchanges or systems or in the over-the-counter market;

 

·                  through the writing of options, whether such
options are listed on an options exchange or otherwise;

 

·                  ordinary brokerage transactions and
transactions in which the broker-dealer solicits purchasers;

 

·                  block trades in which the broker-dealer will
attempt to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;

 

·                  purchases by a broker-dealer as principal and
resale by the broker-dealer for its account;

 

·                  an exchange distribution in accordance with
the rules of the applicable exchange;

 

·                  privately negotiated transactions;

 

·                  short sales;

 

·                  sales pursuant to Rule 144;

 

·                  broker-dealers may agree with the selling
stockholders to sell a specified number of such shares at a stipulated price
per share;

 

1

 

·                  a combination of any such methods of sale; and

 

·                  any other method permitted pursuant to
applicable law.

 

If
the selling stockholders effect such transactions by selling shares of Common
Stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of Common Stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved).  In connection with sales of the shares of
Common Stock or otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of
the shares of Common Stock in the course of hedging in positions they
assume.  The selling stockholders may
also sell shares of Common Stock short and deliver shares of Common Stock
covered by this prospectus to close out short positions and to return borrowed
shares in connection with such short sales. 
The selling stockholders may also loan or pledge shares of Common Stock
to broker-dealers that in turn may sell such shares.

 

The
selling stockholders may pledge or grant a security interest in some or all of
the shares of Common Stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of Common Stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933, as amended, amending,
if necessary, the list of selling stockholders to include, pursuant to
prospectus amendment or prospectus supplement, the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.  The selling stockholders also may transfer
and donate the shares of Common Stock in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.

 

The
selling stockholders and any broker-dealer participating in the distribution of
the shares of Common Stock may be deemed to be “underwriters” within the
meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act.  At the time a particular offering of the
shares of Common Stock is made, a prospectus supplement, if required, will be
distributed which will set forth the aggregate amount of shares of Common Stock
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.

 

Under
the securities laws of some states, the shares of Common Stock may be sold in
such states only through registered or licensed brokers or dealers.  In addition, in some states the shares of
Common Stock may not be sold unless such shares have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.

 

2

 

There
can be no assurance that any selling stockholder will sell any or all of the
shares of Common Stock registered pursuant to the registration statement, of
which this prospectus forms a part.

 

The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the
timing of purchases and sales of any of the shares of Common Stock by the
selling stockholders and any other participating person.  Regulation M may also restrict the ability of
any person engaged in the distribution of the shares of Common Stock to engage
in market-making activities with respect to the shares of Common Stock.  All of the foregoing may affect the marketability
of the shares of Common Stock and the ability of any person or entity to engage
in market-making activities with respect to the shares of Common Stock.

 

We
will pay all expenses of the registration of the shares of Common Stock
pursuant to the registration rights agreement, estimated to be
$[     ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or “blue sky” laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling commissions, if
any.  We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution.  We may be indemnified by the selling
stockholders against civil liabilities, including liabilities under the
Securities Act, that may arise from any written information furnished to us by
the selling stockholder specifically for use in this prospectus, in accordance
with the related registration rights agreement, or we may be entitled to
contribution.

 

Once
sold under the registration statement, of which this prospectus forms a part,
the shares of Common Stock will be freely tradable in the hands of persons
other than our affiliates.

 

3Exhibit 10.1

 

 

AGREEMENT FOR PURCHASE AND SALE

among

SDG Resources, L.P.,

 

Innovative Oil and Gas Development

and Trading Company, Inc., and

 

Arkios Partners, L.P.,

as Sellers,

and

Resaca Exploitation, LP,

as Buyer

dated

March 10, 2006

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
  1.

  	
  SALE
  AND PURCHASE OF THE PROPERTIES

  	
  1

  
	
   

  	
  1.1

  	
  The
  Properties

  	
  1

  
	
   

  	
  1.2

  	
  Excluded
  Assets

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  PURCHASE
  PRICE

  	
  3

  
	
   

  	
  2.1

  	
  Basic
  Amount

  	
  3

  
	
   

  	
  2.2

  	
  Performance
  Deposit

  	
  4

  
	
   

  	
  2.3

  	
  Adjustments
  to Purchase Price

  	
  4

  
	
   

  	
  2.4

  	
  Closing
  Statement

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS
  AND WARRANTIES OF SELLERS

  	
   

  
	
   

  	
  3.1

  	
  Organization

  	
  5

  
	
   

  	
  3.2

  	
  Authority
  and Authorization

  	
  5

  
	
   

  	
  3.3

  	
  Enforceability

  	
  5

  
	
   

  	
  3.4

  	
  Conflicts

  	
  6

  
	
   

  	
  3.5

  	
  Title
  to Properties other than Title Properties

  	
  6

  
	
   

  	
  3.6

  	
  Contracts

  	
  6

  
	
   

  	
  3.7

  	
  Litigation
  and Claims

  	
  6

  
	
   

  	
  3.8

  	
  Approvals
  and Preferential Rights

  	
  7

  
	
   

  	
  3.9

  	
  Compliance
  with Law and Permits

  	
  7

  
	
   

  	
  3.10

  	
  Status
  of Contracts

  	
  7

  
	
   

  	
  3.11

  	
  Production
  Burdens, Taxes, Expenses and Revenues

  	
  7

  
	
   

  	
  3.12

  	
  Production
  Balances and Penalties; Other Production Sales Matters

  	
  8

  
	
   

  	
  3.13

  	
  Well
  and Equipment Status

  	
  8

  
	
   

  	
  3.14

  	
  Equipment

  	
  8

  
	
   

  	
  3.15

  	
  Payout
  Balances

  	
  8

  
	
   

  	
  3.16

  	
  Absence
  of Certain Changes

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS
  AND WARRANTIES OF BUYER

  	
  8

  
	
   

  	
  4.1

  	
  Organization

  	
  9

  
	
   

  	
  4.2

  	
  Authorization
  and Authority

  	
  9

  
	
   

  	
  4.3

  	
  Enforceability

  	
  9

  
	
   

  	
  4.4

  	
  Conflicts

  	
  9

  
	
   

  	
  4.5

  	
  Reliance

  	
  9

  
	
   

  	
  4.6

  	
  Qualified
  Leaseholder

  	
  9

  
	
   

  	
  4.7

  	
  Qualified
  Purchaser

  	
  10

  
	
   

  	
  4.8

  	
  Available
  Funds

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  COVENANTS
  OF SELLERS

  	
  10

  
	
   

  	
  5.1

  	
  Conduct
  of Business Pending Closing

  	
  10

  
	
   

  	
  5.2

  	
  Access

  	
  10

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
  5.3

  	
  Closing
  Conditions

  	
  11

  
	
   

  	
  5.4

  	
  Title
  Review

  	
  11

  
	
   

  	
  5.5

  	
  Environmental
  Review

  	
  11

  
	
   

  	
  5.6

  	
  Consents
  and Approvals

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  COVENANTS
  OF BUYER

  	
  11

  
	
   

  	
  6.1

  	
  Pre-Closing
  Covenants. Buyer shall cause all the representations and warranties made by
  Buyer and contained in this Agreement to be true and correct on and as of the
  Closing Date

  	
  11

  
	
   

  	
  6.2

  	
  Post-Closing
  Covenants

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  CONDITIONS
  PRECEDENT TO THE OBLIGATIONS OF BUYER

  	
  11

  
	
   

  	
  7.1

  	
  Representations
  and Warranties

  	
  11

  
	
   

  	
  7.2

  	
  Consents

  	
  12

  
	
   

  	
  7.3

  	
  Compliance

  	
  12

  
	
   

  	
  7.4

  	
  No
  Pending Suits

  	
  12

  
	
   

  	
  7.5

  	
  Purchase
  Price Adjustments

  	
  12

  
	
   

  	
  7.6

  	
  Lender
  Encumbrances

  	
  12

  
	
   

  	
  7.7

  	
  Cooper
  Jal Operations

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  CONDITIONS
  PRECEDENT TO THE OBLIGATIONS OF SELLERS

  	
  12

  
	
   

  	
  8.1

  	
  Representations
  and Warranties

  	
  12

  
	
   

  	
  8.2

  	
  Compliance

  	
  12

  
	
   

  	
  8.3

  	
  No
  Pending Suits

  	
  13

  
	
   

  	
  8.4

  	
  Purchase
  Price Adjustments

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  CLOSING

  	
  13

  
	
   

  	
  9.1

  	
  The
  Closing

  	
  13

  
	
   

  	
  9.2

  	
  Documents
  to be Delivered at Closing

  	
  13

  
	
   

  	
  9.3

  	
  Possession

  	
  14

  
	
   

  	
  9.4

  	
  Payment
  of Purchase Price

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  CASUALTY
  LOSS

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  TERMINATION

  	
  15

  
	
   

  	
  11.1

  	
  Termination
  Events

  	
  15

  
	
   

  	
  11.2

  	
  Effect
  of Termination

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  ASSUMPTION
  BY BUYER; ASSUMED OBLIGATIONS

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  PRODUCTION,
  PROCEEDS, EXPENSES AND TAXES

  	
  16

  
	
   

  	
  13.1

  	
  Division
  of Ownership

  	
  16

  

 

ii

 

TABLE OF DEFINED TERMS

 

	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  
	
  Adjusted
  Purchase Price

  	
  2.1

  
	
  Adverse
  Environmental Condition

  	
  Annex
  II

  
	
  Advisor

  	
  1.2

  
	
  Agreement

  	
  Page 1

  
	
  Allocated
  Value

  	
  Annex
  I

  
	
  Assignment

  	
  Annex
  V

  
	
  Assignee

  	
  Annex
  V

  
	
  Assignor

  	
  Annex
  V

  
	
  Assumed
  Obligations

  	
  12.1.3

  
	
  Business
  Day

  	
  18

  
	
  Buyer
  Indemnified Parties

  	
  15.3

  
	
  Buyer

  	
  Page 1

  
	
  Casualty
  Loss

  	
  10

  
	
  Closing

  	
  9.1

  
	
  Closing
  Date

  	
  9.1

  
	
  Closing
  Period

  	
  2.3.1(a)

  
	
  Closing
  Statement

  	
  2.4

  
	
  Code

  	
  28

  
	
  Contracts

  	
  1.1.7

  
	
  Cure
  Period

  	
  Annex
  I

  
	
  Data

  	
  1.1.6

  
	
  Defensible
  Title

  	
  Annex
  I

  
	
  Effective
  Time

  	
  1

  
	
  Environmental
  Claim

  	
  Annex
  II

  
	
  Environmental
  Consultant

  	
  Annex
  II

  
	
  Environmental
  Contaminant 

  	
  Annex
  II

  
	
  Environmental
  Defect Deductible

  	
  Annex
  II

  
	
  Environmental
  Defect Value

  	
  Annex
  II

  
	
  Environmental
  Defect Threshold

  	
  Annex
  II

  
	
  Environmental
  Laws

  	
  Annex
  II

  
	
  Environmental
  Liabilities

  	
  Annex
  II

  
	
  Environmental
  Permits

  	
  Annex
  II

  
	
  Environmental
  Review

  	
  5.5

  
	
  Equipment

  	
  1.1.5

  
	
  Equitable
  Limitations

  	
  3.3

  
	
  Excluded
  Assets

  	
  1.2

  
	
  Final
  Settlement Statement

  	
  14.1

  
	
  Indemnification
  Escrow Account

  	
  15.5.1(a)

  
	
  Indemnification
  Escrow Agent

  	
  15.5.1(b)

  
	
  Indemnification
  Escrow Agreement

  	
  15.5.1(c)

  
	
  Indemnification
  Escrow Amount

  	
  15.5.1(d)

  
	
  Liabilities

  	
  15.2

  

 

I

 

	
  Liens

  	
  Annex
  I

  
	
  Net
  Revenue Interest

  	
  Annex
  I

  
	
  Notice
  Date

  	
  Annex
  I

  
	
  Oil
  and Gas Properties

  	
  1.1.1

  
	
  Performance
  Deposit

  	
  2.2

  
	
  Permitted
  Encumbrances

  	
  Annex
  I

  
	
  Permits

  	
  1.1.8

  
	
  Production
  Burdens

  	
  3.11

  
	
  Properties

  	
  1

  
	
  Purchase
  Price

  	
  2.1

  
	
  Real
  Property

  	
  Annex
  VI

  
	
  Remediate

  	
  Annex
  II

  
	
  Royalties

  	
  13.2

  
	
  Sellers

  	
  Page 1

  
	
  Seller
  Group

  	
  Annex
   II

  
	
  Seller
  Indemnified Parties

  	
  15.4

  
	
  Substances

  	
  1.1.3

  
	
  Surface
  Contracts

  	
  1.1.4

  
	
  Taxes

  	
  13.2

  
	
  Three
  Span Real Property

  	
  9.2.1(b)

  
	
  Title
  Defect

  	
  Annex
  I

  
	
  Title
  Defect Amount

  	
  Annex
  I

  
	
  Title
  Defect Deductible

  	
  Annex
  I

  
	
  Title
  Defect Threshold

  	
  Annex
  I

  
	
  Title
  Property

  	
  Annex
  I

  
	
  Title
  Properties

  	
  Annex
  I

  
	
  Title
  Review

  	
  5.4

  
	
  Treasury
  Regulations

  	
  28

  
	
  Wells

  	
  1.1.2

  
	
  Working
  Interest

  	
  Annex
  I

  

 

II

 

AGREEMENT FOR PURCHASE AND SALE

 

This
Agreement for Purchase and Sale (“Agreement”)  is  made
and entered into on March 10, 2006, among SDG RESOURCES, L.P., a Texas
limited partnership (“SDG”),
INNOVATIVE OIL AND GAS DEVELOPMENT AND TRADING COMPANY, INC., a New Mexico
corporation (“IOG”), and  ARKIOS
PARTNERS, L.P., a Texas limited partnership (“Arkios”)
(collectively, SDG, IOG, and Arkios may be referred to herein as “Sellers”), and RESACA EXPLOITATION, LP, a Delaware limited partnership (“Buyer”).

 

1.                                       Sale and Purchase of the
Properties. Subject to the terms
and conditions and for the consideration herein set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Sellers agree to sell, assign, convey and deliver to Buyer, and
Buyer agrees to purchase and acquire from Sellers at Closing, effective as of
7:00 a.m. at the location of each of the Oil and Gas Properties on January 1,
2006 (such time and date is referred to herein as the “Effective Time”),
all of the interest of Sellers in and to the properties described in Sections
1.1.1 through 1.1.9 as such properties exist on the Effective Time, other than
the Excluded Assets (as defined below) (the “Properties”):

 

1.1                                 The Properties.

 

1.1.1                        Oil and Gas Properties. All properties described on Exhibit 1.1.1 - Part A whether the interest of Sellers in such
properties is fee interests, leasehold interests, licenses, concessions,
working interests, farmout rights, royalty, overriding royalty or other
non-working or carried interests, operating rights or other mineral rights of
every nature and any rights that arise by operation of law or otherwise in all
properties and lands pooled, unitized, communitized or consolidated with such
properties (the “Oil and Gas Properties”).

 

1.1.2                        Wells. All oil, condensate or natural gas wells,
water source wells, and water and other types of injection wells either located
on the Oil and Gas Properties or used or held for use in connection with the
Oil and Gas Properties under a Surface Contract, whether producing, operating,
shut-in, temporarily or permanently abandoned (the “Wells”).

 

1.1.3                        Severed Substances. All severed crude oil, natural gas,
casinghead gas, drip gasoline, natural gasoline, petroleum, natural gas
liquids, condensate, products, liquids and other hydrocarbons and other
minerals or materials of every kind and description produced from the Oil and
Gas Properties and either (a) in storage tanks on the Effective Time or (b) sold
on or after the Effective Time (the “Substances”).

 

1.1.4                        Surface Contracts. All leases, easements, privileges,
right-of-way agreements, licenses or other agreements relating to the use or
ownership of surface and subsurface properties and structures that are used or
held for use in connection with the exploration, production or development of
Substances from the Oil and Gas Properties, including the lease arrangements
for the office facility and pipe yard located in Odessa, Texas and the other
interests described on Exhibit 1.1.4
(the “Surface Contracts”).

 

1

 

1.1.5                        Equipment. All equipment, furniture, computers,
fixtures, vehicles, physical facilities or interests therein (including but not
limited to gathering lines, pipelines, compressors and gas plants) of every
type and description to the extent that the same are used or held for use in
connection with the ownership or operation of the Properties and are located on
the Oil and Gas Properties or on any surface covered by a Surface Contract,
including, without limitation, laptop computers used by any Seller’s employees
or independent contractors based in Odessa, Texas (the “Equipment”).

 

1.1.6                        Information and Data. All abstracts, title opinions, title
reports, title policies, lease and land files, surveys, analyses, compilations,
correspondence, filings with and reports to regulatory agencies, other
documents and instruments to the extent they are directly related to the Oil
and Gas Properties and the transfer thereof is not prohibited by any existing
contractual obligations, including geological, geophysical, engineering,
exploration, and production data that are in the possession of any Seller, or
independent contractors of Sellers, and relate to the Properties (the “Data”).

 

1.1.7                        Contracts. All contracts and arrangements that directly
relate to the Properties and the production, storage, treatment,
transportation, processing, purchase, sale, disposal or other disposition of
Substances therefrom and any and all amendments, ratifications or extensions of
the foregoing, to the extent that any of the foregoing relate to or are in
effect during any periods (unless and to the extent pertaining to an obligation
retained by Sellers hereunder) (the “Contracts”), all rights to make claims, during
any periods on or after the Effective Time, under purchase and sale agreements
pursuant to which any Seller acquired its interests in any of the Oil and Gas
Properties, and all rights to make claims and receive proceeds under any
insurance policy held by or on behalf of any Seller in connection with the
Properties for any claim that arises from the Effective Time through the
Closing Date in connection with the Properties.

 

1.1.8                        Permits. All franchises, licenses, permits, approvals,
consents, certificates and other authorizations and other rights granted by
governmental authorities and all certificates of convenience or necessity,
immunities, privileges, grants and other rights, that relate to the Properties
or the ownership or operation of any thereof (the “Permits”),
including, without limitation, the Permits described on Exhibit 1.1.8
hereto.

 

1.1.9                        Payment Rights. All (a) accounts, instruments and
general intangibles (as such terms are defined in the Uniform Commercial Code
of the jurisdiction in which the Properties are located) attributable to the
Properties with respect to any period of time after the Effective Time; and (b) liens
and security interests in favor of any Seller, whether choate or inchoate,
under any law, rule or regulation or under any of the Contracts (i) arising
from the ownership, operation or sale or other disposition on or after the
Effective Time of any of the Properties or (ii) arising in favor of SDG as
the operator of the Oil and Gas Properties.

 

1.2                                 Excluded Assets. As used herein, “Excluded Assets”
means (1) all trade credits and all accounts, instruments and general
intangibles (as such terms are defined in the Texas Uniform Commercial Code)
attributable to the Properties with respect to any period of time prior

 

2

 

to
the Effective Time; (2) all claims and causes of action of any Seller
(unless pertaining to an obligation assumed by Buyer hereunder) (i) arising
from acts, omissions or events, or damage to or destruction of property, occurring
prior to the Effective Time, (ii) arising under or with respect to any of
the Contracts that are attributable to periods of time prior to the Effective
Time (including claims for adjustments or refunds), or (iii) with respect
to any of the Excluded Assets; (3) all rights and interests of any Seller
(unless pertaining to an obligation assumed by Buyer hereunder) (i) under
any policy or agreement of insurance or indemnity, (ii) under any bond, or
(iii) to any insurance or condemnation proceeds or awards arising, in each
case, from acts, omissions or events, or damage to or destruction of property,
occurring prior to the Effective Time; (4) all Substances produced and
sold from the Oil and Gas Properties during any period prior to the Effective
Time, together with all proceeds from or of such Substances; (5) claims of
any Seller for refunds of or loss carry forwards with respect to (i) production
or any other taxes attributable to any period prior to the Effective Time, (ii) income
or franchise taxes, or (iii) any taxes attributable to the Excluded
Assets; (6) all amounts due or payable to any Seller as adjustments to
insurance premiums related to the Properties with respect to any period prior
to the Effective Time; (7) all proceeds, income or revenues (and any
security or other deposits made) attributable to (i) the Properties for
any period prior to the Effective Time, or (ii) any Excluded Assets; (8) all
furniture, equipment, personal computers and associated peripherals and all
radio and telephone equipment owned by Sellers and located in Montrose,
Colorado, New York, New York, or Austin, Texas; (9) any Seller’s
proprietary computer software, patents, trade secrets, copyrights, names,
trademarks, logos and other intellectual property; (10) all of any Seller’s
interpretations of geological and geophysical data; (11) all documents and
instruments of any Seller that may be protected by an attorney-client
privilege; (12) data that cannot be disclosed or assigned to Buyer as a result
of confidentiality arrangements under agreements with persons unaffiliated with
any Seller; (13) all audit rights arising under any of the Contracts or
otherwise with respect to any period prior to the Effective Time or to any of
the Excluded Assets; (14) any Seller’s financial and accounting information
other than any financial and accounting records delivered to Buyer in
connection with Buyer’s due diligence investigation of the Properties; and (15)
all (i) agreements and correspondence between any Seller and Petrie Parkman &
Co. (the “Advisor”)  relating to the transactions contemplated in
this Agreement, (ii) lists of prospective purchasers for such transactions
compiled by any Seller or the Advisor, (iii) bids submitted by other
prospective purchasers of the Properties, (iv) analyses by any Seller or
the Advisor of any bids submitted by any prospective purchaser, (v) correspondence
between or among any Seller or Advisor, or either of their respective
representatives, and any prospective purchaser other than Buyer, (vi) correspondence
between any Seller or Advisor or any of their respective representatives with
respect to any of the bids, the prospective purchasers, the engagement or
activities of the Advisor or the transactions contemplated in this Agreement
and (vii) the Permian Basin Divestiture Executive Presentation, Fourth
Quarter 2005, prepared by the Advisor, and circulated to prospective
purchasers.

 

2.                                       Purchase Price.

 

2.1                                 Basic Amount. The purchase price for the Properties,
subject to adjustment as provided in Section 2.3, shall be $87,500,000
(the “Purchase Price”).
Sellers shall have the full and sole responsibility for allocating and
distributing the Purchase Price among themselves, and Buyer has no obligation
or other responsibility with respect to such allocation and distribution.

 

3

 

The
Purchase Price as adjusted pursuant to Section 2.3 is referred to in this
Agreement as the “Adjusted Purchase Price.”

 

2.2                                 Performance Deposit. Within one Business Day of the date the Performance
Deposit Escrow Account (as defined below) is opened, Buyer, Sellers, and
JPMorgan Chase Bank (the “Performance Deposit Escrow Agent”)
shall enter into the Performance Deposit Escrow Agreement (the “Escrow
Agreement”) and Buyer shall tender to the Performance
Deposit Escrow Agent a cash performance deposit in the amount of $1,000,000
(together with any interest or other earnings thereon, the “Performance Deposit”). The
Performance Deposit shall be deposited by the Performance Deposit Escrow Agent
in an interest bearing account (the “Performance
Deposit Escrow Account”). If the Closing occurs, the
Performance Deposit and any interest earned thereon shall be paid to Sellers by
the Performance Deposit Escrow Agent and applied to the Purchase Price. The
Performance Deposit and any interest earned thereon shall be returned to Buyer
only in accordance with Section 11.2.

 

2.3                                 Adjustments to Purchase
Price. The Purchase Price shall be adjusted as provided
in this Section 2.3.

 

2.3.1                        The Purchase Price shall be increased by the following amounts (without
duplication):

 

(a)                                  An amount equal to the costs and expenses
that are (i) attributable to the Properties for the period from the
Effective Time to the Closing Date (the “Closing Period”)
and, (ii) paid by Sellers (whether before or after the Effective Time),
including, without limitation, bond and insurance premiums paid by or on behalf
of any Seller attributable to coverage during the Closing Period.

 

(b)                                 An amount equal to the collective interest of
Sellers in the quantity of Substances produced from the Oil and Gas Properties
in the tanks above the pipeline connection on the Effective Time multiplied by (i) with
respect to oil, the posted price for such oil on the Effective Time and (ii) with
respect to liquids, the posted price for such liquids, net of all applicable
taxes.

 

(c)                                  An amount equal to $3000 per day from the
Effective Time to the Closing Date in lieu of any indirect overhead charges.

 

(d)                                 The amount of all taxes prorated to Buyer in
accordance with Section 13.2.

 

(e)                                  In the event the Closing Date is after April 1,
2006, $10,000 per day for each day between April 1, 2006 and the Closing
Date.

 

2.3.2                        The Purchase Price shall be decreased by the
following amounts (without duplication):

 

(a)                                  An amount equal to the proceeds received by
any Seller for the sale during the Closing Period of Substances, net of all
applicable taxes not reimbursed to any Seller by a purchaser of Substances.

 

4

 

(b)                                 An amount equal to (i) the proceeds
received by any Seller for the disposition during the Closing Period of the
Properties (other than Substances); (ii) the value of the Properties
retained by any Seller because of a Casualty Loss affecting such Properties or,
in the alternative, the insurance proceeds received by such Seller for such
loss, all as provided in Section 10; and (iii) all other proceeds
received by any Seller from whatever source derived that relate to the
Properties and are attributable to periods on or after the Effective Time.

 

(c)                                  The amount of all adjustments determined in
accordance with Annex I for title adjustments for the Title Properties
and Annex II for
Environmental Defect Values or certain Allocated Values, as applicable.

 

(d)                                 The amount of all taxes prorated to Sellers
in accordance with Section13.2.

 

(e)                                  $30,000 which shall constitute consideration
for Buyer’s assumption of those liabilities set forth in Section 12.1.2.

 

2.4                                 Closing Statement. SDG, on behalf of the Sellers, shall deliver
to Buyer, not less than five (5) Business Days before the Closing Date, a
statement (the “Closing Statement”)  setting
forth the adjustments to the Purchase Price provided in Section 2.3, using
estimates where actual amounts are not known at the Closing and using Title
Defect Amounts and Environmental Defect Values that have been agreed by Sellers
and Buyer prior to such date or, to the extent that arbitration with respect to
such items has been completed prior to the Closing Date, determined by
arbitration prior to such date. The Closing Statement shall be prepared in
accordance with customary accounting principles used in the oil and gas
industry.

 

3.                                       Representations and
Warranties of Sellers. Sellers
represent and warrant to Buyer as follows:

 

3.1                                 Organization. SDG is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Texas. IOG
is a corporation, duly incorporated, validly existing, and is in good standing
under the laws of the State of New Mexico. Arkios is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Texas.

 

3.2                                 Authority and Authorization. Each Seller has full power and authority to
carry on its business as presently conducted, to enter into this Agreement and
to perform its obligations under this Agreement. The execution and delivery of
this Agreement has been, and the performance of this Agreement and the
transactions contemplated hereby shall be at the time required to be performed
hereunder, duly and validly authorized by all requisite action on the part of
such Seller.

 

3.3                                 Enforceability. This Agreement has been duly executed and
delivered on behalf of each Seller and constitutes the legal, valid and binding
obligation of each Seller enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, reorganization or
moratorium statutes. or other similar laws affecting the rights of creditors
generally or equitable principles (collectively. “Equitable Limitations”).
At the Closing all

 

5

 

documents
and instruments required hereunder to be executed and delivered by it shall be
duly executed and delivered and shall constitute the legal, valid and binding
obligations of each Seller enforceable in accordance with their terms, except
as enforceability may be limited by Equitable Limitations.

 

3.4                                 Conflicts. The execution and delivery of this Agreement
by each Seller does not, and the consummation of the transactions contemplated
by this Agreement shall not, (a) violate or be in conflict with, or
require the consent of any person or entity under, any provision of such
Seller’s organizational or governing documents, (b) conflict with, result
in a breach of, constitute a default (or an event that with the lapse of time
or notice, or both would constitute a default) under any agreement or
instrument to which such Seller is a party or by which any of the Properties
owned by such Seller or such Seller is bound, (c) violate any provision of
or require any consent, authorization or approval under any judgment, decree,
judicial or administrative order, award, writ, injunction, statute, rule or
regulation applicable to such Seller, or (d) result in the creation of any
lien, charge or encumbrance on any of the Properties owned by such Seller.

 

3.5                                 Title to Properties other
than Title Properties. Sellers
have title to the Properties (other than the Title Properties) free of all
Liens other than: (i) the Permitted Encumbrances; and (ii) with
respect to that portion of such Properties owned by SDG and that portion of
such Properties owned by IOG, the Lender Encumbrances. “Title Properties”  is defined in Annex I.

 

3.6                                 Contracts.  Exhibit 3.6 sets forth a list of the following contracts, agreements, and
commitments to which any of the Properties are bound: (a) any agreement
with one or more affiliates of any Seller, (b) any agreement or contract
for the sale, exchange or other disposition of Substances produced from the Oil
and Gas Properties that requires more than 60 days prior written notice to
cancel; (c) any agreement to sell, lease, farmout or otherwise dispose of
any of any Seller’s interests in any of the Properties other than conventional
rights of reassignment; (d) any tax partnership agreement; (e) any
operating agreement to which any Seller’s interests in any of the Oil and Gas
Properties is subject; (f) any contract that requires any Seller to expend
more than $10,000 in any year in connection with the Properties; (g) any
contract that contains an indemnity with respect to environmental and health
and safety matters; (h) any option to purchase the Substances produced
from the Oil and Gas Properties; (i) any lease, title retention agreement,
or security interest affecting any of the Equipment; and (j) any agreement
or other contractual arrangement material to the ownership and/or operation of
the Properties.

 

3.7                                 Litigation and Claims. (a) No claim, demand, filing,
investigation, administrative proceeding, action, suit or other legal
proceeding is pending or, to the best of its knowledge, threatened, with
respect to the Properties or the ownership or operation of any thereof, other
than proceedings relating to the oil and gas industry generally and as to which
no Seller is a named party except as set forth on Exhibit 3.7; (b) no Seller is
aware of any facts, conditions or circumstances in connection with, related to
or associated with the Properties or the ownership or operation of any thereof
that could reasonably be expected to give rise to any such claim, demand,
filing, investigation, administrative proceeding, action, suit or other legal
proceeding; and (c) no notice from any governmental authority or any other
person (including employees) has been received by any Seller; (i) claiming
any violation or repudiation of the Oil and Gas Properties or any violation of
any law, rule. regulation, ordinance, order, decision or

 

6

 

decree
of any governmental authority (including, without limitation, any such law,
rule, regulation, ordinance, order, decision or decree concerning the
conservation of natural resources); or (ii) requiring, or calling
attention to the need for, any work, repairs, construction, alterations,
installations, remediation, response, removal or abatement actions,
restoration, investigation or monitoring of, on, in, under, in connection with
or related to the Properties or the ownership or operation of any thereof.

 

3.8                                 Approvals and Preferential
Rights.  Exhibit
3.8 contains a complete and accurate
list of all approvals, consents, filings and notifications required to be
obtained, made or given by any Seller for the assignment or transfer of the
Properties (including, without limitation, the Permits) to Buyer and
preferential purchase rights affecting any of the Properties.

 

3.9                                 Compliance with Law and
Permits. (a) The
Properties have been and currently are operated, and it and the Properties are,
in compliance with the provisions and requirements of all laws, rules,
regulations, ordinances, orders, decisions and decrees of all governmental
authorities having jurisdiction with respect to the Properties or the ownership
or operation of any thereof; (b) all necessary governmental permits,
licenses, approvals, consents, certificates and other authorizations with
regard to the ownership or operation of the Properties have been obtained and
maintained in effect and no violations exist in respect of such permits,
licenses, approvals, consents, certificates or authorizations; and (c) it
is not aware of any facts, conditions or circumstances in connection with,
related to or associated with the Properties or the ownership or operation of
any thereof that could reasonably be expected to give rise to any claim or
assertion that any Seller, the Properties or the ownership or operation of any
thereof is not in compliance with any applicable law, rule, regulation,
ordinance, order, decision or decree of any governmental authority or with any
term or conditions of any applicable permit, license, approval, consent,
certificate or other authorization.

 

3.10                           Status of Contracts. All of the Contracts, Surface Contracts and
other obligations of each Seller that relate to the Properties (a) are in
full force and effect and (b) neither any Seller nor, to the knowledge of
any Seller, any other party to the Contracts or Surface Contracts (i) is
in breach of or default, or with the lapse of time or the giving of notice, or
both, would be in breach or default, with respect to any of such other party’s
obligations thereunder to the extent that such breaches or defaults have an
adverse impact on any of the Properties or (ii) has given or threatened to
give notice of any default under or inquiry into any possible default under, or
action to alter, terminate, rescind or procure a judicial reformation of any
Contract or Surface Contract.

 

3.11                           Production Burdens, Taxes,
Expenses and Revenues. All
rentals, royalties, excess royalty, overriding royalty interests and other
payments due under or with respect to the Oil and Gas Properties (“Production
Burdens”) have been properly and timely paid and no
royalties are currently being held in suspense. All ad valorem, property,
production, severance and other taxes based on or measured by the ownership of
the Properties or the production of Substances from the Oil and Gas Properties
have been properly and timely paid. All
expenses payable under the terms of the Contracts have been properly and timely
paid except for such expenses as are being currently paid prior to delinquency
in the ordinary course of business. All of the proceeds from the sale of
Substances are being properly and timely paid to each Seller by

 

7

 

the
purchasers of production without suspension or indemnity other than standard
division order indemnities.

 

3.12                           Production Balances and
Penalties; Other Production Sales Matters. (a) None of the purchasers under any
production sales contracts are entitled to “make-up” or otherwise receive
deliveries of Substances without paying at the time of such deliveries the full
contract price therefor; (b) none of the purchasers under any production
sales contracts has exercised any economic out provision; (c) none of the
purchasers under any production sales contracts has curtailed its takes of
natural gas in violation of such contracts; (d) none of the purchasers
under any production sales contracts has given notice that it desires to amend
the production sales contracts with respect to price or quantity of deliveries;
(e) no person is entitled to receive any portion of the interest of any
Seller in any Substances or to receive cash or other payments to “balance” any
disproportionate allocation of Substances under any operating agreement, gas
balancing and storage agreement, gas processing or dehydration agreement, gas
transportation or other similar agreements; and (f) no Seller is obligated
to pay any penalties or other payments under any gas transportation or other
agreement as a result of the delivery of quantities of gas from the Oil and Gas
Properties in excess of the contract requirements.

 

3.13                           Well and Equipment Status. As of the Effective Time, there were no
Wells or Equipment located on the Properties that (a) any Seller was
obligated by law or contract to plug and abandon; (b) any Seller would be
obligated by law or contract to plug and abandon with the lapse of time or
notice or both because the Well or Equipment is not capable of producing
Substances in commercial quantities or otherwise being used in normal operations;
(c) are subject to exceptions to a requirement to plug and abandon issued
by a regulatory authority having jurisdiction over the Properties; or (d) to
Sellers’ best knowledge, have been plugged and abandoned but have not been
plugged in accordance in all material respects with all applicable requirements
of each regulatory authority having jurisdiction over the Properties.

 

3.14                           Equipment. The Equipment is in good repair, working
order and operating condition and is adequate for the operation of the Oil and
Gas Properties as operated on the Effective Time.

 

3.15                           Payout Balances.  Exhibit 3.15 contains a complete and accurate list of the
status of any “payout” balance, as of the dates shown in Exhibit 3.15, for each Well that is subject to a reversion
or other adjustment at some level of cost recovery or payout.

 

3.16                           Absence of Certain Changes. Since October 1, 2005; (a) there
has not been any material reduction in the rate of production of Substances
from any of the Oil and Gas Properties other than changes (i) in the
ordinary course of operation, (ii) that result from depletion in the
ordinary course of operation and (iii) that result from variances in
markets for Substances; and (b) none of the Properties has suffered any
material destruction, damage or loss, or any material Casualty Loss, whether or
not covered by insurance.

 

4.                                       Representations and
Warranties of Buyer. Buyer
represents and warrants to Sellers that:

 

8

 

4.1                                 Organization. Buyer is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware.

 

4.2                                 Authorization and Authority. The execution and delivery of this Agreement
have been and the performance of this Agreement and the transactions contemplated
hereby shall be at the time required to be performed hereunder, duly and
validly authorized by all requisite action on the part of Buyer. Buyer has full
power and authority to carry on its business as presently conducted, to enter
into this Agreement, to purchase the Properties on the terms described in this
Agreement and to perform its other obligations under this Agreement.

 

4.3                                 Enforceability. This Agreement has been duly executed and
delivered on behalf of Buyer, and constitutes a legal, valid and binding
obligation of Buyer enforceable in accordance with its terms, except as
enforceability may be limited by Equitable Limitations. At the Closing all
documents required hereunder to be executed and delivered by Buyer shall be
duly executed and delivered and shall constitute legal, valid and binding
obligations of Buyer enforceable in accordance with their terms, except as
enforceability may be limited by Equitable Limitations.

 

4.4                                 Conflicts. The execution and delivery of this Agreement
by Buyer does not, and the consummation of the transactions contemplated by
this Agreement shall not, (a) violate or be in conflict with, or require
the consent of any person or entity under, any provision of Buyer’s governing
documents, (b) conflict with, result in a breach of, constitute a default
(or an event that with the lapse of time or notice, or both, would constitute a
default) under any agreement or instrument to which Buyer is a party or is
bound, or (c) violate any provision of or require any consent, authorization
or approval under any judgment, decree, judicial or administrative order,
award, writ, injunction, statute, rule or regulation applicable to Buyer.

 

4.5                                 Reliance. Prior to executing this Agreement, Buyer has
been afforded an opportunity: (a) to examine the Properties and such
materials as it has requested to be provided to it by any Seller; (b) to
discuss with representatives of each Seller such materials and the nature and
operation of the Properties; and (c) to investigate the condition, including
subsurface condition, of the Oil and Gas Properties and Surface Contracts and
the condition of the Equipment. In entering into this Agreement, Buyer has
relied solely on the express representations and covenants of Sellers in this
Agreement, its independent investigation of, and its judgment with respect to,
the Equipment and the other Properties and the advice of its own legal, tax,
economic, environmental, engineering, geological and geophysical advisors and
not on any comments or statements of any representatives of, or consultants or
advisors engaged by, any Seller or the Advisor.

 

4.6                                 Qualified Leaseholder. At and after Closing, Buyer expects to
satisfy and shall satisfy the area-wide bonding and any other bonding
requirements of all governmental authorities having jurisdiction over the
Properties. Buyer is and, after the Closing, is expected to continue to be,
otherwise qualified to own the Properties. The consummation of the transactions
contemplated hereby will not cause Buyer to be disqualified to be an owner of
the Oil and Gas Properties.

 

9

 

4.7                                 Qualified Purchaser. Buyer is an experienced and knowledgeable
investor and operator in the oil and gas business. Buyer is acquiring the
Properties for its own account and not with a view to, or for offer of resale
in connection with, a distribution thereof, within the meaning of the
Securities Act of 1933, 15 U.S.C. § 77a et seq., and any other rules,
regulations, and laws pertaining to the distribution of securities.

 

4.8                                 Available Funds. Buyer has arranged to and shall have
available by the Closing Date sufficient funds to enable the payment to
Sellers, by wire transfer, of the Adjusted Purchase Price in accordance with
this Agreement and to otherwise perform Buyer’s obligations under this
Agreement.

 

5.                                       Covenants of Sellers.

 

5.1                                 Conduct of Business Pending
Closing. Each Seller
covenants that from the date hereof to the Closing Date, except (a) as
provided herein, (b) as required by any obligation, agreement, lease,
contract, or instrument referred to on any Exhibit hereto, or (c) as
otherwise consented to in writing by Buyer, such Seller will:

 

5.1.1                   Not (a) operate or in any manner deal with, incur obligations with
respect to, or undertake any transactions relating to, the Properties other
than transactions (i) in such Seller’s normal, usual and customary manner,
(ii) of a nature and in an amount consistent with prior practice, and (iii) in
the ordinary and regular course of business of owning and operating the
Properties; (b) dispose of, encumber or relinquish any of the Properties,
(other than relinquishments resulting from the expiration of leases that such
Seller has no right or option to renew); or (c) waive, compromise or
settle any right or claim that would adversely affect the ownership, operation
or value of any of the Properties after the Effective Time.

 

5.1.2                   Use commercially reasonable efforts to preserve relationships with all
third parties having business dealings with respect to the Properties.

 

5.1.3                        Make or give all notifications, filings,
consents or approvals, from, to or with all governmental authorities, and take
all other actions reasonably requested by Buyer, necessary for, and cooperate
with Buyer in obtaining, the issuance, assignment or transfer, as the case may
be, by each such authority of such Permits (including Environmental Permits) as
may be necessary for Buyer to own and operate the Properties following the
consummation of the transactions contemplated in this Agreement.

 

5.1.4                   Notify Buyer of the discovery by such Seller that any representation or
warranty of Sellers contained in this Agreement is or becomes untrue or will be
untrue on the Closing Date.

 

5.1.5                   Maintain in effect insurance providing the same type coverage, in the
same amounts with the same deductibles as the insurance maintained in effect by
such Seller or its affiliates on the Effective Time.

 

5.2                                    Access. Sellers shall afford to Buyer and its
authorized representatives from the date hereof until the Closing Date, during
normal business hours. reasonable access to the

 

10

 

Properties
and to such Seller’s title, contract, corporate and legal materials and
operating data and information available as of the date hereof and that becomes
available to Sellers at any time prior to the Closing Date, other than any
documents that are protected by an attorney-client or other privilege.

 

5.3                                 Closing Conditions. Each Seller shall cause all the
representations and warranties of such Seller contained in this Agreement to be
true and correct on and as of the Closing Date. To the extent the conditions
precedent to the obligations of Buyer are within the control of Sellers, each
Seller shall cause such conditions to be satisfied on or prior to the Closing
Date and, to the extent the conditions precedent to the obligations of Buyer
are not within the control of Sellers, each Seller shall use commercially
reasonable efforts to cause such conditions to be satisfied on or prior to the
Closing Date.

 

5.4                                 Title Review. Sellers agree that Buyer may conduct a review
of title information (“Title Review”)
related to the Properties prior to the Closing as more fully described in Annex
I attached hereto.

 

5.5                                 Environmental Review. Sellers agree that Buyer may conduct a review
of environmental information (“Environmental Review”) related to the Properties prior to the
Closing, including testing as deemed necessary by Buyer, all as and to the
extent more fully described in Annex II attached hereto.

 

5.6                                 Consents and Approvals. After Closing, Sellers shall use
commercially reasonable efforts to obtain any consents and approvals listed on Exhibit 3.8
that are not obtained prior to Closing.

 

6.                                  Covenants of Buyer.

 

6.1                                 Pre-Closing Covenants. Buyer shall cause all the representations
and warranties made by Buyer and contained in this Agreement to be true and
correct on and as of the Closing Date. To the extent the conditions precedent
to the obligations of Sellers are within the control of Buyer, Buyer shall cause
such conditions to be satisfied on or prior to the Closing Date and, to the
extent the conditions precedent to the obligations of Sellers are not within
the control of Buyer, Buyer shall use commercially reasonable efforts to cause
such conditions to be satisfied on or prior to the Closing Date.

 

6.2                                 Post-Closing Covenants. During the period after Closing, Buyer
shall: (a) cooperate in good faith with Sellers to collect any accounts payable
to Sellers in connection with joint account billing by Sellers for costs and
expenses incurred during the period prior to the Closing Date; and (b) promptly
remit to Sellers any payment of such costs and expenses received by Buyer.

 

7.                                  Conditions Precedent to the
Obligations of Buyer.  The  obligations of Buyer to be performed at
Closing are subject to the fulfillment, before or at Closing, of each of the
following conditions:

 

7.l                                    Representations and
Warranties. The representations
and warranties by Sellers set forth in this Agreement were true and correct in
all material respects on the date of this

 

11

 

Agreement
and are true and correct in all material respects as of the Closing Date except
for changes therein specifically contemplated by this Agreement
and except to the extent the failure of any such representations and warranties
to be true and correct would not reasonably be expected to cause a material
adverse effect on Sellers or the Properties.

 

7.2                                 Consents. All consents and approvals required to be obtained, and all filings
and notifications required to be made or given, for the assignment of the
Properties to Buyer shall have been obtained by Sellers (other than consents
and approvals customarily obtained after Closing), and all preferential
purchase rights, if any, arising in connection with the assignment of the Title
Properties to Buyer shall have been waived or shall have expired.

 

7.3                                 Compliance. Sellers shall have performed and complied in
all material respects with each of the covenants and conditions required by
this Agreement of which performance or compliance is required prior to or at
the Closing.

 

7.4                                 No Pending Suits. On the Closing Date, no suit, action or
other proceeding shall be pending or threatened before any court or
governmental agency in which it is sought to restrain or prohibit the
performance of or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.

 

7.5                                 Purchase Price Adjustments. The aggregate of all adjustments to the
Purchase Price pursuant to Annex I, Annex II and Section 10 and all adjustments
asserted by Buyer in good faith pursuant to Annex I, Annex II and Section 10 is less than or equal to
10% of the Purchase Price.

 

7.6                                 Lender Encumbrances. Sellers shall be in a position to deliver,
against payment by Buyer of the Adjusted Purchase Price at the Closing: (a) evidence
that Items 1 through 4 on Exhibit 3.6 attached hereto will not bind the Properties after Closing; and (b) recordable
instruments adequate to fully release and, as applicable, reconvey, the Lender
Encumbrances such that Buyer’s title to the Properties shall be free and clear
of the Lender Encumbrances.

 

7.7                                 Cooper Jal Operations. At least two working interest owners other
than SDG and IOG shall have voted for Buyer, or its designee, to be appointed
as Unit Operator of the Cooper Jal Unit subject to the closing of this
transaction.

 

8.                                       Conditions Precedent to the
Obligations of Sellers. The
obligations of Sellers to be performed at Closing are subject to the
fulfillment, before or at Closing, of each of the following conditions:

 

8.1                                 Representations and
Warranties. The representations
and warranties by Buyer set forth in this Agreement were true and correct in
all material respects on the date of this Agreement and are true and
correct in all material respects as of the Closing Date except for changes
therein specifically contemplated by this Agreement.

 

8.2                                 Compliance. Buyer shall have performed and complied in
all material respects with each of the covenants and conditions required by
this Agreement of which performance or compliance is required prior to or at
the Closing.

 

12

 

8.3                                 No Pending Suits. At the Closing Date, no suit, action or
other proceeding shall be pending or threatened before any court or
governmental agency in which it is sought to restrain or prohibit the
performance of or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.

 

8.4                                 Purchase Price Adjustments. The aggregate of all adjustments to the
Purchase Price pursuant to Annex I, Annex II and Section 10
and all adjustments asserted by Buyer in good faith pursuant to Annex I,
Annex II and Section 10 is less than or equal to 10% of the
Purchase Price.

 

9.                                       Closing.

 

9.1                                 The Closing. The assignment and purchase of the
Properties pursuant to this Agreement shall be consummated (the “Closing”)
in Houston, Texas, at the offices of Bracewell & Giuliani LLP before
5:00 p.m. on April 21, 2006 (the “Closing Date”).

 

9.2                                 Documents to be Delivered at
Closing.

 

9.2.1                        At the Closing, Sellers shall deliver to
Buyer the following instruments, dated the Closing Date and effective as of the
Effective Time, where appropriate, properly executed by authorized officers of
Sellers (except as otherwise specifically provided below) and, where
appropriate, acknowledged:

 

(a)                                  Counterparts of an Assignment and Bill of
Sale substantially in the form of Annex V, executed by each of SDG and
IOG, sufficient to convey to Buyer the Oil and Gas Properties described on Exhibit 1.1.1
- Part A as “Cooper Jal” and
the other Properties related or appurtenant thereto;

 

(b)                                 Counterparts of an Assignment and Bill of
Sale substantially in the form of Annex V, executed by Arkios,
sufficient to convey to Buyer the Oil and Gas Properties described on Exhibit 1.1.1
- Part A as “Kayser”
and the other Properties related or appurtenant thereto;

 

(c)                                  Counterparts of an Assignment and Bill of
Sale substantially in the form of Annex V, executed by SDG, sufficient
to convey to Buyer the Properties (other than the Properties described in
clauses (a), (b), and (d) of this Section 9.2.1);

 

(d)                                 Counterparts of a Conveyance and Bill of
Sale, executed by SDG, substantially in the form of Annex VI sufficient
to convey to Buyer the Three Span Real Property. As used herein, the “Three Span Real Property” means the
property designated as such on Exhibit A.

 

(e)                                  Such other instruments as are necessary to
effectuate the conveyance of the Properties to Buyer:

 

(f)                                    Letters in lieu of division orders addressed
to each purchaser of the Substances:

 

13

 

(g)                                           Any forms promulgated by the appropriate
governmental authority and completed by Buyer designating Buyer as the operator
of the Wells included in the Properties that any Seller is required to execute
by the governmental authority and any forms promulgated by the appropriate
governmental authority and completed by Buyer designating Buyer as the operator
of the Equipment included in the Properties that any Seller is required to
execute by the governmental authority;

 

(h)                                           A certificate in the form of Annex III — A
executed by SDG;

 

(i)                                               A certificate in the form of Annex III — B
executed by 10G; and

 

(j)                                               A certificate in the form of Annex III — C
executed by Arkios.

 

9.2.2                        At the Closing, Buyer shall deliver to
Sellers the following instruments. dated the Closing Date and effective as of
the Effective Time, where appropriate, properly executed by authorized officers
of Buyer and, where appropriate acknowledged:

 

(a)                                            Counterparts of the Assignments and Bill of
Sale delivered by Sellers pursuant to Sections 9.2.1(a), 9.2.1(b),
and 9.2.1(c);

 

(b)                                           A certificate in the form of Annex IV; and

 

(c)                                            Such other instruments as are necessary to
effectuate the transactions contemplated in this Agreement.

 

9.2.3                        At the Closing, Sellers shall deliver to
Buyer recordable instruments adequate to fully release and, as applicable,
reconvey, the Lender Encumbrances such that Buyer’s title to the Properties
shall be free and clear of the Lender Encumbrances (following payment by Buyer
of the Purchase Price as provided in Section 9.4).

 

9.3                                 Possession. At the Closing, Sellers shall deliver to
Buyer at Buyer’s offices all of the Data and shall deliver to Buyer possession
of the other Properties.

 

9.4                                 Payment of Purchase Price. At the Closing, against delivery of the
documents and materials described in Section 9.2.1, Buyer shall pay
to Sellers the estimated Adjusted Purchase Price specified in the Closing
Statement by wire transfer of immediately available funds; provided that such
payment to Sellers shall be net of the Indemnification Escrow Amount (as
defined below), which Buyer shall pay into the Indemnification Escrow Account
(as defined below) by wire transfer of immediately available funds.

 

10.                                 Casualty Loss. As used herein, the term “Casualty
Loss” shall mean, with respect to all or any major
portion of any of the Properties, any destruction by fire, blowout, storm or
other casualty or any taking, or pending or threatened taking, in condemnation
or expropriation or under the right of eminent domain of any of the Properties
or portion thereof, in each case prior to Closing. Each Seller shall promptly
notify Buyer of any Casualty Loss of which such Seller becomes aware. If any
Casualty Loss occurs during the Closing Period, Buyer may elect to (a) cause
such Seller to retain the Properties affected by the Casualty Loss and reduce
the Purchase

 

14

 

Price
by an amount determined before the Closing by the Midland office of Johnson,
Miller and Company (or, if such firm is unable or unwilling to serve, another
independent public accounting firm mutually acceptable to Sellers and Buyer),
in which case Sellers shall retain all insurance proceeds relating to the
Casualty Loss, or (b) require Sellers to (i) transfer to Buyer at
Closing such Property notwithstanding such Casualty Loss; (ii) transfer to
Buyer full rights to receive all unpaid insurance proceeds, claims, awards and
other payments arising out of such Casualty Loss; and (iii) pay to Buyer
all sums paid to Sellers as insurance proceeds, awards or other payments
arising out of such Casualty Loss.

 

11.                            Termination.

 

11.1                           Termination Events. If (a) the Closing has not occurred
prior to April 21, 2006, (b) any condition to Buyer’s obligations set
forth in Section 7 hereof is not satisfied and such condition is not
waived by Buyer at or prior to the Closing, or (c) any condition to
Sellers’ obligations set forth in Section 8 hereof is not satisfied and
such condition is not waived by Sellers at or prior to the Closing, Buyer or
Sellers, as the case may be, may terminate this Agreement at their or its
option, on or prior to the Closing Date, by notice to the other party;
provided, however, that neither Buyer nor Sellers may terminate this Agreement
pursuant to Section 11.1(a) if at such time the party seeking to
terminate this Agreement is in default hereunder.

 

11.2                           Effect of Termination.

 

11.2.1                  If  Buyer or Sellers terminate this Agreement
pursuant to Section 11.1(a), then
Buyer shall be entitled to the Performance Deposit and Buyer and Sellers
shall execute a notice directing the Performance Deposit Escrow Agent to
distribute the Performance Deposit to Buyer.

 

11.2.2                  If  Buyer lawfully terminates this Agreement
pursuant to Section 11.1(b) above or if Sellers terminate this
Agreement pursuant to Section 11.1(c) due to the obligations set forth
in Sections 8.3 or 8.4 not being satisfied, then  Buyer (a) shall be entitled to the Performance
Deposit, and Sellers shall execute a notice prepared by Buyer directing the
Performance Deposit Escrow Agent to distribute the Performance Deposit to Buyer
and (b) Buyer may seek such damages from Sellers as may be available at
law or in equity, including specific performance of Sellers’ obligations under
this Agreement (it being agreed by Buyer and Sellers that the Properties are
unique and that Buyer would not otherwise have an adequate remedy at law due to
the unique nature of the Properties).

 

11.2.3                  If  Sellers lawfully terminate this Agreement
pursuant to Section 11.1(c) above due to the obligations set
forth in Sections 8.1 or 8.2 not being satisfied, then  Sellers may elect to retain the Performance Deposit
as liquidated damages or cause the Performance Deposit to be returned to Buyer
and seek such damages and other remedies as may be available to Sellers at law
or in equity, including specific performance. Buyer acknowledges that the
extent of damages to Sellers occasioned by any breach or misrepresentation by
Buyer would be impossible or very difficult to ascertain and that the amount of
the Performance Deposit is a fair and reasonable estimate of such damages
under the circumstances.

 

15

 

12.                            Assumption by Buyer; Assumed
Obligations.

 

12.1.1                  At Closing, Buyer shall assume (a) the
obligation to (i) plug and abandon or remove and dispose of all wells,
platforms, structures, flow lines, pipelines, and the other equipment now or
hereafter located on the Oil and Gas Properties and Surface Contracts and (ii) cap
and bury all flow lines and other pipelines now or hereafter located on the Oil
and Gas Properties and Surface Contracts; (b) all obligations and
liabilities arising from or in connection with any imbalances relating to gas
production, pipeline, storage, processing or other imbalance attributable to
Substances produced from Oil and Gas Properties, after the Effective Time;
and (c), except for the remediation of the Ogallala aquifer underlying the SE/4
of Section 24, Township 24 South, Range 36 East, Lea County, New Mexico
(the “Cooper Jal Project”) all other costs, obligations and liabilities that
arise under the Oil and Gas Properties or Contracts or otherwise relate to the
Properties and, in each case, arise from or relate to events occurring after
the Effective Time. All such plugging, replugging, abandonment, removal, disposal,
and restoration operations shall be in compliance with applicable laws and
regulations and contracts, and shall be conducted in a good and workmanlike
manner.

 

12.1.2             With
respect to the matters disclosed on Exhibit 3.7, at Closing, Buyer shall
assume and shall be responsible for any liability arising as a result of the
operations of the Properties as described in the matters disclosed on Exhibit 3.7.
Buyer shall assume and conduct the defense and settlement of such claims.

 

12.1.3             As
used herein, the term “Assumed Obligations”
means the obligations and liabilities assumed by Buyer in Sections 12.1.1 and
12.1.2.

 

13.                            Production, Proceeds, Expenses and Taxes.

 

13.1                           Division of Ownership. After the Closing, all Substances produced
from the Oil and Gas Properties on or after the Effective Time and all
Substances in tanks on the Effective Time shall be owned by Buyer. All
Substances produced and sold from the Oil and Gas Properties prior to the—Effective Time shall be owned by Sellers. To the extent any Seller has
sold Substances produced on or after the Effective Time prior to the Closing
and the Purchase Price has not been adjusted pursuant to Section 2.3 or Section 14.1
for such proceeds, Sellers shall deliver any proceeds Sellers receive for such
Substances to Buyer promptly.

 

13.2                           Division of Expenses;
Royalties. All costs and
expenses incurred in connection with the Properties prior to the Effective Time
shall be borne by Sellers. All costs and expenses incurred after the Effective
Time, other than costs and expenses not assumed by Buyer under Section 12, shall be borne by Buyer. Notwithstanding the foregoing, Sellers shall
retain responsibility for, and shall timely pay and discharge, all royalty
payments related to the Properties as a result of any Production Burdens, to
the extent such payments related to production before the Effective Time (the “Royalties”) and shall disburse all Royalties related to production through
the last day of the month in which the Closing Date occurs. All real and
personal property and severance taxes for the Properties (collectively, the “Taxes”)
attributable to the period before the Effective Time shall be for the Sellers’
account and all Taxes attributable to the period after the Effective Time shall
be for the Buyer’s account.

 

16

 

14.                            Final Accounting.

 

14.1                           Settlement Statement. As soon as practical and, in any event, no
later than one hundred twenty (120) calendar days after the Closing Date, Buyer
shall prepare and deliver to Sellers a statement (the “Final Settlement Statement”) setting forth the adjustments to the
Purchase Price in accordance with Section 2.3. The Final Settlement
Statement shall be prepared in accordance with customary accounting principles
used in the oil and gas industry. The Final Settlement Statement shall reflect
all amounts shown on the Closing Statement and shall deduct all such amounts
from the amounts calculated under the Final Settlement Statement. Within thirty
calendar days after Sellers’ receipt of the Final Settlement Statement (but not
earlier than one hundred twenty (120) calendar days after the Closing Date),
Buyer and Sellers shall endeavor to agree on the final accounting.

 

14.2                      Arbitration of Final
Settlement. If Sellers and Buyer
cannot agree upon the Final Settlement Statement, the Midland office of the
firm of Johnson, Miller and Company is designated to act as an arbitrator and
to decide all points of disagreement with respect to the Final Settlement
Statement, such decision to be binding on all parties. If such firm is
unwilling or unable to serve in such capacity, Sellers and Buyer shall attempt
to, in good faith, designate another acceptable regionally-recognized
accounting firm as the sole arbitrator under this Section. If the parties are
unable to agree upon the designation of a person as substitute arbitrator, then
Sellers, on the one hand, or Buyer, on the other hand, or Sellers and Buyer
together, may in writing request the Judge of the United States District Court
for the Southern District of Texas senior in term of service to appoint the
substitute arbitrator. The arbitration shall be conducted under the Texas
General Arbitration Act and the rules of the American Arbitration
Association to the extent such rules do not conflict with the terms of
such Act and the terms hereof. The costs and expenses of the arbitrator,
whether the firm designated above, or a third party appointed pursuant to the
preceding sentence shall be shared equally by Sellers and Buyer.

 

14.3                      Payment. Within five Business Days after the
agreement of Sellers and Buyer on the Final Settlement Statement or after the
decision of the arbitrator, Buyer or Sellers, as the case may be, shall
promptly make a cash payment to the other equal to the sums as may be found to
be due in the Final Settlement Statement. Upon the payment of any amounts due
pursuant to the Final Settlement Statement, neither Sellers nor Buyer shall
have any further claims based on the division of ownership or division of
expenses as set forth in Sections 13.1 and 13.2 above.

 

15.                            Survival and Indemnification.

 

15.1                      Survival and Notice.

 

15.1.1             The
liability of Buyer under its representations and warranties contained in this
Agreement shall survive the Closing and the execution and delivery of the
assignments contemplated hereby.

 

15.1.2             The
liability of Sellers under their representations and warranties contained in
this Agreement shall survive the Closing and the execution and delivery of the
assignments contemplated hereby until the second anniversary of the Closing.

 

17

 

15.2                           Liabilities. The term “Liabilities” shall mean any and all direct or indirect demands,
claims, notices of violation, filings, investigations, administrative
proceedings, actions, causes of action, suits, other legal proceedings,
payments, charges, judgments, assessments, liabilities, damages, deficiencies,
penalties, fines, obligations, responsibilities, costs and expenses paid or
incurred, or diminutions in value of any kind or character (whether or not
asserted prior to the date hereof, and whether known or unknown, fixed or
unfixed, conditional or unconditional, based on negligence, strict liability or
otherwise, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise), including, without limitation, (i) penalties and interest
on any amount payable to a third party as a result of the foregoing, (ii) any
legal or other expenses reasonably incurred in connection with investigating or
defending any claim, demand or legal proceeding, whether or not resulting in
any liability, and (iii) all amounts paid in settlement of claims,
demands, or legal proceedings.

 

15.3                           Sellers’ Indemnification. Sellers shall be responsible for, shall pay
on a current basis, and shall indemnify, save, hold harmless, discharge,
release, and defend Buyer, all of its affiliates, successors and permitted
assignees, and all of their respective stockholders, directors, officers,
employees, agents and representatives (collectively, “Buyer  Indemnified Parties”)  from
and against any and all Liabilities, arising from, based upon, related to or
associated with the following (except to the extent any of the following are Assumed Obligations): (a) any
act or omission involving or relating to the Properties occurring before the
Effective Time; (b) the Excluded Assets; (c) any brokers’ or finders’
fees or commissions arising with respect to brokers or finders retained or
engaged by any person other than Buyer and resulting from or relating to the
transactions contemplated in this Agreement; (d) a breach of or the
inaccuracy of any representation or warranty of any Seller contained herein or
in any other agreement, instrument, document or certificate executed or delivered
in connection with this Agreement, including, without limitation, the special
warranty of title in the Assignment; (e) the breach of, or failure to
perform or satisfy, any of the covenants of Sellers set forth in this Agreement
or in any other agreement, instrument, document or certificate executed or
delivered in connection with this Agreement; (f) any Adverse Environmental
Conditions (as defined in Annex II attached hereto) attributable to the
period prior to the Effective Time (including the Adverse Environmental
Conditions described in Schedule
4.1 attached to Annex II hereof); (g) the Cooper Jal Project.

 

15.4                           Buyer’s Indemnification. Buyer shall be responsible for, shall pay on
a current basis, and shall indemnify, save, hold harmless, discharge, release,
and defend Sellers, their respective affiliates, and their successors and
permitted assigns, and all of their respective stockholders, directors,
officers, employees, agents and representatives (“Seller Indemnified Parties”)
from and against any and all Liabilities arising from, based upon, related to  or
associated with (a) the Assumed Obligations; (b) any act, omission or
event involving or relating to the Properties occurring after the Effective
Time; (c) the ownership or operation of the Properties after the Effective
Time; (d) any brokers’ or finders’ fees or commissions arising with
respect to brokers or finders retained or engaged by Buyer and resulting from
or relating to the transactions contemplated in this Agreement; (e) the
breach of or the inaccuracy of any representation or warranty of Buyer set
forth in this Agreement or in any other agreement, instrument, document, or
certificate executed or delivered in connection with this Agreement; and (f) the
breach of, or failure to perform or satisfy any of the post-closing covenants
of Buyer set forth in this Agreement or in any other agreement, instrument,
document or certificate executed or delivered in connection with this
Agreement.

 

18

 

15.5                      Indemnification Escrow
Arrangements.

 

15.5.1                  As used herein, the following terms has the
meanings ascribed to such terms below:

 

(a)                                            “Indemnification Escrow
Account” means the
account or accounts which shall have been designated in a writing delivered to
Buyer prior to Closing by the Indemnification Escrow Agent and Sellers.

 

(b)                                           “Indemnification Escrow
Agent” means JPMorgan
Chase Bank.

 

(c)                                            “Indemnification Escrow
Agreement” means that
certain Escrow Agreement dated as of the day of Closing, executed by Sellers,
Buyer, and the Indemnification Escrow Agent, and delivered at Closing with
respect to the escrowing and distribution of the Indemnification Escrow Amount.

 

(d)                                           “Indemnification Escrow
Amount” means: (x) at
Closing, $2,000,000 if Sellers make the Sellers Equity Contribution and enter
into the pledge arrangements described in Section 15.10, and $5,000,000 if
Sellers do not make the Sellers Equity Contribution or fail to enter into the
pledge arrangements described in Section 15.10; and (y) from and after
Closing, such amount as is in the Indemnification Escrow Account from time to
time.

 

(e)                                            “Sellers Equity Contribution” means an equity contribution by Sellers (or
an entity owned by Sellers) to the entity to which the Properties are assigned
at Closing in the amount of $3,000,000.

 

15.5.2                  Subject to Section 15.6.6 hereof, the
Indemnification Escrow Amount shall be maintained in escrow until the second
anniversary of the Closing Date and for so long thereafter as is required to
resolve any claims properly asserted by Buyer pursuant to Section 15.6.1
hereof; provided, however, the Indemnification Escrow Amount shall be reduced
on such second anniversary to the extent Buyer’s unresolved claims are less
than the then Indemnification Escrow Amount, and the difference between the
then Indemnification Escrow Amount and the amount required to resolve or
satisfy such unresolved claims shall be distributed to Sellers in accordance
with the Indemnification Escrow Agreement. Upon such second anniversary, or
after the resolution of any claims properly asserted prior to such second
anniversary but resolved after such second anniversary, if applicable, the
escrow shall close, and the Indemnification Escrow Amount (together with all
interest earned thereon) shall be distributed to Buyer and Sellers in
accordance with the Indemnification Escrow Agreement.

 

15.5.3                  The costs and expenses associated with the
Indemnification Escrow Account (x) shall be paid from time to time in
accordance with the Indemnification Escrow Agreement and (y) shall be paid
fifty percent (50%) by Buyer and fifty percent (50%) by Sellers.

 

19

 

15.6                      Limitations on Liability.

 

15.6.1             After the Closing, except for an indemnity
claim pursuant to Section 15.3(g) (which
shall have no time limit) any assertion by any Buyer Indemnified Party that any
Seller is liable (a) for the inaccuracy of any representation or warranty,
(b) for the breach of any covenant, (c) for indemnity under the terms
of this Agreement, or (d) otherwise in connection with this Agreement,
must be made by Buyer in writing and must be given to Sellers on or before the
second anniversary of the Closing Date. The notice shall state the facts known
to Buyer that give rise to such notice in sufficient detail to allow Sellers to
evaluate the assertion.

 

15.6.2             Except for an indemnity claim pursuant to Section 15.3(g) (which
shall have no deductible), none of the Buyer Indemnified Parties shall be
entitled to assert any right to indemnification hereunder or to otherwise seek
any damages or other remedies for or in connection with (1) the inaccuracy
of any representations of any Seller contained in this Agreement or in any
other agreement, instrument, document or certificate executed or delivered in connection
with this Agreement; (2) the breach of, or failure to perform or satisfy
any of the covenants of any Seller set forth in this Agreement or in any other
agreement, instrument, document or certificate executed or delivered in
connection with this Agreement; or (3) any liabilities otherwise arising
in connection with or with respect to the transactions contemplated in this
Agreement until the aggregate amount of the Liabilities for such
misrepresentations and breaches actually suffered by Buyer exceeds one percent
of the Purchase Price, and then only to the extent of such excess.

 

15.6.3                  No Seller shall be required to indemnify any
Buyer Indemnified Parties or pay any other amount in connection with or with
respect to the transactions contemplated in this Agreement in any amount
exceeding in the aggregate fifty percent of the Adjusted Purchase Price.

 

15.6.4                  The amount of any Liabilities for which any
of the Buyer Indemnified Parties or Seller Indemnified Parties is entitled to
indemnification or other compensation under this Agreement or in connection
with or with respect to the transactions contemplated in this Agreement shall
be reduced by any corresponding (1) tax benefit created or generated or (2) insurance
proceeds realized or that could reasonably be expected to be realized by such
party if a claim were properly pursued under the relevant insurance
arrangements.

 

15.6.5                  NONE OF THE BUYER INDEMNIFIED
PARTIES NOR THE SELLER INDEMNIFIED PARTIES SHALL BE ENTITLED TO RECOVER FROM
SELLERS OR BUYER, RESPECTIVELY, FOR ANY LOSSES, COSTS, EXPENSES, OR DAMAGES
ARISING UNDER THIS AGREEMENT OR IN CONNECTION WITH OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT ANY AMOUNT IN EXCESS OF THE ACTUAL
COMPENSATORY DAMAGES, COURT COSTS AND REASONABLE ATTORNEY FEES, SUFFERED BY
SUCH PARTY. BUYER ON BEHALF OF EACH OF THE BUYER INDEMNIFIED PARTIES AND
SELLERS ON BEHALF OF EACH OF THE SELLER INDEMNIFIED PARTIES WAIVES

 

20

 

ANY RIGHT TO RECOVER PUNITIVE, SPECIAL,
EXEMPLARY AND CONSEQUENTIAL DAMAGES ARISING IN CONNECTION WITH OR WITH RESPECT
TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.

 

15.6.6             In
the event Sellers do not make the Sellers Equity Contribution or Sellers do not
enter into the pledge arrangements described in Section 15.10 hereof, the
phrase “second anniversary” in Section 15.1.2, 15.5.2, and 15.6.1 shall be
deemed to be deleted and replaced with the phrase “first anniversary.”

 

15.7                      Waiver of Representations.

 

(a)                                  THE EXPRESS
REPRESENTATIONS OF SELLERS CONTAINED IN THIS AGREEMENT AND IN THE CERTIFICATE
TO BE DELIVERED PURSUANT TO SECTION 9.2.1 ARE EXCLUSIVE AND ARE IN LIEU OF
ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE ENVIRONMENTAL
CONDITION, BOTH SURFACE AND SUBSURFACE, OR OTHER CONDITION OF THE PROPERTIES;
OR THE OWNERSHIP OR OPERATION OF THE PROPERTIES OR ANY PART THEREOF.

 

(b)                                 EXCEPT TO THE EXTENT
OF THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLERS CONTAINED IN THIS
AGREEMENT AND IN THE CERTIFICATE TO BE DELIVERED BY SELLERS PURSUANT TO SECTION 9.2.1,
EACH SELLER EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY EXPRESSLY WAIVES,
ANY LIABILITY OR RESPONSIBILITY FOR, (i) ALL REPRESENTATIONS AND
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY AND (ii) ANY STATEMENT OR
INFORMATION ORALLY OR IN WRITING MADE OR COMMUNICATED TO BUYER, INCLUDING, BUT
NOT LIMITED TO, ANY OPINION, INFORMATION OR ADVICE THAT MAY HAVE BEEN
PROVIDED TO BUYER BY ANY OFFICER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT OR
REPRESENTATIVE OR ANY SELLER, ANY ENGINEER OR ENGINEERING FIRM OR ANY OTHER
AGENT, CONSULTANT OR REPRESENTATIVE.

 

(c)                                  EACH SELLER EXPRESSLY
DISCLAIMS AND NEGATES AND BUYER HEREBY EXPRESSLY WAIVES ANY LIABILITY OR.
RESPONSIBILITY FOR (i) ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE
QUALITY, QUANTITY OR VOLUME OF THE RESERVES, IF ANY, OF OIL, GAS OR OTHER
HYDROCARBONS IN OR UNDER THE OIL AND GAS PROPERTIES; AND (ii) ANY WARRANTY
OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE QUALITY, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO SAMPLES, OR CONDITION OF ANY OF
THE PROPERTIES OR ANY PART THERETO.

 

(d)                                 EXCEPT FOR THE EXPRESS
REPRESENTATIONS CONTAINED IN THIS AGREEMENT AND IN THE CERTIFICATE TO BE
DELIVERED PURSUANT TO SECTION 9.2.1 THE ITEMS OF PERSONAL PROPERTY,
EQUIPMENT,

 

21

 

IMPROVEMENTS,
FIXTURES AND APPURTENANCES CONVEYED AS PART OF THE PROPERTIES ARE SOLD,
AND BUYER ACCEPTS SUCH ITEMS “AS IS, WITH ALL FAULTS.”

 

(e)                                  THERE ARE NO WARRANTIES THAT EXTEND BEYOND
THE FACE OF THIS AGREEMENT AND THE CERTIFICATE TO BE DELIVERED PURSUANT TO SECTION 9.2.1.

 

(f)                                    BUYER ACKNOWLEDGES THAT THE WAIVERS IN THIS SECTION 15.7
ARE CONSPICUOUS.

 

15.8                             Waiver
of Consumer Rights. BUYER HEREBY WAIVES
THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17,
SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555,
WHICH IS NOT WAIVED), OF THE TEXAS BUSINESS AND COMMERCE CODE (THE DTPA), A LAW
THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF ITS OWN SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER. TO
EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, BUYER REPRESENTS TO SELLERS THAT (i) IT
IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION; (ii) IT IS
REPRESENTED BY LEGAL COUNSEL IN ENTERING INTO THIS AGREEMENT; AND (iii) SUCH
LEGAL COUNSEL WAS NOT DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED
BY ANY SELLER OR AN AGENT OF ANY SELLER.

 

15.9                           Exclusivity of Remedies. If the Closing occurs, the sole and
exclusive remedy of each of the Buyer Indemnified Parties and the Seller
Indemnified Parties with respect to the purchase and sale of the Properties
shall be pursuant to the express indemnification provisions of this Section 15.
Any and all (a) claims relating to the representations, warranties,
covenants and agreements contained in this Agreement, (b) other claims
pursuant to or in connection with this Agreement or (c) other claims
relating to the Properties and the purchase and sale thereof shall be subject
to the provisions set forth in this Section 15. Except for claims made
pursuant to the express indemnification provisions of this Section 15,
Buyer on behalf of each of the Buyer Indemnified Parties and Sellers on behalf
of each of the Seller Indemnified Parties shall be deemed to have waived, to
the fullest extent permitted under applicable law, any right of contribution
against Sellers or any of their respective affiliates and any and all rights,
claims and causes of action it may have against Sellers or any of their
respective affiliates or Buyer or any of its affiliates, respectively, arising
under or based on any federal, state or local statute, law, ordinance, rule or
regulation or common law or otherwise.

 

15.10                     Security for Indemnity
Obligations. In the event Sellers
make the Sellers Equity Contribution, at Closing Sellers (or the entity making
the Sellers Equity Contribution) shall execute documents reasonably
satisfactory to Sellers and to Buyer pledging and encumbering the equity
interests acquired by Sellers as a result of the Sellers Equity Contribution in
favor of Buyer as security for the indemnity obligations of Sellers hereunder.

 

22

 

 

16.           Further
Assurances.

 

16.1       Additional Acts.
    After the Closing, Sellers and Buyer shall execute, acknowledge
and deliver or cause to be executed, acknowledged and delivered such
instruments and take such other action as may be necessary or advisable to
carry out their obligations under this Agreement and under any exhibit,
document, certificate or other instrument delivered pursuant hereto. Sellers
shall use commercially reasonable efforts to obtain all approvals and consents
required by or necessary for the transactions contemplated by this Agreement
that are customarily obtained after Closing. As soon as practicable after the
Closing, Buyer will remove or cause  to be removed the names and
marks used by Sellers and logos relating thereto from the Properties.

 

16.2       Operations under Permits.     With respect
to Permits (including Environmental Permits) which cannot be, or are
customarily not, issued, transferred or assigned until after the Closing, and
until such issuances, transfers or assignments are effected, Sellers shall (a) allow
Buyer to operate under such Permits to the extent permitted by law, (b) make
all filings and provide all
notifications and reports required under such Permits, and otherwise comply
with the terms and conditions of such Permits, (c) provide copies of all
such filings, notifications and reports, and of all correspondence with or
from, and notices from, the relevant governmental authority, and (d) take
all actions that are necessary to renew, replace, extend, or otherwise continue
in effect such Permits.

 

17.         Access
to Records by Sellers.     After the Closing Date, each
Seller and its respective authorized representatives shall have reasonable
access (including copying privileges at such Seller’s sole cost and expense)
during Buyer’s normal business hours to all books and records of Buyer
pertaining to the Properties for periods prior to the Effective Time for the
purpose of prosecuting or defending claims, lawsuits or other proceedings, for
audit purposes, or to comply with legal process, rules, regulations or orders
of any governmental authority.

 

18.         Notices.     All notices required or
permitted under this Agreement shall be in writing and, (a) if by air courier shall
be deemed to have been given one Business Day after the date deposited with a
recognized carrier of overnight mail, with all freight or other charges
prepaid, (b) if by telecopier, shall be deemed to have been given when actually
received, and (c) if mailed, shall be deemed to have been given three
Business Days after the date when sent by registered or certified mail, postage
prepaid, addressed as follows:

 

	
  If to Buyer:

  	
  Resaca Exploitation, LP

  
	
   

  	
  c/o Torch Energy Advisors Incorporated

  
	
   

  	
  1221 Lamar, Suite 1175

  
	
   

  	
  Houston, Texas 77010

  
	
   

  	
  Attention: John J. Lendrum, III

  
	
   

  	
  Fax: (713) 655-1711

  

 

23

 

	
  If to SDG:

  	
  SDG Resources, L.P.

  
	
   

  	
  16 South Grand Avenue

  
	
   

  	
  Montrose, Colorado 81401

  
	
   

  	
  Attention: Douglas H. Kiesewetter

  
	
   

  	
  Fax: (970) 249-4498

  
	
   

  	
   

  
	
  If to IOG: 

  	
  Innovative Oil and Gas Development and Trading Company, Inc.

  
	
   

  	
  c/o Hamann Companies

  
	
   

  	
  1000 Pioneer Way

  
	
   

  	
  El Cajon, California 92020

  
	
   

  	
  Attention: Jeffrey C. Hamann

  
	
   

  	
  Fax: (619) 440-8914

  
	
   

  	
   

  
	
  If to Arkios:

  	
  Arkios Partners, L.P.

  
	
   

  	
  c/o SDG Resources, L.P.

  
	
   

  	
  16 South Grand Avenue

  
	
   

  	
  Montrose, Colorado 81401

  
	
   

  	
  Attention: Douglas H. Kiesewetter

  
	
   

  	
  Fax: (970) 249-4498

  

 

“Business Day” shall mean a day
other than Saturday or Sunday or any legal holiday for commercial banking
institutions under the laws of the State of Texas.

 

19.         Assignment.     Except as
otherwise specifically provided in Section 28, neither Sellers nor Buyer
may assign their respective rights or delegate their respective duties or
obligations arising under this Agreement, in whole or in part, by operation of
law or otherwise, without the prior written consent of the other party;
however, Buyer may assign all or part of its rights or delegate its duties and
obligations hereunder to any affiliate of Buyer without obtaining the consent
of Sellers. Any such assignment shall not relieve Buyer of its obligations
under this Agreement. Buyer shall promptly notify Sellers of any such
assignment.

 

20.         Governing Law.     This Agreement
shall be governed and construed in accordance with the laws of the State of Texas without giving effect to any principles of
conflicts of laws. The validity of the various conveyances affecting the title
to real property shall be governed by and construed in accordance with the laws
of the jurisdiction in which such property is situated. The representations and
warranties contained in such conveyances and the remedies available because of
a breach of such representations and warranties shall be governed by and
construed in accordance with the laws of the State of Texas without giving
effect to the principles of conflicts of laws.

 

21.         Expenses and Fees.
    Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay the fees and
expense of its counsel, accountants and other experts incident to the
negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby. Buyer shall be responsible for the cost of
all fees for the recording of transfer documents described in Section 9.2.
Buyer shall be

 

24

 

responsible for any sales or other excise taxes resulting from the
transfer of the Properties to Buyer. All other costs shall be borne by the
party incurring such costs.

 

22.         Integration.     This Agreement,
the Exhibits hereto and the other agreements to be entered into by the parties
under the provisions of this Agreement set forth the entire agreement and
understanding of the parties in respect of the transactions contemplated hereby
and supersede all prior agreements, prior arrangements and prior understandings
relating to the subject matter hereof.

 

23.         Waiver or Modification.
    This Agreement may be amended, modified, superseded
or cancelled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by a
duly authorized officer of Buyer and Sellers, or, in the case of a waiver or
consent, by or on behalf of the party or parties waiving compliance or giving
such consent. The failure of any party at any time or times to require
performance of any provision of this Agreement shall not affect its right at a
later time to enforce such provision. No waiver by any party of any condition,
or of any breach of any covenant, agreement, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to
be or construed as a further or continuing waiver of any such condition or
breach or waiver of any other condition or of any breach of any other covenant,
agreement, representation or warranty.

 

24.         Headings; Annexes, Exhibits, and Schedules.
    The Section headings contained in this Agreement
are for convenient reference only and shall not in any way affect the meaning
or interpretation of this Agreement. The Annexes, Exhibits, and Schedules
attached hereto are hereby incorporated herein and made a part of this
Agreement.

 

25.         Invalid Provisions.     If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof; and the
remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance from this Agreement.

 

26.         Multiple Counterparts.
    This Agreement may be executed in a number of
identical counterparts, each of which for all purposes is to be deemed an
original, and all of which constitute, collectively, one agreement. In
addition, this Agreement may be executed in a number of counterparts, any one
of which may contain the execution of either Buyer or any Seller, and all of
such counterparts taken together shall constitute one completely executed
original agreement.

 

27.         Third Parties.     Nothing in this
Agreement shall entitle any person other than the parties hereto and their
respective successors and permitted assigns to any claim, cause of action,
benefit, remedy or right of any kind, except for the rights of Buyer
Indemnified Parties and Seller Indemnified Parties.

 

28.         Like Kind Exchanges.
    Each of the Sellers, on the one hand, and Buyer, on
the other hand, consents to any Seller’s, in the case of the Buyer, or the
Buyer, in the case of the Sellers,

 

25

 

assignment of its rights and obligations under this Agreement to its
Qualified Intermediary (as that term is defined in section 1.031(k)-1(g)(4)(v) of
the Treasury Regulations (as defined below)), or its Qualified Exchange
Accommodations Titleholder (as that term is defined in Rev. Proc. 2000-37), in
connection with effectuation of a like-kind exchange. In addition, Buyer hereby
consents to and agrees that: (a) SDG may, prior to Closing, assign a
portion of its rights and delegate a portion of its duties and obligations
arising under this Agreement to LHT Partners, Ltd., a Texas limited partnership
(“LHT”), provided LHT enters into an
assignment and assumption agreement reasonably acceptable to Buyer providing
that, among other things, LHT agrees to be bound by and comply with the terms
and conditions of this Agreement as a “Seller” hereunder as though LHT had been
an original signing party hereto; (b) contemporaneously with such
assignment and delegation, SDG may assign, convey, and transfer a portion of
the Properties owned by SDG equivalent to the portion of rights, duties, and
obligations referenced in clause (a) of this Section 28.1; and (c) from
and after such events, LHT shall be deemed to be a “Seller” for all purposes
under this Agreement, and this Agreement shall be deemed to be modified as
necessary to reflect that LHT is a party to this Agreement having such status.
Sellers and Buyer acknowledge and agree that any assignment of this Agreement
to a Qualified Intermediary or to a Qualified Exchange Accommodation
Titleholder does not release either party from any of their respective
liabilities and obligations to each other under this Agreement. Each party
agrees to cooperate with the other to attempt to structure the transaction as a
like-kind exchange. The term “Treasury Regulations” means all
proposed, temporary, and final regulations promulgated under the Code, as in
effect from time to time. The term “Code” means
the Internal Revenue Code of 1986, as amended from time to time, and any
corresponding provisions of any succeeding law.

 

29.           Dispute
Resolution.

 

(a)           Except as provided
in clause (d) below, any controversy or claim arising out of or  relating to
this Agreement is to be resolved by arbitration. The arbitration is to be
administered by the American Arbitration Association and is to be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration is to be held before a panel of three arbitrators,
each of whom must be independent of the parties. No later than 15 days after
the arbitration begins, each party shall select an arbitrator and request the
two selected arbitrators to select a third neutral arbitrator. If the two
arbitrators fail to select a third on or before the 10th day after the second
arbitrator was selected, either party is entitled to request the American
Arbitration Association to appoint the third neutral arbitrator in accordance
with its rules. Before beginning the hearings, each arbitrator must provide an
oath or undertaking of impartiality.

 

(b)           The arbitrators will
have no authority to award punitive damages or other damages not measured by
the prevailing party’s actual damages, and may not, in any event, make any
ruling, finding or award that does not conform to the provisions of this
Agreement.

 

(c)           The arbitration is
to be conducted in Houston, Texas. Each party
shall submit to any court of competent jurisdiction for purposes of the
enforcement of any award, order or judgment. Any award, order or judgment
pursuant to arbitration is final and may be entered and enforced in any court
of competent jurisdiction.

 

26

 

(d)           The dispute
resolution provisions in: (i) Section 14.2, with respect
to the Final Settlement Statement; (ii) Annex I, with respect
to Title Defects; and (iii) in Annex II, with respect
to Environmental Defects, shall take precedence over the dispute resolutions in
this Section 29, and shall govern and control resolution of disputes
arising with respect to such matters.

 

[SIGNATURE PAGES FOLLOW]

 

27

 

[SIGNATURE PAGE TO PURCHASE
AND SALE AGREEMENT]

 

IN WITNESS WHEREOF, the
parties, by their duly authorized officers, have executed this Agreement as of
the date set forth above.

 

 

	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  RESACA
  EXPLOITATION, LP

  
	
   

  	
  By:

  	
  Resaca
  Exploitation GP, LLC,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John Lendrum III

  
	
   

  	
  Name:

  	
  John
  Lendrum III

  
	
   

  	
  Title:

  	
  President

  

 

1

 

[SIGNATURE PAGE TO PURCHASE
AND SALE AGREEMENT]

 

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  SDG
  RESOURCES, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SDG
  Resources I, LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Douglas H. Kiesewetter

  
	
   

  	
   

  	
  Douglas
  H. Kiesewetter

  
	
   

  	
   

  	
  President

  

 

2

 

[SIGNATURE PAGE TO PURCHASE
AND SALE AGREEMENT]

 

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  INNOVATIVE
  OIL AND GAS DEVELOPMENT

  
	
   

  	
  AND
  TRADING COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeffrey C. Hamann

  
	
   

  	
   

  	
  Jeffrey
  C. Hamann

  
	
   

  	
   

  	
  President

  

 

3

 

[SIGNATURE PAGE TO PURCHASE
AND SALE AGREEMENT]

 

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  ARKIOS
  PARTNERS, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SDG
  Resources, L.P.,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SDG
  Resources I, LLC,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Douglas H. Kiesewetter

  
	
   

  	
   

  	
  Douglas
  H. Kiesewetter

  
	
   

  	
   

  	
  President

  

 

4

 

EXECUTED this the    th day of April, 2006, but
effective for all purposes as
                 ,
2006.

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  SDG
  Resources, L.P.

  
	
   

  	
  by
  SDG Resources I, LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address of Assignor:

  	
  Address of Assignee:

  
	
  SDG Resources, L.P.

  	
  Resaca Exploitation, LP

  
	
  16 South Grand Avenue

  	
  1221 Lamar, Suite 1175

  
	
  Montrose, Colorado 8140116

  	
  Houston, Texas 77010

  

 

 

	
  STATE
  OF 

  	
  §

  
	
   

  	
  §

  
	
  COUNTY OF

  	
  §

  

 

This instrument was acknowledged before me on April
          , 2006. by
                       ,
the                              of
SDG Resources I, LLC, general partner of SDG Resources, L.P., a Texas limited
partnership, on behalf of said limited liability
company acting on behalf of said partnership.

 

	
   

  	
   

  
	
   

  	
  Notary
  Public in and for

  
	
   

  	
  The
  State of

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  My
  Commission Expires:

  	
   

  
					

 

ii

 

TABLE
OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  13.2         Division of Expenses; Royalties

  	
  16

  
	
   

  	
   

  	
   

  
	
  14.

  	
  FINAL
  ACCOUNTING

  	
  17

  
	
   

  	
  14.1         Settlement Statement

  	
  17

  
	
   

  	
  14.2         Arbitration of Final Settlement

  	
  17

  
	
   

  	
  14.3         Payment

  	
  17

  
	
   

  	
   

  	
   

  
	
  15.

  	
  SURVIVAL
  AND INDEMNIFICATION

  	
  17

  
	
   

  	
  15.1         Survival and Notice

  	
  17

  
	
   

  	
  15.2         Liabilities

  	
  18

  
	
   

  	
  15.3         Sellers’ Indemnification

  	
  18

  
	
   

  	
  15.4         Buyer’s Indemnification

  	
  18

  
	
   

  	
  15.5         Indemnification Escrow Arrangements

  	
  19

  
	
   

  	
  15.6         Limitations on Liability

  	
  20

  
	
   

  	
  15.7         Waiver of Representations

  	
  21

  
	
   

  	
  13.8         Waiver of Consumer Rights

  	
  22

  
	
   

  	
  15.9         Exclusivity of Remedies

  	
  22

  
	
   

  	
  15.10       Security for indemnity Obligations

  	
  22

  
	
   

  	
   

  	
   

  
	
  16.

  	
  FURTHER
  ASSURANCES

  	
  23

  
	
   

  	
  16.1         Additional Acts

  	
  23

  
	
   

  	
  16.2         Operations under Permits

  	
  23

  
	
   

  	
   

  	
   

  
	
  17.

  	
  ACCESS
  TO RECORDS BY SELLERS

  	
  23

  
	
  18.

  	
  NOTICES

  	
  23

  
	
  19.

  	
  ASSIGNMENT

  	
  24

  
	
  20.

  	
  GOVERNING
  LAW

  	
  24

  
	
  21.

  	
  EXPENSES
  AND FEES

  	
  24

  
	
  22.

  	
  INTEGRATION

  	
  24

  
	
  23.

  	
  WAIVER
  OR MODIFICATION

  	
  25

  
	
  24.

  	
  HEADINGS:
  ANNEXES, EXHIBITS, AND SCHEDULES

  	
  25

  
	
  25.

  	
  INVALID
  PROVISIONS

  	
  25

  
	
  26.

  	
  MULTIPLE
  COUNTERPARTS

  	
  25

  
	
  27.

  	
  THIRD
  PARTIES

  	
  25

  
	
  28.

  	
  LIKE
  KIND EXCHANGES

  	
  25

  
	
  29.

  	
  DISPUTE
  RESOLUTION    

  	
  26

  

 

iii

 

EXHIBIT “A”

 

TO CONVEYANCE AND BILL OF SALE

REAL PROPERTY

 

TOWN
LOTS

 

Lots
5, 6, 7 and the North 5 feet of Lot 8, Block 14, Original Town of Kermit, an
addition to the City of Kermit, Winkler County, Texas.

 

iii

 

EXHIBIT 1.1.1 — PART A

 

COOPER JAL

 

(LEA COUNTY, NEW MEXICO)

 

TEXACO EXPLORATION AND PRODUCTION, INC.

AND KATHLEEN V. LIND ACQUISITIONS

 

Oil and Gas Leases

 

All
right, title and interest in the following Oil and Gas Leases:

 

	
  LEASE
  NO:

  	
  G221501

  
	
  LEASE
  DATE:

  	
  6/1/26

  
	
  LESSOR:

  	
  Ada
  E. Hunter Thomas, et vir

  
	
  LESSEE:

  	
  Chas.
  T. Bates

  
	
  RECORDED:

  	
  Book
  4, Page 227, Oil and Gas Lease Records

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 24:
  E/2 SW/4 and W/2 SE/4, containing 160 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  G221519

  
	
  LEASE
  DATE:

  	
  5/24/26

  
	
  LESSOR:

  	
  Sally
  W. Harrison, a widow

  
	
  LESSEE:

  	
  Chas.
  T. Bates

  
	
  RECORDED:

  	
  Book
  4, Page 251

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 25:
  NW/4, containing 160 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  G221520

  
	
  LEASE
  DATE:

  	
  6/1/26

  
	
  LESSOR:

  	
  Edna
  E. Hunter, a widow

  
	
  LESSEE:

  	
  Chas.
  T. Bates

  
	
  RECORDED:

  	
  Book
  4, Page 261

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 13:
  SW/4, containing 160 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  G221537

  
	
  LEASE
  DATE:

  	
  8/1/45

  
	
  LESSOR:

  	
  United
  States of America (LC-063965)

  
	
  LESSEE:

  	
  Phillips
  Petroleum Company

  
	
  RECORDED:

  	
  Not
  Recorded

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 24:
  E/2 SE/4, containing 80 acres, more or less

  

 

1

 

	
  LEASE
  NO:

  	
  NM225157-a

  
	
  LEASE
  DATE:

  	
  1/16/45

  
	
  LESSOR:

  	
  Charles
  Gutman, et al

  
	
  LESSEE:

  	
  Culbertson &
  Irwin, Inc.

  
	
  RECORDED:

  	
  Book
  58, Page 103

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  N/2 NE/4, containing 80 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225157-b

  
	
  LEASE
  DATE:

  	
  1/16/45

  
	
  LESSOR:

  	
  J.
  L. Crump, et al

  
	
  LESSEE:

  	
  Culbertson &
  Irwin, Inc.

  
	
  RECORDED:

  	
  Book
  58, Page 107

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  N/2 NE/4, containing 80 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225157-c

  
	
  LEASE
  DATE:

  	
  7/7/45

  
	
  LESSOR:

  	
  Western
  Gas Company

  
	
  LESSEE:

  	
  Culbertson &
  Irwin, Inc.

  
	
  RECORDED:

  	
  Book
  58, Page 136

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  N/2 NE/4, containing 80 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225158-a

  
	
  LEASE
  DATE:

  	
  3/2/39

  
	
  LESSOR:

  	
  Maggie
  Dunn, a widow

  
	
  LESSEE:

  	
  Roy
  G. Barton

  
	
  RECORDED:

  	
  Book
  35, Page 474

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 24:
  SW/4 NE/4, E/2 NE/4, S/2 NW/4 NE/4, containing 140 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225158-b

  
	
  LEASE
  DATE:

  	
  3/2/39

  
	
  LESSOR:

  	
  Annabel
  Winningham, et vir

  
	
  LESSEE:

  	
  Roy
  G. Barton

  
	
  RECORDED:

  	
  Book
  35, Page 481

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 24:
  SW/4 NE/4, E/2 NE/4, S/2 NW/4 NE/4, containing 140 acres, more or less

  

 

2

 

	
  LEASE
  NO:

  	
  NM225158-c

  
	
  LEASE
  DATE:

  	
  3/2/39

  
	
  LESSOR:

  	
  Roger
  B. Owings, et ux

  
	
  LESSEE:

  	
  Roy
  G. Barton

  
	
  RECORDED:

  	
  Book
  35, Page 490

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 24:
  SW/4 NE/4, E/2 NE/4, S/2 NW/4 NE/4 containing 140 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225158-d

  
	
  LEASE
  DATE:

  	
  3/2/39

  
	
  LESSOR:

  	
  The
  North Central Texas Oil Co., Inc.

  
	
  LESSEE:

  	
  Roy
  G. Barton

  
	
  RECORDED:

  	
  Book
  35, Page 495

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 24:
  SW/4 NE/4, E/2 NE/4, S/2 NW/4 NE/4 containing 140 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225158-e

  
	
  LEASE
  DATE:

  	
  12/23/41

  
	
  LESSOR:

  	
  Peerless
  Oil and Gas Company

  
	
  LESSEE:

  	
  Western
  Gas Company

  
	
  RECORDED:

  	
  Book
  44, Page 254

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 24:
  SW/4 NE/4, E/2 NE/4, S/2 NW/4 NE/4 containing 140 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225158-f

  
	
  LEASE
  DATE:

  	
  4/22/47

  
	
  LESSOR:

  	
  The
  Atlantic Refining Company

  
	
  LESSEE:

  	
  Western
  Gas Company

  
	
  RECORDED:

  	
  Book
  63, Page 277

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 24:
  SW/4 NE/4, E/2 NE/4, S/2 NW/4 NE/4 containing 140 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225158-g

  
	
  LEASE
  DATE:

  	
  6/15/50

  
	
  LESSOR:

  	
  Western
  Natural Gas Company

  
	
  LESSEE:

  	
  Culbertson &  Irwin, Inc,

  
	
  RECORDED:

  	
  Book
  87, Page 165

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 24:
  S/2 NE/4, NE/4 NE/4 containing 120 acres, more or less

  

 

3

 

	
  LEASE
  NO:

  	
  NM225159-a

  
	
  LEASE
  DATE:

  	
  12/1/45

  
	
  LESSOR:

  	
  Charles
  Gutman, et al

  
	
  LESSEE:

  	
  Culbertson &
  Irwin, Inc.

  
	
  RECORDED:

  	
  Book
  60, Page 493

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  S/2 NE/4, containing 80 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225159-b

  
	
  LEASE
  DATE:

  	
  12/1/45

  
	
  LESSOR:

  	
  Culbertson &
  Irwin, Inc, et al

  
	
  LESSEE:

  	
  Culbertson &
  Irwin, Inc.

  
	
  RECORDED:

  	
  Book
  60, Page 491

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  S/2 NE/4, containing 80 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225159-c

  
	
  LEASE
  DATE:

  	
  12/15/45

  
	
  LESSOR:

  	
  Peerless
  Oil and Gas Company

  
	
  LESSEE:

  	
  Culbertson &
  Irwin, Inc.

  
	
  RECORDED:

  	
  Book
  60, Page 488

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  S/2 NE/4, containing SO acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225160

  
	
  LEASE
  DATE:

  	
  1/4/46

  
	
  LESSOR:

  	
  P.
  G. Russell, et ux

  
	
  LESSEE:

  	
  Culbertson &
  Irwin, inc.

  
	
  RECORDED:

  	
  Book
  61, Page 395

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County,New Mexico

  
	
   

  	
  Section 18:
  NE/4 SE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225161-a

  
	
  LEASE
  DATE:

  	
  11/7/49

  
	
  LESSOR:

  	
  Western
  Natural Gas Company

  
	
  LESSEE:

  	
  Culbertson &
  Irwin, Inc.

  
	
  RECORDED:

  	
  Book
  82, Page 151

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 25:
  NE/4, containing 160 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225161-b

  
	
  LEASE
  DATE:

  	
  11/9/49

  
	
  LESSOR:

  	
  Magnolia
  Petroleum Company

  
	
  LESSEE:

  	
  Culbertson &
  Irwin, Inc.

  

 

4

 

	
  RECORDED:

  	
  Book
  82, Page 160

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 25:
  NE/4, containing 160 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225161-c

  
	
  LEASE
  DATE:

  	
  11/10/49

  
	
  LESSOR:

  	
  Munance
  Corporation

  
	
  LESSEE:

  	
  Culbertson
  and Irwin, Incorporated

  
	
  RECORDED:

  	
  Book
  82, Page 156

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 25:
  NE/4, containing 160 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225161-d

  
	
  LEASE
  DATE:

  	
  11/9/48

  
	
  LESSOR:

  	
  General
  Crude Oil Company

  
	
  LESSEE:

  	
  R.
  Olsen

  
	
  RECORDED:

  	
  Book
  74, Page 206

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 25:
  NE/4, containing 160 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225161-e

  
	
  LEASE
  DATE:

  	
  12/15/48

  
	
  LESSOR:

  	
  J.
  C. McIntyre, et ux

  
	
  LESSEE:

  	
  R.
  Olsen

  
	
  RECORDED:

  	
  Book
  75, Page 317

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 25:
  NE/4, containing 160 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225161-f

  
	
  LEASE
  DATE:

  	
  11/29/48

  
	
  LESSOR:

  	
  M.
  M. Miller, et ux

  
	
  LESSEE:

  	
  R.
  Olsen

  
	
  RECORDED:

  	
  Book
  74, Page 393

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 25:
  NE/4, containing 160 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM225163

  
	
  LEASE
  DATE:

  	
  9/11/48

  
	
  LESSOR:

  	
  Maggie
  Dunn

  
	
  LESSEE:

  	
  C.
  L. Richardson and Jack Richardson

  
	
  RECORDED:

  	
  Book
  73, Page 345

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea
  County, New Mexico

  
	
   

  	
  Section 24:
  N/2 NW/4 NE/4, containing 20 acres, more or less

  

 

5

 

	
  LEASE
  NO:

  	
  NM255183

  
	
  LEASE
  DATE:

  	
  2/1/70

  
	
  LESSOR:

  	
  United
  States of America (LC-032592-b)

  
	
  LESSEE:

  	
  Texaco
  Inc.

  
	
  RECORDED:

  	
  Book
  268, Page 902

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 30:
  Lots 1, 2, E/2 NW/4, containing 156.16 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM909059

  
	
  LEASE
  DATE:

  	
  12/1/57

  
	
  LESSOR:

  	
  United
  States of Ameried(NM-12612)

  
	
  LESSEE:

  	
  Abner
  M. Jack, et al

  
	
  RECORDED:

  	
  Not
  Recorded

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  Lots 3, 4 E/2 SW/4 

  Section 19: Lots 1, 2, E/2 NW/4 

  containing 312.45 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM909887

  
	
  LEASE
  DATE:

  	
  12/31/38

  
	
  LESSOR:

  	
  United
  States of America (LC-032715)

  
	
  LESSEE:

  	
  L.
  F. Meister

  
	
  RECORDED:

  	
  Not
  Recorded

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New
  Mexico

  
	
   

  	
  Section 19:
  Lots 3, 4, E/2 SW/4, containing 156.18 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM909995-a

  
	
  LEASE
  DATE:

  	
  10/30/48

  
	
  LESSOR:

  	
  Samuel-R. Cooper, et ux

  
	
  LESSEE:

  	
  R.
  Olsen Oil Company

  
	
  RECORDED:

  	
  Book
  74, Page 204

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 14:
  SE/4 SE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM909995-b

  
	
  LEASE
  DATE:

  	
  1/11/49

  
	
  LESSOR:

  	
  Southern
  Petroleum Exploration, Inc.

  
	
  LESSEE:

  	
  R.
  Olsen Oil Company

  
	
  RECORDED:

  	
  Book
  75, Page 339

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 14:
  SE/4 SE/4, containing 40 acres, more or less

  

 

6

 

	
  LEASE
  NO:

  	
  NM909995-c

  
	
  LEASE
  DATE:

  	
  1/11/49

  
	
  LESSOR:

  	
  H.
  B. Smyrl

  
	
  LESSEE:

  	
  R.
  Olsen Oil Company

  
	
  RECORDED:

  	
  Book
  75, Page 341

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 14:
  SE/4 SE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM909995-d

  
	
  LEASE
  DATE:

  	
  2/21/49

  
	
  LESSOR:

  	
  Argo
  Oil Corporation

  
	
  LESSEE:

  	
  R.
  Olsen

  
	
  RECORDED:

  	
  Book
  76, Page 270

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 14:
  SE/4 SE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM909995-e

  
	
  LEASE
  DATE:

  	
  3/30/49

  
	
  LESSOR:

  	
  General
  Crude Oil Company

  
	
  LESSEE:

  	
  R.
  Olsen Oil Company

  
	
  RECORDED:

  	
  Book
  76, Page 543

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM Lea County New Mexico

  
	
   

  	
  Section 14:
  SE/4 SE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM909995-f

  
	
  LEASE
  DATE:

  	
  2/5/49

  
	
  LESSOR:

  	
  Reginald
  H. Johnson, et al

  
	
  LESSEE:

  	
  R.
  Olsen

  
	
  RECORDED:

  	
  Book
  77, Page 123

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 14:
  SE/4 SE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM909995-g

  
	
  LEASE
  DATE:

  	
  6/14/49

  
	
  LESSOR:

  	
  Magnolia
  Petroleum Company

  
	
  LESSEE:

  	
  R.
  Olsen Oil Company

  
	
  RECORDED:

  	
  Book
  78, Page 215

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 14:
  SE/4 SE/4, containing 40 acres, more or less

  

 

7

 

	
  LEASE
  NO:

  	
  NM911598

  
	
  LEASE
  DATE:

  	
  6/1/56

  
	
  LESSOR:

  	
  United
  States of America (LC-054665-b)

  
	
  LESSEE:

  	
  Anderson-Prichard
  Oil Corporation and R. Olsen Oil Company

  
	
  RECORDED:

  	
  Not
  Recorded

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 26:
  NE/4 NE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM911599-a

  
	
  LEASE
  DATE:

  	
  5/10/46

  
	
  LESSOR:

  	
  Charles
  T. Bates, et al

  
	
  LESSEE:

  	
  R.
  Olsen

  
	
  RECORDED:

  	
  Book
  61, Page 290

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  SW/4 SE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM911599-b

  
	
  LEASE
  DATE:

  	
  8/2/46

  
	
  LESSOR:

  	
  W.
  M. Beauchamp, Special Guardian of James Ray Bates, a minor

  
	
  LESSEE:

  	
  R.
  Olsen

  
	
  RECORDED:

  	
  Book
  61, Page 485

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  SW/4 SE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM911599-c

  
	
  LEASE
  DATE:

  	
  6/9/47

  
	
  LESSOR:

  	
  Catherine
  L. Dumraese

  
	
  LESSEE:

  	
  Uscan
  Drilling Company

  
	
  RECORDED:

  	
  Book
  65, Page 34

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  SW/4 SE/4, containing 40 acres, more or less

  
	
   

  	
   

  
	
  LEASE
  NO:

  	
  NM911601

  
	
  LEASE
  DATE:

  	
  6/1/46

  
	
  LESSOR:

  	
  Royalty
  Holding Company, et al

  
	
  LESSEE:

  	
  Uscan
  Drilling Company

  
	
  RECORDED:

  	
  Book
  61, Page 426

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  NW/4 SE/4, containing 40 acres, more or less

  

 

8

 

	
  LEASE
  NO:

  	
  NM911602

  
	
  LEASE
  DATE:

  	
  12/27/35

  
	
  LESSOR:

  	
  T. H. Low, Trustee

  
	
  LESSEE:

  	
  Repollo
  Oil Company

  
	
  RECORDED:

  	
  Book
  29, Page 37, as ratified by Agreement, dated 8/30/46, recorded in

  
	
   

  	
  Book
  33, Page 10

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  SE/4 SE/4, containing 40 acres, more or less

  

 

COOPER
JAL UNIT

 

LEA
COUNTY, NEW MEXICO

 

All
right, title and interest in the Cooper Jal Unit (as described below),
including but not limited to any operating rights, working interest,
contractual rights and royalty interests:

 

Description of Cooper Jal Unit Area:

 

Township 24 South, Range 36 East, NMPM, Lea County,
New Mexico

 

	
  Section 13:

  	
  S/2

  
	
  Section 14:

  	
  SE/4
  SE/4

  
	
  Section 23:

  	
  S/2
  SE/4

  
	
  Section 24:

  	
  All

  
	
  Section 25:

  	
  N/2

  
	
  Section 26:

  	
  E/2
  NE/4

  

 

Township 24 South, Range 37 East, NMPM, Lea County, New
Mexico

 

	
  Section 18:

  	
  All

  
	
  Section 19:

  	
  W/2

  
	
  Section 30:

  	
  NW/4

  

 

MINERAL FEE LANDS

 

(LEA COUNTY, NEW MEXICO)

 

	
  FILE
  NO:

  	
  NM090060

  
	
  DATE:

  	
  12/01/93

  
	
  RECORDED:

  	
  Book
  44, pg 559

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County,New Mexico

  
	
   

  	
  Section 25:
  NW/4 as to Tansill, Yates, Seven Rivers, and Queen Formations only (Tract 1
  9), containing 160 acres, more or less

  

 

9

 

	
  FILE
  NO:

  	
  NM090061

  
	
  DATE:

  	
  12/01/93

  
	
  RECORDED:

  	
  Book
  44, pg 559

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 36 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 13:
  SW/4

  
	
   

  	
  Section 24:
  NW/4, as to Tansill, Yates, Seven Rivers, and Queen Formations only (Tracts
  20&21), containing 320 acres, more or less

  
	
   

  	
   

  
	
  FILE
  NO:

  	
  NM911600

  
	
  DATE:

  	
  04/08/88

  
	
  RECORDED:

  	
  Book
  443, pg 24

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  SW/4SE/4 as to Tansill, Yates, Seven Rivers, and Queen

  
	
   

  	
  Formations
  only, containing 40 acres, more or less

  
	
   

  	
   

  
	
  FILE
  NO:

  	
  NM911601

  
	
  DATE:

  	
  06/1/46

  
	
  RECORDED:

  	
  Book
  443, pg 24

  
	
  DESCRIPTION:

  	
  Township
  24 South, Range 37 East, NMPM, Lea County, New Mexico

  
	
   

  	
  Section 18:
  NW/4SE/4, as to Tansill, Yates, Seven Rivers, and Queen

  
	
   

  	
  Formations
  only, containing 40 acres, more or less

  

 

10

 

B. JETTA-X2, L.P., ROBERT KRUSE & JAMES A.
DAVIDSON ACQUISITIONS

 

All
lands listed below are located in Lea County, New Mexico

 

	
  DATE

  	
   

  	
  LESSOR

  	
   

  	
  LESSEE

  	
   

  	
  BOOK

  	
   

  	
  PAGE

  	
   

  	
  DESCRIPTION

  
	
  03/02/39

  	
   

  	
  Maggie
  Dunn

  	
   

  	
  Roy
  G. Barton

  	
   

  	
  35

  	
   

  	
  474

  	
   

  	
  T24S-R36E

  Sec.
  24: S/2 NE/4 & NE/4 NE/4 

  Sec.
  13: N/2 SE/4 & SW/4 SE/4 

  Depth
  Limit: Down to 4,000 feet

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  03/02/39

  	
   

  	
  Annabel
  Winningham

  	
   

  	
  Roy
  G. Barton

  	
   

  	
  35

  	
   

  	
  481

  	
   

  	
  T24S-R36E

  Sec.
  24: S/2 NE/4 & NE/4 NE/4

  Sec.
  13: N/2 SE/4 & SW/4 SE/4

  Depth
  Limit: Down to 4,000 feet

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  03/02/39

  	
   

  	
  Roger
  B. Owings

  	
   

  	
  Roy
  G. Barton

  	
   

  	
  35

  	
   

  	
  490

  	
   

  	
  T24S-R36E

  Sec.
  24: S/2 NE/4 & NE/4 NE/4 

  Sec.
  13: N/2 SE/4 & SW/4 SE/4 

  Depth
  Limit: Down to 4,000 feet

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  03/02/39

  	
   

  	
  North
  Central Texas Oil Co.

  	
   

  	
  Roy
  G. Barton

  	
   

  	
  35

  	
   

  	
  495

  	
   

  	
  T24S-R36E

  Sec.
  24: S/2 NE/4 & NE/4 NE/4 

  Sec.
  13: N/2 SE/4 & SW/4 SE/4 

  Depth
  Limit: Down to 4,000 feet

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12/23/41

  	
   

  	
  Peerless
  Oil and Gas Co.

  	
   

  	
  Roy
  G. Barton

  	
   

  	
  44

  	
   

  	
  254

  	
   

  	
  T24S-R36E

  Sec.
  24: S/2 NE/4 & NE/4 NE/4 

  Sec.
  13: N/2 SE/4 & SW/4 SE/4 

  Depth
  Limit: Down to 4,000 feet 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  04/22/47

  	
   

  	
  Atlantic
  Refining Co.

  	
   

  	
  Western
  Gas Co.

  	
   

  	
  63

  	
   

  	
  277

  	
   

  	
  T24S-R36E

  Sec.
  24: S/2 NE/4 & NE/4 NE/4 

  Sec.
  13: N/2 SE/4 & SWA SE/4 

  Depth
  Limit: Down to 4,000 feet

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5/24/26

  	
   

  	
  Sallie
  W. Harrison

  	
   

  	
  Charles
  T. Bates

  	
   

  	
  4

  	
   

  	
  251

  	
   

  	
  T24S-R36E

  Sec.
  25: NW/4

  Depth
  Limit: Down to 3,750 feet

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  08/01/45

  	
   

  	
  USA
  LC-063965

  	
   

  	
  Phillips
  Petroleum Co.

  	
   

  	
  58

  	
   

  	
  546

  	
   

  	
  T24S-R3GE

  Sec.
  24: E/2 SE/4

  Depth
  Limit: Down to 3,750 feet

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  06/01/26

  	
   

  	
  Ada
  E. Hunter Thomas

  	
   

  	
  Charles
  T. Bates

  	
   

  	
  4

  	
   

  	
  227

  	
   

  	
  T24S-R36E

  Sec.
  24: E/2 SW/4 & W/2 SE/4 

  Depth
  Limit: Down to 3,750 feet

  

 

It
is the Assignor’s intent to convey to Assignee only those portions of the above
oil, gas and mineral leases which are contained within the Cooper Jal Unit,
such unit being more particularly described in that certain Unit Agreement
dated January 15, 1970, recorded in Book 292, Page 352 of the records
of Lea County, New Mexico.

 

C. MARY RAY SIVLEY TRUST ACQUISITION

 

All
of Assignor’s interests in the unitized formations of the Cooper Jal Unit, Lea
County, New Mexico including all interests in that certain Federal Lease # NN112612 covering the
following lands:

 

The
Northwest Quarter (NW/4) of Section 19, T-24-S, R-37-E, Lea County, New
Mexico

 

11

 

COTTON DRAW 9L

 

(LEA COUNTY, NEW MEXICO)

 

County &
State: Lea, New Mexico

 

	
  Unique ID

  	
   

  	
  Lessor

  	
   

  	
  Lessee

  	
   

  	
  Dated

  	
   

  	
  County, State

  
	
  30-0000416-000

  	
   

  	
  Bureau of Land Management

  	
   

  	
  Jack B. Straw

  	
   

  	
  March 1, 1951

  	
   

  	
  Lea, New Mexico

  

 

	
  Lease
  Name: USA LC-061873-B

  	
   

  	
  Type: LSE Federal
  - Acquired Oil &Gas

  	
   

  	
  Agency ID: LC-061873-B

  

 

	
  Description:

  	
   

  	
  Tract County:

  
	
  T 25S R
  32E SEC 9 W2

  	
   

  	
  Lea, New
  Mexico

  

 

	
  County & State : Lea, New Mexico

  	
   

  	
  Operator: SDG Resources, L.P.

  

 

	
  Field

  	
   

  	
  Well ID

  	
   

  	
  Well Name

  	
   

  	
  Asset Type

  	
   

  	
  Location

  	
   

  	
  API

  
	
  Wildcat
  G-05 S253209L

  	
   

  	
  42440010

  	
   

  	
  Cotton
  Draw 9L Federal I

  	
   

  	
  Non
  Consent

  	
   

  	
  009/02S/032E

  	
   

  	
  300253370500

  
	
  Wildcat
  G-05 S253209L

  	
   

  	
  42440011

  	
   

  	
  Cotton
  Draw 9L Federall-L

  	
   

  	
  Working
  Interest

  	
   

  	
  009/02S/032E

  	
   

  	
  300253370500

  
	
  Wildcat
  G-05 S253209L

  	
   

  	
  42440012

  	
   

  	
  Cotton
  Draw 9L Federal I-U

  	
   

  	
  Working
  Interest

  	
   

  	
  009/02S/032E

  	
   

  	
  300253370500

  

 

BTBN

 

(EDDY COUNTY, NEW MEXICO AND LEA COUNTY, NEW MEXICO)

 

	
  LEASE
  NAME

  	
   

  	
  LESSOR

  	
   

  	
  DATE

  	
   

  	
  DESCRIPTION

  
	
  BTBN
  “25” Federal #2, 

  NM-911283 OGL

  	
   

  	
  USA
  (NM-89055)

  	
   

  	
  6/01/92

  	
   

  	
  Township
  24 South, Range 31 East Section 25; NE/4, containing 

  160.00 acres, more or less 

  Only as to the surface to 10,000 feet.

  

 

EDWARDS, JORDAN, and McELROY

 

(CRANE COUNTY, TEXAS and ECTOR COUNTY, TEXAS)

 

EDWARDS FIELD GRAYBURG UNIT

 

	
  TRACT
  NO.

  	
   

  	
  1

  
	
  OGL DATE

  	
   

  	
  March 3,
  1927

  
	
  LESSOR

  	
   

  	
  Will
  Edwards, et ux

  
	
  LESSEE

  	
   

  	
  Magnolia
  Petroleum Company

  
	
  RECORDED

  	
   

  	
  Volume
  22, Page 505 — Ector Co. Deed Records

  

 

12

 

	
   

  	
   

  	
  Volume
  16, Page 41 — Crane Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  The
  Grayburg/San Andres formation in and under the S/2 SE/4 and NE/4 SE/4 of
  Section 32, Block 44, Township 3 South, T&P Ry. Co. Survey, Ector
  County, Texas.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  2

  
	
  OGL DATE

  	
   

  	
  October 28,
  1930

  
	
  LESSOR

  	
   

  	
  Alphonse
  Kloh, et al

  
	
  LESSEE

  	
   

  	
  Humble
  Oil and Refining Company

  
	
  RECORDED

  	
   

  	
  Volume
  33, Page,524 — Ector Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  S/2 5/2
  of Section 31, Block 44, Township 3 South, T&P Ry. Co. Survey, Ector
  County, Texas.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  3

  
	
  OGL DATE

  	
   

  	
  October 7,
  1958

  
	
  LESSOR

  	
   

  	
  Will F.
  Edwards Estate, et al

  
	
  LESSEE

  	
   

  	
  Late Oil
  Company

  
	
  RECORDED

  	
   

  	
  Volume
  323, Page 240 — Ector Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  S/2 SW/4
  and NW/4 SW/4, less a 387’ strip in the North side thereof, in
  Section 30, Block 44, Township 3 South, T&P Ry. Co. Survey, Ector
  County, Texas.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  4

  
	
  OGL DATE

  	
   

  	
  June 28,
  1955

  
	
  LESSOR

  	
   

  	
  State of
  Texas

  
	
  LESSEE

  	
   

  	
  The
  Texas Company

  
	
  RECORDED

  	
   

  	
  Volume
  237, Page 429 — Ector Co. Deed Records Volume 96, Page 131 — Crane
  Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  NE/4
  Section 11, Block 35, University Lands, Crane and Ector Counties, Texas.

  
	
   

  	
   

  	
   

  
	
  TRACT NO.

  	
   

  	
  5

  
	
  OGL DATE

  	
   

  	
  June 28,
  1955

  
	
  LESSOR

  	
   

  	
  State of
  Texas

  
	
  LESSEE

  	
   

  	
  The
  Texas Company

  
	
  RECORDED

  	
   

  	
  Volume
  96, Page 128 — Crane Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  SE/4
  Section 11, Block 35, University Lands, Crane and Ector Counties, Texas.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  6

  
	
  OGL DATE

  	
   

  	
  January 22,
  1947

  
	
  LESSOR

  	
   

  	
  George
  C. Fraser, et al

  
	
  LESSEE

  	
   

  	
  S. C.
  Currie

  
	
  RECORDED

  	
   

  	
  Volume
  104, Page 315 — Ector Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  NW/4 of
  Section 33, Block 44, Township 3 South, T&P Ry. Co. Survey, Ector
  and Crane Counties, Texas.

  

 

13

 

	
  TRACT
  NO.

  	
   

  	
  7

  
	
  OGL DATE

  	
   

  	
  October 28,
  1930

  
	
  LESSOR

  	
   

  	
  Alphonse
  Kloh, et al

  
	
  LESSEE

  	
   

  	
  Humble
  Oil and Refining Company

  
	
  RECORDED

  	
   

  	
  Volume
  33, Page 524 — Ector Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  E/2 and
  SW/4 of Section 33, Block 44, Township 3 South, T&P Ry. Co. Survey,
  Ector and Crane Counties, Texas.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  8

  
	
  OGL DATE

  	
   

  	
  January 30,
  1946

  
	
  LESSOR

  	
   

  	
  Will P.
  Edwards, et ux

  
	
  LESSEE

  	
   

  	
  Fred
  Turner, Jr.

  
	
  RECORDED

  	
   

  	
  Volume
  42, Page 459 — Crane Co. Deed Records 

  
	
   

  	
   

  	
  Volume
  95, Page 341 — Ector Co. Deed Records 

  
	
  DESCRIPTION

  	
   

  	
  W/2 of
  Section 34, Block 44, Township 3 South, T &P Ry. Co. Survey, Crane and Ector Counties, Texas.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  9

  
	
  OGL DATE

  	
   

  	
  February 22,
  1955

  
	
  LESSOR

  	
   

  	
  Merle J.
  Steward & E. E. Ellis,
  Independent Executors and Trustees of the Estate of Will P. Edwards, Deceased

  
	
  LESSEE

  	
   

  	
  The
  Texas Company

  
	
  RECORDED

  	
   

  	
  Volume
  96, Page 137 — Crane Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  NW/4 of
  Section 2, Block B-23, Public School Land, Crane County, Texas.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  9

  
	
  OGL DATE

  	
   

  	
  July 14,
  1955

  
	
  LESSOR

  	
   

  	
  Mrs. Otho
  O. Sparks, et vir

  
	
  LESSEE

  	
   

  	
  The
  Texas Company

  
	
  RECORDED

  	
   

  	
  Volume
  100, Page 3 — Crane Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  NW/4 of
  Section 2, Block B-23, Public School Land, Crane County, Texas.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  9

  
	
  OGL DATE

  	
   

  	
  May 1,
  1972

  
	
  LESSOR

  	
   

  	
  Atlantic
  Richfield Company

  
	
  LESSEE

  	
   

  	
  APCO Oil
  Corporation, Agent

  
	
  RECORDED

  	
   

  	
  Volume
  231, Page 514 — Crane Co. Deed Records

  
	
  DESCRIPTION

  	
   

  	
  NW/4 of
  Section 2, Block B-23, Public School Land, Crane County, Texas, down to
  and including the depth of 3,735 feet from the surface of the ground, but not
  to exceed the base of the Grayburg formation.

  

 

14

 

JORDAN (SAN ANDRES) UNIT

 

	
  TRACT
  NO.

  	
   

  	
  1

  
	
  OGL DATE

  	
   

  	
  November 9,
  1936

  
	
  LESSOR

  	
   

  	
  Commissioner
  of the General Land Office

  
	
  LESSEE

  	
   

  	
  Sinclair
  Prairie Oil Company

  
	
  RECORDED

  	
   

  	
  Volume
  46, Page 96 – Deed Records

  
	
  DESCRIPTION

  	
   

  	
  NE/4
  Section 6, Block 35, University Lands, Ector County, Texas, from the
  surface down to 3,900 feet or the base of the San Andres formation as described
  in that certain Unit Agreement, dated May 1, 1966, for the Jordan (San
  Andres) Unit.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  2

  
	
  OGL DATE

  	
   

  	
  November 2,
  1939

  
	
  LESSOR

  	
   

  	
  Commissioner
  of the General Land Office

  
	
  LESSEE

  	
   

  	
  Snowden &
  McSweeney Company

  
	
  RECORDED

  	
   

  	
  Volume
  60, Page 441 – Deed Records

  
	
  DESCRIPTION

  	
   

  	
  SE/4
  Section 6, Block 35, University Lands, Ector County, Texas, from the
  surface down to 3,900 feet or the base of the San Andres formation as
  described in that certain Unit Agreement, dated May 1, 1966, for the
  Jordan (San Andres) Unit.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  3

  
	
  OGL DATE

  	
   

  	
  March 9,
  1937

  
	
  LESSOR

  	
   

  	
  Commissioner
  of the General Land Office

  
	
  LESSEE

  	
   

  	
  Sinclair
  Prairie Oil Company

  
	
  RECORDED

  	
   

  	
  Volume
  47, Page 143 – Deed Records

  
	
  DESCRIPTION

  	
   

  	
  NW/4
  Section 9, Block 35, University Lands, Ector County, Texas, from the
  surface down to 3,900 feet or the base of the San Andres formation as
  described in that certain Unit Agreement, dated May 1, 1966, for the
  Jordan (San Andres) Unit.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  4

  
	
  OGL DATE

  	
   

  	
  October 5,
  1929

  
	
  LESSOR

  	
   

  	
  Commissioner
  of the General Land Office

  
	
  LESSEE

  	
   

  	
  Prairie
  Oil and Gas Company

  
	
  RECORDED

  	
   

  	
  Volume
  20, Page 596 – Deed Records

  
	
  DESCRIPTION

  	
   

  	
  NW/4
  Section 14, Block 35, University Lands, Crane County, Texas, from the
  surface down to 3,900 feet or the base of the San Andres formation as
  described in that certain Unit Agreement, dated May 1, 1966, for the
  Jordan (San Andres) Unit.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  5

  
	
  OGL DATE

  	
   

  	
  December 8,
  1950

  
	
  LESSOR

  	
   

  	
  Commissioner
  of the General Land Office

  
	
  LESSEE

  	
   

  	
  Stanolind
  Oil and Gas Company

  
	
  RECORDED

  	
   

  	
  Volume
  66, Page 165 - Deed Records

  

 

15

 

	
  DESCRIPTION

  	
   

  	
  E/2 SW/4
  Section 14, Block 35, University Lands, Crane County, Texas, from the
  surface down to 3,900 feet or the base of the San Andres formation as
  described in that certain Unit Agreement, dated May 1, 1966, for the
  Jordan (San Andres) Unit.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  6

  
	
  OGL DATE

  	
   

  	
  October 5,
  1929

  
	
  LESSOR

  	
   

  	
  Commissioner
  of the General Land Office

  
	
  LESSEE

  	
   

  	
  Prairie
  Oil and Gas Company

  
	
  RECORDED

  	
   

  	
  Volume
  20, Page 599 – Deed Records

  
	
  DESCRIPTION

  	
   

  	
  SW/4
  Section 13, Block 35, University Lands, Crane County, Texas, from the
  surface down to 3,900 feet or the base of the San Andres formation as
  described in that certain Unit Agreement, dated May 1, 1966, for the
  Jordan (San Andres) Unit.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  7

  
	
  OGL DATE

  	
   

  	
  November 12,
  1929

  
	
  LESSOR

  	
   

  	
  Commissioner
  of the General Land Office

  
	
  LESSEE

  	
   

  	
  Snowden &
  McSweeney Company

  
	
  RECORDED

  	
   

  	
  Volume
  21, Page 60 – Deed Records

  
	
  DESCRIPTION

  	
   

  	
  SE/4
  Section 13, Block 35, University Lands, Crane County, Texas, from the
  surface down to 3,900 feet or the base of the San Andres formation as
  described in that certain Unit Agreement, dated May 1, 1966, for the
  Jordan (San Andres) Unit.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  8

  
	
  OGL DATE

  	
   

  	
  November 12,
  1929

  
	
  LESSOR

  	
   

  	
  Commissioner
  of the General Land Office

  
	
  LESSEE

  	
   

  	
  Prairie
  Oil and Gas Company

  
	
  RECORDED

  	
   

  	
  Volume
  21, Page 126 – Deed Records

  
	
  DESCRIPTION

  	
   

  	
  NW/4
  Section 12, Block 35, University Lands, Crane and Ector Counties, Texas,
  from the surface down to 3,900 feet or the base of the San Andres formation
  as described in that certain Unit Agreement, dated May 1, 1966, for the
  Jordan (San Andres) Unit.

  
	
   

  	
   

  	
   

  
	
  TRACT
  NO.

  	
   

  	
  9

  
	
  OGL DATE

  	
   

  	
  December 8,
  1950

  
	
  LESSOR

  	
   

  	
  Commissioner
  of the General Land Office

  
	
  LESSEE

  	
   

  	
  Stanolind
  Oil and Gas Company

  
	
  RECORDED

  	
   

  	
  Volume
  66, Page 165 – Deed Records

  
	
  DESCRIPTION

  	
   

  	
  W/2 SW/4
  Section 14, Block 35, University Lands, Crane County, Texas, from the
  surface down to 4000 feet.

  

 

16

 

McELROY UNIT

 

	
  STATE
  –NY- LEASE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  OGL
  NUMBER

  	
   

  	
  100590

  
	
  OGL DATE

  	
   

  	
  May 19,
  1999

  
	
  LESSOR

  	
   

  	
  State of
  Texas and the Board for Lease of University Lands

  
	
  LESSEE

  	
   

  	
  Pronto,
  Ltd

  
	
  RECORDED

  	
   

  	
  Volume
  406, Page 408 – Official Public Records

  
	
  DESCRIPTION

  	
   

  	
  SE/4
  Section 13, Block 30, University Lands, Crane County, Texas.

  
	
   

  	
   

  	
   

  
	
  STATE
  –NZ- LEASE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  OGL
  NUMBER

  	
   

  	
  95512

  
	
  OGL DATE

  	
   

  	
  June 23,
  1993

  
	
  LESSOR

  	
   

  	
  State of
  Texas and the Board for Lease of University Lands

  
	
  LESSEE

  	
   

  	
  WJC
  Engineering & Management

  
	
  RECORDED

  	
   

  	
  Volume
  351, Page 811 — Official Public Records

  
	
  DESCRIPTION

  	
   

  	
  NE/4
  Section 24, Block 30, University Lands, Crane County, Texas.

  
	
   

  	
   

  	
   

  
	
  UNIVERSITY –B- LEASE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  OGL
  NUMBER

  	
   

  	
  40351

  
	
  OGL DATE

  	
   

  	
  June 19,
  1953

  
	
  LESSOR

  	
   

  	
  State of
  Texas and the Board for Lease of University Lands

  
	
  LESSEE

  	
   

  	
  The Pure
  Oil Company

  
	
  RECORDED

  	
   

  	
  Volume 80,
  Page 424 — Deed Records

  
	
  DESCRIPTION

  	
   

  	
  SE/4
  Section 24, Block 30, University Lands, Crane County, Texas, from the
  surface of the earth down to 4,301 feet subsurface and all depths below the
  Barnett Shale formation.

  

 

GRAND CLEARFORK

 

(PECOS COUNTY, TEXAS)

 

The Grand Clearfork Unit

 

1.                                       Oil and
Gas Lease dated June 4, 1968, by and between Atlantic Richfield Company,
Lessor, and T. J. Welfelt, Lessee, recorded in Volume 365, Page 372, Lease
Records, Pecos County, Texas, and covering Tract 1 of the Grand Clearfork Unit
as follows:

 

17

 

The E/2 of the South 160 acres of Section 15, Block 11, H&GN
Ry. Co. Survey, Pecos County, Texas, containing 80 acres, from the surface down
to 3,322 feet below the surface.

 

2.                                       Oil and
Gas Lease dated August 19, 1968, by and between Atlantic Richfield
Company, Lessor, and T. J. Welfelt, Lessee, recorded in Volume 368, Page 23,
Lease Records, Pecos County, Texas, and covering the W/2 of the South 160 acres
of Section 15, Block 11, H&GN Ry. Co. Survey, Pecos County, Texas,
from the surface down to 3,330 feet below the surface, this acreage being a
portion of Tract 2 of the Grand Clearfork Unit as follows:

 

The W/2 of the South 160 acres of Section 15, from the surface down
to 3,330 feet below the surface and the S/2 of the North 160 acres of the South
320 acres of Section 15, from the surface down to 3,310 feet below the
surface, Block 11, H&GN Ry. Co. Survey, Pecos County, Texas, containing 160
acres.

 

3.                                       Oil and
Gas Lease dated October 14, 1968, by and between Atlantic Richfield Company,
Lessor, and T. J. Welfelt, Lessee, recorded in Volume 371, Page 220, Lease
Records, Pecos County, Texas, and covering the S/2 of the North 160 acres of
the South 320 acres of Section 15, Block 11, H&GN Ry. Co. Survey, this
acreage being a portion of Tract 2 of the Grand Clearfork Unit as follows:

 

The W/2 of the South 160 acres of Section 15, from the surface down
to 3,330 feet below the surface and the S/2 of the North 160 acres of the South
320 acres of Section 15, from the surface down to 3,310 feet below the
surface, Block 11, H&GN Ry. Co. Survey, Pecos County, Texas, containing 160
acres.

 

4.                                       Oil and
Gas Lease dated March 20, 1967, by and between West Texas Utilities Company,
a corporation, Individually and as agent for the State of Texas, Lessor, and T.
J.  Welfelt,
Lessee, recorded in Volume 351, Page 534, Lease Records, Pecos County,
Texas, and covering Tract 3 of the Grand Clearfork Unit as follows:

 

The South 40 acres of Section 16, Block 11, H&GN Ry. Co.
Survey, Pecos County, Texas containing 40 acres, from the surface down to 3,500
feet below the surface.

 

5.                                       Oil and
Gas Lease dated July 16, 1957, by and between J. Alfred Roosevelt, et ux, and
John W. Scott, et ux, Individually and as agents for the State of Texas,
Lessors, and Kerr-McGee Oil Industries, Inc., Lessee, recorded in Volume
247, Page 302, Lease Records, Pecos County, Texas, and covering Tract 4 of
the Grand Clearfork Unit as follows:

 

The North 200 acres of the South 240 acres of Section 16, Block 11,
H&GN Ry. Co. Survey, Pecos County, Texas, containing 200 acres, from the
surface down to 3,280 feet below the surface.

 

18

 

6.                                       Oil and
Gas Lease dated July 14, 1967, by and between Atlantic Richfield Company,
Lessor, and T. J. Welfelt, Lessee, recorded in Volume 359, Page 129, Lease
Records, Pecos County, Texas, and covering Tract 5 of the Grand Clearfork Unit
as follows:

 

The W/2 of the South 160 acres of Section 17, Block 11, H&GN
Ry. Co. Survey, Pecos County, Texas, containing 80 acres, from the surface down
to 3,307 feet below the surface.

 

7.                                       Oil and
Gas Lease dated September 14, 1969, by and between Atlantic Richfield
Company, Lessor, and T. J. Welfelt, Lessee, recorded in Volume 387, Page 262,
Lease Records, Pecos County, Texas, and covering the NW/4 NE/4 and NE/4 NW/4 of
Section 35, Block 11, H&GN Ry. Co. Survey, Pecos County, Texas,
containing 80.0 acres, more or less, from the surface down to 5,187 feet below
the surface, this acreage being a portion of Tract 6 of the Grand Clearfork
Unit as follows:

 

The NW/4 NE/4, NE/4 NW/4, NW/4 SE/4, SE/4 NW/4 and SW/4 NE/4 of Section 35,
Block 11, H&GN Ry. Co. Survey, Pecos County, Texas, containing 200 acres,
more or less, limited to the following depths:

 

	
  NW/4
  NE/4 of Section 35:

  	
  Surface
  to 5,187’

  
	
  NE/4
  NW/4 of Section 35:

  	
  Surface
  to 5,187’

  
	
  NW/4
  SE/4 of Section 35:

  	
  Surface
  to 3,397’

  
	
  SE/4
  NW/4 of Section 35:

  	
  Surface
  to 3,397’

  
	
  SW/4
  NE/4 of Section 35:

  	
  Surface
  to 3,300’

  

 

8.                                       Oil and
Gas Lease dated June 11, 1970, by and between Atlantic Richfield Company,
Lessor, and Carl F. Lawrence, Lessee, recorded in Volume 394, Page 172,
Lease Records, Pecos County, Texas, and covering the SW/4 NE/4 of Section 35,
Block 11, H&GN Ry. Co. Survey, containing 40 acres, more or less, from the
surface down to 3,300 feet below the surface, this acreage being a portion of
Tract 6 of the Grand Clearfork Unit as follows:

 

The NW/4 NE/4, NE/4 NW/4, NW/4 SE/4, SE/4 NW/4 and SW/4 NE/4 of Section 35,
Block 11, H&GN Ry. Co. Survey, Pecos County, Texas, containing 200 acres,
more or less, limited to the following depths:

 

	
  NW/4
  NE/4 of Section 35:

  	
  Surface
  to 5,187’

  
	
  NE/4
  NW/4 of Section 35:

  	
  Surface
  to 5,187’

  
	
  NW/4
  SE/4 of Section 35:

  	
  Surface
  to 3,397’

  
	
  SE/4
  NW/4 of Section 35:

  	
  Surface
  to 3,397’

  
	
  SW/4
  NE/4 of Section 35:

  	
  Surface
  to 3,300’

  

 

9.                                       Oil and
Gas Lease dated August 2, 1970, by and between Atlantic Richfield Company,
Lessor, and Carl F. Lawrence, Lessee, recorded in Volume 398, Page 40,
Lease Records, Pecos County, Texas, and covering the NW SE/4 and SE/4 NW/4 of Section 35,
Block 11, H&GN Ry. Co. Survey, containing 80 acres, more or less, from the
surface down to 3,397 feet below the surface, this acreage being a portion of
Tract 6 of the Grand Clearfork Unit as follows:

 

19

 

The NW/4 NE/4, NE/4 NW/4, NW/4 SE/4, SE/4 NW/4 and SW/4 NE/4 of Section 35,
Block 11, H&GN Ry. Co. Survey, Pecos County, Texas, containing 200 acres,
more or less, limited to the following depths:

 

	
  NW/4
  NE/4 of Section 35:

  	
  Surface
  to 5,187’

  
	
  NE/4
  NW/4 of Section 35:

  	
  Surface
  to 5,I87’

  
	
  NW/4
  SE/4 of Section 35:

  	
  Surface
  to 3,397’

  
	
  SE/4
  NW/4 of Section 35:

  	
  Surface
  to 3,397’

  
	
  SW/4
  NE/4 of Section 35:

  	
  Surface
  to 3,300’

  

 

10.                                 Oil and
Gas Lease dated February 10, 1971, by and between Atlantic Richfield
Company, Lessor, and Carl F. Lawrence, Lessee, recorded in Volume 403, Page 353,
Lease Records, Pecos County, Texas, and covering the N/2 NW/4 of Section 29
and NE/4 SE/4, NW/4 NW/4 of Section 35, Block 11, H&GN Ry. Co. Survey,
containing 160 acres, more or less, from the surface down to 3,400 feet below
the surface, this acreage being a portion of Tract 7 of the Grand Clearfork
Unit as follows:

 

The NW/4 and NW/4 NE/4 of Section 29, and the E/2 SE/4 and NW/4
NW/4 of Section 35, Block 11, H&GN Ry. Co. Survey, Pecos County,
Texas, containing 320 acres, more or less, limited to the following depths:

 

	
  N/2 NW/4
  of Section 29:

  	
  Surface
  to 3,400’

  
	
  SE/4
  NW/4 of Section 29:

  	
  Surface
  to 3,400’

  
	
  SW/4
  NW/4 of Section 29:

  	
  Surface
  to 3,375’

  
	
  NW/4
  NE/4 of Section 29:

  	
  Surface
  to 3,375’

  
	
  E/2 SE/4
  of Section 35:

  	
  Surface
  to 3,400’

  
	
  NW/4
  NW/4 of Section 35:

  	
  Surface
  to 3,400’

  

 

11.                                 Oil and
Gas Lease dated May 25, 1971, by and between Atlantic Richfield Company,
Lessor, and Carl F. Lawrence, Lessee, recorded in Volume 407, Page 173,
Lease Records, Pecos County, Texas, and covering the NW/4 NE/4 and SW/4 NW/4 of
Section 29, Block 11, H&GN Ry. Co. Survey, containing 80 acres, more
or less, from the surface down to 3,375 feet below the surface, this acreage
being a portion of Tract 7 of the Grand Clearfork Unit as follows:

 

The NW/4 and NW/4 NE/4 of Section 29, and the E/2 SE/4 and NW/4
NW/4 of Section 35, Block 11, H&GN Ry. Co. Survey, Pecos County,
Texas, containing 320 acres, more or less, limited to the following depths:

 

	
  N/2 NW/4
  of Section 29:

  	
  Surface
  to 3,400’

  
	
  SE/4
  NW/4 of Section 29:

  	
  Surface
  to 3,400’

  
	
  SW/4
  NW/4 of Section 29:

  	
  Surface
  to 3,375’

  
	
  NW/4
  NE/4 of Section 29:

  	
  Surface
  to 3,375’

  
	
  E/2 SE/4
  of Section 35:

  	
  Surface
  to 3,400’

  
	
  NW/4 NW/4
  of Section 35:

  	
  Surface
  to 3,400’

  

 

20

 

12.                                 Oil and Gas Lease dated September 8,
1971, by and between Atlantic Richfield Company, Lessor, and Wellaw
Corporation, Lessee, recorded in Volume 409, Page 516, Lease Records,
Pecos County, Texas, and covering the SE/4 NW/4 of Section 29, and the
SE/4 SE/4 of Section 35, Block 11, H&GN Ry. Co. Survey, containing 80
acres, more or less, from the surface down to 3,400 feet below the surface,
this acreage being a portion of Tract 7 of the Grand Clearfork Unit as follows:

 

The NW/4 and NW/4 NE/4 of Section 29, and the E/2 SE/4 and NW/4
NW/4 of Section 35, Block 11, H&GN Ry. Co. Survey, Pecos County,
Texas, containing 320 acres, more or less, limited to the following depths:

 

	
  N/2 NW/4
  of Section 29:

  	
  Surface
  to 3,400’

  
	
  SE/4
  NW/4 of Section 29:

  	
  Surface
  to 3,400’

  
	
  SW/4
  NW/4 of Section 29:

  	
  Surface
  to 3,375’

  
	
  NW/4
  NE/4 of Section 29:

  	
  Surface
  to 3,375’

  
	
  E/2 SE/4
  of Section 35:

  	
  Surface
  to 3,400’

  
	
  NW/4
  NW/4 of Section 35:

  	
  Surface
  to 3,400’

  

 

13.                                 Oil and Gas Lease dated May 1,
1984, by and between Atlantic Richfield Company, Lessor, and C. F. Lawrence &
Assoc., Inc., Lessee, recorded in Volume 600, Page 407, Lease
Records, Pecos County, Texas, and covering Tract 8 of the Grand Clearfork Unit
as follows:

 

40 acres, more or less, out of the SW/4 of Section 35, Block 11,
H&GN Ry. Co. Survey, Pecos County, Texas, from the surface down to 3,200
feet below the surface, more particularly described as follows:

 

BEGINNING at a point from which an iron pipe set for the SW corner of said
Section 35 bears S 11 deg 48’29” W 1219.5 ft and N 78 deg 06’18” W
1226.4ft;

 

THENCE N 11 deg 48’29” E 1420.6 ft to a point from which the Fee “35” #1
bears S 11 deg 48’29” W 370.0 ft and S 78 deg 06’18” E 184.5 ft;

 

THENCE S 78 deg 06’18” E 1226.5 ft to a point;

 

THENCE S 11 deg 48’29” W 1420.6ft to a point;

 

THENCE N 78 deg 06’18” W 1226.5ft to the place of beginning.

 

21

 

IATAN

 

(HOWARD COUNTY, TEXAS and MITCHELL COUNTY, TEXAS)

 

IATAN PROPERTIES

 

LEASE NAME

 

Willard R. Read

The SE/4
of Section 37, Block 30, T-I-N, T & P Railway Company Survey,
Howard County, Texas.

 

W. R. Read “A” Lease:

The SE/4
NE/4 NW/4, W/2 NE/4 NW/4, NE/4 SE/4 NW/4 and W/2 SE/4 NW/4 of Section 48,
Block 30, T-I-N, T & P Railway Company Survey, Howard County, Texas,
containing 60 acres, more or less from the surface down to a depth of 3500 feet
below the surface.

 

W. R. Read “B” Lease:

The NE/4
of Section 48, Block 30, T-I-N, T & P Railway Company Survey,
Howard County, Texas.

 

W. R. Read “C” Lease:

The SE/4
NW/4 NW/4, NE/4 NE/4 NW/4 AND SE/4 SE/4 NW/4 of Section 48, Block 30, T-I-N,
T & P Railway Company Survey, Howard County, Texas, containing 30
acres more or less.

 

W. L. FOSTER “A”:

The 70
acres of land, more or less, lying south of the T & P Railway Company
right-of-way in Section 42, Block 29, T-I-N, T & P Railway
Company Survey, Howard & Mitchell Counties, Texas.

 

W. L. FOSTER “B”:

The NW/4
of Section 43, Block 29, T-I-N, T & P Railway Company Survey,
Howard County, Texas.

 

W.R. READ “A” LEASE

 

01)                                Oil and Gas Lease dated January 20,
1943, between William Brookover, Lessor, and Cosden Petroleum Corporation,
Lessee, recorded in Volume 115, Page 163, Deed Records of Howard County,
Texas, covering all of the Northwest Quarter (NW/4) and the Northeast Quarter
(NE/4) of Section 48, Block 30, T-1-N, T&P RR Co. Survey, Howard
County, Texas.

 

02)                                Oil and Gas Lease dated January 20,
1943, between David Lyon, Lessor, and Cosden Petroleum Corporation, Lessee,
recorded in Volume 115, Page 167, Deed Records of Howard County, Texas,
covering all of the Northwest Quarter (NW/4) and the Northeast Quarter (NE/4)
of Section 48, Block 30, T-1-N, T&P RR Co. Survey, Howard County,
Texas.

 

22

 

03)                                Oil and Gas Lease dated September 30,
1943, between Alfred G. Saenger, Lessor, and Cosden Petroleum Corporation,
Lessee, recorded in Volume 116, Page 412, Deed Records of Howard County,
Texas covering all of the South Half (S/2) and Northwest Quarter (NW/4) of Section 48,
the Northeast Quarter (NE/4), Southeast Quarter (SE/4) and Northwest Quarter
(NW/4) of Section 47, all in Block 30, T-1-N, T&P RR Co. Survey,
Howard County, Texas.

 

04)                                Oil and Gas Lease dated January 20,
1943, between James A. Hopkins, Lessor, and Cosden Petroleum Corporation,
Lessee, recorded in Volume 115, Page 165, Deed Records of Howard County,
Texas, covering all of the Northwest Quarter (NW/4) and the Northeast Quarter
(NE/4) of Section 48, Block 30, T-1-N, T&P RR Co. Survey, Howard
County, Texas.

 

05)                                Oil and Gas Lease dated January 20,
1943, between G.A. Torrence, Lessor, and Cosden Petroleum Corporation, Lessee,
recorded in Volume 115, Page 160, Deed Records of Howard County, Texas,
covering all of the Northwest Quarter (NW/4) and the Northeast Quarter (NE/4)
of Section 48, Block 30, T-1-N, T&P RR Co. Survey, Howard County,
Texas.

 

06)                                Oil and Gas Lease dated October 21,
1947, between Jessie Ault Strauss and husband, Laurence Strauss, Lessors, and
Cosden Petroleum Corporation, Lessee, recorded in Volume 140, Page 639,
Deed Records of Howard County, Texas, covering all of the Southeast Quarter
(SE/4), Southwest Quarter (SW/4) and the Northwest Quarter (NW/4) of Section 48,
the Southeast Quarter (SE/4), Southwest Quarter (SWi4), Northwest Quarter
(NW/4) and Northeast Quarter (NE/4) of Section 47, all in Block 30, T-1-N,
T&P RR Co. Survey, Howard County, Texas.

 

07)                                Oil and Gas Lease dated January 20,
1943, between Lora Ault Vrooman, a widow, Lessor, and Cosden Petroleum
Corporation, Lessee, recorded in Volume 140, Page 641, Deed Records of
Howard County, Texas, covering all of the Northwest Quarter (NW/4) and the
Northeast Quarter (NE/4) of Section 48, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

08)                                Oil and Gas Lease dated January 30,
1943, between J. Ernest Their, Lessor, and Cosden Petroleum Corporation,
Lessee, recorded in Volume 115, Page 156, Deed Records of Howard County,
Texas, covering all of the Northwest Quarter (NW/4) of Section 48, and the
Northeast Quarter (NE/4) of Section 47, all in Block 30, T-1-N, T&P RR
Co. Survey, Howard County, Texas.

 

09)                                Oil and Gas Lease dated January 20,
1943, between Leek Royalty and Oil Co., Lessor, and Cosden Petroleum
Corporation, Lessee, recorded in Volume 115, Page 175, Deed Records of
Howard County, Texas, covering all of the Northwest Quarter (NW/4) and the
Northeast Quarter (NE/4) of Section 48, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

10)                                Oil and Gas Lease dated January 20,
1943, between William R. Read and wife, Ruby Read, Lessor, and Cosden Petroleum
Corporation, Lessee, recorded in Volume 115, Page

 

23

 

170, Deed Records of Howard County, Texas, covering all of the Northwest
Quarter (NW/4) of Section 48, Block 30, T-1-N, T&P RR Co. Survey,
Howard County, Texas.

 

11)                                Oil and Gas Lease dated March 1, 1943, between R.H.
Ratliff, Lessor, and Cosden Petroleum Corporation, Lessee, recorded in Volume
115, Page 473, Deed Records of Howard County, Texas, covering all of the
Northwest Quarter (NW/4) and the Northeast Quarter (NE/4) of Section 48,
Block 30, T-1-N, T&P RR Co. Survey, Howard County, Texas.

 

12)                                Oil and Gas Lease dated January 1,
1988, between Enron Oil & Gas Company, Lessor, and CNG Producing
Company - Tulsa, Lessee, recorded in Volume 613, Page 548, Deed Records of
Howard County, Texas, covering all of the Northwest Quarter (NW/4) and the
Northeast Quarter (NE/4) of Section 48, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

W.R. READ “B” LEASE

 

13)                                Oil and Gas Lease dated February 24, 1942, between William
Brookover and R.H. Ratliff, Lessor, and E.V. Mitchell, Lessee, recorded in
Volume 111, Page 517, Deed Records of Howard County, Texas, covering all
of the Northwest Quarter (NW/4) and the Northeast Quarter (NE/4) of Section 48,
Block 30, T-I-N, T&P RR Co. Survey, Howard County, Texas.

 

14)                                Oil and Gas Lease dated February 20,
1942, between David Lyon, Lessor, and E.V. Mitchell, Lessee, recorded in Volume
111, Page 503, Deed Records of Howard County, Texas, covering all of the
Northwest Quarter (NW/4) and the Northeast Quarter (NE/4) of Section 48,
Block 30, T-1-N, T&P RR Co. Survey, Howard County, Texas.

 

15)                                Oil and Gas Lease dated February 20,
1942, between Alfred G. Saenger, Lessor, and E.V. Mitchell, Lessee, recorded in
Volume 112, Page 256, Deed Records of Howard County, Texas, covering-all of the
Northwest Quarter (NW/4) and the Northeast Quarter (NE/4) of Section 48,
Block 30, T-l-N, T&P RR Co. Survey, Howard County, Texas.

 

16)                                Oil and Gas Lease dated February 20,
1942, between James A. Hopkins, Lessor, and E.V. Mitchell, Lessee, recorded in
Volume 112, Page 260, Deed
Records of Howard County, Texas, covering all of the Northwest Quarter (NW/4)
and the Northeast Quarter (NE/4) of Section 48, Block 30, T-1-N, T&P
RR Co. Survey, Howard County, Texas.

 

17)                                Oil and Gas Lease dated February 20,
1942, between G.A. Torrence, Lessor, and E.V. Mitchell, Lessee, recorded in Volume
111, Page 501, Deed Records of Howard County, Texas, covering all of the
Northwest Quarter (NW/4) and the Northeast Quarter (NE/4) of Section 48,
Block 30, T-1-N, T&P RR Co. Survey, Howard County, Texas.

 

18)                                Oil and Gas Lease dated February 20,
1942, between J. Ernest Thier, Lessor, and E.V. Mitchell, Lessee, recorded in
Volume 111, Page 505, Deed Records of Howard County, Texas, covering all
of the Northwest Quarter (NW/4) and the Northeast Quarter (NE/4) of Section 48,
Block 30, T-1-N, T&P RR Co. Survey, Howard County. Texas.

 

24

 

19)                                Oil and Gas Lease dated March 24,
1942, between Leek Royalty and Oil Co., Lessor, and E.V. Mitchell, Lessee,
recorded in Volume 111, Page 507, Deed Records of Howard County, Texas,
covering all of the Northwest Quarter (NW/4) and the Northeast Quarter (NE/4)
of Section 48, Block 30, T-1-N, T&P RR Co. Survey, Howard County,
Texas.

 

20)                                Oil and Gas Lease dated January 30,
1942, between Willard R. Read and wife, Ruby Reed, Lessor, and E.V. Mitchell,
Lessee, recorded in Volume 112, Page 252, Deed Records of Howard County,
Texas, covering all of the Northeast Quarter (NE/4) of Section 48, Block
30, T-1-N, T&P RR Co. Survey, Howard County, Texas.

 

21)                                Oil and Gas Lease dated January 1
1988, between Enron Oil & Gas Company, Lessor, and CNG Producing
Company - Tulsa, Lessee, recorded in Volume 613, Page 548, Deed Records of
Howard County, Texas, covering all of the Northwest Quarter (NW/4) and the
Northeast Quarter (NE/4) of Section 48, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

W.R. READ “C” LEASE

 

22)                                Oil and Gas Lease dated January 20,
1943, between J. Ernest Thier, Lessor, and Cosden Petroleum Corporation,
Lessee, recorded in Volume 115, Page 156, Deed Records of Howard County,
Texas, covering all of the Northwest Quarter (NW/4) of Section 48, and the
Northeast Quarter (NE/4) of Section 47, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

23)                                Oil and Gas Lease dated January 20,
1943, between G.A. Torrence, Lessor, and Cosden Petroleum Corporation, Lessee,
recorded in Volume 115, Page 160, Deed Records of Howard County, Texas,
covering all of the Northwest Quarter (NW/4) of Section 48, and the
Northeast Quarter (NE/4) of Section 47, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

24)                                Oil and Gas Lease-dated January 20,
1943, between Wm. Brookover, Lessor, and Cosden Petroleum Corporation, Lessee,
recorded in Volume 115, Page 163, Deed Records of Howard County, Texas,
covering all of the Northwest Quarter (NW/4) of Section 48, and the
Northeast Quarter (NE/4) of Section 47, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

25)                                Oil and Gas Lease dated January 20,
1943, between James A. Hopkins,
Lessor, and Cosden Petroleum Corporation, Lessee, recorded in Volume 115, Page 165,
Deed Records of Howard County, Texas, covering all of the Northwest Quarter
(NW/4) of Section 48, and the Northeast Quarter (NE/4) of Section 47,
Block 30, T-1-N, T&P RR Co. Survey, Howard County, Texas.

 

26)                                Oil and Gas Lease dated January 20,
1943, between David Lyon, Lessor, and Cosden Petroleum Corporation, Lessee,
recorded in Volume 115, Page 167, Deed Records of Howard County, Texas,
covering all of the Northwest Quarter (NW/4) of Section 48, and the
Northeast Quarter (NE/4) of Section 47, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

25

 

27)                                Oil and Gas Lease dated January 20,
1943, between Willard R. Read and wife Ruby Read, Lessor, and Cosden Petroleum
Corporation, Lessee, recorded in Volume 115, Page 170, Deed Records of
Howard County, Texas, covering all of the Northwest Quarter (NW/4) of Section 48,
Block 30, T-1-N, T&P RR Co. Survey, Howard County, Texas.

 

28)                                Oil and Gas Lease dated January 20,
1943, between Leck Royalty and Oil Company, Lessor, and Cosden Petroleum
Corporation, Lessee, recorded in Volume 115, Page 175, Deed Records of
Howard County, Texas, covering all of the Northwest Quarter (NW/4) of Section 48,
and the Northeast Quarter (NE/4) of Section 47, Block 30, T-1-N, T&P
RR Co. Survey, Howard County, Texas.

 

29)                                Oil and Gas Lease dated March 1,
1943, between R.H. Ratliff, Lessor, and Cosden Petroleum Corporation, Lessee,
recorded in Volume 114, Page 473, Deed Records of Howard County, Texas,
covering all of the Northwest Quarter (NW/4) of Section 48, and the
Northeast Quarter (NE/4) of Section 47, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

30)                                Oil and Gas Lease dated September 30,
1943, between Alfred Saenger, Lessor, and Cosden Petroleum Corporation, Lessee,
recorded in Volume 116, Page 412, Deed Records of Howard County, Texas,
covering all of the South Half (S/2) and Northwest Quarter (NW/4) of Section 48,
and the Northeast Quarter (NE/4), Southeast Quarter (SE/4) and Northwest
Quarter (NW/4) of Section 47, Block 30, T-1-N, T&P RR Co. Survey,
Howard County, Texas.

 

31)                                Oil and Gas Lease dated October 21,
1947, between Lora Ault Vrooman, a widow, Lessor, and Cosden Petroleum
Corporation, Lessee, recorded in Volume 140, Page 641, Deed Records of
Howard County, Texas, covering all of the Southeast Quarter (SE/4), Southwest
Quarter (SW/4) and Northwest Quarter (NW/4) of Section 48, and the
Southeast Quarter (SE/4), Southwest Quarter (SW/4), Northwest Quarter (NW/4)
and Northeast Quarter (NE/4) of Section 47, Block 30, T-1 -N, T&P RR
Co. Survey, Howard County, Texas.

 

32)                                Oil and Gas Lease dated October 21,
1947, between Jessie Ault Strauss and husband, Laurence Strauss, Lessor, and
Cosden Petroleum Corporation, Lessee, recorded in Volume 140, Page 639,
Deed Records of Howard County, Texas, covering all of the Southeast Quarter
(SE/4), Southwest Quarter (SW/4) and Northwest Quarter (NW/4) of Section 48,
and the Southeast Quarter (SE/4), Southwest Quarter (SW/4), Northwest Quarter
(NW/4) and Northeast Quarter (NE/4) of Section 47, Block 30, T-1 -N,
T&P RR Co. Survey, Howard County, Texas.

 

33)                                Oil and Gas Lease dated December 4,
1987, between Stanley N. Nixon, Lessor, and D.L. Ray, Inc., Lessee,
recorded in Volume 608, Page 525, Deed Records of Howard County, Texas,
covering all of the Northwest Quarter (NW/4) of Section 48, and the
Northeast Quarter (NE/4) of Section 47, Block 30, T-1-N, T&P RR Co.
Survey, Howard County, Texas.

 

26

 

34)                                Oil and
Gas Lease dated January 1, 1988, between Enron Oil & Gas Company,
Lessor, and CNG Producing Company - Tulsa, Lessee, recorded in Volume 613, Page 548,
Deed Records of Howard County, Texas, covering all of the Northwest Quarter
(NW/4) of Section 48, and the Northeast Quarter (NE/4) of Section 47,
Block 30, T-1-N, T&P RR Co. Survey, Howard County, Texas.

 

W.L. FOSTER “A” LEASE

 

35)                                Oil and Gas Lease dated February 7,
1942, between W.L. Foster and wife, Mary E. Foster, Lessor, and E.V. Mitchell,
Lessee, recorded in Volume 112, Page 258, Deed Records of Howard County,
Texas, covering all of the 70 acres of land, more or less lying South of the
T&P Railway Company right-of-way in Section 42, Block 29, T-1-N,
T&P RR Co. Survey, Howard and Mitchell Counties, Texas.

 

36)                                Oil and Gas Lease dated March 28,
1942, between A.C. Scott and wife, Victoria Scott, Lessor, and E.V. Mitchell,
Lessee, recorded in Volume 102, Page 589, Deed Records of Mitchell County,
Texas, and in Volume 112, Page 152, Deed Records of Howard County, Texas,
covering all of the 70 acres of land, more or less lying South of the T&P
Railway Company right-of-way in Section 42, Block 29, T-1-N, T&P RR
Co. Survey, Howard County, Texas.

 

37)                                Oil and Gas Lease dated August 18,
1942, between A.C. Scott and wife, Victoria Scott; W.L. Foster and wife Mary E.
Foster; Grady Acuff, Riley G. Maxwell and E.V. Mitchell, Lessors, and J. Harlan
Ray and G.F. Ray, Lessees, recorded in Volume 112, Page 547, Deed Records
of Howard County, Texas, covering all of the South 160 acres of Section 42,
Block 29, T-1-N, T&P RR Co. Survey, Howard and Mitchell Counties, Texas.

 

38)                                Oil and Gas Lease dated December 3,
1987, between Joe B. Whitlow, et al, Lessor, and D.L. Ray Inc., Lessee,
recorded in Volume 608, Page 394, Deed Records of Howard County, Texas,
covering all of the 70 acres of land, more or less, lying South of the T&P
Railway Company right-of-way in Section 42, Block 29, T-1-N, T&P RR
Co. Survey, Howard and Mitchell Counties, Texas.

 

39)                                Oil and Gas Lease dated December 4
1987, between Stanley N. Nixon, Lessor, and D.L. Ray, Inc., Lessee,
recorded in Volume 608, Page 525, Deed Records of Howard County, Texas,
covering all of the 70 acres of land, more or less, lying South of the T&P
Railway Company right-of-way in Section 42, Block 29, T-1-N, T&P RR
Co. Survey, Howard and Mitchell Counties, Texas.

 

40)                                Oil and Gas Lease dated May 27,
1992, between Missouri Pacific RR Co., Lessor, and CNG Producing Company,
Lessee, recorded in Volume        , Page
        , Deed Records of Howard
County, Texas, covering all of the 70 acres of land, more or less, lying South
of the T&P Railway Company right-of-way in Section 42, Block 29,
T-1-N, T&P RR Co. Survey, Howard and Mitchell Counties, Texas.

 

27

 

W. L. FOSTER “B” LEASE

 

41)           Oil and Gas Lease dated February 7, 1942, between W.
L. Foster and wife, Mary E. Foster, Lessor, and E. V. Mitchell, Lessee,
recorded in Volume 112, Page 262, Deed Records of Howard County, Texas,
covering all of the Northwest Quarter (NW/4) of Section 43, Block
              
, T-1-N, T&P RR Co. Survey, Howard and Mitchell Counties, Texas.

 

42)           Oil and Gas Lease dated December 3, 1987, between
Janet W. Underwood, et al, Lessor, and D. L. Ray, Inc., Lessee, recorded
in Volume 419, Page 327, Deed Records of Howard County, Texas, covering
all of the Northwest Quarter (NW/4) of Section 43, Block 29, T- 1-N,
T&P RR Co. Survey, Howard and Mitchell Counties, Texas.

 

43)           Oil and Gas Lease dated February 22, 1988, between
Janet W. Underwood, et al, Lessor, and D. L. Ray, Inc., Lessee, recorded
in Volume 612, Page 72, Deed Records of Howard County, Texas, covering all
of the Northwest Quarter (NW/4) of Section 43, Block 29, T- 1-N, T&P
RR Co. Survey, Howard and Mitchell Counties, Texas.

 

44)           Oil and Gas Lease dated May 27, 1992, between
Missouri Pacific RR Co., Lessor, and D. L. Ray, Inc., Lessee, recorded in
Volume             
, Page            , Deed
Records of Howard County, Texas, covering all of the Northwest Quarter (NW/4)
of Section 43, Block 29, T- 1-N, T&P RR Co. Survey, Howard and
Mitchell Counties, Texas.

 

45)           Oil and Gas Lease dated November 25 1987, between
Robert F. Westbrook et al, Lessor, and D. L. Ray, Inc., Lessee, recorded
in Volume 611, Page 654, Deed Records of Howard County, Texas, covering
all of the Northwest Quarter (NW/4) of Section 43, Block 29, T- 1-N,
T&P RR Co. Survey, Howard and Mitchell Counties, Texas.

 

46)           Oil and Gas Lease dated November 25, 1987, between
Melinda Lou T. Hinds et al, Lessor, and D. L. Ray, Inc., Lessee, recorded in
Volume 419, Page 19, Deed Records of Howard County, Texas, covering all of
the Northwest Quarter (NW/4) of Section 43, Block 29, T-1-N, T&P RR
Co. Survey, Howard and Mitchell Counties, Texas.

 

OLIVER
BROWN

 

(WARD COUNTY, TEXAS and
WINKLER COUNTY, TEXAS)

 

George Sealy “47” Lease

 

Oil &
Gas Lease dated November 1, 1990, between NCNB Texas National Bank,
Trustee as Lessor, and W. Glenn Shedd as Lessee, recorded in Volume 399,
Page 506, Deed Records, Winkler County, Texas.

 

Ida Hendrick “A” Lease

 

Oil &
Gas Lease dated March 27, 1925 between Ida Hendrick and husband, T. G.
Hendrick as Lessor and J. W. Grant as Lessee, recorded in Book 1,
Page 290, Oil & Gas Records, Winkler County, Texas.

 

28

 

Tobe Morton 16 Lease

 

Oil &
Gas Lease dated August 13, 1925, between Tobe Morton and wife, Nevada O. Morton,
as Lessor, and T. B. Cranfill, as Lessee, recorded in Volume 1, Page 153, Oil &
Gas Records and rerecorded Volume 1, Page 278, Oil &
Gas Records, Winkler County, Texas

 

Arco Cummins “A” Lease

 

Oil &
Gas Lease dated February 15, 1926, between Lum Daugherty as Lessor and L. C. Turman and J. C. Maxwell, as
Lessee, recorded in Volume 1,  Page 232, Oil &
Gas Records, Winkler County, Texas.

 

Hendrick Lease

 

Oil &
Gas Lease dated March 27, 1925, between T. G. Hendrick as Lessor and J.W. Grant
as Lessee, recorded in Volume 1, Page 143, Oil & Gas Records, Winkler
County, Texas.

 

O. Clapp Lease

 

Oil &
Gas Lease dated October 12, 1926 between Oscar Clapp as Lessor and Gulf
Oil Corporation as Lessee, recorded in Book 1, Page 374, Oil &
Gas Records, Winkler County, Texas.

 

Duval Royalty

 

Oil &
Gas Lease dated May 7, 1936 between Duval Royalty Company as Lessor and
Wahlenmaier Petroleum Corporation as Lessee, recorded in Volume 54, Page 103,
Deed Records, Winkler County, Texas.

 

Ray Clapp Lease

 

Oil &
Gas Lease dated April 29, 1936 between Ray Clapp and wife, Pauline Clapp
as Lessor and Wahlenmaier Petroleum Corporation as Lessee, recorded in Volume 54,
Page 82, Deed Records, Winkler County, Texas.

 

Thornberry #2W

 

Oil &
Gas Lease dated April 23, 1936 between R.C. Thornberry and wife, Theena
Thornberry as Lessors and Wahlenmaier Petroleum Corporation as Lessee, recorded
in Volume 54, Page 233, Deed Records, Winkler County, Texas.

 

Cummins Lease

 

Oil &
Gas Lease dated 2/15/26 between Lum Daugherty as Lessor and L. C. Turman, as
Lessee, recorded in Volume 1, Page 232, Oil & Gas Records, Winkler
County, Texas.

 

Sun-Walton Lease

 

Oil &
Gas Lease dated 11/30/25 between J. B. Walton as Lessor and Sun Oil Company, as
Lessee, recorded in Book 1, Page 200, Oil & Gas Records, Winkler
County, Texas.

 

J. B. Walton #6

 

Oil &
Gas Lease dated November 30, 1925, between J. B. Walton as Lessor and Sun
Oil Company as Lessee, recorded in Volume 1, Page 200, Oil & Gas
Records, Winkler County, Texas.

 

29

 

J.F. Howe
“A”

 

Oil &
Gas Lease dated October 25, 1925 between J. F. Howe as Lessor and W. A. Priest
and W. E. Baird, Jr., as Lessee, recorded in Volume 1, Pages 165, Lease
Records, Winkler County, Texas.

 

J.F. Howe
“B”

 

Oil &
Gas Lease dated October 25, 1925 between J. F. Howe as Lessor and W. A. Priest
and W. E. Baird, Jr., as Lessee, recorded in Volume 1, Pages 165, Lease
Records, Winkler County, Texas.

 

Howe “A”

 

Oil &
Gas Lease dated October 25, 1925 between J. F. Howe as Lessor and W. A. Priest
and W. E. Baird, Jr., as Lessee, recorded in Volume 1, Pages 165, Lease
Records, Winkler County, Texas.

 

Howe “B”

 

Oil & Gas Lease dated October 25,
1925 between J. F. Howe as Lessor and W. A. Priest and W. E. Baird, Jr., as
Lessee, recorded in Volume 1, Pages 165, Lease Records, Winkler County, Texas.

 

Howe “C”

 

Oil &
Gas Lease dated October 25, 1925 between J. F. Howe as Lessor and W. A. Priest
and W. E. Baird, Jr., as Lessee, recorded in Volume 1, Pages 165, Lease
Records, Winkler County, Texas.

 

Fernandes Ranch

 

Oil &
Gas Lease dated 3/6/81 R.C. Waddell, et al, as Lessor and Peter Gill, as Lessee,
recorded in Volume 313, page 372, Deed Records, Winkler County, Texas.

 

Oil &
Gas Lease dated 3/6/81 between Amon G. Carter Foundation, Individually and as
Agent for the State of Texas as Lessor and Peter Gill, as Lessee, recorded in
Volume 314, Page 249, Deed Records, Winkler County, Texas.

 

Fernandes 20-1 SWD

 

That
certain SWD Well located 621 feet from the north line and 789 feet from the
west line of Section 20, Block B-2, PSL, Winkler County, Texas, as set out
in that certain Salt Water Disposal Agreement dated March 21, 1985 between
Tiburon Petroleum Corp., and Point Petroleum Corporation.

 

Hendrick Murko “H”

 

Oil &
Gas Lease dated March 27, 1925 between Ida Hendrick and husband, T.G. Hendrick
as Lessors and J.W. Grant as Lessee, recorded in Volume 1, Pages 290, Records,
Winkler County,

 

Hendrick “C”

 

Hendrick
“C” Lease, described as Tracts 81, 82, 111, and 112, Westbrook and Company
Survey, in Section 33, Block 26, PSL, Winkler County, Texas, being the
Southeast Quarter Southwest Quarter Southwest Quarter (SE/4 SW/4 SW/4) and the
Southwest Quarter Southeast Quarter

 

30

 

Southwest
Quarter (SW/4 SE/4 SW/4) of Section 33, Block 26 PSL, Winkler County, Texas,
from the surface to a depth of 3,250 feet.

 

Westbrook Lease

 

Oil & Gas Lease dated February 15,
1926, between Lum Daugherty, as Lessor, and L.C. Turman and J.T. Maxwell, as
Lessees, recorded in Volume 1, Page 232, Oil & Gas Records, Winkler
County, Texas.

 

EADO

 

(WINKLER COUNTY, TEXAS)

 

O. Clapp
“A”

 

Oil &
Gas Lease dated November 15, 1926, by and between Oscar Clapp as Lessor to
Pure Oil Company, as Lessee, recorded in Volume 1, Page 382 of the Oil &
Gas Records, Winkler County, Texas.

 

McCutchen Lease

 

Oil &
Gas Lease dated May 12, 1926, by and between Wm. A McCutchen and Evelyn
McCutchen as Lessors to W.A. Priest and W.E. Baird, Jr., as Lessees, recorded
in Volume 1, Page 292 of the Oil & Gas Records, Winkler County, Texas.

 

Hendrick “B” Lease

 

Oil &
Gas Lease dated April 20, 1926, by and between T.G. Hendrick and wife, Ida
Hendrick, as Lessors to J.D. Collett., as
Lessee, recorded in Volume 1, Page 245 of the Oil & Gas Records, Winkler
County, Texas.

 

Tobe Morton Lease (Well # 1, 2, 4, 5 & 6D)

 

Oil &
Gas Lease dated August 13, 1925, by and between Tobe Morton and wife, Nevada
O. Morton, as Lessors to T.B. Cranfill, as Lessee, recorded in Volume 1, Page 153,
rerecorded in Volume 1, Page 278 of the Oil & Gas Records, Winkler
County, Texas.

 

Hendrick “A” Lease

 

Oil & Gas Lease dated March 27,
1925, by and between Ida Hendrick and husband, T.G. Hendrick, as Lessors to J.W.
Grant., as Lessee, recorded in Volume 1, Page 290 of the Oil &
Gas Records, Winkler County, Texas.

 

Hendricks Lease

 

Oil &
Gas Lease dated March 27, 1925, by and between Ida Hendrick; Lessee, as
Lessors to J.W. Grant, as Lessee, recorded in Volume 1, Page 144 of the
Oil & Gas Records, Winkler County, Texas.

 

Morton Lease

 

Oil &
Gas Lease dated March 27, 1925, by and between Ida
Hendrick; Lessee, as Lessors to J.W. Grant, as Lessee, recorded in Volume 1, Page 144
of the Oil & Gas Records, Winkler County, Texas.

 

31

 

McCurdy McCutchen Lease

 

Oil &
Gas Lease dated May 12, 1926, by and between Wm. A McCutchen and Evelyn
McCutchen as Lessors to W.A. Priest and W.E. Baird, Jr., as Lessees, recorded
in Volume 1, Page 292 of the Oil & Gas Records, Winkler County, Texas.

 

THREE SPAN

 

(WINKLER COUNTY, TEXAS)

 

CENTRAL STATE BANK LEASE

 

1)      Oil and Gas Lease dated April 12,
1926 from Central State Bank to Marland Oil Company of Texas, recorded in
Volume 1, Page 292 of the Lease Records of Winkler County, Texas.

 

CLAPP LEASE

 

2)      Oil and Gas Lease dated April 29,
1936 from Ray Clapp and wife, Pauline Clapp, to Wahlenmaier Petroleum
Corporation, recorded in Volume 54, Page 82 of the Deed Records of Winkler
County, Texas.

 

COLBY LEASE

 

3)      Oil and Gas Grant dated August 7,
1926 from N. R. Colby, D. E. Taft, R. R. Massey and Southland Royalty Company
to M. D. Bryant, recorded in Volume 1, Page 384 of the Lease Records of
Winkler County, Texas.

 

4)      Oil and Gas Lease dated June 7,
1960 from Socony Mobil Oil Company, Inc. to Ralph C. Hart and George
L. Buckles, recorded in Volume 165, Page 283 of the Deed Records of
Winkler County, Texas.

 

CONTINENTAL-HALLEY LEASE

 

5)      Oil and Gas Lease dated July 14,
1925 from S. M. Halley and wife, Jessie Halley, to J. W. Grant, recorded
in Volume 1, Page 149 of the Lease Records of Winkler County, Texas.

 

CRENSHAW LEASE

 

6)      Oil and Gas Lease dated April 6, 1936
from Charles C. Crenshaw and wife, Luella F. Crenshaw, and Fern Cone, a feme
sole, to Wahlenmaier Petroleum Corporation, recorded in Volume 54, Page 260
of the Deed Records of Winkler County, Texas.

 

32

 

DESPAIN-HALLEY LEASE

 

7)     Oil and Gas
Lease dated March 11, 1935 from S. M. Halley and wife, Jessie Halley, to F.
W. Estill, recorded in Volume 43, Page 588 of the Deed Records of Winkler
County, Texas.

 

DRANE LEASE

 

8)     Oil and Gas Lease dated June 13,
1936 from J. A. Drane, Individually and as Trustee, to Wahlenmaier Petroleum
Corporation, recorded in Volume 54, Page 404 of the Deed Records of
Winkler County, Texas.

 

ESTILL-HALLEY LEASE

 

9)     Oil and Gas Lease dated July 14,
1925 from S. M. Halley and wife,
Jessie Halley, to J. W. Grant, recorded in Volume 1, Page 149 of the Lease
Records of Winkler County, Texas.

 

10)   Oil and Gas Lease dated March 11,
1935 from S. M. Halley and wife, Jessie Halley, to F. W. Estill, recorded in
Volume 43, Page 588 of the Deed Records of Winkler County, Texas.

 

HALLEY -C- LEASE

 

11)   Oil and Gas Lease dated July 14,
1925 from S. M. Halley and wife, Jessie Halley, to J. W. Grant, recorded in
Volume 1, Page 149 of the Lease Records of Winkler County, Texas.

 

HALLEY -D- LEASE

 

12)   Oil and Gas Lease dated July 14,
1925 from S. M. Halley and wife, Jessie Halley, to J. W. Grant, recorded in
Volume 1, Page 149 of the Lease Records of Winkler County, Texas.

 

IVERSON-COWDEN LEASE

 

13)   Oil and Gas Lease dated October 18,
1924 from E. W. Cowden and wife, Eva Cowden, to J. W. Grant, recorded in Volume
1, Page 132 of the Lease Records of Winkler County, Texas.

 

NANCE LEASE

 

14)   Oil, Gas and Mineral Lease
dated June 2, 1957 from Hollis E. Nance and wife, Nova Nance to Martha N. Jackson,
recorded in Volume 128, Page 399 of the Deed Records of Winkler County, Texas.

 

33

 

S. M. HALLEY -A- LEASE

 

15)   Oil and Gas Lease dated July 14,
1925 from S. M. Halley and wife, Jessie Halley, to J. W. Grant, recorded in Volume 1, Page 149 of the Lease Records of Winkler County, Texas.

 

16)   Oil and Gas Lease dated March 11,
1935 from S. M. Halley and wife, Jessie Halley, to F. W. Estill, recorded in
Volume 43, Page 588 of the Deed Records of Winkler County, Texas.

 

S. M. HALLEY LEASE

 

17)   Oil and Gas Lease dated July 14,
1925 from S. M. Halley and wife, Jessie Halley, to J. W. Grant, recorded in
Volume 1, Page 149 of the
Lease Records of Winkler County, Texas.

 

18)   Oil and Gas Lease dated March 11,
1935 from S. M. Halley and wife, Jessie Halley, to F. W. Estill, recorded in
Volume 43, Page 588 of the Deed Records of Winkler County, Texas.

 

THOMPSON-COWDEN LEASE

 

19)   Oil and Gas Lease dated October 18,
1924 from E. W. Cowden and wife, Eva Cowden, to J. W. Grant, recorded in Volume
1, Page 132 of the Lease Records of Winkler County, Texas.

 

VADEN LEASE

 

20)   Oil, Gas and Mineral Lease
dated April 2, 1936 from Frank S. Vaden, Jr. to Wahlenmaier Petroleum
Corporation, recorded in Volume 53, Page 493 of the Lease Records of
Winkler County, Texas.

 

WOODLEY-HALLEY LEASE

 

21)   Oil and Gas Lease dated July 14,
1925 from S. M. Halley and wife, Jessie Halley, to J. W. Grant, recorded in
Volume 1, Page 149 of the Lease Records of Winkler County, Texas.

 

AMERADA SCARBOROUGH LEASE

 

22)    Oil and Gas Lease dated October 14, 1925 from
W. F. Scarborough and wife, Kara E. Scarborough, to W. T. Lewis, recorded in
Volume 1, Page 176 of the Lease Records of Winkler County, Texas.

 

W. F. SCARBOROUGH LEASE

 

23)   Oil and Gas Lease dated October 14, 1925 from W.
F. Scarborough and wife, Kara E. Scarborough, to W. T. Lewis, recorded in
Volume 1, Page 176 of the Lease Records of Winkler County, Texas.

 

34

 

LINEBERRY LEASE

 

Those
certain oil and gas leases described in the following instruments to which
reference is here made for all purposes, including a more complete description
of those oil and gas leases and the lands they cover:

 

Partial
Assignment of Oil and Gas Leases dated September 23, 1983, and recorded in
Volume 335, Pages 423 et seq. of the Deed Records of Winkler County,
Texas, from Rickey Smith, as Assignor, and Herschel Wortham, as Assignee.

 

Partial
Assignment of Oil and Gas Leases dated September 23, 1983, and recorded in
Volume 335, Pages 427 et seq. of the Deed Records of Winkler County,
Texas, from Rickey Smith, as Assignor, and Herschel Wortham, as Assignee.

 

TOWN LOTS

 

Lots
5, 6, 7 and the North 5 feet of Lot 8, Block 14, Original Town of Kermit, an
addition to the City of Kermit, Winkler County, Texas.

 

KAYSER

 

(ECTOR COUNTY, TEXAS)

 

KAYSER TRACT

 

KAYSER LEASE:

 

Oil &
Gas Lease dated October 7, 1940, by and between Eva Kayser and husband, John
Kayser, Lessors to Cities Service Oil-Company, as Lessee, recorded in Volume 66,
Page 613 of the Deed Records, Ector County, Texas.

 

HOBBIE #1  LEASE

 

Oil &
Gas Lease dated October 7, 1940, by and between Velma Clark Hobbie and
husband W.E. Hobbie, Lessors to Cities Service Oil Company, as Lessee, recorded
in Volume 66, Page 619 of the Deed Records, Ector County, Texas.

 

GRANGE LEASE

 

Oil &
Gas Lease dated October 7, 1940, by and between Pearl H. Grange and
husband, Arthur H. Grange; Glenn D. Addis and wife, Kate Addis; Earl R. Addis
and wife, Maude Addis; and Orville J. Addis and wife, Ada Addis, Lessors to
Cities Service Oil Company, as Lessee, recorded in Volume 66, Page 627 of
the Deed Records, Ector County, Texas

 

35

 

BOYD LEASE

 

Oil &
Gas Lease dated October 7, 1940, by and between Lois Pauline Boyd, Lessor
to Cities Service Oil Company, as Lessee, recorded in Volume 66, Page 611
of the Deed Records, Ector County, Texas.

 

MCURDY LEASE

 

Oil &
Gas Lease dated October 7, 1940, by and between E. J. McCurdy, Jr. and
wife, Mrs. E. J. McCurdy, Jr.; S. H. Casteel; and West Texas
Production Company, Lessors to Cities Service Oil Company, as Lessee, recorded
in Volume 66, Page 623 of the Deed Records, Ector County, Texas.

 

DEARMOND LEASE

 

Oil &
Gas Lease dated October 7, 1940, by and between J. M. DeArmond and wife, Norma
DeArmond, Lessors to Cities Service Oil Company, as Lessee, recorded in Volume
66, Page 608 of the Deed Records, Ector County, Texas.

 

DUNAWAY LEASE

 

Oil &
Gas Lease dated October 7, 1940, by and between Elizabeth Ann Dunaway; Lillian
Kunze and husband, Ervin Kunze; and the Heirs of George W. Dunaway, deceased, Lessors
to Cities Service Oil Company, as Lessee, recorded in Volume 66, Page 616
of the Deed Records, Ector County, Texas.

 

HOBBIE #2 LEASE

 

Oil &
Gas Lease dated October 7, 1940, by and between Velma Clark Hobbie and
husband W.E. Hobbie, Lessors to Cities Service Oil Company, as Lessee, recorded
in Volume 66, Page 619 of the Deed Records, Ector County, Texas.

 

THE MARTIN TRACT

 

Oil &
Gas Lease dated February 20, 1932, by and between Thomas J. Martin and
wife, Lela Martin; James Power and wife, Frieda Power; Frank Power and wife, Tillie
Power; Lillie Power Hermance Corbin and husband William E. Corbin; Charles L. Power,
Individually; Chester Power, an unmarried man; Myrtle Power Corkins and husband
Austin M. Corkins, acting by and through their duly authorized Attorney-in-Fact,
Charles L. Power; and R.L. York, Individually as Lessors to J.L. Green, as
Lessee, recorded in Volume 36, Page 1  of the Deed Records, Ector
County, Texas.

 

36

 

THE ADDIS TRACT

 

Oil
and Gas Lease dated May 20, 1931, by and between Frank V. Addis and Nancy
Margaret Addis, Executor and Executrix of the Estate of Daniel O. Addis, Deceased;
and Nancy Margaret Addis, individually as Lessors, and John Kayser and Fred
Turner, Jr. as Lessees, recorded in Volume 35, Page 451, Deed Records,
Ector County, Texas.

 

37

 

EXHIBIT 1.1.1 - PART B

 

	
  Subject Leases

  	
   

  	
  OIL

  Net Revenue

  Interest (“NRI”)

  	
   

  	
  GAS

  Net Revenue

  Interest (“NRI”)

  	
   

  	
  Working

  Interest

  (“WI”)

  	
   

  
	
  9L

  	
   

  	
  0.83500000

  	
   

  	
  0.83500000

  	
   

  	
  1.00000000

  	
   

  
	
  BTBN

  	
   

  	
  0.39843750

  	
   

  	
  0.39843750

  	
   

  	
  0.50000000

  	
   

  
	
  EADO

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Clapp

  	
   

  	
  0.80140620

  	
   

  	
  0.80140620

  	
   

  	
  1.00000000

  	
   

  
	
  Hendrick A

  	
   

  	
  0.79500000

  	
   

  	
  0.79500000

  	
   

  	
  1.00000000

  	
   

  
	
  Hendrick B

  	
   

  	
  0.69125000

  	
   

  	
  0.69125000

  	
   

  	
  1.00000000

  	
   

  
	
  Hendricks

  	
   

  	
  0.79750000

  	
   

  	
  0.79750000

  	
   

  	
  1.00000000

  	
   

  
	
  McCurdy-McCutchen

  	
   

  	
  0.72500000

  	
   

  	
  0.72500000

  	
   

  	
  1.00000000

  	
   

  
	
  McCutchen

  	
   

  	
  0.84981831

  	
   

  	
  0.84981831

  	
   

  	
  1.00000000

  	
   

  
	
  Morton

  	
   

  	
  0.77796900

  	
   

  	
  0.77796900

  	
   

  	
  1.00000000

  	
   

  
	
  Tobe Morton

  	
   

  	
  0.76000000

  	
   

  	
  0.76000000

  	
   

  	
  1.00000000

  	
   

  
	
  Edwards
  Grayburg

  	
   

  	
  0.80331000

  	
   

  	
  0.80331000

  	
   

  	
  1.00000000

  	
   

  
	
  Grand
  Clearfork

  	
   

  	
  0.75279174

  	
   

  	
  0.75279174

  	
   

  	
  1.00000000

  	
   

  
	
  Iatan
  North

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Foster WL A

  	
   

  	
  0.71749805

  	
   

  	
  0.71749805

  	
   

  	
  0.96000000

  	
   

  
	
  Foster WL B

  	
   

  	
  0.71749805

  	
   

  	
  0.71749805

  	
   

  	
  0.96000000

  	
   

  
	
  Read A

  	
   

  	
  0.69678672

  	
   

  	
  0.69678672

  	
   

  	
  0.96000000

  	
   

  
	
  Read B

  	
   

  	
  0.71784931

  	
   

  	
  0.71784931

  	
   

  	
  0.96000000

  	
   

  
	
  Read WR

  	
   

  	
  0.71749805

  	
   

  	
  0.71749805

  	
   

  	
  0.96000000

  	
   

  
	
  Jordan
  San Andres

  	
   

  	
  0.79094059

  	
   

  	
  0.79094059

  	
   

  	
  1.00000000

  	
   

  
	
  Kayser

  	
   

  	
  0.80750000

  	
   

  	
  0.80750000

  	
   

  	
  1.00000000

  	
   

  
	
  McElroy

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  State
  NY

  	
   

  	
  0.74000000

  	
   

  	
  0.74000000

  	
   

  	
  1.00000000

  	
   

  
	
  State
  NZ

  	
   

  	
  0.76500000

  	
   

  	
  0.76500000

  	
   

  	
  1.00000000

  	
   

  
	
  University
  B

  	
   

  	
  0.84000000

  	
   

  	
  0.84000000

  	
   

  	
  1.00000000

  	
   

  

 

1

 

	
  Subject Leases

  	
   

  	
  OIL

  Net Revenue

  Interest (“NRI”)

  	
   

  	
  GAS

  Net Revenue

  Interest (“NRI”)

  	
   

  	
  Working

  Interest

  (“WI”)

  	
   

  
	
  Oliver
  Brown

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Arco-Cummins

  	
   

  	
  0.68500000

  	
   

  	
  0.68500000

  	
   

  	
  1.00000000

  	
   

  
	
  O Clapp

  	
   

  	
  0.86000000

  	
   

  	
  0.86000000

  	
   

  	
  1.00000000

  	
   

  
	
  Ray Clapp

  	
   

  	
  0.73500000

  	
   

  	
  0.73500000

  	
   

  	
  1.00000000

  	
   

  
	
  Cummins

  	
   

  	
  0.73499980

  	
   

  	
  0.73499980

  	
   

  	
  1.00000000

  	
   

  
	
  Duval Royalty

  	
   

  	
  0.73500000

  	
   

  	
  0.73500000

  	
   

  	
  1.00000000

  	
   

  
	
  Fernandes Ranch

  	
   

  	
  0.73500000

  	
   

  	
  0.73500000

  	
   

  	
  1.00000000

  	
   

  
	
  George Sealy

  	
   

  	
  0.73500000

  	
   

  	
  0.73500000

  	
   

  	
  1.00000000

  	
   

  
	
  Howe A

  	
   

  	
  0.73500000

  	
   

  	
  0.73500000

  	
   

  	
  1.00000000

  	
   

  
	
  Howe B

  	
   

  	
  0.78593700

  	
   

  	
  0.78593700

  	
   

  	
  1.00000000

  	
   

  
	
  Howe C

  	
   

  	
  0.78593700

  	
   

  	
  0.78593700

  	
   

  	
  1.00000000

  	
   

  
	
  Howe JF A

  	
   

  	
  0.78500000

  	
   

  	
  0.78500000

  	
   

  	
  1.00000000

  	
   

  
	
  Howe JF B

  	
   

  	
  0.78500000

  	
   

  	
  0.78500000

  	
   

  	
  1.00000000

  	
   

  
	
  Ida Hendricks A

  	
   

  	
  0.75062500

  	
   

  	
  0.75062500

  	
   

  	
  1.00000000

  	
   

  
	
  Murko H

  	
   

  	
  0.74774610

  	
   

  	
  0.74774610

  	
   

  	
  1.00000000

  	
   

  
	
  Sun Walton

  	
   

  	
  0.75062670

  	
   

  	
  0.75062670

  	
   

  	
  1.00000000

  	
   

  
	
  Thornberry

  	
   

  	
  0.75000000

  	
   

  	
  0.75000000

  	
   

  	
  1.00000000

  	
   

  
	
  Tobe Morton 16

  	
   

  	
  0.77500000

  	
   

  	
  0.77500000

  	
   

  	
  1.00000000

  	
   

  
	
  Walton JB

  	
   

  	
  0.73500000

  	
   

  	
  0.73500000

  	
   

  	
  1.00000000

  	
   

  
	
  Westbrook

  	
   

  	
  0.73500000

  	
   

  	
  0.73500000

  	
   

  	
  1.00000000

  	
   

  
	
  Three
  Span

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Amerada Scarborough

  	
   

  	
  0.74750000

  	
   

  	
  0.74750000

  	
   

  	
  1.00000000

  	
   

  
	
  Central State Bank

  	
   

  	
  0.68500000

  	
   

  	
  0.68500000

  	
   

  	
  1.00000000

  	
   

  
	
  Clapp

  	
   

  	
  0.81000000

  	
   

  	
  0.81000000

  	
   

  	
  1.00000000

  	
   

  
	
  Colby

  	
   

  	
  0.73968751

  	
   

  	
  0.73968751

  	
   

  	
  1.00000000

  	
   

  
	
  Continental Halley

  	
   

  	
  0.74750080

  	
   

  	
  0.74750080

  	
   

  	
  1.00000000

  	
   

  
	
  Crenshaw

  	
   

  	
  0.81000000

  	
   

  	
  0.81000000

  	
   

  	
  1.00000000

  	
   

  

 

2

 

	
  Subject Leases

  	
   

  	
  OIL

  Net Revenue

  Interest (“NRI”)

  	
   

  	
  GAS

  Net Revenue

  Interest (“NRI”)

  	
   

  	
  Working

  Interest

  (“WI”)

  	
   

  
	
  Despain Halley

  	
   

  	
  0.75531249

  	
   

  	
  0.75531249

  	
   

  	
  1.00000000

  	
   

  
	
  Drane

  	
   

  	
  0.81000000

  	
   

  	
  0.81000000

  	
   

  	
  1.00000000

  	
   

  
	
  Estill Halley

  	
   

  	
  0.75140000

  	
   

  	
  0.75140000

  	
   

  	
  1.00000000

  	
   

  
	
  Halley A

  	
   

  	
  0.73650000

  	
   

  	
  0.73650000

  	
   

  	
  1.00000000

  	
   

  
	
  Halley C

  	
   

  	
  0.79906249

  	
   

  	
  0.79906249

  	
   

  	
  1.00000000

  	
   

  
	
  Halley SM

  	
   

  	
  0.73656249

  	
   

  	
  0.73656249

  	
   

  	
  1.00000000

  	
   

  
	
  Iverson-Cowden

  	
   

  	
  0.74750000

  	
   

  	
  0.74750000

  	
   

  	
  1.00000000

  	
   

  
	
  Lineberry

  	
   

  	
  0.79246088

  	
   

  	
  0.79246088

  	
   

  	
  1.00000000

  	
   

  
	
  Nance

  	
   

  	
  0.68500000

  	
   

  	
  0.68500000

  	
   

  	
  1.00000000

  	
   

  
	
  Scarborough WF

  	
   

  	
  0.74750000

  	
   

  	
  0.74750000

  	
   

  	
  1.00000000

  	
   

  
	
  Thompson- Cowden

  	
   

  	
  0.74750000

  	
   

  	
  0.74750000

  	
   

  	
  1.00000000

  	
   

  
	
  Woodley Halley

  	
   

  	
  0.74750070

  	
   

  	
  0.74750070

  	
   

  	
  1.00000000

  	
   

  
	
  Vaden

  	
   

  	
  0.81000000

  	
   

  	
  0.81000000

  	
   

  	
  1.00000000

  	
   

  
	
  Cooper
  Jal

  	
   

  	
  0.58332679

  	
   

  	
  0.55551362

  	
   

  	
  0.72467155

  	
   

  

 

3

 

EXHIBIT 1.1.1 - PART B

 

ALLOCATED VALUES

 

	
  PROPERTY

  	
   

  	
  ALLOCATED VALUE

  	
   

  
	
  Cooper Jal Unit

  	
   

  	
  $

  	
  38,636,000

  	
   

  
	
  Penwell

  	
   

  	
   

  	
   

  
	
  McElroy

  	
   

  	
   

  	
   

  
	
  State NY

  	
   

  	
  $

  	
  19,000

  	
   

  
	
  State NZ

  	
   

  	
  $

  	
  4,378,000

  	
   

  
	
  University B

  	
   

  	
  $

  	
  635,000

  	
   

  
	
  Jordan San Andres Unit

  	
   

  	
  $

  	
  16,578,000

  	
   

  
	
  Edward Grayburg Unit

  	
   

  	
  $

  	
  3,994,000

  	
   

  
	
  latan North

  	
   

  	
   

  	
   

  
	
  Foster A

  	
   

  	
  $

  	
  30,000

  	
   

  
	
  Foster B

  	
   

  	
  $

  	
  743,000

  	
   

  
	
  Read A

  	
   

  	
  $

  	
  32,000

  	
   

  
	
  Read B

  	
   

  	
  $

  	
  79,000

  	
   

  
	
  Read C

  	
   

  	
  $

  	
  —

  	
   

  
	
  Willard R. Read

  	
   

  	
  $

  	
  32,000

  	
   

  
	
  9L

  	
   

  	
  $

  	
  1,128,000

  	
   

  
	
  BTBN

  	
   

  	
  $

  	
  27,000

  	
   

  
	
  Grand Clearfork Unit

  	
   

  	
  $

  	
  6,561,000

  	
   

  
	
  Eva Kayser Tract

  	
   

  	
  $

  	
  1,761,000

  	
   

  
	
  Kermit

  	
   

  	
   

  	
   

  
	
  EADO

  	
   

  	
   

  	
   

  
	
  Clapp

  	
   

  	
  $

  	
  19,000

  	
   

  
	
  Oscar A. Clapp

  	
   

  	
  $

  	
  565,000

  	
   

  
	
  Hendrick A

  	
   

  	
  $

  	
  —

  	
   

  
	
  Hendrick B

  	
   

  	
  $

  	
  240,000

  	
   

  
	
  Hendrick C

  	
   

  	
  $

  	
  —

  	
   

  
	
  Hendrick

  	
   

  	
  $

  	
  —

  	
   

  
	
  Hendricks

  	
   

  	
  $

  	
  —

  	
   

  
	
  McCutchen

  	
   

  	
  $

  	
  1.547,000

  	
   

  
	
  McCurdy-McCutchen

  	
   

  	
  $

  	
  —

  	
   

  
	
  Morton

  	
   

  	
  $

  	
  —

  	
   

  
	
  Tobe Morton

  	
   

  	
  $

  	
  408,000

  	
   

  
	
  Oliver Brown

  	
   

  	
   

  	
   

  
	
  Arco Cummins A

  	
   

  	
  $

  	
  682,000

  	
   

  
	
  O. Clapp

  	
   

  	
  $

  	
  1,816,000

  	
   

  
	
  Ray Clapp

  	
   

  	
  $

  	
  18,000

  	
   

  
	
  Cummins

  	
   

  	
  $

  	
  34,000

  	
   

  
	
  Duval Royalty

  	
   

  	
  $

  	
  568,000

  	
   

  
	
  Fernandes
  Ranch

  	
   

  	
  $

  	
  17,000

  	
   

  
	
  George Sealy

  	
   

  	
  $

  	
  262,000

  	
   

  
	
  Howe A

  	
   

  	
  $

  	
  425,000

  	
   

  

 

 

	
  PROPERTY

  	
   

  	
  ALLOCATED VALUE

  	
   

  
	
  Howe B

  	
   

  	
  $

  	
  7,000

  	
   

  
	
  Howe C

  	
   

  	
  $

  	
  382,000

  	
   

  
	
  J F Howe A

  	
   

  	
  $

  	
  329,000

  	
   

  
	
  J F Howe B

  	
   

  	
  $

  	
  151,000

  	
   

  
	
  Ida Hendrick A

  	
   

  	
  $

  	
  226,000

  	
   

  
	
  Hendrick Murko H

  	
   

  	
  $

  	
  681,000

  	
   

  
	
  Sun-Walton

  	
   

  	
  $

  	
  610,000

  	
   

  
	
  Tobe Morton 16

  	
   

  	
  $

  	
   —

  	
   

  
	
  Thornberry

  	
   

  	
  $

  	
  11,000

  	
   

  
	
  J B Walton

  	
   

  	
  $

  	
  6,000

  	
   

  
	
  Westbrook

  	
   

  	
  $

  	
  39,000

  	
   

  
	
  Three Span

  	
   

  	
   

  	
   

  
	
  Amerada Scarborough

  	
   

  	
  $

  	
  26,000

  	
   

  
	
  Central State Bank

  	
   

  	
  $

  	
  81,000

  	
   

  
	
  Colby

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  Continental-Halley

  	
   

  	
  $

  	
  6,000

  	
   

  
	
  Crenshaw

  	
   

  	
  $

  	
  48,000

  	
   

  
	
  Despain-Halley

  	
   

  	
  $

  	
  389,000

  	
   

  
	
  Drane

  	
   

  	
  $

  	
  216,000

  	
   

  
	
  Estill-Halley

  	
   

  	
  $

  	
  30,000

  	
   

  
	
  Halley C

  	
   

  	
  $

  	
  36,000

  	
   

  
	
  Halley D

  	
   

  	
  $

  	
   —

  	
   

  
	
  Lineberry

  	
   

  	
  $

  	
  2,000

  	
   

  
	
  S M Halley A

  	
   

  	
  $

  	
  27,000

  	
   

  
	
  Iverson-Cowden

  	
   

  	
  $

  	
  603,000

  	
   

  
	
  S M Halley

  	
   

  	
  $

  	
  510,000

  	
   

  
	
  Nance

  	
   

  	
  $

  	
  6,000

  	
   

  
	
  W F Scarborough

  	
   

  	
  $

  	
  22,000

  	
   

  
	
  Thompson-Cowden

  	
   

  	
  $

  	
  339,000

  	
   

  
	
  Woodley-Halley

  	
   

  	
  $

  	
  520,000

  	
   

  
	
  Vaden

  	
   

  	
  $

  	
  213,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  $

  	
  87,500,000

  	
   

  

 

 

EXHIBIT 1.1.1 - PART C

 

1.               Conveyance of
Net Profits Overriding Royalty Interest, executed by (i) Working Interest Owner:
SDG Resources, L.P.; and Royalty Owner: MTGLQ Investors, L.P., dated October 19,
2004.

 

	
  JURISDICTION

  	
   

  	
  RECORDING DATA

  
	
   

  
	
  NEW MEXICO

  
	
   

  
	
  Eddy
  County, New Mexico 

  	
   

  	
  Document
  #0412761

  Book
  571, Page 0459

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Lea
  County, New Mexico 

  	
   

  	
  Document
  #63758

  Book
  1338, Page 256

  Recorded
  October 29, 2004

  
	
   

  	
   

  	
   

  
	
  TEXAS

  
	
   

  
	
  Crane
  County, Texas 

  	
   

  	
  Document
  #0085147

  Vol.
  0462, Page 292

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Ector
  County, Texas 

  	
   

  	
  Document
  #00016220

  Book
  OR, Vol. 1881, Page 381

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Howard
  County, Texas 

  	
   

  	
  Document
  #0005494

  Book
  OR, Vol. 951, Page 296

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Mitchell
  County, Texas 

  	
   

  	
  Document
  #1611

  Book
  04 1611, Vol. 706, Page 825

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Pecos
  County, Texas 

  	
   

  	
  Document
  #85974

  Vol.
  756, Page 651

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Tom
  Green County, Texas 

  	
   

  	
  Document
  #580109

  Vol.
  1153, Page 179

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Ward
  County, Texas 

  	
   

  	
  Document
  #2238

  Vol.
  761, Page 294

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Winkler
  County. Texas 

  	
   

  	
  Document
  #B76402

  Vol.
  517, Page 509

  Recorded
  October 29, 2004

  

 

1

 

2.               Deed of Trust,
Mortgage, Line of Credit Mortgage, Assignment, Security Agreement, Fixture
Filing and Financing Statement, dated October 19, 2004 from SDG Resources,
L.P. in favor of Kurt A. Talbot, Trustee and J. Aron & Company, as
Agent

 

	
  JURISDICTION

  	
   

  	
  RECORDING DATA

  
	
   

  	
   

  	
   

  
	
  NEW MEXICO

  
	
   

  	
   

  	
   

  
	
  Eddy
  County, New Mexico 

  	
   

  	
  Document
  #0412762

  Book
  571, Page 0543

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Lea
  County, New Mexico 

  	
   

  	
  Document
  #63759

  Book
  1338, Page 340

  Recorded
  October 29, 2004

  
	
   

  	
   

  	
   

  
	
  TEXAS

  
	
   

  	
   

  	
   

  
	
  Crane
  County, Texas 

  	
   

  	
  Document
  #0085148

  Vol.
  0462, Page 376

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Ector
  County, Texas 

  	
   

  	
  Document
  #00016221

  Book
  OR, Vol. 1881, Page 466

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Howard
  County, Texas 

  	
   

  	
  Document
  #00005495

  Book
  OR, Vol. 951, Page 380

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Mitchell
  County, Texas 

  	
   

  	
  Document
  #1612

  Book
  04 1612, Vol. 706, Page 909

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Pecos
  County, Texas 

  	
   

  	
  Document
  #85975

  Vol.
  335, Page 578

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Tom
  Green County, Texas 

  	
   

  	
  Document
  #580110

  Vol.
  1153, Page 263

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Ward
  County, Texas 

  	
   

  	
  Document
  #2239

  Vol.
  761, Page 378

  Recorded
  October 28, 2004

  
	
   

  	
   

  	
   

  
	
  Winkler
  County, Texas 

  	
   

  	
  Document
  #B76403

  Vol.
  517, Page 593

  Recorded
  October 29, 2004

  

 

2

 

UCC-1 Financing Statement naming Company as Debtor and
Administrative Agent as Secured Party covering all assets of Company

 

	
  Jurisdiction

  	
   

  	
  Recording Data

  
	
  Texas Secretary of State

  	
   

  	
  Initial Filing NO.: 04-0086482628

  
	
   

  	
   

  	
  Filing Date: October 27, 2004

  

 

3

 

3.                                      Financing Documents for Innovative Oil & Gas Development and
Trading Company, Inc.

 

	
  A.

  	
  Deed of  Trust,
  Mortgage, Line of Credit Mortgage, Assignment, Security Agreement, Fixture
  Filing and Financing Statement dated December 17, 2001, recorded in Lea
  County, New Mexico on December 21, 2001 as Document Number 15709, Book
  1120, Page 441, and Financing Statement filed with the New Mexico
  Secretary of State on December 26, 2001, Document Number 2001122604728.

  
	
   

  	
   

  
	
  B.

  	
  Deed
  of Trust, Mortgage, Line of Credit Mortgage, Assignment, Security Agreement,
  Fixture Filing and Financing Statement dated March 11, 2003, recorded in
  Lea County, New Mexico on March 18, 2003 as Reception Number 000035458,
  Book 1212, Page 591.

  
	
   

  	
   

  
	
  C.

  	
  Amended
  and Restated Deed of Trust, Mortgage, Line of Credit Mortgage Assignment,
  Security Agreement, Fixture Filing and Financing Statement dated
  March 29, 2005, recorded in Lea County, New Mexico on April 6, 2005
  as Document Number 04151, Book 1366, Page 244, and Financing Statement filed
  with the New Mexico Secretary of State on April 5, 2005 as File Number
  20050006003H.

  
	
   

  	
   

  
	
  D.

  	
  Secretary
  of State

  	
  Recording
  Information

  
	
   

  	
   

  	
   

  
	
   

  	
  New
  Mexico

  	
  Filed
  April 5, 2005

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  File NO. 20050006003H

  

 

4

 

EXHIBIT 1.1.4

 

SURFACE CONTRACTS

 

Contract No. 6 - Lease Agreement by and
between Rowe Management Corp., as landlord, and SDG Resources, L.P., as tenant,
dated December 29, 2004, regarding premises in Odessa, Texas.

 

Contract No. 10 - Salt Water Disposal Agreement,
dated February 17, 2003, by and between Yates Petroleum Corporation, as Operator, and SDG Resources, L.P., as
Producer.

 

Contract No. 11 - Salt Water Disposal
Agreement by and between Texaco Exploration and Production, Inc. and SDG
Resources, L.P., dated June 8, 2001.

 

Contract No. 15 - Letter agreement pertaining
to the Cooper Jal Unit Battery by and between SDG Resources, L.P., and Lewis B.
Burleson, Inc., dated February 24, 2003.

 

Contract No. 17 - Surface Lease Agreement by
and between Deep Wells Ranch, Inc., as Lessor, and SDG Resources, L.P., as
Lessee, dated December 9, 2002 and effective October 1, 2002.

 

Contract No. 27 - Agreement for Surface Use,
dated July    2005, by and between Margaret McDonald, as Owner, and
SDG Resources, as Operator.

 

Contract No. 29 - Surface Use Agreement dated March 4,
1993, by and between Grand Energy, Inc., as Leasehold Owner, and Lillian
Evins, as Surface Owner.

 

Contract No. 30 - Surface Use Agreement dated September 30,
1993, by and between Grand Energy, Inc., as Leasehold Owner, and Robert F.
Addis, as Surface Owner.

 

Contract No. 31 - Surface Use Agreement dated March 5,
1993, by and between Grand Energy, Inc., as Leasehold Owner, and Margaret
Allene West, as Surface Owner.

 

Contract No. 32 - Surface Use Agreement dated February 19,
1993, by and between Grand Energy, Inc., as Leasehold Owner, and Dale V.
Addis, as Surface Owner.

 

Contract No. 33 - Surface Use Agreement dated February 23,
1993, by and between Grand Energy, Inc., as Leasehold Owner, and Lillian
K. Meadows, as Surface Owner.

 

Contract No. 34 - Surface Use Agreement dated February 24,
1993, by and between Grand Energy, Inc., as Leasehold Owner, and John C.
Addis, as Surface Owner.

 

Contract No. 35 - Surface Use Agreement dated March 1,
1993, by and between Grand Energy, Inc., as Leasehold Owner, and Kathryn
Hartung, as Surface Owner.

 

1

 

Contract No. 37 - Surface Lease Agreement by
and between Ludean E. Cantrell, et. al, and Louis Q. Thomas, as Lessors, and
SDG Resources, L.P.,  as lessee, dated August 14,
2002.

 

Contract No. 38 - Letter agreement dated February 16,
1983, by and between Gelty Oil Company, as lessor, and Exxon Company, U.S.A.,
as lessee.

 

Contract No. 40 - Lease Line Well Agreement
dated March 10, 1976 between Reserve Oil and Gas Company, as Unit Operator
of the Cooper Jal Unit, and Skelly Oil Company , as Operator of the Myers
Langlie-Mattix Unit.

 

Contract No. 47 - Disposal Agreement dated May 20,
1999 by and between IBEX, as Leasehold Owner and James D. Addis, as Surface
Owner

 

Contract No. 48 - Disposal Agreement dated May 15,
1999 by and between IBEX, as Leasehold Owner and Marilyn M. Nuenfeldt, as
Surface Owner

 

Contract No. 49 - Disposal Agreement dated June 24,
1999 by and between IBEX, as Leasehold Owner and John J. Addis, as Surface
Owner

 

Contract No. 50 - Disposal Agreement dated June 21,
1999 by and between IBEX, as Leasehold Owner and Mark Addis, etal, as Surface
Owner

 

Contract No. 62 - Surface Use Agreement dated January 9,
1994, by and between Grand Energy, Inc., as Leasehold Owner, and Frank R.
Addis Il, as Surface Owner.

 

Contract No. 63 - Surface Use Agreement dated January 12,
1994, by and between Grand Energy, Inc., as Leasehold Owner, and Sharon
Ann Barth, as Surface Owner.

 

Contract No. 64 - Surface Use Agreement dated January 15,
1994, by and between Grand Energy, Inc., as Leasehold Owner, and Mary L.
Sorensen, as Surface Owner.

 

Contract No. 65 - Disposal Agreement dated May 13,
1999, by and between IBEX Resources V, L.P., as Operator, and John C. Addis, as
Owner.

 

Contract No. 66 - Disposal Agreement dated September 1,
1999, by and between IBEX Resources V, L.P., as Operator, and Sharon Ann Barth,
as Owner.

 

Contract No. 67 - Disposal Agreement dated September 1,
1999, by and between IBEX Resources V, L.P., as Operator, and Frank R. Addis Il,
as Owner.

 

Contract No. 68 - Disposal Agreement dated September 1,
1999, by and between IBEX Resources V, L.P., as Operator, and Mary L. Sorensen,
as Owner.

 

Contract No. 69 - Disposal Agreement dated June 1,
1999, by and between IBEX Resources V, L.P., as Operator, and Lillian K.
Meadows, as Owner.

 

2

 

Contract No. 70 - Disposal Agreement dated May 20,
1999, by and between IBEX Resources V, L.P., as Operator, and James D. Addis,
as Owner.

 

Contract No. 71 - Disposal Agreement dated May 15,
1999, by and between IBEX Resources V, L.P., as Operator, and Marilyn M.
Neuenfeldt, as Owner.

 

Contract No. 72 - Disposal Agreement dated June 21,
1999, by and between IBEX Resources V, L.P., as Operator, and Mark D. Addis
ETAL, as Owner.

 

Contract No. 73 - Disposal Agreement dated June 24,
1999, by and between IBEX Resources V, L.P., as Operator, and John J. Addis, as
Owner.

 

3

 

EXHIBIT 1.1.8

 

PERMITS

 

NEW MEXICO:

 

·                                          Administrative Order DHC-3403
from the New Mexico Energy, Minerals and Natural Resources Department, to SDG
Resources, L.P. regarding Cooper Jal Unit #403, API No. 30-025-32296, Unit
4,  Section 19,
Township 24S, Range 37E, NMPM, Lea County, New Mexico.

 

·                                          The following Approvals of
Request for Allowable and Authorization to Transport from the State of New
Mexico Energy, Minerals, and Natural Resources Department, Oil Conservation Division:

 

·                  Dated May 29, 2002 with
respect to Cooper Jal Unit, Well Number 411, Pool Code 33820, located in UL/Lot
J, Section 24, Township 24S, Range 36E, Lea County, New Mexico;

 

·                  Dated September 19,
1995 with respect to Cooper Jal Unit, Well Number 412, Pool Code 37240, located
in UL/Lot P, Section 24, Township 24-S, Range 36-E, Lea County, New
Mexico; and

 

·                  Dated November 16, 2004
with respect to Cooper Jal Unit, Well Number 410, Pool Code 37240, located in
UL/Lot P, Section 24, Township 24-S, Range 36-E, Lea County, New Mexico.

 

·                                          The following Approvals of
Application for Exception to Rule 303-A of the Division Rules and
Regulations for Permission to Commingle Production from the State of New Mexico
Energy, Minerals and Natural Resources Department, Oil Conservation Division:

 

·                  Dated September 17,
2003 with respect to Cooper Jal Unit Well Number 102, located in UL/Lot B, Section 18,
Township 24-S, Range 37-E, Lea County, New Mexico;

 

·                  Dated November 21, 2002
with respect to Cooper Jal Unit Well Number 104, located in UL/Lot E, Section 18,
Township 24-S, Range 37-E, Lea County, New Mexico;

 

·                  Dated November 21, 2002
with respect to Cooper Jal Unit Well Number 105, located in UL/Lot F, Section 18,
Township 24-S, Range 37-E, Lea County, New Mexico;

 

·                  Dated November 21, 2002
with respect to Cooper Jal Unit Well Number 114, located in UL/Lot O, Section 13.
Township 24-S, Range 36-E, Lea County, New Mexico;

 

1

 

·                  Dated November 21, 2002
with respect to Cooper Jal Unit Well Number 119, located in UL/Lot P, Section 18,
Township 24-S, Range 37-E, Lea County, New Mexico;

 

·                  Dated November 21, 2002
with respect to Cooper Jal Unit Well Number 229, located in UL/Lot E, Section 25,
Township 24-S, Range 36-E, Lea County, New Mexico;

 

·                  Dated November 21, 2002
with respect to Cooper Jal Unit Well Number 420,
located in UL/Lot G, Section 24, Township 24-S, Range 36-E, Lea County,
New Mexico;

 

·                  Dated November 21, 2002
with respect to Cooper Jal Unit Well Number 103, located in UL/Lot A, Section 18,
Township 24-S, Range 37-E, Lea County, New Mexico; and

 

·                  Dated November 21, 2002
with respect to Cooper Jal Unit Well Number 102, located in UL/Lot B, Section 18,
Township 24-S, Range 37-E, Lea County, New Mexico.

 

TEXAS:

 

·                                          Permit To
Maintain and Use a Pit, dated April 11, 1985 (Pit Permit No. P003743)
issued by State of Texas Railroad Commission Oil and Gas Division, that
allows the operator to maintain and use an emergency saltwater storage pit
(lined) with respect to the Crenshaw Lease.

 

2

 

DISCLOSURE EXHIBIT

 

This document represents the disclosure
exhibits (“Disclosure Exhibit”)
of SDG Resources, L.P., Innovative Oil & Gas Development and Trading
Company, Inc., and Arkios Partners, L.P. (collectively, “Sellers”) and is furnished by Sellers pursuant to the Agreement for
Purchase and Sale dated March 10, 2006 by and among Sellers and Resaca
Exploitation, LP, a Delaware limited partnership (the “Agreement”), concurrently with
the execution thereof.

 

This
Disclosure Exhibit and the use of any item or information set forth in
this Disclosure Exhibit is subject to the Agreement. This Disclosure Exhibit (including
each of the attached schedules and exhibits) is qualified in its entirety by
reference to specific provisions of the Agreement, and nothing herein is
intended to constitute, and shall not be construed as constituting,
representations or warranties of Sellers except to the extent expressly
provided in the Agreement. The information disclosed in this Disclosure Exhibit is
intended to relate to and qualify the representations, warranties and covenants
made by Sellers in the Agreement and shall not be deemed to expand in any way
the scope or effect of any such representations and warranties. Nothing in this
Disclosure Exhibit constitutes an admission of any liability or obligation
of Sellers to any third party, nor an admission to any third party against the interest of
Sellers.

 

The
disclosure of a particular matter or item of information in this Disclosure Exhibit is
not an admission by Sellers that the disclosure is required to
be made under the terms of any provision contained in the Agreement. Certain
matters listed in this Disclosure Exhibit are for informational purposes
only; these matters are not required to be listed in this Disclosure Exhibit by
the terms of the Agreement because they do not rise above applicable
materiality thresholds or for other reasons. Inclusion of information in this
Disclosure Exhibit is not an admission that the information is material to
the ability of Sellers to consummate the transactions contemplated by the
Agreement.

 

Except
as set forth in this document, capitalized terms that are not defined in this
Disclosure Exhibit have the meanings given such terms in the Agreement.
Terms defined in this Disclosure Exhibit shall have the meanings given
such terms throughout this Disclosure Exhibit.

 

Capitalized
terms not defined in the Agreement or in this Disclosure Exhibit have the
meanings assigned such terms in the agreements or documents such terms are
being used to describe.

 

 

SCHEDULE 3.6

 

MATERIAL CONTRACTS

 

1.                                       Credit
Agreement (and related documents), dated October 19, 2004, by and between
SDG Resources, L.P., various lenders from time to time party thereto, J. Aron &
Company, as lead arranger and syndication agent, and J. Aron &
Company, as administrative agent

 

2.                                       Credit
Agreement and Related Documents dated December 17, 2001, as amended from
time to time, by land between Innovative Oil and Gas Development and Trading
Company, Inc., as Borrower, Texas Capital Bank, N.A., as Agent, and
certain financial institutions, as Lenders.

 

3.                                       Management
Services Agreement, dated December 18, 2001, by and between SDG Resources,
L.P. and Innovative Oil and Gas Development and Trading Company, Inc.

 

4.                                       Management
Services Agreement, dated December 22, 2003, by and between SDG Resources,
L.P. and Arkios Partners, L.P.

 

5.                                       [INTENTIONALLY
OMITTED]

 

6.                                       Lease Agreement
by and between Rowe Management Corp., as landlord, and SDG Resources, L.P., as
tenant, dated December 29, 2004, regarding premises in Odessa, Texas.

 

7.                                       Unit Operating
Agreement Cooper Jal Unit Lea County, New Mexico, filed for record September 30,
1970, by and between various parties including, without limitation, Reserve Oil
and Gas Company.

 

8.                                       Unit Agreement
for the Development and Operation of Cooper Jal Unit Lea County, New Mexico,
dated January 15, 1970, by and between the parties including, without
limitation, Reserve Oil and Gas Company.

 

9.                                       Change in Unit
Operator by Assignment dated January 15, 2002, by and between Texaco
Exploration and Production Inc. and SDG Resources L.P.

 

10.                                 Salt Water
Disposal Agreement, dated February 17, 2003, by and between Yates
Petroleum Corporation, as Operator, and SDG Resources, L.P., as Producer.

 

11.                                 Salt Water
Disposal Agreement by and between Texaco Exploration and Production, Inc.
and SDG Resources, L.P., dated June 8, 2001.

 

12.                                 Water Purchase
Agreement dated April 19, 2005, by and between SDG Resources L.P., as
Buyer, and OXY USA WTP LP, as Seller.

 

1

 

13.                                 Colorado River
Municipal Water District Diverted Water Contract dated August 10, 2005, by
and between the Colorado River Municipal Water District and SDG Resources, L.P.

 

14.                                 [INTENTIONALLY
OMITTED]

 

15.                                 Letter
agreement pertaining to the Cooper Jal Unit Battery by and between SDG
Resources, L.P., and Lewis B. Burleson, Inc., dated February 24,
2003.

 

16.                                 [INTENTIONALLY
OMITTED]

 

17.                                 Surface Lease
Agreement by and between Deep Wells Ranch, Inc., as Lessor, and SDG
Resources, L.P., as Lessee, dated December 9, 2002 and effective October 1,
2002.

 

18.                                 [INTENTIONALLY
OMITTED]

 

19.                                 [INTENTIONALLY
OMITTED]

 

20.                                 [INTENTIONALLY
OMITTED].

 

21.                                 Farmout
Agreement dated November 15, 1988, by and between Amoco Production
Company, as Farmer, and Tom R. Minihan, as Farmee.

 

22.                                 Farmout
Agreement dated September 7, 1988, by and between OXY USA Inc., as lease
owner, and Tom R. Minihan, as operator.

 

23.                                 Model Form Operating
Agreement, effective October 1, 1994, by and between Texaco Exploration
and Production Inc., as Operator and Devon Energy Company (Nevada), as
Non-Operator.

 

24.                                 Unit Operating
Agreement Edwards Field Grayburg Unit Crane & Ector Counties Texas,
dated July 1, 1966, by and between parties including, but not limited to,
Apco Oil Corporation.

 

25.                                 Unit Agreement
Edwards Field Grayburg Unit Crane & Ector Counties, Texas, dated as of
July 1, 1966, by and between parties including, but not limited to, Apco
Oil Corporation.

 

26.                                 Unit Agreement
Grand Clearfork Unit Pecos County, Texas, recorded February 23,
1995 under Clerk’s File No. 42048, by and between parties including,
without limitation, Grand Energy, Inc.

 

27.                                 Agreement for
Surface Use dated July     , 2005, by and
between Margaret McDonald, as Owner, and SDG Resources, as Operator.

 

28.                                 [INTENTIONALLY
OMITTED]

 

2

 

29.                                 Surface Use
Agreement dated March 4, 1993, by and between Grand Energy, Inc., as
Leasehold Owner, and Lillian Evins, as Surface Owner.

 

30.                                 Surface Use
Agreement dated September 30, 1993, by and between Grand Energy, Inc.,
as Leasehold Owner, and Robert F. Addis, as Surface Owner.

 

31.                                 Surface Use
Agreement dated March 5, 1993, by and between Grand Energy, Inc., as
Leasehold Owner, and Margaret Allene West, as Surface Owner.

 

32.                                 Surface Use
Agreement dated February 19, 1993, by and between Grand Energy, Inc., as
Leasehold Owner, and Dale V. Addis, as Surface Owner.

 

33.                                 Surface Use
Agreement dated February 23, 1993, by and between Grand Energy, Inc.,
as Leasehold Owner, and Lillian K. Meadows, as Surface Owner.

 

34.                                 Surface Use
Agreement dated February 24, 1993, by and between Grand Energy, Inc.,
as Leasehold Owner, and John C. Addis, as Surface Owner.

 

35.                                 Surface Use
Agreement dated March 1, 1993, by and between Grand Energy, Inc., as
Leasehold Owner, and Kathryn Hartung, as Surface Owner.

 

36.                                 That certain
three-way subtract meter service agreement, dated October 17, 2001, by and
between Texas-New Mexico Power Company, BAMA OIL, and SDG Resources, L.P.

 

37.                                 Surface Lease
Agreement by and between Ludean E. Cantrell, et. al. and Louis Q. Thomas, as
Lessors, and SDG Resources, L.P., as lessee, dated August 14, 2002.

 

38.                                 Letter
agreement dated February 16, 1983, by and between Getty Oil Company, as
lessor, and Exxon Company, U.S.A., as lessee.

 

39.                                 [INTENTIONALLY
OMITTED]

 

40.                                 Lease Line Well
Agreement dated March 10, 1976 between Reserve Oil and Gas Company, as
Unit Operator of the Cooper Jal Unit, and Skelly Oil Company, as Operator of
the Myers Langlie-Mattix unit.

 

41.                                 Purchase and
Sale Agreement dated November 19, 2001, by and between Texaco Exploration
and Production, Inc., as Seller, and SDG Resources, L.P., as Buyer.

 

3

 

42.                                 Purchase and
Sale Agreement effective June 1, 2001, by and between Curtis E. Gray,
Bryan D. Gray, and EADO Production, Inc., as Sellers, and Chevman I, Ltd
as Buyer.

 

43.                                 Purchase and
Sale Agreement by and between Bank of America, N.A. Trustee of T. J. and Mary
Ray Sivley Trust, as Seller or Assignor, and SDG Resources, dated March 27,
2003.

 

44.                                 [INTENTIONALLY
OMITTED]

 

45.                                 Purchase and
Sale Agreement of Oil and Gas Properties and Related Assets by and between
Kathleen V. Lind, as Seller, and SDG Resources, L.P., as Buyer, dated July 1,
2002.

 

46.                                 Purchase and
Sale Agreement by and between JETTA-X2, L.P., as Seller, and SDG Resources,
L.P., dated January 31, 2003.

 

47.                                 Disposal
Agreement dated May 20, 1999 by and between IBEX, as Leasehold Owner and
James D. Addis, as Surface Owner

 

48.                                 Disposal
Agreement dated May 15, 1999 by and between IBEX, as Leasehold Owner and
Marilyn M. Nuenfeldt, as Surface Owner

 

49.                                 Disposal
Agreement dated June 24, 1999 by and between IBEX, as Leasehold Owner and
John J. Addis, as Surface Owner

 

50.                                 Disposal
Agreement dated June 21, 1999 by and between IBEX, as Leasehold Owner and
Mark Addis, etal, as Surface Owner

 

51.                                 Gas Purchase
Contract dated November 17, 1993 by and between Dune Oil &
Gas:Company, as
Seller and GPM Gas Corporation, as Buyer

 

52.                                 Gas Purchase
Contract dated May 31, 1994 by and between Dune Oil &  Gas, Inc. as Seller and GPM Gas
Corporation, as Buyer

 

53.                                 Gas Purchase
Contract dated January 1, 2002 by and between SDG Resources, LP, as Seller
and Versado Gas Processors, LLC, as Buyer

 

54.                                 [INTENTIONALLY
OMITTED]

 

55.                                 Gas Purchase
Contract dated January 28, 1993 by and between Texaco Exploration and
Production Inc., Seller and GPM Gas Corporation, Buyer

 

56.                                 Gas Purchase
Agreement dated November 1, 2001 by and between SDG Resources, LP, Seller
and Sid Richardson Energy Services Co.

 

57.                                 Gas Purchase
Contract dated January 1, 1991 by and between Valley Resources, Inc.,
Seller and Phillips 66 Natural Gas Company, Buyer

 

4

 

58.                                 Casinghead Gas
Contract dated November 1, 1990 by and between Osceola Oil and Gas
Corporation, Seller and American Central Gas Companies, Inc., Buyer

 

59.                                 Purchase and
Sale Agreement dated March 11, 2003 by and between SDG Resources, LP,
Seller and LHT Partners, LP, Buyer

 

60.                                 Purchase and
Sale Agreement dated March 11, 2003 by and between SDG Resources, LP,
Seller and Innovative Oil and Gas Development and Trading Company, Inc.,
Buyer

 

61.                                 Marketing
Agreement No. 03-0105 dated January 29, 2003 and as amended March 25,
2004, by and between Meredith Marketing company and SDG Resources, LP, as
amended March 25, 2004

 

62.                                 Surface Use
Agreement dated January 9, 1994, by and between Grand Energy, Inc.,
as Leasehold Owner, and Frank R. Addis Il, as Surface Owner.

 

63.                                 Surface Use
Agreement dated January 12, 1994, by and between Grand Energy, Inc.,
as Leasehold Owner, and Sharon Ann Barth, as Surface Owner.

 

64.                                 Surface Use
Agreement dated January 15, 1994, by and between Grand Energy, Inc.,
as Leasehold Owner, and Mary L. Sorensen, as Surface Owner.

 

65.                                 Disposal
Agreement dated May 13, 1999, by and between IBEX Resources V, L.P., as
Operator, and John C. Addis, as Owner.

 

66.                                 Disposal Agreement
dated September 1, 1999, by and between IBEX Resources V, L.P., as
Operator, and Sharon Ann Barth, as Owner.

 

67.                                 Disposal
Agreement dated September 1, 1999, by and between IBEX Resources V, L.P.,
as Operator, and Frank R. Addis Il, as Owner.

 

68.                                 Disposal
Agreement dated September 1, 1999, by and between IBEX Resources V, L.P.,
as Operator, and Mary L. Sorensen, as Owner.

 

69.                                 Disposal
Agreement dated June 1, 1999, by and between IBEX Resources V, L.P., as
Operator, and Lillian K. Meadows, as Owner.

 

70.                                 Disposal
Agreement dated May 20, 1999, by and between IBEX Resources V, L.P., as
Operator, and James D. Addis, as Owner.

 

71.                                 Disposal
Agreement dated May 15, 1999, by and between IBEX Resources V, L.P., as
Operator, and Marilyn M. Neuenfeldt, as Owner.

 

5

 

72.                                 Disposal
Agreement dated June 21, 1999, by and between IBEX Resources V, L.P., as
Operator, and Mark D. Addis ETAL, as Owner.

 

73.                                 Disposal
Agreement dated June 24, 1999, by and between IBEX Resources V, L.P., as
Operator, and John J. Addis, as Owner.

 

74.                                 Crude Oil
Purchase Contract No. 2189-1005 dated October 31, 2005 by and between
Meredith Marketing Company and Plains Marketing, L.P.

 

75.                                 Crude Oil
Purchase Contract No. 4659-1004 dated September 28, 2005 by and
between SDG Resources, L.P and Plains Marketing, L. P.

 

76.                                 Crude Oil
Purchase Contract No. 4659-1003 dated November 18, 2003 by and
between SDG Resources, L. P. and plains Marketing, L. P.

 

77.                                 Marketing
Agreement No. 03-0103 dated January 29, 2003 by and between SDG
Resources, L. P. and Meredith Marketing Company

 

78.                                 Crude Oil
Purchase Contract dated February 1, 2003 by an between SDG Resources, L.
P. and TEPPCO Crude Oil, L. P. and covering the Eva Kayser Lease

 

79.                                 Crude Oil
Purchase Agreement dated December 9, 2004 by and between SDG Resources, L.
P. and Sunoco Partners Marketing & Terminals L. P.

 

80.                                 Crude Oil
Purchase Agreement No. LPS700014 dated February 9, 2004 and amended May 26,
2004 by and between SDG Resources, L. P and Shell Trading (US) Company

 

81.                                 Crude Oil
Purchase Letter dated September 17, 2004 by and between SDG Resources L.P.  and Navajo Refining Company

 

6

 

EXHIBIT 3.7

 

LITIGATION AND CLAIMS

 

1.                                       Luella Fern Howe, et al. v. SDG Resources, L.P., Cause No. 14,731,
in the 109th Judicial
District Court of Winkler County, Texas. [Plaintiffs allege surface ownership
interest in 5 leases in Section 12, Block 26, Public School Land in
Winkler County in which SDG owns a 100% working interest. Plaintiffs claim the
right to receive certain rental payments and water disposal fees not specified
in the lease and seek to compel defendant to bury flow lines on the leases.]

 

2.                                       John B. Walton. By letter from Timothy J.
Mason, attorney at law, dated January 4, 2006, John B. Walton, a surface
owner on the Oscar Clapp Lease in Winkler County, Texas, asserts claims against
SDG Resources, L.P. (“SDG”) arising from alleged breaches of the lease
agreement [Mr. Walton demands that SDG remove certain abandoned equipment,
reclaim the surface, pay damages for unauthorized roads and certain flow lines,
bury flow lines and pipelines below plough depth, and place new signs with
proper Texas Railroad Commission lease names and numbers on all wells. No
litigation or arbitration has been initiated. Mr. Walton gives SDG 30 days
to respond].

 

 

EXHIBIT 3.8

 

APPROVALS, CONSENTS, NOTIFICATIONS,

FILINGS AND PREFERENTIAL RIGHTS

 

CONSENTS AND NOTIFICATIONS:

 

Contract No. 6 - Lease Agreement by and
between Rowe Management Corp., as landlord, and SDG Resources, L.P., as tenant,
dated December 29, 2004, regarding premises in Odessa, Texas.

 

Contract No. 11 - Salt Water Disposal
Agreement by and between Texaco Exploration and Production, Inc. and SDG
Resources, L.P., dated June 8, 2001.

 

Contract No. 12 - Water Purchase Agreement
dated April 19, 2005, by and between SDG Resources L.P., as Buyer, and OXY
USA WTP LP, as Seller.

 

Contract No. 13 - Colorado River Municipal
Water District Diverted Water Contract dated August 10, 2005, by and
between the Colorado River Municipal Water District and SDG Resources, L.P.

 

Contract No. 15 - Letter agreement pertaining
to the Cooper Jal Unit Battery by and between SDG Resources, L.P., and Lewis B.
Burleson, Inc., dated February 24, 2003.

 

Contract No. 21 - Farmout Agreement dated November 15,
1988, by and between Amoco Production Company, as Farmer, and Tom R. Minihan,
as Farmee.

 

Contract No. 22 - Farmout Agreement dated September 7,
1988, by and between OXY USA Inc., as lease owner, and Tom R. Minihan, as
operator.

 

Contract No. 23 - Model Form Operating
Agreement, effective October 1, 1994, by and between Texaco Exploration
and Production Inc., as Operator, and Devon Energy Company (Nevada), as
Non-Operator. (PREFERENTIAL RIGHT TO PURCHASE
– 15  day election after notice)

 

Contract No. 56 - Gas Purchase Agreement dated
November 1, 2001 by and between SDG Resources, LP, Seller and Sid
Richardson Energy Services Co.

 

Contract No. 61 - Marketing Agreement dated January 29,
2003 by and between Meredith Marketing Company and SDG Resources, LP, as
amended March 25, 2004

 

Contract No. 62 - Surface Use Agreement dated January 9,
1994, by and between Grand Energy, Inc., as Leasehold Owner, and Frank R.
Addis Il, as Surface Owner.

 

Contract No. 63 - Surface Use Agreement
dated January 12, 1994, by and between Grand Energy, Inc., as
Leasehold Owner, and Sharon Ann Barth, as Surface Owner.

 

1

 

Contract No. 64 - Surface Use Agreement dated January 15,
1994, by and between Grand Energy, Inc., as Leasehold Owner, and Mary L.
Sorensen, as Surface Owner.

 

Contract No. 66 - Disposal Agreement dated September 1,
1999, by and between IBEX Resources V, L.P., as Operator, and Sharon Ann Barth,
as Owner.

 

Contract No. 67 - Disposal Agreement dated September 1,
1999, by and between IBEX Resources V, L.P.,  as Operator, and Frank R.
Addis Il, as Owner.

 

Contract No. 68 - Disposal Agreement dated September 1,
1999, by and between IBEX Resources V, L.P., as Operator, and Mary L. Sorensen,
as Owner.

 

Texas Permit - Permit to Maintain and Use a
Pit, dated April 11,  1985 (Pit Permit No. P003743)
issued by State of Texas Railroad Commission Oil and Gas Division, that allows
the operator to maintain and use an emergency saltwater storage pit (lined)
with respect to the Crenshaw Lease.

 

2

 

SCHEDULE 3.15

 

PAYOUT BALANCES

 

[SEE ATTACHED]

 

 

KAYSER PAYOUT

 

BEGINNING BALANCE FROM PRIOR
OPERATOR [illegible]

 

	
  2001

  	
   

  	
  Jan-01

  	
   

  	
  Feb-01

  	
   

  	
  Mar-01

  	
   

  	
  Apr-01

  	
   

  	
  May-01

  	
   

  	
  Jun-01

  	
   

  	
  Jul-01

  	
   

  	
  Aug-01

  	
   

  	
  Sep-01

  	
   

  	
  Oct-01

  	
   

  	
  Nov-01

  	
   

  	
  Dec-01

  	
   

  	
  Total

  2001

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  12,681.15

  	
   

  	
  8,083.72

  	
   

  	
  3,251.98

  	
   

  	
  2,486.51

  	
   

  	
  2,433.46

  	
   

  	
  ?

  	
   

  
	
  Gas
  Sales

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,570.32

  	
   

  	
  1,301.53

  	
   

  	
  998.64

  	
   

  	
  ?

  	
   

  
	
  Total
  Sales

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  12,681.15

  	
   

  	
  8,083.72

  	
   

  	
  4,822.30

  	
   

  	
  3,788.04

  	
   

  	
  3,432.10

  	
   

  	
  ?

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  7,667.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
   

  	
   

  	
  3,26?.96

  	
   

  	
  5,022.99

  	
   

  	
  5,205.51

  	
   

  	
  21,161.00

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  9,671.84

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,349.51

  	
   

  	
  264.46

  	
   

  	
  0.00

  	
   

  	
  6,022.60

  	
   

  	
  18,306.41

  	
   

  
	
  Total
  Costs

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  17,339.38

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,349.51

  	
   

  	
  3,52?.42

  	
   

  	
  5,022.99

  	
   

  	
  11,228.11

  	
   

  	
  39,467.41

  	
   

  
	
  Net
  Profit

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  (17,339.38

  	
  )

  	
  0.00

  	
   

  	
  12,681.15

  	
   

  	
  5,734.21

  	
   

  	
  ?

  	
   

  	
  (1,234.95

  	
  )

  	
  (7,796.01

  	
  )

  	
  ?

  	
   

  
	
  Cumulative
  Payout

  	
   

  	
  (1,812,787.00

  	
  )

  	
  (1,812,787.00

  	
  )

  	
  (1,812,787.00

  	
  )

  	
  (1,812,787.00

  	
  )

  	
  (1,812,787.00

  	
  )

  	
  (1,8?0.125.38

  	
  )

  	
  (1,830,128.3?

  	
  )

  	
  (1,817,4?5.23

  	
  )

  	
  (1,811,711.02

  	
  )

  	
  (1,810,416.14

  	
  )

  	
  (1,811,650.99

  	
  )

  	
  (1,819,447.00

  	
  )

  	
  (1,819,44?.00

  	
  )

  

 

	
  2002

  	
   

  	
  Jan-02

  	
   

  	
  Feb-02

  	
   

  	
  Mar-02

  	
   

  	
  Apr-02

  	
   

  	
  May-02

  	
   

  	
  Jun-02

  	
   

  	
  Jul-02

  	
   

  	
  Aug-02

  	
   

  	
  Sep-02

  	
   

  	
  Oct-02

  	
   

  	
  Nov-02

  	
   

  	
  Dec-02

  	
   

  	
  Total

  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  2,213.77

  	
   

  	
  0.00

  	
   

  	
  5,104.53

  	
   

  	
  3,020.93

  	
   

  	
  5,894.16

  	
   

  	
  9,425.05

  	
   

  	
  6,181.60

  	
   

  	
  3,127.55

  	
   

  	
  6,762.65

  	
   

  	
  6,762.65

  	
   

  	
  6,651.21

  	
   

  	
  8,873.20

  	
   

  	
  64,017.30

  	
   

  
	
  Gas
  Sales

  	
   

  	
  1,177.90

  	
   

  	
  1,123.27

  	
   

  	
  1,004.20

  	
   

  	
  655.78

  	
   

  	
  1,137.35

  	
   

  	
  679.88

  	
   

  	
  506.62

  	
   

  	
  706.39

  	
   

  	
  802.23

  	
   

  	
  2,113.82

  	
   

  	
  1,116.04

  	
   

  	
  1,367.76

  	
   

  	
  12,391.24

  	
   

  
	
  Total
  Sales

  	
   

  	
  3,391.67

  	
   

  	
  1,123.27

  	
   

  	
  6,108.73

  	
   

  	
  3,676.71

  	
   

  	
  7,031.51

  	
   

  	
  10,104.93

  	
   

  	
  6,688.22

  	
   

  	
  3,833.94

  	
   

  	
  7,564.88

  	
   

  	
  8,876.47

  	
   

  	
  7,767.25

  	
   

  	
  10,240.96

  	
   

  	
  76,408.54

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  4,598.54

  	
   

  	
  5,778.13

  	
   

  	
  16,942.43

  	
   

  	
  21,213.88

  	
   

  	
  11,190.91

  	
   

  	
  18,803.46

  	
   

  	
  8,452.30

  	
   

  	
  5,285.58

  	
   

  	
  4,980.12

  	
   

  	
  5,462.87

  	
   

  	
  7,739.36

  	
   

  	
  2,554.11

  	
   

  	
  113,001.69

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  473.04

  	
   

  	
  2,540.52

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  3,013.56

  	
   

  
	
  Total
  Costs

  	
   

  	
  4,598.54

  	
   

  	
  5,778.13

  	
   

  	
  17,415.47

  	
   

  	
  23,754.40

  	
   

  	
  11,190.91

  	
   

  	
  18,803.46

  	
   

  	
  8,452.30

  	
   

  	
  5,285.58

  	
   

  	
  4,980.12

  	
   

  	
  5,462.87

  	
   

  	
  7,739.36

  	
   

  	
  2,554.11

  	
   

  	
  116,015.25

  	
   

  
	
  Net
  Profit

  	
   

  	
  (1,206.87

  	
  )

  	
  (4,654.86

  	
  )

  	
  (11,306.74

  	
  )

  	
  (20,077.69

  	
  )

  	
  (4,159.40

  	
  )

  	
  (8,698.53

  	
  )

  	
  (1,764.08

  	
  )

  	
  (1,451.64

  	
  )

  	
  2,584.76

  	
   

  	
  3,413.60

  	
   

  	
  27.89

  	
   

  	
  7,686.85

  	
   

  	
  (39,606.71

  	
  )

  
	
  Cumulative
  Payout

  	
   

  	
  (1,820,?53.87

  	
  )

  	
  (1,825,308.7?

  	
  )

  	
  (1,83?,615.47

  	
  )

  	
  (1,856,???.??

  	
  )

  	
  (1,860,852.56

  	
  )

  	
  (1,869,55?.09

  	
  )

  	
  (1,871,315.17

  	
  )

  	
  (1,872,76?.81

  	
  )

  	
  (1,870,182.06

  	
  )

  	
  (1,866,768.45

  	
  )

  	
  (1,866,740.?

  	
  )

  	
  (1,869,053.71

  	
  )

  	
  ?

  	
   

  

 

 

	
  2003

  	
   

  	
  Jan-03

  	
   

  	
  Feb-03

  	
   

  	
  Mar-03

  	
   

  	
  Apr-03

  	
   

  	
  May-03

  	
   

  	
  Jun-03

  	
   

  	
  Jul-03

  	
   

  	
  Aug-03

  	
   

  	
  Sep-03

  	
   

  	
  Oct-03

  	
   

  	
  Nov-03

  	
   

  	
  Dec-03

  	
   

  	
  Total

  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  3,811.42

  	
   

  	
  4,326.91

  	
   

  	
  7,457.94

  	
   

  	
  6,201.51

  	
   

  	
  6,390.93

  	
   

  	
  0.00

  	
   

  	
  6,353.93

  	
   

  	
  8,992.41

  	
   

  	
  (1,067.92

  	
  )

  	
  0.00

  	
   

  	
  2,948.54

  	
   

  	
  248.13

  	
   

  	
  45,663.80

  	
   

  
	
  Gas
  Sales

  	
   

  	
  1,887.96

  	
   

  	
  1,857.98

  	
   

  	
  2,146.79

  	
   

  	
  1,243.48

  	
   

  	
  1,406.45

  	
   

  	
  1,428.38

  	
   

  	
  1,475.58

  	
   

  	
  529.06

  	
   

  	
  301.24

  	
   

  	
  1,064.04

  	
   

  	
  273.89

  	
   

  	
  575.36

  	
   

  	
  14,188.21

  	
   

  
	
  Total
  Sales

  	
   

  	
  5,699.38

  	
   

  	
  6,184.89

  	
   

  	
  9,604.73

  	
   

  	
  7,444.99

  	
   

  	
  7,797.38

  	
   

  	
  1,428.38

  	
   

  	
  7,829.51

  	
   

  	
  9,521.47

  	
   

  	
  (766.68

  	
  )

  	
  1,064.04

  	
   

  	
  3,222.43

  	
   

  	
  823.49

  	
   

  	
  59,852.01

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  5,851.76

  	
   

  	
  4,139.63

  	
   

  	
  3,684.61

  	
   

  	
  10,602.00

  	
   

  	
  10.424.90

  	
   

  	
  5,219.57

  	
   

  	
  7,540.72

  	
   

  	
  8,285.93

  	
   

  	
  4,092.38

  	
   

  	
  (1,289.30

  	
  )

  	
  6,185.20

  	
   

  	
  3,942.22

  	
   

  	
  66,678.62

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  98.50

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  331.36

  	
   

  	
  132,000.15

  	
   

  	
  0.00

  	
   

  	
  132,430.01

  	
   

  
	
  Total
  Costs

  	
   

  	
  5,851.76

  	
   

  	
  4,139.63

  	
   

  	
  3,783.11

  	
   

  	
  10,602.00

  	
   

  	
  10,424.90

  	
   

  	
  5,219.57

  	
   

  	
  7,540.72

  	
   

  	
  8,285.93

  	
   

  	
  4,092.38

  	
   

  	
  (957.94

  	
  )

  	
  138,185.35

  	
   

  	
  3,942.22

  	
   

  	
  199,108.63

  	
   

  
	
  Net
  Profit

  	
   

  	
  (132,38

  	
  )

  	
  2,045.26

  	
   

  	
  5,621.62

  	
   

  	
  (3,157.01

  	
  )

  	
  (2,627.52

  	
  )

  	
  (3,793.19

  	
  )

  	
  ?

  	
   

  	
  3,235.54

  	
   

  	
  (4,859.06

  	
  )

  	
  2,021.??

  	
   

  	
  (134,962.92

  	
  )

  	
  (3,118.73

  	
  )

  	
  (?

  	
  )

  
	
  Cumulative
  Payout

  	
   

  	
  (1,859,206.09

  	
  )

  	
  (1,857,150.83

  	
  )

  	
  (1,851,339.??

  	
  )

  	
  (1,854,498.22

  	
  )

  	
  (1,857,123.74

  	
  )

  	
  (?

  	
  )

  	
  (1,860,628.14

  	
  )

  	
  (1,857,392.60

  	
  )

  	
  (1,862,251.66

  	
  )

  	
  (1,860,???.68

  	
  )

  	
  (1,995,192.60

  	
  )

  	
  (1,998,311.33

  	
  )

  	
  (1,998,311

  	
  )

  

 

	
  2004

  	
   

  	
  Jan-04

  	
   

  	
  Feb-04

  	
   

  	
  Mar-04

  	
   

  	
  Apr-04

  	
   

  	
  May-04

  	
   

  	
  Jun-04

  	
   

  	
  Jul-04

  	
   

  	
  Aug-04

  	
   

  	
  Sep-04

  	
   

  	
  Oct-04

  	
   

  	
  Nov-04

  	
   

  	
  Dec-04

  	
   

  	
  2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  12,093.43

  	
   

  	
  8,434.49

  	
   

  	
  13,736.93

  	
   

  	
  13,399.21

  	
   

  	
  35,114.61

  	
   

  	
  43,593.89

  	
   

  	
  33,881.53

  	
   

  	
  28,359.50

  	
   

  	
  21,065.06

  	
   

  	
  23,118.82

  	
   

  	
  232,837.??

  	
   

  
	
  Gas
  Sales

  	
   

  	
  700.66

  	
   

  	
  670.00

  	
   

  	
  6,315.84

  	
   

  	
  3,648,65

  	
   

  	
  (2,433.12

  	
  )

  	
  970.59

  	
   

  	
  3,548.47

  	
   

  	
  3,818.11

  	
   

  	
  3,112.58

  	
   

  	
  1,740.42

  	
   

  	
  2,257.48

  	
   

  	
  2,257.48

  	
   

  	
  26,607.??

  	
   

  
	
  Total
  Sales

  	
   

  	
  700.66

  	
   

  	
  670.00

  	
   

  	
  18,409.27

  	
   

  	
  12,083.06

  	
   

  	
  11,303.81

  	
   

  	
  14,369.80

  	
   

  	
  38,663.08

  	
   

  	
  47,412.00

  	
   

  	
  36,994.11

  	
   

  	
  30,139.92

  	
   

  	
  23.322.54

  	
   

  	
  25,376.30

  	
   

  	
  259,444.??

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  4,985.44

  	
   

  	
  18,604.85

  	
   

  	
  13,893.17

  	
   

  	
  22,457.32

  	
   

  	
  46,388.44

  	
   

  	
  26,796.33

  	
   

  	
  49,162.06

  	
   

  	
  60,208.82

  	
   

  	
  38,635.44

  	
   

  	
  37,054.21

  	
   

  	
  51,204.05

  	
   

  	
  59,516.??

  	
   

  	
  425,906.97

  	
   

  
	
  CapX

  	
   

  	
  7,275.89

  	
   

  	
  40,872.89

  	
   

  	
  118,100.13

  	
   

  	
  156,921.41

  	
   

  	
  140,739.58

  	
   

  	
  123,237.13

  	
   

  	
  37,554.87

  	
   

  	
  4,388.34

  	
   

  	
  2,104.13

  	
   

  	
  2,858.88

  	
   

  	
  46,475.50

  	
   

  	
  17,073.??

  	
   

  	
  692,602.33

  	
   

  
	
  Total
  Costs

  	
   

  	
  12,261.33

  	
   

  	
  59,477.74

  	
   

  	
  131,993.30

  	
   

  	
  179,378.73

  	
   

  	
  187,128.02

  	
   

  	
  150,033.46

  	
   

  	
  86,716.93

  	
   

  	
  64,597.16

  	
   

  	
  40,739.57

  	
   

  	
  39,913.09

  	
   

  	
  97,679.55

  	
   

  	
  78,590.42

  	
   

  	
  1,126,509.30

  	
   

  
	
  Net
  Profit

  	
   

  	
  (11,560.67

  	
  )

  	
  (58,807.74

  	
  )

  	
  (113,584.03

  	
  )

  	
  (167,295.68

  	
  )

  	
  (175,824.21

  	
  )

  	
  (135,663.68

  	
  )

  	
  (48,063.85

  	
  )

  	
  (178,185.16

  	
  )

  	
  (3,745.46

  	
  )

  	
  (9,7?3.17

  	
  )

  	
  (74,357.??

  	
  )

  	
  (51,214.12

  	
  )

  	
  ?

  	
   

  
	
  Cumulative
  Payout

  	
   

  	
  (2,009,872.00

  	
  )

  	
  (2,068,679.74

  	
  )

  	
  (?

  	
  )

  	
  (2,349,559.45

  	
  )

  	
  (2,525,383.66

  	
  )

  	
  (2,661,047.32

  	
  )

  	
  (2,709,101.17

  	
  )

  	
  (2,726,286.33

  	
  )

  	
  (2,730,031.79

  	
  )

  	
  (2,739.804.96

  	
  )

  	
  (2,??????

  	
  )

  	
  (2,???,375.09

  	
  )

  	
  (2,865,376.09

  	
  )

  

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2005

  	
   

  	
  Jan-05

  	
   

  	
  Feb-05

  	
   

  	
  Mar-05

  	
   

  	
  Apr-05

  	
   

  	
  May-05

  	
   

  	
  Jun-05

  	
   

  	
  Jul-05

  	
   

  	
  Aug-05

  	
   

  	
  Sep-05

  	
   

  	
  Oct-05

  	
   

  	
  Nov-05

  	
   

  	
  Dec-05

  	
   

  	
  2005

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  32,923.33

  	
   

  	
  36,885.09

  	
   

  	
  29,194.05

  	
   

  	
  53,827.86

  	
   

  	
  50,069.21

  	
   

  	
  26,862.00

  	
   

  	
  50,003.66

  	
   

  	
  69,059.87

  	
   

  	
  50,500.03

  	
   

  	
  44,???.??

  	
   

  	
  11,?32.91

  	
   

  	
  0.00

  	
   

  	
  455,112.54

  	
   

  
	
  Gas
  Sales

  	
   

  	
  2,617.86

  	
   

  	
  2,882.39

  	
   

  	
  2,380.09

  	
   

  	
  4,861.00

  	
   

  	
  4,340.74

  	
   

  	
  2,270.00

  	
   

  	
  4,517.66

  	
   

  	
  5,265.96

  	
   

  	
  3,468.35

  	
   

  	
  5,???.45

  	
   

  	
  3,?08.55

  	
   

  	
  0.00

  	
   

  	
  41,308.05

  	
   

  
	
  Total
  Sales

  	
   

  	
  35,541.19

  	
   

  	
  39,767.48

  	
   

  	
  31,574.14

  	
   

  	
  58,688.86

  	
   

  	
  54,409.95

  	
   

  	
  29,132.00

  	
   

  	
  54,523.31

  	
   

  	
  74,325.83

  	
   

  	
  53,968.38

  	
   

  	
  49,???.09

  	
   

  	
  14,?41.46

  	
   

  	
  0.00

  	
   

  	
  496,420.59

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  37,798.26

  	
   

  	
  30,???.02

  	
   

  	
  37,967.35

  	
   

  	
  38,760.42

  	
   

  	
  26,791.55

  	
   

  	
  53,509.40

  	
   

  	
  52,641.29

  	
   

  	
  39,892.32

  	
   

  	
  32,030.22

  	
   

  	
  39,999.54

  	
   

  	
  58,106.20

  	
   

  	
  0.00

  	
   

  	
  448,163.88

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  8,586.63

  	
   

  	
  62,106.19

  	
   

  	
  10,710.18

  	
   

  	
  3,816.78

  	
   

  	
  56,460.84

  	
   

  	
  101,614.22

  	
   

  	
  32,279.56

  	
   

  	
  68,481.78

  	
   

  	
  12,848.32

  	
   

  	
  0.00

  	
   

  	
  356,903.50

  	
   

  
	
  Total
  Costs

  	
   

  	
  37,798.26

  	
   

  	
  30,???.02

  	
   

  	
  46,553.98

  	
   

  	
  100.863.61

  	
   

  	
  37,502.04

  	
   

  	
  57,326.18

  	
   

  	
  109,102.13

  	
   

  	
  141,506.54

  	
   

  	
  64,309.78

  	
   

  	
  108,481.32

  	
   

  	
  70,954.52

  	
   

  	
  0.00

  	
   

  	
  805,067.38

  	
   

  
	
  Net
  Profit

  	
   

  	
  (2,257.07

  	
  )

  	
  9,100.46

  	
   

  	
  (14,979.84

  	
  )

  	
  (42,178.75

  	
  )

  	
  16,907.81

  	
   

  	
  (28,154.18

  	
  )

  	
  (54,578.82

  	
  )

  	
  (67,180.71

  	
  )

  	
  (10,343.40

  	
  )

  	
  (58,???.23

  	
  )

  	
  (55,313.05

  	
  )

  	
  0.00

  	
   

  	
  (308,645,69

  	
  )

  
	
  Cumulative Payout

  	
   

  	
  (2,867,633.16

  	
  )

  	
  (2,858,532.70

  	
  )

  	
  (2,873,?12.54

  	
  )

  	
  (2,915,568.29

  	
  )

  	
  (2,898,781.38

  	
  )

  	
  (2,928,975.56

  	
  )

  	
  (2,981,???.38

  	
  )

  	
  (3,048,735.09

  	
  )

  	
  (3,059,078.49

  	
  )

  	
  (3,117,789.72

  	
  )

  	
  (3,174,022,78

  	
  )

  	
  (3,174,022,79

  	
  )

  	
  (3,174,022,79

  	
  )

  

 

 

KAYSER PAYOUT

 

BEGINNING BALANCE FROM PRIOR
OPERATOR (3,419,158.00)

 

	
  2001

  	
   

  	
  Jan-01

  	
   

  	
  Feb-01

  	
   

  	
  Mar-01

  	
   

  	
  Apr-01

  	
   

  	
  May-01

  	
   

  	
  Jun-01

  	
   

  	
  Jul-01

  	
   

  	
  Aug-01

  	
   

  	
  Sep-01

  	
   

  	
  Oct-01

  	
   

  	
  Nov-01

  	
   

  	
  Dec-01

  	
   

  	
  Total

  2001

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  12,681.15

  	
   

  	
  8,083.72

  	
   

  	
  3,251.98

  	
   

  	
  2,456.51

  	
   

  	
  2,433.46

  	
   

  	
  ??

  	
   

  
	
  Gas
  Sales

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,570.32

  	
   

  	
  1,301.63

  	
   

  	
  998.64

  	
   

  	
  3,870.59

  	
   

  
	
  Total
  Sales

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  12,681.15

  	
   

  	
  8,083.72

  	
   

  	
  4,822.30

  	
   

  	
  3,758.14

  	
   

  	
  3,432.10

  	
   

  	
  32,807.41

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  7,667.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
   

  	
   

  	
  3,262.96

  	
   

  	
  5,022.99

  	
   

  	
  5,205.51

  	
   

  	
  21,159.00

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  9,671.84

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,349.51

  	
   

  	
  264.45

  	
   

  	
  0.00

  	
   

  	
  6,022.60

  	
   

  	
  18,308.41

  	
   

  
	
  Total
  Costs

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  17,339.38

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,349.51

  	
   

  	
  3,527.42

  	
   

  	
  5,022.99

  	
   

  	
  11,228.11

  	
   

  	
  ?

  	
   

  
	
  Net
  Profit

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  (17,339.38

  	
  )

  	
  0.00

  	
   

  	
  12,681.15

  	
   

  	
  5,734.21

  	
   

  	
  1,294.??

  	
   

  	
  (1,234.85

  	
  )

  	
  (7,796.01

  	
  )

  	
  (6,660.00

  	
  )

  
	
  Cumulative
  Payout

  	
   

  	
  (3,419,158.00

  	
  )

  	
  (3,419,158.00

  	
  )

  	
  (3,419,158.00

  	
  )

  	
  (3,419,158.00

  	
  )

  	
  (3,419,158.00

  	
  )

  	
  (3,436,497.38

  	
  )

  	
  (3,436,497.38

  	
  )

  	
  (3,423,816.23

  	
  )

  	
  (3,418,082.02

  	
  )

  	
  (3,416,787.14

  	
  )

  	
  (3,416,021.99

  	
  )

  	
  (3,425,813.00

  	
  )

  	
  (3,425,818.00

  	
  )

  

 

	
  2002

  	
   

  	
  Jan-02

  	
   

  	
  Feb-02

  	
   

  	
  Mar-02

  	
   

  	
  Apr-02

  	
   

  	
  May-02

  	
   

  	
  Jun-02

  	
   

  	
  Jul-02

  	
   

  	
  Aug-02

  	
   

  	
  Sep-02

  	
   

  	
  Oct-02

  	
   

  	
  Nov-02

  	
   

  	
  Dec-02

  	
   

  	
  Total

  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  2,213.77

  	
   

  	
  0.00

  	
   

  	
  5,104.53

  	
   

  	
  3,020.93

  	
   

  	
  5,894.16

  	
   

  	
  9,425.05

  	
   

  	
  6,181.60

  	
   

  	
  3,127.55

  	
   

  	
  6,762.65

  	
   

  	
  6,762.65

  	
   

  	
  6,651.21

  	
   

  	
  8,873.20

  	
   

  	
  64,017.30

  	
   

  
	
  Gas
  Sales

  	
   

  	
  1,177.90

  	
   

  	
  1,123.27

  	
   

  	
  1,004.20

  	
   

  	
  655.78

  	
   

  	
  1,137.35

  	
   

  	
  679.88

  	
   

  	
  506.62

  	
   

  	
  706.39

  	
   

  	
  802.23

  	
   

  	
  2,113.82

  	
   

  	
  1,116.04

  	
   

  	
  1,367.76

  	
   

  	
  12,391.24

  	
   

  
	
  Total
  Sales

  	
   

  	
  3,391.67

  	
   

  	
  1,123.27

  	
   

  	
  6,108.73

  	
   

  	
  3,675.71

  	
   

  	
  7,031.51

  	
   

  	
  10,104.93

  	
   

  	
  6,688.22

  	
   

  	
  3,833.94

  	
   

  	
  7,564.88

  	
   

  	
  8,876.47

  	
   

  	
  7,767.25

  	
   

  	
  10,240.96

  	
   

  	
  76,408.54

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  4,598.54

  	
   

  	
  5,778.13

  	
   

  	
  16,942.43

  	
   

  	
  21,213.88

  	
   

  	
  11,190.91

  	
   

  	
  18,803.46

  	
   

  	
  8,452.30

  	
   

  	
  5,285.58

  	
   

  	
  4,980.12

  	
   

  	
  5,462.87

  	
   

  	
  7,739.36

  	
   

  	
  ?

  	
   

  	
  113,001.69

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  473.04

  	
   

  	
  2,540.52

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  3,013.56

  	
   

  
	
  Total
  Costs

  	
   

  	
  4,598.54

  	
   

  	
  5,778.13

  	
   

  	
  17,415.47

  	
   

  	
  23,754.40

  	
   

  	
  11,190.91

  	
   

  	
  18,803.46

  	
   

  	
  8,452.30

  	
   

  	
  5,285.58

  	
   

  	
  4,980.12

  	
   

  	
  5,462.87

  	
   

  	
  7,739.36

  	
   

  	
  ?

  	
   

  	
  116,015.25

  	
   

  
	
  Net
  Profit

  	
   

  	
  (1,206.87

  	
  )

  	
  (4,654.86

  	
  )

  	
  (11,306.74

  	
  )

  	
  (20,077.69

  	
  )

  	
  (4,159.40

  	
  )

  	
  (8,69?.53

  	
  )

  	
  (1,764.08

  	
  )

  	
  (1,451.64

  	
  )

  	
  2,584.7?

  	
   

  	
  3,413.80

  	
   

  	
  27.89

  	
   

  	
  ?

  	
   

  	
  (39,606.71

  	
  )

  
	
  Cumulative
  Payout

  	
   

  	
  (3,427.024.57)

  	
   

  	
  (3,431,679.73

  	
  )

  	
  (3,442,986.47

  	
  )

  	
  (3,463,064.16

  	
  )

  	
  (3,467,223.56

  	
  )

  	
  (3,475,922.09

  	
  )

  	
  (3,477,686.17

  	
  )

  	
  (3,479,137.81

  	
  )

  	
  (3,476,563.05

  	
  )

  	
  (3,478,139.45

  	
  )

  	
  (3,473,111.?

  	
  )

  	
  (3,465,424.71

  	
  )

  	
  (3,465,424.71

  	
  )

  

 

 

	
  2003

  	
   

  	
  Jan-03

  	
   

  	
  Feb-03

  	
   

  	
  Mar-03

  	
   

  	
  Apr-03

  	
   

  	
  May-03

  	
   

  	
  Jun-03

  	
   

  	
  Jul-03

  	
   

  	
  Aug-03

  	
   

  	
  Sep-03

  	
   

  	
  Oct-03

  	
   

  	
  Nov-03

  	
   

  	
  Dec-03

  	
   

  	
  Total

  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  3,811.42

  	
   

  	
  4,326.91

  	
   

  	
  7,457.94

  	
   

  	
  6,201.51

  	
   

  	
  6,390.93

  	
   

  	
  0.00

  	
   

  	
  6,353.93

  	
   

  	
  8,992.41

  	
   

  	
  (1,067.92

  	
  )

  	
  0.00

  	
   

  	
  2,948.54

  	
   

  	
  248.13

  	
   

  	
  45,663.80

  	
   

  
	
  Gas
  Sales

  	
   

  	
  1,887.96

  	
   

  	
  1,857.98

  	
   

  	
  2,146.79

  	
   

  	
  1,243.48

  	
   

  	
  1,406.45

  	
   

  	
  1,426.38

  	
   

  	
  1,475.58

  	
   

  	
  529.06

  	
   

  	
  301.24

  	
   

  	
  1,054.04

  	
   

  	
  273.89

  	
   

  	
  575.36

  	
   

  	
  14,188.21

  	
   

  
	
  Total
  Sales

  	
   

  	
  5,699.38

  	
   

  	
  6,184.89

  	
   

  	
  9,604.73

  	
   

  	
  7,444.99

  	
   

  	
  7,797.38

  	
   

  	
  1,426.38

  	
   

  	
  7,829.51

  	
   

  	
  9,521.47

  	
   

  	
  (766.68

  	
  )

  	
  1,054.04

  	
   

  	
  3,222.43

  	
   

  	
  823.49

  	
   

  	
  59,852.01

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  5,851.76

  	
   

  	
  4,139.63

  	
   

  	
  3,684.61

  	
   

  	
  10,602.00

  	
   

  	
  10,424.90

  	
   

  	
  5,219.57

  	
   

  	
  7,540.72

  	
   

  	
  6,285.93

  	
   

  	
  4,092.38

  	
   

  	
  (1,289.30

  	
  )

  	
  6,185.20

  	
   

  	
  3,942.22

  	
   

  	
  66,679.62

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  98.50

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  331.36

  	
   

  	
  132,000.15

  	
   

  	
  0.00

  	
   

  	
  132,430.01

  	
   

  
	
  Total
  Costs

  	
   

  	
  5,851.76

  	
   

  	
  4,139.63

  	
   

  	
  3,783.11

  	
   

  	
  10,602.00

  	
   

  	
  10,424.90

  	
   

  	
  5,219.57

  	
   

  	
  7,540.72

  	
   

  	
  6,285.93

  	
   

  	
  4,092.38

  	
   

  	
  (957.94

  	
  )

  	
  138,185.35

  	
   

  	
  3,942.22

  	
   

  	
  199,109.63

  	
   

  
	
  Net
  Profit

  	
   

  	
  (152.38

  	
  )

  	
  2,045.26

  	
   

  	
  5,821.62

  	
   

  	
  (3,157.01

  	
  )

  	
  (2,627.52

  	
  )

  	
  (3,793.19

  	
  )

  	
  288.79

  	
   

  	
  3,235.54

  	
   

  	
  (4,859.06

  	
  )

  	
  2,021.98

  	
   

  	
  (134,962.92

  	
  )

  	
  (3,118.73

  	
  )

  	
  (139,25?.52

  	
  )

  
	
  Cumulative
  Payout

  	
   

  	
  (3,465,577.09

  	
  )

  	
  (3,463,531.83

  	
  )

  	
  (3,457,710.21

  	
  )

  	
  (3,460,867.22

  	
  )

  	
  (3,463,494.74

  	
  )

  	
  (3,467,287.93

  	
  )

  	
  (3,466,999.14

  	
  )

  	
  (3,463,763.60

  	
  )

  	
  (3,468,622.66

  	
  )

  	
  (3,466,600.68

  	
  )

  	
  (3,691,563.60

  	
  )

  	
  (3,604,682.33

  	
  )

  	
  (3,604,682.33

  	
  )

  

 

	
  2004

  	
   

  	
  Jan-04

  	
   

  	
  Feb-04

  	
   

  	
  Mar-04

  	
   

  	
  Apr-04

  	
   

  	
  May-04

  	
   

  	
  Jun-04

  	
   

  	
  Jul-04

  	
   

  	
  Aug-04

  	
   

  	
  Sep-04

  	
   

  	
  Oct-04

  	
   

  	
  Nov-04

  	
   

  	
  Dec-04

  	
   

  	
  2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  12,093.43

  	
   

  	
  8,434.49

  	
   

  	
  13,736.93

  	
   

  	
  13,399.21

  	
   

  	
  35,114.61

  	
   

  	
  43,593.89

  	
   

  	
  33,881.53

  	
   

  	
  28,399.50

  	
   

  	
  21,065.06

  	
   

  	
  23,118.82

  	
   

  	
  2?2,837.47

  	
   

  
	
  Gas
  Sales

  	
   

  	
  700.66

  	
   

  	
  670.00

  	
   

  	
  6,315.84

  	
   

  	
  3,648.56

  	
   

  	
  (2,433.12

  	
  )

  	
  970.59

  	
   

  	
  3,548.47

  	
   

  	
  3,818.11

  	
   

  	
  3,112.58

  	
   

  	
  1,740.42

  	
   

  	
  2,257.48

  	
   

  	
  2,257.48

  	
   

  	
  26,607.07

  	
   

  
	
  Total
  Sales

  	
   

  	
  700.66

  	
   

  	
  670.00

  	
   

  	
  18,409.27

  	
   

  	
  12,083.05

  	
   

  	
  11,303.81

  	
   

  	
  14,369.80

  	
   

  	
  38,663.08

  	
   

  	
  47,412.00

  	
   

  	
  38,994.11

  	
   

  	
  30,139.92

  	
   

  	
  23,322.54

  	
   

  	
  25,375.30

  	
   

  	
  259,444.54

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  4,985.44

  	
   

  	
  18,604.85

  	
   

  	
  13,893.17

  	
   

  	
  22,457.32

  	
   

  	
  46,388.44

  	
   

  	
  26,796.33

  	
   

  	
  49,162.06

  	
   

  	
  60,208.82

  	
   

  	
  38,635.44

  	
   

  	
  37,054.21

  	
   

  	
  51,204.05

  	
   

  	
  59,516.54

  	
   

  	
  425,906.97

  	
   

  
	
  CapX

  	
   

  	
  7,275.89

  	
   

  	
  40,872.89

  	
   

  	
  118,100.13

  	
   

  	
  156,921.41

  	
   

  	
  140,739.58

  	
   

  	
  123,237.13

  	
   

  	
  37,554.87

  	
   

  	
  4,389.34

  	
   

  	
  2,104.13

  	
   

  	
  2,858.88

  	
   

  	
  48,475.50

  	
   

  	
  17,073.54

  	
   

  	
  697,602.33

  	
   

  
	
  Total
  Costs

  	
   

  	
  12,261.33

  	
   

  	
  59,477.74

  	
   

  	
  131,983.30

  	
   

  	
  179,378.73

  	
   

  	
  187,128.02

  	
   

  	
  150,033.46

  	
   

  	
  86,716.93

  	
   

  	
  64,587.16

  	
   

  	
  40,739.57

  	
   

  	
  39,913.09

  	
   

  	
  97,679.55

  	
   

  	
  76,590.42

  	
   

  	
  1,126,509.30

  	
   

  
	
  Net
  Profit

  	
   

  	
  (11,560.67

  	
  )

  	
  (58,807.74

  	
  )

  	
  (113,584.03

  	
  )

  	
  (167,295.68

  	
  )

  	
  (175,824.21

  	
  )

  	
  (135,663.68

  	
  )

  	
  (48,053.85

  	
  )

  	
  (17,185.16

  	
  )

  	
  (3,745.46

  	
  )

  	
  (9,773.17

  	
  )

  	
  (74,357.01

  	
  )

  	
  (51,214.12

  	
  )

  	
  ?

  	
   

  
	
  Cumulative
  Payout

  	
   

  	
  (3,616,243.00

  	
  )

  	
  (3,675,060.74

  	
  )

  	
  (3,788,634.77

  	
  )

  	
  (3,955,930.45

  	
  )

  	
  (4,131,754.66

  	
  )

  	
  (4,257,418.32

  	
  )

  	
  (4,315,472.17

  	
  )

  	
  (4,332.657.33

  	
  )

  	
  (4,336,402.79

  	
  )

  	
  (4,346,175.96

  	
  )

  	
  (4,420,532.97

  	
  )

  	
  (4,471,747.09

  	
  )

  	
  (4,471,747.09

  	
  )

  

 

 

	
  2005

  	
   

  	
  Jan-05

  	
   

  	
  Feb-05

  	
   

  	
  Mar-05

  	
   

  	
  Apr-05

  	
   

  	
  May-05

  	
   

  	
  Jun-05

  	
   

  	
  Jul-05

  	
   

  	
  Aug-05

  	
   

  	
  Sep-05

  	
   

  	
  Oct-05

  	
   

  	
  Nov-05

  	
   

  	
  Dec-05

  	
   

  	
  2005

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  32,923.33

  	
   

  	
  36,885.09

  	
   

  	
  29,194.05

  	
   

  	
  53,827.86

  	
   

  	
  50,069.21

  	
   

  	
  26,862.00

  	
   

  	
  50,005.65

  	
   

  	
  69,059.87

  	
   

  	
  50,500.03

  	
   

  	
  44,452.64

  	
   

  	
  11,332.91

  	
   

  	
  0.00

  	
   

  	
  455,112.54

  	
   

  
	
  Gas
  Sales

  	
   

  	
  2,617.86

  	
   

  	
  2,882.39

  	
   

  	
  2,380.09

  	
   

  	
  4,861.00

  	
   

  	
  4,340.74

  	
   

  	
  2,270.00

  	
   

  	
  4,517.66

  	
   

  	
  5,265.96

  	
   

  	
  3,466.35

  	
   

  	
  5,397.45

  	
   

  	
  3,308.55

  	
   

  	
  0.00

  	
   

  	
  41,308.05

  	
   

  
	
  Total
  Sales

  	
   

  	
  35,541.19

  	
   

  	
  39,767.48

  	
   

  	
  31,574.14

  	
   

  	
  58,688.86

  	
   

  	
  54,409.95

  	
   

  	
  29,132.00

  	
   

  	
  54,523.31

  	
   

  	
  74,325.83

  	
   

  	
  53,966.38

  	
   

  	
  49,850.09

  	
   

  	
  14,641.46

  	
   

  	
  0.00

  	
   

  	
  496,420.59

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  37,798.26

  	
   

  	
  30,667.02

  	
   

  	
  37,967.35

  	
   

  	
  38,760.42

  	
   

  	
  26,791.96

  	
   

  	
  53,509.40

  	
   

  	
  52,641.29

  	
   

  	
  39,892.32

  	
   

  	
  32,030.22

  	
   

  	
  39,999.54

  	
   

  	
  58,106.20

  	
   

  	
  0.00

  	
   

  	
  448,163.88

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  8,586.63

  	
   

  	
  62,105.19

  	
   

  	
  10,710.18

  	
   

  	
  3,816.78

  	
   

  	
  56,460.84

  	
   

  	
  101,614.22

  	
   

  	
  32,279.56

  	
   

  	
  68,481.78

  	
   

  	
  12,848.32

  	
   

  	
  0.00

  	
   

  	
  356,903.50

  	
   

  
	
  Total
  Costs

  	
   

  	
  37,798.26

  	
   

  	
  30,667.02

  	
   

  	
  46,553.98

  	
   

  	
  100,865.61

  	
   

  	
  37,502.04

  	
   

  	
  57,326.18

  	
   

  	
  109,102.13

  	
   

  	
  141,506.54

  	
   

  	
  64,309.78

  	
   

  	
  108,481.32

  	
   

  	
  70,954.52

  	
   

  	
  0.00

  	
   

  	
  805,067.38

  	
   

  
	
  Net
  Profit

  	
   

  	
  (2,257.07

  	
  )

  	
  9,100.46

  	
   

  	
  (14,979.84

  	
  )

  	
  (42,176.75

  	
  )

  	
  16,907.91

  	
   

  	
  (28,1?4.18

  	
  )

  	
  (54,578.82

  	
  )

  	
  (67,180.71

  	
  )

  	
  (10,343.40

  	
  )

  	
  (58,?31.23

  	
  )

  	
  (56,313.06

  	
  )

  	
  0.00

  	
   

  	
  (308,646.69

  	
  )

  
	
  Cumulative
  Payout

  	
   

  	
  (4,474,004.1?

  	
  )

  	
  (4,464,903.70

  	
  )

  	
  (4,475,883.54

  	
  )

  	
  (4,522,060.29

  	
  )

  	
  (4,505,152.38

  	
  )

  	
  (4,533,346.56

  	
  )

  	
  (4,587,925.38

  	
  )

  	
  (4,655,105.09

  	
  )

  	
  (4,665,449.49

  	
  )

  	
  (4,724,080.72

  	
  )

  	
  (4,780,393.78

  	
  )

  	
  (4,780,393.78

  	
  )

  	
  (4,780,393.78

  	
  )

  

 

 

KAYSER PAYOUT

 

BEGINNING BALANCE FROM PRIOR
OPERATOR (1,478,428.00)

 

	
  2001

  	
   

  	
  Jan-01

  	
   

  	
  Feb-01

  	
   

  	
  Mar-01

  	
   

  	
  Apr-01

  	
   

  	
  May-01

  	
   

  	
  Jun-01

  	
   

  	
  Jul-01

  	
   

  	
  Aug-01

  	
   

  	
  Sep-01

  	
   

  	
  Oct-01

  	
   

  	
  Nov-01

  	
   

  	
  Dec-01

  	
   

  	
  Total

  2001

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  12,681.15

  	
   

  	
  8,083.72

  	
   

  	
  3,251.98

  	
   

  	
  2,486.51

  	
   

  	
  2,433.46

  	
   

  	
  28,936.82

  	
   

  
	
  Gas
  Sales

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,570.32

  	
   

  	
  1,301.63

  	
   

  	
  998.64

  	
   

  	
  3,870.59

  	
   

  
	
  Total
  Sales

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  12,681.15

  	
   

  	
  8,083.72

  	
   

  	
  4,822.30

  	
   

  	
  3,788.14

  	
   

  	
  3,432.10

  	
   

  	
  32,807.41

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  7,667.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
   

  	
   

  	
  3,262.96

  	
   

  	
  5,022.99

  	
   

  	
  5,205.51

  	
   

  	
  21,159.00

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  9,671.84

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,349.51

  	
   

  	
  264.46

  	
   

  	
  0.00

  	
   

  	
  6,022.60

  	
   

  	
  18,308.41

  	
   

  
	
  Total
  Costs

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  17,339.38

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,349.51

  	
   

  	
  3,527.42

  	
   

  	
  5,022.99

  	
   

  	
  11,228.11

  	
   

  	
  39,467.41

  	
   

  
	
  Net
  Profit

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  (17,339.38

  	
  )

  	
  0.00

  	
   

  	
  12,681.15

  	
   

  	
  5,734.21

  	
   

  	
  1,294.68

  	
   

  	
  (1,234.85

  	
  )

  	
  (7,796.01

  	
  )

  	
  (6,660.00

  	
  )

  
	
  Cumulative
  Payout

  	
   

  	
  (1,478,428.00

  	
  )

  	
  (1,478,428.00

  	
  )

  	
  (1,478,428.00

  	
  )

  	
  (1,478,428.00

  	
  )

  	
  (1,478,428.00

  	
  )

  	
  (1,495,767.38

  	
  )

  	
  (1,495,767.38

  	
  )

  	
  (1,483,086.23

  	
  )

  	
  (?

  	
  )

  	
  (?

  	
  )

  	
  (1,477,291.99

  	
  )

  	
  (1,485,088.00

  	
  )

  	
  (1,485,088.00

  	
  )

  

 

	
  2002

  	
   

  	
  Jan-02

  	
   

  	
  Feb-02

  	
   

  	
  Mar-02

  	
   

  	
  Apr-02

  	
   

  	
  May-02

  	
   

  	
  Jun-02

  	
   

  	
  Jul-02

  	
   

  	
  Aug-02

  	
   

  	
  Sep-02

  	
   

  	
  Oct-02

  	
   

  	
  Nov-02

  	
   

  	
  Dec-02

  	
   

  	
  Total

  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  2,213.77

  	
   

  	
  0.00

  	
   

  	
  5,104.53

  	
   

  	
  3,020.93

  	
   

  	
  5,894.16

  	
   

  	
  9,425.05

  	
   

  	
  6,181.60

  	
   

  	
  3,127.55

  	
   

  	
  6,762.65

  	
   

  	
  6,762.65

  	
   

  	
  6,651.21

  	
   

  	
  8,873.20

  	
   

  	
  64,017.30

  	
   

  
	
  Gas
  Sales

  	
   

  	
  1,177.90

  	
   

  	
  1,123.27

  	
   

  	
  1,004.20

  	
   

  	
  655.78

  	
   

  	
  1,137.35

  	
   

  	
  679.88

  	
   

  	
  506.62

  	
   

  	
  706.39

  	
   

  	
  802.23

  	
   

  	
  2,113.82

  	
   

  	
  1,116.04

  	
   

  	
  1,367.76

  	
   

  	
  12,391.24

  	
   

  
	
  Total
  Sales

  	
   

  	
  3,391.67

  	
   

  	
  1,123.27

  	
   

  	
  6,108.73

  	
   

  	
  3,676.71

  	
   

  	
  7,031.51

  	
   

  	
  10,104.93

  	
   

  	
  6,688.22

  	
   

  	
  3,833.94

  	
   

  	
  7,564.88

  	
   

  	
  8,876.47

  	
   

  	
  7,767.25

  	
   

  	
  10,240.96

  	
   

  	
  76,408.54

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  4,598.54

  	
   

  	
  5,778.13

  	
   

  	
  16,942.43

  	
   

  	
  21,213.88

  	
   

  	
  11,190.91

  	
   

  	
  18,803.46

  	
   

  	
  8,452.30

  	
   

  	
  5,285.58

  	
   

  	
  4,980.12

  	
   

  	
  5,462.87

  	
   

  	
  7,739.36

  	
   

  	
  2,564.11

  	
   

  	
  113,001.69

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  473.04

  	
   

  	
  2,540.52

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  3,013.56

  	
   

  
	
  Total
  Costs

  	
   

  	
  4,598.54

  	
   

  	
  5,778.13

  	
   

  	
  17,415.47

  	
   

  	
  23,754.40

  	
   

  	
  11,190.91

  	
   

  	
  18,803.46

  	
   

  	
  8,452.30

  	
   

  	
  5,285.58

  	
   

  	
  4,980.12

  	
   

  	
  5,462.87

  	
   

  	
  7,739.36

  	
   

  	
  2,564.11

  	
   

  	
  116,015.25

  	
   

  
	
  Net
  Profit

  	
   

  	
  (1,206.87

  	
  )

  	
  (4,654.86

  	
  )

  	
  (11,306.74

  	
  )

  	
  (20,077.69

  	
  )

  	
  (4,159.40

  	
  )

  	
  (8,698.53

  	
  )

  	
  (1,764.08

  	
  )

  	
  (1,451.64

  	
  )

  	
  2,584.75

  	
   

  	
  3,413.60

  	
   

  	
  27.89

  	
   

  	
  7,686.55

  	
   

  	
  (39,806.71

  	
  )

  
	
  Cumulative
  Payout

  	
   

  	
  (1,486,294.87

  	
  )

  	
  (1,4?0,948.73

  	
  )

  	
  (1,502,256.47

  	
  )

  	
  (1,522,334.16

  	
  )

  	
  (1,526,493.56

  	
  )

  	
  (1,535,192.09

  	
  )

  	
  (1,535,956.17

  	
  )

  	
  (1,538,407.??

  	
  )

  	
  (1,535,823.05

  	
  )

  	
  (1,532,409.45

  	
  )

  	
  (1,532.381.56

  	
  )

  	
  (1,524,694.71

  	
  )

  	
  (1,524,694.71

  	
  )

  

 

 

	
  2003

  	
   

  	
  Jan-03

  	
   

  	
  Feb-03

  	
   

  	
  Mar-03

  	
   

  	
  Apr-03

  	
   

  	
  May-03

  	
   

  	
  Jun-03

  	
   

  	
  Jul-03

  	
   

  	
  Aug-03

  	
   

  	
  Sep-03

  	
   

  	
  Oct-03

  	
   

  	
  Nov-03

  	
   

  	
  Dec-03

  	
   

  	
  Total

  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  3,811.42

  	
   

  	
  4,326.91

  	
   

  	
  7,457.94

  	
   

  	
  6,201.51

  	
   

  	
  6,390.93

  	
   

  	
  0.00

  	
   

  	
  6,353.??

  	
   

  	
  8,992.41

  	
   

  	
  (1,067.92

  	
  )

  	
  0.00

  	
   

  	
  2,948.54

  	
   

  	
  248.13

  	
   

  	
  45,663.80

  	
   

  
	
  Gas
  Sales

  	
   

  	
  1,887.96

  	
   

  	
  1,857.98

  	
   

  	
  2,146.79

  	
   

  	
  1,243.48

  	
   

  	
  1,406.45

  	
   

  	
  1,426.38

  	
   

  	
  1,47?.??

  	
   

  	
  529.06

  	
   

  	
  301.24

  	
   

  	
  1,064.04

  	
   

  	
  273.89

  	
   

  	
  575.36

  	
   

  	
  14,188.21

  	
   

  
	
  Total
  Sales

  	
   

  	
  5,699.38

  	
   

  	
  6,184.89

  	
   

  	
  9,604.73

  	
   

  	
  7,444.99

  	
   

  	
  7,797.38

  	
   

  	
  1,426.38

  	
   

  	
  7,829.51

  	
   

  	
  9,521.47

  	
   

  	
  (766.68

  	
  )

  	
  1,064.04

  	
   

  	
  3,222.43

  	
   

  	
  823.49

  	
   

  	
  59,852.01

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  5,851.76

  	
   

  	
  4,139.63

  	
   

  	
  3,684.51

  	
   

  	
  10,602.00

  	
   

  	
  10,424.90

  	
   

  	
  5,219.57

  	
   

  	
  7,540.72

  	
   

  	
  6,285.93

  	
   

  	
  4,092.38

  	
   

  	
  (1,289.30

  	
  )

  	
  6,185.20

  	
   

  	
  3,942.22

  	
   

  	
  66,679.52

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  98.50

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  331.36

  	
   

  	
  132,000.15

  	
   

  	
  0.00

  	
   

  	
  132,430.01

  	
   

  
	
  Total
  Costs

  	
   

  	
  5,851.76

  	
   

  	
  4,139.63

  	
   

  	
  3,783.11

  	
   

  	
  10,602.00

  	
   

  	
  10,424.90

  	
   

  	
  5,219.57

  	
   

  	
  7,540.72

  	
   

  	
  6,285.93

  	
   

  	
  4,092.38

  	
   

  	
  (967.94

  	
  )

  	
  138,185.35

  	
   

  	
  3,942.22

  	
   

  	
  199,109.53

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  Profit

  	
   

  	
  (152.38

  	
  )

  	
  2,045.26

  	
   

  	
  5,821.62

  	
   

  	
  (3,157.01

  	
  )

  	
  (2,627.52

  	
  )

  	
  (3,793.19

  	
  )

  	
  288.79

  	
   

  	
  3,235.54

  	
   

  	
  (4,859.06

  	
  )

  	
  2,021.98

  	
   

  	
  (134,962.92

  	
  )

  	
  (3,118.73

  	
  )

  	
  (139,257.52

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cumulative
  Payout

  	
   

  	
  (1,524,847.09

  	
  )

  	
  (1,522,801.83

  	
  )

  	
  (1,516,980.21

  	
  )

  	
  (1,520,137.22

  	
  )

  	
  (1,522,764.74

  	
  )

  	
  (1,526,557.93

  	
  )

  	
  (1,526.269.14)

  	
   

  	
  (1,523,033.60

  	
  )

  	
  (1,527,392.66

  	
  )

  	
  (1,525,870.68

  	
  )

  	
  (1,660,833.60

  	
  )

  	
  (1,663,952.33

  	
  )

  	
  (1,653,952.33

  	
  )

  

 

	
  2004

  	
   

  	
  Jan-04

  	
   

  	
  Feb-04

  	
   

  	
  Mar-04

  	
   

  	
  Apr-04

  	
   

  	
  May-04

  	
   

  	
  Jun-04

  	
   

  	
  Jul-04

  	
   

  	
  Aug-04

  	
   

  	
  Sep-04

  	
   

  	
  Oct-04

  	
   

  	
  Nov-04

  	
   

  	
  Dec-04

  	
   

  	
  2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  12,093.43

  	
   

  	
  8,434.49

  	
   

  	
  13,736.93

  	
   

  	
  13399.21

  	
   

  	
  35,114.61

  	
   

  	
  43.593.89

  	
   

  	
  33,881.53

  	
   

  	
  28,399.50

  	
   

  	
  21,065.06

  	
   

  	
  23,118.82

  	
   

  	
  232,837.47

  	
   

  
	
  Gas
  Sales

  	
   

  	
  700.66

  	
   

  	
  670.00

  	
   

  	
  6,315.84

  	
   

  	
  3,648.56

  	
   

  	
  (2,433.12

  	
  )

  	
  970.59

  	
   

  	
  3,548.47

  	
   

  	
  3,818.11

  	
   

  	
  3,112.58

  	
   

  	
  1,740.42

  	
   

  	
  2,257.48

  	
   

  	
  2,257.48

  	
   

  	
  26,607.07

  	
   

  
	
  Total
  Sales

  	
   

  	
  700.66

  	
   

  	
  670.00

  	
   

  	
  18,409.27

  	
   

  	
  12,083.05

  	
   

  	
  11,303.81

  	
   

  	
  14,369.80

  	
   

  	
  38,663.08

  	
   

  	
  47,412.00

  	
   

  	
  35,994.11

  	
   

  	
  30,139.92

  	
   

  	
  23,322.54

  	
   

  	
  25,376.30

  	
   

  	
  259,444.54

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  4,985.44

  	
   

  	
  18,604.85

  	
   

  	
  13,893.17

  	
   

  	
  22,457.32

  	
   

  	
  46,388.44

  	
   

  	
  26,796.33

  	
   

  	
  49,162.06

  	
   

  	
  50,208.82

  	
   

  	
  38,635.44

  	
   

  	
  37,054.21

  	
   

  	
  51,204.05

  	
   

  	
  59,516.84

  	
   

  	
  428,906.97

  	
   

  
	
  CapX

  	
   

  	
  7,275.89

  	
   

  	
  40,872.89

  	
   

  	
  118,100.13

  	
   

  	
  156,921.41

  	
   

  	
  140,739.58

  	
   

  	
  123,237.13

  	
   

  	
  37,554.87

  	
   

  	
  4,388.34

  	
   

  	
  2,104.13

  	
   

  	
  2,858.68

  	
   

  	
  46,475.50

  	
   

  	
  17,073.58

  	
   

  	
  697,602.33

  	
   

  
	
  Total
  Costs

  	
   

  	
  12,261.33

  	
   

  	
  59,477.74

  	
   

  	
  131,993.30

  	
   

  	
  179,378.73

  	
   

  	
  187,128.02

  	
   

  	
  150,033.45

  	
   

  	
  86,716.93

  	
   

  	
  54,597.16

  	
   

  	
  40,739.57

  	
   

  	
  39,913.09

  	
   

  	
  97,679.55

  	
   

  	
  76.590.42

  	
   

  	
  1,126,509.30

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  Profit

  	
   

  	
  (11,560.67

  	
  )

  	
  (58,807.74

  	
  )

  	
  (113,584.03

  	
  )

  	
  (167,295.68

  	
  )

  	
  (175,824.21

  	
  )

  	
  135,663.65

  	
  )

  	
  (48,053.85

  	
  )

  	
  (17,185.16

  	
  )

  	
  (3,745.46

  	
  )

  	
  (9,773.17

  	
  )

  	
  (74,357.01

  	
  )

  	
  (51,214.12

  	
  )

  	
  (867,064.76

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cumulative
  Payout

  	
   

  	
  (1,675,513.00

  	
  )

  	
  (1,734,320.74

  	
  )

  	
  (1,847,904.77

  	
  )

  	
  (2,015,200.45

  	
  )

  	
  (2,191,024.66

  	
  )

  	
  (2,326,658.32

  	
  )

  	
  (2,374,742.17

  	
  )

  	
  (2,391,927.33

  	
  )

  	
  (2,395,672.79

  	
  )

  	
  (2,405,,445.36

  	
  )

  	
  (2,479,802.97

  	
  )

  	
  (2,531,317.09

  	
  )

  	
  (2,031,017.09

  	
  )

  

 

 

	
  2005

  	
   

  	
  Jan-05

  	
   

  	
  Feb-05

  	
   

  	
  Mar-05

  	
   

  	
  Apr-05

  	
   

  	
  May-05

  	
   

  	
  Jun-05

  	
   

  	
  Jul-05

  	
   

  	
  Aug-05

  	
   

  	
  Sep-05

  	
   

  	
  Oct-05

  	
   

  	
  Nov-05

  	
   

  	
  Dec-05

  	
   

  	
  2005

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oil
  Sales

  	
   

  	
  32,923.33

  	
   

  	
  36,885.09

  	
   

  	
  29,194.05

  	
   

  	
  53,827.86

  	
   

  	
  50,065.21

  	
   

  	
  25,952.00

  	
   

  	
  50,005.65

  	
   

  	
  69,059.67

  	
   

  	
  50,500.03

  	
   

  	
  44,452.64

  	
   

  	
  11,332.91

  	
   

  	
  0.00

  	
   

  	
  455,122.64

  	
   

  
	
  Gas
  Sales

  	
   

  	
  2,617.86

  	
   

  	
  2,882.39

  	
   

  	
  2,380.09

  	
   

  	
  4,861.00

  	
   

  	
  4,340.74

  	
   

  	
  2,270.00

  	
   

  	
  4,517.65

  	
   

  	
  5,255.96

  	
   

  	
  3,466.35

  	
   

  	
  5,397.45

  	
   

  	
  3,308.55

  	
   

  	
  0.00

  	
   

  	
  41,308.05

  	
   

  
	
  Total
  Sales

  	
   

  	
  35,541.19

  	
   

  	
  39,767.48

  	
   

  	
  31,574.14

  	
   

  	
  58,688.86

  	
   

  	
  54,405.95

  	
   

  	
  28,222.00

  	
   

  	
  54,523.30

  	
   

  	
  74,315.63

  	
   

  	
  53,966.38

  	
   

  	
  49,850.09

  	
   

  	
  14,641.46

  	
   

  	
  0.00

  	
   

  	
  496,430.69

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOE

  	
   

  	
  37,798.26

  	
   

  	
  30,667.02

  	
   

  	
  37,967.35

  	
   

  	
  38,760.42

  	
   

  	
  26,791.86

  	
   

  	
  53,509.40

  	
   

  	
  52,641.29

  	
   

  	
  39,892.32

  	
   

  	
  32,030.22

  	
   

  	
  39,999.54

  	
   

  	
  58,106.20

  	
   

  	
  0.00

  	
   

  	
  448,163.88

  	
   

  
	
  CapX

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  8,586.63

  	
   

  	
  52,105.19

  	
   

  	
  10,710.18

  	
   

  	
  3,816.78

  	
   

  	
  56,460.84

  	
   

  	
  101,614.22

  	
   

  	
  32,279.56

  	
   

  	
  68,481.78

  	
   

  	
  12,848.32

  	
   

  	
  0.00

  	
   

  	
  356,903.50

  	
   

  
	
  Total
  Costs

  	
   

  	
  37,798.26

  	
   

  	
  30,667.02

  	
   

  	
  46,553.98

  	
   

  	
  90,865.61

  	
   

  	
  37,502.04

  	
   

  	
  57,326.18

  	
   

  	
  109,102.13

  	
   

  	
  141,506.54

  	
   

  	
  64,309.78

  	
   

  	
  108,481.32

  	
   

  	
  70,954.52

  	
   

  	
  0.00

  	
   

  	
  805,067.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  Profit

  	
   

  	
  (2,257.07

  	
  )

  	
  9,100.46

  	
   

  	
  (14,979.84

  	
  )

  	
  (32,176.75

  	
  )

  	
  16,903.91

  	
   

  	
  (29,104.18

  	
  )

  	
  (54,578.83

  	
  )

  	
  (67,190.91

  	
  )

  	
  (10,343.40

  	
  )

  	
  (58,631.23

  	
  )

  	
  (56,313.06

  	
  )

  	
  0.00

  	
   

  	
  (308,636.69

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cumulative
  Payout

  	
   

  	
  (2,533,274.16

  	
  )

  	
  (2,524,173.70

  	
  )

  	
  (2,539,153.54

  	
  )

  	
  (2,581,330.29

  	
  )

  	
  (2,564,422.38

  	
  )

  	
  (2,592,616.56

  	
  )

  	
  (2,647,195.38

  	
  )

  	
  (2,714,376.09

  	
  )

  	
  (2,724,719.49

  	
  )

  	
  (2,793,350.72

  	
  )

  	
  (2,839,663.78

  	
  )

  	
  (2,839,663.78

  	
  )

  	
  (2,839,663.7?

  	
  )

  

 

 

	
   

  	
   

  	
   

  	
   

  	
  Unrisked
  PDNP

  	
   

  	
  Risk

  	
   

  	
  Risked

  	
   

  	
  Price/

  	
   

  	
  Value

  	
   

  
	
   

  	
   

  	
  PDP PV10

  	
   

  	
  net BO

  	
   

  	
  net mcf

  	
   

  	
  net BOE

  	
   

  	
  Weight

  	
   

  	
  PDNP

  	
   

  	
  net BOE

  	
   

  	
  PDNP

  	
   

  	
  Total

  	
   

  
	
  Kayser
  w/o Back-ins

  	
   

  	
  $

  	
  1,631,110

  	
   

  	
  457,160

  	
   

  	
  426,900

  	
   

  	
  528,310

  	
   

  	
  95

  	
  %

  	
  501,895

  	
   

  	
  $

  	
  0.235

  	
   

  	
  $

  	
  117,659

  	
   

  	
  $

  	
  1,748,969

  	
   

  
	
  Kayser
  w/ Back-ins

  	
   

  	
  $

  	
  1,631,110

  	
   

  	
  412,160

  	
   

  	
  390,860

  	
   

  	
  477,303

  	
   

  	
  95

  	
  %

  	
  453,438

  	
   

  	
  $

  	
  0.235

  	
   

  	
  $

  	
  105,480

  	
   

  	
  $

  	
  1,737,590

  	
   

  
	
  Value
  of Back-ins

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  11,379

  	
   

  

 

 

	
  Date :
  2/9/06

  	
  10:12:50AM

  	
   

  	
   

  	
   

  	
   

  
	
  ECONOMIC SUMMARY PROJECTION

  
	
  Project
  Name :

  	
  Kayser
  Back-ins 06

  	
  As Of Date :

  	
     01/01/06

  	
   

  	
  COWDEN SOUTH Lease Sort

  
	
  Partner
  :

  	
  Amoco
  Farmout

  	
  Discount Rate (%) :

  	
        10.00

  	
   

  	
   

  
	
  Case
  Type :

  	
  REPORT
  BREAK TOTAL CASE

  	
  Custom
  Selection

  	
   

  	
   

  
									

 

	
  Cum
  Oil (Mbbl):

  	
  274.44

  
	
  Cum
  Gas (MMcf):

  	
  556.55

  

 

	
  Year

  	
   

  	
  Gross

  Oil

  (Mbbl)

  	
   

  	
  Gross

  Gas

  (MMcf)

  	
   

  	
  Net

  Oil

  (Mbbl)

  	
   

  	
  Net

  Gas

  (MMcf)

  	
   

  	
  Oil

  Price

  ($/bbl)

  	
   

  	
  Gas

  Price

  ($/Mcf)

  	
   

  	
  Oil

  Revenue

  (M$)

  	
   

  	
  Gas

  Revenue

  (M$)

  	
   

  	
  Misc.

  Revenue

  (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  25.34

  	
   

  	
  45.09

  	
   

  	
  20.46

  	
   

  	
  26.36

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,094.11

  	
   

  	
  176.63

  	
   

  	
  0.00

  	
   

  
	
  2007

  	
   

  	
  46.50

  	
   

  	
  74.09

  	
   

  	
  36.86

  	
   

  	
  42.63

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,971.00

  	
   

  	
  285.66

  	
   

  	
  0.00

  	
   

  
	
  2008

  	
   

  	
  58.69

  	
   

  	
  77.63

  	
   

  	
  43.59

  	
   

  	
  41.75

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  2,330.70

  	
   

  	
  279.77

  	
   

  	
  0.00

  	
   

  
	
  2009

  	
   

  	
  53.84

  	
   

  	
  68.91

  	
   

  	
  39.57

  	
   

  	
  36.67

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  2,115.80

  	
   

  	
  245.74

  	
   

  	
  0.00

  	
   

  
	
  2010

  	
   

  	
  49.54

  	
   

  	
  61.45

  	
   

  	
  36.41

  	
   

  	
  32.70

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,946.64

  	
   

  	
  219.11

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2011

  	
   

  	
  45.58

  	
   

  	
  54.87

  	
   

  	
  33.50

  	
   

  	
  29.20

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,791.01

  	
   

  	
  195.66

  	
   

  	
  0.00

  	
   

  
	
  2012

  	
   

  	
  42.04

  	
   

  	
  49.19

  	
   

  	
  30.90

  	
   

  	
  26.18

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,652.16

  	
   

  	
  175.42

  	
   

  	
  0.00

  	
   

  
	
  2013

  	
   

  	
  38.57

  	
   

  	
  43.93

  	
   

  	
  28.35

  	
   

  	
  23.38

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,515.74

  	
   

  	
  156.65

  	
   

  	
  0.00

  	
   

  
	
  2014

  	
   

  	
  35.49

  	
   

  	
  39.39

  	
   

  	
  26.08

  	
   

  	
  20.96

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,394.56

  	
   

  	
  140.48

  	
   

  	
  0.00

  	
   

  
	
  2015

  	
   

  	
  32.65

  	
   

  	
  35.38

  	
   

  	
  24.00

  	
   

  	
  18.83

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,28?.07

  	
   

  	
  126.15

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2016

  	
   

  	
  30.12

  	
   

  	
  31.89

  	
   

  	
  22.14

  	
   

  	
  16.97

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,183.59

  	
   

  	
  113.72

  	
   

  	
  0.00

  	
   

  
	
  2017

  	
   

  	
  27.63

  	
   

  	
  28.63

  	
   

  	
  20.31

  	
   

  	
  15.24

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,085.87

  	
   

  	
  102.09

  	
   

  	
  0.00

  	
   

  
	
  2018

  	
   

  	
  25.42

  	
   

  	
  25.81

  	
   

  	
  18.69

  	
   

  	
  13.73

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  999.05

  	
   

  	
  92.03

  	
   

  	
  0.00

  	
   

  
	
  2019

  	
   

  	
  23.39

  	
   

  	
  23.29

  	
   

  	
  17.19

  	
   

  	
  12.39

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  919.18

  	
   

  	
  83.05

  	
   

  	
  0.00

  	
   

  
	
  2020

  	
   

  	
  21.58

  	
   

  	
  21.10

  	
   

  	
  15.86

  	
   

  	
  11.23

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  847.92

  	
   

  	
  75.23

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
  133.12

  	
   

  	
  120.36

  	
   

  	
  97.84

  	
   

  	
  64.05

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  5,231.22

  	
   

  	
  429.19

  	
   

  	
  0.00

  	
   

  
	
  Total

  	
   

  	
  689.49

  	
   

  	
  801.01

  	
   

  	
  511.76

  	
   

  	
  432.26

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  27,361.63

  	
   

  	
  2,896.59

  	
   

  	
  0.00

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  963.93

  	
   

  	
  1,357.56

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Year

  	
   

  	
  Well

  Count

  	
   

  	
  Net Tax

  Production

  (M$)

  	
   

  	
  Net Tax

  AdValorem

  (M$)

  	
   

  	
  Net

  Investment

  (M$)

  	
   

  	
  Net

  Lease Costs

  (M$)

  	
   

  	
  Net

  Well Costs

  (M$)

  	
   

  	
  Other

  Costs

  (M$)

  	
   

  	
  Net

  Profits

  (M$)

  	
   

  	
  Annual

  Cash Flow

  (M$)

  	
   

  	
  Cum Disc.

  Cash Flow

  (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  15.00

  	
   

  	
  63.58

  	
   

  	
  0.64

  	
   

  	
  1,655.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  -867.95

  	
   

  	
  -847.27

  	
   

  
	
  2007

  	
   

  	
  15.00

  	
   

  	
  112.09

  	
   

  	
  1.13

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,723.95

  	
   

  	
  640.77

  	
   

  
	
  2008

  	
   

  	
  15.00

  	
   

  	
  128.?0

  	
   

  	
  1.31

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,061.49

  	
   

  	
  2,267.25

  	
   

  
	
  2009

  	
   

  	
  15.00

  	
   

  	
  115.76

  	
   

  	
  1.18

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,825.12

  	
   

  	
  3,576.06

  	
   

  
	
  2010

  	
   

  	
  15.00

  	
   

  	
  105.98

  	
   

  	
  1.08

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,639.21

  	
   

  	
  4,644.77

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2011

  	
   

  	
  15.00

  	
   

  	
  97.06

  	
   

  	
  0.99

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,469.14

  	
   

  	
  5,515.58

  	
   

  
	
  2012

  	
   

  	
  15.00

  	
   

  	
  89.16

  	
   

  	
  0.91

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,318.03

  	
   

  	
  6,225.79

  	
   

  
	
  2013

  	
   

  	
  15.00

  	
   

  	
  81.47

  	
   

  	
  0.84

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,170.60

  	
   

  	
  6,799.17

  	
   

  
	
  2014

  	
   

  	
  15.00

  	
   

  	
  74.69

  	
   

  	
  0.77

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,040.10

  	
   

  	
  7,262.36

  	
   

  
	
  2015

  	
   

  	
  15.00

  	
   

  	
  68.48

  	
   

  	
  0.70

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  920.55

  	
   

  	
  7,635.07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2016

  	
   

  	
  15.00

  	
   

  	
  62.97

  	
   

  	
  0.65

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  814.21

  	
   

  	
  7,934.76

  	
   

  
	
  2017

  	
   

  	
  15.00

  	
   

  	
  57.61

  	
   

  	
  0.59

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  710.27

  	
   

  	
  8,172.4?

  	
   

  
	
  2018

  	
   

  	
  15.00

  	
   

  	
  52.86

  	
   

  	
  0.55

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  618.19

  	
   

  	
  8,360.46

  	
   

  
	
  2019

  	
   

  	
  15.00

  	
   

  	
  48.51

  	
   

  	
  0.50

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  533.74

  	
   

  	
  8,508.08

  	
   

  
	
  2020

  	
   

  	
  15.00

  	
   

  	
  44.65

  	
   

  	
  0.46

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  458.56

  	
   

  	
  8,623.39

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
   

  	
   

  	
  272.83

  	
   

  	
  2.83

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  3,879.72

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,505.03

  	
   

  	
  287.98

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  1,475.88

  	
   

  	
  15.13

  	
   

  	
  1,635.00

  	
   

  	
  0.00

  	
   

  	
  10,1?1.98

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  16,940.23

  	
   

  	
  8,911.37

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  Present Worth Profile (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  5.00

  	
  %

  	
  11,962.03

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  8.00

  	
  %

  	
  9,970.57

  	
   

  
	
  Disc. Initial Invest (M$)

  	
   

  	
  1,591.057

  	
   

  	
  PW

  	
  10.00

  	
  %

  	
  8,911.37

  	
   

  
	
  ROInvestment (disc/undisc)

  	
   

  	
  ?

  	
   

  	
  PW

  	
  12.00

  	
  %

  	
  8,015.29

  	
   

  
	
  Years to Payout

  	
   

  	
  1.57

  	
   

  	
  PW

  	
  15.00

  	
  %

  	
  6,908.59

  	
   

  
	
  Internal ROR(%)

  	
   

  	
  172.9?

  	
   

  	
  PW

  	
  20.00

  	
  %

  	
  5,518.57

  	
   

  

 

6

 

	
  Date :
  2/9/06

  	
  10:12:49AM

  	
   

  	
   

  	
   

  	
   

  
	
  ECONOMIC SUMMARY PROJECTION

  
	
  Project
  Name :

  	
  Kayser
  Back-ins1.06

  	
  As Of Date :

  	
     01/01/06

  	
   

  	
  COWDEN SOUTH Lease Sort

  
	
  Partner
  :

  	
  Amoco
  Farmout

  	
  Discount Rate (%) :

  	
        10.00

  	
   

  	
  Producing Rsv Category

  
	
  Case
  Type :

  	
  REPORT BREAK TOTAL CASE

  	
  Custom
  Selection

  	
   

  	
  Proved Rsv Class

  
									

 

	
  Cum
  Oil (Mbbl):

  	
  275.68

  
	
  Cum
  Gas (MMcf):

  	
  557.26

  

 

	
  Year

  	
   

  	
  Gross

  Oil

  (Mbbl)

  	
   

  	
  Gross

  Gas

  (MMcf)

  	
   

  	
  Net

  Oil

  (Mbbl)

  	
   

  	
  Net

  Gas

  (MMcf)

  	
   

  	
  Oil

  Price

  ($/bbl)

  	
   

  	
  Gas

  Price

  ($/Mcf)

  	
   

  	
  Oil

  Revenue

  (M$)

  	
   

  	
  Gas

  Revenue

  (M$)

  	
   

  	
  Misc.

  Revenue

  (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  15.53

  	
   

  	
  8.92

  	
   

  	
  12.54

  	
   

  	
  5.21

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  670.61

  	
   

  	
  34.93

  	
   

  	
  0.00

  	
   

  
	
  2007

  	
   

  	
  14.29

  	
   

  	
  8.20

  	
   

  	
  11.54

  	
   

  	
  4.80

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  617.00

  	
   

  	
  32.14

  	
   

  	
  0.00

  	
   

  
	
  2008

  	
   

  	
  13.18

  	
   

  	
  7.57

  	
   

  	
  10.65

  	
   

  	
  4.42

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  569.16

  	
   

  	
  29.65

  	
   

  	
  0.00

  	
   

  
	
  2009

  	
   

  	
  12.09

  	
   

  	
  6.94

  	
   

  	
  9.77

  	
   

  	
  4.06

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  522.17

  	
   

  	
  27.20

  	
   

  	
  0.00

  	
   

  
	
  2010

  	
   

  	
  11.13

  	
   

  	
  6.39

  	
   

  	
  8.99

  	
   

  	
  3.73

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  480.42

  	
   

  	
  25.03

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2011

  	
   

  	
  10.24

  	
   

  	
  5.88

  	
   

  	
  8.27

  	
   

  	
  3.44

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  442.01

  	
   

  	
  23.03

  	
   

  	
  0.00

  	
   

  
	
  2012

  	
   

  	
  9.44

  	
   

  	
  5.42

  	
   

  	
  7.63

  	
   

  	
  3.17

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  407.74

  	
   

  	
  21.24

  	
   

  	
  0.00

  	
   

  
	
  2013

  	
   

  	
  8.66

  	
   

  	
  4.97

  	
   

  	
  7.00

  	
   

  	
  2.91

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  374.08

  	
   

  	
  19.49

  	
   

  	
  0.00

  	
   

  
	
  2014

  	
   

  	
  7.97

  	
   

  	
  4.58

  	
   

  	
  6.44

  	
   

  	
  2.68

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  344.17

  	
   

  	
  17.93

  	
   

  	
  0.00

  	
   

  
	
  2015

  	
   

  	
  7.33

  	
   

  	
  4.21

  	
   

  	
  5.92

  	
   

  	
  2.46

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  316.65

  	
   

  	
  16.50

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2016

  	
   

  	
  6.77

  	
   

  	
  3.88

  	
   

  	
  5.46

  	
   

  	
  2.27

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  292.10

  	
   

  	
  15.22

  	
   

  	
  0.00

  	
   

  
	
  2017

  	
   

  	
  6.21

  	
   

  	
  3.56

  	
   

  	
  5.01

  	
   

  	
  2.08

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  267.99

  	
   

  	
  13.96

  	
   

  	
  0.00

  	
   

  
	
  2018

  	
   

  	
  0.49

  	
   

  	
  0.28

  	
   

  	
  0.39

  	
   

  	
  0.16

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  21.05

  	
   

  	
  1.10

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  Total

  	
   

  	
  123.34

  	
   

  	
  70.81

  	
   

  	
  99.60

  	
   

  	
  41.40

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  ?,325.14

  	
   

  	
  277.40

  	
   

  	
  0.00

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  399.02

  	
   

  	
  628.07

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Year

  	
   

  	
  Well

  Count

  	
   

  	
  Net Tax

  Production

  (M$)

  	
   

  	
  Net Tax

  AdValorem

  (M$)

  	
   

  	
  Net

  Investment

  (M$)

  	
   

  	
  Net

  Lease Costs

  (M$)

  	
   

  	
  Net

  Well Costs

  (M$)

  	
   

  	
  Other

  Costs

  (M$)

  	
   

  	
  Net

  Profits

  (M$)

  	
   

  	
  Annual

  Cash Flow

  (M$)

  	
   

  	
  Cum Disc.

  Cash Flow

  (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  11.00

  	
   

  	
  33.47

  	
   

  	
  0.35

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  415.77

  	
   

  	
  396.93

  	
   

  
	
  2007

  	
   

  	
  11.00

  	
   

  	
  30.79

  	
   

  	
  0.32

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  362.07

  	
   

  	
  711.19

  	
   

  
	
  2008

  	
   

  	
  11.00

  	
   

  	
  28.41

  	
   

  	
  .0.30

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  314.16

  	
   

  	
  959.10

  	
   

  
	
  2009

  	
   

  	
  11.00

  	
   

  	
  26.06

  	
   

  	
  0.27

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  267.08

  	
   

  	
  1,150.68

  	
   

  
	
  2010

  	
   

  	
  11.00

  	
   

  	
  23.98

  	
   

  	
  0.25

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  225.27

  	
   

  	
  1,297.60

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2011

  	
   

  	
  11.00

  	
   

  	
  22.06

  	
   

  	
  0.23

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  186.80

  	
   

  	
  1,408.38

  	
   

  
	
  2012

  	
   

  	
  11.00

  	
   

  	
  20.35

  	
   

  	
  0.21

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  152.47

  	
   

  	
  1,490.59

  	
   

  
	
  2013

  	
   

  	
  11.00

  	
   

  	
  18.67

  	
   

  	
  0.20

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  118.75

  	
   

  	
  1,548.81

  	
   

  
	
  2014

  	
   

  	
  11.00

  	
   

  	
  17.18

  	
   

  	
  0.18

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  88.79

  	
   

  	
  1,588.39

  	
   

  
	
  2015

  	
   

  	
  11.00

  	
   

  	
  15.80

  	
   

  	
  0.17

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  61.23

  	
   

  	
  1,613.22

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2016

  	
   

  	
  11.00

  	
   

  	
  14.58

  	
   

  	
  0.15

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  36.64

  	
   

  	
  1,626.76

  	
   

  
	
  2017

  	
   

  	
  11.00

  	
   

  	
  13.37

  	
   

  	
  0.14

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  12.48

  	
   

  	
  1,630.97

  	
   

  
	
  2018

  	
   

  	
  11.00

  	
   

  	
  1.05

  	
   

  	
  0.01

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  20.64

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.44

  	
   

  	
  1,631.11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  265.76

  	
   

  	
  2.80

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  3.092.02

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,111.96

  	
   

  	
  1,631.11

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  Present Worth Profile (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  ?.00

  	
  %

  	
  1,890.44

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  8.00

  	
  %

  	
  1,725.19

  	
   

  
	
  Disc Initial Invest (M$)

  	
   

  	
  0.000

  	
   

  	
  PW

  	
  10.00

  	
  %

  	
  1,631.11

  	
   

  
	
  ROInvestment (disc/undisc)

  	
   

  	
  0.00/0.00

  	
   

  	
  PW

  	
  12.00

  	
  %

  	
  1,546.10

  	
   

  
	
  Years to Payout

  	
   

  	
  0.00

  	
   

  	
  PW

  	
  15.00

  	
  %

  	
  1,414.20

  	
   

  
	
  Internal ROR (%)

  	
   

  	
  ?.?0

  	
   

  	
  PW

  	
  20.00

  	
  %

  	
  1,233.86

  	
   

  

 

1

 

	
  Date :
  2/9/06

  	
  10:12:50AM

  	
   

  	
   

  	
   

  	
   

  
	
  ECONOMIC SUMMARY PROJECTION

  
	
  Project
  Name :

  	
  Kayser
  Back-ins 1.06

  	
  As Of Date :

  	
     01/01/06

  	
   

  	
  COWDEN SOUTH Lease Sort

  
	
  Partner
  :

  	
  Amoco
  Farmout

  	
  Discount Rate (%) :

  	
        10.00

  	
   

  	
  Non-Producing Rsv Category

  
	
  Case
  Type :

  	
  REPORT BREAK TOTAL CASE

  	
  Custom
  Selection

  	
   

  	
  Proved Rsv Class

  
									

 

	
  Cum
  Oil (Mbbl):

  	
  0.00

  
	
  Cum
  Gas (MMcf):

  	
  0.00

  

 

	
  Year

  	
   

  	
  Gross

  Oil

  (Mbbl)

  	
   

  	
  Gross

  Gas

  (MMcf)

  	
   

  	
  Net

  Oil

  (Mbbl)

  	
   

  	
  Net

  Gas

  (MMcf)

  	
   

  	
  Oil

  Price

  ($/bbl)

  	
   

  	
  Gas

  Price

  ($/Mcf)

  	
   

  	
  Oil

  Revenue

  (M$)

  	
   

  	
  Gas

  Revenue

  (M$)

  	
   

  	
  Misc.

  Revenue

  (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  9.81

  	
   

  	
  36.17

  	
   

  	
  7.92

  	
   

  	
  21.15

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  423.50

  	
   

  	
  141.70

  	
   

  	
  0.00

  	
   

  
	
  2007

  	
   

  	
  32.21

  	
   

  	
  65.89

  	
   

  	
  25.32

  	
   

  	
  37.83

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,354.00

  	
   

  	
  253.52

  	
   

  	
  0.00

  	
   

  
	
  2008

  	
   

  	
  45.50

  	
   

  	
  70.06

  	
   

  	
  32.95

  	
   

  	
  37.33

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,761.54

  	
   

  	
  258.12

  	
   

  	
  0.00

  	
   

  
	
  2009

  	
   

  	
  41.75

  	
   

  	
  61.97

  	
   

  	
  29.81

  	
   

  	
  32.61

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,?93.63

  	
   

  	
  215.54

  	
   

  	
  0.00

  	
   

  
	
  2010

  	
   

  	
  38.41

  	
   

  	
  55.06

  	
   

  	
  27.42

  	
   

  	
  28.96

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,466.22

  	
   

  	
  194.09

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2011

  	
   

  	
  35.34

  	
   

  	
  48.99

  	
   

  	
  25.23

  	
   

  	
  25.76

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,349.00

  	
   

  	
  172.63

  	
   

  	
  0.00

  	
   

  
	
  2012

  	
   

  	
  32.60

  	
   

  	
  43.77

  	
   

  	
  23.27

  	
   

  	
  23.01

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,244.41

  	
   

  	
  154.18

  	
   

  	
  0.00

  	
   

  
	
  2013

  	
   

  	
  29.91

  	
   

  	
  38.95

  	
   

  	
  21.35

  	
   

  	
  20.47

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,141.67

  	
   

  	
  137.16

  	
   

  	
  0.00

  	
   

  
	
  2014

  	
   

  	
  27.52

  	
   

  	
  34.82

  	
   

  	
  19.65

  	
   

  	
  15.29

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,050.39

  	
   

  	
  122.55

  	
   

  	
  0.00

  	
   

  
	
  2015

  	
   

  	
  23.32

  	
   

  	
  31.17

  	
   

  	
  18.08

  	
   

  	
  16.36

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  966.42

  	
   

  	
  109.65

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2016

  	
   

  	
  23.35

  	
   

  	
  28.01

  	
   

  	
  16.67

  	
   

  	
  14.70

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  891.49

  	
   

  	
  98.51

  	
   

  	
  0.00

  	
   

  
	
  2017

  	
   

  	
  21.42

  	
   

  	
  25.07

  	
   

  	
  15.30

  	
   

  	
  13.15

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  817.88

  	
   

  	
  88.13

  	
   

  	
  0.00

  	
   

  
	
  2018

  	
   

  	
  24.94

  	
   

  	
  25.53

  	
   

  	
  18.29

  	
   

  	
  13.57

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  97?.01

  	
   

  	
  90.93

  	
   

  	
  0.00

  	
   

  
	
  2019

  	
   

  	
  23.39

  	
   

  	
  23.29

  	
   

  	
  17.19

  	
   

  	
  12.39

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  919.18

  	
   

  	
  83.05

  	
   

  	
  0.00

  	
   

  
	
  2020

  	
   

  	
  21.58

  	
   

  	
  21.10

  	
   

  	
  15.86

  	
   

  	
  11.23

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  847.92

  	
   

  	
  75.23

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
  133.12

  	
   

  	
  120.36

  	
   

  	
  97.84

  	
   

  	
  64.05

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  5.231.22

  	
   

  	
  429.19

  	
   

  	
  0.00

  	
   

  
	
  Total

  	
   

  	
  566.15

  	
   

  	
  730.20

  	
   

  	
  412.16

  	
   

  	
  390.86

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  22,036.4?

  	
   

  	
  2,619.19

  	
   

  	
  0.00

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  566.15

  	
   

  	
  730.20

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Year

  	
   

  	
  Well

  Count

  	
   

  	
  Net Tax

  Production

  (M$)

  	
   

  	
  Net Tax

  AdValorem

  (M$)

  	
   

  	
  Net

  Investment

  (M$)

  	
   

  	
  Net

  Lease Costs

  (M$)

  	
   

  	
  Net

  Well Costs

  (M$)

  	
   

  	
  Other

  Costs

  (M$)

  	
   

  	
  Net

  Profits

  (M$)

  	
   

  	
  Annual

  Cash Flow

  (M$)

  	
   

  	
  Cum Disc.

  Cash Flow

  (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  4.00

  	
   

  	
  30.11

  	
   

  	
  0.28

  	
   

  	
  1,655.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  ?1,283.73

  	
   

  	
  -1,244.70

  	
   

  
	
  2007

  	
   

  	
  4.00

  	
   

  	
  81.30

  	
   

  	
  0.80

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,361.88

  	
   

  	
  -70.43

  	
   

  
	
  2008

  	
   

  	
  4.00

  	
   

  	
  99.79

  	
   

  	
  1.01

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,747.34

  	
   

  	
  1,308.16

  	
   

  
	
  2009

  	
   

  	
  4.00

  	
   

  	
  89.70

  	
   

  	
  0.91

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,558.03

  	
   

  	
  2.425.37

  	
   

  
	
  2010

  	
   

  	
  4.00

  	
   

  	
  82.00

  	
   

  	
  0.83

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,413.94

  	
   

  	
  3,347.16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2011

  	
   

  	
  4.00

  	
   

  	
  75.00

  	
   

  	
  0.76

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,282.34

  	
   

  	
  4,107.21

  	
   

  
	
  2012

  	
   

  	
  4.00

  	
   

  	
  68.81

  	
   

  	
  0.70

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,165.56

  	
   

  	
  4,735.20

  	
   

  
	
  2013

  	
   

  	
  4.00

  	
   

  	
  62.80

  	
   

  	
  0.64

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,051.83

  	
   

  	
  5,250.37

  	
   

  
	
  2014

  	
   

  	
  4.00

  	
   

  	
  57.51

  	
   

  	
  0.59

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  951.31

  	
   

  	
  5,673.97

  	
   

  
	
  2015

  	
   

  	
  4.00

  	
   

  	
  52.68

  	
   

  	
  0.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  859.32

  	
   

  	
  6,021.85

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2016

  	
   

  	
  4.00

  	
   

  	
  48.40

  	
   

  	
  0.49

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  777.57

  	
   

  	
  6,308.00

  	
   

  
	
  2017

  	
   

  	
  4.00

  	
   

  	
  44.23

  	
   

  	
  0.45

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  697.79

  	
   

  	
  6,541.44

  	
   

  
	
  2018

  	
   

  	
  4.00

  	
   

  	
  51.81

  	
   

  	
  0.53

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  398.84

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  617.75

  	
   

  	
  6,729.35

  	
   

  
	
  2019

  	
   

  	
  15.00

  	
   

  	
  48.51

  	
   

  	
  0.50

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  533.74

  	
   

  	
  6,876.97

  	
   

  
	
  2020

  	
   

  	
  15.00

  	
   

  	
  44.65

  	
   

  	
  0.46

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  458.56

  	
   

  	
  6,992.28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
   

  	
   

  	
  272.83

  	
   

  	
  2.83

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  3,879.72

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1.505.03

  	
   

  	
  287.98

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  1,210.13

  	
   

  	
  12.33

  	
   

  	
  1,655.00

  	
   

  	
  0.00

  	
   

  	
  7,079.97

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  14,698.27

  	
   

  	
  7,280.26

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  Present Worth Profile (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  5.00

  	
  %

  	
  10,071.59

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  8.00

  	
  %

  	
  8,244.58

  	
   

  
	
  Disc Initial Invest (MS)

  	
   

  	
  1,591.057

  	
   

  	
  PW

  	
  10.00

  	
  %

  	
  7,280.26

  	
   

  
	
  ROInvestment (disc/undisc)

  	
   

  	
  5.58/9.88

  	
   

  	
  PW

  	
  12.00

  	
  %

  	
  6,469.20

  	
   

  
	
  Years to Payout

  	
   

  	
  1.95

  	
   

  	
  PW

  	
  15.00

  	
  %

  	
  5,474.39

  	
   

  
	
  Internal ROR (%)

  	
   

  	
  103.04

  	
   

  	
  PW

  	
  20.00

  	
  %

  	
  4,237.71

  	
   

  

 

2

 

	
  Date :
  2/9/06    9:55:34AM

  	
  ECONOMIC SUMMARY PROJECTION

  	
  COWDEN SOUTH Lease Sort

  

 

	
   

  	
  As Of Date : 01/01/06

  	
   

  
	
  Project
  Name : Kayser Back-ins 1:06

  	
  Discount Rate (%) : 10.00

  	
   

  
	
  Partner
  : SDG Resources, L.P.

  	
  Custom Selection

  	
   

  
	
  [ILLEGIBLE]
  : REPORT BREAK TOTAL CASE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cum
  Oil (Mbbl) : 274.44

  	
   

  	
   

  
	
  Cum
  Gas (MMcf) : 556.55

  	
   

  	
   

  

 

	
  Year

  	
   

  	
  Gross

  Oil

  (Mbbl)

  	
   

  	
  Gross

  Gas

  (MMcf)

  	
   

  	
  Net

  Oil

  (Mbbl)

  	
   

  	
  Net

  Gas

  (MMcf)

  	
   

  	
  Oil

  Price

  ($/bbl)

  	
   

  	
  Gas

  Price

  ($/Mcf)

  	
   

  	
  Oil

  Revenue

  (M$)

  	
   

  	
  Gas

  Revenue

  (M$)

  	
   

  	
  Misc.

  Revenue

  (M$)

  	
   

  
	
  2006

  	
   

  	
  25.34

  	
   

  	
  45.09

  	
   

  	
  20.46

  	
   

  	
  26.36

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,094.11

  	
   

  	
  176.63

  	
   

  	
  0.00

  	
   

  
	
  2007

  	
   

  	
  46.50

  	
   

  	
  74.09

  	
   

  	
  37.55

  	
   

  	
  43.32

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  2,007.57

  	
   

  	
  290.28

  	
   

  	
  0.00

  	
   

  
	
  2008

  	
   

  	
  58.69

  	
   

  	
  77.63

  	
   

  	
  47.39

  	
   

  	
  45.39

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  2.533.70

  	
   

  	
  304.13

  	
   

  	
  0.00

  	
   

  
	
  2009

  	
   

  	
  53.84

  	
   

  	
  68.91

  	
   

  	
  43.48

  	
   

  	
  40.79

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  2,324.50

  	
   

  	
  269.98

  	
   

  	
  0.00

  	
   

  
	
  2010

  	
   

  	
  49.54

  	
   

  	
  61.45

  	
   

  	
  40.00

  	
   

  	
  [?]

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  2,138.66

  	
   

  	
  240.73

  	
   

  	
  0.00

  	
   

  
	
  2011

  	
   

  	
  45.58

  	
   

  	
  54.87

  	
   

  	
  36.80

  	
   

  	
  32.08

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,967.68

  	
   

  	
  214.96

  	
   

  	
  0.00

  	
   

  
	
  2012

  	
   

  	
  42.04

  	
   

  	
  49.19

  	
   

  	
  33.95

  	
   

  	
  28.76

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,815.12

  	
   

  	
  192.73

  	
   

  	
  0.00

  	
   

  
	
  2013

  	
   

  	
  38.57

  	
   

  	
  43.93

  	
   

  	
  31.15

  	
   

  	
  25.68

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,665.25

  	
   

  	
  172.10

  	
   

  	
  0.00

  	
   

  
	
  2014

  	
   

  	
  35.49

  	
   

  	
  39.39

  	
   

  	
  28.66

  	
   

  	
  23.03

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,532.12

  	
   

  	
  154.33

  	
   

  	
  0.00

  	
   

  
	
  2015

  	
   

  	
  32.65

  	
   

  	
  35.38

  	
   

  	
  26.37

  	
   

  	
  20.68

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,409.63

  	
   

  	
  138.59

  	
   

  	
  0.00

  	
   

  
	
  2016

  	
   

  	
  30.12

  	
   

  	
  31.89

  	
   

  	
  24.32

  	
   

  	
  18.64

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,300.34

  	
   

  	
  124.94

  	
   

  	
  0.00

  	
   

  
	
  2017

  	
   

  	
  27.63

  	
   

  	
  28.63

  	
   

  	
  22.31

  	
   

  	
  16.74

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,192.98

  	
   

  	
  112.16

  	
   

  	
  0.00

  	
   

  
	
  2018

  	
   

  	
  25.42

  	
   

  	
  25.81

  	
   

  	
  20.53

  	
   

  	
  15.09

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,097.60

  	
   

  	
  101.10

  	
   

  	
  0.00

  	
   

  
	
  2019

  	
   

  	
  23.39

  	
   

  	
  23.29

  	
   

  	
  18.89

  	
   

  	
  13.62

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,009.85

  	
   

  	
  91.24

  	
   

  	
  0.00

  	
   

  
	
  2020

  	
   

  	
  21.58

  	
   

  	
  21.10

  	
   

  	
  17.42

  	
   

  	
  12.33

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  931.56

  	
   

  	
  82.63

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
  133.12

  	
   

  	
  120.36

  	
   

  	
  107.49

  	
   

  	
  70.37

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  5,747.22

  	
   

  	
  471.52

  	
   

  	
  0.00

  	
   

  
	
  Total

  	
   

  	
  689.49

  	
   

  	
  801.01

  	
   

  	
  556.76

  	
   

  	
  468.30

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  29,767,90

  	
   

  	
  3,138.09

  	
   

  	
  0.00

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  963.93

  	
   

  	
  1,357.56

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  Net Tax

  	
   

  	
  Net Tax

  	
   

  	
  Net

  	
   

  	
  Net

  	
   

  	
  Net

  	
   

  	
  Other

  	
   

  	
  Net

  	
   

  	
  Annual

  	
   

  	
  Cum
  Disc.

  	
   

  
	
  Year

  	
   

  	
  Well

  Count

  	
   

  	
  Production

  (M$)

  	
   

  	
  AdValorem

  (M$)

  	
   

  	
  Investment

  (M$)

  	
   

  	
  Lease Costs

  (M$)

  	
   

  	
  Well
  Costs

  (M$)

  	
   

  	
  Costs

  (M$)

  	
   

  	
  Profits

  (M$)

  	
   

  	
  Cash
  Flow

  (M$)

  	
   

  	
  Cash
  Flow

  (M$)

  	
   

  
	
  2006

  	
   

  	
  15.00

  	
   

  	
  63,58

  	
   

  	
  0.64

  	
   

  	
  1,655.0

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  -867.95

  	
   

  	
  -847.27

  	
   

  
	
  2007

  	
   

  	
  15.00

  	
   

  	
  114.12

  	
   

  	
  1.15

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,763.10

  	
   

  	
  673.45

  	
   

  
	
  2008

  	
   

  	
  15.00

  	
   

  	
  139.36

  	
   

  	
  1.42

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,277.56

  	
   

  	
  2,470.14

  	
   

  
	
  2009

  	
   

  	
  15.00

  	
   

  	
  127.18

  	
   

  	
  1.30

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,046.52

  	
   

  	
  3,937.70

  	
   

  
	
  2010

  	
   

  	
  15.00

  	
   

  	
  116.43

  	
   

  	
  1.19

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,842.28

  	
   

  	
  5,138.78

  	
   

  
	
  2011

  	
   

  	
  15.00

  	
   

  	
  106.64

  	
   

  	
  1.09

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,.655.43

  	
   

  	
  6,120.01

  	
   

  
	
  2012

  	
   

  	
  15.00

  	
   

  	
  97.95

  	
   

  	
  1.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,489.41

  	
   

  	
  6,922.35

  	
   

  
	
  2013

  	
   

  	
  15.00

  	
   

  	
  89.51

  	
   

  	
  0.92

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,327.44

  	
   

  	
  7,572.74

  	
   

  
	
  2014

  	
   

  	
  15.00

  	
   

  	
  82.05

  	
   

  	
  0.84

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,184.08

  	
   

  	
  8,100.03

  	
   

  
	
  2015

  	
   

  	
  15.00

  	
   

  	
  75.24

  	
   

  	
  0.77

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,052.73

  	
   

  	
  8,526.25

  	
   

  
	
  2016

  	
   

  	
  15.00

  	
   

  	
  69.19

  	
   

  	
  0.71

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  935.90

  	
   

  	
  8,870.72

  	
   

  
	
  2017

  	
   

  	
  15.00

  	
   

  	
  63.29

  	
   

  	
  0.65

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  821.71

  	
   

  	
  9,145.64

  	
   

  
	
  2018

  	
   

  	
  15.00

  	
   

  	
  58.07

  	
   

  	
  0.60

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  720.55

  	
   

  	
  9,364.82

  	
   

  
	
  2019

  	
   

  	
  15.00

  	
   

  	
  [?]

  	
   

  	
  0.55

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  627.76

  	
   

  	
  9,538.44

  	
   

  
	
  2020

  	
   

  	
  15.00

  	
   

  	
  49.05

  	
   

  	
  0.51

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  545.17

  	
   

  	
  9,675.51

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
   

  	
   

  	
  299.74

  	
   

  	
  311

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  3,879.72

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,036.17

  	
   

  	
  377.28

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  1,604.68

  	
   

  	
  16.45

  	
   

  	
  1655.00

  	
   

  	
  0.00

  	
   

  	
  10,171.98

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  19,457.86

  	
   

  	
  10,052.80

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  Present Worth Profile (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  5.00

  	
  %

  	
  13,588.48

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  8.00

  	
  %

  	
  11,274.82

  	
   

  
	
  Disc. Initial Invest (M$):

  	
   

  	
  1,591.057

  	
   

  	
  PW

  	
  10.00

  	
  %

  	
  10,052.80

  	
   

  
	
  ROInvestment (disc/undisc)

  	
   

  	
  732/12.76

  	
   

  	
  PW

  	
  12.00

  	
  %

  	
  9,023.75

  	
   

  
	
  Years to Payout

  	
   

  	
  1.57

  	
   

  	
  PW

  	
  15.00

  	
  %

  	
  7,758.97

  	
   

  
	
  Internal ROR (%):

  	
   

  	
  181.31

  	
   

  	
  PW

  	
  20.00

  	
  %

  	
  6,180.23

  	
   

  

 

5

 

	
  Date :
  2/9/06    9:55:33AM

  	
  ECONOMIC SUMMARY PROJECTION

  	
  COWDEN SOUTH Lease Sort

  

 

	
   

  	
  As Of Date : 01/01/06

  	
  Producing Rsv Category

  
	
  Project
  Name : Kayser Back-ins 1.06

  	
  Discount Rate (%) : 10.00

  	
  Proved Rsv Class

  
	
  Partner
  : SDG Resources, L.P.

  	
  Custom Selection

  	
   

  
	
  [ILLEGIBLE]
  : REPORT BREAK TOTAL CASE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cum
  Oil (Mbbl) : 275.68

  	
   

  	
   

  
	
  Cum
  Gas (MMcf) : 557.26

  	
   

  	
   

  

 

	
  Year

  	
   

  	
  Gross

  Oil

  (Mbbl)

  	
   

  	
  Gross

  Gas

  (MMcf)

  	
   

  	
  Net

  Oil

  (Mbbl)

  	
   

  	
  Net

  Gas

  (MMcf)

  	
   

  	
  Oil

  Price

  ($/bbl)

  	
   

  	
  Gas

  Price

  ($/Mcf)

  	
   

  	
  Oil

  Revenue

  (M$)

  	
   

  	
  Gas

  Revenue

  (M$)

  	
   

  	
  Misc.

  Revenue

  (M$)

  	
   

  
	
  2006

  	
   

  	
  15.53

  	
   

  	
  8.92

  	
   

  	
  12.54

  	
   

  	
  5.21

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  670.61

  	
   

  	
  34.93

  	
   

  	
  0.00

  	
   

  
	
  2007

  	
   

  	
  14.29

  	
   

  	
  8.20

  	
   

  	
  11.54

  	
   

  	
  4.80

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  617.00

  	
   

  	
  32.14

  	
   

  	
  0.00

  	
   

  
	
  2008

  	
   

  	
  13.18

  	
   

  	
  7.57

  	
   

  	
  10.65

  	
   

  	
  4.42

  	
   

  	
  53 47

  	
   

  	
  6.70

  	
   

  	
  569.16

  	
   

  	
  29.65

  	
   

  	
  0.00

  	
   

  
	
  2009

  	
   

  	
  12.09

  	
   

  	
  6.94

  	
   

  	
  9.77

  	
   

  	
  4.06

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  522.17

  	
   

  	
  27.20

  	
   

  	
  0.00

  	
   

  
	
  2010

  	
   

  	
  11.13

  	
   

  	
  6.39

  	
   

  	
  8.99

  	
   

  	
  3.23

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  480.42

  	
   

  	
  25.03

  	
   

  	
  0.00

  	
   

  
	
  2011

  	
   

  	
  10.24

  	
   

  	
  5.88

  	
   

  	
  8.27

  	
   

  	
  3.44

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  442.01

  	
   

  	
  23.03

  	
   

  	
  0.00

  	
   

  
	
  2012

  	
   

  	
  9.44

  	
   

  	
  5.42

  	
   

  	
  7.63

  	
   

  	
  3.17

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  407.74

  	
   

  	
  21.24

  	
   

  	
  0.00

  	
   

  
	
  2013

  	
   

  	
  8.66

  	
   

  	
  4.97

  	
   

  	
  7.00

  	
   

  	
  2.91

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  374.08

  	
   

  	
  19.49

  	
   

  	
  0.00

  	
   

  
	
  2014

  	
   

  	
  7.97

  	
   

  	
  4.58

  	
   

  	
  6.44

  	
   

  	
  2.68

  	
   

  	
  53 47

  	
   

  	
  6.70

  	
   

  	
  344.17

  	
   

  	
  17.93

  	
   

  	
  0.00

  	
   

  
	
  2015

  	
   

  	
  7.33

  	
   

  	
  4.21

  	
   

  	
  5.92

  	
   

  	
  2.46

  	
   

  	
  53 47

  	
   

  	
  6.70

  	
   

  	
  316.65

  	
   

  	
  16.50

  	
   

  	
  0.00

  	
   

  
	
  2016

  	
   

  	
  6.77

  	
   

  	
  3.88

  	
   

  	
  5.46

  	
   

  	
  2.27

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  292.10

  	
   

  	
  15.22

  	
   

  	
  0.00

  	
   

  
	
  2017

  	
   

  	
  6.21

  	
   

  	
  3.56

  	
   

  	
  5.01

  	
   

  	
  2.08

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  267.99

  	
   

  	
  13.96

  	
   

  	
  0.00

  	
   

  
	
  2018

  	
   

  	
  0.49

  	
   

  	
  0 28

  	
   

  	
  0.39

  	
   

  	
  0.16

  	
   

  	
  53 47

  	
   

  	
  6.70

  	
   

  	
  21.05

  	
   

  	
  1.10

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  Total

  	
   

  	
  123.34

  	
   

  	
  70.81

  	
   

  	
  99.60

  	
   

  	
  41.40

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  5,325.14

  	
   

  	
  277.40

  	
   

  	
  0.00

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  399.02

  	
   

  	
  628.07

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  Net Tax

  	
   

  	
  Net Tax

  	
   

  	
  Net

  	
   

  	
  Net

  	
   

  	
  Net

  	
   

  	
  Other

  	
   

  	
  Net

  	
   

  	
  Annual

  	
   

  	
  Cum
  Disc.

  	
   

  
	
  Year

  	
   

  	
  Well

  Count

  	
   

  	
  Production

  (M$)

  	
   

  	
  AdValorem

  (M$)

  	
   

  	
  Investment

  (M$)

  	
   

  	
  Lease Costs

  (M$)

  	
   

  	
  Well
  Costs

  (M$)

  	
   

  	
  Costs

  (M$)

  	
   

  	
  Profits

  (M$)

  	
   

  	
  Cash
  Flow

  (M$)

  	
   

  	
  Cash
  Flow

  (M$)

  	
   

  
	
  2006

  	
   

  	
  11.00

  	
   

  	
  33.47

  	
   

  	
  0.35

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  415.77

  	
   

  	
  396.93

  	
   

  
	
  2007

  	
   

  	
  11.00

  	
   

  	
  30.79

  	
   

  	
  0.32

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  362.07

  	
   

  	
  711.19

  	
   

  
	
  2008

  	
   

  	
  11.00

  	
   

  	
  28.41

  	
   

  	
  .0.30

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  314.16

  	
   

  	
  959.10

  	
   

  
	
  2009

  	
   

  	
  11.00

  	
   

  	
  26.06

  	
   

  	
  0.27

  	
  .

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  267.08

  	
   

  	
  1,150.68

  	
   

  
	
  2010

  	
   

  	
  11.00

  	
   

  	
  23.98

  	
   

  	
  0.25

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  225.27

  	
   

  	
  1,297.60

  	
   

  
	
  2011

  	
   

  	
  11.00

  	
   

  	
  22.06

  	
   

  	
  0.23

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  186.80

  	
   

  	
  1,408.38

  	
   

  
	
  2012

  	
   

  	
  11.00

  	
   

  	
  20.35

  	
   

  	
  0.21

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  152.47

  	
   

  	
  1,490.59

  	
   

  
	
  2013

  	
   

  	
  11.00

  	
   

  	
  18.67

  	
   

  	
  0.20

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  118.75

  	
   

  	
  1,548.81

  	
   

  
	
  2014

  	
   

  	
  11.00

  	
   

  	
  17.18

  	
   

  	
  0.18

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  88.79

  	
   

  	
  1.588.39

  	
   

  
	
  2015

  	
   

  	
  11.00

  	
   

  	
  15.80

  	
   

  	
  0.17

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  61.23

  	
   

  	
  1,613.22

  	
   

  
	
  2016

  	
   

  	
  11.00

  	
   

  	
  14.58

  	
   

  	
  0.15

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  36.64

  	
   

  	
  1,626.76

  	
   

  
	
  2017

  	
   

  	
  11.00

  	
   

  	
  13.37

  	
   

  	
  0.14

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  255.95

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  12.48

  	
   

  	
  1,630.97

  	
   

  
	
  2018

  	
   

  	
  11.00

  	
   

  	
  1.05

  	
   

  	
  0.01

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  20.64

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.44

  	
   

  	
  1,631.11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  265.76

  	
   

  	
  2.80

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  3.092.02

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,241.96

  	
   

  	
  1,631.11

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  Present Worth Profile (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  5.00

  	
  %

  	
  1,890.44

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  8.00

  	
  %

  	
  1,725.99

  	
   

  
	
  Disc. Initial Invest (M$):

  	
   

  	
  0.000

  	
   

  	
  PW

  	
  10.00

  	
  %

  	
  1,631.11

  	
   

  
	
  ROInvestment (disc/undisc)

  	
   

  	
  0.00/0.00

  	
   

  	
  PW

  	
  12.00

  	
  %

  	
  1,546.10

  	
   

  
	
  Years to Payout

  	
   

  	
  0.00

  	
   

  	
  PW

  	
  15.00

  	
  %

  	
  1,434.20

  	
   

  
	
  Internal ROR (%):

  	
   

  	
  0.00

  	
   

  	
  PW

  	
  20.00

  	
  %

  	
  1,280.86

  	
   

  

 

1

 

	
  Date :
  2/9/06    9:55:34AM

  	
  ECONOMIC SUMMARY PROJECTION

  	
  COWDEN SOUTH Lease Sort

  

 

	
   

  	
  As Of Date : 01/01/06

  	
  Non-Producing Rsv Category

  
	
  Project
  Name : Kayser Back-ins 1:06

  	
  Discount Rate (%) : 10.00

  	
  Proved Rsv Class

  
	
  Partner
  : SDG Resources, L.P.

  	
  Custom Selection

  	
   

  
	
  [ILLEGIBLE]
  : REPORT BREAK TOTAL CASE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cum
  Oil (Mbbl) : 0.00

  	
   

  	
   

  
	
  Cum
  Gas (MMcf) : 0.00

  	
   

  	
   

  

 

	
  Year

  	
   

  	
  Gross

  Oil

  (Mbbl)

  	
   

  	
  Gross

  Gas

  (MMcf)

  	
   

  	
  Net

  Oil

  (Mbbl)

  	
   

  	
  Net

  Gas

  (MMcf)

  	
   

  	
  Oil

  Price

  ($/bbl)

  	
   

  	
  Gas

  Price

  ($/Mcf)

  	
   

  	
  Oil

  Revenue

  (M$)

  	
   

  	
  Gas

  Revenue

  (M$)

  	
   

  	
  Misc.

  Revenue

  (M$)

  	
   

  
	
  2006

  	
   

  	
  9.81

  	
   

  	
  36.17

  	
   

  	
  7.92

  	
   

  	
  21.15

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  423.50

  	
   

  	
  141.70

  	
   

  	
  0.00

  	
   

  
	
  2007

  	
   

  	
  32.21

  	
   

  	
  65.89

  	
   

  	
  26.01

  	
   

  	
  38.52

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,390.58

  	
   

  	
  258.14

  	
   

  	
  0.00

  	
   

  
	
  2008

  	
   

  	
  45.50

  	
   

  	
  70.06

  	
   

  	
  36.74

  	
   

  	
  40.96

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,964.54

  	
   

  	
  274.48

  	
   

  	
  0.00

  	
   

  
	
  2009

  	
   

  	
  41.75

  	
   

  	
  61.97

  	
   

  	
  33.71

  	
   

  	
  36.23

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,802.33

  	
   

  	
  242.78

  	
   

  	
  0.00

  	
   

  
	
  2010

  	
   

  	
  38.41

  	
   

  	
  55.06

  	
   

  	
  31.01

  	
   

  	
  32.19

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,658.24

  	
   

  	
  215.70

  	
   

  	
  0.00

  	
   

  
	
  2011

  	
   

  	
  35.34

  	
   

  	
  48.99

  	
   

  	
  28.54

  	
   

  	
  28.64

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,525.67

  	
   

  	
  191.93

  	
   

  	
  0.00

  	
   

  
	
  2012

  	
   

  	
  32.60

  	
   

  	
  43.77

  	
   

  	
  26.32

  	
   

  	
  25.59

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,407.38

  	
   

  	
  171.49

  	
   

  	
  0.00

  	
   

  
	
  2013

  	
   

  	
  29.91

  	
   

  	
  38.95

  	
   

  	
  24.15

  	
   

  	
  22.77

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,291.18

  	
   

  	
  152.61

  	
   

  	
  0.00

  	
   

  
	
  2014

  	
   

  	
  27.52

  	
   

  	
  34.82

  	
   

  	
  22.22

  	
   

  	
  20.36

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,187.95

  	
   

  	
  136.41

  	
   

  	
  0.00

  	
   

  
	
  2015

  	
   

  	
  25.32

  	
   

  	
  31.17

  	
   

  	
  20.44

  	
   

  	
  18.22

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,092.98

  	
   

  	
  122.10

  	
   

  	
  0.00

  	
   

  
	
  2016

  	
   

  	
  23.35

  	
   

  	
  28.01

  	
   

  	
  18.86

  	
   

  	
  16.37

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,08.24

  	
   

  	
  109.72

  	
   

  	
  0.00

  	
   

  
	
  2017

  	
   

  	
  21.42

  	
   

  	
  25.07

  	
   

  	
  17.30

  	
   

  	
  14.65

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  924.99

  	
   

  	
  98.20

  	
   

  	
  0.00

  	
   

  
	
  2018

  	
   

  	
  24.94

  	
   

  	
  25.53

  	
   

  	
  20.14

  	
   

  	
  14.92

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,076.55

  	
   

  	
  100.01

  	
   

  	
  0.00

  	
   

  
	
  2019

  	
   

  	
  23.39

  	
   

  	
  23.29

  	
   

  	
  18.89

  	
   

  	
  13.62

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  1,009.85

  	
   

  	
  91.24

  	
   

  	
  0.00

  	
   

  
	
  2020

  	
   

  	
  21.58

  	
   

  	
  21.10

  	
   

  	
  17.42

  	
   

  	
  12.33

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  931.56

  	
   

  	
  82.65

  	
   

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
  133.12

  	
   

  	
  120.36

  	
   

  	
  107.49

  	
   

  	
  70.37

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  5,747.22

  	
   

  	
  471.52

  	
   

  	
  0.00

  	
   

  
	
  Total

  	
   

  	
  566.15

  	
   

  	
  730.20

  	
   

  	
  457.16

  	
   

  	
  426.90

  	
   

  	
  53.47

  	
   

  	
  6.70

  	
   

  	
  24,442.75

  	
   

  	
  2,860.69

  	
   

  	
  0.00

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  566.15

  	
   

  	
  730.20

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  Net Tax

  	
   

  	
  Net Tax

  	
   

  	
  Net

  	
   

  	
  Net

  	
   

  	
  Net

  	
   

  	
  Other

  	
   

  	
  Net

  	
   

  	
  Annual

  	
   

  	
  Cum
  Disc.

  	
   

  
	
  Year

  	
   

  	
  Well

  Count

  	
   

  	
  Production

  (M$)

  	
   

  	
  AdValorem

  (M$)

  	
   

  	
  Investment

  (M$)

  	
   

  	
  Lease Costs

  (M$)

  	
   

  	
  Well
  Costs

  (M$)

  	
   

  	
  Costs

  (M$)

  	
   

  	
  Profits

  (M$)

  	
   

  	
  Cash
  Flow

  (M$)

  	
   

  	
  Cash
  Flow

  (M$)

  	
   

  
	
  2006

  	
   

  	
  4.00

  	
   

  	
  30.11

  	
   

  	
  0.28

  	
   

  	
  1,655.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  -1,283.73

  	
   

  	
  -1,244.20

  	
   

  
	
  2007

  	
   

  	
  4.00

  	
   

  	
  83.33

  	
   

  	
  0.82

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,401.02

  	
   

  	
  -37.75

  	
   

  
	
  2008

  	
   

  	
  4.00

  	
   

  	
  110.95

  	
   

  	
  1.12

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,963.4l

  	
   

  	
  1,511.04

  	
   

  
	
  2009

  	
   

  	
  4.00

  	
   

  	
  101.12

  	
   

  	
  1.02

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,779.44

  	
   

  	
  2,787.02

  	
   

  
	
  2010

  	
   

  	
  4.00

  	
   

  	
  92.46

  	
   

  	
  0.94

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,617.01

  	
   

  	
  3,841.18

  	
   

  
	
  2011

  	
   

  	
  4.00

  	
   

  	
  84.58

  	
   

  	
  0.86

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,468.63

  	
   

  	
  4,711.63

  	
   

  
	
  2012

  	
   

  	
  4.00

  	
   

  	
  77.60

  	
   

  	
  0.79

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,336.94

  	
   

  	
  5,431.96

  	
   

  
	
  2013

  	
   

  	
  4.00

  	
   

  	
  70.84

  	
   

  	
  0.72

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,208.69

  	
   

  	
  6,023.94

  	
   

  
	
  2014

  	
   

  	
  4.00

  	
   

  	
  64.88

  	
   

  	
  0.66

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  1,095.28

  	
   

  	
  6,511.64

  	
   

  
	
  2015

  	
   

  	
  4.00

  	
   

  	
  50.43

  	
   

  	
  0.61

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  991.50

  	
   

  	
  6,913.03

  	
   

  
	
  2016

  	
   

  	
  4.00

  	
   

  	
  54.61

  	
   

  	
  0.56

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  899.26

  	
   

  	
  7,243.96

  	
   

  
	
  2017

  	
   

  	
  4.00

  	
   

  	
  49.91

  	
   

  	
  0.51

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  163.54

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  809.23

  	
   

  	
  7,514.67

  	
   

  
	
  2018

  	
   

  	
  4.00

  	
   

  	
  57.02

  	
   

  	
  0.59

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  398.84

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  720.11

  	
   

  	
  7,733.71

  	
   

  
	
  2019

  	
   

  	
  15.00

  	
   

  	
  53.30

  	
   

  	
  0.35

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  627.76

  	
   

  	
  7,907.33

  	
   

  
	
  2020

  	
   

  	
  15.00

  	
   

  	
  49.05

  	
   

  	
  0.51

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  419.48

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  545.17

  	
   

  	
  8,044.40

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rem.

  	
   

  	
   

  	
   

  	
  299.74

  	
   

  	
  3.11

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  3,879.72

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  2,036.17

  	
   

  	
  377.28

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  1,338.92

  	
   

  	
  13.65

  	
   

  	
  1,655.00

  	
   

  	
  0.00

  	
   

  	
  7,079.97

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  17,215.90

  	
   

  	
  8,421.69

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
  Present Worth Profile (M$)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  5.00

  	
  %

  	
  11,693.05

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  PW

  	
  8.00

  	
  %

  	
  9,548.83

  	
   

  
	
  Disc. Initial Invest (M$):

  	
   

  	
  1,591.057

  	
   

  	
  PW

  	
  10.00

  	
  %

  	
  8,421.69

  	
   

  
	
  ROInvestment (disc/undisc)

  	
   

  	
  6.29/11.40

  	
   

  	
  PW

  	
  12.00

  	
  %

  	
  7,477.65

  	
   

  
	
  Years to Payout

  	
   

  	
  1.94

  	
   

  	
  PW

  	
  15.00

  	
  %

  	
  6,324.78

  	
   

  
	
  Internal ROR (%):

  	
   

  	
  110.74

  	
   

  	
  PW

  	
  20.00

  	
  %

  	
  4,899.37

  	
   

  

 

2

 

ANNEX I

TITLE TO THE PROPERTIES

 

1.                                       Definitions. This Annex I incorporates
the defined terms contained in the Agreement and also includes the following
definitions:

 

(a)                                  “Allocated Value” means the
value allocated to each Title Property as set forth on Exhibit 1.1.1.
- Part B,  reflecting the
portion of the Purchase Price associated with each Title Property.

 

(b)                                 “Liens”  means any encumbrance, lien,
claim, easement, right, agreement, instrument, obligation, burden or defect.

 

(c)                                  “Defensible Title” means such
title as (i) will enable Buyer, as Sellers’ successor in title, to receive from
a particular Oil and Gas Property at least the “Net Revenue Interest”  identified on Exhibit 1.1.1 - Part B as being associated with
such Oil and Gas Property, without reduction, suspension or termination
throughout the term of such Oil and Gas Property, except for any reduction,
suspension or termination set forth in Exhibit 1.1.1 - Part B; (ii) will  obligate Buyer,
as Sellers’ successor in title, to bear no greater “Working Interest”
than the Working Interest identified on Exhibit 1.1.1 - Part B as being
associated with a particular Oil and Gas Property, without increase throughout
the term of such Oil and Gas Property, except for any increase set forth in Exhibit 1.1.1 - Part B; and (iii) is
free and clear of all Liens, except for the Lender Encumbrances and the
Permitted Encumbrances.

 

(d)                                 “Lender” means J. Aron
& Company, Inc.

 

(e)                                  “Lender Encumbrances” means: (i) the
mortgage liens, deeds of trust, security interests, and financing statements in
favor of J. Aron & Company, each of which is described on Exhibit 1.1.1 - Part C; (ii) the
mortgage liens, deeds of trust, security interests, and financing statements in
favor of Texas Capital Bank, each of which is described on Exhibit 1.1.1 - Part C; and (iii) the
Net Profits Interest conveyances in favor of MTGLQ Investors, L.P., an
affiliate of Lender, each of which is described on Exhibit 1.1.1 - Part C.

 

(f)                                    “Notice Date” means April 11,
2006.

 

(g)                                 “Permitted Encumbrances” means (i) liens
for taxes not yet delinquent, (ii) lessors’ royalties, overriding royalties,
division orders, reversionary interests, and similar burdens that do not
operate to reduce the Net Revenue Interest of any Seller in any of the Oil and
Gas Properties to less than the amount set forth therefor on Exhibit 1.1.1 -
Part B, (iii) the consents and rights described in Exhibit 3.8; and (iv) the
Contracts insofar as they do not operate to increase the Working Interest of
any Seller set forth on Exhibit 1.1.1 - Part B, for any of the
Oil and Gas Properties or decrease the Net Revenue Interest of such Seller set
forth on Exhibit 1.1.1 - Part B for any of the
Oil and Gas Properties.

 

(h)                                 “Title Defect” means (i) any
Lien, Contract, agreement, instrument, obligation, defect. consent to
assignment or preferential right to purchase a Title Property, other than a
Permitted Encumbrance or matter specifically waived by Buyer, that is
identified by Buyer on or

 

i

 

before
the Notice Date, and that renders title to a Title Property (or any portion
thereof) less than Defensible Title or (ii) any misstatement or inaccuracy of a
“Net
Revenue Interest” (as defined in Section 1 (c) hereof) or
a “Working
Interest” (as defined in Section 1(c)  hereof) as set
forth on Exhibit 1.1.1 - Part B. Notwithstanding anything herein to the
contrary, so long as the condition to Buyer’s obligation in Section 9.2.3
is satisfied at Closing, the Lender Encumbrances shall not constitute Title
Defects.

 

(i)                                     “Title Defect Amount” means the
amount by which the Allocated Value of a Title Property (or a portion thereof)
is reduced because of the existence of a Title Defect. In determining the Title
Defect Amount, the following factors shall be taken into account: (i) the
Allocated Value assigned to the Title Property affected; (ii) the method of
arriving at such Allocated Value; (iii) the portion of the Title Property
affected by such Title Defect; (iv) the legal effect of the Title Defect; and (v)
the potential economic effect of the Title Defect over the life of the Title
Property affected. However, in no event shall the Title Defect Amount, as to
any particular Title Property, exceed the Allocated Value therefor.

 

(j)                                     “Title Defect Deductible” means $200,000.

 

(k)                                  “Title Defect Threshold” means $25,000.

 

(1)                                  “Title Property” (or
collectively, the “Title Properties”)  means each Oil and Gas Property
designated in Exhibit 1.1.1 - Part
B to the Agreement.

 

2.                                       Title Procedure.

 

2.1                                 Notice of Title Defects. On or before the Notice Date, Buyer shall notify
Sellers of any Title Defect(s) affecting the Title Properties discovered by
Buyer. The notice(s) shall be in writing and shall describe the alleged Title
Defect(s), specify the Title Property affected and set forth Buyer’s assessment
of the aggregate of the Title Defect Amounts which exceed the Title Defect
Threshold. Notwithstanding the foregoing, Buyer shall not deliver a notice of
any Title Defects until Buyer has identified Title Defects having, in the
aggregate, in excess of the Title Defect Deductible.

 

2.2                                 Sellers’ Election to Cure. Sellers may
notify Buyer in writing on or before three days prior to the Closing Date that
they elect to cure the alleged Title Defect. If Sellers have elected to cure
the Title Defect, then Sellers shall use commercially reasonable efforts to
cure such Title Defect during a period ending thirty days after Closing (the “Cure
Period”).

 

2.3                                 Uncured Title Defects. If at the
Closing Date, a Title Defect identified by Buyer pursuant to Section 2.1 of
this Annex I remains uncured and Sellers have not notified Buyer of
their election to attempt to cure such Title Defect, then the Purchase Price to
be paid at the Closing shall be reduced by the amount by which the Title Defect
Amount exceeds the Title Defect Threshold. If after the Cure Period, a Title
Defect that Sellers have elected to cure remains uncured, then the following
provisions shall apply: (a) the Purchase Price shall be reduced in the Final
Settlement Statement by an amount equal to the Title Defect Amount attributable
to such Title Defect; (b) if Sellers believe in good faith that Sellers can
cure such Title Defect. Sellers may continue to attempt to cure such Title
Defect for an additional ninety (90) days; (c) if after such additional ninety
(90) day period, such Title Defect remains uncured.

 

ii

 

the
Purchase Price shall be reduced in the Final Settlement Statement by an amount
equal to the Title Defect Amount for such Title Defect; and (d) if Sellers cure
such Title Defect on or before the expiration of such ninety (90) day period,
Buyer shall reimburse Sellers the Title Defect Amount attributable to such
Title Defect. In the event that the Title Defect Deductible has not been factored
into an adjustment of the Purchase Price at Closing, then the Title Defect
Amount used in the Final Settlement Statement shall be reduced by the Title
Defect Deductible.

 

3.                                       Dispute Resolution. If a Dispute
exists as to whether a matter referred to in any notice furnished by Buyer to
Sellers pursuant to Section 2.1 of this Annex I constitutes a Title
Defect, whether a Title Defect has been cured, or the amount of any Title
Defect Amount, either Buyer or Sellers may request arbitration of such dispute.

 

4.                                       Arbitration Matters.

 

(a)                                  The parties
agree that a law firm reasonably acceptable to Buyer and Sellers shall be the
sole arbitrator to hear and decide all matters that are subject to
arbitration under this Annex I. If no member of that firm is willing
or able to serve in such capacity, then the parties agree to designate another
mutually acceptable person as the sole arbitrator under this Agreement. If the
parties are unable to agree upon the designation of a person as substitute
arbitrator, then either Sellers, on the one hand, or Buyer, on the other hand,
or Sellers and Buyer together, may in writing request the judge of the United
States District Court for the Southern District of Texas senior in term of
service to appoint the substitute
arbitrator.

 

(b)                            Any arbitration
hearing shall be held at a place in Houston, Texas acceptable to the
arbitrator.

 

(c)                             The arbitrator
shall settle any dispute referred to in this Annex I in accordance with
the Texas General Arbitration Act and the Rules of the American Arbitration
Association to the extent such rules do not conflict with the terms of such Act
and the terms hereof. The decision of the arbitrator shall be binding upon the
parties, and may he enforced in any court of competent jurisdiction. Sellers
and Buyer, respectively, shall bear their own legal fees and other costs
incurred in presenting their respective cases. The charges and expenses of the
arbitrator shall be shared equally by Sellers and Buyer.

 

iii

 

(vii)
the Permian Basin Divestiture Executive Presentation, Fourth Quarter 2005,
prepared by the Advisor, and circulated to prospective purchasers.

 

This
Assignment is made with full substitution and subrogation of Assignee in and to
all covenants and warranties by others heretofore given or made in respect of
the Properties or any part thereof.

 

This
Assignment and Bill of Sale may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
Assignment and Bill of Sale.

 

As
used herein, the term “SDG” means
SDG Resources, L.P., a Texas limited partnership.

 

iv

 

IN
WITNESS WHEREOF, the parties hereto have caused this Assignment to be duly
executed on this, the       day of April 2006.
This Assignment shall be effective at 7:00 a.m. (in the locale where the
Properties are located) on January 1, 2006
(the “Effective Time”).

 

 

	
   

  	
  ASSIGNOR:

  
	
   

  	
   

  
	
   

  	
  [assignor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

	
   

  	
  ASSIGNEE:

  
	
   

  	
   

  
	
   

  	
  RESACA
  EXPLOITATION, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Resaca
  Exploitation GP, LLC,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

	
  Address
  of Assignor:

  	
  Address
  of Assignee:

  
	
  [assignor]

  	
  Resaca
  Exploitation, LP

  
	
   

  	
  1221
  Lamar, Suite 1175

  
	
   

  	
  Houston,
  Texas 77010

  

 

v

 

	
  STATE
  OF

  	
  §

  
	
   

  	
  §

  
	
  COUNTY
  OF

  	
  §

  

 

This instrument was acknowledged before me on April                   , 2006, by                 , the                              of [assignor], on behalf of
said [entity].

 

	
   

  	
   

  
	
   

  	
  Notary
  Public in and for

  
	
   

  	
  The
  State of

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  My
  Commission Expires:

  	
   

  
					

 

 

	
  STATE
  OF

  	
  §

  
	
   

  	
  §

  
	
  COUNTY
  OF

  	
  §

  

 

This
instrument was acknowledged before me on April                 , 2006, by                  of Resaca Exploitation GP.
LLC, the general partner of Resaca Exploitation, LP, a Delaware limited
partnership, on behalf of said partnership.

 

	
   

  	
   

  
	
   

  	
  Notary
  Public in and for

  
	
   

  	
  The
  State of

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  My
  Commission Expires:

  	
   

  
					

 

vi

 

EXHIBIT A

TO

ASSIGNMENT AND BILL OF SALE

[To he Attached]

 

vii

 

ANNEX II

 

ENVIRONMENTAL REVIEW

 

Buyer
and Sellers acknowledge and agree that the provisions of this Annex II
are the result of mutual compromise and an allocation of risk with respect to
the subject matter hereof. The provisions of this Annex II shall be effective
notwithstanding the knowledge or lack of knowledge of Buyer and/or Sellers with
respect to the condition of the Properties, Environmental Contaminants,
Environmental Liabilities, or any compliance or lack thereof with Environmental
Laws and Environmental Permits, as such terms are hereafter defined. Buyer and
Sellers further acknowledge and agree that the provisions of this Annex II
have been given individual weight by them in connection with entering into this
agreement and the setting of the Purchase Price. Buyer and Sellers acknowledge
and agree that the allocations of risk and responsibility contained in this Annex
II are mutually intended by them to be fully enforced and given full effect
in the construction and interpretation of this Agreement.

 

1.                                       Definitions.

 

1.1                                 “Environmental Claim” means any
environmental, health, and/or safety claim, demand, filing, investigation,
administrative proceeding, action, suit, or other legal proceeding, whether
direct, indirect, contingent, pending, threatened or otherwise, whether arising
under any Environmental Law or otherwise.

 

1.2                                 “Environmental Contaminant”  means any pollutant, waste,
contaminant, or hazardous, extremely hazardous, or toxic material, substance,
chemical or waste identified, defined, or regulated as such under any
Environmental Law.

 

1.3                                 “Environmental Laws” as used herein
means all laws, statutes, ordinances. permits, orders, judgments, rules or
regulations which are promulgated, issued or enacted by a governmental entity
having appropriate jurisdiction that relate to (A) the prevention of pollution
or environmental damage, (B) the rernediation of pollution or environmental
damage, (C) public health and/or safety, or (D) the protection of the
environment generally; including without limitation, the Clean Air Act, as
amended, the Clean Water Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Federal Water
Pollution Control Act, as amended, the Resource Conservation and Recovery Act
of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic
Substance and Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous and the Solid Waste
Amendments Act of 1984, as amended, the Oil Pollution Act of 1990, as amended,
the Occupational Safety and Health Act of 1970 and all applicable State of
Texas statutes relating to protection of natural resources and the environment
and to environmental response.

 

1.4                                 “Environmental Liability” or “Environmental
Liabilities”  means
any and all Claims arising from, based upon. associated with or related to (A) any
Environmental Claim, (B) any Environmental Permit, (C) any Environmental Law,
or (D) Environmental Contaminants, (including, without limitation, all costs
arising under any theory of recovery, in law or at equity).

 

i

 

whether
based on negligence, strict liability, or otherwise, including, without
limitation, remediation, removal, response, restoration, abatement,
investigative, monitoring, personal injury, and property damage costs and all
other related costs, expenses, losses, damages, penalties, fines, liabilities
and obligations (including interest paid or accrued, attorneys’ fees, and court
costs).

 

1.5                                 “Environmental Permits” means all
environmental and health and safety permits, licenses, approvals, consents,
certificates and other authorizations necessary for the ownership or operation
of the Properties.

 

2.                                       Inspection and Testing.

 

2.1                                 Prior to
Closing, Buyer shall have the right, at its sole cost and risk, to conduct a Phase
I environmental assessment of
the Properties to the extent that Sellers have the authority to grant such
right to Buyer; provided that Sellers shall have the right to review and
approve any plan to conduct such an environmental assessment, with such
approval not to be unreasonably withheld, delayed or conditioned by Sellers.
Any data obtained shall be provided to Sellers, including any reports and
conclusions. Sellers and Buyer shall keep all information strictly confidential
whether or not Closing occurs, except as may be required pursuant to any
Environmental Laws. If Buyer
believes the Phase I environmental assessment reveals the need for further soil
or ground water sampling or subsurface testing to determine the extent of any
Adverse Environmental Condition, as such term is hereafter defined, subject to
Sellers’ approval of Buyer’s plan for further testing, which such approval
shall not he unreasonably withheld, the Buyer shall have the right to conduct
at its cost and risk such tests. As used herein, the term “Adverse
Environmental Condition” shall mean (i) the failure of
the Properties to be in material compliance with all applicable Environmental
Laws; (ii) the Properties being subject to any agreements, consent orders,
decrees or judgments currently in existence based on any Environmental Laws
that negatively and materially impact the future use of any portion of the
Properties or that require any material change in the present conditions of any
of the Properties; (iii) the Properties being subject to any material uncured
notices of violations of or material non-compliance with any applicable
Environmental Laws; or (iv) any condition on the Properties which has presently
resulted in, or with the passage of time, could result in, in the judgment of
Buyer, the incurrence of Environmental Liabilities.

 

2.2                                 Buyer waives
and releases all claims against each Seller, its parent and subsidiary companies,
and each of their respective directors, officers, employees, agents and other
representatives and their successor and assigns (collectively, the “Seller
Group”),  for
injury to or death of persons, or damage to property, arising in any way from
the exercise of rights granted to Buyer hereby or the activities of Buyer or
its employees, agents or contractors on the Properties, BUYER SHALL INDEMNIFY
THE SELLER GROUP AGAINST AND HOLD EACH AND ALL OF SAID INDEMNITEES HARMLESS
FROM ANY AND ALL LOSS, COST, DAMAGE, EXPENSE OR LIABILITY, INCLUDING ATTORNEY’S
FEES, WHATSOEVER ARISING OUT OF (i) ANY AND ALL STATUTORY OR COMMON LAW LIENS
OR OTHER ENCUMBRANCES FOR LABOR OR MATERIALS FURNISHED IN CONNECTION WITH SUCH
TESTS, SAMPLINGS, STUDIES OR SURVEYS AS BUYER MAY CONDUCT WITH RESPECT TO THE
PROPERTIES; AND (ii) ANY INJURY TO OR DEATH OF PERSONS OR

 

ii

 

DAMAGE
TO PROPERTY OCCURRING IN, ON OR ABOUT THE PROPERTIES AS A RESULT OF SUCH
EXERCISE OR ACTIVITIES.

 

3.                                       Notice of Adverse Environmental Conditions. No later than ten Business Days prior to the Closing
Date, Buyer shall notify Sellers in writing of any Adverse Environmental
Condition with respect to the Properties. Such notice shall describe in
reasonable detail the  Adverse
Environmental Condition and include the estimated Environmental Defect Value
attributable thereto, as such term is hereafter defined. Buyer shall not send
such a notice to Sellers: (a) except with respect to any Adverse Environmental
Conditions having an Environmental Defect Value that exceeds $50,000 (the “Environmental
Defect Threshold”); and (b) unless Buyer has identified
Adverse Environmental Conditions having Environmental Defect Values, in the
aggregate, in excess of 1% of the Adjusted Purchase Price (the “Environmental
Defect Deductible”).
The “Environmental Defect Value”
attributable to any Adverse Environmental Condition shall be the estimated
amount (net to the applicable Seller’s interest) of all reasonable costs and
claims associated with the existence, Remediation, as hereafter defined, or
correction of the Adverse Environmental Conditions, as reasonably determined
and estimated by Buyer. With the exception of those matters described in Annex II below, Buyer
also shall be deemed to have conclusively waived any remedies under this Annex II for all
Adverse Environmental Conditions not disclosed to Sellers before ten Business
Days prior to the Closing Date. Buyer waives any remedy under this Annex II against
Sellers for Adverse Environmental Conditions that do not exceed the
Environmental Defect Deductible. Any Adverse Environmental Condition waived
shall be deemed to be a Permitted Encumbrance. Nothing contained in this Annex
shall be construed to limit the indemnities of Sellers contained in Section 15.3
of the Agreement to which this Annex is attached.

 

4.                                       Rights and Remedies for Adverse Environmental Conditions.

 

4.1                                 With respect to
any Adverse Environmental Conditions affecting one or more of the Properties
which have Environmental Defect Values in the aggregate exceeding the
Environmental Defect Deductible (other than the Adverse Environmental
Conditions described on Schedule 4.1 to Annex II), Buyer may
elect, on a Property by Property basis, to take one of the following actions: (i)
Remediate or cause Sellers to Remediate (as defined below), in each case at
Sellers’ cost, the Adverse Environmental Conditions, and proceed to Closing
with an indemnification from Sellers pursuant to the terms of Section 15.3
hereof but with no adjustment of the Adjusted Purchase Price (whether or not
such Remediation is complete at Closing); (ii) proceed to Closing and adjust
the Adjusted Purchase Price in an amount equal to the applicable Environmental
Defect Value; provided that such adjustment shall not exceed the Allocated Value
for such Asset; or (iii) cause Sellers to retain the affected Property and
reduce the Adjusted Purchase Price by the Allocated Value of the affected
Property.

 

4.2                                 Buyer waives
any Adverse Environmental Condition for which Buyer has received an adjustment
to the Adjusted Purchase Price in accordance with Annex II.

 

4.3                                 The term “Remediate”
means, with respect to any valid Adverse Environmental Condition, the
undertaking and completion of those actions and activities necessary to
remediate such Adverse Environmental Condition to the degree sufficient that
such Adverse Environmental Condition no longer constitutes an Adverse
Environmental Condition as defined above. Buyer 

 

iii

 

shall
notify Sellers at such time as it believes that it has Remediated an Adverse
Environmental Condition along with the compilation of Buyer’s costs in
completing the Remediation. Sellers shall promptly reimburse Buyer for such
costs.

 

4.4                                 If Sellers and
Buyer are unable to agree on the amount of the Environmental Defect Value
within ten (10) days after Sellers’ receipt of the Environmental Defect Notice,
any proposed Remediation of an Adverse Environmental Condition by Buyer or that
an Adverse Environmental Condition exists, has been Remediated or is required
to be Remediated, then the dispute will be submitted to ENSR or another
mutually acceptable company (the “Environmental Consultant”) whose
determination shall be final and binding upon the Parties. Sellers and Buyer
shall each bear their respective costs and expenses incurred in connection with
any such dispute, and one-half (1/2) of the fees, costs and expenses charged by
the Environmental Consultant. Each Party shall present a written statement of
its position on the Adverse Environmental Condition and/or the Environmental
Defect Value in question to the Environmental Consultant within five (5) days
after the Environmental Consultant is selected, and the Environmental
Consultant shall make a determination of all points of disagreement in
accordance with the terms and conditions of this Agreement within ten (10) Business
Days of receipt of such position statements. If necessary, the Closing Date
shall be deferred only as to those Properties affected by any unresolved
disputes regarding the existence of an Adverse Environmental Condition and/or
the Environmental Defect Value until the Environmental Consultant has made a
determination of the disputed issues with respect thereto and all subsequent
dates and required activities with respect to any such Properties having
reference to the Closing Date shall be correspondingly deferred; provided,
however, that, unless Sellers and Buyer mutually agree to the contrary, the
Closing Date shall not be deferred in any event for more than sixty (60) days
beyond the scheduled Closing Date. All Properties as to which no such dispute(s)
exist shall be conveyed to Buyer subject to the terms of this Agreement at
Closing. Once the Environmental Consultant’s determination has been expressed
to the Parties, if applicable, Buyer shall have five (5) days in which to
advise Sellers in writing which of the options available to Buyer under Annex II Buyer elects
regarding each of the Properties as to which the Environmental Consultant has
made a determination.

 

iv

 

EXHIBIT 4.1 TO ANNEX II

ADVERSE ENVIRONMENTAL CONDITIONS

 

·                                          Items described
in that certain Environmental Assessment of SDG Resources, L.P. dated July 2004,
prepared for Goldman, Sachs & Co. by E. Vironment, L.P.

 

 

ANNEX III – PART A

 

CERTIFICATE OF SELLER

 

Pursuant
to the Agreement for Purchase and Sale (the “Agreement”) by and among
SDG Resources, L.P. (which entity is known, for purposes of this Certificate,
as “Seller”), Innovative Oil and Gas Development and Trading Company,
Inc., and Arkios Partners, L.P., collectively as Sellers, and Resaca
Exploitation, LP (“Buyer”), Seller hereby represents, warrants, and
affirms to Buyer as follows:

 

1.                                       Seller has
performed and complied in all material respects with each of the covenants and
conditions required by the Agreement to be performed or complied with by each
of the Seller before or at the time of execution of this Certificate; and

 

2.                                       Each
representation and warranty made by Seller under the Agreement was true and
correct in all material respects as of the date when made and is hereby made
again as of the date of this Certificate and is, as of the date of this
Certificate, true and correct in all material respects, except for changes
specifically contemplated under the Agreement.

 

This Certificate is executed this                     day of April, 2006.

 

	
   

  	
  SDG
  RESOURCES, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  

 

 

ANNEX III – PART B

CERTIFICATE OF SELLER

 

Pursuant
to the Agreement for Purchase and Sale (“Agreement”) by and among SDG
Resources, L.P., Innovative Oil and Gas Development and Trading Company, Inc.
(which entity is known, for purposes of this Certificate, as “Seller”),
and Arkios Partners, L.P., collectively, as Sellers, and Resaca
Exploitation, LP (“Buyer”), Seller hereby represents, warrants, and
affirms to Buyer as follows:

 

1.                                       Seller has
performed and complied in all material respects with each of the covenants and
conditions required by the Agreement to be performed or complied with by each
of the Seller before or at the time of execution of this Certificate; and

 

2.                                       Each
representation and warranty made by Seller under the Agreement was true and
correct in all material respects as of the date when made and is hereby made
again as of the date of this Certificate and is, as of the date of this
Certificate, true and correct in all material respects, except for changes
specifically contemplated under the Agreement.

 

This Certificate is executed this                    day of April, 2006.

 

	
   

  	
  INNOVATIVE
  OIL AND GAS DEVELOPMENT AND TRADING COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  

 

 

ANNEX III – PART C

CERTIFICATE OF SELLER

 

Pursuant
to the Agreement for Purchase and Sale (“Agreement”) by and among SDG
Resources, L.P., Innovative Oil and Gas Development and Trading Company, Inc.,
and Arkios Partners, L.P. (which entity is known, for purposes of this
Certificate, as “Seller”),  collectively as Sellers, and
Resaca Exploitation, LP (“Buyer”), Seller hereby represents, warrants,
and affirms to Buyer as follows:

 

1.                                       Seller has
performed and complied in all material respects with each of the covenants and
conditions required by the Agreement to be performed or complied with by each
of the Seller before or at the time of execution of this Certificate; and

 

2.                                       Each representation
and warranty made by Seller under the Agreement was true and correct in all
material respects as of the date when made and is hereby made again as of the
date of this Certificate and is, as of the date of this Certificate, true and
correct in all material respects, except for changes specifically contemplated
under the Agreement.

 

This Certificate is executed this                    day of April, 2006.

 

	
   

  	
  ARKIOS
  PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  

 

 

ANNEX IV

CERTIFICATE OF BUYER

 

Pursuant
to the Agreement for Purchase and Sale (“Agreement”) by and between SDG
Resources, L.P., Innovative Oil and Gas Development and Trading Company, Inc.,
and Arkios Partners, L.P., collectively as Sellers, and Resaca Exploitation, LP
(which entity is known, for purposes of this Certificate, as “Buyer”), Buyer
hereby represents, warrants, and affirms to Sellers as follows:

 

1.                                       Buyer has
performed and complied in all material respects with each of the covenants and
conditions required by the Agreement to be performed or complied with by it
before or at the time of execution of this Certificate; and

 

2.                                       Each
representation and warranty made by Buyer under the Agreement was true and
correct in all material respects as of the date when made and is hereby made
again as of the date of this Certificate and is, as of the date of this
Certificate, true and correct in all material respects, except for changes
specifically contemplated under the Agreement.

 

This Certificate is executed this                           day
of April 2006.

 

	
   

  	
  RESACA
  EXPLOITATION, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Resaca
  Exploitation GP, LLC.

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  

 

 

ANNEX V

 

ASSIGNMENT AND BILL OF SALE

 

THE
STATE OF

 

COUNTY
OF

 

THIS
ASSIGNMENT AND BILL OF SALE (“Assignment”) is executed and delivered by
[Sellers] (“Assignor”), to Resaca Exploitation, LP, a Delaware limited
partnership (“Assignee”).

 

Assignor,
for valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, does by these presents GRANT, BARGAIN, SELL, CONVEY, ASSIGN,
TRANSFER, SET OVER and DELIVER unto Assignee the undivided interest of Assignor
set forth in Exhibit ”A” in and to the following properties, other than the
Excluded Assets (as defined below) (the “Properties”):

 

A.                                        All properties
described on Exhibit A — Part I whether the interest of Assignor in such
properties is fee interests, leasehold interests, licenses, concessions,
working interests, farmout rights, royalty, overriding royalty or other
non-working or carried interests, operating rights or other mineral rights of
every nature and any rights that arise by operation of law or otherwise in all
properties and lands pooled, unitized, communitized or consolidated with such
properties (the “Oil and Gas Properties”);

 

B.                                          All oil,
condensate or natural gas wells, water source wells, and water and other types
of injection wells either located on the Oil and Gas Properties or used or held
for use in connection with the Oil and Gas Properties under a Surface Contract,
whether producing, operating, shut-in, temporarily or permanently abandoned
(the “Wells”);.

 

C.                                          All severed
crude oil, natural gas, casinghead gas, drip gasoline, natural gasoline,
petroleum, natural gas liquids, condensate, products, liquids and other
hydrocarbons and other minerals-or materials of every kind and description produced
from the Oil and Gas Properties and either (i) in storage tanks on the Effective
Time or (ii) sold on or after the Effective Time (the “Substances”);

 

D.                                         All leases,
easements, privileges, right-of-way agreements, licenses or other agreements
relating to the use or ownership of surface and subsurface properties and
structures that are used or held for use in connection with the exploration,
production or development of Substances from the Oil and Gas Properties,
including the lease arrangements for the office facility and pipe yard located
in Odessa, Texas and the other interests described on Exhibit A — Part 2
(the “Surface Contracts”);

 

E.                                      All equipment,
furniture, computers, fixtures, vehicles, physical facilities or interests therein
(including but not limited to gathering lines, pipelines, compressors and gas
plants) of every type and description to the extent that the same are used or
held for use in connection with the ownership or operation of the Properties
and are located on the Oil and Gas Properties or on any surface covered by a
Surface Contract, including, without

 

i

 

limitation,
laptop computers used by Assignor’s employees or independent contractors based
in Odessa, Texas (the “Equipment”);

 

F.                                      All abstracts,
title opinions, title reports, title policies, lease and land files, surveys, analyses,
compilations, correspondence, filings with and reports to regulatory agencies,
other documents and instruments to the extent they are directly related to the
Oil and Gas Properties and the transfer thereof is not prohibited by any
existing contractual obligations, including geological, geophysical,
engineering, exploration, and production data that are in the possession of
Assignor, or any independent contractor of Assignor, and relate to the
Properties (the “Data”);

 

G.                                 All contracts
and arrangements that directly relate to the Properties and the production, storage,
treatment, transportation, processing, purchase, sale, disposal or other
disposition of Substances therefrom and any and all amendments, ratifications
or extensions of the foregoing, to the extent that any of the foregoing relate
to or are in effect during any periods (unless and to the extent pertaining to
an obligation retained by Assignor hereunder) (the “Contracts”), all
rights to make claims, during any periods on or after the Effective Time, under
purchase and sale agreements pursuant to which Assignor acquired its interests
in any of the Oil and Gas Properties, and all rights to make claims and receive
proceeds under any insurance policy held by or on behalf of Assignor in
connection with the Properties for any claim that arises from the Effective
Time through the Closing Date in connection with the Properties;

 

H.                                    All franchises,
licenses, permits, approvals, consents, certificates and other authorizations and
other rights granted by governmental authorities and all certificates of
convenience or necessity, immunities, privileges, grants and other rights, that
relate to the Properties or the ownership or operation of any thereof (the “Permits”),
including, without limitation, the Permits described on Exhibit A – Part 3
hereto; and

 

I.                                         All (i) accounts,
instruments and general intangibles (as such terms are defined in the Uniform
Commercial Code of the jurisdiction in which the Properties are located)
attributable to the Properties with respect to any period of time after the
Effective Time; and (ii) liens and security interests in favor of Assignor,
whether choate or inchoate, under any law, rule or regulation or under any of
the Contracts (a) arising from the ownership, operation or sale or other
disposition on or after the Effective Time of any of the Properties or (b) arising
in favor of SDG (as defined below) as the operator of the Oil and Gas
Properties.

 

Without
limiting the foregoing, all interests, lands and leases, whether now owned by
Assignor or hereafter acquired by operation of law or otherwise that relate to
the Properties are intended to be conveyed hereby, even though the Assignor’s
interest in said lands or leases be incorrectly described in, or a description
of such interest be omitted from, Exhibit A.

 

TO
HAVE AND TO HOLD all and singular the Properties, together with all rights,
titles, interests, estates, remedies, powers and privileges thereunto
appertaining unto Assignee and their respective successors, legal
representatives and assigns forever, subject to the Permitted Encumbrances (as
defined in the Agreement for Purchase
and Sale among Assignor, [other

 

ii

 

sellers],
as Sellers, and Assignee, as Buyer). Assignor hereby binds
itself, its successors, legal representatives and assigns, to warrant and
forever defend the Properties unto Assignee, their respective successors, legal
representatives and assigns, against every person whomsoever lawfully claiming
or to claim the same or any part thereof, by, through or under Assignor, but
not otherwise.

 

As
used herein, “Excluded Assets” means (1) all
trade credits and all accounts, instruments and general intangibles (as such
terms are defined in the Texas Uniform Commercial Code) attributable to the
Properties with respect to any period of time prior to the Effective Time; (2) all
claims and causes of action of Assignor (unless pertaining to an obligation
assumed by Assignee hereunder) (i) arising from acts, omissions or events, or
damage to or destruction of property, occurring prior to the Effective
Time, (ii) arising under or with respect to any of the
Contracts that are attributable to periods of time prior to the Effective Time
(including claims for adjustments or refunds), or (iii) with respect to any of
the Excluded Assets; (3) all rights and interests of Assignor (unless
pertaining to an obligation assumed by Assignee hereunder) (i) under any policy
or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any
insurance or condemnation proceeds or awards arising, in each case, from acts,
omissions or events, or damage to or destruction of property, occurring prior
to the Effective Time; (4) all Substances produced and sold from the Oil and Gas
Properties during any period prior to the Effective Time, together with all
proceeds from or of such Substances; (5) claims of Assignor for refunds of or
loss carry forwards with respect to (i) production or any other taxes
attributable to any period prior to the Effective Time, (ii) income or
franchise taxes, or (iii) any taxes attributable to the Excluded Assets; (6) all
amounts due or payable to Assignor as adjustments to insurance premiums related
to the Properties with respect to any period prior to the Effective Time; (7) all
proceeds, income or revenues (and any security or other deposits made)
attributable to (i) the Properties for any period prior to the Effective Time,
or (ii) any Excluded Assets; (8) all furniture, equipment, personal computers
and associated peripherals and all radio and telephone equipment owned by
Assignor and located in Montrose, Colorado, New York, New York, or Austin,
Texas; (9) Assignor’s proprietary computer software, patents, trade secrets,
copyrights, names, trademarks, logos and other intellectual property; (10) all
of Assignor’s interpretations of geological and geophysical data; (11) all
documents and instruments of Assignor that may be protected by an
attorney-client privilege; (12) data that cannot be disclosed or assigned to
Assignee as a result of confidentiality arrangements under agreements with
persons unaffiliated with Assignor; (13) all audit rights arising under any of
the Contracts or otherwise with respect to any period prior to the Effective
Time or to any of the Excluded Assets; (14) Assignor’s financial and accounting
information other than any financial and accounting records delivered to
Assignee in connection with Assignee’s due diligence investigation of the
Properties; and (15) all (i) agreements and correspondence between Assignor and
Petrie Parkman & Co. (the “Advisor”) relating to the
transactions contemplated in this Agreement, (ii) lists of prospective
purchasers for such transactions compiled by Assignor or the Advisor, (iii) bids
submitted by other prospective purchasers of the Properties, (iv) analyses by
Assignor or the Advisor of any bids submitted by
any prospective purchaser, (v) correspondence between or among Assignor or
Advisor, or either of their respective representatives, and any prospective
purchaser other than Assignee, (vi) correspondence between Assignor or Advisor
or any of their respective representatives with respect to any of the bids, the
prospective purchasers, the engagement or activities of the Advisor or the
transactions contemplated in this Agreement and

 

iii

 

ANNEX VI

CONVEYANCE AND BILL OF SALE

(Three Span Real Property)

 

	
  STATE
  OF TEXAS

  	
  §

  	
   

  
	
   

  	
  §

  	
  KNOW
  ALL MEN BY THESE PRESENTS:

  
	
  COUNTY
  OF WINKLER

  	
  §

  	
   

  

 

For
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, SDG Resources, L.P., whose address is P.O. Box 1390, Montrose,
Colorado 81402 (“Seller”), does-hereby SELL, GRANT, CONVEY and ASSIGN, and by
these presents does hereby SELL, GRANT, CONVEY and ASSIGN, unto                         , whose address is                 (“Buyer”) all of all of its right, title and
interest in the real property described in the attached Exhibit ”A”, together
with all improvements, structures and fixtures located thereon and all
appurtenances thereto, and any and all mineral interests therein if owned by
Seller (hereinafter called the “Real Property”), subject to the provisions
hereinafter set forth.

 

With
respect to the Real Property conveyed hereby, Seller warrants its title thereto
by, through and under it, but not otherwise. As to said Real Property, this
Conveyance is made subject to all valid and subsisting restrictions, covenants,
ordinances and zoning classifications pertaining to the Real Property as to any
improvements located on said Real Property. Seller makes no warranty of
merchantability, tenantability, habitability or fitness for any particular
purpose with respect to such Real Property. Ad valorem and other real property
taxes assessed against the Real Property will be prorated with respect to the
year 2006 to the Effective Time hereof.

 

TO
HAVE AND-TO -HOLD the
Equipment and Real Property described in the exhibit attached hereto, together
with all and singular the rights and appurtenances thereto in any way belonging
unto Buyer, its successors and assigns, forever.

 

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i

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