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REGISTRATION AND REPORTING UNDER
THE SECURITIES EXCHANGE ACT OF 1934
REGISTRATION STATEMENT ON FORM 10
SECURITIES & EXCHANGE COMMISSION
AMENDMENT NUMBER ONE TO FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the year ended December 31, 1997.
INDO-PACIFIC ENERGY LTD.
(Exact name of Registrant as specified in its charter)
BRITISH COLUMBIA, CANADA NOT APPLICABLE
(State or Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200-1090 WEST PENDER STREET
VANCOUVER, BRITISH COLUMBIA
CANADA, V6E 2N7
(Address of Principal Executive Offices) (Zip Code)
(604) 682-6496
(Registrant's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
Common shares without par value OTC Bulletin Board
The exhibit index commences on page 100 of this Registration Statement.
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ITEM 1. BUSINESS
General
The Registrant is an oil and gas exploration company based in
Vancouver, British Columbia, Canada which has interests in the
Asia-Pacific region in hydrocarbon properties described in Item 3.
The Registrant is to a lesser extent involved in the development
and production of hydrocarbons. The majority of the Registrant's
properties are in the exploration stage. Total production revenue
for the year ended December 31, 1997 was $487,941. The Registrant's
focus is on the acquisition, exploration and development of
properties in the Asia-Pacific region, with the objective of
establishing a solid cash flow base, and participating in high
potential exploration blocks in under-explored countries with
attractive fiscal regimes.
All monetary amounts contained in this Statement are, unless
otherwise indicated, expressed in United States dollars. On
December 31, 1997 the buying rate for Canadian dollars was US$1.00
for CDN$1.4305. Rates of exchange are obtained from the Bank of
Canada and believed by the Registrant to approximate closely the
rates certified for customs purposes by the Federal Reserve Bank in
New York. See Item 2 - Financial Information - Exchange Rates.
General Development of the Business
The Registrant was incorporated on July 31, 1979 under the name
Pryme Energy Resources Ltd. by the registration of memorandum and
articles under the Company Act (British Columbia, Canada). On March
21, 1980 the Registrant became a reporting or distributing company
in British Columbia with the issuance of a receipt for its initial
prospectus offering. The business of the Registrant was not
successful and the Registrant was reorganized. On August 23, 1985
the name was changed to Newjay Resources Ltd. and a consolidation
of its common shares on a 2.5 old for one new basis occurred. The
business of the Registrant was the exploration for hydrocarbons in
Alberta, California and Texas. The business of the Registrant was
not successful and the Registrant was again reorganized. The
Registrant applied to be, and was deemed, inactive by the Vancouver
Stock Exchange on February 26, 1993 and subsequently completed a
reorganization satisfactory to the Vancouver Stock Exchange and was
removed from inactive status on April 25, 1994. On August 25, 1993
the name of the Registrant was changed to Consolidated Newjay
Resources Ltd. and a consolidation of its common shares on a 3.5
old for one new basis occurred. The Registrant did not commence any
business after these events until 1996.
In April, 1995 control of the Registrant was acquired by Mr. Alex
Guidi, who is currently a member of the board of directors,
chairman and the promoter of the Registrant, and the current
business of the Registrant began to be organized. See Item 7-
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Certain Relationships and Related Transactions. On May 9, 1995 the
name of the Registrant was changed to its current name. A
subdivision of its common shares on a 1.5 new for one old basis
occurred on April 15, 1996 and a further subdivision of its common
shares on a two new for one old basis on May 31, 1996 occurred. The
Registrant began to acquire its current hydrocarbon assets in 1996.
See Item 3-Properties.
The common shares of the Registrant commenced trading in January,
1996 on the OTC Bulletin Board and trades under the symbol "INDX".
Trading in the common shares of the Registrant was halted by the
Vancouver Stock Exchange on September 12, 1996 and the Registrant
was voluntarily delisted from the Vancouver Stock Exchange on
September 13, 1996.
On September 25, 1997 the Registrant was continued from being a
corporation subsisting under the Company Act (British Columbia) to
a corporation subsisting under the Business Corporations Act
(Yukon). The Registrant maintains its head office in Vancouver,
British Columbia and an exploration office in Wellington, New
Zealand.
In 1996 and 1997, the Registrant acquired interests in petroleum
exploration licenses in New Zealand, Australia and Papua New
Guinea. The Registrant also acquired the outstanding shares of
Minora Energy (New Zealand ) Ltd. and entered into a joint study
agreement with China National Oil and Gas Exploration and
Development Corporation for the study of the Nanling and Wuwei
basins, Anhui province, China. The exploration of certain of the
petroleum interests commenced in 1996. The Registrant continued to
acquire and explore petroleum interests.
The Registrant's operations are conducted through its wholly-owned
subsidiaries, as described below:
Indo-Pacific Energy Ltd.
100%
Source Rock Holdings Limited -100% Indo Overseas
Exploration Ltd. (B.C.)
100%
Indo-Pacific Energy (NZ) Limited -100% Indo-Pacific
Energy (PNG) Pty. Ltd.
100% -100% Indo-Pacific Energy
Pty. Ltd. (Aust.)
Ngatoro Energy PEP 38716 Ltd.
Limited (N.Z.)
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Unless the context indicates otherwise, the "Registrant" will refer
to Indo-Pacific Energy Ltd. and its subsidiaries.
The Registrant has financed the revival and conduct of its business
by the issuance of common shares and other securities by way of
private placement.
Discussion of Development of Business
Development of Business
The following is a discussion of the development of the business of
the Registrant between January 1, 1996 and December 31, 1997. For
a discussion of intended operations to December 31, 1998 see Item
1-Business-Plan of Operations below.
The acquisition, exploration and development of hydrocarbon
permits and licenses by the Registrant is carried on, in a number
of cases, with associated companies that have common or connected
management, the same principal shareholders and, in all but one
case, a common promoter. The associated companies are Trans-
Orient Petroleum Ltd., Durum Energy Corp., Trans New Zealand Oil
Company and Gondwana Energy Ltd.
Oil discovered in New Zealand may be sold locally to any of Shell
(NZ), Todd Petroleum, Fletcher Challenge and others. The sale of
gas discovered in New Zealand requires the negotiation of contracts
and the installation of compression and transport facilities. A gas
pipeline crosses from the Taranaki Basin to Napier crosses PEP
38328. Oil discovered in offshore Australia may be sold
internationally. The sale of gas discovered in offshore Australia
will depend, among other things, on the ease of laying a pipeline
to markets on land or having sufficient quantities to justify
liquifaction. The sale of gas or oil in Papua New Guinea will
require the installation of connection with transport facilities
lying some 100 miles to the east. Gas or oil discovered in China
will be sold locally.
1. New Zealand, East Coast Basin, North Island
(a) Petroleum Prospecting License PPL 38312 (10.5%)
PPL 38312 was granted on August 26, 1996 to Asia Pacific Oil Co.
Ltd. In August, 1997 the Registrant earned a participating interest
of 10.5% in the license by funding 10.5% of the costs of drilling
the Waitaria-1 well. The other participants were Asia Pacific Oil
Co. Ltd. (64.5%%), Arthur Oil Ltd. (2.5%), Everest Oil Co. Ltd.
(12.5%) and Trans-Orient Petroleum Ltd. (10.0%). Asia Pacific Oil
Co. Ltd. was the operator. The permit area is about 100,000 acres.
The permit expired in November, 1997. The Registrant and an
associated company, Trans-Orient Petroleum Ltd., have applied for
a new permit covering the area. Any production permits granted will
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be for a term of up to 40 years from the date of issue. The Crown
in right of New Zealand reserves a royalty of the greater of five
per cent of net sales revenue from the sale of petroleum products
or 20% of accounting profits.
The conditions of the permit required the participants by October,
1997 to re-enter and complete the drilling of Waitaria-1 well to
1600 meters unless geological or engineering constraints make this
unreasonable and before November 15, 1997 to assess the well and if
appropriate apply for an extension of the duration of the license
in order to undertake a further work program.
In the third quarter of 1997, the participants drilled the
Waitaria-1 well which encountered gas bearing formations, but was
abandoned due to engineering problems encountered while drilling
before the target Tunani sandstones were reached.
On expiration of the permit, the Registrant and associated company
Trans-Orient Petroleum applied for a new permit to cover the area.
The permit has not been awarded yet.
(b) Petroleum Exploration Permit PEP 38328 (40.0%)
PEP 38328 was granted on July 1, 1996. The Registrant assigned a
10% working interest to Trans-Orient Petroleum Ltd. in
consideration that Trans-Orient pay for 20% of the dry hole costs
of drilling the Kereru-1 well. By an agreement dated November 1,
1996 and subsequent arrangements, Boral Energy Resources Limited
acquired a 30% participating interest in PEP 38328 from the
Registrant and another party by funding a disproportionate share of
costs associated with the drilling of the Kereru-1 well, up to and
including the plugging and abandonment of the well. By an agreement
dated September 15, 1997 Trans-Orient acquired a further 10%
interest from the Registrant by agreeing to pay for costs incurred
after drilling the Kererru-1 well. The Registrant paid the costs of
Trans-Orient in consideration that Trans-Orient issue to the
Registrant 233,510 common shares at $1.00 per share.
After the withdrawal of two participants, the participants in the
license are the Registrant (40.0%), Trans-Orient Petroleum Ltd.
(22.5%) and Boral Energy Resources Limited (37.5%). The Registrant
is the operator. The permit area is 785,000 acres (1,226 square
miles). The permit is for five years, renewable for a further five
years over 50% of the license area. Any production permits granted
will be for a term of up to 40 years from the date of issue. The
Crown in right of New Zealand reserved a royalty of the greater of
five per cent of net sales revenue from the sale of petroleum
products or 20% of accounting profits.
The conditions of the permit require that before July 1, 1997 the
participants reprocess existing seismic data over the Kereru
Prospect, collect, process and interpret at least eight km of new
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seismic data and drill one exploration well to a minimum depth of
1,500 meters to test the Pliocene section of the Kereru Prospect.
Before July 1, 1998 the participants are required to collect and
process 240 km of new seismic data and reprocess 300 km of existing
seismic data. By July 1, 1999 the participants are required to
conduct geologic field studies and complete a permit review report.
By July 1, 2000 the participants are required to collect such other
data as is necessary to make a drilling decision and, subject to
their commitment to do so, by July 1, 2001 to drill an exploration
well to a depth of at least 1,500 meters.
In the fourth quarter of 1996, after completion of the necessary
seismic work, the Kereru-l exploration well was drilled to a depth
of 1,938 meters (6,391 feet). Several thin and separated potential
pay reservoir sandstones were encountered, but the Registrant and
the other participants decided that the results did not justify the
expense of flow testing the well. The well was plugged. In the
first half of 1997, a 120 mile seismic survey costing approximately
$700,000 was completed. Data was exchanged with adjacent permit
holders which identified a number of new prospects and leads. These
include a large thrust fault anticline in the northern part of the
permit area (the Pentane Lead), anticlinal structures in the
coastal area south of Napier (the Awanga and Haumoana Leads) and
several structures on the southern boundary with PEP 38332 (the
Rosearl Leads).
PEP 38329 is owned by third parties and lies between PEP 38328 and
PEP 38330. In the first quarter of 1998, the third parties that
hold PEP 38329 drilled the Kauhauroa-1 well which was reported as
flowing sulfur-free gas at a sustained rate of 11.5 million cubic
foot per day, with a pressure of 2100 psi, from Miocene sandstones
situated near 4,000 foot depth over a 60 hour test period. Although
the Registrant holds no interest in this discovery, it is important
in several respects. The 1. Kauhauroa-1 is the first potentially
commercial discovery in the huge, but very lightly explored East
Coast Basin. With the discovery, the Basin changes from non-
producing to hydrocarbon productive status. Many of the structures
which the Registrant is exploring are geologically similar to that
of the Kauhauroa-1 discovery.
After the announcement of the discovery of the Kauhauroa-1 well,
the Registrant and other participants commenced a 100 mile seismic
program on PEP 38328 and on PEP 38332 to define the existing leads
better and to identify targets for drilling later in 1998.
(c) Petroleum Exploration Permit PEP 38330 (34%)
PEP 38330 was granted on July 1, 1996. The other participants are
Mosaic Oil NL (33%) and Moondance Energy Property Ltd. (33%). The
Registrant is the operator. The permit area is 1,077,000 acres
(1,683 square miles). The permit term is for five years, renewable
for a further five years over 50% of the permit area. Any
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production permits granted will be for a term of up to 40 years
from the date of issue. The Crown in right of New Zealand has
reserved a royalty of the greater of five per cent of net sales
revenue from the sale of petroleum products or 20% of accounting
profits.
The conditions of the permit require the participants by July 1,
1997 to review all existing data, undertake field sampling,
reprocess a minimum of 80 km of existing seismic data and undertake
certain test for seismic planning purposes. By July 1, 1998 the
participants are required to collect, process and interpret a
minimum of 12 km of seismic data and undertake a structural review
of the permit area. By July 1, 1999 the participants are required
either to collect, process and interpret a minimum of 60 km of
seismic data, and either commit to drill an exploration well before
July 1, 2001 or to collect, process and interpret a further 25 km
of seismic data before July 1, 2001. Subject to their commitment to
do so, the participants are required to drill an exploration well
before July 1, 2001 and submit a further program of exploration for
approval.
At December 31, 1997 a 25 km regional seismic line had been
completed over the main structural features in the license area,
including the Matanui and Pauariki anticlines, both of which may be
drilling targets. Also, the Waingoromia-1 well, which produced in
the 1880's, was relocated and found to be leaking hydrocarbons. In
June, 1998 the Registrant and other participants plan to collect 30
miles of seismic data which will detail several other structures,
including the Arataha Dome, which was originally mapped by Mobil
Oil in the early part of the century. Drilling is planned for late
1998.
In June, 1998 the Registrant completed a seismic program to
identify further drilling prospects.
(d) Petroleum Exploration Permit PEP 38332 (42.5%)
PPL 38332 was granted on August 25, 1997. The other participants
are Boral Energy Resources Limited. (37.5%) and Trans-Orient
Petroleum Ltd. (20%). The Registrant is the operator. The permit
area is situated immediately south of PEP 38328 and is 1,012,000
acres (1,581 square miles) in area. The permit term is for five
years, renewable for a further five years over 50% of the license
area. Any production permits granted will be for a term of up to 40
years from the date of issue. The Crown in right of New Zealand has
reserved a royalty of the greater of five per cent of net sales
revenue from the sale of petroleum products or 20% of accounting
profits.
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By December 24, 1998 the participants are required to reprocess 100
km of existing seismic data, collect 25 km of new seismic data,
undertake photogeologic and field geological mapping, complete an
evaluation of the exploration potential of the permit area and make
a further work commitment or relinquish the permit. By December 24,
1999, the participants are required to collect 50 km of seismic
data, complete an evaluation of the exploration potential of the
permit area and make a further work commitment or relinquish the
permit. By June 24, 2000, the participants are required to drill
one exploration well and submit a further program of work for
approval.
At December 31, 1997 a regional seismic program had been completed
over the northern part of the permit area. The comment relating to
PEP 38329 made under the heading "Petroleum Exploration Permit PEP
38328" applies to this permit. After the announcement of the
discovery of the Kauhauroa-1 well, the Registrant and other
participants commenced a 100 mile seismic program on PEP 38328 and
on PEP 38332 to define the existing leads better and to identify
targets for drilling later in 1998.
In June, 1998 the Registrant completed a seismic program to
identify further drilling prospects.
2. New Zealand, Onshore Canterbury Basin, South Island
Petroleum Exploration Permit 38256 (50%)
PEP 38256 was granted on August 25, 1997 to the Registrant and to
Trans-Orient Petroleum Ltd. The Registrant and Trans-Orient
Petroleum Ltd. agreed to assign an interest of 20% to Trans New
Zealand Oil Company and an interest of 10% to Gondwana Energy Ltd.
This transaction was cancelled January 31, 1998. The Registrant is
the operator. The permit area is situated in the area surrounding
Christchurch, South Island and is 2,760,120 acres (4,312.69 square
miles) in area. The permit term is for five years, but at the end
of the third year of the permit the participants must relinquish at
least 50% of the permit area. Any production permits granted will
be for a term of up to 40 years from the date of issue. The Crown
in right of New Zealand has reserved a royalty of the greater of
five per cent of net sales revenue from the sale of petroleum
products or 20% of accounting profits.
By November 25, 1998 the participants are required to locate and
analyze petroleum seeps within the permit area, model existing
gravity data and acquire new gravity data, collect and interpret a
minimum of ten magnetotelluric stations, process existing seismic
data and complete surface geological work. If the permit is not
surrendered, the participants are required by August 25, 1999 to
collect, process and interpret 80 kilometres of new seismic data.
If the permit is not surrendered, by February 25, 2000 the
participants are required to acquire, process and interpret 120
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kilometres of new seismic data. If the permit is not surrendered,
the participants are required by August 25, 2000 to drill an
exploration well to the lesser of 1200 meters or the economic
basement.
At December 31, 1997 the participants were planning the first phase
of required work in order to determine the geologic structure of
the sedimentary basin. If the interpretation of the geologic
structure indicates the possible existence of hydrocarbons, the
participants will conduct further seismic surveys in order to
determine the location of possible drill targets. Seismic work is
expected to start in late June, 1998.
In June, 1998 the Registrant and associated company Trans-Orient
Petroleum ("TOP") granted two options to associated company Trans
New Zealand Oil Company ("TNZ"). The first option is for TNZ to
acquire a 30% participating interest on paying for past costs and
a 200 km seismic program designed to identify two drilling
prospects. The second option is for TNZ to acquire a further 50%
participating interest on paying for any additional seismic
required and paying for the cost of drilling two wells. TNZ agreed
to issue 1,000,000 shares to a subsidiary of the Registrant for
US$0.25 per share and 500,000 shares to a subsidiary of TOP at the
same price, to give 12,500,000 shares outstanding. An option to
acquire 1,000,000 shares for US$0.50 per share before July 31, 2000
has been granted to each of the Registrant and TOP.
3. New Zealand, Onshore Taranaki Basin, North Island
(a) Petroleum Mining Permit PMP 38148 (5.0%)
Effective September 1, 1996 the Registrant bought the outstanding
shares of Minora Energy (New Zealand) Limited for AUS$575,000
(CDN$478,755, US$348,790). The name of the company was changed to
Ngatoro Energy Limited. Ngatoro Energy Limited owns a five per cent
participating interest and revenue interest in petroleum mining
permit 38148, which has four producing oil wells and two shut-in
gas wells. The permit area is 9,400 acres. The permit expires on
December 23, 2010. Production is from turbidite sandstones of the
Mount Messenger Formation at depths of 1,500 meters to 2,000
meters. The other participants are New Zealand Oil & Gas Ltd.
(35.43%) and Fletcher Challenge Energy Taranaki Ltd. (59.57%). New
Zealand Oil & Gas Ltd. is the operator. The Crown in right of New
Zealand has reserved a royalty of the greater of five per cent of
net sales revenue from the sale of petroleum products or 20% of
accounting profits.
In the year ended December 31, 1997, the Registrant received
revenues of $487,941 and in the first quarter of 1998 revenues of
$68,499. Production from the four oil wells remained steady at
between 1,400 and 1,500 barrels per day. A flow test was done on
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one of the shut-in gas wells flowed gas at sustained rates in
excess of four million cubic feet per day, establishing a new gas
field in the permit area.
Oil and gas production and sales revenue from September, 1997 to
March, 1998 is:
Year Oil Sales (bbl) Revenue (US$) Gas Production ( 000 scf)
1966 (1) 8,207 $ 67,866 10,384 (3)
1977 26,555 487,941 43,491
1988 (2) 5,481 68,499 12,141
Notes:
1. For the months September to December, inclusive.
2. For the first quarter.
3. To date, gas has been flared.
The Registrant entered into an oil sales contract dated November 9,
1997 with Fletcher Challenge Energy Taranaki Limited and a gas
sales contract dated February 18, 1998 with Fletcher Challenge
Energy Limited. Gas sales have not begun.
A workover of the Ngatoro-2 oil well was suspended in May, 1998
with the intention of carrying out a complete rehabilitation of the
well after drilling of the Ngatoro-9 development well. This well
was spudded in June, 1998. If this well is successful, a further
development well is planned. In addition, an exploration well is
planned for later in the year on a separate prospect defined by 3D
seismic within the permit area.
(b) Petroleum Prospecting License PPL 38706 (7.75%)
PPL 38706 is in the last year of its ten year term and will expire
on November 1, 1998. The permit area is 40,000 acres Before that
date, the participants are required to drill one exploration well.
Two well locations are under consideration for drilling in the
second quarter of 1998. Should a discovery be made, the
participants may apply for a petroleum mining permit over the
extent of the discovery for a term of up to 40 years. The license
is operated by Fletcher Challenge Energy Taranaki Ltd. which holds
a 46.125% working interest in the license. The remaining 46.125%
working interest is held by Southern Petroleum (Ohanga) Ltd. The
Crown in right of New Zealand has reserved a royalty of the greater
of five per cent of net sales revenue from the sale of petroleum
products or 20% of accounting profits.
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The Tariki-2C well, to which the Registrant is making a fixed
dollar contribution, was spudded in March, 1998 and in May, 1998
reached its target depth along hole of about 9,500 feet. Electric
logging is being completed over about an 1,800 foot interval of
horizontal hole drilled in the Tikorangi Formation limestones.
Significant mud losses and gas peaks within this interval indicate
that there may be producible, oil filled fractures within the
Tikorangi limestones. Flow testing of the interval is planned for
June, 1998 after completion of logging. Tariki-2C is located within
PML 38138, in which the Registrant does not hold an interest, but
tests a prospect which extends into the adjacent PPL 38706. If
Tariki-2C flows oil, the discovery area could extend a considerable
distance into PPL 38706, and the Registrant would drill a well
within PPL 38706 before November, 1998.
(c) Petroleum Exploration Permit PEP 38716 (12.4%)
A participating interest of 38.4% in PEP 38716 was acquired by the
Registrant on January 30, 1996. On application, the effective date
was changed to April 10, 1996. A participating interest of six per
cent was assigned to Durum Energy Corp. By agreement effective July
1, 1997 with Australian Worldwide Exploration NL, the participants
assigned a 25% participating interest to Australian Worldwide in
consideration that Australian Worldwide pay the first NZ$2,000,000
of the costs of drilling an exploration well to earn a 25%
interest. After giving effect to this assignment, the other
participants are Durum Energy Corp. (4.0%), Marabella Enterprises
Ltd. (39.6%), Euro-Pacific Energy Pty. Ltd. (6.6%) and Australian
Worldwide Exploration NL (25.0%). Marabella Enterprises Limited, a
subsidiary of Bligh Oil & Minerals NL, is the operator.
By an agreement dated November 6, 1997, Marabella Enterprises ltd.
agreed to sell a 15% participating interest to Antrim Energy Ltd.
for US$225,000. The Registrant agreed to participate in one-third
of this. After giving effect to this assignment, the participants
are the Registrant (12.4%), Durum Energy Corp. (4.0%), Marabella
Enterprises Ltd. (29.6%), Euro-Pacific Energy Pty. Ltd. (6.6%),
Australian Worldwide Exploration NL (25.0%) and Antrim Energy Ltd.
(15%).
The permit is about 67,000 acres (104 square miles) in area. The
permit term is for five years, renewable for a further five years
over 50% of the license area. Any production permits granted will
be for a term of up to 40 years from the date of issue. The Crown
in right of New Zealand has reserved a royalty of the greater of
five per cent of net sales revenue from the sale of petroleum
products or 20% of accounting profits.
The conditions of the permit require the participants within 18
months of the commencement date to reinterpret 250 km of existing
seismic data, acquire, process and interpret 30 km of new seismic
data, collect gravity data and commit to a second phase of work.
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The second phase of work requires the participants to drill an
exploration well to a depth of 2,500 meters or another approved
depth before August 1, 1998. In the second quarter of 1996, a
program of aeromagnetic survey and reprocessing of existing seismic
data was undertaken. In the first quarter of 1997 a total of 60 km
of new seismic data was acquired to assist in defining a drill
location on the Crown Prospect in the northern part of the permit
area. The program confirmed the presence of the Crown Prospect at
the Tikorangi Limestones and deeper levels and also detailed the
shallower Oru Prospect.
The Huinga-1 well is scheduled to be drilled in September, 1998 to
test to 13,000 feet the Crown Prospect, a thrust structure similar
to the adjacent Waihapa/Ngaere oil field, where individual wells
have flowed in excess of 10,000 barrels of oil per day from
fractured Tikorangi limestones. The Huinga-1 well will test
Tikorangi Formation fractured limestones, Tariki Formation
sandstones and Kapuni Formation sandstones within the Crown
structure, as well as intersecting Mt. Messenger sandstones at
shallower depth.
On the adjacent property, the Waihapa-8 well touched the edge of
the Oru Prospect and flowed at 750 barrels of oil a day from Mt.
Messenger sandstones. The Oru Prospect has the potential to be a
larger discovery than the Ngatoro Field, and may be drilled in the
near future.
In June, 1998 the Tariki-2C well was drilled on a prospect which
extends into the permit. Over 150 feet of oil-bearing sandstones
were intersected and the well flowed production of 550 barrels oil
and 600 mcf gas through a 1/4" choke.
(d) Petroleum Exploration Permit PEP 38720 (50.0%)
A participating interest of 50.0% in PEP 38720 was acquired by the
Registrant on September 2, 1996. The other participant is Trans-
Orient Petroleum Ltd. The Registrant is the operator.
The permit is approximately 6,322 acres (9.8 square miles) in area
and the term of the permit is five years, renewable for a further
five years over 50% of the permit area. Any production permits
granted will be for a term of up to 40 years from the date of
issue. The Crown in right of New Zealand reserved a royalty of the
greater of five per cent of net sales revenue from the sale of
petroleum products or 20% of accounting profits.
Before September 2, 1997 the participants are obligated to
reprocess a minimum of 100 miles of existing seismic data,
undertake modeling of the seismic data to investigate reservoir
distribution, undertake a reservoir engineering review of flow-
tested off-set wells to investigate likely productivity potential
within the permit area and either commit to drill one exploration
<PAGE> 13
well before September 2, 1998 or commit to collect, process and
interpret a minimum of 15 km of new seismic data before March 31,
1999. If an exploration well is drilled, a program for further
exploration must then be submitted for approval. If further seismic
work is done, the participants must commit by March 31, 1999 to
drill an exploration well before September 2, 1999 or relinquish
the permit.
In the first half of 1997, the participants completed 38 km of
seismic survey. At December 31, 1997 the data had been processed
and confirmed the Waitoriki Prospect as a sizable gas-condensate
drilling target within the Kapuni formation at depths below 3,500
meters. Sandstones of the Mount Messenger Formation are also oil
discovery objectives at depths between 1,500 and 2,000 meters. The
participants are planning to drill an exploration well at an
estimated cost of $1,200,000 in late 1998 to early 1999. The
Registrant's portion of budgeted costs is $600,000.
(e) Petroleum Exploration Permit PEP 38723 (40%)
PEP 38723 was granted on October 30, 1997. The other participants
are Trans-Orient Petroleum Ltd. (40.0%) and Gonadwana Energy Ltd.
(20.0%). The Registrant is the operator. The permit area is 19,783
acres (30.9 square miles) in area. The permit term is for five
years, renewable for a further five years over 50% of the license
area. Any production permits granted will be for a term of up to 40
years from the date of issue. The Crown in right of New Zealand has
reserved a royalty of the greater of five per cent of net sales
revenue from the sale of petroleum products or 20% of accounting
profits.
By January 31, 1999, the participants must reprocess a minimum of
50 km of seismic data, re-evaluate prospects and leads, review
relevant existing wells to identify a potential Mount Messenger
sand play and develop a sand distribution model in conjunction with
the seismic interpretation, identify and high grade leads for
further seismic acquisition and either make a firm commitment to
continue the work program or surrender the permit. By April 30,
2000 the participants must collect a minimum of six square km of 3D
seismic data, or 2D swathe coverage of equivalent detail, interpret
the new data and identify and consider drilling targets. If the
participants continue, by October 30, 2000 they must drill an
exploration well to a minimum depth of 1600 meters unless
geological or engineering constraints encountered while drilling
make this unreasonable and either submit a satisfactory work
program for the remainder of the permit term or surrender the
permit.
In 1996 and 1997, previous holders of PEP 38723 reprocessed seismic
data and the Registrant is involved in a seismic reprocessing
program in the area. Completion of this work is required to be able
to identify prospects. Before January 31, 1999 the participants
<PAGE> 14
intend to carry out the first phase of the required work at an
estimated cost of $75,000 and, if results warrant, proceed to the
second stage of the work program at an estimated cost of $420,000.
PAPUA NEW GUINEA
Petroleum Prospecting License PPL 192 (40.0%)
A participating interest of 80% in PPL 192 was acquired by the
Registrant in January, 1997. The Registrant assigned a 20%
participating interest to each of Trans-Orient Petroleum Ltd. and
Durum Energy Corp. The remaining participant is Mosaic Oil Niugini
Pty. Ltd. (20%). The Registrant is the operator.
PPL 192 grants the exclusive right to explore for petroleum for an
initial six year term commencing January 28, 1997, extendable for
a further five year term over 50% of the original area, and the
exclusive right to enter into a production agreement upon a
discovery. A production agreement provides the right to produce any
oil and gas discovered for a period of up to 30 years from
discovery, subject to a maximum 22.5% participating interest that
can be acquired by the Government of Papua New Guinea and a two per
cent participating interest that can be acquired by local
landowners.
PPL 192 comprises some 1,200,000 acres (1,875 square miles) located
in the foreland of the Papuan Basin, immediately south of the
Highlands fold belt. Previous seismic work by Shell US (Pecten)
identified a number of exploration targets and drilled the Langia-1
gas discovery well. However, the license has in general been only
lightly explored. The main areas of interest are the Kamu Prospect,
the Mamboi Prospect and the area surrounding the Langia gas
discovery. The license requires the participants to reprocess
seismic and other data in the first year of the license at a cost
of $100,000 and in the second year of the license to spend $100,000
on an area review and an analysis of gas development in a "Kamu"
type gas discovery. If work proceeds in the license area, 50 km of
seismic work are required in the third year of the license and
drilling of an exploration well is required in the fourth year of
the license.
The participants intend to carry out a program of geological work,
license administration and seismic data collection and, if results
warrant, proceed to the second stage of the work program at an
estimated cost of $420,000. The Registrant's portion of budgeted
costs of $198,000.
The Registrant has applied for other interests in Papua New Guinea.
<PAGE> 15
AUSTRALIA
(a) Offshore Petroleum Exploration Permit Ashmore Cartier AC/P19,
Timor Sea (65.0% to earn 61.75%)
A participating interest of 65.0% was acquired by the Registrant in
AC/P19 in May, 1997. The other participant is Mosaic Oil NL
(35.0%). The Registrant is the operator.
The permit comprises some 364,500 acres (570 square miles) and
encompasses the Cartier Trough and parts of the Ashmore Platform.
The permit has a term of six years. In the first three years of the
permit, the participants are required to carry out a program of
seismic reprocessing and acquisition, including the collection of
400 km of seismic data, with an estimated cost of $675,000. At
December 31, 1997, the Registrant was planning the initial
exploration program. The Omnia survey, a large 3D seismic survey,
is in progress in the area and will extend over much of this permit
in late 1998.
By an agreement dated August 12, 1997 the participants granted a
five percent carried interest to Lonman Pty. Ltd. The Registrant is
initially carrying 3.25%. If the participants farmout an interest
to drill the first well on the permit, the carried interest will
become five percent of the percentage interest that is farmed out.
The carried interest may be converted to a participating interest
before the commencement of commercial production. The carried
interest may be assigned after being first offered to the
participants.
(b) Offshore Gippsland Basin, Bass Strait Permit VIC/P-39 (33.33%
to earn 31.67%)
A participating interest of 33.33% was acquired by the Registrant
in VIC/P-39 in June, 1997. The other participants are Mosaic Oil NL
(33.33%) and Moondance Energy Pty. Ltd (33.33%). Mosaic Oil NL is
the operator.
The permit comprises some 541,250 acres (845 square miles). The
permit has a term of six years. The permit provides for certain
minimum work requirements. In the first year, the participants must
reprocess certain seismic data. In the second year, a 500 km
seismic survey must be completed. In the third year, an exploration
well must be drilled. The work requirements for the balance of the
permit are not mandatory. The estimated cost for the first three
years is $5,600,000. Further seismic interpretation, seismic data
collection and drilling is prescribed.
The participants are applying new computer processing techniques to
the existing data to identify and map prospects. Subject to the
success of this work, farm-in participants will be sought to fund
an exploration well to be drilled in 1999.
<PAGE> 16
By an agreement dated August 12, 1997 the participants granted a
five percent carried interest to Lonman Pty. Ltd. The Registrant is
initially carrying 1 2/3%. If the participants farmout an interest
to drill the first well on the permit, the carried interest will
become five percent of the percentage interest that is farmed out.
The carried interest may be converted to a participating interest
before the commencement of commercial production. The carried
interest may be assigned after being first offered to the
participants.
(c) Offshore Exploration Permit WA-199-P, Western Australia (5.0%)
Pursuant to an agreement dated September 15, 1997 with Boral Energy
Resources Limited, a participating interest of five percent is to
be acquired by the Registrant in WA-199-P in consideration that the
Registrant pay the lesser of 10% of the dry hole costs of drilling
the Kittiwake-1 well or $636,000. The other participants are Boral
Energy Resources Limited (24.869%), which is the operator, Petroz
NL (11.392%), TAP Oil NL (10.0%), Asisun Pty. Ltd. (10.027%) and
Santos (BOL) Pty Ltd. (38.712%)
The permit requires the participants to complete geological and
geophysical studies with an estimated cost of $75,000 by December
31, 1997 and to drill two exploration wells by December 31, 1998
with an estimated cost of $9,500,000. The Kittiwake-1 well was
drilled in April and May, 1998. The Plover Sands, which were the
main target of the well, were encountered at a depth near 8,800
feet, and were present down to the 9,400 foot level. Electric log
evaluation showed there are no significant hydrocarbons in the
reservoir. Accordingly, the decision was taken to plug and abandon
the Kittiwake-1 well. In June, 1998 the participants decided to
apply for a six month deferral on drilling a second well on the
Avocet Deep and to seek a farm-in participant.
CHINA
China-Joint Study Agreement of March 18, 1996 (50%)
A Joint Technical Study Agreement of March 18, 1996 between China
National Oil and Gas Exploration and Development Corporation and
the Registrant and Moondance Energy Limited provides for the
preparation of a comprehensive study report of the Nanling and
Wuwei Basins, Anhui Province, China. The area involved is about
2,500,000 acres (3,906 square miles). Operatorship is vested in the
person of the chief executive officer of the Registrant. The
Registrant and Moondance Energy Limited are required to bear all
costs. The participants are negotiating with China National Oil and
Gas Exploration and Development Corporation with a view to entering
into the next phase or work, which may take the form of a
Geophysical Study Agreement, a Drilling Participation Agreement or
a Production Sharing Contract.
<PAGE> 17
Conceptual planning and costing of exploration wells on the
Hongzhuang Prospect in the Nanling Basin and on the Longtangwon
Prospect in the Wuwei Basin and an assessment of the cost of
additional seismic work have been completed and the negotiation of
the next phase of work with China National Oil and Gas Exploration
and Development Corporation is underway.
Plan of Operations
The plan of operations for fiscal 1998 is as follows:
1. New Zealand, East Coast Basin, North Island
(a) Petroleum Exploration Permit PEP 38312
The permit lapsed in November, 1997. The Registrant and an
associated company, Trans-Orient Petroleum Ltd., have applied for
a new license over the area.
(b) Petroleum Exploration Permit PEP 38328 (40.0%)
The Registrant intends to collect, process and interpret 45 miles
of new seismic data at an estimated cost of $300,000. The
Registrant's portion of the budgeted cost is $120,000.
(c) Petroleum Exploration Permit PEP 38330 (34%)
The Registrant intends to collect, process and interpret 30 miles
of new seismic data at an estimated cost of $200,000. The
Registrant's portion of the budgeted cost is $68,000.
(d) Petroleum Prospecting License PPL 38332 (42.5%)
The Registrant intends to collect, process and interpret 55 miles
of new seismic data at an estimated cost of $300,000. The
Registrant's portion of the budgeted cost is $127,500.
2. New Zealand, Onshore Canterbury Basin, South Island
Petroleum Exploration Permit 38256 (50%)
To November, 1998 the Registrant intends to locate and analyze
petroleum seeps within the permit area, model existing gravity data
and acquire new gravity data, collect and interpret a minimum of
ten magnetotelluric stations, process existing seismic data and
complete surface geological work at an estimated cost of $100,000.
The Registrant's portion of the budgeted costs is $50,000.
<PAGE> 18
3. New Zealand, Taranaki Basin, North Island
(a) Petroleum Mining Permit PMP 38148 (5.0%)
The participants intend to workover the producing Ngatoro-1 well in
the second quarter of 1998 and to enhance the production levels in
the other producing wells. The Ngatoro-9 development well is
planned to be drilled in the Ngatoro-2 pool to be followed, if
successful, by the Ngatoror-11 well, and an exploration well is
planned to be drilled to test an undrilled structure in the PMP
38148 area. The estimated cost of the workover program is $380,000
and of the drilling of the three wells is $2,067,000. The
Registrant's portion of the budgeted cost is $122,000.
Petroleum Prospecting License 38706 (7.75%)
The Registrant has contributed to the cost of the Tariki-2C
exploration well. A well is to be drilled on this permit before
November, 1998.
(b) Petroleum Exploration Permit PEP 38716 (12.4%)
On PEP 38716, the participants intend to drill, and if successful
complete, the Huinga-1 well in October, 1998 at an estimated cost
of $4,000,000. The Registrant's portion of the budgeted cost is
$200,000.
(c) Petroleum Exploration Permit PEP 38720 (50.0%)
On PEP 38720, the participants intend to drill in late 11998 or
early 1999 an exploration well to test the Kapuni sandstone and
Mount Messenger Formations at an estimated cost of $1,000,000. The
Registrant's portion of the budgeted cost is $500,000.
(d) Petroleum Exploration Permit PEP 38723 (40%)
Before January 31, 1999 the participants intend to carry out the
first phase of the required work at an estimated cost of $75,000
and, if results warrant, proceed to the second stage of the work
program at an estimated cost of $420,000. The Registrant's portion
of budgeted costs is $198,000.
Papua New Guinea
Petroleum Prospecting License PPL 192 (40.0%)
The participants intend to carry out a geological work program,
license administration and a seismic data collection, processing
and interpretation program at an estimated cost of $1,600,000. The
Registrant's portion of the budgeted cost is $640,000.
The Registrant has applied for a further interest in Papua New
Guinea.
<PAGE> 19
Australia
(a) Offshore Petroleum Exploration Permit Ashmore Cartier AC/P19,
Timor Sea (65.0% to earn 61.75%)
The participants intend to carry out a geological program and to
purchase 3D seismic data at an estimated cost of $600,000. The
Registrant's portion of budgeted costs is $390,000.
The Registrant is in the process of applying for further offshore
interests in the Timor Sea.
(b) Offshore Gippsland Basin, Bass Strait Permit VIC/P-39 (33.33 to
earn 31.67%)
The participants intend to carry out a program of seismic
collection, processing and interpretation at an estimated cost of
$600,000. The Registrant's portion of the budgeted cost is
$200,000.
(c) Offshore Exploration Permit WA-199-P, Western Australia (5.0%)
The participants intend to seek a six month extension to find a
farm in participant to drill an exploration well on the Avocet Deep
in the last quarter of 1998.
China
China-Joint Study Agreement of March 18, 1996 (50%)
The Registrant and Moondance Energy Limited have completed the
study of existing seismic data and the preparation of the report on
the Nanling and Wuwei basins. The Registrant is in the process of
negotiating the next phase of work with China National Oil and Gas
Exploration and Development Corporation and, if successful, the
participants intend to carry out further seismic work in the second
half of 1998. Along with the costs of administration, the estimated
costs are $1,105,000 of which the Registrant's portion is $553,000.
If warranted, the participants intend to drill two exploration
wells in the second half of 1999.
Acquisition, Exploration and Development Expenditures
The Registrant has incurred expenditures of $1,113,928 to December
31, 1996 and $1,064,976 in the year ended December 31, 1997 in the
acquisition, exploration and development of petroleum properties.
<PAGE> 20
Employees and Consultants
The Registrant employs ten people in its Vancouver office and
five people in its Wellington office. The persons employed in the
Vancouver office are the chairman and nine others occupied with
office management, reception, shareholder relations and
communications and legal and accounting matters. The persons
employed in the Wellington office are the president and chief
executive officer and four persons occupied with joint venture
accounting, office management and New Zealand, Australian and PNG
corporate affairs.
The principal consultants engaged by the Registrant are Alan
Hart, Dr. Bruce Morris, Roger Brand, David Francis, Carey Mills and
Xian Xi Tai.
Mr. Hart holds graduate degrees in geology from the University of
Texas and has 23 years of industry experience. Mr. Hart worked on
petroleum projects for Hunt Oil Company and later with Atlantic
Richfield International in North and West Africa, Central America,
Southeast Asia, Australia and New Zealand. Mr. Hart served for six
years as exploration manager of Arco International's Jakarta-based
companies which, during his tenure, added one trillion cubic feet
of gas and 156 million barrels of oil to the reserve base.
Dr. Morris trained and lectured as a sedimentologist at University
of Victoria (New Zealand). Over the last nine years, he has been
involved in remote oilfield operations in Papua New Guinea, and
with exploration in the Taranaki and East Coast Basin of New
Zealand. Dr. Morris has also worked as a well site geologist for
Exxon in the Gippsland Basin, Australia.
Mr. Brand has over 20 years experience in the oil industry. After
graduating from Oxford University (United Kingdom) in 1974, he
worked for British Petroleum as a geologist in the North Sea and
onshore United Kingdom. Following a move to New Zealand in 1982,
Mr. Brand served as Chief Geologist for New Zealand Oil and Gas
Ltd. for three years. Since 1986, he has conducted a variety of
exploration assessments and prospect valuations for major and minor
oil companies based in New Zealand, Australia and Papua New Guinea.
His main interests lie in the definition of hydrocarbon plays in
New Zealand's Taranaki Basin.
Mr. Francis is a highly experienced field geologist with over 15
years specialist activity in New Zealand's East Coast Basin. He has
completed numerous scientific papers and company reports detailing
East Coast petroleum geology.
Mr. Mills provides the group with a broad range of capabilities.
Before joining the Registrant, Mr. Mills worked as a petrophysisist
for Exxon on the West Tuna Field in the Gippsland Basin,
Australia, on the Moran discovery in Papua New Guinea and had other
responsibilities.
<PAGE> 21
As consultant for the Nanling-Wuwei project in China and other
exploration projects, Tian Xi Tai brings expertise in seismic field
acquisition and data processing. A geophysicists with a Master of
Science from Stanford University (California), Mr. Tian has worked
for such companies as Fletcher Challenge Energy Ltd. and China
National Petroleum Corporation.
Anticipated Sale of Oil and Gas
Oil discovered in New Zealand may be sold locally to any of Shell
(NZ), Todd Petroleum, Fletcher Challenge and others. The sale of
gas discovered in New Zealand requires the negotiation of contracts
and the installation of compression and transport facilities. A gas
pipeline crosses from the Taranaki Basin to Napier crosses PEP
38328. Oil discovered in offshore Australia may be sold
internationally. The sale of gas discovered in offshore Australia
will depend, among other things, on the ease of laying a pipeline
to markets on land or having sufficient quantities to justify
liquefaction. The sale of gas or oil in Papua New Guinea will
require the installation of connection with transport facilities
lying some 100 miles to the east. Gas or oil discovered in China
will be sold locally.
Hydrocarbon Tenures in New Zealand, Australia, Papua New Guinea and
China
In New Zealand a prospecting license is a form of tenure held
under the Petroleum Act 19337, the predecessor legislation to the
Crown Minerals Act of 1991 and is, as the tenure expires, replaced
by the exploration permit under the later legislation. In New
Zealand, permits are granted for specified minerals to the first
applicant for that mineral in a specific area and generally
prescribe work to be performed over the term of the permit. In most
cases, permits contain a work program approved by the Minister of
Energy. Prospecting permits are limited forms of tenure granted
under the Crown Minerals Act of 1991 for two years on conditions
the Minister of Energy considers appropriate. The Registrant does
not hold any prospecting permits. Under the Crown Minerals Act of
1991, the exploration permit, which replaced the prospecting
license, grants the right to explore a specified mineral for a term
of five years and may be extended for up to ten years on conditions
the Minister of Energy considers appropriate. If the holder of an
exploration permit discovers a deposit or occurrence to which the
exploration permit relates and satisfies the Minister of Energy
that the results of exploration justify granting a mining permit,
the holder may, on application before the expiry of the exploration
permit, obtain a mining permit for up to 40 years for such part of
the land as the deposit or occurrence relates and exchange the
exploration permit for such part of the land. Changes to the
conditions prescribed in a permit may be made by application to the
Minister of Energy of the holder of a permit is in substantial
compliance with the conditions of the permit. The Crown Minerals
<PAGE> 22
Act of 1991 also provides for the revocation of a permit if the
Minister of Energy has reason to believe that the holder of the
permit is contravening, or not making reasonable efforts to comply
with, the Crown Minerals Act or the conditions of the permit and
the Minister of Energy is satisfied that the holder of a permit has
failed to comply with a note to rectify the contravention or non-
compliance. Any transfer or other dealing with a permit is subject
to the consent of the Minister of Energy on such conditions as he
considers appropriate and an application for consent is made within
three months of the date of the agreement. A transfer or lease of
a permit with respect to petroleum has no effect until a notice of
the transfer has been lodged with the Secretary of Commerce and the
Minister of Energy has given his consent. Otherwise, the transfer
or other dealing has no effect. The Minister of Energy may also
direct that any petroleum products be refined or processed in New
Zealand. The Minister of Energy also has the jurisdiction to
unitize producing permits. Finally, the Crown Minerals Act of 1991
provides procedures for the resolution of conflict with other forms
of land tenure.
In Australia, the Petroleum (Submerged Lands) Act 1967 governs
permits lying further offshore than three miles form the coast.
Coastal waters and lands are within state jurisdiction. The
Australian permits of the Registrant are granted and regulated
under the Petroleum (Submerged Lands) Act 1967. This statute
provides for four types of permits, exploration permits, retention
leases, production licenses and pipeline licenses. An exploration
permit provides the exclusive right to undertake seismic surveys
and drilling in a defined area. Permits are awarded by a work
program bidding system or a cash bidding system over acreage
released each year by the Commonwealth. Work program permits are
issued for an initial term of six years with an unlimited number of
five year renewals. At each renewal, 50% of the permit area must be
relinquished. On discovering petroleum, a holder must notify the
authority. If commercial, the holder may apply for a production
license. Production licenses are issued for 21 years and may be
renewed for a further 21 years. If the holder makes a non-
commercial discovery which has a reasonable chance of becoming
commercial within the next 15 years, a retention lease may be
granted. Retention leases are issued for terms of five years with
renewal periods of five years. a pipeline license is usually
granted at the same time as a production license.
In Papua New Guinea, the Petroleum Act provides for four different
types of license, petroleum prospecting licenses ("PPL") for
exploration, which is the form of tenure held by the Registrant,
petroleum development licenses ("PDL") for petroleum developments,
petroleum retention licenses ("PRL") for gas reserves which are
considered sub-economic and pipeline licenses. A PPL is granted for
a term of six years with one five year extension permitted. At the
end of the first term, the holder must relinquish 50% of the
initial size of the permit, less the area of any PRLs on extension.
<PAGE> 23
A PPL usually contains a work program which is submitted to, and
approved by, the Minister for Petroleum and Energy. Appropriate
variations to a work program may be approved by the Minister at any
time during the third to sixth years of a PPL. The State has the
option to acquire a 22.5% interest in any petroleum development.
Where it does so, a two percent interest is held for the benefit of
the landowners in the project area. The price payable by the State
is 22.5% of sunk costs, including the allowable exploration
expenditure of the project. Orogen Minerals Limited ("Orogen"), a
publicly listed company 51% owned by the State, has an option to
acquire up to a 20.5% interest in future petroleum projects out of
the State's entitlement of 22.5%. If Orogen does not exercise its
option, the permit holder is obliged to carry the State's
acquisition of its 22.5% interest and all development costs. This
carried interest is repaid with a commercial rate of interest out
of petroleum production attributable to the State's share. If
Orogen exercises its option, the cost of the carried interest is
paid immediately. A PDL is granted for an initial term of 25 years
with one 20 year extension. A PRL is granted for an initial term of
five years with two five year extensions. A pipeline license is
granted for a term of 25 years with one 20 year extension.
Assignments of, and dealings in, all types of petroleum licenses
are permitted, subject to the Minister's consent. Any assignment or
dealing without such consent is void. Before drilling an
exploration well, the permit holder and the State generally enter
into a production agreement that sets out additional conditions
applying to operations, the procedures which will lead to a
development and the terms on which the state will acquire its
equity interest in a development.
In China, the Registrant is negotiating with the China National
Petroleum Corporation the next stage of its operation. The terms
and conditions of operation and property tenure cannot at this time
be determined. Discussions are based on the February 1994 China
National Petroleum Corporation model contract, but it is not clear
at this time if the Registrant will enter into a geophysical
service agreement, a drilling services agreement or a production
sharing contract or the extent to which terms and conditions of the
model agreement will be modified during the course of negotiation
with the China National Petroleum Corporation.
Risk Factors
The common shares of the Registrant must be considered a
speculative investment due to a number of factors. The purchase of
the common shares involves a number of significant risk factors.
Purchasers of common shares should consider the following:
<PAGE> 24
1. No History of Operations and Reliance on Expertise of Certain
Persons
The Registrant has no history of operations and is dependent on the
management by its president and, in the acquisition, exploration
and development of petroleum properties, and on the advice of
consulting geologists retained by the Registrant from time to time.
The current president of the Registrant is experienced in the
acquisition, exploration and development of petroleum properties in
New Zealand and other Asian countries, particularly China, Papua
New Guinea and Australia. Should the current president leave the
Registrant, the Registrant may have difficulty in finding a person
of comparable education and experience to manage the business of
the Registrant.
2. Limited Financial Resources
The Registrant has limited financial resources and, if the business
is not profitable, may not be able to raise sufficient funds to
sustain, continue or expand its business. The Registrant currently
has limited revenues and relies principally on the issuance of
common shares to raise funds to finance the business of the
Registrant. There is no assurance that market conditions will
continue to permit the Registrant to raise funds if required.
3. Competition with Other Companies
Other companies with greater financial resources or expertise are
in competition with the Registrant. The Registrant must compete
with such companies in bidding for the acquisition of petroleum
interests from various state authorities, in purchasing or leasing
equipment necessary to explore for, develop and produce
hydrocarbons and in obtaining the services of personnel in the
exploration for, and development and production of, hydrocarbons.
While the Registrant has acquired various rights to explore, there
is no assurance that personnel and equipment will be available to
carry out the programs planned by the Registrant.
4. Failure to Locate Commercial Quantities of Hydrocarbons and
Geological Risks
There is no assurance that commercial quantities of hydrocarbons
will be discovered and prices for hydrocarbons may vary, rendering
any deposit discovered uneconomic. In addition, even if
hydrocarbons are discovered, the costs of extraction and delivering
the hydrocarbons to market may render any deposit found uneconomic.
Geological conditions are variable and unpredictable. Even if
production is commenced from a well, the production will inevitably
decline and may be affected or terminated by changes in geological
conditions that cannot be foreseen or remedied by the Registrant.
<PAGE> 25
Prices for oil and gas may fluctuate widely from time to time
depending on international demand, production and other factors
which cannot be foreseen by the Registrant. A decline in price
may render a discovery uneconomic. The recent Asian financial
market crisis has reduced demand for petroleum products in the
Asia-Pacific region, but production, if any, from the
Registrant's properties that might be sold to countries affected
by the recent Asian financial market crisis would, even for a
discovery made in 1998, take some years to develop and would be
sold under financial conditions cannot be determined.
5. Governmental Laws and Local Conditions
Claims of aboriginal peoples in Australia or New Zealand may
adversely affect the rights or operations of the Registrant. There
is no assurance that governmental regulation will not vary,
including regulations relating to prices, royalties, allowable
production, environmental matters, import and export of
hydrocarbons and protection of water resources and agricultural
lands. The Registrant is subject to numerous foreign governmental
regulations that relate directly and indirectly to its operations
including title to the petroleum interests acquired by the
Registrant, production, marketing and sale of hydrocarbons,
taxation, environmental matters, restriction on the withdrawal of
capital from a country in which the Registrant is operating and
other factors. There is no assurance that the laws relating to the
ownership of petroleum interests and the operation of the business
of the Registrant in the jurisdictions in which it currently
operates will not change in a manner that may materially and
adversely affect the business of the Registrant. In particular, the
Registrant is of the view that the laws of China and to a lesser
extent those of Papua New Guinea relating to the business of the
Registrant may be unable to be determined or may change with little
or no notice or the Registrant may be subject to unofficial or
local policies that materially and adversely affect the business of
the Registrant. There is, however, no assurance that the laws of
any jurisdiction in which the Registrant carries on business may
not change in a manner that materially and adversely affects the
business of the Registrant.
6. Environmental Risks
The Registrant is subject to laws and regulations that control the
discharge of materials into the environment, require removal and
cleanup in certain circumstances, require the proper handling and
disposal of waste materials or otherwise relate to the protection
of the environment. In operating and owning petroleum interests,
the Registrant may be liable for damages and the costs of removing
hydrocarbon spills for which it is held responsible. Laws relating
to the protection of the environment have in many jurisdictions
become more stringent in recent years and may, in certain
circumstances, impose strict liability, rendering the Registrant
liable for environmental damage without regard to negligence of
<PAGE> 26
fault on the part of the Registrant. Such laws and regulations may
expose the Registrant to liability for the conduct of, or
conditions caused by, others or for acts of the Registrant that
were in compliance with all applicable law at the time such acts
were performed. The application of these requirements or the
adoption of new requirements could have a material adverse effect
on the business of the Registrant. The Registrant believes that it
has conducted its business in substantial compliance with all
applicable environmental laws and regulations.
7. Indemnities may be Unenforceable or Uncollectable
The operating agreements with participants in a property provide
for the indemnification of the Registrant as operator. There is no
assurance that such indemnification will be enforceable or that a
participant will be financially able in all circumstances to comply
with its indemnification obligations, or that the Registrant will
be able to obtain such indemnification agreements in the future.
8. Possible Lack of or Inadequacy of Insurance
The Registrant maintains insurance against certain public
liability, operational and environmental risks, but there is no
assurance that an event causing loss will be covered by such
insurance, that such insurance will continue to be available to, or
carried by, the Registrant or, if available and carried, that such
insurance will be adequate to cover the Registrant's liability.
9. No Assurance of Earnings or Dividends and Taxation of
Dividends
The Registrant has no history of earnings and there is no assurance
that the business of the Company will be profitable and, even if
the business of the Registrant is profitable, there is no assurance
the board of directors will declare dividends on common shares.
The register of members of the Registrant discloses that the
majority of the shares of the Registrant are held of record by
persons resident in the United States of America. If the Registrant
should declare a dividend, a withholding tax of five per cent is
payable in Canada on payment of a dividend to a corporate resident
of the United States of America holding more than ten per cent of
the shares of the Registrant and 15% to all other residents of the
United States.
10. Marketing of Petroleum Products
The availability of products sold, or to be sold, by the Registrant
may be restricted or rendered unavailable due to factors beyond the
control of the Registrant, such as change in laws in the
jurisdictions in which the properties of the Registrant are
located, changes in the source of supply in foreign countries,
<PAGE> 27
prohibition on use due to testing and licensing requirements and in
certain areas of the world civil disorder or governmental
confiscation without compensation.
The Registrant is in the early stages of the exploration of its
properties and does not sell petroleum production in countries
affected by the current Asian financial market crisis. Even if
discoveries in commercial quantities are made by the Registrant,
development of a discovery may take a number of years and financial
conditions at that time cannot be determined. The Registrant holds
its cash reserves in US dollars and, if anything, has benefited
from the Asian financial crises with the recent rise of the US
dollar relative to currencies of countries in the Asia-Pacific
region.
11. Activities of Management
The management of the Registrant and the growth of the Registrant's
business depends on certain key individuals who may not be easily
replaced if they should leave the Registrant; and persons in
management have other business interests which may result in them
devoting, from time to time, some of their time to such other
interests.
12. Inadequacy of Public Market
There is no assurance that the public market for the common shares
of the Registrant will be maintained or that the holder of common
shares will be able in all circumstances to sell such shares in the
quantity and at the price desired by such holder.
13. Restrictions in Applicable Securities Laws
Applicable securities laws may restrict the transfer of common
shares and if an exemption is not available to a holder wishing to
sell, the shares may not be transferred.
14. Dilution
The Registrant may issue more common shares at prices determined by
the board of directors, possibly resulting in dilution of the value
of common shares, and, given there is no preemptive right to
purchase common shares, if a member does not purchase additional
common shares, the percentage share ownership of the member in the
Registrant will be reduced.
15. Loss of Investment
An investment in common shares of the Registrant should only be
made by persons who can afford a complete loss of their investment
and there is no assurance that the common shares of the Registrant
will increase in value from the amount at which a member acquired
common shares of the Registrant.
<PAGE> 28
16. Risk Inherent in Exploration
Most of the properties of the Registrant are at the exploration
stage and, except for petroleum mining permit 38148, without known,
commercial reserves of oil or gas. Oil and gas exploration and
development involves a high degree of risk and few properties which
are explored are ultimately developed into producing and profitable
properties.
17. Dealings With Associated Companies
Mr. Alex Guidi is the chairman, a member of the board of directors,
principal shareholder and the promoter of the Registrant. Mr. Guidi
is a member of the board of directors, principal shareholder and
the promoter of Trans New Zealand Oil Company ("TNZ"). Mr. Guidi is
a member of the board of directors, the chairman, principal
shareholder and the promoter of Trans-Orient Petroleum Ltd. ("TOP")
and the promoter of Gondwana Energy, Ltd. ("GEL"). Mr. Guidi is a
shareholder of Durum Energy Corp. ("Durum") but is by private
agreement not involved in Durum until the earlier of delisting of
trading of the shares of Durum through the facilities of the
Vancouver Stock Exchange or April 15, 2000.
Dr. David Bennett is a member of the board of directors of TNZ. Dr.
Bennett is the president, chief executive officer and a member of
the boards of directors of the Registrant, TOP and Durum. Dr.
Bennett is the spouse of Jennifer Lean. Dr. Bennett is a member of
the various boards of directors and an officer of various
subsidiaries of companies in the IREMCO Group and holds powers of
attorney to deal on behalf of various companies in the IREMCO
Group.
Mr. Ronald Bertuzzi if the president and a member of the board of
directors of the TNZ. Mr. Bertuzzi is also a member of the boards
of directors of the Registrant and GEL.
Mr. Mark Katsumata is the secretary and treasurer of TNZ. Mr.
Katsumata is also the secretary of the Registrant, TOP and Durum
and the secretary and treasurer of GEL.
Ms. Jennifer Lean is the president and a member of the board of
directors of GEL. She holds the authority to act on behalf of
various companies in the IREMCO Group and subsidiaries of various
companies in the IREMCO Group. She is also a member of various
boards of directors and an officer of various subsidiaries of
companies in the IREMCO Group and is the spouse of Dr. David
Bennett.
Mr. Peter McKeown and Mr. Bernhard Zinkhofer are members of the
boards of directors of TOP and Durum and Mr. Zinkhofer is a partner
of the solicitors of the companies in the IREMCO Group, Lang
Michener Lawrence Shaw, Vancouver, B.C. and Toronto, Ontario,
Canada.
<PAGE> 29
At June 30, 1998 Mr. Guidi beneficially held 4,991,000 shares of
TNZ of a total outstanding of 12,500,000 (39.9%). Mr. Garth
Johnson, who has voting discretion over 1,500,000 (12.0%) shares of
the outstanding shares of the Company, is employed by the IREMCO
Group. At June 30, 1998 Mr. Guidi beneficially held 5,904,076
common shares of the Registrant of a total outstanding of
28,262,398 common shares (20.9%) and held rights to acquire an
additional 994,000 common shares at various prices. At June 30,
1998 Mr. Guidi beneficially held 10,021,400 common shares of TOP of
a total outstanding of 28,779,060 common shares (34.8%) and held
rights to acquire an additional 6,800,000 common shares at various
prices. At June 30, 1998 Mr. Guidi beneficially held 1,000,000
common shares of Durum of a total outstanding of 9,541,908 common
shares (10.5%) subject to a private agreement dated April 15, 1997.
At July 8, 1998 Mr. Guidi owned 90.9% of the outstanding shares of
GEL.
The percentage participation of the Registrant and associated
companies in a property is determined by the boards of directors of
each company in accordance with the provisions of the Business
Corporations Act (Yukon). Persons who are not willing to rely on
the exercise of judgment by the respective boards of directors in
determining the participation in properties should not consider an
investment in the shares of the Registrant or associated companies.
18. Defeasance of Title
The possibility exists that title to one or more properties of the
Registrant may be lost due to an omission in the claim of title.
The Registrant does not maintain title insurance.
ITEM 2. FINANCIAL INFORMATION
Introduction
The following is a discussion of the Registrant's financial
condition, results of operations, financial resources and working
capital. This discussion and analysis should be read in conjunction
with the Registrant's consolidated financial statements contained
in this Form 10 under Item 13.
Overview
The Registrant was not active in the acquisition, exploration and
development of petroleum properties in 1995. The interests
currently held by the Registrant began to be acquired in 1996. The
Registrant has directed its efforts to the acquisition of petroleum
interests of substantial acreage in under-explored areas that are
geologically favorable for the discovery of the hydrocarbons. The
risk inherent in the exploration for the discovery of hydrocarbons
has been reduced by the participation of other companies as working
<PAGE> 30
interest participants. The Registrant has also established itself
as the operator of programs on certain of the petroleum interests
held by the Registrant in order to better control and manage the
process of exploration and development of the petroleum interests.
Acquisition of Petroleum Interests, Exploration, Development and
Production
The acquisition, exploration and development of, and production
from, petroleum interests between January 1, 1996 and December 31,
1997 is described under Item 1-Business.
Selected Financial Information
The following constitutes selected financial data for the
Registrant prepared in accordance with United States generally
accepted accounting principles for the last five completed
financial periods The information, expressed in United States
dollars unless otherwise indicated, must be read in conjunction
with the more detailed financial information contained in the
accompanying audited and management financial statements.
<TABLE>
<CAPTION>
December 31 January 31
1997 1996 1995 1995 1994
<S> <C> <C> <C> <C> <C>
Current Assets $10,785,233 $9,597,265 $1,024,635 $ 575,210 $ 604,111
Petroleum and Natural
Gas Properties 1,929,839 1,113,928 60,438 10,320
Property and
Equipment 115,244 34,933 6,150 nil nil
Incorporation
Costs nil nil 867 867 867
Total Assets 12,830,316 10,746,126 1,092,090 586,397 604,978
Share Capital 18,178,652 15,528,959 4,993,739 4,397,920 4,290,952
Deficit (5,394,040) (4,869,868) (3,968,214) (3,824,570) (3,773,864)
Gross Revenue 870,059 426,432 38,980 25,768 2,266
Net Loss (524,172) (901,654) (143,644) (50,706) (40,027)
Net Loss
per Share (0.02) (0.04) (0.01) (0.00) nil
</TABLE>
Certain transactions have occurred during the periods which may
cause the data between periods to be not comparable. For fiscal
1996, refer to Item 1-Business-Development of Business for a
description of the acquisition of the interest in the Ngatoro Oil
Field.
<PAGE> 31
Exchange Rates
On December 31, 1997, the buying rate for Canadian dollars was
US$1.00: CDN $l.4305. The following table sets out the buying rate
for Canadian dollars for the period indicated. Rates of exchange
are obtained from the Bank of Canada and believed by the Registrant
to approximate closely the rates certified for customs purposes by
the Federal Reserve Bank in New York.
1993 1994 1995 1996 1997
Year End 1.3217 1.4018 1.3640 1.3706 1.4305
Average 1.2898 1.3659 1.3726 1.3636 1.3844
High (1) 1.3446 1.4065 1.4243 1.3855 1.4393
Low (1) 1.2425 1.3109 1.3303 1.3295 1.3365
Note (1): The high and low buying rate figures are selected from
daily high and low figures.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Registrant is in the exploration and evaluation stage on its
oil and gas properties and hence has not yet achieved profitability
or break even cash flow. The Registrant has experienced losses in
each fiscal period reported on. Its main source of capital
currently is the issuance of equity securities, which has a
dilative effect on the Registrant's shareholders. Total losses
incurred from incorporation to December 31, 1997 were $5,572,109.
The level of future operations may be limited by the availability
of capital resources, the sources of which are not predictable. The
results of operations should be largely measured by the success of
the extent and quality of oil and gas discovered as a result of
exploration programs. The sales value of any oil and gas discovered
by the Registrant will be largely dependent on factors beyond the
Registrant's control such as the market value of the hydrocarbons
produced.
The business of the Registrant was inactive during the 1995 fiscal
year. The Registrant commenced the operation of its current
business in 1996. The efforts of management have been directed
towards the acquisition of petroleum interests and the commencement
of exploration programs on the interests acquired. The Registrant
is also the operator on certain of the interests acquired and to
that end has established an exploration office in Wellington, New
Zealand. The acquisitions made by the Registrant between January 1,
1996 and December 31, 1997 are described under Item 1-Discussion of
Development of Business.
<PAGE> 32
Operating Revenue
Effective September 1, 1996 the Registrant bought the outstanding
shares of Minora Energy (New Zealand) Limited for AUS$575,000
(CDN$478,755, US$348,790). The name of the company was changed to
Ngatoro Energy Limited. Ngatoro Energy Limited owns a five per cent
participating interest and revenue interest in petroleum mining
permit PMP 38148, which has four producing oil wells and two shut-
in gas wells. In the year ended December 31, 1996 the Registrant
received $163,388 from hydrocarbon sales and in the year ended
December 31, 1997, the Registrant received revenues of $487,941.
Production has remained relatively constant.
Costs and Expenses
In the year ended December 31, 1997 the Registrant incurred
expenses in the acquisition, exploration and development of
petroleum interests of $1,064,976. The amount incurred in the
acquisition, exploration and development of petroleum interests for
the year ended December 31, 1996 was $1,182,655. The increase
represents the acquisition of additional petroleum interests by the
Registrant and development and implementation exploration programs.
Depletion and amortization expense for the year ended December 31,
1997 was $97,827 and for the year ended December 31, 1996 was
$98,252.
General and administrative expenses for the year ended December 31,
1997 were $1,022,554 and for the year ended December 31, 1996 were
$1,153,770.
Interest Expense
The Registrant finances its business primarily from the issuance of
common shares and secondarily from the receipt of petroleum
revenues from its interest in the Ngatoro oil field, New Zealand.
The Registrant has not effected any borrowing and has consequently
not incurred any interest expense.
Interest Income
Interest income for the year ended December 31, 1997 was $382,118
and for the year ended December 31, 1996 was $263,044. The increase
was due to the receipt and deposit between January 1, 1996 and
December 31, 1997 of $13,184,913 from the issuance of common
shares.
Liquidity
The Registrant has maintained an appropriate liquidity level to
fund its expenditure programs in the past and has no reason to
conclude that this will not continue for fiscal 1998. The
<PAGE> 33
Registrant is satisfied with its ability to access capital markets
through private placements, public offerings, and convertible
securities in order to preserve liquidity levels. The Registrant
will utilize joint venture arrangements to reduce its exposure on
exploration and development programs.
In the fiscal year ended December 31, 1997 the Registrant completed
a Canadian private placement of 1,000,000 units for $1.80 per unit.
Each unit is comprised of one common share and one non-transferable
share purchase warrant. Each share purchase warrant entitles the
holder to purchase a common share for $1.90 before July 4, 1998,
for $2.00 from July 4, 1998 to July 3, 1999 and for $2.10 from July
4, 1999 to July 3, 2000. The Registrant issued 279,000 common
shares to directors, senior officers and employees pursuant to the
exercise of incentive stock options for gross proceeds of $652,151.
The Registrant also issued 50,000 common shares on exercise of
warrants for proceeds of $125,667.
As of December 31, 1997 the Registrant had $10,739,529 in working
capital as compared with $9,510,230 as of December 31, 1996.
During the fiscal year ended December 31, 1996, the Registrant
completed a Canadian private placement of units distributed to
British Columbia residents raising $2,209,620 (CDN$3,030,000)
through the issuance of 1,000,000 units at a price of CDN$3.03 per
unit, each unit consisting of one common share and one non-
transferable share purchase warrant to purchase an additional share
before May 27, 1997 at CDN$3.03 per share and between May 28, 1997
and May 27, 1998 at CDN$3.485 per share. The Registrant issued
additional common shares to directors, senior officers and
employees pursuant to the exercise of incentive stock options for
gross proceeds of $7,614,949 (CDN$10,384,167) (1,725,000 shares for
CDN$2.167 per share, 1,002,000 shares for CDN$3.333 per share,
612,000 shares for CDN$5.00 per share, 40,000 shares for CDN$5.33
per share and 40,000 shares for CDN$0.837 per share).
During the fiscal period ended December 31, 1995, the Registrant
issued 7,494,000 shares for CDN$0.103 per share for gross proceeds
of $579,789 (CDN$774,380) pursuant to the exercise of share
purchase warrants. No incentive options were exercised during this
period.
Capital Resources
The Registrant's capital resources are comprised primarily of
private investors, including members of management, who are either
existing contacts of the Registrant's management or who come to the
attention of the Registrant through brokers, financial institutions
and other intermediaries. The Registrant's management is of the
view that conventional banking is unavailable to resource companies
which are in the exploration stage. The Registrant's access to
capital is always dependent upon general financial market
<PAGE> 34
conditions, especially those which pertain to venture capital
situations such as oil and gas exploration companies. The
Registrant's capital resources have not changed in 1997 nor are
they anticipated to change materially in 1998.
The amount that the Company has spent on acquisitions vs.
exploration and development over the past two years is:
Acquisition: $ 460,104
Exploration and development: $1,787,527
The amount that the Company intends to spend in 1998 on
acquisitions vs. exploration and development is:
Acquisition: $ 100,000
Exploration and development: $ 2,950,000
It is management's intention to acquire, explore and develop oil
and gas properties in the Asia Pacific region. Material capital
commitments to December 31, 1998 are described in Item 1-Business-
Plan of Operations.
The Registrant has no other anticipated capital expenditures of a
material amount. However, the Registrant intends to acquire
additional petroleum interests which may give rise to further
capital expenditures.
The Registrant has no agreements with management, investors,
shareholders or anyone else respecting additional financing at this
time. Because of the nature of the Registrant's business, there are
no trends in the nature of its capital resources which could be
considered predictable. To date, the Registrant's capital resources
have consisted solely of the issuance of common shares pursuant to
either public distributions, private placements or the exercise of
convertible securities.
Results of Operations
The Registrant is an exploration company. The Registrant's primary
focus as of December 31, 1997 is the investigation and acquisition
of oil and gas properties. The Registrant's policy is to acquire
interests and where possible, minimize its risk exposure by farming
out or joint venturing these interests to other industry
participants.
The Registrant's current property focus is on the acquisition and
exploration of properties primarily in the Asia Pacific region with
the objective of establishing a solid cash flow base and
participating in high potential exploration blocks in under
explored countries with attractive fiscal regimes.
<PAGE> 35
Revenues for the year ended December 31, 1997 were $870,059
compared with $426,432 for the year ended December 31, 1996. The
Registrant's expenses for the year ended December 31, 1997 were
$1,394,231 resulting in a per share book loss of $0.02 compared
with $1,328,086 resulting in a per share book loss of $0.01 for the
period ended December 31, 1996.
Effective September 1, 1996 the Registrant bought the outstanding
shares of Minora Energy (New Zealand) Limited for AUS$575,000
(CDN$478,755, US$348,790). The name of the company was changed to
Ngatoro Energy Limited. This acquisition provided the Registrant
with oil and gas revenues of $163,388 for the year ended December
31, 1996 and $487,941 for the year ended December 31,1997. During
the year ended December 31, 1997, interest income increased to
$382,118 compared to $263,044 for the year ended December 31, 1996.
This is due to additional cash of $2,649,693 provided by the
issuance of common shares through private placements and exercise
of stock options and warrants during the year ended December 31,
1997.
Revenues for the period ended December 31, 1995 were $38,980
compared with $25,768 for the year ended January 31, 1995. The
Registrant's expenses for the period ended December 31, 1995 were
$182,624 resulting in a per share book loss of $0.01 compared with
$76,474 resulting in a per share book loss of $0.01 for the year
ended January 31, 1995.
ITEM 3. PROPERTIES
The following is a brief description of the principal properties
held by the Registrant. The terms and conditions of the permits and
licenses under which the properties are held are discussed in Item
1-Business-Discussion of Development of Business.
ALTHOUGH THE REGISTRANT IS CURRENTLY RECEIVING SOME PRODUCTION
REVENUE, THE REGISTRANT DOES NOT REPRESENT THAT IT HOLDS MATERIAL
INTERESTS IN PROVEN PROPERTIES AS ALMOST ALL OF ITS PROPERTIES ARE
IN THE EXPLORATION STAGE. THE REGISTRANT SHOULD BE CONSIDERED AN
EXPLORATION AND DEVELOPMENT STAGE OIL AND GAS COMPANY.
For definitions of technical terms in the following description of
properties, see the Glossary of Terms.
General
The formation of geological conditions for the generation,
entrapment and location of hydrocarbons depends on a number of
unpredictable factors. First, any system of sedimentary strata must
contain a source of hydrocarbons. Secondly, the source rocks must
have been buried in order for conditions favorable to the
production of hydrocarbons to prevail and the hydrocarbons must
<PAGE> 36
have been expelled from the source formations. With expulsion, the
hydrocarbons will migrate and strata into which the hydrocarbons
migrate must be conducive to both the collection of the
hydrocarbons in the strata and the sealing of the hydrocarbons
within the strata in which they collect. Geological conditions are
extremely varied and unpredictable. See Item 1-Business-Risk
Factors.
1. New Zealand, East Coast Basin, North Island
Regional Geology
Geologically, the East Coast Basin area in north-east New Zealand
lies in the forearc of an active convergent plate margin between
the subducting oceanic Pacific plate to the east and the Indian-
Australian plate of continental composition to the west. The rocks
exposed on land are characterized by thick marine clastic sequences
ranging in age from early Cretaceous to the Quaternary, with
complex stratigraphy and structure. The stratigraphy may be
simplified into five parts. The pre-Miocene geology can be divided
into autochthonous and allochthonous sequences. Both sequences have
some units in common, but there are material differences. The
basement rocks are Early to Mid-Cretaceous. Overlying the basement
rocks is an allochthonous unit that was emplaced by a foreland
style thrust belt in early Miocene times. This emplacement occurred
at the same time as a change in sedimentation from a slow, clastic-
starved environment (Late Cretaceous to Paleocene) to a rapid
clastic deposition environment (Miocene to Quaternary). Overlying
this unit is about 19,000 feet of Miocene strata that was laid down
in a moderate to deep marine environment. The sequence is
interspersed with turbiditic sandstone and mudstone sections of
variable thickness of up to 100 feet. The structural geology in the
area is complex, varying from large, open synclines and tight
anticlines in the north to low angle normal faults of several
hundreds of feet displacement in the west and disconformities and
faulting in the south. From Pliocene times, there was rapid uplift
in the area, which prevented further marine deposition, and rapid
erosion began with normal faulting occurring throughout the area.
Currently, there is no production from the East Coast Basin except
for small scale local use of gas seeps.
(a) Petroleum Exploration Permit PEP 38328 (40.0%)
Most of PEP 38328 is flat or gentle hill country, with some hilly
areas to the south-east. The main population centers are the twin
cities of Hastings and Napier, which has a port, with a combined
population of about 110,000. These are the largest cities on the
east coast of the North Island and service a largely rural area.
Current gas consumption in the area is about 2.5 billion cubic
feet. Gas is supplied by an eight inch pipeline from the Taranaki
area on the west coast of the North Island. This pipeline passes
through the center of the permit area.
<PAGE> 37
PEP 38328 has been very lightly explored. Only three wells have
been drilled in the permit area and limited seismic data has been
collected. A well in the south of the permit area encountered
Pliocene reservoir limestones, but these were water saturated and
the well was abandoned. Another well near Napier encountered gas
but was not tested. Later, gas was collected for local use. A third
well near Napier encountered Upper Pliocene turbidite sandstones
which contained a gassy brine. Upper Miocene turbidite sandstones
were also encountered below the Upper Pliocene. Other horizons also
has indications that they were gas bearing.
The Kereru Prospect was defined in 1988 to 1991, but much of the
permit has not been explored with seismic techniques. One of the
objects of the participants is to define additional structures in
the permit area. The East Coast Basin has many oil seeps, gas seeps
and indications of oil in outcrop but not enough is known about
sub-surface structures to determine likely reservoir locations. The
best source formations in the permit area are considered to be the
Upper Cretaceous to Paleocene Whangai Formation and the Paleocene
Waipawa black shale formation. The latter is usually about 100 feet
thick and the former about 300 feet thick. These formations are
considered to be likely oil bearing formations. Local gas seeps
indicate that other formations may be targets for the location of
gas.
Surface geology and information from the wells drilled to date
indicate the Pliocene and Pleistocene limestones, which occur at
several stratigraphic levels and outcrop throughout the permit
area, have the best potential to be reservoir formations.
Thicknesses vary from 15 to several hundred feet. Other potential
reservoir formations include Pliocene and Pleistocene turbidite
sandstones that occur throughout the permit area, and Upper Miocene
turbidite sandstones.
Additional seismic work is required to delineate structures within
the permit area. Finally, regional conditions indicate that the
depth of burial of the source formations for oil and gas is in
excess of 13,000 feet, sufficient for the generation of
hydrocarbons. Seismic data indicates that there are structures
within the permit area which may act as traps for migrating
hydrocarbons.
In the fourth quarter of 1996, the Kereru-l exploration well was
drilled to a depth of 1,938 meters (6,391 feet). Several thin and
separated potential pay reservoir sandstones were encountered, but
the Registrant decided that the results did not justify the expense
of flow testing the well. The well was plugged and abandoned. In
the first half of 1997, a 120 mile seismic survey costing
approximately $700,000 was completed. Data was exchanged with
adjacent permit holders and indicated a previously unidentified
structure in coastal the northern part of the permit, an anticlinal
structure in the coastal area south of Napier and several structure
along the southern boundary with PEP 38330.
<PAGE> 38
(b) Petroleum Exploration Permit PEP 38330 (34%)
PEP 38330 is north of PEP 38328 on the eastern side of Raukumara
Peninsula, the most easterly part of the North Island. The country
covered by PEP 38330 ranges from low alluvium-filled valleys to
hilly incised country. The area is lightly populated, comprised
mostly of pastoral farmland increasingly converted to forestry
blocks in recent years. An extensive transportation system is
already in place. Gisborne, with a population of 30,000 serves as
a port and service center for the area.
The permit area is very lightly explored. The abundance of oil and
gas seeps in the area indicates that hydrocarbon generation has
occurred, the most likely source rocks being the Whangai Formation.
The formation process will be complex as a result of the
complicated tectonic and burial history. In the permit area, the
Miocene turbiditic sandstones and minor conglomerate and limestone
deposits are the likely areas where reservoirs will be located.
There are several promising outcrops known with some indications of
hydrocarbons. Finally, the presence of mud volcanoes and hot
springs in the permit area indicate that the Miocene-Pliocene
mudstone sequences contain stratigraphic seals capable of
containing hydrocarbons.
Historically, there have been six exploration wells drilled on or
adjacent to the permit area since 1945. Four of the wells were
drilled before 1972 with very poor seismic control. Two wells
drilled in 1985 and 1986 were supported with 75 miles of seismic
data but in both cases were unsuccessful. The Registrant is
concentrating on the acquisition of seismic data and on surface
geological mapping.
The main exploration targets currently recognized are around the
Waitangi Oil Seeps area in the south of the permit area and the
Matanui Anticline area in the center of the permit area. The
surface expression of the Matanui Anticline covers some 80 square
miles in area and there are few oil or gas seeps along its
boundaries, indicating a possible unbreached structure. The
Registrant is also considering drilling a well alongside the old
Waingaromia-1 well, which produced oil in the 1880's before the rig
burnt down due to ignition of gas escaping from the well. A recent
survey of this old well confirmed that it is still actively leaking
hydrocarbons.
A 15 mile regional seismic line was completed in April, 1997 over
the main structural features of the basin, including the Matanui
and Pauariki Anticlines.
(c) Petroleum Prospecting License PPL 38332 (42.5%)
PEP 38332 covers an area of approximately one million acres in the
East Coast Basin and is located onshore in the southern Hawke Bay
area, North Island, immediately south of PEP 38328.
<PAGE> 39
The country covered by PEP 38332 is a fairly flat alluvial plain in
the center, but more hilly, incised country in the east and west.
Major road and rail links, including the eight-inch natural gas
line to the Hawke Bay area, running across the center of PEP 38332.
There is a good network of minor roads. The area is predominantly
pastoral farmland, with no major population centers. The area is
serviced from Napier and Hastings to the north.
Two wells were drilled in the east of the permit in the early years
of the 20th century, and both recorded oil and gas shows. Two
further wells, in 1969 and 1971, were drilled in the western area
of PEP 38332, but were unsuccessful. These results identify the
area east of the Waewaepa Fault as being the main area of
exploration interest in PEP 38332. A number of prominent oil and
gas seeps in the eastern area, and oil source rocks seen in
outcrop, confirm its potential for discovery. Potential reservoirs
are also present in the Miocene sandstones and Pliocene limestones.
Some limited seismic data, acquired in 1970, together with surface
geological mapping identifies potential trapping structures
immediately east of the Waewaepa Fault.
Approximately 15 miles of new seismic data were acquired in this
area of PEP 38332 in May, 1997 as an extension of the larger
program in PEP 38328, to the north. Further seismic in 1998 will be
considered after interpretation of this new seismic, together with
reinterpretation of the existing old seismic. Over the next six
months, the Registrant intends to continue the processing and
interpretation of seismic data.
The Registrant intends to apply for the acquisition of further
petroleum exploration rights in the East Coast Basin, New Zealand.
2. New Zealand, Canterbury Basin, South Island, Petroleum
Exploration Permit PEP 38256 (50%)
The Canterbury Basin is located both onshore and offshore in the
area surrounding Christchurch, on the east coast of the South
Island. The total area of the Canterbury Basin is about twelve
million acres. The sediments in the Canterbury Basin range in age
from Middle Cretaceous to Miocene and have evolved in a manner
similar to the Taranki Basin. There are numerous gas seeps in the
area.
There have been five wells drilled on PEP 38256 since 1914 and four
offshore wells drilled since 1970, two of which were condensate
discoveries, which are relevant in interpreting the geology of PEP
38256. Generally, the area is lightly explored. The basement rocks
are Cretaceous sediments and volcanics with some interbedding of
coal formations. Overlying the Cretaceous formations are Paleocene
and Eocene terrestrial sediments which gradually become of marine
origin towards the eastern part of the basin. Overlying these
formations are Oligocene limestone and sandstone formations which
<PAGE> 40
are principally marine in origin. The early Miocene period saw the
deposition of marine sandstones and mudstones with a gradation to
nonmarine sediments in the late Miocene period. The Pliocene and
Quaternary strata are principally gravels derived from the
formation of the Southern Alps with some volcanics.
Structures in the area trend from the north east to the south west.
Little is known of the local geologic structure. The sandstones in
the Miocene, Paleocene and late Cretaceous formations are
considered to be potential reservoirs, with lesser emphasis placed
on the Eocene and Oligocene limestones. Interbedded mudstones would
provide seals for the reservoirs. Source formations are thought to
be the upper Cretaceous coal formations and the Whangai and Waipawa
Black Shale formations which are found elsewhere in the East Coast
Basin.
3. New Zealand, Taranaki Basin, North Island
Regional Geology
The Taranaki Basin is located on the west coast of the North
Island. The sediments in the Taranaki Basin range in age from Late
Cretaceous to the Quaternary and encompass a depth of some 25,000
feet with complex structure and geology. Compression across the
eastern portion of the Basin during the early Miocene period
resulted in a thrusted fold belt up to ten miles wide, which
contains the McKee, Tariki, Ahuroa and Waihapa-Ngaere fields. The
eastern margin of the Basin, where PEP 38716 is located, is lightly
explored when compared with other areas of the Basin.
(a) Petroleum Mining Permit PMP 38148 (5%) and Petroleum
Prospecting License PPL 38706 (7.75%)
PPL 38706 and PMP 38148 are situated onshore in the north central
part of the Taranaki Basin, and cover a total area of approximately
40,000 acres. The area is immediately to the south of PEP 38720.
Oil production from the four wells producing from sandstones of the
Mount Messenger Formation at depths of 5,000 feet has remained
steady at 1,400 to 1,500 barrels per day. The participants intend
to workover the producing Ngatoro- well and to enhance the
production levels in the other producing wells. After this, a
development well is planned to be drilled in the Ngatoro-2 pool, to
be followed, if successful, by another development well, and an
exploration well is planned to be drilled to test an undrilled
structure in the PMP 38148 area.
(b) Petroleum Exploration Permit PEP 38716 (12.6%)
PEP 38716 is situated in the eastern margin of the onshore Taranaki
Basin and covers an area of approximately 67,000 acres. It is
located adjacent to both the Kapuni gas-condensate field,
<PAGE> 41
discovered in 1959, and the Waihapa-Ngaere oil and gas field. The
gathering station for the Waihapa-Ngaere oil and gas field is
located within a few miles of the boundary of PEP 38716. The area
consists of gently rolling hills with rural agriculture being the
main activity.
Exploration of PEP 38716 has to date resulted in the collection of
several hundred miles of seismic data from the area overlying the
Taranaki Fault which formed the eastern margin of the Basin before
Miocene thrusting. Two major plays are currently recognized as the
basis for further exploration.
The Crown Prospect is located in the northern part of PEP 38716.
Two wells were drilled to the south of this prospect in 1991 and
both were unsuccessful. The main target horizons in the Crown
Prospect are the Tikorangi limestones, with an estimated depth of
8,000 feet and the Tariki sandstones, with a depth of 10,500 feet.
The Crown Prospect is interpreted as a thrust block anticline,
somewhat similar in geological style and size to the nearby Waihapa
oil field.
Deeper reservoir targets are provided by the sandstones of the
Kapuni Group, with a depth of 12,000 to 16,000 feet. This formation
may underlie the Crown Prospect and areas in the southern part of
PEP 38716.
South of the Crown Prospect lies the Oru Prospect which overlies
the Miocene sandstones of the Mount Messenger Formation. This
horizon may contain oil at depths of less than 5,000 feet. This is
considered to be a secondary target within the permit area. The
Waihapa-8 well, drilled on the very edge of the Oru structure, flow
tested oil from the target sandstones at rates in excess of 750
barrels per day.
(c) Petroleum Exploration Permit PEP 38720 (50.0%)
PEP 38720 lies in the north central part of the Taranaki Basin,
immediately south-west of the McKee oil field and north-east of the
Ngatoro oil field. The Kaimiro gas field lies to the west of the
permit area. The permit area is underlain by a complete Tertiary
section including the Mount Messenger and Kapuni Formations which
are reservoir objectives.
The Inglewood Fault, a feature which has played a significant
geological role, both in creating traps for oil and gas, as in the
Kaimiro and Ngatoro fields and in providing a conduit for oil and
gas to move into such traps, crosses the northern part of PEP
38720. Movement on this fault system in the geological past has
created a structural trap at Kapuni level (12,000 feet) within PEP
38720, which has been mapped from existing seismic and well
information as covering an area of up to ten square km (2,500
acres). This feature, named the Waitoriki Prospect, will be the
main focus of the ongoing exploration effort.
<PAGE> 42
A significant petroleum seep in a quarry on the permit boundary, at
a location where the Inglewood Fault cuts to ground surface,
demonstrates that oil entrapment at shallower levels can also
occur, in similar manner to the adjacent Ngatoro and Kaimiro oil
fields. This makes the shallower Mount Messenger Formation (~5,000
feet depth) an exploration target.
(d) Petroleum Exploration Permit 38723 (40%)
PEP 38723 is adjacent to, and was until 1993 part of, PEP 38706 and
has similar geology. Exploration of the general area has been
conducted since 1978 and has resulted in the discovery of the
McKee, Tariki, Ahuroa, Kaimiro and Ngatoro fields. The discovery of
the McKee field in 1979 directed exploration towards investigation
of the overthrust area of the eastern Taranaki Basin. In the
general area, the formations which have been the targets of
exploration are the Kapuni Formation, the Mount Messenger Formation
and to a lesser extent the Upper Moki Formation. In 1993, 50% of
PEP 38706 was relinquished and there were no leads recognized in
the area covered by PEP 38723.
PEP 38723 is underlain by Late Cretaceous coal and marine shale
sequences. Above these formations lies the Kapuni Formation of
inter-bedded coal sequences which provide the principal source of
local oil and gas accumulations. Above the Kapuni formation lies
the McKee formation which was formed during the Eocene period. This
formation has a limited potential to be a producing horizon on PEP
38723 due to its limited distribution, depth and absence of
prospects and leads. During the Oligocene period, there was erosion
followed by sandstone and then limestone deposition. The Tikorangi
limestones increase in thickness towards the eastern boundary of
the permit. In the Miocene period, clastic sediments were deposited
to form the Moki sandstones which are a secondary reservoir target
and to form the Mount Messenger sandstones which have not been
tested on PEP 38723, although they are the producing horizon on the
adjacent Ngatoro and Kaimiro fields. Tectonic activity along the
Taranaki and Tarata fault zones also occurred during the Miocene
period. Tilting to the southwest and about one kilometer of uplift
occurred in the late Pliocene period.
The principal target formation on PEP 38723 is the Mount Messenger
sandstones. There is, however, much regional variation within this
formation given its deposition as toe and slope fans. Experience
from the Ngatoro wells indicates that there may be as little as
1000 meters of continuity in the Mount Messenger formation.
Definition of drilling targets requires well control, strong
seismic anomalies and evidence of geologic structural closure.
<PAGE> 43
Papua New Guinea
Petroleum Prospecting License PPL 192 (40.0%)
PPL 192 lies across the Strickland River in Western Province, Papua
New Guinea. The area is covered by forests and is relatively flat.
The area is sparsely populated and the lack of roads leaves the
principal mode of transport as the Strickland River.
Drilling of several wells near to PPL 192 has given geologic
indications of features favorable to oil and gas exploration on PPL
192. Thirty miles to the north-west of PPL 192 a well drilled by
British Petroleum in 1990 was directed at a large basement drape
structure of some 25,000 acres in area and 250 feet of vertical
relief. The well encountered a basal Cretaceous sandstone at 10,040
feet which produced gas at 11.9 MMCFPD and condensate at 634 BCPD.
Other wells have encountered structures and horizons which are
likely to be replicated in PPL 192. Generally, the geologic system
contains sizable, four-way dip closures of areas of up to 5,000
acres at the levels of Late Jurassic to Early Cretaceous target
horizons. There is widespread development at the 5,500 to 6,000
foot level of the Toro sandstones and overlying Cretaceous marine
shale which provide topseals, both of which have been encountered
throughout the area. Finally, the geologic structures in the area
were formed before hydrocarbon emplacement, meaning that structural
traps for entrapment of hydrocarbons existed at the time of any
hydrocarbon migration in the area.
PPL 192 has seen substantial exploration in the past. In the early
1970's, the area was largely covered by seismic surveys by Conoco,
Marathon, Union Oil and others. In 1988 to 1990, Shell US, spent
about $30 million in exploration and acquired an open 8 km by 16 km
seismic grid over most of the area, with an infilling down to a 4
km by 4 km grid over the Kamu and Mamboi Prospects and the Tagari
and Pogo Leads. Several other single line leads are also
identified, and sizable structures may have been completely missed
by the existing seismic coverage, given the open nature of the
grid. In addition, the drilling in 1991 of the Langia-l well,
located in the southern part of PPL 192, resulted in the discovery
of 25 feet of gas pay at 5,000 feet depth which might extend over
an area of some 5,000 acres across the Langia structure.
Since 1991, there has been virtually no exploration in this area as
exploration in Papua New Guinea was at reduced levels and was
concentrated in the mountain fold belt to the north-east of PPL
192. Activity in the foreland area has recently increased. The main
feature in PPL 192 is the Kamu Prospect, a structure in the center
part of the area defined on seismic as covering an area of
approximately 4,500 acres, with a vertical relief of about 260 feet
at the Toro Sands level at about 5,500 feet depth. The Toro Sands
are widely developed across the Papuan Basin, and are the main
producing reservoir sequence in virtually all the onshore
discoveries. In addition to the Toro Sands, the Digimu and Imburu
Formations also may be target reservoir formations.
<PAGE> 44
Computer reprocessing and remapping of the existing seismic data is
in process and a variety of geological studies are being conducted
to better define the potential size and exploration uncertainties
of the existing prospects and leads, particularly focusing on the
Kamu Prospect and the Langia Field. In the immediate future, it is
expected that several wells will be drilled in adjacent foreland
basin licenses, both southeast and northwest of PPL 192, and these
should also aid in understanding the potential of PPL 192. After
completion of the current geological studies, further seismic
acquisition will be considered before a drilling program in the
license is announced.
The Registrant has applied for a further interest in Papua New
Guinea.
Australia
(a) Offshore Petroleum Exploration Permit Ashmore Cartier AC/P19,
Timor Sea (65.0% to earn 61.75%)
The Western Australian continental margin was formed in the late
Paleozoic era by the extension of this area of Gondwanaland. This
event determined the major crustal architecture of the region. The
AC/P19 permit area lies within the northern and western portion of
the Vulcan sub-basin and the eastern flank of the Ashmore Platform.
The Vulcan Sub-basin is a north-east trending, fault bounded
deposition area that is characterized by several prominent troughs
and a graben terrain. It is bounded to the northwest and to the
southeast by the Permian-Triassic blocks of the Ashmore Platform
and the Londonderry High. Up to ten kilometres of Upper Permian to
Tertiary sediments lie in the basin.
The Vulcan Sub-basin is thought to have undergone a complex
structural evolution that was dominated by three tectonic events,
a Late Triassic compression, a Late Jurassic NNW-SSE extension and
a Tertiary compression on collision with Pacific plates. The fault
styles are dominated by a mixture of tilted fault blocks in the
southern area and hourglass structures in the northern area. The
location and geometry of the basement rocks control the relative
position of the source rocks, fluid migration paths and reservoirs.
The Ashmore Platform is a large, elevated block that extends along
the western margin of the Vulcan sub-basin. Triassic sediments on
the Ashmore Platform are up to 4.5 kilometres thick. Faulting of
the area in the Late Triassic resulted in extensive uplift and
erosion. Flat-lying Cretaceous and Tertiary sediments unconformably
overlie the Triassic sediments.
Regionally, Late Jurassic shales have been the source rocks for
hydrocarbon formation. Source rock shales may also have been
deposited in Middle and Early Jurassic shales in the Cartier
Trough. Four dry wells have been drilled on the Ashmore Platform
<PAGE> 45
and this area is of little interest to the Registrant. The area of
greatest interest is the Cartier Trough. The main objectives for
exploration are traps that occur within and bounding the Cartier
Trough. The water depth in the area is about 400 meters.
The Registrant has applied for further offshore interests in the
Timor Sea.
(b) Offshore Gippsland Basin, Bass Strait Permit VIC/P-39 (33.33%
to earn 31.67%)
The Gippsland Basin lies offshore between the mainland of Australia
and Tasmania, about 30 miles from the coastline of the state of
Victoria. All commercial oil and gas fields located in the area
have been discovered in structural or combined structural and
stratigraphic traps, mainly at the top of the Latrobe Group Coarse
Clastic formation. The basin was developed during the separation of
Australia from Antarctica by north-northeast to south-southwest
lithospheric extension during the Early Cretaceous and the
separation of Australia from the Lord Howe Rise and the Campbell
Plateau in the Late Cretaceous. Rifting occurred in the Early
Cretaceous and formed NNE-SSW transfer faults. Rift-bounding faults
terminate abruptly before reaching the Paleozoic Gippsland Rise.
The Rise is part of a regional belt which extends along the eastern
margin of Australia. A second phase of rifting occurred in the Late
Cretaceous, followed by a period of uplift and erosion over much of
the basin area. Most of the formations in the basin area, including
the Latrobe Group, are of marine to marginal marine origin.
Source formations in the area of the Gippsland Basin are located in
the Western and Eastern Deeps. The Western Deep has undergone
predominantly coastal plain deposition while the Eastern Deep was
a transition zone between an estuary environment and limited
offshore deposition. The Eastern Deep was buried during the Eocene
period. Oil formation and migration occurred during the Miocene
period and is believed to have been over vertical distances of two
kilometres from the source formations to the coarse clastic
sandstone reservoirs.
Permit VIC/P-39 is surrounded by the Kingfish, Halibut and Mackerel
oil fields and the Marlin, Snapper, Bream and Barracouta gas
fields. Seismic mapping of the area is difficult due to the
existence of large, buried marine channels. Historically, seven
wells have been drilled in the area of permit VIC/P-39. However,
correct positioning of the exploration wells has been hindered by
the difficulty of interpreting seismic data. The buried marine
channels give a false representation of the subsurface geology. The
Veilfin-1 well tested gas with a small amount of condensate at a
depth of 9,760 feet and exhibited hydrocarbon shows in other
formations. Preliminary examination of seismic information
indicated that the well was drilled off structure and the area to
the south east of the well is considered a lead. The other wells
were also unsuccessful.
<PAGE> 46
Other leads recognized in the permit area are Lead A and Knifejaw.
The former is an upthrown, tilted fault block about six square
kilometres in area and the latter has been mapped as a downthrown
tilted fault block. Water depths in the area are less than 100
meters.
(c) Offshore Exploration Permit WA-199-P (5%), Timor Sea, Western
Australia
This permit area is located on the south east flank of the Sahul
Syncline in the Timor Sea, north east of the AC/P19 permit area.
The permit has been held since 1984 by the principal participants
and work to date has identified two main prospects, the Kittiwake
Prospect in the northern part of the permit area and the Avocet
Deep Prospect in the southern part of the permit area. The water
depth over the Kittiwake Prospect is about 300 feet and the target
formation for drilling is the Plover sandstones at a depth of about
9,000 feet. The target formation is at a depth of some 12,000 feet.
The Kittiwake-1 well was dry. The participants have decided to
apply for a six month extension and to farm-out a well on the
Avocet Deep.
China
China-Joint Study Agreement of March 18, 1996 (50%)
The Registrant and Moondance Energy Limited have completed the
study of existing seismic data and the preparation of the report on
the Nanling and Wuwei basins and are negotiating the next stage of
the work program.
The basins are situated immediately north and south of the Yangtze
River in south-eastern Anhui Province and cover approximately 2.5
million acres (3,900 square miles). The shipbuilding center of
Wuhu, a trading hub and deep-water river port, is located in the
eastern part of the Wuwei Basin. It has a population of about
600,000 and is the last deep water port on the Yangtze River,
accommodating ships of up to 10,000 tons year round. Shanghai is
some 180 miles downstream.
The basins are geologically closely linked to the Subei Basin in
North Jiangsu Province, about 100 miles to the northeast.
Regionally, there was marine sedimentary deposition from the
Proterozoic to Early Mesozoic eras. This was followed by what is
called the Indosinian orogeny. This was a period of folding and the
occurrence of thrust faults with later erosion occurring from the
collision of the Yangtze and Huanan plates into the Jurassic
period. There was then a change to continental sequences of
deposition with arid conditions in the Early Cretaceous, regional
compression thrust faults and north-west trending, high angle
faulting occurred. This was followed in the Late Cretaceous by
extensional rift basin development which were filled by thick
<PAGE> 47
continental deposits throughout the Cenozoic era. As a consequence,
the basins have complex structural features of highly folded and
eroded pre-Jurassic marine sequences which have been later thrusted
and buried under thousands of meters of continental sedimentary
formations. The current surface morphology is relatively flat and
the recent deposition of continental sediments hides the complex
structure.
The formations laid down in the Permian and Triassic periods are
considered the best source for hydrocarbons. Outcrops of formations
of Early Triassic age on the edges of the basins contain
hydrocarbons. Outcrops of the Late Cretaceous to early Cenozoic
strata have not been observed. The Paleozoic sediments are not
considered to be likely formations for the location of reservoirs.
On the south-western edge of the Wuwei Basin, there are outcrops of
Middle to Late Jurassic carbonates and on the south-east edge of
the Nanling basin there are outcrops of Cretaceous conglomerates
and an outcrop of a porous sandstone which may possibly be placed
in the Late Cretaceous period.
The regional folding that occurred during the Indosinian orogeny
created four-way dip closures that are the most favorable
structures for hydrocarbon entrapment. These "buried hill"
structures affect the overlying sediments. In the overlying
sediments, the normal and wrench faulting has created other traps
for hydrocarbons. Accordingly, there are a number of targets for
exploration, although the geology is complex. The basins contain
numerous other leads, including domal features and pinch outs,
unconformity, and stratigraphic and fault traps.
The basins have been lightly explored, with efforts by Chinese
exploration companies being limited to geophysical surveys and the
drilling of one deep exploration well. The participants have
reinterpreted about 360 miles of seismic data collected in the
Wuwei Basin in 1989 to 1994 and about 430 miles of pre-1982 analog
data and 52 miles of 1988 digital data in the Nanling Basin.
The existing seismic data from the Nanling and Wuwei Basins was
reprocessed in Shanghai for the Registrant as part of the ongoing
evaluation of these areas. The main Nanling Basin prospect is the
Hongzhuang Prospect, a mid-basin domal ridge approximately 8,000
feet deep at the crest, which is mapped in an upper level as
covering approximately 25 square miles, with almost 1,200 feet of
vertical relief. A second structure at about 12,000 feet deep
covering about eight square miles with almost 1,000 feet of
vertical relief has been detected.
Conceptual planning and costing of exploration wells on the
Hongzhuang Prospect in the Nanling Basin and the Longtangwan
Prospect in the Wuwei Basin is being completed, together with an
assessment of the costs of additional seismic programs, in
preparation for the next phase of work in these areas.
<PAGE> 48
GLOSSARY OF TERMS
Currency and Measurement-All currency amounts in this Statement are
stated in United States dollars unless otherwise indicated.
Conversion into imperial equivalents is as follows:
Metric Units Imperial Units
hectare 2.471 acres
meter (m) 3.281 feet
kilometer (km) 0.621 miles (5,280 feet)
Geologic Time
Name of Era Name of Period Number of Years Before Present
Quaternary Holocene 0 to 400,000
Pleistocene 400,000 to 1,800,000
Tertiary Pliocene 1,800,000 to 5,000,000
Miocene 5,000,000 to 24,000,000
Oligocene 24,000,000 to 36,500,000
Eocene 36,500,000 to 56,000,000
Paleocene 56,000,000 to 66,000,000
Mesozoic Cretaceous 66,000,000 to 140,000,000
Jurassic 140,000,000 to 200,000,000
Triassic 200,000,000 to 250,000,000
Paleozoic Permian 250,000,000 to 290,00,000
Carboniferous 290,000,000 to 365,000,000
Devonian 365,000,000 to 405,000,000
Silurian 405,000,000 to 425,000,000
Ordivician 425,000,000 to 500,000,000
Anticline is a geologic structure in which the sedimentary strata
are folded to form an arch or dome.
Basin is a segment of the crust of the Earth which has been
downwarped and in which thick layers of sediments have accumulated
over a long period of time.
Condensate refers to hydrocarbons associated with natural gas which
are liquid under surface conditions but gaseous in a reservoir
before extraction.
Depletion is the reduction in petroleum reserves due to production.
Development Phase refers to the phase in which a proven oil or gas
field is brought into production by drilling and completing
production wells.
Dry Hole is a well drilled without finding commercial quantities of
oil or gas.
<PAGE> 49
Exploration Well is a well drilled without knowledge of the
contents of the underlying rock.
Farm-In or Farm-Out refers to a common form of agreement between
petroleum companies where the holder of the petroleum interest
agrees to assign all or part of an interest in the ownership to
another party that is willing to fund agreed exploration
activities.
Formation is a reference to a group of rocks of the same age
extending over a substantial area of a basin.
Hydrocarbons is the general term for oil, gas, condensate and other
petroleum products.
Lead is an inferred geological feature or structural pattern which
on further investigation may be upgraded to a prospect.
Participating Interest or Working Interest is an equity interest
(compared with a royalty interest) in an oil and gas property
whereby the participating interest holder pays its proportionate
percentage share of development and operating costs and receives
the equivalent share of the proceeds of hydrocarbon sales after
deduction of royalties due on the gross income.
Pay Zone is the stratum of sedimentary rock in which oil or gas is
found.
Prospect is a potential hydrocarbon trap which has been confirmed
by geological and geophysical studies to the degree that drilling
of an exploration well is warranted.
Reservoir is a porous and permeable sedimentary rock formation
containing adequate pore space in the rock to provide storage space
for oil, gas or water.
Seal is an impervious sedimentary rock formation overlying a
reservoir that prevents the further migration of hydrocarbons.
Seismic refers to a geophysical technique using low frequency sound
waves to determine the subsurface structure of sedimentary rocks.
Trap is a geological structure in which hydrocarbons build up to
form an oil or gas field.
<PAGE> 50
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Registrant's securities are recorded on the books of its
transfer agent in registered form. However, the majority of such
shares are registered in the name of intermediaries such as
brokerage houses and clearing houses on behalf of their respective
clients and the Registrant does not have knowledge of the
beneficial owners thereof. The Registrant is not directly or
indirectly owned or controlled by a corporation or foreign
government.
As of December 31, 1997 the Registrant had authorized share capital
of 100,000,000 common shares without par value of which 28,262,398
shares were issued and outstanding.
Of the issued and outstanding shares, there are 1,406,250 shares
subject to escrow restrictions and held in escrow by Pacific
Corporate Trust Company ("Pacific Corporate"), 830 - 625 Howe
Street, Vancouver, British Columbia pursuant to an agreement dated
April 8, 1994. The escrow shares were originally issued in
accordance with Local Policy 3-07 of the British Columbia
Securities Commission. 1,361,250 shares are owned by International
Resource Management Corp.("IREMCO"), a private company the voting
shares of which are owned by Alex Guidi. Mr. Guidi is a member of
the board of directors, chairman and promoter of the Registrant. By
an agreement dated December 15, 1997 IREMCO agreed, subject to
receipt of regulatory approval, to sell 225,000 escrow shares to
Dr. David Bennett. Two former directors own 45,000 and they are by
the terms of the agreement dated April 8, 1994 obligated to
transfer the escrow shares held by them to IREMCO or surrender the
shares to the Registrant.
The agreement of April 8, 1994 provides that the beneficial
ownership of the common shares or any interest in them will not be
sold, assigned, hypothecated, alienated, released from escrow,
transferred within escrow or otherwise in any manner dealt with,
without the expressed consent, order or direction in writing from
the Executive Director, British Columbia Securities Commission (the
"BCSC"), except as may be required by the death or bankruptcy of
any shareholder. All voting rights attached to the escrowed shares
may be exercised by the registered owner and any dividends declared
on the common shares of the Registrant will similarly be paid to
the holders of the escrowed shares. The shares are released from
escrow on application to the Executive Director and an assessment
by the Executive Director of the progress of the Registrant's
business. If any shares are not released from escrow before April
25, 1999, those shares are to be cancelled.
<PAGE> 51
In January, 1998 the Registrant applied for the consent of the
Executive Director to the transfer of 225,000 escrow shares to Dr.
Bennett. In his position as president and chief executive officer
of the Registrant, Dr. Bennett is an eligible recipient of escrow
shares under applicable BCSC securities policies. On application
made January 20, 1998 to the BCSC for consent to the transfer of
225,000 of the escrow shares to Dr. David Bennett, the Registrant
was informed that the BCSC maintained an unofficial and unpublished
policy that consent to the transfer or release of escrow shares was
not given if the shares of an applicant were not listed for trading
on a stock exchange or facility recognized by the BCSC. The BCSC
does not recognize the Over-the-Counter Bulletin Board. The BCSC
declined to consider the application for consent to the transfer in
spite of the terms of the escrow agreement of April 8, 1994 and its
own policy statement.
The position of the BCSC is based on their view that adequate
regulatory supervision of the business of the Registrant may not be
provided unless subject to the review and policies of a body such
as the Vancouver Stock Exchange. The view of the Registrant is that
compliance with applicable common and statutory laws of Canada and
the United States and reliance by shareholders on the experience
and judgment of members of the board of directors and management of
the Registrant is sufficient for shareholders' and investors'
needs.
The Registrant obtained shareholder approval for the surrender and
cancellation of the escrow shares and replacement of the escrow
shares by the issue to IREMCO of 1,181,250 common shares for
CDN$0.01 per share and to the DJ and JM Bennett Family Trust of
225,000 common shares for CDN$0.01 per share. The shares to be
issued to the DJ and JM Bennett Family Trust will, after expiry of
the applicable statutory hold period, be released to the trust
based on the board of directors' assessment of the progress of the
business of the Registrant under the management of Dr. Bennett.
IREMCO's shares will not be subject to this condition. The
Registrant has entered into agreements dated April 15, 1998 with
IREMCO and the DJ and JM Bennett Family Trust to provide for the
issuance of such shares on receipt of shareholders' approval and
issuance of an exemption order under applicable securities
legislation.
The replacement shares were issued on June 25, 1998 after receipt
of the necessary exemption order.
The beneficial shareholdings, and addresses, of persons or entities
holding five per cent or more of the Registrant's common shares as
at December 31, 1997 is as follows:
<PAGE> 52
Title of Class Person or Group Amount Percentage of
and Address Class
Common shares Alex Guidi (1) 5,904,076 20.9% (3)
Vancouver, B.C.
Common shares Peter Loretto (2) 2,307,208 8.2% (3)
Richmond, B.C.
Notes:
(1)Mr. Guidi holds rights to acquire 994,000 common shares of the
Registrant at various prices and has agreed on receipt of
regulatory and shareholder approval to surrender escrow shares and
be issued 1,181,250 shares.
(2) Includes the holdings of Mrs. Tanya Loretto. At December 31,
1997 Mr. Loretto and Mrs. Tanya Loretto held rights to acquire
1,296,000 common shares at various prices.
(3) Calculated on a non-diluted basis. On a fully diluted basis,
Mr. Guidi beneficially owns 21.3% of the shares and Mr. Peter and
Mrs. Tanya Loretto beneficially own 10.5% of the shares.
The directors, officers and associated insiders as a group (four
persons) owned as of December 31, 1997, 5,906,866 shares of the
Registrant which is 20.9% of the outstanding shares on a non-
diluted basis or 24.6% of the outstanding shares of the Registrant
on a fully diluted basis. The holdings of the directors and
officers are as follows:
Number of Shares Percentage
Name Beneficially Held of Class
David Bennett (1) Nil Nil
Ronald Bertuzzi 1,790 0.006%
Alex Guidi 5,904,076 20.89%
John Holland Nil Nil
Brad Holland Nil Nil
Mark Katsumata 1,000 0.004%
Note:
(1) By an agreement dated April 15, 1998 the DJ and JM Bennett
Family Trust subscribed for 225,000 shares at CDN$0.01 per share,
subject to receipt of regulatory and shareholder approval.
The Securities Act (Yukon) does not require reporting by insiders.
The Registrant is a reporting issuer in British Columbia and
insiders comply with Part 12 of the Securities Act (British
Columbia). Insiders (generally officers and directors of the
Registrant and its subsidiaries, persons who own or control at
<PAGE> 53
least ten percent of the voting shares and employees or consultants
of the Registrant) are required to file individual insider reports
of changes in their ownership in the Registrant's securities within
the first ten days of the calendar month following any trade in the
Registrant's securities. Copies of such reports are available for
public inspection at the offices of the British Columbia Securities
Commission, Suite 200 - 865 Hornby Street, Vancouver, British
Columbia V6Z 2H4 phone (604) 899-6500, facsimile: (604) 899-6506.
The names, holdings, exercise price and expiry date of outstanding
options to acquire common shares of the Registrant are as follows:
Name Number of Shares Exercise Price Expiry Date
Under Option (1)
David Bennett (2) 200,000 $2.50 10/30/2000 (4)
Jennifer
Bennett (2) 50,000 2.50 03/25/1999
Alex Guidi 500,000 2.50 10/30/2000 (4)
Brad Holland 300,000 2.50 05/13/2000 (4)
John Holland (3) 500,000 2.50 03/25/1999
Mark Katsumata 6,000 3.00 05/12/1999
Jennifer Muzzin 5,000 3.125 05/22/1999
Paul Townson 5,000 3.125 05/22/1999
Notes:
(1) In the year ended December 31, 1997, options to acquire 279,000
shares were exercised.
(2) To be transferred to the DJ and JM Bennett Family Trust on
receipt of regulatory approval.
(3) After December 31, 1997 the option held by John Holland expired
on his death.
(4) Term extended pursuant to agreements dated May 7, 1998.
The names, holdings, exercise price and expiry date of outstanding
warrants to purchase common shares of the Registrant are as
follows:
Number of
Name Share Purchase Price Expiry Date
Warrants
Tracy Godoy 160,000 CDN$3.485 05/28/1999 (3)
Alex Guidi 494,000 CDN$3.485 05/27/1999 (3)
Peter Loretto 146,000 (1) CDN$3.485 05/27/1999 (3)
1,000,000 (2) Note (2) 07/03/2000
Tanya Loretto 150,000 CDN$3.485 05/27/1999 (3)
<PAGE> 54
Notes:
(1) In the year ended December 31, 1997, warrants to acquire 50,000
shares were exercised.
(2) By an agreement dated June 2, 1997, Mr. Loretto purchased
1,000,000 units for $1.80 per unit. Each unit is comprised of one
common share and one non-transferable share purchase warrant. Each
share purchase warrant entitles the holder to purchase a common
share for $1.90 before July 4, 1998, for $2.00 from July 4, 1998 to
July 3, 1999 and for $2.10 from July 4, 1999 to July 3, 2000.
(3) Term extended by agreements dated May 8, 1998.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The names, municipality of residence, age and position held of the
directors and officers of the Registrant are as follows:
Name and Municipality of Age Position Held
Residence
Dr. David Bennett (1) 51 President, Chief Executive
Karori, Wellington Officer and Director
New Zealand
Ronald Bertuzzi (1)(2) 60 Director
Vancouver, British Columbia
Canada
Alex P. Guidi 38 Chairman of the Board
Vancouver, British Columbia and Director
Canada
Brad J. Holland (1) 40 Director
Dhahran, Saudi Arabia
Mark Katsumata 31 Secretary
Surrey, British Columbia
Canada
Notes:
(1) Member of audit committee.
(2) Appointed on March 31, 1998.
<PAGE> 55
Dr. David Bennett has been a member of the board of directors and
an officer since October, 1996. Dr. Bennett received a Bachelor of
Arts (Natural Sciences) from Cambridge University in 1968 and a
Master of Science in Exploration Geophysics from the University of
Leeds in 1969. In 1973, Dr. Bennett received his doctorate in
Geophysics from the Australian National University and from 1973 to
1975 conducted post-doctoral research at the University of Texas
(Dallas). From 1975 to 1977, Dr. Bennett was a post-doctoral fellow
and lecturer at the University of Wellington, New Zealand. From
1977 to 1982, Dr. Bennett was employed by the Department of
Scientific and Industrial Research, Government of New Zealand and
from 1982 to 1994 was employed as geophysicists, exploration
manager and finally general manager by New Zealand Oil and Gas Ltd.
Dr. Bennett was an independent consultant from 1994 to 1996 when he
joined the Registrant and other associated companies. Dr. Bennett
has been the president and a member of the board of directors of
the Registrant since October, 1996. Since November, 1996, Dr.
Bennett has been a member of the board of directors, and since
April, 1997 the president, of Trans-Orient Petroleum Ltd. and since
April, 1997 a member of the board of directors and president of
Durum Energy Corp.
Mr. Bertuzzi was a member of the board of directors from October 2,
1992 to October 30, 1996 and was appointed on March 31, 1998 to
fill the vacancy resulting from the passing of Mr. John Holland.
Mr. Bertuzzi received a Bachelor of Arts from the University of
British Columbia in 1965 and has worked in the medical sales and
product development industries since that time. Mr. Bertuzzi is a
member of the board of directors of several companies, including
Trans New Zealand Oil Company, of which he is president, and
Gondwana Energy, Ltd., of which he is secretary.
Mr. Alex Guidi has been a member of the board of directors and an
officer since October, 1996. Mr. Guidi has been involved in public
markets since 1980 and since 1986 in the oil and gas sector. Mr.
Guidi has organized and financed five oil and gas companies. Mr.
Guidi has been chairman of the board and a member of the board of
directors of the Registrant since October, 1996. From July, 1988 to
December, 1995, Mr. Guidi was a member of the board of directors of
Trans-Orient Petroleum Ltd. and was elected a member of the board
of directors on January 28, 1998 and chairman on April 22, 1998.
From December, 1990 to May, 1996, Mr. Guidi was a member of the
board of directors of Durum Energy Corp. and was president from
August, 1992 to May, 1996. See Item 7-Certain Relationships and
Related Transactions.
Mr. Brad Holland was a member of the board of directors from May,
1996 to February, 1997, an officer from February, 1997 to October
15, 1997 and was appointed a member of the board on October 15,
1997. Mr. Holland received a Bachelor of Science in Chemical
Engineering from the University of Alberta in 1979. Mr. Holland was
initially employed for two years by John Holland Consultants Ltd.
<PAGE> 56
in property valuation, production management, evaluation and
financing for production acquisition. From 1982 to 1988, Mr.
Holland was employed by Canadian Western Natural Gas, a natural gas
utility. From 1988 to 1992, Mr. Holland was employed as a senior
project engineer with Nova Corp. where he was responsible for the
design and construction of large diameter pipeline projects. Since
1992, Mr. Holland has been employed by ARAMCO in Saudi Arabia in
the construction of pipelines.
Mr. Mark Katsumata was a director and officer from December, 1994
to November, 1995 and an officer from November, 1995 to February,
1997. Mr. Katsumata was appointed an officer on October 15, 1997.
Mr. Katsumata is a certified general accountant who was in public
practice from 1990 to 1994 in Vancouver, B. C. In 1994 Mr.
Katsumata joined the Registrant and associated companies as
controller. Mr. Katsumata is also the secretary of Trans-Orient
Petroleum Ltd., Durum Energy Corp. and Trans new Zealand Oil
Company.
All directors have a term of office expiring at the next annual
general meeting of the Registrant to be scheduled in June, 1998
unless re-elected or unless a director's office is earlier vacated
in accordance with the by-laws of the Registrant or the provisions
of the Business Corporations Act (Yukon). All officers have a term
of office lasting until their removal or replacement by the board
of directors.
ITEM 6. EXECUTIVE COMPENSATION
During the year ended December 31, 1997 the Registrant had two
executive officers: David Bennett, president and chief executive
officer and Alex Guidi, chairman of the board. The aggregate cash
compensation paid or payable by the Registrant and its subsidiaries
to its executive officers during the year ended December 31, 1997
was $132,214 all of which was compensation paid to Dr. Bennett.
During the year ended December 31, 1996 the Registrant had three
executive officers: David Bennett, president and chief executive
officer; Alex Guidi, chairman of the board; and John Holland, a
former president and chief executive officer. The aggregate cash
compensation paid or payable by the Registrant and its subsidiaries
to its executive officers during the year ending December 31, 1996
was $80,092. During the year ended December 31, 1995, the
Registrant had two executive officers: John Holland, a former
president and chief executive officer, and Mark Katsumata, a former
president and chief executive officer. No cash compensation was
paid by the Registrant and its subsidiaries to its executive
officers during the year ended December 31, 1995.
No long-term incentive plan awards have been made to the directors
and officers for the Registrant's most recently completed financial
year.
<PAGE> 57
No other cash compensation, including salaries, fees, commissions,
and bonuses, was paid or is to be paid to the directors and
officers of the Registrant for services rendered for the financial
years ended December 31, 1997 or 1996, nor was any remuneration
paid to the Registrant's directors in their capacity as such.
No profit sharing, pension or retirement benefit plans have been
instituted by the Registrant and none are proposed at this time.
There are no arrangements for payments on termination of any member
of management in the event of a change of control.
The aggregate value of directors' and senior officers' options
exercised below the market price of the shares at the time of
exercise for the year ended December 31, 1997 was $570,660, for the
year ended December 31, 1996 was $2,365,008 and for the period
ended December 31, 1995 was nil. These benefits are calculated as
the difference between the market price and option exercise price
on the date of exercise. Actual proceeds of the disposition will
usually vary from the date of the exercise to the date of actual
disposition of such shares.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisitions From or With Associated Companies
The Registrant has acquired interests in some petroleum properties
with four other companies, Durum Energy Corp. ("Durum"), Trans-
Orient Petroleum Ltd. ("TOP"), Trans New Zealand Oil Company
("TNZ") and Gondwana Energy Ltd. ("Gondwana"). Mr. Alex Guidi is
the promoter, a member of the board of directors and the chairman
of the Registrant. Mr. Guidi is also the promoter and a member of
the board of directors of TOP and TNZ and the promoter of Gondwana
and the chairman of TOP. Mr. Guidi is a shareholder of Durum. Dr.
David Bennett is the president, chief executive officer and a
member of the board of directors of the Registrant, TOP and Durum.
Mr. Ronald Bertuzzi is a member of the board of directors of the
Registrant, TNZ and Gondwana and is president of TNZ and secretary
of Gondwana. Messrs. Bernhard Zinkhofer and Peter McKeown are
members of the board of directors of TOP and Durum. They have no
direct relationship to the Company. Mr. Mark Katsumata is the
secretary of the Registrant, TOP, Durum and TNZ.
At April 30, 1998 Mr. Guidi beneficially held 5,904,076 common
shares of the Registrant of a total outstanding of 28,262,398
common shares (20.9%) and held rights to acquire an additional
994,000 common shares at various prices. At April 30, 1998 Mr.
Guidi beneficially held 10,021,400 common shares of TOP of a total
outstanding of 28,769,060 common shares (34.8%) and held rights to
acquire an additional 6,800,000 common shares at various prices. At
April 30, 1998 Mr. Guidi beneficially held 1,000,000 common shares
of Durum of a total outstanding of 9,541,908 common shares (10.5%)
<PAGE> 58
subject to an agreement dated April 15, 1997 among Alex Guidi,
Peter Loretto, Tanya Loretto and S. David Anfield as trustee. At
April 30, 1998 Mr. Guidi held 5,031,000 common shares of TNZ of a
total outstanding of 11,000,000 common shares (45.7%).
Other
No director or senior officer, and no associate or affiliate of the
foregoing persons, and no insider has, or has had any material
interest, direct or indirect, in any transactions, or in any
proposed transaction which in either such case has materially
affected or will materially affect the Registrant or its
predecessors except as disclosed herein.
Related Party Transactions
In the year ended December 31, 1997, consulting fees of $132,214
were paid to Dr. David Bennett, president and chief executive
officer of the Registrant. During the fiscal year ended December
31, 1996, consulting fees of $80,092 (December 31, 1995 fiscal
period - $29,274) were paid to Dr. Bennett.
In May, 1996, the Registrant sold 1,000,000 units pursuant to a
private placement. Each unit consists of one common share of the
Registrant and one share purchase warrant. Each share purchase
warrant entitles the holder to purchase a common share for
CDN$3.485 per share until May 27, 1998. Mr. Alex Guidi, chairman of
the board and a director of the Registrant, acquired 494,000 units.
By an agreement dated May 18, 1995, the Registrant granted Durum
Energy Corp. ("Durum"), a company with a common director, the right
to acquire up to a 20% interest in future exploration ventures
undertaken by the Registrant for a one year period, renewable
annually. In return, Durum would provide the Registrant with
certain services and duties in connection with the conduct of the
business of the Registrant. During the fiscal year ended December
31, 1996, this agreement was cancelled.
By an agreement dated September 1, 1997 the Registrant assigned a
participating interest of 10.0% in petroleum exploration permit
38328, East Coast Basin, New Zealand to a subsidiary of Trans-
Orient Petroleum Ltd. for nominal consideration.
By an agreement dated September 15, 1997 the Registrant satisfied
obligations of Trans-Orient Petroleum Ltd. relating to PEP 38328 in
consideration of the issuance of 233,510 shares of Trans-Orient
Petroleum Ltd. for $1.00 per share.
<PAGE> 59
By an agreement dated September 1, 1997 the Registrant assigned a
participating interest of 10% in petroleum exploration permit
38256, Canterbury Basin, New Zealand to a subsidiary of Trans New
Zealand Oil Company Ltd. and a participating interest of 5.0% to a
subsidiary of Gondwana Energy Ltd. for nominal consideration. This
agreement was cancelled on January 31, 1998.
By an agreement dated June 30, 1997, the Registrant assigned a
participating interest of six per cent in petroleum exploration
permit PEP 38716, Taranaki Basin, New Zealand to Durum Energy Corp.
for nominal consideration.
By an agreement dated June 30, 1997, the Registrant assigned a
participating interest of 20% in petroleum prospecting license PPL
192, Papua New Guinea to a subsidiary of Trans Orient Petroleum
Ltd. and a participating interest of 20% in petroleum prospecting
license PPL 192, Papua New Guinea to a subsidiary of Durum Energy
Corp. for nominal consideration.
Any member of the Registrant's management that, in its capacity as
such, locates or acquires an interest in an oil and gas property
must, because of his or her fiduciary relationship with the
Registrant, present the opportunity to effect such acquisition by
the Registrant on terms commensurate with those prevailing in the
industry. If however, the Registrant declines to participate in the
acquisition of any such property, these members of the Registrant's
management may effect an acquisition for their own account. The
directors and officers of the Registrant are both by statute and at
common law, required to act fairly and in the best interests of the
Registrant and are not permitted to breach this fiduciary duty for
their own benefit.
In many cases, application for exploration permits has been made
without consideration of which company in the IREMCO group would
participate in the permit. A case in point in PPL 192, Papua New
Guinea, in which the Registrant was granted an 80% participating
interest. The Registrant then conveyed a 20% participating interest
for nominal consideration to Trans-Orient Petroleum Ltd. and Durum
Energy Corp. In both cases, the Registrant may have been able to
obtain more favorable terms from third parties. Investors not
willing to rely on the judgment of management in allocating
interests in exploration properties should not consider an
investment in the Registrant or in associated companies.
ITEM 8. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Registrant is
subject or which are anticipated or threatened.
<PAGE> 60
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The shares of the Registrant traded on the Vancouver Stock Exchange
("VSE") in Vancouver, British Columbia, Canada to September 12,
1996. Since January, 1996 the shares of the Registrant have traded
and continue to trade on the OTC Bulletin Board under the symbol
"INDX". Summary trading by quarter, adjusted for the 1996 stock
subdivisions, for the two most recent calendar years ending
December 31, 1997 on the VSE and the OTC Bulletin Board are as
follows:
VSE and OTC Bulletin Board
(in Canadian dollars unless otherwise indicated)
Year and High Low Close Trading Volume
Quarter
1996
First Quarter CDN$2.75 CDN$0.97 CDN$2.67 6,100,851
Second Quarter CDN$7.80 CDN$2.71 CDN$5.80 28,021,277
Third Quarter (1) 10.25 3.00 5.75 9,214,099
Fourth Quarter 7.75 1.75 3.13 8,341,500
1997
First Quarter $4.031 $0.30 $2.25 10,075,800
Second Quarter $4.437 $2.13 $4.312 5,675,200
Third Quarter $6.562 $3.50 $3.656 10,199,200
Fourth Quarter $3.75 $1.25 $2.438 6,399,900
Note:
(1) To September 12, 1996 on the VSE and thereafter only on the OTC
Bulletin Board.
As at June 30, 1997 there were 28,262,398 shares outstanding. At
June 30, 1997 there were 1,180 holders of record within the United
States collectively holding 18,951,627 of such shares, or
approximately 67% of outstanding shares. To the best of the
knowledge, information and belief of the Registrant, shares of the
Registrant are held by U.S. residents through brokerage clearing
houses, depositories or otherwise in unregistered form, but the
actual number and percentage of these shares is not known by the
Registrant.
No cash dividends have been declared by the Registrant nor are any
intended to be declared. The Registrant is not subject to any legal
restrictions respecting the payment of dividends (except that they
may not be paid to render the Registrant insolvent). Dividend
policy will be based on the Registrant's cash resources and needs
and it is anticipated that all available cash will be needed for
property development for the foreseeable future.
<PAGE> 61
The Registrant believes that its market price is a reflection of
actual sales and purchases. OTC BB quotations may reflect
interdealer prices, without retail markup, markdown or commission
and may not necessarily reflect actual transactions.
Exchange Controls and Other Limitations Affecting Security Holders
There is no law or governmental decree or regulation in Canada that
restricts the export or import of capital, or affects the
remittance of dividends, interest or other payments to a non-
resident holder of common shares of the Registrant, other than
withholding tax requirements. The 1980 Tax Convention between
Canada and the United States provides for a rate of withholding tax
on dividends of five per cent of the amount to be paid if the
recipient is a corporation and holds more than 10% of the shares of
the Registrant and a withholding tax of 15% in all other cases. In
the absence of the 1980 Tax Convention, the rate would be 25% per
cent on all distributions of dividends.
There is no law or governmental decree or regulation in Canada that
restricts the export or import of capital, or affects the
remittance of dividends, interest or other payments to a non-
resident holder of Common shares, other than withholding tax
requirements. Any such remittances to United States residents are
subject to withholding tax. See "Taxation".
There is no limitation imposed by the laws of Canada or by the
charter or other constituent documents of the Registrant on the
right of a non-resident to hold or vote common shares, other than
as provided in the Investment Canada Act (Canada) (the "Investment
Act"). The following discussion summarizes the principal features
of the Investment Act for a non-resident who proposes to acquire
common shares. It is general only, it is not a substitute for
independent advice from an investor's own advisor, and it does not
anticipate statutory or regulatory amendments.
The Investment Act generally prohibits implementation of a
reviewable investment by an individual, government or agency
thereof, corporation, partnership, trust or joint venture (each an
"entity") that is not a "Canadian" as defined in the Investment Act
(a "non-Canadian"), unless after review the minister responsible
for the Investment Act (the "Minister") is satisfied that the
investment is likely to be of net benefit to Canada. An investment
in common shares by a non-Canadian other than a "WTO Investor" (as
that term is defined in the Investment Act and which term includes
entities which are nationals of or are controlled by nationals of
members of the World Trade Organization) when the Registrant was
not controlled by a WTO Investor, would be reviewable under the
Investment Act if it was an investment to acquire control of the
Registrant and the value of the assets of the Registrant was $5
million or more, or if an order for review was made by the federal
cabinet on the grounds that the investment related to Canada's
<PAGE> 62
cultural heritage or national identity. An investment in common
shares by a WTO Investor, or by a non-Canadian when the Registrant
was controlled by a WTO Investor, would be reviewable under the
Investment Act if it was an investment to acquire control of the
Registrant and the value of the assets of the Registrant was not
less than a specified amount, which for 1997 is CDN. $172 million,
and which increases each year by an amount equal to the increase in
current nominal Gross Domestic Product. A non-Canadian would
acquire control of the Registrant for the purposes of the
Investment Act if the non-Canadian acquired a majority of the
common shares. The acquisition of less than a majority but one-
third or more of the common shares would be presumed to be an
acquisition of control of the Registrant unless it could be
established that, on the acquisition, the Registrant was not
controlled in fact by the acquirer through the ownership of common
shares.
Certain transactions relating to common shares would be exempt from
the Investment Act, including
(a) an acquisition of common shares by a person in the ordinary
course of that person's business as a trader or dealer in
securities,
(b) an acquisition of control of the Registrant in connection with
the realization of security granted for a loan or other financial
assistance and not for a purpose related to the provisions of the
Investment Act, and
(c) an acquisition of control of the Registrant by reason of an
amalgamation, merger, consolidation or corporate reorganization
following which the ultimate direct or indirect control in fact of
the Registrant, through the ownership of common shares, remained
unchanged.
Acquisitions of control by WTO Investors of certain Canadian
businesses are subject to review even if the value of the assets of
the Canadian business does not exceed the annual threshold
applicable to WTO Investors. For example, investments in the
following sectors are subject to the $5 million threshold
applicable to all non-Canadians: uranium, financial services,
transportation services and cultural businesses, which include
publication, distribution and sale of books, magazines,
periodicals, newspapers, music, film and video products and the
exhibition of film and video products and broadcast media such as
television and radio services. The Minister has also issued an
Interpretation Note advising that oil and gas properties, and other
mineral properties, which are only at the exploration stage, are
not considered to be a business. A producing mine, however, is
considered to be a business as is a property on which development
of a mine has been commenced for the purpose of production.
<PAGE> 63
Taxation
The following summarizes the principal Canadian federal income tax
considerations applicable to the holding and disposition of common
shares by a holder of one or more common shares (the "Holder") who
is resident in the United States of America and holds common shares
solely as capital property. This summary is based on the current
provisions of the Income Tax Act (Canada) (the "Tax Act"), the
regulations thereunder and all amendments to the Tax Act publicly
proposed by the government of Canada to the date hereof, and on the
current provisions of the Canada-U.S. 1980 Tax Convention (the
"Treaty"). It has been assumed that all currently proposed
amendments to the Tax Act will be enacted as proposed and there is
no other relevant change in any governing law, although no
assurance can be given in these respects.
Every Holder is liable to pay a Canadian withholding tax on every
dividend that is or is deemed to be paid or credited to the Holder
on the Holder's common shares. Under the Treaty, the rate of
withholding tax is, if the Holder is a company that owns at least
10% of the voting stock of the Registrant and beneficially owns the
dividend, 5%, and in any other case 15%, of the gross amount of the
dividend.
Pursuant to the Act, a Holder will not be subject to Canadian
capital gains tax on any capital gain realized on an actual or
deemed disposition of a common share, including a deemed
disposition on death, provided either that the Holder did not hold
the common share as capital property used in carrying on a business
in Canada, or that neither the Holder nor persons with whom the
Holder did not deal at arm's length alone or together owned 25% or
more of the issued shares of any class of the Registrant at any
time in the five years immediately preceding the disposition.
Subject to certain limited exceptions, a Holder who otherwise would
be liable for Canadian capital gains tax in consequence of an
actual or deemed disposition of a common share will generally be
relieved by the Treaty from such liability.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
In the past three fiscal years, the Registrant has issued in Canada
the following unregistered securities at the following prices.
Securities are either director and employee incentive options
entitling the holder to purchase common shares, private placements
of common shares and share purchase warrants entitling the holder
to purchase common shares, common shares issued on share splits or
common shares issued on exercise of options or share purchase
warrants. There were no underwriters engaged and no underwriting
discounts or commissions paid. None of the securities was
distributed by the Registrant in the United States and accordingly
no exemptions from registration under U.S. legislation needed to be
claimed.
<PAGE> 64
Type of Number of
Date Security Securities Consideration
1995
March 20, 1995 Option 200,000 Nominal
July 13, 1995 Options 104,000 Nominal
March to October Common shares 2,498,000 $579,789
on warrant
exercise
1996
March 21, 1996 Option 375,000 Nominal
April 8, 1996 Option 334,000 Nominal
April 1-10, 1996 Common shares 386,500 $1,839,301
on option
exercise
April 15, 1996 Stock split 3,945,559 Nominal
April 24, 1996 Option 606,000 Nominal
April 19-28, 1996 Common shares 1,103,250 $5,608,418
on option
exercise
May 13, 1996 Option 561,000 Nominal
May 31, 1996 Stock split 12,940,111 Nominal
July, 1996 Common shares 1,000,000 (1) CDN$3,030,000
and warrants
October 30, 1996 Options 700,000 Nominal
June to Dec, 1996 Common shares 53,000 $167,230
on option
exercise
1997
March 25, 1997 Options 550,000 Nominal
May 12, 1996 Option 10,000 Nominal
May 22, 1997 Options 10,000 Nominal
June 2, 1997 Common shares 1,000,000 (2) $1,800,000
and warrants
Mar-July, 1997 Common shares 279,000 $652,151
on option
exercise
Sept. 10, 1997 Common shares 50,000 $125,667
on warrant
exercise
Notes:
(1) By an agreement dated May 1996, the Registrant sold 1,000,000
units for CDN$3.03 per unit by private placement. Each unit
consists of one common share and one share purchase warrant. Each
share purchase warrant entitles the holder to purchase a common
share for CDN$3.485 per share until May 27, 1999. Mr. Alex Guidi,
chairman of the board and a director of the Registrant, acquired
494,000 units.
<PAGE> 65
(2) By an agreement dated June 2, 1997, Mr. Loretto purchased
1,000,000 units for $1.80 per unit. Each unit is comprised of one
common share and one non-transferable share purchase warrant. Each
share purchase warrant entitles the holder to purchase a common
share for $1.90 before July 4, 1998, for $2.00 from July 4, 1998 to
July 3, 1999 and for $2.10 from July 4, 1999 to July 3, 2000.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The securities of the Registrant to be registered are common shares
without par value, outstanding director and employee options and
outstanding share purchase warrants.
All common shares of the Registrant's common stock, both issued and
unissued are of the same class and rank equally as to dividends,
voting powers and participation in the assets of the Registrant on
a winding-up or dissolution. No common shares have been issued
subject to call or assessment. There are no preemptive or
conversion rights, and no provisions for redemption, purchase for
cancellation, surrender of sinking fluid or purchase fund.
Provisions as to the creation or modifications, amendments or
variations of such rights or such provisions are contained in the
Business Corporations Act (Yukon). Each common share is entitled to
one vote with respect to the election of directors and other
matters to which shareholders are ordinarily entitled. All
references to "shares" or "common shares" herein refer to common
shares without par value of the Registrant or its predecessors, all
of which have had only one class or kind of security authorized or
issued in the past, that being common shares without par value.
Pursuant to the applicable provisions of the Business Corporations
Act (Yukon) (the "Corporations Act"), no right or special right
attached to any share of the Registrant, may be prejudiced,
modified or otherwise "interfered with" under the Corporations Act
or the by-laws of Registrant, unless the members of the class of
shareholders affected consent to such action by a separate
resolution of the members of that class adopted by at least a
majority of two-thirds of the votes cast with respect to the
resolution. Under certain circumstances, two-thirds of the votes
cast with respect to such resolution may be less than a majority of
more than 50% of the total number of shares in that class which are
issued and outstanding, since under the by-laws of the Registrant,
a quorum for a general meeting of the holders of a class of share
consist of two shareholders holding not less than five percent of
the outstanding shares of that class share.
The attributes of outstanding options and share purchase warrants
are described elsewhere in this Statement.
The Registrant's registrar and transfer agent is Pacific Corporate
Trust Company, Suite 830 - 625 Howe Street, Vancouver, British
Columbia, Canada V6C 3B8, telephone (604) 689-9853, facsimile (604)
689-8144.
<PAGE> 66
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except with respect to an action by the Registrant to obtain a
judgment, the constating documents of the Registrant provide for
the indemnification of any director, officer, employee or agent of
the Registrant if the person acted honestly and in good faith with
a view to the best interests of the Registrant and, with respect to
any criminal action or administrative proceeding, had reasonable
grounds to believe that his action was lawful. The Registrant has
not, however, entered into any agreement with a director and
officer providing for the grant of a covenant of indemnity by the
Registrant pursuant to this provision in the constating documents
of the Registrant.
With respect to an action to obtain a judgment, the Registrant is
required under the Business Corporations Act (Yukon) before
performing its obligation to indemnify to obtain the approval of
the Supreme Court (Yukon) of the indemnity and any payment to be
made in connection with the indemnity.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDO-PACIFIC ENERGY LTD.
CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
<PAGE> 67
AUDITORS' REPORT
To the Directors of Indo-Pacific Energy Ltd.
(formerly Consolidated Newjay Resources Ltd.)
We have audited the consolidated balance sheets of Indo-Pacific
Energy Ltd. (formerly Consolidated Newjay Resources Ltd.) as at
December 31, 1997 and 1996 and the related consolidated statements
of loss and deficit and cash flows for the years ended December 31,
1997 and 1996 and for the eleven month period ended December 31,
1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards in the United States. Those standards require
that we plan and perform an audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of the Company as at December 31, 1997 and 1996 and the
results of its operations and the cash flows for the years ended
December 31, 1997 and 1996 and for the eleven month period ended
December 31, 1995 in conformity with generally accepted accounting
principles in the United States.
/s/ Sadovnick Telford + Skov
CHARTERED ACCOUNTANTS
Vancouver, British Columbia
Canada
February 20, 1998
<PAGE> 68
INDO-PACIFIC ENERGY LTD.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN UNITED STATES DOLLARS)
AS AT DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Note
Reference 1997 1996
<S> <C> <C> <C>
CURRENT
Cash and short-term deposits $10,255,407 $ 9,442,554
Accounts receivable 134,474 142,835
Due from related companies 8 152,373 404
Prepaid expenses 9,469 11,472
Marketable securities 3 233,510 -
----------- -----------
10,785,233 9,597,265
PETROLEUM AND
NATURAL GAS PROPERTIES 4 1,929,839 1,113,928
PROPERTY AND EQUIPMENT 5 115,244 34,933
----------- -----------
$12,830,316 $10,746,126
=========== ===========
LIABILITIES
CURRENT
Accounts payable and
accrued liabilities $ 45,704 $ 81,183
Due to related company - 5,852
----------- -----------
45,704 87,035
----------- -----------
SHAREHOLDERS' EQUITY
SHARE CAPITAL 6 17,719,726 15,512,578
DEFICIT (4,935,114 (4,853,487)
----------- -----------
12,784,612 10,659,091
----------- -----------
$12,830,316 $10,746,126
=========== ===========
APPROVED BY THE DIRECTORS:
/s/ D. J. Bennett, Director
/s/ A. P. Guidi, Director
</TABLE>
<PAGE> 69
INDO-PACIFIC ENERGY LTD.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(EXPRESSED IN UNITED STATES DOLLARS)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
AND FOR THE ELEVEN MONTH PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
For the Eleven
For the Year For the Year Month Period
Ended Ended Ended
Note December 31, December 31, December 31,
Reference 1997 1996 1995
(Note 11)
<S> <C> <C> <C> <C>
REVENUES
Petroleum and natural gas sales $ 487,941 $ 163,388 $ -
Interest income 382,118 263,044 38,980
---------- ----------- -----------
870,059 426,432 38,980
---------- ----------- -----------
COST OF SALES
Amortization and depletion 97,827 98,258 958
Production costs 67,593 19,338 -
Royalties 44,209 19,067 -
Write-down of petroleum
properties 4 (b) 162,048 37,653 -
---------- ----------- -----------
371,677 174,316 958
---------- ----------- -----------
498,382 252,116 38,022
---------- ----------- -----------
EXPENSES
General and administrative
(Schedule) 580,009 1,137,389 181,666
---------- ----------- -----------
LOSS FOR THE PERIOD (81,627) (885,273) (143,644)
DEFICIT - BEGINNING OF PERIOD (4,853,487) (3,968,214) (3,824,570)
----------- ----------- -----------
DEFICIT - END OF PERIOD $(4,935,114) $(4,853,487) $(3,968,214)
=========== =========== ===========
BASIC LOSS PER SHARE $ (0.00) $ (0.04) $ (0.01)
=========== =========== ===========
DILUTED LOSS PER SHARE $ (0.00) $ (0.04) $ (0.01)
=========== =========== ===========
</TABLE>
<PAGE> 70
INDO-PACIFIC ENERGY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
AND FOR THE ELEVEN MONTH PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
For the Eleven
For the Year For the Year Month Period
Ended Ended Ended
December 31, December 31, December 31,
1997 1996 1995
(Note 11)
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss for the period $ (81,627) $ (885,273) $(143,644)
Items not affecting cash flows from
operating activities:
Amortization and depletion 97,827 98,258 958
Write-down of petroleum
properties 162,048 37,653 -
Write-off of
incorporation costs - 867 -
---------- ----------- ---------
178,248 (748,495) (142,686)
Changes in non-cash working capital items:
Accounts receivable 8,361 (119,416) (9,908)
Due from related companies (157,821) 5,448 -
Prepaid expenses 2,003 14,099 (23,399)
Accounts payable and
accrued liabilities (35,479) 14,618 53,519
---------- ----------- ---------
Net cash used in
operating activities (4,688) (833,746) (122,474)
---------- ----------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES
Issue of share capital 2,207,148 10,518,839 595,819
---------- ----------- ---------
Net cash provided by
financing activities 2,207,148 10,518,839 595,819
---------- ----------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES
Marketable securities (233,510) - -
Petroleum and natural
gas properties (1,064,976) (1,182,655) (50,118)
Property and equipment (91,121) (35,529) (7,109)
---------- ----------- ---------
Net cash used in
investing activities (1,389,607) (1,218,184) (57,227)
---------- ----------- ---------
NET INCREASE IN CASH POSITION 812,853 8,466,909 416,118
CASH AND SHORT-TERM DEPOSITS
- BEGINNING OF PERIOD 9,442,554 975,645 559,527
---------- ----------- ---------
CASH AND SHORT-TERM DEPOSITS
- END OF PERIOD $10,255,407 $ 9,442,554 $ 975,645
========== =========== =========
</TABLE>
<PAGE> 71
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 1 - NATURE OF OPERATIONS
The Company was incorporated under the Company Act (British Columbia) and
continued its jurisdiction of incorporation to the Yukon Territory under the
Business Corporations Act (Yukon). Its major activity is the acquisition,
exploration and development of petroleum and natural gas properties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Consolidation
These consolidated financial statements include the accounts of Indo-Pacific
Energy Ltd. and its wholly-owned subsidiaries, Indo Overseas Exploration
Ltd., Indo-Pacific Energy Pty Limited, Indo-Pacific Energy (PNG) Pty.
Limited, and Source Rock Holdings Limited and its wholly-owned subsidiaries,
Indo-Pacific Energy (NZ) Limited, Ngatoro Energy Limited (formerly Minora
Energy (New Zealand) Limited), and PEP 38716 Limited.
b) Joint Operations
Substantially all of the Company's activities relate to the exploration for
and production of petroleum and natural gas which are conducted jointly with
other companies and accordingly, the accounts reflect only the Company's
proportionate interest in these activities.
c) Cash and Short-Term Deposits
Cash and short-term deposits include Government treasury bills and Bankers'
Acceptance with maturities no longer than 90 days, together with accrued
interest.
d) Petroleum and Natural Gas Properties
The Company follows the full cost method of accounting for petroleum and
natural gas operations for each licence whereby all costs associated with the
acquisition of, exploration for and development of petroleum and natural gas
reserves are capitalized. Such costs include lease acquisitions, geological
and geophysical evaluations, lease rentals on non-producing properties, costs
of drilling productive and non-productive wells and overhead expenses
directly related to these activities. Costs of producing properties are
depleted using the unit-of-production method based on proven reserves of oil
and gas as determined by management and/or the Company's independent
consulting engineers.
In order to compute depletion, natural gas production and reserves are stated
in equivalent units of oil, based on the relative energy content of each
commodity. No gain or loss is recognized on the sale or disposition of oil
and gas properties except for dispositions which would significantly change
depletion rates.
<PAGE> 72
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
d) Petroleum and Natural Gas Properties (Cont'd)
Costs of acquiring and evaluating unproven properties are initially
excluded from depletion calculations. These unproven properties are
assessed annually to ascertain whether impairment has occurred.
At each fiscal year-end, any unproven property without firm plans for
further exploration work in the foreseeable future will be written off by
the Company. In general, the Company may write-off any unproven property
under one or more of the following conditions:
i) exploration work done on the unproven property during the fiscal year
produced negative results which does not merit further exploration;
ii) exploration work done in the vicinity of the unproven property during
the fiscal year produced negative results which does not merit further
exploration on the Company's unproven property; and
iii) for a non-renewable leased property or permit, the expiration date of
the permit does not allow sufficient time for exploration work on the
unproven property.
The Company applies a "ceiling" to net capitalized costs to ensure that such
costs do not exceed estimated net revenues after income taxes, general and
administrative costs, future removal and site restoration costs and financing
costs from production of proven reserves, discounted by 10%. Excess carrying
value, if any, is recorded as depletion in the year. Estimated net revenues
are determined by applying year-end prices to estimated proven reserves.
e) Property and Equipment
Property and equipment are recorded at cost and amortized over their
estimated useful lives on a declining-balance basis as follows:
Office equipment 20% to 30%
Automobile 30%
In the period a capital asset is acquired, management deems it to be acquired
midway through the fiscal period and accordingly, the amortization recorded
is restricted to one-half of the normal rate. Amortization is not calculated
in the period of disposal.
<PAGE> 73
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
f) Translation of Foreign Currencies
The Company's foreign operations are of an integrated nature and accordingly,
the temporal method of foreign currency translation is used for conversion
into United States dollars, as follows:
Revenues and expenses arising from foreign currency transactions are
translated into United States dollars at the average rate for the period.
Monetary assets and liabilities are translated into United States dollars at
the rates prevailing at the balance sheet date. Other assets and liabilities
are translated into United States dollars at the rates prevailing on the
transaction dates. Exchange gains and losses are recorded as income or
expense in the period in which they occur.
g) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
h) Financial Instruments and Financial Risk
i) Fair value of financial instruments
The Company's financial instruments consist of current assets and current
liabilities. The fair values of the current assets and liabilities
approximate the carrying amounts due to the short-term nature of these
instruments.
ii) Credit risk
d The Company is subject to credit risk through short-term investments.
Short-term cash investments are placed in short duration corporate and
government debt securities with well capitalized, high quality financial
institutions . By policy, the Company limits the amount of credit
exposure in any one type of investment instrument.
<PAGE> 74
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
i) Accounting Pronouncements Recently Issued
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128: Earnings per Share ("SFAS 128"),
effective for fiscal periods ending after December 15, 1997 and requiring
restatement of all prior period earnings per share data. SFAS 128 replaces
the presentation of primary earnings per share ("EPS") with a presentation of
both basic and diluted EPS for all entities with complex capital structures.
Basic EPS excludes dilutive securities and is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if dilutive securities were converted into common
shares and is computed similarly to fully diluted EPS pursuant to previous
accounting pronouncements. SFAS 128 applies equally to loss per share
presentations.
The FASB issued Statement of Financial Accounting Standards No. 130:
Reporting Comprehensive Income ("SFAS 130"), effective for fiscal periods
beginning after December 15, 1997 and requiring restatement of all
comparative financial statements disclosed. SFAS 130 requires that all items
required to be recognized under accounting standards as components of
comprehensive income be reported as part of the basic financial statements.
The Company does not expect adoption of this new standard to have a material
effect on its financial reporting.
The FASB issued Statement of Financial Accounting Standards No. 131:
Disclosures about Segments of an Enterprise and Related Information ("SFAS
131"), effective for fiscal periods beginning after December 15, 1997 and
requiring restatement of all comparative financial statements disclosed.
SFAS 131 establishes standards for reporting information about operating
segments in annual financial statements and requires selected information
about operating segments in interim financial reports. The Company does not
expect adoption of this new standard to have a material effect on its
financial reporting.
NOTE 3 - MARKETABLE SECURITIES
Marketable securities are comprised of 233,510 (1996 - Nil) shares
of Trans-Orient Petroleum Ltd., which are restricted from resale for
a one year period, acquired at a cost of $233,510. At December 31,
1997, the market value of these shares is $321,077 (1996 - Nil).
Trans-Orient Petroleum Ltd. is a related public company with a
common director.
<PAGE> 75
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES
Petroleum and natural gas properties are comprised as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------------- --------
Accumulated Net Book Net Book
Cost Amortization Value Value
and Depletion
<S> <C> <C> <C> <C>
Proven:
New Zealand
PMP 38148
Ngatoro Oil Field $ 493,702 $178,552 $ 315,150 $ 351,607
---------- -------- ---------- ----------
Total Proven 493,702 178,552 315,150 351,607
---------- -------- ---------- ----------
Unproven:
New Zealand
PEP 38256 - - - -
PPL 38312 - - - -
PEP 38328 398,443 - 398,443 314,090
PEP 38330 109,219 - 109,219 23,561
PEP 38332 41,054 - 41,054 -
PPL 38706 14,897 - 14,897 -
PEP 38716 333,459 - 333,459 150,075
PEP 38720 176,960 - 176,960 11,219
PEP 38723 - - - -
New licences 25,899 - 25,899 42,314
Australia
AC/P19 50,254 - 50,254 -
VIC/P39 20,976 - 20,976 -
WA-199-P 1,165 - 1,165 -
People's Republic of China
Nanling-Wuwei
Blocks 324,851 - 324,851 140,251
Papua New Guinea
PPL 192 117,512 - 117,512 80,811
---------- -------- ---------- ----------
Total Unproven 1,614,689 - 1,614,689 762,321
---------- -------- ---------- ----------
$2,108,391 $178,552 $1,929,839 $1,113,928
========== ======== ========== ==========
</TABLE>
<PAGE> 76
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
NEW ZEALAND
Unless otherwise indicated, petroleum exploration permits granted
in New Zealand provide for the exclusive right to explore for
petroleum for an initial term of five years, renewable for a
further five years over one- half of the original area. Any
production permits granted will be for a term of up to 40 years
from the date of issue. The Crown in right of New Zealand has
reserved a royalty of the greater of 5% of net sales revenue or 20%
of accounting profits from the sale of petroleum products.
a) PEP 38256
The Company has a 50% participating interest in, and is the
operator of, Petroleum Exploration Permit 38256 ("PEP 38256")
commencing August 25, 1997. At least one-half of the original
area must be relinquished by August 25, 2000. The other
participant is Trans-Orient Petroleum Ltd.
The Company and its co-participant are required to complete a
work program as follows:
(i) prior to November 25, 1998, locate and analyse petroleum
seeps, model existing gravity data and acquire new gravity
and magnetotelluric data, reprocess existing BP and Bounty
seismic data, complete a license evaluation, and either
commit to complete the next stage of the work program
detailed below in (ii) or surrender the permit;
(ii) prior to August 25, 1999, acquire 80 kilometres of new
seismic data and either commit to complete the next stage
of the work program detailed below in (iii) or surrender
the permit;
(iii) prior to February 25, 2000, acquire 120 kilometres of new
seismic data and either commit to complete the next stage
of the work program detailed below in (iv) or surrender the
permit; and
(iv) prior to August 25, 2000, drill one exploration well and
either commit to a satisfactory work program for the
remainder of the permit term or surrender the permit.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $240,000 of exploration expenditures
is required to be incurred.
<PAGE> 77 INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
b) PPL 38312
The Company farmed into a 10.5% participating interest in
Petroleum Prospecting License 38312 ("PPL 38312"). The other
participants in PPL 38312 were Asia Pacific Oil Co. Ltd.
(64.5%), as the operator, Everest Oil Co. Ltd. (12.5%),
Trans-Orient Petroleum Ltd. (10.0%) and Northern Oil Ltd. (2.5%).
The participants drilled the Waitaria-1 well in August 1997.
The well was abandoned due to engineering problems before the
target depth was reached. PPL 38312 expired in November 1997
and accordingly, all costs relating to PPL 38312 were written
off during the year.
c) PEP 38328
The Company has a 40% participating interest in, and is the
operator of, Petroleum Exploration Permit 38328 ("PEP 38328")
commencing July 1, 1996.
In December 1996, the Company and the other participants
completed drilling of the Kereru-1 exploration well in PEP
38328, which was plugged and abandoned, thereby completing the
work program required for the first year. The requirements of
the remaining work program are as follows:
(i) prior to July 1, 1998, acquire and process 240 kilometres
of new seismic data and reprocess a minimum of 300
kilometres of existing seismic data;
(ii) prior to July 1, 1999, conduct geological field studies as
appropriate, synthesise and interpret all relevant
geological and geophysical data and complete a review
report for PEP 38328; and
(iii) prior to July 1, 2000, acquire further seismic data as
required to detail prospects for drilling and commit to
drill an exploration well prior to July 1, 2001, or
surrender the permit.
By an agreement dated November 1, 1996, Boral Energy Resources
Limited acquired a 20% participating interest in PEP 38328 from
the Company and 10% from another participant by funding 60% of
the costs of drilling the Kereru-1 well.
<PAGE> 78
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
c) PEP 38328 (Cont'd)
Trans-Orient Petroleum Ltd. ("Trans-Orient") acquired a 10%
participating interest in PEP 38328 from the Company by funding
20% of the costs of drilling the Kereru-1 well. By an agreement
dated September 15, 1997, Trans-Orient acquired a further 10%
interest in PEP 38328 from the Company by funding additional
costs incurred subsequent to the Kereru-1 well. The
consideration received by the Company was 233,510 common shares
of Trans-Orient at $1.00 per share. As a result of certain
participants withdrawing from PEP 38328, the participants
consist of the Company (40.0%), Boral Energy Resources Ltd.
(37.5%) and Trans-Orient (22.5%).
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $200,000 of exploration expenditures
is required to be incurred.
Refer to Note 3
d) PEP 38330
The Company has a 34% participating interest in, and is the
operator of, Petroleum Exploration Permit 38330 ("PEP 38330")
commencing July 1, 1996. The other participants in PEP 38330
are Moondance Energy Pty. Ltd. (33%) and Mosaic Oil N.L. (33%).
The Company and its co-participants have completed the work
program required for the first two years which includes
reviewing existing seismic data, reprocessing and interpreting
a minimum of 80 kilometres of seismic data, and acquiring twelve
kilometres of new seismic data. The requirements of the
remaining work program are as follows:
(i) prior to July 1, 1999, acquire, process and interpret a
minimum of 60 kilometres of new seismic data and commit to
drill an exploration well, or surrender the permit; and
(ii) prior to July 1, 2001, drill an exploration well, or
surrender the permit.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $90,000 of exploration expenditures is
required to be incurred.
<PAGE> 79
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
e) PEP 38332
The Company has a 42.5% participating interest in, and is the
operator of, Petroleum Exploration Permit 38332 ("PEP 38332")
commencing June 24, 1997. The other participants in PEP 38332
are Boral Energy Resources Ltd. (37.5%) and Trans New Zealand
Oil Company (20%).
The Company and its co-participants have completed the work
program required for the first year and a half which includes
reprocessing a minimum of 100 kilometres of existing seismic
data, acquiring a minimum of 25 kilometres of new seismic data,
undertaking photogeologic and field geological mapping, and
completing an evaluation of the exploration potential of PEP
38332. The requirements of the remaining work program are as
follows:
(i) prior to December 24, 1999, acquire a minimum of 50
kilometres of new seismic data, complete an evaluation of
the exploration potential of PEP 38332, and commit to
complete the next stage of the work program detailed below
in (ii); and
(ii) prior to June 24, 2000, drill one exploration well and
commit to a satisfactory work program for the remainder of
the permit term.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $140,000 of exploration expenditures
is required to be incurred.
f) PMP 38148 Ngatoro Oil Field
By an agreement dated December 4, 1996 and effective September
1, 1996, the Company acquired a 5% participating interest in
Petroleum Mining Permit 38148 ("Ngatoro Oil Field") and an
initial 4.45% participating interest in the surrounding
Petroleum Prospecting License 38706 through the purchase of
Ngatoro Energy Limited (formerly Minora Energy (New Zealand)
Limited) for $575,000 in Australian funds. The Crown in right
of New Zealand has reserved a royalty of the greater of 5% of
net sales revenue or 20% of accounting profits from the sale of
petroleum products which amounts to $44,209 (NZ$66,738) for the
1997 fiscal year. All obligatory work commitments have been
completed.
<PAGE> 80
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
f) PMP 38148 Ngatoro Oil Field (Cont'd)
The Ngatoro Oil Field includes four producing oil wells and
three shut-in gas wells.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $100,000 of exploration expenditures
is required to be incurred.
g) PPL 38706
The Company has a 7.75% participating interest in Petroleum
Prospecting Licence 38706 ("PPL 38706"). Initially, a 4.45%
participating interest was acquired which increased to 7.75%
after two participants withdrew from PPL 38706. Any production
permits granted will be for a term of up to 40 years from the
date of issue. The Crown in right of New Zealand has reserved
a royalty of the greater of 5% of net sales revenue or 20% of
accounting profits from the sale of petroleum products.
Fletcher Challenge Energy Ltd. is the operator and holds the
remaining 92.25% interest in PPL 38706.
PPL 38706 is in the last year of its ten-year term. The
participants are required to drill an exploration well by July
31, 1998.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $50,000 of exploration expenditures is
required to be incurred.
h) PEP 38716
The Company has a 24.8% participating interest in Petroleum
Exploration Permit 38716 ("PEP 38716") commencing January 30,
1996.
By an agreement effective July 1, 1997 with Australian Worldwide
Exploration N.L. ("Australian Worldwide"), the participants
agreed to assign a 25% participating interest to Australian
Worldwide in consideration that Australian Worldwide fund 50%
of the dry hole costs of drilling an exploration well. The
other participants in PEP 38716 are Marabella Enterprises Ltd.
(39.6%), Australian Worldwide Exploration N.L. (25%), Euro-
Pacific Energy Pty. Ltd. (6.6%), and Durum Energy Corp. (4%).
<PAGE> 81
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
h) PEP 38716 (Cont'd)
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $50,000 of exploration expenditures is
required to be incurred.
The Company and its co-participants have completed the work
program required for the first year and a half which includes
reprocessing and interpreting a minimum of 250 kilometres of
existing seismic data, acquiring, processing and interpreting 30
kilometres of new seismic data, acquiring aeromagnetic data, and
committing to drill one exploration well prior to July 30, 1998.
Due to the schedule on which a suitable drilling rig has been
secured, the participants applied for and received approval to
extend the deadline for drilling an exploration well to January
30, 1999.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $220,000 of exploration expenditures
is required to be incurred.
i) PEP 38720
The Company has a 50% participating interest in, and is the
operator of, Petroleum Exploration Permit 38720 ("PEP 38720")
commencing September 2, 1996. The other participant in PEP
38720 is Trans-Orient Petroleum Ltd.
The Company and its co-participant have completed the work
program required for the first two and a half years which
includes reprocessing and interpreting a minimum of 100
kilometres of seismic data, seismic modelling, reservoir
engineering and petrophysical reviews, and acquiring a minimum
of 15 kilometres of new seismic data. In addition, the
participants must commit by March 2, 1999 to drill one
exploration well prior to September 2, 1999, or surrender the
permit.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $40,000 of exploration expenditures is
required to be incurred.
<PAGE> 82
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
j) PEP 38723
The Company has a 40% participating interest in, and is the
operator of, Petroleum Exploration Permit 38723 ("PEP 38723")
commencing October 30, 1997. The other participants in PEP
38723 are Trans-Orient Petroleum Ltd. (40%) and Trans New
Zealand Oil Company (20%).
The Company and its co-participants are required to complete a
work program as follows:
(i) prior to January 30, 1999, reprocess a minimum of 50
kilometres of seismic data, re-evaluate the permit, and
either commit to continue the work program or surrender the
permit; and
(ii) prior to April 30, 2000, collect a minimum of six square
kilometres of 3D seismic data, or 2D swathe coverage of
equivalent detail, identify drilling targets, and either
commit to drill an exploration well by October 30, 2000 or
surrender the permit.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $30,000 of exploration expenditures is
required to be incurred.
AUSTRALIA
Offshore exploration permits granted in Australia provide for the
exclusive right to explore for petroleum for an initial term of six
years, renewable for an unlimited number of five-year terms over
one-half of the remaining area at each renewal. Any production
permits granted will be for a term of 21 years from the date of
issue, renewable for a further 21 years. In addition to general
Australian taxation provisions, most offshore permits, including
all of the Company's Australian permits, are subject to Petroleum
Resource Rent Taxation at the rate of 40% on a project's net income
after deduction of allowable project and exploration expenditures,
with undeducted exploration expenditures compounded forward at the
Long-Term Bank Rate ("LTBR") plus 15% and project expenditures at
LTBR plus 5%.
<PAGE> 83
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
k) AC/P19
The Company has a 65% participating interest in, and is the
operator of, Permit Ashmore-Cartier Platform 19 ("AC/P19")
commencing May 30, 1997. The other participant is Mosaic Oil
N.L.
The Company and its co-participant are required to complete a
work program as follows:
(i) prior to May 30, 1998, collect, collate and reprocess
seismic data;
(ii) prior to May 30, 1999, conduct mapping, seismic data
analysis, and delineate prospects and leads;
(iii) prior to May 30, 2000, conduct a 300 kilometre seismic grid
over the Cartier depression fan leads;
(iv) prior to May 30, 2001, collect additional seismic, if
necessary, and map and interpret data;
(v) prior to May 30, 2002, drill one exploration well; and
(vi) prior to May 30, 2003, reinterpret and evaluate results.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $60,000 of exploration expenditures is
required to be incurred.
l) VIC/P39
The Company has a 33% participating interest in Victoria/P39
("VIC/P39") commencing July 31, 1997. The other participants in
VIC/P39 are Mosaic Oil N.L. (34%), which is the operator, and
Euro-Pacific Energy Pty. Ltd. (33%).
The Company and its co-participants are required to complete a
work program as follows:
(i) prior to July 31, 1998, collect, collate and reprocess
seismic data;
(ii) prior to July 31, 1999, acquire, process and interpret 500
kilometres of 2D seismic data;
<PAGE> 84
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
l) VIC/P39 (Cont'd)
(iii) prior to July 31, 2000, drill one exploration well;
(iv) prior to July 31, 2001, collate and reprocess seismic data;
(v) prior to July 31, 2002, acquire, process and interpret a
further 500 kilometres of 2D seismic data; and
(vi) prior to July 31, 2003, drill a second exploration well.
The participants have the right to withdraw from the permit at
the end of each year's work program starting in the third year.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $80,000 of exploration expenditures is
required to be incurred.
m) WA-199-P
By an agreement effective September 15, 1997 with Boral Energy
Resources Limited, the Company has the right to acquire a 5%
participating interest in Permit Western Australia-199-P ("WA-
199-P"). The Company is required to fund 10% of the costs of
drilling the Kittiwake-1 well to a maximum of Aus$850,000,
thereafter contributing to any additional costs in accordance
with the Company's 5% participating interest. The other
participants in WA-199-P are Boral Energy Resources Limited
(24.869%), which is the operator, Petroz NL (11.392%), TAP Oil
NL (10.0%), Asisun Pty. Ltd. (10.027%) and Santos (BOL) Pty Ltd.
(38.712%).
The Company and its co-participants are required to complete a
work program as follows:
(i) prior to June 30, 1998, drill the Kittiwake-1 exploration
well; and
(ii) prior to December 31, 1998, drill a second exploration
well.
WA-199-P is in the last year of a five-year renewal term.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $1,060,000 of exploration expenditures
is required to be incurred.
<PAGE> 85
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
PEOPLE'S REPUBLIC OF CHINA
n) Nanling-Wuwei Blocks
By a Joint Study Agreement dated March 18, 1996 with China
National Oil and Gas Exploration and Development Corp.
("CNODC"), the Company has a 50% participating interest to study
the Nanling and Wuwei Blocks ("the Blocks"). The other
participant in the Blocks is Moondance Energy Limited.
A detailed technical evaluation of the Blocks, including seismic
data reprocessing and remapping, investigating field geology,
and conducting an economic evaluation, was completed by June 30,
1997 after which the Joint Study Agreement expired.
The Company has the exclusive right to negotiate with CNODC for
a Geophysical Survey Agreement or a Production Sharing Contract
covering the Blocks by March 1998.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $560,000 of exploration expenditures
is required to be incurred.
PAPUA NEW GUINEA
o) PPL 192
The Company has a 40% participating interest in, and is the
operator of, Petroleum Prospecting Licence No. 192 ("PPL 192").
PPL 192 grants the exclusive right to explore for petroleum for
an initial term of six years commencing January 28, 1997,
extendable for a further five years over one-half of the
original area, and the right to enter into a Petroleum Agreement
upon a discovery. The Petroleum Agreement provides the right to
produce any oil and gas discovered for a period of up to 30
years from discovery, subject to a maximum 22.5% participating
interest that can be acquired by the Government of Papua New
Guinea and a 2% participating interest that can be acquired by
local landowners. The Company assigned a 20% participating
interest to each of Trans-Orient Petroleum Ltd. and Durum Energy
Corp. The remaining participant is Mosaic Oil Niugini Pty. Ltd.
(20%).
<PAGE> 86
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 4 - PETROLEUM AND NATURAL GAS PROPERTIES (Cont'd)
o) PPL 192 (Cont'd)
The Company and its co-participants completed the work program
required for the first year which includes reprocessing and
interpreting a minimum of 200 kilometres of existing seismic
data. The requirements of the remaining work program are as
follows:
(i) prior to January 28, 1999, complete a work program which
includes conducting field and environmental reviews,
engineering and economic analyses, and producing a prospect
and lead ranking report. In addition, the participants
must commit to a minimum work program prior to November 28,
1998 for the third and fourth years, or surrender the
permit;
(ii) prior to January 28, 2000, complete a work program which
includes acquiring, processing and interpreting 50
kilometres of new seismic data;
(iii) prior to January 28, 2001, drill one exploration well. In
addition, the participants must commit to a minimum work
program prior to November 28, 2000 for the fifth and sixth
years, or surrender the permit;
(iv) prior to January 28, 2002, complete a work program which
includes acquiring 400 kilometres of new 2D or equivalent
3D seismic data; and
(v) prior to January 28, 2003, drill a second exploration well.
In order to meet the Company's exploration commitments for
fiscal 1998, an estimated $80,000 of exploration expenditures is
required to be incurred.
The Company has implemented the requirements of the Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." In evaluating the recoverability of the Company's
long-lived assets, management evaluated the current fair market
value and expected future cash flows attributable to its long-lived
assets and concluded that no impairment of value had occurred as of
December 31, 1997 or 1996.
<PAGE> 87
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment are comprised as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------- -------
Accumulated Net Book Net Book
Cost Amortization Value Value
<S> <C> <C> <C> <C>
Office equipment $128,698 $ 14,725 $113,973 $ 32,166
Automobile 5,043 3,772 1,271 2,767
-------- -------- -------- ---------
$133,741 $ 18,497 $115,244 $ 34,933
======== ======== ======== =========
</TABLE>
<PAGE> 88
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 6 - SHARE CAPITAL
a) Authorized Share Capital
The authorized share capital of the Company is 100,000,000
common shares without par value.
b) Issued Shares
<TABLE>
<CAPTION>
Number of
Shares Amount
<S> <C> <C>
Balance - December 31, 1995 7,504,978 $ 4,993,739
Issued during the year for:
Exercise of stock options 386,500 1,908,750
Stock subdivision on a 1.5
new for one old basis 3,945,559 -
---------- -----------
11,837,037 6,902,489
Exercise of stock options 1,103,250 5,620,395
Stock subdivision on a two
new for one old basis 12,940,111 -
---------- -----------
25,880,398 12,522,884
Exercise of stock options 53,000 171,409
Private placement 1,000,000 2,209,260
Accrued compensation from stock options
granted during the year - 711,011
Less: Reclassification of stock
options exercised (85,605)
Adjustment for stock
options cancelled - (16,381)
---------- -----------
Balance - December 31, 1996 26,933,398 15,512,578
Issued during the year for:
Exercise of stock options 279,000 675,630
Private placement 1,000,000 1,800,000
Exercise of share
purchase warrants 50,000 125,667
Accrued compensation from stock options
granted during the year - 158,125
Less: Reclassification of
stock options exercised (23,479)
Adjustment for stock
options cancelled - (528,795)
---------- -----------
Balance - December 31, 1997 28,262,398 $17,719,726
========== ===========
</TABLE>
<PAGE> 89
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 6 - SHARE CAPITAL (Cont'd)
c) Subdivision of Share Capital
Effective April 15, 1996, the Company subdivided its share
capital on a 1.5 new for one old basis.
Effective May 31, 1996, the Company subdivided its share capital
on a two new for one old basis.
At an Extraordinary General Meeting held on October 9, 1996 the
shareholders of the Company granted to the board of directors
the discretion to implement a stock subdivision based on one of
three alternative ratios: a three new for one old basis, a four
new for one old basis or a five new for one old basis. The
Company has yet to implement the subdivision.
d) Incentive Stock Options
The Company applies Accounting Principles Board Opinion No. 25:
Accounting for Stock Issued to Employees ("APB 25") to account
for all stock options granted. Further, the Statement of
Financial Accounting Standards No. 123: Accounting for Stock-
Based Compensation ("SFAS 123") requires additional disclosure
to reflect the results of the Company had it elected to follow
SFAS 123.
SFAS 123 requires a fair value based method of accounting for
stock options using the Black-Scholes option pricing model and
other existing models. These models were developed for use in
estimating the fair value of traded options and require the
input of and are highly sensitive to subjective assumptions
including the expected stock price volatility. The stock
options granted by the Company have characteristics
significantly different from those of traded options. In the
opinion of management, the existing models do not provide a
reliable single measure of the fair value of stock options
granted by the Company.
<PAGE> 90 INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 6 - SHARE CAPITAL (Cont'd)
d) Incentive Stock Options
The following incentive stock options are outstanding at
December 31, 1997:
Number of Shares Price per Share Expiry Date
832,000 $ 2.50 May 13, 1998
700,000 $ 2.50 October 30, 1998
550,000 $ 2.50 March 25, 1999
6,000 $ 3.00 May 12, 1999
10,000 $ 3.125 May 22, 1999
Refer to Note 13
e) Share Purchase Warrants
The following share purchase warrants are outstanding at
December 31, 1997:
Number of Shares Price per Share Expiry Date
950,000 Cdn$3.485 May 27, 1998
1,000,000 $1.90/$2.00/$2.10 July 3,1998/1999/2000
f) Escrow Shares
There are 1,406,250 shares issued at a price of Cdn$0.00333 per
share subject to escrow restrictions and held by Pacific
Corporate Trust Company, the Company's transfer agent, pursuant
to an agreement dated April 8, 1994. These shares were
originally issued in accordance with Local Policy 3-07 of the
British Columbia Securities Commission and cannot be sold,
released from escrow or otherwise in any manner dealt with,
without the expressed consent of the British Columbia Securities
Commission, except as may be required by the death or bankruptcy
of any shareholder. All voting rights attached to the escrowed
shares may be exercised by the registered owner and any
dividends declared on the common shares of the Company will
similarly be paid. Any shares not released from escrow before
April 25, 1999 will be cancelled.
<PAGE> 91
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 7 - LOSS PER SHARE
In the fourth quarter of 1997, the Company adopted the provisions
of SFAS 128 which specifies the computation, presentation and
disclosure requirements for loss per share.
A reconciliation of the numerators and denominators of the basic
and diluted loss per share calculations is as follows:
<TABLE>
<CAPTION>
For the Period Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Basic Loss per Share Computation
Numerator, Net Loss $ (81,627) $ (885,273) $ (143,644)
Denominator, Weighted Average
Number of Common Shares
Outstanding 26,169,806 23,873,549 15,434,190
----------- ----------- -----------
Basic Loss per Share $ (0.00) $ (0.04) $ (0.01)
=========== =========== ===========
Diluted Loss per Share Computation
Numerator, Net Loss $ (81,627) $ (885,273) $ (143,644)
Denominator, Weighted Average
Number of Common Shares
Outstanding 26,169,806 23,873,549 15,434,190
Effect of Dilutive Securities:
Stock options and
warrants - - -
----------- ----------- -----------
Diluted Loss
per Share $ (0.00) $ (0.04) $ (0.01)
=========== =========== ===========
</TABLE>
For the periods ended December 31, 1997, 1996 and 1995, common
shares issuable in connection with stock options and warrants have
not been included in the computation of diluted loss per share.
Inclusion of these shares would be antidilutive due to losses
incurred in those periods.
<PAGE> 92
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 8 - RELATED PARTY TRANSACTIONS
The following are related party transactions not disclosed
elsewhere in these financial statements.
a) Due from Related Companies
As at December 31, 1997 the Company is owed a total amount of
$144,228 (December 31, 1996 - $404) by two public companies with
a common director. In addition, the Company is owed a total
amount of $8,145 (December 31, 1996 - Nil) by two public
companies with certain common directors.
b) Consulting and Management Agreements
The Company is of the view that the amounts incurred for
services provided by related parties approximates what the
Company would incur to non-arms length parties for the same
services.
During the 1997 fiscal year, the Company paid $132,214 (1996 -
$79,992) in consulting fees to the President of the Company.
A consulting agreement between the Company and a private company
owned by a former director of the Company requiring a fee of
Cdn$2,550 per month was cancelled. During the 1997 fiscal year,
the Company paid $12,820 (1996 - $15,035) to this private
company.
A management agreement between the Company and a private company
wholly-owned by a relative of a former director of the Company
requiring a fee of Cdn$2,500 per month was cancelled during the
1996 fiscal year.
c) Petroleum and Natural Gas Properties
Certain co-participants of petroleum and natural gas properties
as described in Note 4 have common directors with the Company.
These co-participants are Trans-Orient Petroleum Ltd., Durum
Energy Corp. and Trans New Zealand Oil Company.
<PAGE> 93
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 8 - RELATED PARTY TRANSACTIONS (Cont'd)
c) Petroleum and Natural Gas Properties (Cont'd)
By a Strategic Alliance Agreement dated May 18, 1995, the
Company granted Durum Energy Corp. ("Durum") a company with a
common director, the right to acquire up to a 20% participating
interest in future exploration ventures undertaken by the
Company for a one year period. In return, Durum provided the
Company with certain services and duties in connection with the
conduct of the business of the Company. This agreement was
cancelled during the 1996 fiscal year.
NOTE 9 - INCOME TAXES
There are no income taxes payable for the years ended December 31,
1997 and 1996.
The Company has approximately Cdn$1.5 million (1996 - Cdn$2.1
million) of resource and other unused tax pools to offset future
taxable income derived in Canada. In addition, the Company has
non-capital losses of Cdn$977,025 available for future deductions
from taxable income derived in Canada, which expire as follows:
2000 Cdn$ 10,071
2001 52,731
2002 251,664
2003 662,559
------------
Cdn$ 977,025
============
The Company also has losses and deductions of approximately NZ$3.5
million (1996 - NZ$0.9 million) available to offset future taxable
income in New Zealand, Australia, Papua New Guinea and People's
Republic of China.
The benefits of these excess resource tax pools and non-capital
loss carryforwards have not been recognized in these financial
statements as there is no virtual certainty that these will be
utilized in the future.
NOTE 10 - NAME CHANGE
On May 9, 1995 the name of the Company was changed from
Consolidated Newjay Resources Ltd. to Indo-Pacific Energy Ltd.
<PAGE> 94
INDO-PACIFIC ENERGY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997 AND 1996
NOTE 11 - YEAR-END CHANGE
During the 1995 fiscal period the Company changed its year-end from
January 31 to December 31 effective December 31, 1995.
NOTE 12 - COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to
the current period's presentation.
NOTE 13 - SUBSEQUENT EVENTS
The following events have occurred subsequent to the year-end:
a) In January 1998, stock options to purchase 500,000 shares
at a price of $2.50 per share exercisable until March 25,
1999 were cancelled.
b) The Company and two other co-participants have agreed in
principle to assign a total participating interest of 15%
in PEP 38716 to Antrim International, Inc. ("Antrim") in
consideration for the payment of $450,000. The Company is
to assign a 5% participating interest in PEP 38716 in
consideration for the payment of $150,000. After giving
effect to this assignment, the participants will be the
Company (19.8%), Marabella Enterprises Ltd. (31.8%),
Australian Worldwide Exploration N.L. (25%), Antrim
International, Inc. (15%), Euro-Pacific Energy Pty. Ltd.
(4.4%) and Durum Energy Corp. (4%).
<PAGE> 95
INDO-PACIFIC ENERGY LTD.
CONSOLIDATED SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
(EXPRESSED IN UNITED STATES DOLLARS)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
AND FOR THE ELEVEN MONTH PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
For the Eleven
For the Year For the Year Month Period
Ended Ended Ended
Note December 31, December 31, December 31,
Reference 1997 1996 1995
(Note 11)
<S> <C> <C> <C> <C>
EXPENSES
Accounting and audit $ 54,165 $ 11,776 $ 3,781
Compensation expense
(recovery) (370,670) 694,630 16,029
Consulting fees 8 150,298 27,346 12,055
Corporate relations
and development 71,548 51,964 19,597
Directors' fees - 734 -
Filing and transfer
agency fees 9,803 28,360 13,462
Foreign exchange (gain) loss 239,713 56,437 (5,091)
Legal fees 61,395 39,503 12,433
Management fees 8 - 11,591 20,092
Office and miscellaneous 68,614 75,188 6,809
Printing 104,901 65,710 41,459
Rent 33,791 9,205 10,335
Telephone 23,005 24,968 8,778
Travel 101,567 15,594 13,425
Wages and benefits 31,879 23,516 8,502
Write-off of
incorporation costs - 867 -
----------- ------------ ---------
$ 580,009 $ 1,137,389 $ 181,666
=========== ============ =========
</TABLE>
<PAGE> 96
INDO-PACIFIC ENERGY LTD.
(FORMERLY CONSOLIDATED NEWJAY RESOURCES LTD.)
SUPPLEMENTARY INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
(EXPRESSED IN UNITED STATES DOLLARS)
DECEMBER 31, 1997
(Unaudited - Prepared by Management)
<PAGE> 97
INDO-PACIFIC ENERGY LTD.
(FORMERLY CONSOLIDATED NEWJAY RESOURCES LTD.)
SUPPLEMENTARY INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
(EXPRESSED IN UNITED STATES DOLLARS)
AS AT DECEMBER 31, 1997
(Unaudited - Prepared by Management)
PROVED PETROLEUM AND NATURAL GAS RESERVE QUANTITIES
<TABLE>
<CAPTION>
12/31/97 12/31/96 12/31/95
<S> <C> <C> <C>
PETROLEUM RESERVES
Proved developed reserves, end of period
Oil (barrels) 110,500 70,000 -
Gas (billion cubic feet) 0.17 0.17 -
Proved reserves, end of period
Oil (barrels) 110,500 145,000 -
Gas (billion cubic feet) 0.40 0.40 -
</TABLE>
All petroleum and natural gas reserves are located in New Zealand.
Petroleum and natural gas reserves cannot be measured exactly.
Reserve estimates are based on many factors related to reservoir
performance which require evaluation by engineers interpreting
available data, as well as price, costs and other economic factors.
The reliability of these estimates at any point in time depends on
both the quality and quantity of the technical and economic data,
the production performance of the reservoirs as well as extensive
engineering judgment. Consequently, reserve estimates are subject
to revision as additional data becomes available during the
producing life of a reservoir. When a commercial reservoir is
discovered, proved reserves are initially determined based on only
limited data from the first well or wells. Further drilling may
better define the extent of the reservoir and additional production
performance, well tests and engineering studies will likely improve
the reliability of the estimate.
Proved developed reserves are reserves that can be expected to be
recovered through existing wells with existing equipment and
operating methods. Proved reserves are reserves which geological
and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reserves under existing
economic and operating conditions. Reserves are considered proved
if economic producibility is supported by either production or
conclusive formation tests.
<PAGE> 98
INDO-PACIFIC ENERGY LTD.
(FORMERLY CONSOLIDATED NEWJAY RESOURCES LTD.)
SUPPLEMENTARY INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
(EXPRESSED IN UNITED STATES DOLLARS)
AS AT DECEMBER 31, 1997
(Unaudited - Prepared by Management)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING
TO PROVED OIL AND GAS RESERVES
<TABLE>
<CAPTION>
12/31/97 12/31/96 12/31/95
<S> <C> <C> <C>
Future cash inflows $1,493,878 $ 850,040 $ -
Future production and development
costs to abandonment at
December 31, 2003 639,322 314,576 -
Future income taxes - - -
---------- ---------- ---------
854,556 535,464 -
Discount at 10% annual
rate for estimated timing
of cash flows 169,983 54,025 -
--------- ---------- ---------
$ 684,573 $ 481,439 $ -
========= ========== =========
</TABLE>
Undiscounted future net cash flows from proved producing oil and
natural gas reserves is largely based on information provided by
in-house reserve calculations. A discount factor of 10% was
applied to estimated future cash flows to compute the estimated
present value of proved oil and natural gas reserves. This
valuation procedure does not necessarily result in an estimate of
the fair market value of the Company's oil and natural gas
properties.
There has been no provision for income taxes, as the Company has
resource and other unused tax pools to offset future taxable
income.
The only change in the standardized measure of future cash flows
from production has been due to the purchase of Ngatoro Energy
Limited (formerly Minora Energy (New Zealand) Limited, a company
whose sole asset was a 5% interest in the producing Ngatoro oil
field. This is the only interest the Company holds in a proven oil
property. The standardized measure calculation for the property,
at December 31, 1997, was $684,573, as compared to the Net Book
Value of $315,150.
<PAGE> 99
INDO-PACIFIC ENERGY LTD.
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
(EXPRESSED IN UNITED STATES DOLLARS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
New
Total Zealand
<S> <C> <C>
REVENUES
Petroleum and natural gas $487,941 $487,941
-------- --------
Amortization and depletion 97,827 97,827
Production costs 67,593 67,593
Royalties 44,209 44,209
Write-down of petroleum properties 162,048 162,048
-------- --------
371,677 371,677
-------- --------
RESULTS OF OPERATIONS FROM
PRODUCING ACTIVITIES
(excluding corporate overhead
and interest costs) $116,264 $116,264
======== ========
</TABLE>
<PAGE> 100
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There are no changes in, or disagreements with, accountants on
accounting and financial disclosure.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements are contained in Item 8 of this Form 10.
(b) No reports on Form 8-K have been filed during the last quarter
of the period covered by this report.
(c) Exhibits
Exhibit
Number Document Description
3.1 * Certificate of incorporation as Pryme Energy Resources
Ltd. dated July 31, 1979.
3.2 * Certificate of change of name from Pryme Energy Resources
Ltd. to Newjay Resources Ltd. dated August 23, 1985.
3.3 * Certificate of change of name from Newjay Resources Ltd.
to Consolidated Newjay Resources Ltd. dated August 25,
1993.
3.4 * Certificate of change of name from Consolidated Newjay
Resources Ltd. to Indo-Pacific Energy Ltd. dated May 9,
1995.
3.5 * Articles of incorporation and memorandum of the
Registrant.
3.6 * Articles of continuance dated September 10, 1997 under
Business Corporations Act (Yukon).
3.7 * Certificate of continuance dated September 25, 1997 under
Business Corporations Act (Yukon).
3.8 * Bylaws dated as at September 25, 1997.
10.1 * Copy of permit dated August 19, 1997.
10.2 * Operating agreement regarding PPL 38312 with Asia Pacific
Oil. Filed via paper, pursuant to a Continuing Hardship
Exemption.
10.3 * Copy of permit dated June 19, 1996.
<PAGE> 101
10.4 * Farm-in agreement dated November 14, 1996 with
Trans-Orient Petroleum Ltd. and Indo-Pacific Energy (NZ)
Ltd.
10.5 * Farm-in agreement dated October 30, 1997 with Boral
Energy Resources (NZ) Ltd., Indo-Pacific Energy (NZ) Ltd.
and Moondance Energy Ltd.
10.6 * Deed of Assignment and Assumption dated October 30, 1997
with Indo-Pacific Energy (NZ) Ltd., Moondance Energy
Ltd., Croft Exploration Ltd. and Boral Energy Resources
(NZ) Ltd.
10.7 * Deed of Assignment and Assumption dated November 6, 1997
with Indo-Pacific Energy (NZ) Ltd., Moondance Energy
Ltd., Croft Exploration Ltd., Boral Energy Resources (NZ)
Ltd. and Trans-Orient Petroleum (NZ) Ltd.
10.8 * Deed of Withdrawal, Assignment and Assumption dated
November 7, 1997 with Indo-Pacific Energy (NZ) Ltd.,
Moondance Energy Ltd., Croft Exploration Ltd., Boral
Energy Resources (NZ) Ltd. and Trans-Orient Petroleum
(NZ) Ltd.
10.9 * Deed of Withdrawal, Assignment and Assumption dated
November 7, 1997 with Indo-Pacific Energy (NZ) Ltd.,
Moondance Energy Ltd., Boral Energy Resources (NZ) Ltd.
and Trans-Orient Petroleum (NZ) Ltd.
10.10 * Copy of permit 38330 dated June 4, 1996.
10.11 * Copy of permit 38332 dated June 24, 1997.
10.12 * Deed of Assignment dated October 10, 1997 with
Indo-Pacific Energy (NZ) Ltd., Boral Energy Resources
Limited, Boral Energy Resources (NZ) Limited, Trans New
Zealand Oil Company.
10.13 * Copy of permit 38256 dated August 25, 1997.
10.14 * Copy of permit 38148 dated December 23, 1996.
10.15 * Copy of license 38706 dated August 1, 1993.
10.16 * Share Purchase Agreement with Shareholders of Minora
Energy (New Zealand) dated December 4, 1996.
10.17 * Deed of Assignment and Assumption from Minister of Energy
(New Zealand), December 23, 1996.
<PAGE> 102
10.18 * Operating agreement regarding PPL 38706 dated September
2, 1993. Filed via paper, pursuant to a Continuing
Hardship Exemption.
10.19 * Copy of permit 38716 dated October 12, 1995.
10.20 * Operating agreement regarding PEP 38716 dated April 22,
1997. Filed via paper, pursuant to a Continuing Hardship
Exemption.
10.21 * Assignment and novation agreement dated as of July 1,
1997 with Australian Worldwide Exploration NL.
10.22 * Copy of permit 38720 dated September 2, 1996.
10.23 * Copy of permit PEP 38723 dated October 30, 1997.
10.24 * Copy of license PPL 192 dated January 28, 1997.
10.25 * Copy of permit AC P19.
10.26 * Copy of permit 39.
10.27 * Copy of permit WA-199-P.
10.28 * Duplicate copy of permit WA-199-P.
10.29 * Farmin agreement dated November 28, 1997 between Boral
Energy Resources Limited and Indo-Pacific Energy (Aust)
Pty. Ltd.
10.30 * China-Joint Study Agreement of March 18, 1996 (50%).
10.31 * Agreement dated January 31, 1998 among Indo-Pacific
Energy Ltd., Trans-Orient Petroleum Ltd., Trans New
Zealand Oil Company and Gondwana Energy Corp. cancelling
interest of Trans New Zealand and Gondwana in PEP 38256.
10.32 * PEP 38716 permit endorsement dated August 8, 1997.
10.33 * Farm-out agreement dated April 21, 1997 - Marabella
Enterprises Ltd. to Australian Worldwide Exploration NL.
10.34 * Participation commitments in PEP 38716 of Indo-Pacific
Energy Ltd., Durum Energy Corp. and Euro-Pacific.
10.35 PEP 38706-Deed of withdrawal of Australia and New Zealand
Resources and of Petroleum Resources dated January 28,
1998.
10.36 PMP 38148-Oil sales contract dated November 9, 1997.
<PAGE> 103
10.37 PMP 38148-Gas sales contract dated February 18, 1998.
10.38 PEP 38328-Permit endorsements dated December 8, 1997.
10.39 PEP 38330-Deed of assignment of Moondance Pty. to
Moondance dated February 29, 1998. -Permit endorsement
dated April 14, 1998.
10.40 AC/P19-Agreement dated August 12, 1997 among Lonman Pty.
Ltd., Mosiac Oil N.L. and Indo-Pacific Energy Pty. Ltd.
granting to Lonman a free carried interest of five
percent (1.75% from Mosiac and 3.25% from Indo).
10.41 Vic/P39-Agreement dated August 12, 1997 among Lonman Pty.
Ltd., Mosiac Oil N.L., Euro Pacific Energy Pty. Ltd. and
Indo-Pacific Energy Pty. Ltd. granting to Lonman a free
carried interest of five percent (1 2/3% from each).
10.42 PEP 38716-Australia World Wide Exploration farmin
agreement dated April 10, 1997
10.43 PEP 38716-Antrim Energy farmin agreement dated November
6, 1997.
10.44 PEP 38716 proportional participation agreement dated May
6, 1998 among Marabella, Durum, PEP 38716 and Euro
10.45 PEP 38332 Deed dated August 25, 1997-TNZ to TNZ(NZ)
10.46 PEP 38332 Deed dated October 10, 1997-Boral to Boral(NZ)
10.47 PEP 38332 Permit endorsement dated January 14, 1998-Boral
to Boral(NZ)
10.48 PEP 38332.Deed dated April 1, 1998-TNZ(NZ) to TOP(NZ)
10.49 WA-199-P Farmin agreement dated March 26, 1998-Boral,
Indo(Aus) and Indo as guarantor
10.50 WA-199-P-Indo deed of guarantee dated March 26, 1998
10.51 WA-199-P-Permit endorsement dated May 12, 1998
10.52 Vic/P39-Permit dated July 31, 1997
10.53 PEP 38716-Various endorsements to PEP 38716
10.54 Permit 38148 and various endorsements
27 Financial Data Schedule
<PAGE> 104
99.1 * Escrow agreement dated April 8, 1994 among the Pacific
Corporate Trust Company, the Registrant and certain
shareholders of the Registrant.
99.2 * Form Incentive Stock Option Agreement.
99.3 * Letter granting Continuing Hardship Exemption.
99.4 * Agreement dated December 15, 1997 between 437577 B.C.
Ltd. (now International Resources Management Corp.) and
Dr. David Bennett for sale of 225,000 escrow shares.
99.5 Terms and conditions attached to share purchase warrants-May 1, 1998.
* Filed previously.
<PAGE> 105
SIGNATURES
Pursuant to the requirements of section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this
signature page to the Form 10 Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized in Wellington, New Zealand on this 15th day of July,
1998.
INDO-PACIFIC ENERGY LTD.
By: /s/ Dr. David Bennett, President
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Dr. David
Bennett as true and lawful attorney, with full power of
substitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments to this
registration statement, and to file the same, therewith, with
the Securities and Exchange Commission, and to make any and all
state securities law or blue sky filings, granting unto said
attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite or necessary to
be done in or about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or any
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this Form 10 Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Name Title Date
/s/ Dr. David Bennett President, Chief Executive
Officer and member of the
Board of Directors July 15, 1998
/s/ Ronald Bertuzzi Director July 15, 1998
/s/ Alex Guidi Chairman of the July 15, 1998
Board of Directors
/s/ Brad Holland Member of the July 15, 1998
Board of Directors
/s/ Mark Katsumata Secretary July 15, 1998
<PAGE> 106
EXHIBIT 10.35
DATED 29 JANUARY 1998
AUSTRALIA AND NEW ZEALAND PETROLEUM LIMITED
PETROLEUM RESOURCES LIMITED
SOUTHERN PETROLEUM (OHANGA) LIMITED
FLETCHER CHALLENGE ENERGY TARANAKI LIMITED
AND
NGATORO ENERGY LIMITED
DEED OF WITHDRAWAL
PPL 38706
THIS DEED is made the 29 January 1998
BETWEEN
AUSTRALIA AND NEW ZEALAND PETROLEUM LIMITED, a duly incorporated
company having its registered office at Auckland, New Zealand
("ANZ")
PETROLEUM RESOURCES LIMITED, a duly incorporated company having
its registered office at Auckland, New Zealand ("Resources")
SOUTHERN PETROLEUM (OHANGA) LIMITED, a duly incorporated company
having its registered office at New Plymouth, New Zealand
("Southern")
FLETCHER CHALLENGE ENERGY TARANAKI LIMITED, a duly incorporated
company having its registered office at New Plymouth, New Zealand
("Fletcher")
AND
NGATORO ENERGY LIMITED, a duly incorporated company having its
registered office at Wellington, New Zealand ("Ngatoro")
RECITALS:
A. ANZ, Resources and the Other Joint Venturers are the current
parties to the Joint Venture and Joint Venture Operating
Agreement.
B. Pursuant to Clasue 12.02(b) of the Joint Venture Operating
Agreement, by notice dated 31 July 1997, ANZ and Resources
exercised their right to withdraw from the Joint Venture and PPL
38706 Licence Area and wish to transfer their respective
Percentage Interests free from all encumbrances to the Other
Joint Venturers, on the terms and conditoins of this Agreement.
<PAGE> 107
THE PARTIES COVENANT AND AGREE:
1. DEFINITIONS
Unless otherwise required by the context or subject matter:
"Agreement" means this deed;
"Effective Date" means 31 July 1997;
Joint Venture" means the joint venture formed by the Parties
hereto in relation to the explorations and development of the
PPL38706 Licence Area;
"Joint Venture Operating Agreement" means the Joint Venture
Operating Agreement for PPL38706 executed by ANZ, Resources and
the Other Joint Venturers dated 2 September 1993;
"PPL 38706 Licence Area" means the area the subject of Petroleum
Prospecting Licence 38706 as at the Effective Date;
"PMP 38148 Permit Area" means the area the subject of Petroleum
Mining Permit 38148 granted by the Minister of Energy on 23
December 1996;
"Covenants" means the covenants, agreements and obligations
contained incurred or implied in or pursuant to the Joint Venture
Operating Agreement or imposed by law to be observed and
performed to the extent of ANZ and Resources' interest but
specifically excluding those for which ANZ and Resources retain
liability under Section 12.03 of the Joint Venture Operating
Agreement;
"Other Joint Venturers" means Southern, Fletcher and Ngatoro.
"Party" means ANZ and/or Resources and/or any or all of the Other
Joint Venturers according to the context, and "Parties" has a
corresponding meaning; and
"Percentage Interest" means the undivided right, title, interest
and obligation from time to time of a Joint Venturer as tenant in
common with the Joint Venture parties in the Joint Venture,
expressed as a percentage of the totality of all the Joint
Venturers' undivided beneficial rights, titles, interests and
obligations therein.
2. INTERPRETATION
2.1 Words in the Joint Venture Operating Agreement
Words and expressoins defined in the Joint Venture Operating
Agreement and used but not defined in this Agreement have the
same meaning as in the Joint Venture Operating Agreement.
<PAGE> 108
2.2 Headings
Except in the Schedule (where applicable), headings in this
Agreement are for convenience and identificatoin of clauses only
and do not otherwise affect its interpretation.
2.3 Reference to other document
Subject to any contrary provision in this Agreement, a reference
to any other deed, agreement, instrument or contract includes a
reference to that other deed, agreement, instrument or contract
as amended, supplemented or varied from time to time.
2.4 Reference to a Party
Unless contrary to the sense or context, a reference to a Party
includes that Party's successors and assigns.
3. WITHDRAWAL AND ASSIGNMENT
3.1 With effect on and from the Effective Date, ANZ and
Resources hereby:
(a) withdraw from the PPL 38706 Licence Area, the Joint Venture
and the Joint Venture Operating Agreement in so far as it applies
to the PPL 38706 Licence Area only; and
(b) in consideration of the covenants herein contained, asking
for nil compensation to each of the Other Joint Venturers their
Percentage Interests in respect of the PPL 38706 Licence Area on
a pro rata basis in proportion to the Percentage Interests held
by each of the Other Joint Venturers in the PPL 38706 Licence
Area at the Effective Date.
3.2 For the avoidance of doubt, the withdrawal of ANZ and
Resources from the Joint Venture, the Joint Venture Operating
Agreement and PPL 38706 Licence Area and the assignment of their
respective Percentage Interests to the Other Joint Venturers
shall not affect the interests of any party to the PMP 38148
Permit Area.
4. WARRANTY
ANZ and Resources hereby warrant that their respective Percentage
Interests to be assigned under this Agreement are free from all
mortgages, charges, lien's and other encumbrances or adverse
claims of any nature whatsoever (other than governmental
royalty).
<PAGE> 109
5. OTHER JOINT VENTURERS TO OBSERVE ANZ AND RESOURCES COVENANTS
5.1 The Other Joint Venturers agree on and from the Effective
Date to observe and perform ANZ and Resources' Covenants arising
or incurred on or after the Effective Date in proportion to the
pro rata share ech receive pursuant to this Agreement. For the
avoidance of doubt, ANZ and Resources retain liability for the
obligations under subsection 12.03(vi) of the Joint Venture
Operating Agreement.
5.2 The Other Joint Venturers are not liable for any failure to
observe and perform ANZ and Resources' Covenants before the
Effective Date or for any liabilities and obligations which
remain with ANZ and Resources' on or after the Effective Date
pursuant to subsection 12.03(vi) of the Joint Venture Operating
Agreement.
5.3 Each of the Other Joint Venturers severally (but not jointly
or joint and severally) on a pro rata basis in proportion to the
Percentage Interest acquired from each of ANZ and Resources by
each of the Other Joint Venturers indemnify ANZ and Resources
against all liabilities and obligations arising with respect to
ANZ and Resources' Covenants accruing on or after the Effective
Date.
6. RELEASE
6.1 Subject to clause 4.2 and 5.2 of this Agreement the Other
Joint Venturers release and discharge ANZ and Resources from ANZ
and Resources Covenants on an from the Effective Date.
6.2 ANZ and Resources:
(a) remain liable for, and must observe and perform, all ANZ and
Resources Covenants arising or incurred before the Effective
Date; and
(b) remain bound by the confidentiality provisions of Article
13.01 (b) of the Joint Venture Operating Agreement; and
(c) indemnify each of the Other Joint Venturers against all
liabilities and obligations arising or incurred with respect to
ANZ and Resources Covenants accruing before the Effective Date.
7. COMPLIANCE WITH JOINT VENTURE OPERATING AGREEMENT
7.1 The Parties confirm that this Agreement fully complies with
Section 12.03 of the Joint Venture Operating Agreement.
7.2 The Other Joint Venturers consent to the withdrawal and
assignment by ANZ and Resources as evidenced by this Agreement.
<PAGE> 110
8. PERCENTAGE INTERESTS OF PARTIES FROM EFFECTIVE DATE
For the avoidance of doubt, the Percentage Interests of the
parties to the Joint Venture Operating Agreement and in respect
of the PPL 38706 Licence Area and the PMP 38148 Permit Area on
and from the Effective Date are:
NAME OF PARTY PERCENTAGE INTEREST
PPL 38706 PMP 38148
Southern 46.125% 29.78465%
Fletcher 46.125% 29.78465%
Ngatoro 7.75% 5.00000%
ANZ - 15.00000%
Resources - 20.43070%
9. CONDITION PRECEDENT
9.1 This Agreement and the withdrawal and assignments
contemplated by it are subject ot the condition precedent that
any necessary approval or consent by the Minister of Energy for
the time being responsible for the administration of the
Petroleum Act 1937 is obtained.
9.2 As soon as practicable after the execution of this Agreement
by all parties, ANZ and Resources will lodge this Agreement with
the appropriate authorities to enable any necessary approval or
consent to be given.
9.3 The Parties will use all reasonable efforts and will
promptly execute all documents and do all acts and things which
are necessary to obtain any approval or consent referred to in
Clause 8.1 as expeditiously as possible.
9.4 Upon satisfaction of the condition referred to in Clause
8.1, this Agreement shall, as between the parties, take effect on
and from the Effective Date.
10. COSTS
ANZ and Resources will pay the registration fees on this
Agreement.
11. PROPER LAW
This Agreement is governed by, and to be interpreted in
accordance with the laws of New Zealand.
<PAGE> 111
12. JURISDICTION
The Parties agree to submit to the jurisdiction of the courts of
New Zealand.
13. FURTHER ASSURANCES
Each Party must execute and do all acts and things necessary or
desirable to implement and give full effect to the provisions and
purpose of this Agreement.
EXECUTED AS A DEED
Signed for and on behalf of )
AUSTRALIA AND NEW ZEALAND )
PETROLEUM LIMITED by: )
/s/ illegible /s/ illegible
Director Director/Secretary
Witness to both signatories
Name: illegible
Address: illegible
Occupation: Secretary
Signature: /s/ illegible
Signed for an on behalf of )
PETROLEUM RESOURCES LIMITED )
by:
/s/ illegible /s/ illegible
Director Director/Secretary
Witness to both signatories
Name: illegible
Address: illegible
Occupation: Secretary
Signature: /s/ illegible
Executed as a Deed by )
SOUTHERN PETROLEUM (OHANGA) )
LIMITED in the presence of: )
/s/ illegible /s/ illegible
Director Director/Secretary
The Common Seal of Fletcher Challenge Energy Taranaki Limited
97/686
<PAGE> 112
Executed as a Deed by )
FLETCHER CHALLENGE ENERGY )
TARANAKI LIMITED in the presence of: )
/s/ illegible /s/ illegible
Signed for and on behalf of )
NGATORO ENERGY LIMITED )
by: )
/s/ David Bennett /s/ Jenni Lean
Director Director/Secretary
Witness to both signatories
Signature: /s/ Keren Witt
Name: Keren Witt
Address: 12/37 Bracken Road
Newlands, Wellington
Occupation: Office Manager
<PAGE> 113
EXHIBIT 10.36
AGREEMENT FOR
THE PURCHASE OF CRUDE OIL AND CONDENSATE
DATED this 9th day of November, 1997
BETWEEN
(1) FLETCHER CHALLENGE ENERGY TARANAKI LIMITED a company duly
incorporated in New Zealand having its registered office at New
Plymouth, New Zealand (the "Buyer"); and
(2) NGATORO ENERGY LIMITED a company duly incorporated in New
Zealand having its registered office at Wellington, New Zealand
(the "Seller")
WHEREAS:
A. The Parties are Permit Holders in respect of PMP 38148 held
by the Parties and in the respective Percentage Interests as
specified in Schedule 1.
B. The Buyer currently transports its Percentage share of
Product from the Ngatoro Field to the Omata Tank Farm in the
following manner:
(i) Product from the Ngatoro 1 Site by way of transmission
through a certain Pipeline;
(ii) Product from the Ngatoro 2 Site by way of carriage by road
tanker.
C. The Seller now desires the following:
(i) to transport its Percentage Share of Product from the
Ngatoro 1 Site to the Omata Tank Farm by way of transmission
through the said Pipeline or alternatively (by default) by way of
carriage by road tanker; and
(ii)
to continue to transport its Percentage share of Product from the
Ngatoro 2 Site by way of carriage by road tanker.
D. To facilitate the above, the Seller has agreed to sell its
Percentage Share of the Product produced from the Ngatoro Field
to the Buyer and the Buyer has agreed to purchase the same on the
terms and conditions contained herein.
<PAGE> 114
THE PARTIES HEREBY AGREE as follows:
1.0 INTERPRETATION
1.1 Defined Terms
In this Agreement and in each schedule unless the context
otherwise requires, the following terms shall have the following
meanings:
"Agreement" means this agreement including the Schedules and as
amended from time to time in accordance with clause 21.0;
"bbl" means a unit of Product consisting of 158.987 litres of oil
(excluding water, sediment, and other impurities) at an
atmospheric pressure of 1.01325 bars and a temperature of 15
degrees Celsius, and "Barrel" and "Barrels" shall have
corresponding meanings;
"bpd" mean Barrels of oil per day;
"Commencement Date" mean 1 April 1997;
"Default Interest Rate" means the average floating rate of interest
calculated at three percent above the average 90 day bank bill mid
rate quoted in New Zealand on Reuters for bank bills at 10.45 am on
the day on which the default is made or, if no such rate is quoted
on that day, on the immediately preceding day on which a rate is
quoted, or in the event publication of such rate has ceased then
the rate of interest calculated at three percent above the average
90 day commercial bill rate quoted by Reuters and thereafter for
each day of the default;
"Deliver" means to deliver Product to the Point of Delivery, and
the words "Delivered", "Delivery" and
"Deliveries" shall have corresponding meanings;
"Force Majeure Event" shall have the meaning ascribed to it in
clause 12.1;
"Inspector" means the inspector(s) nominated in Schedule 3;
"Meter FT 016" means the meter located at the Ngatoro 1 Site and
marked FT 016 on drawing number 660-11002 of the Piping and
Instrumentation Diagram for the Ngatoro Production Station
(attached as Schedule 2);
"Month" means a calendar month;
"Month of Delivery" means the Month in which Deliveries made
shall be aggregated for invoicing;
<PAGE> 115
"Ngatoro 1 Site" means the Ngatoro 1 well site located within the
Ngatoro Field;
"Ngatoro 2 Site" means the Ngatoro 2 well site located within the
Ngatoro Field;
"Ngatoro Field" means the geologic structures containing
recoverable hydrocarbons within the area defined in PMP 38148;
"Ngatoro Spur Line" means the pipeline which ties in the Ngatoro 1
Site to the Oil export Pipeline;
"Oil Export Pipeline" means the oil export pipeline which runs
between the Waihapa Production Station and the Omata Tank Farm and
which is owned by the TAWN Joint Venture;
"Omata Tank Farm" means the crude oil and condensate storage
facility owned by Fletcher Challenge Petroleum Marketing Limited
and situated at Omata, New Plymouth;
"Operator" means the operator for the time being of PMP 38148;
"Party" means either the Buyer or the Seller, depending on the
context, and "Parties" means the Buyer and Seller collectively;
"Percentage Interest" means the percentage interests each of the
Permit Holders holds individually in PMP 38148, as indicated in
Schedule 1;
"Percentage Share" means the share of Product due to a Permit
Holder in accordance with its Percentage Interest;
"Permit Holder" means a permit holder in PMP 38148 and
"Permit Holders" has a corresponding meaning;
"Pipeline" means the Ngatoro Spur Line;
"Point of Delivery" means either (as the case may be):
a) bwhere the Product is to be Delivered to the Pipeline, the
point at which the Product enters the Ngatoro Spur Line at the
Ngatoro 1 Site, downstream from the valve XSV 019 on drawing
number 660-11002 of the Piping and Instrumentation Diagram for
the Ngatoro Production Station (attached as Schedule 2); or
b) where the Product is to be Delivered by road tanker, the
point at the Omata Tank Farm at which the Flange on the discharge
hose of the tanker connects with the tank loading flange or
manifold;
"PMP 38148" means Petroleum Mining Permit 38148;
<PAGE> 116
"Price" means the purchase price calculated by multiplying the
volume of Product Delivered in the relevant Month with the Price
per Barrel specified in this Agreement;
"Product" means oil and condensate produced from the Ngatoro
Field, measured in bbl;
"Quantity" means the quantity of Product specified in Schedule 3;
"Quality" means the quality of Product, the requirements of which
are specified in Schedule 3;
"Range" means (in relation to Quantity) between 1100 bpd and 1750
bpd;
"Seller's Bank Account" means the account number at the Seller's
Bank specified in Schedule 3;
"Seller's Bank" means the bank identified as such in Schedule 3;
"Statement of Quantity" means the document produced by the
Inspector specifying the quantity of Product Delivered during the
relevant Month;
"Tapis" means the average of the mean of the Asian Petroleum Price
Index (APPI) Tapis quotations as published by Seapac Services, Hong
Kong for the Month of Delivery calculated to three (3) decimal
places, exclusive of Goods and Services Tax.
"Term" means the term of this Agreement commencing on the
Commencement Date and terminating on the Termination Date, unless
varied in accordance with clause 21.0;
"Termination Date" means 31 March 1998;
"Upon Demand" shall have the meaning ascribed to that term in the
Fifth Schedule to the Chattels transfer Act 1924;
"Working Day" means any day on which banks are open for normal
business in Auckland, New Zealand.
1.2 Construction
In the construction of this Agreement, unless the context otherwise
requires:
a) Headings and subheadings appear as a matter of convenience and
shall not affect the construction of this Agreement;
b) References to clauses and Schedules are to clauses and
schedules in this Agreement;
<PAGE> 117
c) The singular includes the plural and vice versa, and words
importing any gender include the other gender;
d) References to a Party shall include where appropriate that
Party's successors, agents, servants, invitees and contractors;
e) References to persons or parties shall be deemed to include
references to individuals, companies, corporations, firms,
partnerships, joint ventures, associations, organisations, trusts,
states or agencies of state, government departments and local and
municipal authorities in each case whether or not having separate
legal personality;
f) References to a prohibition against doing anything are to be
regarded as including references to not permitting, suffering or
causing that thing to be done;
g) References to an enactment, New Zealand standard or any
regulations are references to that enactment, standard or those
regulations as amended, or to any enactment, standard or
regulations substituted for that enactment, standard or those
regulations;
h) All references to time in this document shall refer to New
Zealand Standard Time;
2.0 SALE AND PURCHASE
2.1 The Buyer agrees to buy and the Seller agrees to sell the
Product on the terms and conditions contained in this Agreement.
2.2 The Product shall be Delivered to the Buyer at the Point of
Delivery.
3.0 WARRANTIES
3.1 The Seller warrants that it has clear and unencumbered title
to the Product sold and Delivered hereunder at the time of
Delivery.
4.0 TERM
4.1 This Agreement shall be deemed to have commenced on the
Commencement Date and shall remain in force and effect until the
Termination Date unless any of the following occur earlier:
a) Either Party gives notice to the other Party pursuant to
clause 15.2, and this Agreement is terminated as a consequence; or
b) The Agreement is extended by way of variation in accordance
with clause 21.0.
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5.0 PRICE AND PAYMENT
5.1 The Buyer shall pay the Price specified in Schedule 3 to the
Seller for Product Delivered.
5.2 Subject to the provisions of clause 5.6 the Buyer shall pay
the Price in respect of each Month's total delivery of Product on
the 20th of the Month following the Month of Delivery upon the
receipt of the following documents:
a) a statement of quantity in respect of the Month's total
Delivery; and
b) an invoice for the Price in respect of the Month's total
Delivery.
In the event that the 20th day of the Month falls on a Saturday or
on a day the Seller's Bank is not open for business Tuesday through
Friday (inclusive) then and in such instance payment shall be made
on the preceding Working Day. In the event that payment falls on
a Sunday or Monday when the Seller's Bank is not open for business,
then and in such instance payment shall be made on the next Working
Day.
5.3 The invoice referred to in clause 5.2 b) shall be forwarded to
the Buyer not less than five (5) Working Days before the date the
invoice is due to be paid and shall be based on the Statement of
Quantity and the findings of the Inspector(s) in accordance with
the provisions of clause 8.0.
5.4 Subject to the provisions of clause 5.6 the Buyer shall:
a) pay the Price free of any deductions whatsoever and without
asserting any set-off, counterclaim, or right to withhold
whatsoever; and
b) deposit the Price directly into the Seller's Account. The
Buyer shall ensure that such deposit shall clearly reference the
Seller's invoice number and name.
5.5 Subject to clause 5.6, if the Buyer fails to pay all or part
of the invoiced Price to the Seller on the date due, then the Buyer
shall Upon Demand, pay to the Seller interest calculated at the
Default Interest Rate. Such interest shall accrue on the unpaid
portion of the Price from the due date until payment is actually
made.
5.6 Disputed Invoices
5.6.1 In the event of any dispute concerning an invoiced amount
(referred to in the balance of this clause 5.6 as "the dispute")
the Buyer shall, within ten (10) Days from the date it received the
<PAGE> 119
invoice, notify the Seller in writing identifying the amount in
dispute and giving full reasons for the dispute. The Buyer shall
pay the full amount of any portion of the invoice which is not in
dispute as set out in clause 5.4. The dispute will then be
referred to the dispute resolution procedure outlined in the
provisions of clause 17.0 In the event that Buyer complies with
the terms of this clause 5.6.1, the Seller shall not have the right
to suspend the continued supply of the Product by reason only of
the Buyer's withholding of the disputed amount.
5.6.2 Where as a result of the determination of the dispute
either Party has to pay money to the other, then in addition to
such payment, interest calculated on a daily basis (but not
compounded) shall be payable thereon from the due date for payment
of the invoice until actual payment at a rate equal to the Default
Interest Rate.
5.6.3 If it shall be found at any time that the Buyer has been
overcharged or undercharged in any form whatsoever under the
provisions of this Agreement and the Buyer shall have actually paid
the invoices containing such overcharge or undercharge, then,
within thirty (30) days after such error has been discovered and
the amount has been agreed to by the Parties or determined during
the disputes resolution procedure pursuant to the provisions of
clause 17.0, the Seller shall refund to the Buyer the amount of any
such overcharge or the Buyer shall pay to the Seller the amount of
any such undercharge, in both cases together with interest on the
overcharged or undercharged amount at the Default Interest Rate
calculated from the due date for payment of the appropriate invoice
to the date of actual payment of the overcharged or undercharged
amount PROVIDED THAT there shall be no right to re-open invoices if
more than eighteen (18) months has elapsed since the date of the
invoice.
6.0 DELIVERY
6.1 The Seller hereby acknowledges that transportation of Product
from the Ngatoro 1 Site by way of transmission through the Pipeline
is dependent on the Buyer's use of the Pipeline pursuant to an Oil
Transportation Agreement with the owners of that Pipeline dated 30
January 1997, and that transmission may be interrupted at any time
for maintenance or emergencies in accordance with the provisions of
that agreement.
6.2 The Buyer shall endeavour to give as much advance notice as
possible of interruption of transmission through the Pipeline,
including at least five (5) days notice of a planned shutdown for
maintenance. Where notice has been given by the Buyer in
accordance with this clause, then and in such instance the Seller
shall arrange and take sole responsibility for Product from the
Ngatoro 1 Site to be Delivered by road tanker.
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6.3 Where Product is to be Delivered by road tanker then a
delivery schedule indicating the quantity and timing of such
Deliveries shall be agreed upon in writing between the Parties.
The Seller shall use its best endeavours to conform to the delivery
schedule for the Delivery of Product.
6.4 The Seller shall Deliver the Product to the Buyer and the
Buyer shall take Delivery of the Product from the Seller at the
Point of Delivery and the Buyer shall at the sole expense of the
Buyer arrange the storage or carriage of the Product beyond the
Point of Delivery.
6.5 The Product shall be supplied and Delivered hereunder by the
Seller and the Buyer shall receive and take Delivery of the same at
an approximately even rate over the Term of the Agreement,
acknowledging the Ngatoro field's natural rate of decline.
6.6 Subject to any right to the control contained herein the Buyer
shall not prevent, interrupt, or delay the Delivery of the Product.
6.7 Notwithstanding clause 6.6, the Buyer reserves the right not
to receive Product from time to time due to lack of pullage,
PROVIDED THAT:
(a) the exercise of the right contained in this clause 6.7 shall
be on the basis that the Buyer shall endeavour to pro rate such
right across all parties having use of the Omata Tank Farm storage
facilities (including the Buyer), whether or not such parties are
parties to this or similar Agreement; and
(b) where the Buyer wishes to exercise this right the Buyer shall
give notice to the Seller of such intention in accordance with this
Agreement.
7.0 TITLE AND RISK
7.1 Title to the Product and all risk of loss or damage to the
Product (including without limitation, contamination, shortage or
diminution of quantity) shall pass from the Seller to the Buyer as
the Product passes the Point of Delivery.
8.0 INSPECTION
8.1 The independent Inspector(s) nominated in Schedule 3 shall
check and verify the quantity and quality of the Product Delivered
at the Point of Delivery. A copy of the Inspector's report shall
be provided to both the Buyer and the Seller. The Inspector's
findings shall be final and binding, except in the case of manifest
error. The costs of such inspection(s) and reports shall be borne
equally by the Buyer and the Seller.
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9.0 QUALITY
9.1 The Seller warrants that the Product to be Delivered to the
Buyer for transportation from the Ngatoro Field to the Omata Tank
Farm through the Pipeline pursuant to this Agreement will meet the
Quality requirements specified in paragraph 3 of Schedule 3
(referred to in the balance of this clause 9.0 as the "Quality
Requirements".)
9.2 Notwithstanding anything else contained in this Agreement, if
the Buyer in its absolute discretion reasonably determines that the
Quality Requirements have not been met then the Buyer will have the
right to refuse acceptance of Product Delivered and to terminate
this Agreement in accordance with clause 15.0.
10.0 QUANTITY
10.1 The Seller undertakes that within the Range, the Seller will
Deliver the Quantity to the Buyer on a daily basis.
10.2 In respect of the Quantity of Product:
a) where the Product is delivered by the Seller by road tanker,
the Statement of Quantity of Product carried by the road tanker
shall be prepared by the Inspector based upon the Weighbridge
dockets for Product delivered by the Seller to the Omata Tank Farm;
and,
b) where the Product is delivered by the Seller to the Pipeline,
the Statement of Quantity of Product carried by Pipeline shall be
prepared by the Operator based upon the meter reading of Meter FT
016 and subject to any adjustments as deemed appropriate and
necessary for the purposes of accuracy by the Inspector. Either
Party may elect to be present at the time of the said meter reading
by the Operator for the purposes of preparing the Statement of
Quantity.
10.3 For the purposes of verifying the accuracy of meter readings
for Product delivered by Pipeline the Parties shall ensure that:
a) on a monthly basis the metered volume of Product is checked
against the tank volume of Product. In the event that the tank
volume indicates that Meter FT 016 is out of calibration then the
Parties shall take such steps as they deem necessary to ensure that
it is recalibrated; and
b) on a six (6) monthly basis ensure that a calibration test is
conducted on Meter FT 016.
10.4 Where the total volume of Product (including the Seller's
Percentage Share), produced from the Ngatoro Field falls outside of
the Range then and in such instance the Buyer reserves the right to
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give written notice requiring the Seller to renegotiate the Price
or other material terms of this Agreement. Such notice shall
contain the new price or terms desired by the Buyer.
10.5 If the Parties do not agree upon a new price or terms
satisfactory to both Parties within thirty (30) days after the
Buyer gives such notice, subject to subclause 10.6 the Buyer may
terminate this Agreement at the end of the thirty day period. Any
Product Delivered during this thirty day period shall be sold and
purchased at the Price and on the terms applying hereunder without
any adjustment, and neither party shall have further claim against
the other in this regard.
10.6 For the avoidance of doubt, in the event that the Buyer
exercises its rights under subclause 10.5 then the Buyer's sole
remedy will be under that subclause and the Buyer will not have any
further rights to claim from or against the Seller any amount by
way of general or special damages or otherwise.
11.0 INSURANCE
11.1 Both Parties shall obtain and maintain throughout the term of
this Agreement such public liability insurance and other suitable
insurance to cover each Party's respective operations as would be
obtained by a prudent Buyer or Seller of crude oil participating in
the petroleum industry. Each Party shall, Upon Demand from the
Buyer, provide evidence that such insurance cover has been obtained
and that the premiums for such insurance cover have been paid.
12.0 TAXES, DUTIES AND IMPOSTS
12.1 All taxes, duties or other imposts (including without
limitation Goods and Services Tax) (whether retroactive or
otherwise), levied on the Product and arising in New Zealand prior
to the Point of Delivery of the Product to the Buyer, shall be the
sole responsibility of and shall be paid on or before the due date
by the Seller.
13.0 FORCE MAJEURE
13.1 For the purposes of this clause 13.0, a "Force Majeure Event"
shall mean an event or circumstance beyond the control of either
Party, which results in or causes a failure by one Party in the
performance of any obligations imposed on it by this Agreement
notwithstanding the exercise by that Party of reasonable care.
13.2 Notwithstanding any other provisions of this Agreement but
subject to clause 13.3, neither the Buyer nor the Seller shall be
responsible for any failure to fulfill their respective obligations
under this Agreement if fulfillment has been delayed, hindered,
interfered with, curtailed or prevented by any Force Majeure Event
whatsoever which is not within the control of the Buyer or of the
Seller as the case may be, including but not limited to:
<PAGE> 123
a) acts of God, acts of the Queen's enemies, sabotage, acts of
war, blockades, insurrections, riots, epidemics, floods, storms,
fires, washouts, explosions, breakage of or accident to machines,
pipelines, or associated equipment, freezing of wells or delivery
facilities, well blowouts, craterings, nuclear accidents or civil
disturbances; or
b) any curtailment, failure or cessation of supplies of Product
from any of the Seller's sources of supply (whether in fact sources
of supply for the purposes of this Agreement or not); or
c) any compliance with any law, regulation, or ordinance, or with
any order, demand, or request of any international, national, port,
transportation, local, or other authority or agency or of any body
or person purporting to be or to act for such authority or agency
or any corporation directly or indirectly controlled by any of
them; or
d) a strike, lock-out or labour dispute (whether or not the
Seller, its suppliers or the Buyer as the case may be, are party
thereto or would be able to influence or procure the settlement
thereto).
13.3 Subject to clause 15.1c) no mere curtailment or suspension or
acceptance of Deliveries, pursuant to this clause 13.0 shall
operate to extend or to terminate this Agreement. Any portion of
the Product, the Delivery or acceptance of which has been prevented
by a Force Majeure Event shall be deducted from the amount required
to be Delivered and received pursuant to this Agreement unless
otherwise agreed. Performance under these Terms and Conditions
shall resume to the extent made possible by the end or amelioration
of the Force Majeure Event.
13.4 On the occurrence of any Force Majeure Event the Party so
affected in the discharge of its obligations (referred to in the
balance of this clause 13.0 as "the affected Party") shall promptly
give written notice to the other Party which may, in its discretion
request that reasonable evidence of the occurrence of the Force
Majeure Event be provided. Upon the termination of the Force
Majeure Event the affected Party shall promptly give written notice
to the other Party of such termination.
13.5 The affected Party shall take all reasonable steps to make
good and resume with the least possible delay, compliance with the
obligation which is hindered or prevented, PROVIDED HOWEVER that
the affected Party shall not be obliged to settle any labour
dispute on terms unacceptable to that Party.
13.6 Where the Force Majeure Event is such that it is unlikely that
the affected Party could ever again be in a position to perform its
obligations under this Agreement, that Party shall give written
notice to be served on the other Party terminating this Agreement
<PAGE> 124
in accordance with clause 15.0, such notice stating specifically
the cause for termination and declaring it to be the intention of
the affected Party to terminate the same forthwith.
14.0 NEW AND CHANGED REGULATIONS
14.1 It is understood and acknowledged by and between the Parties
that they are entering into this Agreement in reliance on the laws,
rules, regulations, decrees, agreements, concessions and
arrangements (referred to in the balance of this clause as
"Regulations") in effect on the Commencement Date of this
Agreement.
14.2 In the event that at any time and from time to time during the
Term of this Agreement, any of the Regulations directly or
indirectly affecting the Product are changed, modified or amended
or new Regulations become effective and the effect of such changed
or new Regulations:
a) is not covered by any other provision of this Agreement, and
b) has an adverse economic effect upon either Party,
then and in such case the affected Party may give written notice
requiring the other Party to renegotiate the Price or other
material terms of this Agreement. Such notice shall contain the
new price or terms desired by the affected Party.
14.3 If the Parties do not agree upon a new price or terms
satisfactory to both Parties within thirty (30) days after the
affected Party gives such notice, the affected Party may terminate
this Agreement at the end of the thirty day period. Any Product
Delivered during this thirty day period shall be sold and purchased
at the Price and on the terms applying hereunder without any
adjustment in respect of the changed or new Regulations.
15.0 TERMINATION
15.1. This Agreement may be terminated by one Party on the
default of the other Party in accordance with this clause 15.0.
The Party not in default or unaffected by the circumstances
(referred to in the balance of this clause as the "Notifying
Party") may at its option give notice to terminate this Agreement
in the manner prescribed in clause 10.
15.2. Defaults may lead to termination in cases where:
a) pursuant to clause 9.2, the Buyer in is absolute discretion
has determined that the Product does not meet the quality
requirements set out in Schedule 3; or
b) either Party defaults in payment of any money payable under
this Agreement (for reasons other than for incorrect or disputed
invoices) for a period of ten (10) Business Days; or
<PAGE> 125
c) either Party defaults in the performance of any of the other
material covenants or obligations imposed upon it by this
Agreement; or
d) a Force Majeure Event occurs with the result that it is
unlikely that one Party could ever again be in a position to
perform its obligations under this Agreement; or
e) a resolution is passed or an order made by the Court for the
winding up of either Party except for the purposes of
reconstruction or amalgamation; or
f) either Party is placed in liquidation; or
g) either Party makes or enters into or endeavours to make or
enter into any composition, assignment or other arrangement with or
for the benefit of that Party's creditors.
15.2 The Notifying Party shall give written notice to be served on
the other Party (referred to in the balance of this clause as the
"Defaulting Party") stating specifically the cause for terminating
this Agreement and declaring it to be the intention of the
Notifying Party to terminate the same.
15.3 Where the notice is given
a) in respect of a default under clause 15.1 (a) (referred to in
the balance of this clause as a "5 Day Default"), the Defaulting
Party shall have five (5) days after the service of that notice in
which to remedy or remove the cause or causes stated in the notice
for terminating this Agreement;
b) in respect of a default under clauses 15.1 (b) (c) inclusive
(referred to in the balance of this clause as a "30 Day Default"),
the Defaulting Party shall have thirty (30) days after the service
of that notice in which to remedy or remove the cause or causes
stated in the notice for terminating this Agreement;
c) in respect of a default under clauses 15.1 (d) (g)
inclusive, no such thirty day period shall apply and termination
can be effected immediately upon delivery of the notice.
15.5 If, in respect of a 5 Day Default or a 30 Day Default, the
defaulting Party removes and remedies the cause or causes and fully
indemnifies the Notifying Party for any and all direct consequences
of such breach within the respective notice period, then such
notice of default shall be deemed to be withdrawn and this
Agreement shall continue in full force and effect.
15.6 If, in respect of a 5 Day Default or a 30 Day Default, the
Defaulting Party does not so remedy and remove the cause or causes
and/or does not indemnify the Notifying Party for any and all
<PAGE> 126
direct consequences of such Default to the satisfaction of the
Notifying Party within the respective notice period, then the
Notifying Party shall be entitled to terminate this Agreement
forthwith.
15.7 The termination of this Agreement shall not, of itself
a) relieve either Party of its obligation to pay any money
outstanding at that time; or
b) relieve the Seller of its obligation to deliver any Product at
the time of termination (subject to the Seller retaining a lien
over such Product against the payment of its outstanding fees); or
c) constitute a waiver of any remedy to which the Party not in
default may be entitled for breach of this Agreement.
15.8 The termination rights set out in this clause shall be in
addition to, and not in substitution for, any other rights and
remedies available to the Parties.
16.0 INDEMNITY
16.1 Except as provided for in clause 16.2, the Buyer shall
indemnify and hold harmless the Seller and as the case may be its
principals, servants, agents, contractors, and sub-contractors
against all actions, claims, losses, liabilities or damages
suffered by the Buyer and/or its Affiliates arising from any cause
whatsoever including without limitation, any negligent act or
omission or willful misconduct of the Buyer.
16.2 Where Product is to be delivered by road tanker, the Seller
shall indemnify and hold harmless the Buyer and its servants,
agents, contractors and sub-contractors against all costs and
expenses arising in respect of any action the Buyer may, in its
sole discretion, take in order to minimize any spillage of Product
or any damage resulting from such spillage occurring before the
Product has been Delivered at the Point of Delivery and whilst the
Product is within the Omata Tank Farm.
16.3 The Seller shall indemnify and hold harmless the Buyer and as
the case may be its principals, servants, agents, contractors, and
sub-contractors against all actions, claims, losses, liabilities or
damages suffered by the Seller and/or its Affiliates arising from
any cause whatsoever including without limitation, any negligent
act or omission or willful misconduct of the Seller.
16.4 Neither Party shall be liable to the other, in actions brought
by the other, for special, indirect, consequential or punitive
damages resulting from or arising out of this Agreement, including,
without limitation, loss of use, loss of profit or business
interruptions, however same may be caused and regardless of the
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sole or concurrent negligence of the other Party. In no event
shall this clause limit the indemnities given herein with respect
to actions brought by third parties. A Party's obligation to
indemnify and hold the other Party harmless shall not apply to the
extent such obligation relates to a loss or liability resulting
from the willful misconduct of the Party with the right to be
indemnified and held harmless.
16.5 As regards injury, sickness or death of persons or damage to,
loss, or destruction of property belonging to third parties (being
persons in respect of whom indemnities are not granted hereunder)
the Parties will be liable to such third parties in accordance with
the applicable law in relation to such injury, sickness or death or
damage, loss or destruction.
16.6 The indemnities provided under this Agreement will be
continuing indemnities and will survive the termination or
cessation of performance of it.
17.0 DISPUTES
17.1 The Parties agree that should any dispute, controversy, or
claim arise out of or in connection with this Agreement, or the
operation, interpretation, breach, termination or validity thereof
("the dispute") then at first instance each shall use its best
endeavours to resolve the dispute quickly and amicable by way of
negotiation.
17.2 Should such negotiation fail to resolve the dispute within a
reasonable period of time, having regard to the nature of the
dispute, then the parties may submit the dispute to arbitration in
New Zealand pursuant to the provisions of the Arbitration Act 1996
and/or any legislation in amendment thereto or substitution thereof
(referred to in the balance of this clause as "the Act"), before a
sole independent arbitrator agreed upon by both Parties or, if no
such agreement can be reached between the Parties, appointed by the
President for the time being of the Taranaki District Law Society
PROVIDED THAT in all cases the arbitrator so appointed shall be
skilled in the particular nature of the dispute. The provisions of
the Act shall apply to any such arbitration except that the
arbitrator shall give reasons in writing for the decision, and such
decision shall be final and binding on the Parties without right of
application or appeal (except where the arbitral award was
improperly rendered due to misconduct of the arbitrator(s) or was
improperly procured). The Parties expressly agree that the
arbitrator cannot refer or consent to the application by any Party
to refer the matter arising out of any proceedings commenced
pursuant to this clause 17.2 for judicial determination.
17.3 In the event that the application of clause 17.2 is waived by
both Parties in writing, then and in such case the Parties
irrevocably and unconditionally submit to the exclusive
jurisdiction of the High Court of New Zealand at Wellington.
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18.0 NOTICES
18.1 Any notice or other communication required to be given to the
other party pursuant to this Agreement shall be deemed to have been
sufficiently given if sent by facsimile transmission to that Party
or by letter delivered to that Party either by registered mail or
personal delivery at the numbers or addresses set out in Schedule
3 or such other address or numbers as may subsequently be notified
by that Party for such purpose.
18.2 Notices sent by:
a) registered mail shall be deemed to have been received by the
addressee four days after posting;
b) personal delivery shall be deemed to be received by the
addressee on receipt thereof;
c) facsimile transmission shall be deemed to have been received
by the addressee at the time of completion of the facsimile
transmission, provided that if the facsimile transmission occurs at
a time other than during the ordinary business hours of the
addressee, the notice shall be deemed to have been received by the
addressee at the opening of business on the next succeeding Working
Day.
19.0 CONFIDENTIALITY
19.1 The Parties agree that the information acquired pursuant to
this Agreement shall be kept confidential and that there shall be
no press releases or public announcements unless and until the
content and timing of such announcement has been mutually agreed
between the Parties save and except those disclosures that are
required by law, rules, or requirements of governments or stock
exchanges.
20.0 WAIVER
20.1 No failure on the part of either Party to exercise, and no
delay by either Party in exercising, any right under this Agreement
shall operate as waiver of such right nor shall any single or
partial exercise or waiver of any right under this Agreement
preclude a party from exercising any other or further right in
respect of any other or further default by the other Party whether
of a like or of a different character.
21.0 VARIATION AND AMENDMENT
21.1 Except as expressly set out in this Agreement, no variation,
amendment, modification or waiver of any provision of this
Agreement shall be of any force or effect unless it is in writing
and signed by both Parties.
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22.0 ENTIRE AGREEMENT
22.1 This Agreement contains the entire agreement of and between
the Parties with respect to the matters contained herein and
supersede all prior agreements, undertakings, representations and
warranties by or between the Parties (including their directors,
officers, employees, and agents) relating to the subject matter
contained in this Agreement.
23.0 SEVERABILITY
23.1 If any clause or provision of this Agreement shall be held
illegal or unenforceable by any judgment of any Court or tribunal
having competent jurisdiction, such judgment shall not affect the
remaining provisions of this Agreement which shall remain in full
force and effect as if such clause or provision held to be illegal
or unenforceable had not been included in this Agreement.
24.0 ASSIGNMENT
24.1 Neither Party may assign or transfer its rights and
obligations under this Agreement without the consent of the other
Party, such consent not to be unreasonably or arbitrarily withheld.
25.0 APPLICABLE LAW
25.1 This Agreement shall be governed by and construed in
accordance with the laws of New Zealand.
IN WITNESS WHEREOF of this Agreement was executed on the day and
year first written above.
SIGNED for and on behalf of
FLETCHER CHALLENGE ENERGY TARANAKI LIMITED
by:
Signature /s/ G.M. Logan
Name and Title G.M. Logan, General Manager
Witness
Signature /s/ T. Ming-Wong
Name and Occupation Ming-Wong, Legal Adviser
Address New Plymouth, NZ
SIGNED for and on behalf of
NGATORO ENERGY LIMITED
by:
Signature /s/ D.J. Bennett
Name and Title D.J. Bennett, CEO
Witness
Signature /s/ J.R. Burt
Name and Occupation John Burt, Financial Controller
Address 284 Karori Road, Wellington, NZ
<PAGE> 130
SCHEDULE 1
PERMIT HOLDERS
AND THEIR RESPECTIVE PERCENTAGE INTERESTS
IN PMP 38148 (percent)
(as at 1 April 1997)
1. Australia and New Zealand Petroleum Limited 15.00000
2. Ngatoro Energy Limited 5.00000
3. Fletcher Challenge Energy Taranaki Limited 29.78465
4. Petroleum Resources Limited 20.43070
5. Southern Petroleum (Ohanga) Limited 29.78465
100.00000%
Notes: 1 and 4 are operated by New Zealand Oil & Gas Limited
2 is operated by Indo Pacific Limited
3 and 5 are operated by Fletcher Challenge Energy Limited
<PAGE> 131
EXHIBIT 10.37
FLETCHER CHALLENGE ENERGY TARANAKI LIMITED
SOUTHERN PETROLEUM (OHANGA) LIMITED
PETROLEUM RESOURCES LIMITED
AUSTRALIA AND NEW ZEALAND PETROLEUM LIMITED
NGATORO ENERGY LIMITED
as "Seller"
and
FLETCHER CHALLENGE ENERGY LIMITED
as "Buyer"
CONTRACT FOR THE SALE AND PURCHASE OF
NGATORO GAS
AGREEMENT dated February 18, 1998
PARTIES
1. FLETCHER CHALLENGE ENERGY TARANAKI LIMITED, SOUTHERN
PETROLEUM (OHANGA) LIMITED, PETROLEUM RESOURCES LIMITED,
AUSTRALIA AND NEW ZEALAND PETROLEUM LIMITED, NGATORO ENERGY
LIMITED (collectively "Seller")
2. FLETCHER CHALLENGE ENERGY LIMITED ("Buyer")
BACKGROUND
A. The Parties constituting Seller are the licensees of the
Ngatoro Field (as defined herein) and are the joint venturers in
the development of the Ngatoro Field and production of Gas from
the Field.
B. Buyer is intending to install one or more Gas pipelines from
the Ngatoro Field to the Kaimiro production station (owned by
Buyer). This will enable Buyer to buy and sell Ngatoro Gas into
the high pressure reticulation system.
C. Seller has offered to sell and deliver and Buyer has agreed
to purchase and take Gas on the terms and conditions set out in
this Contract.
AGREEMENT
1. INTERPRETATION
1.1 Definitions: In this Contract, unless the context otherwise
requires:
<PAGE> 132
(a) "Affiliated Company" or "Affiliate" means any company or
legal entity which;
(i) controls either directly or indirectly a Party; or
(ii) which is controlled directly or indirectly by such Party; or
(iii) is directly or indirectly controlled by a company or
entity which directly or indirectly controls such Party.
(b) "Control" means the right to exercise 50% or more of the
voting rights in the appointment of the directors of a company.
(c) "Bank Bill Bid Rate" means the New Zealand dollar bank bill
three months bid rate (rounded upwards to the nearest second
decimal place) as appearing at 11.00 or as soon as practicable
thereafter on the relevant day in Wellington on page BKBM of the
Reuters screen;
(d) "Buyer's Facilities" means the equipment to be purchased and
installed by Buyer such that it can uplift Gas from the Point of
Delivery at Ngatoro-1;
(e) "Commencement Date" means the date determined in accordance
with clause 5.1;
(f) "Confidential Information" has the meaning ascribed to it in
clause 14.1;
(g) "Day" means a period of 24 consecutive hours beginning and
ending at midnight;
(h) "Default Rate" means the Bank Bill Bid Rate plus 5% per
annum;
(i) "Existing Well" means a well in existence at the date of
execution of this Contract including a well which is producing,
shut-in or suspended;
(j) "Force Majeure" or "an event or circumstance of Force
Majeure" means an event or circumstance described in clause 13;
(k) "Gas" means gaseous hydrocarbons produced from the Ngatoro
Field;
(l) "Gigajoule" means one thousand million joules;
(m) "Gross Negligence" means an intentional, conscious or
reckless act or omission in disregard of any of the material
terms of this Contract by a party's management or senior
supervisory personnel (but not including any error of judgment or
mistake in the exercise of good faith of any function, authority
or discretion conferred on such party);
<PAGE> 133
(n) "GST" means Goods and Services Tax payable pursuant to the
Goods and Services Tax Act 1985;
(o) "Inspector" means a third party to be agreed between Buyer
and Seller who shall be responsible for maintaining and auditing
the meters described in Section 11 and for notifying delivered
quantities in accordance with clause 8.1;
(p) "Month" means a calendar month;
(q) "Ngatoro Field" means the Ngatoro Field defined by the
Petroleum Mining Permit 38148 (Ngatoro) and any extensions to the
permit;
(r) "Party" means Seller, Buyer and each of the respective
Parties constituting Seller;
(s) "Percentage Interest" means the percentage interest in
Ngatoro Field of each party comprising the Seller;
(t) "Petajoule" or "PJ" means one million gigajoules;
(u) "Point of Delivery" means in relation to Gas produced or
gathered;
(i) at the Ngatoro-1 site the valve at Ngatoro at which Gas
enters into the Gas pipeline between Ngatoro-1 and Kaimiro, as
shown on Schedule A of this Contract; or
(ii) at the Ngatoro-3 site the valve at Ngatoro at which Gas
enters into the Gas pipeline between Ngatoro-3 and Kaimiro, as
shown on Schedule A of this Contract; or
(iii) for any new Gas discovered in respect of which Buyer
exercises its Option under clause 6.1, at the wellsite boundary
for that new Gas discovery or at such other point agreed prior to
the commencement of delivery of such Gas to Buyer.
(v) "PPI" means Producers Price Index, Inputs (All Markets) as
published by the New Zealand Department of Statistics;
(w) "Working Day" means any day other than a Saturday, Sunday or
official holiday in New Zealand;
(x) "Year" means a period of 365 consecutive days (or 366 as the
case may be).
1.2 Rules of Interpretation: In this Contract, unless the
context otherwise requires:
(a) bHeadings: clause headings and other headings are for ease
of reference only and shall be deemed not to form any part of
this Contract or to affect the construction of this Contract;
<PAGE> 134
(b) Plural and Singular: words importing the singular number
shall include the plural and vice versa;
(c) Parties: references to Parties are references to Seller and
Buyer and their respective successors and assigns;
(d) Persons: references to persons shall be deemed to include
references to individuals, companies, corporations, firms,
partnerships, joint ventures, associations, organisation, trusts,
states or agencies of state, government departments and local and
municipal authorities in each case whether or not having separate
legal personality;
(e) Obligations: any obligation not to do something shall be
deemed to include an obligation not to suffer, permit or cause
that thing to be done. An obligation to do something shall be
deemed to include an obligation to cause that thing to be done;
(f) Currency: all amounts referred to in this Contract are
denominated in New Zealand dollars;
(g) Rights May Be Exercised From Time to Time: a right
conferred by this Contract to do any act or thing shall be
capable of being exercised from time to time.
(h) Amended and Updated Legislation: Any reference in this
Contract to any statute or regulation shall be deemed to include
all amendments, revisions or re-enactment's or substitutions made
from time to time to the statute or those regulations. Any
reference in this Contract to a statute includes reference to any
regulations made under it.
2 SALE AND PURCHASE OF GAS
2.1 Sale and Purchase of Gas: Seller agrees to sell and deliver
Gas to Buyer and Buyer agrees to purchase and take Gas upon the
terms and conditions contained in this Contract.
2.2 Dedication: Seller hereby dedicates to the performance of
this Contract all the Gas reserves produced or capable of being
produced from Existing Wells in the Ngatoro Field subject to
clauses 3.2, 5.4 and 6.1.
2.3 Allocation of Gas between Seller: All Gas will be purchased
by Buyer from each Party comprising Seller in proportion to each
such Party's Percentage Interest.
3. Term
3.1 Commencement: This contract shall commence on the date of
execution and will continue until terminated pursuant to clause
3.2, 3.4(b) or 3.7.
<PAGE> 135
3.2 Termination: Subject to clauses 3.4(b) and 3.7 this
Contract shall terminate once Buyer has uplifted a total of 10PJ
of Gas from Seller pursuant to this Contract.
3.3 Subject to clause 13.2, if by 31 December 1998 the
Commencement Date has not occurred then the Parties comprising
Seller, other than those Parties which are Affiliated Companies
of Buyer, may give notice to Buyer that they wish Buyer to
exercise its option under Clause 3.4.
3.4 On receiving any notice given under clause 3.3 Buyer must
exercise one of the following options:
(a) bAgree to pay Seller liquidated damages at a rate of
$50,000.00 per month for each full month from the date on which
such notice was received until the earlier of the Commencement
date or the date from which Buyers notice given under clause 3.7
takes effect; or
(b) Agree with Seller that the Contract be terminated from the
date that Buyer gives notice to Seller, pursuant to clause 3.5,
that it agrees this Contract should be terminated.
3.5 Buyer must give Seller notice of the option it has chosen no
later than 10 working days after the date that it receives the
notice under clause 3.3.
3.6 If Buyer exercises its option under clause 3.4(b) this
contract will be rescinded and of no further effect. Seller will
have no further claim against the Buyers, other than the right to
retain any amounts paid to it under clause 4.2.
3.7 Notwithstanding any other provision of this Contract, Buyer
may, at any time after it has exercised its option under clause
3.4(a), terminate this Contract by giving 10 working days notice
to Seller. In that event this Contract will be rescinded and of
no further effect. Seller will have no further claim against the
Buyers, other than the right to retain any amounts paid to it
under clause 4.2 or 2.4(a).
3.8 Except as provided herein, this Contract does not constitute
an agreement between the Parties as to procedures for the uplift
of Gas from Ngatoro Field and if at any time this contract is
terminated in accordance with clause 3.2, 3.4(b) or 3.7 the
Parties will be required to agree another basis for uplifting Gas
and, in the absence of such agreement, no Party will be entitled
to separately uplift any portion of any Gas whatsoever.
4. FACILITIES
4.1 Buyer shall use reasonable endeavours to purchase and
install Buyer's Facilities by 30 June 1998.
<PAGE> 136
4.2 Subject to clause 13.2, if by 30 June 1998 Buyer has failed
to purchase and install 60% of Buyer's Facilities Buyer shall pay
to Seller liquidated damages of $50,000 for each full Month
beyond 30 June 1998 that the Commencement Date falls. Buyer's
obligation to pay such damages shall cease on the earlier of the
Commencement Date or 31 December 1998. Any dispute as to whether
Buyer has purchased and installed 60% of Buyer's Facilities shall
be referred to and determined by an Independent Expert.
4.3 If Buyer commits to the installation of facilities allowing
the uplift of Gas from the Ngatoro-3 site, Buyer shall provide
notice to Seller stating the same and Seller shall by the later
of 4 Months from receipt of Buyer's notice or 1 May 1998 purchase
and install at the Ngatoro-3 site well head equipment, choke,
shutdown valve and pipework to the Point of Delivery at the
Ngatoro-3 site.
4.4 All costs relat4ed to the production, gathering and
transporting of the Gas to the Point of Delivery must be borne by
the Seller.
4.5 Subject to clause 4.10 Seller shall be solely responsible
for all costs of and work required for facilities to the site
boundary at Ngatoro-1.
4.6 Buyer shall be solely responsible for all costs of and work
required for the installation of signaling equipment from
Kaimiro.
4.7 The costs of switching equipment to allow for switching from
Gas export to flaring at the Ngatoro-1 site shall be shared
equally between Buyer and Seller.
4.8 Buyer and Seller shall each be responsible for the design,
construction, operation, maintenance and any future restoration
requirements of their respective facilities.
4.9 Seller must endeavour to retain the ability and consents to
flare Gas from the Ngatoro-1 site in the event Buyer does not
uplift the Gas.
4.10 Buyer may at any time request that Seller install additional
facilities to improve the quality of the Gas delivered to Buyer.
If Buyer makes such a request then:
(a) bSeller shall take all steps and measures reasonably
required to meet the request and design, construct and operate
such facilities; and
(b) bBuyer shall reimburse all costs reasonably incurred by
Seller in meeting the request including ongoing maintenance and
future restoration requirements.
<PAGE> 137
4.11 In respect of new Gas discoveries in respect of which Buyer
exercises its option to uplift in accordance with clause 6.1:
(a) bThe procedure under clause 4.10 is available to Buyer; but
(b) bThe provisions of clauses 4.1 4.9 do not apply.
5. PROCEDURE AND QUANTITY
5.1 Commencement Date: Buyer shall provide Seller with a minimum
of 10 days notice of the date on which it can purchase, accept
and onsell Gas from the Ngatoro Field. That date shall be known
as the Commencement Date.
5.2 Sellers Forecast: At the Commencement Date and:
(a) At annual intervals thereafter Seller must provide to Buyer,
Seller's five yearly annual Gas production capacity forecast;
(b) At monthly intervals thereafter Seller must provide to Buyer
its forecast of average monthly Gas production capacity for the
following 6 months. In respect of every day of the first month
of every 6 month forecast Seller must specify;
(i) the anticipated daily production capacity; and
(ii) the anticipated periods of down-time.
5.3 If for any reason the anticipated period of downtime
changes, Seller must notify Buyer of that change as soon as
reasonably practicable.
5.4 Buyer is entitled to uplift and purchase (up to and
including 10 PJ) any and all Gas produced by Seller, in such
quantities and at such times as Buyer in its sole discretion
determines is appropriate. Buyer shall use reasonable endeavours
to uplift Gas made available by Seller but Buyer is not obliged
to purchase and accept any Gas that it, in its sole discretion,
determines is not viable for Buyer to transmit, onsell or
otherwise deal with.
5.5 Buyer acknowledges that oil production optimisation is
Sellers main priority for the Ngatoro Field.
5.6 Notwithstanding clause 5.5 Seller shall use reasonable
endeavours to deliver Gas to Buyer in accordance with the
quantities forecast by Seller pursuant to clause 5.2 and at an
annual quantity of not less than 1 PJ per annum.
5.7 Seller shall use reasonable endeavours to meet requests from
Buyer for changes in the quantity of Gas delivered, provided such
request does not reduce oil production from the Ngatoro Field
unless the Seller agrees otherwise.
<PAGE> 138
6. NEW GAS DISCOVERIES
6.1 If as a result of a new well, Seller makes discovery of a
new Gas accumulation or produces Gas from a new well within the
Ngatoro Field at a depth no greater than 2000 metres true
vertical sub-sea then the Buyer shall have the option of meeting
the necessary capital costs to enable this new Gas to be uplifted
by buyer under this Contract (the "Option"). If such a discovery
occurs the following procedure will apply:
(a) Seller shall notify Buyer of all reasonably available
information relating to the Gas discovery including expected
reserves, production rate and Gas quality;
(b) Buyer shall have a period of 3 months from the receipt of
Sellers notice to exercise the Option.
(c) If Buyer chooses to exercise the Option then:
(i) Buyer shall pay for the installation of the facilities
necessary to enable Buyer to uplift Gas from the new
discovery, provided however that Buyer shall not be required
to reimburse Seller for costs already incurred;
(ii) Seller shall dedicate such new Gas reserves to the
performance of this Contract; and
(iii) Seller must take all steps and measures reasonably
required to facilitate delivery and sale of such new Gas to
Buyer, provided however that Seller shall not be obliged to
test and complete a gas discovery unless Buyer has agreed to
reimburse Seller for the costs of testing and completing
such a discovery.
(d) If Buyer does not exercise the Option within the required
time then Seller shall be free to sell the Gas to other parties.
(e) If further relevant information becomes available prior to
Seller entering into an agreement with another party to sell the
gas then Seller shall notify Buyer of the new information and
Buyer shall have a period of 1 month from receipt of Sellers
notice to exercise the Option.
7. GAS PRICE
7.1 Gas Price: The price payable by Buyer to Seller for Gas
delivered and taken shall be:
(a) First 4 PJ: up to and including the first 4 PJ of Gas
delivered and taken under this Contract, $0.50 per GJ, plus GST;
(b) In Excess of 4 PJ: for all Gas delivered and taken under
this Contract in excess of 4 PJ, $1.05 per GJ, plus GST.
<PAGE> 139
7.2 Escalation: The price payable under clause 7.1(a) is fixed.
However, the Gas price payable (excluding GST) by Buyer under
clause 7.1(b) shall be adjusted annually in accordance with the
movement in the PPI, using the PPI for the quarter ending
31/12/97 as the base index.
7.3 The price payable by Buyer includes Energy Resources Levy
imposed under the Energy Resources Act 1976 if applicable.
8. PAMENT
8.1 Measurement: On or before the 15th day in each Month
(following the Month in which Seller first delivers Gas to Buyer)
the Inspector will deliver to Seller a notice setting out the
amount of Gas delivered to Buyer in the preceding Month, as
recorded by the measurements taken pursuant to section 11.
8.2 Invoices: Seller will deliver to Buyer on or before the
20th day in each Month (following the month in which Seller first
delivers Gas to Buyer) an invoice showing the quantity of Gas
expressed in GJ delivered to Buyer at the Point of Delivery
during the preceding Month and the amount (including GST) due to
Seller for Gas delivered to and taken by Buyer during the
preceding Month. All Invoices shall be calculated on the basis
of cents to 2 decimal places (rounded upwards) per GJ.
8.3 Payment: Buyer shall pay to Seller all monies so invoiced
on the later of the 20th day of each Month or five Days after
receipt of such invoice and if such a Day is not a working Day,
then the next following working Day (the "Due Date").
8.4 Default Interest: All monies so invoiced which remain
unpaid after the due date shall attract interest calculated daily
at the Default Rate until the date payment is received, which
interest shall be capitalized daily and shall accrue after as
well as before judgment.
8.5 Disputed Invoices: If Buyer disputes the accuracy of
Sellers invoice:
(a) Payment of Undisputed Amount: Buyer shall notify Seller of
the dispute on or before the due date for payment and Buyer shall
pay the undisputed amount in accordance with clause 8.3. No part
payment shall be treated as being in full and final settlement of
any obligation of buyer unless expressly acknowledged in writing
by seller to Buyer to be such;
(b) Independent Expert: If the Parties are unable to resolve
the dispute by amicable discussion within a reasonable time
either Party may notify the other Party that the dispute be
referred to an independent expert for resolution;
<PAGE> 140
(c) Payment of Balance: On settlement, Buyer shall within 5
Days pay to Seller any outstanding balance of the invoice
together with interest at the Bank Bill Bid Rate plus 2 per cent
per annum, such interest to be capitalised daily and shall accrue
after as well as before judgment.
9. QUALITY
9.1 Specification: Seller will use reasonable endeavours to
ensure Gas delivered to Buyer is within the requirements of Buyer
specified at clause 9.2 or any specification that buyer notifies
Seller is acceptable in accordance with clause 9.3.
9.2 Quality requirements: Buyer requires that:
(a) Gas delivered to it at the Point of Delivery has had
formation water, being water with total dissolved solids in
excess of 100 ppm, removed from the Gas;
(b) Gas received at Kaimiro Production Station does not exceed
five barrels of water per million standard cubic feet of Gas,
which is deemed to be the cutoff point for producing water of
condensation;
(c) Gas composition be of sufficient quality such that the total
blended sales gas stream from the Kaimiro Production Station is
on an acceptable quality for marketing purposes.
9.3 Buyer may at any time advise Seller of a change in Buyers
Gas quality requirements. Buyer shall provide Seller with a
minimum of 5 days notice of any change in the acceptable Gas
specification.
9.4 At Buyers request Seller shall provide a means by which
Buyer can inject corrosion inhibitor into the gas Pipeline
upstream of the Point of Delivery.
9.5 Seller shall not knowingly deliver Gas to Buyer which falls
outside of the requirements of clauses 9.1 and 9.2 and will not
deliver Gas which it believes (acting reasonably) is likely to
cause damage to any facilities downstream of the Point of
Delivery, unless Buyer requests delivery of such Gas knowing it
to be of such a quality.
9.6 Without derogating from any other of Buyers available rights
and remedies if any Gas delivered to Buyer does not meet the
quality requirements set out at clause 9.2 above or any
specification which Buyer notifies Seller is acceptable in
accordance with clause 9.3 then;
(a) Buyer may refuse to purchase further Gas and reject any Gas
until its quality requirements are met;
<PAGE> 141
(b) Buyer may request that Seller cut back or shut in any
particular well to improve gas quality and Seller shall use
reasonable endeavours to comply with such a request.
10. POINT OF DELIVERY
10.1 Point of Delivery: Seller shall deliver the Gas that the
Buyer wishes to purchase to the Point of Delivery. Title to and
risk of the Gas shall pass to Buyer at the Point of Delivery.
11. MEASUREMENT OF GAS
11.1 Measurement: Buyer and Seller agree that the quantity of
Gas delivered will be measured by meters installed by the Buyer
at the Kaimiro production station. These meters will be used for
royalty and sale volumes and shall be maintained and audited by
the Inspector. The Inspector shall measure the Gas delivered in
Gigajoules for the purpose of notifying the delivered quantity to
Seller under clause 8.1.
11.2 The Seller shall have the right to inspect the meter at the
Kaimiro production station on giving reasonable notice to Buyer.
11.3 The Seller shall pay for all charges of the Inspector.
12. LIABILITY AND INSURANCE
12.1 Indemnity: Seller hereby indemnifies Buyer for all direct
losses, claims, expenses, damage arising from a breach of clause
9.5.
12.2 Seller liability: Seller shall be liable for and hereby
agrees to indemnify and hold Buyer harmless from any and all
claims, liabilities, costs, damages and expenses of every kind
and nature with respect to:
(a) Sickness, injury or death of any person employed directly or
indirectly by Seller or its subsidiaries, Affiliates and/or
contractors and its or their respective employees; and
(b) Damage to or destruction of any property or equipment of
Seller, its subsidiaries or Affiliates or contractors
Arising out of or in connection with this Contract from any cause
including but not limited to the negligence of Buyer and its
subsidiaries, Affiliates, contractors, sub-contractors and its or
their respective employees, but excluding gross negligence of
Buyer and its subsidiaries, Affiliates, contractors, sub-
contractors and its or their respective employees.
<PAGE> 142
12.3 Buyers liability: Subject to clause 12.1 Buyer shall be
liable for and hereby agrees to indemnify and hold Seller
harmless from any and all claims, liabilities, costs, damages and
expenses of every kind and nature with respect to:
(a) Sickness, injury or death of any person employed directly or
indirectly by Buyer or its subsidiaries, affiliates and/or
contractors and its or their respective employees; and
(b) Damage to or destruction of any property or equipment of
Buyer, its subsidiaries or Affiliates or contractors arising out
of or in connection with this Contract from any cause including
but not limited to the negligence of Seller and its subsidiaries,
Affiliates, contractors, sub-contractors and its or their
respective employees, but excluding gross negligence of Seller
and its subsidiaries, Affiliates, contractors, sub-contractors
and its or their respective employees;
12.4 Third Party Liability: As regards injury, sickness and
death of persons or damage to, loss or destruction of property of
third parties (being persons in respect of whom indemnities are
not granted in terms of clauses 12.2 or 12.3) the Parties shall
be liable to such third parties in accordance with applicable law
in relation to such injury, sickness, death, damage, loss or
destruction.
12.5 Indirect and consequential losses: Neither Seller or Buyer
shall be liable to the other for special, indirect or
consequential damages resulting from or arising out of this
Contract including, without limitation, loss of profit, loss of
property or business interruption, however the same may be
caused.
12.6 Subrogation: Seller and Buyer shall ensure that they each
obtain from their respective insurers waivers of the insurer's
rights of subrogation against the other for any insurance carried
by Seller and Buyer (as applicable) in relation to the
liabilities assumed by each of them pursuant to clauses 12.2 and
12.3.
12.7 Insurance: Buyer and Seller must maintain public liability
insurance and other suitable insurance, to cover each Party's
respective operations and property, as would be obtained by a
prudent operator operating in the gas and petroleum industry.
Each Party, upon demand from the other, must provide evidence
that such insurance cover has been obtained and the premiums for
such insurance cover have been paid, or reasonable evidence to
support that Party's capacity to self insure.
13. FORCE MAJEURE
13.1 Force Majeure: A force majeure event or circumstance is:
<PAGE> 143
(a) an act of god, strike, lockout or other industrial
disturbance, act of public enemy, sabotage, war, blockade,
insurrection, riot, epidemic; or
(b) an order of any Court or government authority; or
(c) a delay in the granting of, or the refusal to grant, any
permit or consent by any Court, government authority or landowner
notwithstanding that the Party invoking Clause 13.2 has taken all
reasonable steps to procure the grant of such permit or consent;
or
(d) any landslide, lightning, earthquake, flood, storm, fire,
washout, civil disturbance; or
(e) any explosion, well blow-out, craterings, breakage or
failure of or accidents to machinery, pipelines or other fault,
which occurs notwithstanding the Party invoking clause 13.2 has
taken all reasonable care to safeguard against the same; or
(f) any other act or omission which is beyond the control of the
Party invoking clause 13.2 notwithstanding the exercise by that
Party of reasonable care to safeguard against the same.
13.2 Force Majeure: Subject to clause 13.4 if either Party fails
to comply with any obligation in the Contract and such failure is
caused by an event or circumstance of force majeure, that failure
shall not give rise to any cause of action or liability based on
breach of the obligation.
13.3 Mitigation of Force Majeure: The Party invoking clause 13.2
shall take all reasonable steps to mitigate the event or
circumstances of force majeure.
13.4 Notice of Force Majeure: No event or circumstance of force
majeure shall prevent a cause of action based on breach of this
Contract unless the Party invoking clause 13.2 has given notice
in writing of the same to the other Party with reasonable
promptness. Like notice shall also be given on termination of the
force majeure event.
14 CONFIDENTIALITY
14.1 Definition of Confidential Information: Confidential
information means:
(a) the terms of this Contract; and
(b) the information directly or indirectly acquired by Seller or
Buyer (as the case may be) from the other in the performance of
this Contract (whether in tangible form or otherwise) except:
<PAGE> 144
(i) information which, at the time of disclosure, is in the
public domain;
(ii) information which, prior to or after disclosure, enters
the public domain other than from a breach hereof;
(iii) information which, prior to disclosure by Seller
or Buyer (as the case may be) to the other in the
performance of this agreement, was already in the possession
of Seller or Buyer (as the case may be) and not acquired
from Seller or Buyer (as the case may be) who disclosed the
same;
(iv) information which, subject to a disclosure by Seller or
Buyer (as the case may be) to the other in the performance
of this Contract, is obtained by the Seller or Buyer (as the
case may be) from a third party who is lawfully in
possession of the same;
14.2 Confidentiality: All Confidential Information disclosed by
either Seller or Buyer shall be kept confidential and shall not
be disclosed by Seller or Buyer (as the case may be) to any third
party other than:
(a) Law: if and to the extent that Seller or Buyer (as the case
may be) bona fide believes such disclosure is required by law or
the requirements of any Stock Exchange;
(b) Independent Advisors: to the independent advisers and
contractors and employees whose duties in relation to the
Contract reasonably require such disclosures;
(c) Financial Institution: to the financial institution in
connection with any loan sought to be arranged by Seller or Buyer
(as the case may be) for purposes directly related to this
Contract (but such disclosure shall only be made for the purposes
of satisfying such institution as to the value and commercial
viability of the Contract).
(d) Affiliated Companies: to Affiliated Companies and their
independent advisors, contractors and employers to the extent
that disclosure of such information is necessary for the carrying
out of the terms and conditions of this Contract.
14.3 Where information is disclosed to third parties under Clause
14.2 Seller or Buyer (as the case may be) disclosing the
information must ensure that the third party to whom the
information is disclosed keeps it confidential.
14.4 The provisions of this clause 14 shall survive the
termination of this Contract for a period of two years from the
date of termination.
<PAGE> 145
15. DISPUTE RESOLUTION
15.1 Amicable Discussion: Subject to clause 15.6, except where
any matter is to be determined by an independent expert, the
Parties acknowledge their desire that all disputes whatsoever
arising out of this Contract, its subject matter (and whether as
to interpretation or otherwise) be resolved by amicable
discussion.
15.2 Mediation: If any dispute referred to in clause 15.1 is not
resolved after a reasonable time either Seller or Buyer may
invoke mediation whereby:
(a) Notification: Seller or Buyer (as the case may be) notifies
the other in writing requiring that the dispute be mediated (a
"Mediation Notice");
(b) Obligation to Resolve Remains: a Mediation Notice shall not
derogate from the obligation of the Parties to seek resolution of
the dispute by amicable discussion;
(c) Appointment of Mediator: the Parties shall endeavour to
agree on a mediator within seven Days of the date on which the
Mediation Notice was given;
(d) Mediation Procedures: if a mediator is appointed, the
mediator shall, in consultation with the Parties, settle a
procedure and timetable for mediation. The mediator's decision
on such procedural and timetabling matters shall be final;
(e) Good Faith Negotiations: the Parties shall conduct
negotiations in good faith at the mediated meetings, and use best
endeavours to reach an agreed solution acceptable to both Seller
and Buyer. Legal counsel may assist, but all proceedings (other
than any settlement or supplementary written agreement between
the Parties) shall be on a "without prejudice" basis. In
particular:
(i) any opinion, report or recommendation by the mediator
shall not be disclosed;
(ii) the fact that information made available to the
mediator does not affect its privilege or confidentiality
for any other proceedings;
(iii) the fact that the accuracy of the information
provided was not challenged does not prevent later
challenge;
(f) Has No Power of Decision: the mediator shall have no power
of decision on any matters other than procedural and timetabling
matters;
<PAGE> 146
(g) Costs to be Borne Equally: The mediator's charges including
room hire and other disbursements shall be borne equally by
Seller and Buyer, who are severally liable to the mediator.
Seller and Buyer are to pay their own legal fees and
disbursements.
15.3 Arbitration: If any mediated dispute is not resolved
pursuant to clause 15.2, within 3 months of delivery of the
mediation notice either Seller or Buyer may notify the other in
writing requiring that the procedure under clause 15.2 cease and
the dispute be resolved by arbitration. In that event the
provisions of the Arbitration Act 1996 will apply to the extent
modified by clause 15.4.
15.4 In respect of the first schedule to the Arbitration Act 1996
the Parties "otherwise agree" to the following:
(a) Article 3: in addition to the stated methods of giving
notice, notice by facsimile is also permitted.
(b) Article 11(2): in the absence of the agreement the
arbitrator shall be appointed by the President of the New Zealand
District Law Society.
(c) Article 2.6: the arbitrator shall not appoint any expert to
advise him or her except with the written consent of Seller and
Buyer.
15.5 Continued Performance: Notwithstanding the fact that any
matter between the Parties has been referred to mediation or
arbitration or is the subject of legal proceedings, the Parties
shall continue to comply with their respective obligations and
may exercise their respective rights under this Contract as if
the matter had not arisen.
15.6 Urgent Interlocutory Relief: Notwithstanding any other
provision of this Contract each Party reserves the right to take
steps to seek urgent interlocutory relief, or a declaration,
before an appropriate court.
16. MISCELLANEOUS
16.1 Notices: Any communication or notice required by this
Contract to be given by Seller or Buyer to the other shall be
given in writing and shall be sufficiently given or served if
sent by registered post or facsimile transmission or delivered by
hand or courier to Seller or Buyer (as the case may be) at the
address specified, namely:
<PAGE> 147
Buyer:
Fletcher Challenge Energy Limited
581 Great South Road, Penrose
Private Bag 92813
Auckland
Fax: 09 525 9982
Attn: Chief Executive Officer
(or such other address as Buyer may advise in writing to
Seller)
Seller:
Petroleum Resources Limited
Australia and New Zealand Petroleum Limited
6th Floor, Tower 2, Shortland Centre
55 Shortland Street
Auckland
Fax: 09 300 5499
Fletcher Challenge Energy Taranaki Limited
Southern Petroleum (Ohanga) Limited
Petrocorp House
32-38 Molesworth Street
New Plymouth
Fax: 06 758 0777
Attn: Ngatoro Team Leader
Ngatoro Energy Limited
284 Karori Road
PO Box 17258
Wellington
Fax: 04 476 0120
(or such other address as Seller may advise in writing to
Buyer)
Notices must be sent or delivered on a working day. Any
document so sent by registered post to any address within New
Zealand shall be deemed to have been received 48 hours after the
time of posting. Any document sent by facsimile shall be deemed
to have been received on the working day following transmission.
Notices delivered by hand or courier shall be deemed to have been
received on the day of delivery.
16.2 Governing Law: This Contract shall be governed and
construed in accordance with the laws of New Zealand.
16.3 Waiver: Failure or omission by a Party at any time to
enforce or require strict compliance with any provision of this
Contract shall not constitute a waiver as to that matter or any
<PAGE> 148
other matter either then or in the future. Any waiver of any
right or obligation under this Contract shall only be of any
force and effect if such waiver is in writing and is expressly
stated to be a waiver of specified right or obligation under this
Contract.
16.4 Amendment: There shall be no amendment, addition or
modification of the provisions of this Contract except by a
supplementary written agreement between the Parties.
16.5 Severability: Any provision of this contract which is
prohibited, illegal, invalid or unenforceable shall be
ineffective to the extent of such prohibition, illegality,
invalidity or unenforceability without invalidating or otherwise
affecting the enforceability of the remaining provisions of this
Contract.
16.6 Assignment to Affiliates: The Parties shall have the right
without the prior written consent of the other Parties to assign
any of their rights and obligations hereunder to any of their
Affiliates, provided always that the assignor shall remain liable
to the other Parties to this Contract for the performance of all
obligations so assigned.
16.7 Assignment to Persons other than Affiliates: Subject to
clause 16.6 a Party may not assign its rights and duties under
this Contract without the written consent of the other Parties,
which consent must not be unreasonably withheld.
16.8 Notification of Assignment: Any proposed assignment
pursuant to clause 16.7 shall be notified by the Party concerned
to all other Parties in writing within 30 days of the proposed
effective date thereof. Such notice shall contain the name and
address of the proposed assignee, a description of the rights and
obligations assigned and the proposed effective date of such
assignment. No assignment shall be effective unless and until
the proposed assignee has expressly agreed in writing directly
with the other Parties to observe and perform all the provisions
of this Contract and has supplied all other Parties with a copy
of such covenant.
16.9 Entire Agreement: Insofar as the subject matter of this
Contract is concerned this contract constitutes the entire
agreement between Seller and Buyer on the subject matter of this
Contract and supersedes any and all prior negotiations
representations and agreements on such subject matter.
16.10 Several Liability: The liability of each of the
Parties constituting Seller will be several. Each such Party
will be liable for any loss or damage suffered by Seller or claim
against Seller to the extent of its respective Percentage
Interest in Seller at the date of execution of this Contract.
<PAGE> 149
EXECUTION
SIGNED by
FLETCHER CHALLENGE ENERGY LIMITED
/s/ K.M. Coutts /s/ G. M. Morgan
Witness
Secretary
Occupation
1B Wendell Place, Greenlane
Address
SIGNED by
FLETCHER CHALLENGE ENERGY TARANAKI LIMITED
/s/ Kerry Gilman /s/ G. M. Morgan
Witness
Personal Assistant
Occupation
12 Keats Place, New Plymouth
Address
SIGNED by SOUTHERN PETROLEUM (OHANGA) LIMITED
/s/ Kerry Gilman /s/ G. M. Morgan
Witness
Personal Assistant
Occupation
12 Keats Place, New Plymouth
Address
SIGNED by PETROLEUM RESOURCES LIMITED
/s/ Michelle Olney /s/ P. Labelle
Witness
Secretary
Occupation
41 View Rd., Eden
Address
SIGNED by AUSTRALIA AND NEW ZEALAND PETROLEUM LIMITED
/s/ Michelle Olney /s/ P. Labelle
Witness
Secretary
Occupation
41 View Rd., Eden
Address
SIGNED by NGATORO ENERGY LIMITED
/s/ Karen Witt /s/ J. Lean
Witness
Office Manager
Occupation
12/37 Bracken Rd., Wellington
Address
<PAGE> 150
EXHIBIT 10.38
PERMIT ENDORSEMENT
Permit Petroleum Exploration Permit (PEP) 38328
Action In terms of section 41 of the Crown Minerals Act 1991,
and in accordance with a delegation from the Minister of Energy
of 4 November 1997, the Secretary of Commerce approved a Deed of
Withdrawal Assignment and Assumption whereby Croft Exploration
Limited withdraws from the permit and assigns its interest to
Indo-Pacific Energy (NZ) Limited.
Date 16 December 1997
Details The participating interests in this permit are now as
follows:
Indo-Pacific Energy (NZ) Limited 37.50 percent
Boral Energy Resources NZ Limited 30.00 percent
Trans-Orient Petroleum (NZ) Limited 22.50 percent
Moondance Energy Pty Limited 10.00 percent
Certified true and correct
/s/ Clyde Bennett
For Unit Manager Permitting
8/12/1997
<PAGE> 151
PERMIT ENDORSEMENT
Permit Petroleum Exploration Permit (PEP) 38328
Action In terms of section 41 of the Crown Minerals Act 1991,
and in accordance with a delegation from the Minister of Energy
of 4 November 1997, the Secretary of Commerce approved a Deed of
Withdrawal Assignment and Assumption whereby Moondance Energy Pty
Limited withdraws from the permit and assigns its interest to
Indo-Pacific Energy (NZ) Limited and Boral Energy Resources NZ
Limited
Date 16 December 1997
Details The participating interests in this permit are now as
follows:
Indo-Pacific Energy (NZ) Limited 40.00 percent
Boral Energy Resources NZ Limited 37.50 percent
Trans-Orient Petroleum (NZ) Limited 22.50 percent
Certified true and correct
/s/ Clyde Bennett For Unit Manager Permitting
8/12/1997
PERMIT ENDORSEMENT
Permit Petroleum Exploration Permit (PEP) 38328
Action In terms of section 41 of the Crown Minerals Act 1991,
and in accordance with a delegation from the Minister of Energy
of 4 November 1997, the Secretary of Commerce approved a Deed of
Withdrawal Assignment and Assumption whereby Indo-Pacific Energy
(NZ) Limited and Moondance Energy Pty Limited agreed to assign
part of their respective interests in the permit to Boral energy
Resources NZ Limited.
Date 16 December 1997
Details The participating interests in this permit are now as
follows:
Indo-Pacific Energy (NZ) Limited 50.00 percent
Boral Energy Resources NZ Limited 30.00 percent
Moondance Energy Pty Limited 10.00 percent
Croft Exploration Limited 10.00 percent
Certified true and correct
/s/ Clyde Bennett
For Unit Manager Permitting
8/12/1997
<PAGE> 152
PERMIT ENDORSEMENT
Permit Petroleum Exploration Permit (PEP) 38328
Action In terms of section 41 of the Crown Minerals Act 1991,
and in accordance with a delegation from the Minister of Energy
of 4 November 1997, the Secretary of Commerce approved a Deed of
Withdrawal Assignment and Assumption whereby Indo-Pacific Energy
(NZ) Limited has agreed to assign part of its interest in the
permit to Trans-Orient Petroleum (NZ) Limited.
Date 16 December 1997
Details The participating interests in this permit are now as
follows:
Boral Energy Resources NZ Limited 30.00 percent
Indo-Pacific Energy (NZ) Limited 27.50 percent
Trans-Orient Petroleum (NZ) Limited 22.50 percent
Moondance Energy Pty Limited 10.00 percent
Croft Exploration Limited 10.00 percent
Certified true and correct
/s/ Clyde Bennett
For Unit Manager Permitting
8/12/1997
<PAGE> 153
EXHIBIT 10.39
PETROLEUM EXPLORATION PERMIT 38330
DEED OF ASSIGNMENT
THIS DEED OF ASSIGNMENT is made this 27th day of February, 1998
BETWEEN: MOONDANCE ENERGY PTY LTD of 100 Stirling St., Perth,
WESTERN AUSTRALIA 6000 ("Moondance Pty Ltd")
AND: MOONDANCE ENERGY LIMITED care of Sinclair & Wood Chartered
Accountants, Trust Bank Building, 510 Cameron Road, Tauranga, NEW
ZEALAND ("Moondance Limited")
AND: INDO-PACIFIC ENERGY (NZ) LTD of 284 Karori Rd, Karori,
Wellington, NEW ZEALAND ("Indo")
AND: MOSAIC OIL NL 6-8 Underwood St, Sydney, NEW SOUTH WALES,
2000 ("Mosaic")
AND: CONTINENTAL OIL NL 6-8 Underwood St, Sydney, NEW SOUTH
WALES, 2000 ("Continental")
RECITALS
A. Moondance Pty Ltd, Indo, Continental and Mosaic are the
title holders of PEP38330 in the following percentage interests:
Indo 34.0%
Moondance Pty Ltd. 33.0%
Mosaic 20.0%
Continental 13.0%
B. Moondance Pty Ltd was issued the title in error and has
agreed to assign to Moondance Limited all of its 33.0% interest
in PEP38330, which company should be the title holder.
NOW THIS DEED WITNESSETH
1. DEFINITIONS AND INTERPRETATION
In this Deed, including the Recitals, except to the extent that
the context otherwise requires:
"Effective Date" means from the date of grant of PEP 38330.
"PEP 338330" means Petroleum Exploration Permit 38330 issued
under the Crown Minerals Act 1991 of New Zealand as amended from
time to time.
<PAGE> 154
2. ASSIGNMENT OF INTEREST
In consideration for the assumption of obligations under Clause 3
of this Deed, Moondance Pty Ltd hereby assigns to Moondance
Limited all of its 33.0% interest in PEP 38330, with effect from
the Effective Date so that with effect from the Effective Date
Moondance Limited, Indo, Continental and Mosaic hold the
following undivided interests in PEP 38330:
Indo 34.0%
Moondance Limited 33.0%
Mosaic 20.0%
Continental 13.0%
3. ASSUMPTION OF OBLIGATIONS
Moondance Limited to the extent of the 33.0% undivided interest
assigned to it under this Deed assumes and covenants with each of
Indo, Mosaic and Continental to perform with effect from the
Effective Date the liabilities, obligations, responsibilities and
duties of Moondance Pty Ltd with respect to the 33.0% interest
which is assigned to it under this Deed and agrees to indemnify
and hold Indo, Mosaic and Continental harmless against all such
liabilities, obligations, responsibilities and duties.
4. COSTS AND STAMP DUTY
The costs of and incidental to the preparation and execution of
this Deed together with all stamp duty and registration fees
payable on this Deed shall be borne and paid by Moondance
Limited.
5. GOVERNING LAW
This Deed shall be governed by and construed in accordance with
New Zealand law.
IN WITNESS WHEREOF this Deed of Assignment was executed on the
day and year first written above.
THE COMMON SEAL OF MOONDANCE ENERGY PTY LTD
Was hereunto affixed in )
The presence of )/s/ illegible
)Director
)/s/ illegible
)Secretary
THE COMMON SEAL OF MOSAIC OIL NL
Was hereunto affixed in )
The presence of )/s/ John Carmody
Director
<PAGE> 155
THE COMMON SEAL OF CONTINENTAL OIL NL
Was hereunto affixed in )
The presence of )/s/ John Carmody
) Director
SIGNED FOR AND ON BEHALF OF MOONDANCE ENERGY LIMITED
By Colin Crabb, it's duly appointed )
attorney pursuant to a board resolution dated
10 February 1998, in the presence of: ) /s/ Colin Crabb,
Attorney
SIGNED FOR AND ON BEHALF OF INDO-PACIFIC ENERGY (NZ) LTD
By its duly appointed attorney )
In the presence of ) /s/ Jennifer Margaret Lean,
Attorney
PERMIT ENDORSEMENT
Permit Petroleum Exploration Permit (PEP) 38330
Action In terms of section 41 of the Crown Minerals Act 1991,
and in accordance with a delegation from the Minister of Energy
of 20 January 1998, the Manager Crown Minerals consented to a
Deed of Assignment whereby Moondance Energy Pty Limited assigned
its interest in the permit to Moondance Energy Limited.
Date 8 April 1998
Details The participating interests in this permit are now as
follows:
Indo-Pacific Energy (NZ) Limited 34.00 percent
Moondance Energy Limited 33.00 percent
Mosaic Oil NL 20.00 percent
Continental Oil NL 13.00 percent
Certified true and correct
/s/ Clyde Bennett
For Unit Manager Permitting
14/4/1998
<PAGE> 156
EXHIBIT 10.40
AGREEMENT
THIS AGREEMENT is dated the 12 day of August 1997
BETWEEN
LONMAN PTY. LTD. (CAN 002674 919) a company incorporated in New
South Wales and having its principal office at 63 Rawson Avenue,
Queens Park, New South Wales 2022 (hereinafter called "Lonman")
AND
MOSAIC OIL N.L. (CAN 003 329 084) a company incorporated in New
South Wales and having its principal office at 11th Floor, 15-17
Young Street, Sydney, New South Wales 200 (hereinafter called
"Mosaic");
INDO-PACIFIC ENERGY PTY. LTD. (ARBN) a company incorporated in
British Columbia and having its principal office at 284 Karori
Road, Wellington, New Zealand (hereinafter called "Indo-Pacific"); and
WHEREAS
A. The Original Parties are the registered holders and legal
and beneficial owners of Petroleum Exploration Permit AC/P19
issued under the Petroleum (Submerged Lands) Act 1967 of the
Commonwealth of Australia.
B. The Original Parties have agreed to grant a carried interest
in the Permit to Lonman and Lonman has agreed to accept such
carried interest.
IT IS THEREFORE AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
"Act" means the Petroleum (Submerged Lands) Act 1967 of the
Commonwealth of Australia and any Act with which that Act is
incorporated, together with all regulations, directions,
determinations and administrative procedure under any of those
Acts.
"Carried to Production Interest" ("CTP1") means the IFCI as
varied pursuant to clause 2.2.
"Effective Date" means 12 August 1997
<PAGE> 157
"Farmout Equity" means the proportions of each of the Original
Parties Permit Interests which are to be earned by a Farminee or
Farminees during the drilling of the first obligation well in the
Permit.
"First Production Date" means the first date upon which
commercial production of Petroleum from the Permit is commenced.
"Permit" means Exploration Permit for Petroleum No. AC/P19 and
includes any renewal or substitution of it, and any Retention
Lease of Production License derived therefrom.
"Initial Free Carried Interest" ("IFCI") means 5% in the Permit
as granted to Lonman by the Original Parties in the proportions
as set out in clause 2.1.
"Permit Interest" means an interest in the Permit and in any
Petroleum recovered from the Permit to which Lonman will be
entitled to pursuant to this Agreement and held by the original
in the following proportions:
Mosaic 35%
Indo-Pacific 65%
2. THE CARRIED INTERESTS
1) With effect on and from the Effective Date, the Original
Parties hereby grant to Lonman a 5% IFCI, being 5% of their total
Permit Interest and granted to Lonman in the following
proportions:
ORIGINAL PARTIES IFCI LONMAN
Mosaic 1.75% 1.75%
Indo-Pacific 3.25% 3.25%
2) Upon the drilling of the first well within the Permit area
the IFCI will, in the event of a Farminee drilling or
contributing to the drilling of the well, become a CTP1 being 5%
of the amount of the Farmout Equity instead of the 5% of the
total Permit Interest.
Example
ORIGINAL FARMOUT LONMAN
PARTIES EQUITY CTP1
Mosaic 10% 0.5%
Indo-Pacific 10% 0.5%
TOTALS 20% 1%
3) Each of the Original Parties will carry the Lonman IFCI and
CTP1 as applicable pursuant to clause 2 until such time as;
<PAGE> 158
a. Lonman gives notice to the Original Parties that it wishes
to convert the IFCI or CTPI to a normal working Permit Interest
at any time prior to the first Production Date; or
b. the CTPI automatically converts to a working Permit Interest
on the first Production Date.
4) If at any time:
a. prior to the conversion of the IFCI or CTPE as applicable,
to a working Permit Interest, Lonman receives and offer from a
third party for the Lonman IFCI or CTPI, each of the Original
Parties will be entitled to match such third party offer on a pro
rata basis calculated in accordance with the percentages which
then comprise the IFCI or the total CTPI as applicable.
b. following conversion of the IFCI of the CTPI to a working
Permit Interest, Lonman receives an offer from a third party for
its working Permit Interest, Lonman shall be free to deal with
its working Permit Interest, subject only to the terms and
conditions of the Joint Operating Agreement which shall then be
governing the relationships of the Parties.
5) The CTPI will remain with and be carried by the Original
Parties until:
a. it is converted to a working Permit Interest in accordance
with clause 2.3.1; or
b. it is assigned to a third party, subject to the prior
consent of Lonman, provided however that Lonman shall not be
entitled to any part of share of the consideration for such
assignment.
3. IFIC AND CTPI COSTS AND RECOVERIES
1) Prior to the Production Date, the Original Parties will bear
and pay for all costs associated with the IFCI and the CTPI as
applicable in proportion to their respective percentages of the
Lonman IFCI or CTPI as calculated in accordance with clause 2.
Such costs include all costs of whatsoever kin or nature required
to be expended to meet the Permit work Obligations and to keep
the Permit in good standing, including but not limited to all
exploration, development and administrative costs which shall
include all fees paid in accordance with any provision of the
Act.
2) With effect on and from the Production Date, Lonman will
pay, or the Original Parties will be entitled to take in kind,
from the Lonman entitlement to production of Petroleum, an amount
equal to 50% of the net cash proceeds from such entitlement,
after deduction of all relevant taxes, royalties, operating costs
<PAGE> 159
and any other costs not otherwise incurred pursuant to clause
3.1, until the costs incurred pursuant to clause 3.1 are fully
amortised.
The accrual of such costs will commence from and relate back to
the date the Parties first formed the AC/P19 study group and will
be subject to adjustment by the Australian CPI for the period
between when such costs were incurred and the date of payment.
1. ACCESS TO INFORMATION
1) Until the Lonman CTPI is converted to a working Permit
Interest, Lonman shall have the right of access to all technical
data with respect to the Permit, at all reasonable times. Lonman
will also have the right to attend the statutory TCM/OCM which
will be defined in the joint Operating Agreement to be agreed
between the Parties, but will not have a right to vote unless or
until the Lonman CTPI is converted to a working Permit Interest.
2) Lonman agrees to keep all information obtained from the data
or the TCM/OCM meetings confidential.
3) The Original Parties agree that, in the process of agreeing
the terms and conditions of a Joint Operating Agreement, Lonman
shall be included as a participating party to that process.
2. NOTICES
1) Any notice required under this Agreement must be in writing,
in the English language, and sent by registered mail of facsimile
transmission to the address of the receiving party as stated in
this Agreement, or to such other address as a Party may advise
from time to time.
2) A notice sent by registered mail is effective upon receipt.
3) A notice sent by facsimile transmission is effective upon
transmission unless it is transmitted after the close of normal
business hours, or on a Saturday, Sunday or public holiday, in
which case it is effective on the opening of business on the next
business day at the intended place of receipt.
3. INDEMNITY
1) Each of the Original Parties, to the extent of its
proportion of the Lonman CTPI, hereby indemnifies Lonman against
any loss of or damage to any property whatsoever and personal
injury (including death or disease) to any person whomsoever,
which arises out of or in connection with any act, matter or
thing directly or indirectly related to the Permit and without
regard to the cause or causes thereof or the negligence of any
party.
<PAGE> 160
2) The indemnity in clause 6.1 will cease to apply on and from
the date upon which the Lonman CTPI is converted to a
working Permit Interest pursuant to this Agreement.
4. GOVERNING LAW AND JURISDICTION
1) This Agreement and all questions arising in connection with
it are governed by and will be construed according to the
laws from time to time in force in the State of Victoria and
the Parties irrevocably submit to the authority of the
Courts in and of that State.
5. MISCELLANEOUS
Any approval and registration of this Agreement in accordance
with the provisions of the Act shall be obtained by Lonman,
subject always to clause 3.1.
IN WITNESS WHEREOF the Parties have executed this Agreement
Agreed and accepted by Agreed and accepted by
/s/ D. Lonman /s/ John Carmody
For and on Behalf of For and on Behalf of
Lonman Pty. Ltd. Mosaic Oil N.L.
Agreed and accepted by
/s/ D.J. Bennett
For and on Behalf of
Indo-Pacific Energy Pty. Ltd.
<PAGE> 161
EXHIBIT 10.41
AGREEMENT
THIS AGREEMENT is dated the 12 day of August 1997
BETWEEN
LONMAN PTY. LTD. (ACN 002 674 919)a company incorporated in New
South Wales and having its principal office at 63 Rawson Avenue,
Queens Park, New South Wales 2022 (herinafter called "Lonman")
AND
MOSAIC OIL N.L. (ACN 003 329 084) a company incorporated in New
South Wales and having its principal office at 11th floor, 15-17
Young Street, Sydney, New South Wales 200 (hereinafter called
"Mosaic");
INDO-PACIFIC ENERGY PTY LTD. (ARBN ) a company incorporated
in British Columbia and having its principal office at 284 Karori
Road, Wellington, New Zealand (hereinafter called "Indo-
Pacific); and
EURO-PACIFIC ENERGY PTY. LTD. (ACN ) a company incorporated in
and having its principal office at 133 Edward Street, Perth,
Western Australia 6004 (hereinafter called "Euro-Pacific")
Sometimes collectively called the "Original Parties"
WHEREAS
A. The Original Parties are the registered holders and legal
and beneficial owners of Petroleum Exploration Permit VIC/P39
issued under the Petroleum (Submerged Lands) Act 1967 of the
Commonwealth of Australia.
B. The Original Parties have agreed to grant a carried interest
in the Permit to Lonman and Lonman has agreed to accept such
carried interest.
IT IS THEREFORE AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
"Act" means the Petroleum (Submerged Lands) Act 1967 of the
Commonwealth of Australia and any Act with which that Act is
incorporated, together with all regulations, directions,
determinations and administrative procedure under any of those
Acts.
<PAGE> 162
"Carried to Production Interest" ("CTPI") means the IFCI as
varied pursuant to clause 2.2.
"Effective Date" means 12 August 1997.
"Farmout Equity" means the proportions of each of the Original
Parties Permit Interests which are to be earned by the Farminee
or Farminees during the drilling of the first obligation well in
the Permit.
"First Production Date" means the first date upon which
commercial production of Petroleum from the Permit is commenced.
"Permit" means Exploration Permit for Petroleum No. VIC/P39 and
includes any renewal of substitution of it, and any Retention
Lease of Production Licence derived therefrom.
"Initial Free Carried Interest" ("IFCI") means 5% in the Permit
as granted to Lonman by the Original Parties in the proportions
as set out in clause 2.1.
"Permit Interest" means an interest in the Permit and in any
Petroleum recovered from the Permit to which Lonman will be
entitled to pursuant to this Agreement and held by the original
in the following proportions:
Mosaic 33.34%
Indo-Pacific 33.33%
Euro-Pacific 33.33%
2. THE CARRIED INTERESTS
1. With effect on the from the Effective Date, the Original
Parties hereby grant to Lonman a 5% IFCI, being 5% of their total
Permit Interest and granted to Lonman in the following
proportions:
ORIGINAL PARTIES IFCI LONMAN
Mosaic 1 2/3% 1 2/3%
Indo-Pacific 1 2/3% 1 2/3%
Euro-Pacific 1 2/3% 1 2/3%
2. Upon the drilling of the first well within the Permit area
the IFCI will, in the event of a Farmine drilling or contributing
to the drilling of the well, become a CTPI being 5% of the amount
of the Farmout Equity instead of the 5% of the total Permit
Interest.
<PAGE> 163
Example
ORIGINAL FARMOUT LONMAN
PARTIES EQUITY CTPI
Mosaic 10% 0.5%
Indo-Pacific 10% 0.5%
Euro-Pacific 10% 0.5%
TOTALS 30% 1.5%
3. Each of the Original Parties will carry the Lonman IFCI and
CTPT as applicable pursuant to clause 2 until such time as:
1. Lonman gives notice to the Original Parties that it wishes
to convert the IFCI and CTPI to a normal working Permit Interest
at any time prior to the first Production Date; or
2. the CTPI automatically converts to a working Permit Interest
on the first Production Date.
4. If at any time:
1. prior to the conversion of the IFCI and CTPI as applicable,
to the working Permit Interest, Lonman receives an offer from a
third party for the Lonman IFCI or CTPI, each of the Original
Parties will be entitled to match such third party offer on a pro
rat basis calculated in accordance with the percentages which
then comprise the IFCI or the total CTPI as applicable.
2. following conversion of the IFCI of the CTPI to a working
Permit Interest, Lonman receives an offer from a third party for
its working Permit Interest, Lonman shall be free to deal with
its working Permit Interest, subject only to the terms and
conditions of the Joint Operating Agreement which shall then be
governing the relationships of the Parties.
5. The CTPI will remain with and be carried by the Original
Parties until:
1. it is converted to a working Permit Interest in accordance
with clause 2.3.1; or
2. it is assigned to a third party, subject to the prior
consent of Lonman, provided however that Lonman shall not be
entitled to any part of share of the consideration for such
assignment.
3. IFCI AND CTPI COSTS AND RECOVERIES
1. Prior to the Production Date, the Original Parties will bear
and pay for all costs associated with the IFCI and the CTPI as
applicable in proportion to their respective percentages of the
Lonman IFCI or CTPE as calculated in accordance with clause 2.
<PAGE> 164
Such costs include all costs of whatsoever kin or nature required
to be expended to meet the Permit work obligations and to keep
the Permit in good standing including but not limited to all
exploration, development and administrative costs, which shall
include all fees paid in accordance with any provision of the
Act.
2. With effect on and from the Production Date, Lonman will
pay, or the Original Parties will be entitled to take in kind,
from the Lonman entitlement to production of Petroleum, an amount
equal to 50% of the net cash proceeds from such entitlement,
after deduction of all relevant taxes, royalties, operating costs
and any other costs not otherwise incurred pursuant to clause
3.1, until the costs incurred pursuant to clause 3.1 are fully
amortised.
The accrual of such costs will commence from the relate back to
the date the Parties first formed the V96-G2 study group and will
be subject to adjustment by the Australian CPI for the period
between when such costs were incurred and the date of payment.
4. ACCESS TO INFORMATION
1. Until the Lonman CTPI is converted to a working Permit
Interest, Lonman shall have the right of access to all technical
data with respect to the Permit, at all reasonable times. Lonman
will also have the right to attend the statutory TCM/OCM which
will be defined in the joint Operating Agreement to be agreed
between the Parties, but will not have a right to vote unless or
until the Lonman CTPI is converted to a working Permit Interest.
2. Lonman agrees to keep all information obtained from the data
or the TCM/OCM meetings confidential.
3. The Original Parties agree that, in the process of agreeing
the terms and conditions of a Joint Operating Agreement, Lonman
shall be included as a participating party to that process.
5. NOTICES
1. Any notice required under this Agreement must be in writing,
in the English language, and sent by registered mail of facsimile
transmission to the address of the receiving party as stated in
this Agreement, or to such other address as a Party may advise
from time to time.
2. A notice sent by registered mail is effective upon receipt.
3. A notice sent by facsimile transmission is effective upon
transmission unless it is transmitted after the close of normal
business hours, or on a Saturday, Sunday or public holiday, in
which case it is effective on the opening of business on the next
business day at the intended place or receipt.
<PAGE> 165
6. INDEMNITY
1. Each of the Original Parties, to the extent of its
proportion of the Lonman CTPI, hereby indemnifies Lonman against
any loss of or damage to any property whatsoever and personal
injury (including death or disease) to any person whomsoever,
which arises out of or in connection with any act, matter or
thing directly or indirectly related to the Permit and without
regard to the cause of causes thereof or the negligence of any
party.
2. The indemnity in clause 6.1 will cease to apply on and from
the date upon which the Lonman CTPI is converted to a working
Permit Interest pursuant to this Agreement.
7. GOVERNING LAW AND JURISDICTION
1. This Agreement and all questions arising in connection with
it are governed by and will be construed according to the laws
from time to time in force in the State of Victoria and the
Parties irrevocably submit to the authority of the Courts in and
of that State.
8. MISCELLANEOUS
Any approval and registration of this Agreement in accordance
with the provisions of the Act shall be obtained by Lonman,
subject always to clause 3.1
IN WITNESS WHEREOF the Party have executed this Agreement.
Agreed and accepted by Agreed and accepted by
/s/ D. Lonman /s/ John Carmody
For and on Behalf of For an of Behalf of
Lonman Pty. Ltd. Mosaic Oil N.L.
Agreed and accepted by Agreed and accepted by
/s/ David Bennett /s/ illegible
For and on Behalf of For and on Behalf of
Indo-Pacific Energy Pty. Ltd. Euro-Pacific Energy Pty. Ltd.
<PAGE> 166
EXHIBIT 10.42
Bligh Oil & Minerals N.L. ACN 009 799 455
April 10, 1997
Indo-Pacific Energy NZ Ltd. Euro Pacific Energy Pty Ltd.
284 Karori Road 133 Edward Street
Karori, East Perth
New Zealand WA 6004
Atn: Mr. Dave Bennett Atn: Mr. Ivan Burgess
Gentlemen:
PEP 38716, Taranaki Basin, New Zealand.
In anticipation of the drilling of a deep Tariki or Tikorangi test
on the Crown prospect, Bligh (Marabella) has been holding informal
discussions with several parties on the future of the permit. As
a result of these discussions, Marabella has entered into an Option
Agreement with a party ("Optionee"), under which Optionee has the
right to earn a 25.00% working interest in PEP 38716. The identity
of Optionee must remain confidential for the time being, but
Marabella is satisfied that the technical and professional status
of Optionee would be satisfactory to all members of our group, and
is confident that Optionee will have full financial capability to
discharge its obligations under the Option Agreement by the
exercise date of June 30, 1997.
The Option Agreement contains the following basic terms:
1. A June 30, 1997 option expiry date, extendable to July 31,
1997 by written notification of extension, and a non-refundable
payment of $250,000 within 48 hours of the June 30 deadline expiry.
2. Subject to the approval of the original parties to the JOA,
Optionee will become a party to the permit and Joint Operating
Agreement upon the exercising of the option.
3. Optionee assumes the obligation to bear the first NZ$2,000,000
of Marabella's share of the costs of the exploration program on the
permit incurred subsequent to the exercising date. In the event
that Optionee has paid the $250,000 indicated in (1) to secure an
extension, and subsequently exercises its right to participate, the
$250,000 would be deductible against the $2,000,000 obligation.
4. Marabella will use its best efforts to achieve the spudding of
a test well on the permit prior to year end 1997.
<PAGE> 167
5. Marabella has veto rights as to the financial qualification of
Optionee with respect to the exercising of the Option Agreement.
Marabella has entered into this option agreement for its own
account, and has prepared the documentation accordingly. However,
we are prepared to extend the opportunity to participate in the
arrangement between Marabella and Optionee to all working interest
partners on a pro-rata basis, in the event that the Option
Agreement is exercised. Should you wish to participate in the
arrangement negotiated by Marabella, subject only to a review of
the formal documentation between Marabella and Optionee, kindly so
indicate by signing in the space provided below, and returning a
signed copy to Marabella prior to April 30, 1997.
In the event that all parties wished to participate on a pro-rata
basis, the interest would be drawn as follows:
Marabella 13.200%
Indo Overseas Exploration Ltd. 9.600%
Euro Pacific Energy Pty Ltd. 2.200%
In the interim, Marabella intends to maintain the documentation
between Marabella and Optionee only, and will modify the
documentation as necessary after the exercise date, depending upon
the degree to which the other working interest owners wish to
contribute working interest to the arrangement between Marabella
and Optionee. The terms of such contribution are not additionally
negotiable by any incoming parties, and will be in accordance with
the terms of the Option Agreement, unless otherwise mutually agreed
by all parties.
In view of the delays which have been encountered in execution of
the JOA, Marabella is under no legal obligation to any other
working interest owner under the terms of Clause 17.3 of JOA, which
requires written notification and approval of any proposed transfer
of working interest. However, in the spirit of the agreement
between us, Marabella is hereby providing notice of the existence
of the Option Agreement and the proposed transfer of working
interest to Optionee, in the event that the option is exercised, as
if the JOA was in place. Forms providing for Acknowledgement and
Consent of the proposed Option Agreement and transfer of interest
are attached hereto for your respective signatures.
We request that you grant your approval for the proposed
transaction. We feel that the Option Agreement represents a
commercially attractive opportunity for the group overall, and
provides each party with an avenue to farm out a portion of its
interests, should it wish to do so, on the terms outlined herein.
Yours sincerely,
/s/ Neil J. Malloy,
Chief Executive Officer
<PAGE> 168
EXHIBIT 10.43
Bligh Oil & Minerals N.L. ACN 009 799 455
November 6, 1997
Antrim Energy Ltd.
1050 633 6th Avenue S.W.
Calgary, AB T2P 2Y5
Canada
Attention: Mr. Dale Fisher, Manager, Business Development
Gentlemen:
Re: Proposed Trade and Farmout Agreements, Tunisia, Tanzania and
New Zealand.
Heads of Agreement
This letter sets forth the basic understanding between us with
respect to our projects in the above areas. Subject to the
provisions indicated herein, it has been agreed between us as
follows:
1. That Antrim will assign to Bligh a 20.00% Participation
Interest in its Pemba-Zanzibar block in Tanzania, and that Bligh
will assign to Antrim a 20.00% Participating Interest in its
Fejaj Permit, Tunisia. The effective date of these assignments
will be January 1, 1998. Antrim will repay to Bligh US$225,000
of the historical costs incurred on the Fejaj Permit. This
payment will be made upon execution by Antrim of the Deed of
Assignment effecting the transfer of interest from Bligh to
Antrim.
It is acknowledged by both Parties hereto that Bligh commits to
drill a well to a depth of 3800 metre on the Fejaj properties,
commencing during the second quarter of 1998, at an estimated
cost of US$4,500,000. It is specifically acknowledged by Antrim
that it is acquiring an interest in the Fejaj Permit with a view
to participating in the drilling of the proposed well.
2. That Bligh will assign, or cause to be assigned to Antrim, a
15.00% Participating Interest in PEP 38716, Taranaki Basin, New
Zealand. The effective date of this assignment will be January
1, 1998. Antrim will repay to Bligh US$225,000 of the historical
costs incurred on PEP 38716. This payment will be made upon
execution by Antrim of the Deed of Assignment effecting the
transfer of interest from Bligh to Antrim.
<PAGE> 169
It is acknowledged by both parties hereto that Bligh intends to
drill a well to a depth of 3750 metres on PEP 38716, commencing
during the second or third quarters of 1998, at an estimated cost
of US$3,000,000. It is specifically acknowledged by Antrim that
it is acquiring an interest in PEP 38716 with a view to
participating in the drilling of the proposed well.
3. That Bligh will grant to Antrim a first right of refusal to
earn a Participating Interest in PEP 38712, Taranaki Basin, New
Zealand, to the extent that such Participating Interest becomes
available. This Participating Interest will be drawn from any
equity interest acquired by Bligh, pursuant to negotiations
currently in progress with Bligh's existing partners in the
Permit. Bligh's existing 20.00% Participating Interest is
specifically excluded from consideration in this regard.
Antrim's entitlement to earn a Participating Interest will be
limited to one half of the available net Participating Interest
negotiated by Bligh. Any interest offered to Antrim will be made
available to Antrim on the same terms and conditions to those
under which the interest is delivered to Bligh.
It is acknowledged by both Parties hereto that Bligh intends to
drill a well to a depth of 2500 metres on PEP 38712 commencing in
the second quarter of 1998, at an estimated cost of US$1,625,000.
4. That Bligh will be granted an option to acquire a 10%
participating Interest in any one of Antrim's acreage holdings
(including current acreage applications) in Mozambique,
Madagascar and Eritrea, which are in effect as of the date of
this Agreement. Bligh will be granted the opportunity to review
all technical data on each area, with a view to selecting one of
the three areas in which to participate. This option expires on
December 1st, 1997. It is acknowledged by Bligh that Antrim's
ownership of certain of the acreage blocks is subject to final
negotiation with the host government, and delivery of an interest
to Bligh cannot be guaranteed in such cases. In the event that
Bligh elects to participate in a block, and Antrim is
subsequently unable to deliver an interest in that block Bligh
may, at its discretion, select an alternative block in which to
participate.
Upon Bligh making its election, Antrim will assign to Bligh a
10.00% Participating Interest in the block or acreage application
selected by Bligh. The effective date of this assignment will be
January 1, 1998. Bligh will repay to Antrim a pro-rate share of
all costs attributable to the interest assigned, which were
accrued up to the Effective Date.
Separate trade and/or farmout agreements will be prepared for
each of the above proposed transactions except as otherwise
mutually agreed. Documentation of each transaction will be
administered independently. The transactions are subject to the
following terms and conditions:
<PAGE> 170
a. Preparation, review and mutual approval of the documentation
covering each transaction, including approval of the form of a
Joint Operating Agreement on each area.
b. Disclosure by each party of any and all liens and
encumbrances which may affect any of the properties involved,
including all work obligations for the forthcoming three years
attributable to each of the properties under the relevant permit
or tenement agreement.
c. Provision to each party of all relevant legal agreements and
documentation, evidencing chain of title and ownership of the
interest to be assigned.
d. The acquisition by Antrim or Bligh, as the case may be, of
all requisite consents and approvals for the proposed
transactions, be these from existing partners, or the relevant
authorities.
e. Each transaction can be consummated on a stand-alone basis,
by mutual agreement. However, in the event that either party
elects not to proceed with either of the transactions proposed in
Clauses 1 and 2 above, the other party may, at its sole election,
elect to withdraw from this agreement in its entirety.
f. Interests acquired by virtue of this agreement may be
assigned to third parties with the prior written approval of the
original owner, be this Bligh or Antrim. Such approval will not
be unreasonably withheld. This clause does not represent any
implication of pre-emptive or preferential rights.
Should the foregoing be acceptable to Antrim, kindly so indicate
by signing in the space provided below and returning a copy of
the executed document to me by fax at your earliest convenience.
Yours sincerely,
/s/ Neil J. Malloy,
Chief Executive Officer
AGREED AND ACCEPTED THIS 7TH DAY OF NOVEMBER 1997.
ANTRIM ENERGY LTD.
/s/ Illegible
<PAGE> 171
EXHIBIT 10.44
MARABELLA ENTERPRISES LIMITED
AND
DURUM ENERGY CORPORATION
AND
PEP 38716 LIMITED
AND
EURO PACIFIC ENERGY PTY LTD
AGREEMENT TO CONTRIBUTE TO FARM IN OPTION
RUDD WATTS & STONE
SOLICITORS
WELLINGTON,
AUCKLAND AND NEW PLYMOUTH
AGREEMENT dated May 6, 1998
BETWEEN MARABELLA ENTERPRISES LIMITED ("Marabella")
AND DURUM ENERGY CORPORATION ("Durum")
AND PEP 38716 LIMITED ("716 Ltd")
AND EURO PACIFIC ENERGY PTY LTD ("Euro")
BACKGROUND
A. By an Option Agreement dated 21 April 1997, Marabella
granted to Australian Worldwide Exploration NL (or its nominee
now nominated as AWE New Zealand Pty Limited) ("AWE") an option
to acquire from Marabella a 25% undivided interest in PEP 38716
and PEP 38716 Joint Venture.
B. By letter dated 10 April 1997, Marabella offered to the
other participants in PEP 38716 the right to contribute interest
to the Option Agreement. Durum and 716 Ltd, by facsimile dated
2 May 1997, agreed to take up the offer to participate pro rata
in the Option Agreement with Marabella. By facsimile dated 12
May 1997, Euro advised that it also wished to participate in the
Option Agreement. So Marabella, 716 Ltd, Durum and Euro
(collectively referred to as the "Assignors") would contribute
undivided interests to AWE (if AWE exercised the option) in the
following percentages:
<PAGE> 172
Marabella: 13.2%
716 Limited: 7.6%
Durum: 2.0%
Euro: 2.2%
Total: 25.0%
C. On 30 June 1997, AWE exercised the option referred to in
Recital A. AWE did not object to splitting the Option Agreement
among the other participants, but did not wish to deal directly
with the participants other than Marabella.
D. The Agreement is entered into by the parties to recognize
the contribution of interest by Durum, 716 Ltd and Euro, and
their pro rata entitlement to the benefits and obligations
accruing under the Option Agreement.
THE PARTIES AGREE
1. In consideration for Durum, 716 Ltd and Euro obtaining a pro
rata share of the benefits under the Option Agreement, they each
agree to assign an undivided interest in PEP 38716 and the PEP
38716 Joint Venture to AWE in the amounts set out in Recital B.
Marabella agrees to share and pass on such pro rata benefits
directly to Durum, 716 Ltd, and Euro in consideration for such
agreement to assign.
2. In particular, but without limiting the generality of clause
1, Marabella agrees:
(a) to cash call AWE for $2 million, when cash calls are to be
made for the drilling of the Huinga Well, and apply the proceeds
of this cash call directly to the accounts of the Assignors
within 48 hours of receipt of funds from AWE, as follows:
Marabella: 52.8% $1,056,000.00
716 Limited: 30.4% $ 608,000.00
Durum: 8.0% $ 160,000.00
Euro: 8.8% $ 176,000.00
100.0% $2,000,000.00
(b) that Durum, 716 Ltd, and Euro shall be entitled to enforce,
directly or by joining Marabella as a party, any obligation to be
performed by AWE under the Option Agreement (or any amendments to
its performance agreed by Marabella and AWE). Any reference to
"Marabella" in the Option Agreement is, for the purposes of this
clause, to be read as a reference to the Assignors in pro rata
shares;
(c) Marabella, in making cash calls on the Assignors for the
Huinga Well, will take into account the amounts to be paid by AWE
and credited to the accounts of the parties, and reduce such cash
calls accordingly.
<PAGE> 173
3. Durum, 716 Ltd, and Euro agree to execute such documents as
are necessary, in terms agreed between the participants in PEP
38716, to effect the transfer agreed by clause 1.
SIGNED on behalf of MARABELLA
ENTERPRISES LIMITED
in the presence of:
/s/ N. Charalambols /s/ N. Malloy
Signature of Witness Signature of N. Malloy
SIGNED on behalf of DURUM ENERGY
CORPORATION by its duly
authorized attorney in the presence of:
/s/ Jeanette Watson /s/ Jenni Lean
Signature of Witness Signature of Jenni Lean
SIGNED on behalf of PEP 38716 LIMITED by
its sole director in the presence of:
/s/ Jeanette Watson /s/ Jenni Lean
Signature of Witness Signature of Jenni Lean
SIGNED on behalf of EURO PACIFIC
ENERGY PTY LTD by a director
in the presence of:
/s/ Audrey Svamble /s/ Colin Crabb
Signature of Witness Signature of Colin Crabb
CERTIFICATE OF NON-REVOCATION
OF POWER OF ATTORNEY
I, JENNIFER MARGARET LEAN, hereby certify:
1. THAT by a Power of Attorney dated 19 June 1997 DURUM ENERGY
CORPORATION appointed me its attorney on the terms and subject to
the conditions set out in such Power of Attorney.
2. THAT at the date hereof I have not received any notice or
information of the revocation of this appointment by any means
whatsoever.
SIGNED at Wellington the 6th day of May 1998
/s/ Jenni Lean
Jennifer Margaret Lean
<PAGE> 174
EXHIBIT 10.45
TRANS NEW ZEALAND OIL COMPANY
AND
TRANS NEW ZEALAND OIL COMPANY (NZ) LIMITED
RUDD WATTS & STONE
SOLICITORS
WELLINGTON,
AUCKLAND AND NEW PLYMOUTH
ASSIGNMENT AGREEMENT (PEP 38332)
THIS AGREEMENT is dated the 25th of August 1997
BETWEEN TRANS NEW ZEALAND OIL COMPANY of Nevada, USA ("TNZO")
AND TRANS NEW ZEALAND OIL COMPANY (NZ) LIMITED at Wellington
("TraNZ(NZ)")
RECITALS
A. As at the date of this Agreement, TNZO is the holder of a
20% participating interest in Petroleum Exploration Permit 38332
("the permit").
B. TNZO has agreed to transfer and TraNZ(NZ) has agreed to take
on transfer such share in the permit, on the terms and conditions
set out in this Agreement.
OPERATIVE PART
1. ASSIGNMENT OF INTERESTS
1.1 Subject to this Agreement, in consideration for the sum of
$1 (one New Zealand dollar), TNZO transfers and assigns to
TraNZ(NZ) a 20% participating interest in the Permit, with effect
from 31 July 1997 ("Effective Date").
1.2 TNZO retains all its rights relating to the interest to be
assigned, until the Effective Date of the assignment.
1.3 With effect on and from the Effective Date, TraNZ(NZ)
assumes the obligations and liabilities arising on and from the
Effective Date (but always excluding the liabilities and
obligations arising prior to the Effective Date) and shall be
entitled to the full benefit and advantage of the assigned
interest and all rights under it to the same extent to which TNZO
would have been so entitled had the interest not been assigned to
TraNZ(NZ).
<PAGE> 175
2. AGREEMENT CONDITIONAL
This Agreement and the transfers and assignments provided
for by it are conditional upon the consent of the Minister being
given to this Agreement and to those transfers and assignments,
pursuant to the Crown Minerals Act 1991.
3. RESTORATION
If the condition in Clause 2 is not satisfied, the parties
will do all such things and execute all such documentation as may
be necessary to restore the status quo ante between the parties.
4. COUNTERPART EXECUTION
This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but all of which shall together constitute one and the same
instrument. However, this Agreement shall not have any effect
until all of the parties named in it have either executed the
same copy of this Agreement or have executed a counterpart of
this Agreement.
5. GOVERNING LAW
This Agreement shall be governed by, and construed in
accordance with, the laws of New Zealand.
EXECUTED AS AN AGREEMENT on the date set out at the head of the
first page.
SIGNED for and on behalf of
TRANS NEW ZEALAND OIL COMPANY (NZ)
LIMITED By:
/s/ Jenni Lean /s/ D.J. Bennett
Signature of Director Signature of Director
SIGNED for and on behalf of
TRANS NEW ZEALAND OIL COMPANY
By its duly authorised attorney:
/s/ Jenni Lean
Signature of Attorney
<PAGE> 176
EXHIBIT 10.46
INDO-PACIFIC ENERGY (NZ) LIMITED
BORAL ENERGY RESOURCES NZ LIMITED
TRANS NEW ZEALAND OIL COMPANY (NZ) LIMITED
BORAL ENERGY RESOURCES LIMITED
Dated October 10 1997
DEED OF ASSIGNMENT AND ASSUMPTION PEP 38332
TABLE OF CONTENTS
1. DEFINITIONS
2. APPROVAL OF MINISTER
3. ASSIGNEE
4. ASSIGNOR
5. PARTICIPATING INTERESTS
6. NOTICES
7. MISCELLANEOUS
THIS DEED is made October 10 1997
BETWEEN
INDO-PACIFIC ENERGY (NZ) LIMITED of 284 Karori Road,
Wellington, New Zealand ("Indo-Pacific")
AND
BORAL ENERGY RESOURCES LIMITED (CAN 0007 845 338) of 60
Hindmarsh Square, Adelaide, South Australia ("BERL")
AND
BORAL ENERGY RESOURCES NZ LIMITED of 38 Bruce Mclaron Road,
Henderson, Auckland ("Boral Energy")
AND
TRANS NEW ZEALAND OIL COMPANY (NZ) LIMITED of 284 Karori
Road, Wellington, New Zealand ("TNZO")
RECITALS
A. As at the date of this Deed the Parties are parties to an
unincorporated joint venture for the purpose of holding their
respective Participating Interests in PEP 38332 in the
percentages set out as follows:
<PAGE> 177
Indo-Pacific 42.50%
BERL 37.50%
TNZO 20.00%
B. The Permit was issued incorrectly in the name of BERL rather
than Boral Energy and this Deed evidences an assignment to
correct the error.
THE PARTIES AGREE as follows:
1. Definitions and Interpretation
1.1 Definitions
In this Deed (including the Recitals) unless the context
otherwise requires:
1.1.1 "Act" means the Crown Minerals Act (NZ) 1991 and any
regulations made thereto.
1.1.2 "Deed" means this deed between the Parties.
1.1.3 "BERL Interest" means a 17.50% Participating Interest
owned by BERL
1.1.4 "Effective Date" means 00.01 hours on 25 June 1997.
1.1.5 "Parties" means each of Indo-Pacific, Boral Energy,
BERL and TNZO
1.1.6 "Participating Interest" means a percentage interest of
a Party in the Permit"
1.1.7 "Permit" means petroleum exploration permit PEP 38332
or any renewal or extension thereof and any mining permit granted
pursuant thereto.
1.1.8 "Minister" means the Minister of Energy as defined
under the Act who administers the approval and registration
procedure under the Act.
1.1.9 "Continuing Parties" means Indo-Pacific and TNZO.
1.2 Interpretation
In this Deed, unless a contrary intention appears:
1.2.1 reference to this Deed is a reference to this Deed as
amended, varied, novated or substituted from time to time;
1.2.2 a reference to any legislation or any provision of any
legislation includes:
<PAGE> 178
(a) all regulations, orders or instruments issued under the
legislation or provision; and
(b) any modification, consolidation, amendment,
re-enactment, replacement or codification of such legislation or
provision;
1.2.3 a word:
(a) importing the singular includes the plural and vice
versa; and
(b) denoting an individual includes corporations, firms,
unincorporated bodies, authorities and instrumentalities;
1.2.4 a reference to a Party to this Deed or any other
instrument includes that Party's executors, administrators,
successors and permitted assigns;
1.2.5 where a word or phrase is given meaning, any other part
of speech or grammatical forms has a corresponding meaning; and
1.2.6 a reference to a clause number, schedule number or
annexure number (or letter) is a reference to a clause, schedule
or annexure of this Deed;
1.2.7 words and expressions used in this Deed which are used
in the Act shall where the context admits have the same meaning
as they have in the Act.
2. Approval
2.1 Each dealing evidences by this Deed to which the Act applies
will relate back to and take effect on and from the Effective
Date upon the date of obtaining approval for such dealing in
accordance with the Act.
2.2 The Parties must use all reasonable endeavours to have all
dealings evidenced by this Deed approved and registered as
contemplated by clause 2.1 as expeditiously as possible.
2.3 If any dealing evidenced by this Deed is not approved and
registered in accordance with clause 2.1 within 12 months of
execution of this deed (or such other date as the Parties may
agree), any Party may terminate this Deed at any time by notice
to other Parties and this Deed will terminate on the receipt of
that notice.
2.4 On termination of this Deed under clause 2.3, the Parties
must execute all documents and do alloter things necessary or
desirable to place each other in the same position as they would
have been had this Deed not been executed or acted upon.
<PAGE> 179
3. Assignee
3.1 With effect on and from the Effective Date, Boral Energy
assumes the obligations and liabilities in respect of the BERL
Interest assigned to it arising on and from the Effective Date
(but always excluding liabilities and obligations arising prior
to the Effective Date) and shall be entitled to the full benefit
and advantage of the BERL Interest and all rights thereunder to
the same extent to which BERL would have been so entitled had the
BERL Interest not been assigned to Boral Energy.
3.2 Boral Energy will indemnify and keep indemnified the
Continuing Parties against all liability which each of them any
incur by reason of any breach or non-observance by Boral Energy
of any of the provisions of this Deed.
3.3 With effect on and from the Effective Date the Continuing
Parties accept the liability of Boral Energy as set out in clause
3.1 hereof.
4. Assignor
4.1 BERL covenants and agree with the Continuing Party and Boral
Energy to duly and punctually discharge all liabilities and
perform all obligations incurred in respect of the BERL Interest
prior to the Effective Date (but excluding liabilities and
obligations scheduled for performance on or after the Effective
Date) regardless of whether such liability and obligations arise
before or after the Effective Date.
4.2 BERL shall indemnify and hold the Continuing Party and Boral
Energy harmless from and against all liability which each of them
may incur by reason of any breach or non-observance by BERL of
this Deed.
5. Participating Interests
The parties agree that on and from the Effective Date their
respective Participating Interests shall be as set out below:
Indo-Pacific 42.50%
Boral Energy 37.50%
TNZO 20.00%
100.00%
6. Miscellaneous
6.1 This Deed will be binding upon the enure to the benefit or
the Parties, their respective successors and each person who
derives from them title to a Participating Interest.
<PAGE> 180
6.2 This Deed will be governed by and construed in accordance
with laws of New Zealand for the time being in force.
6.3 The Parties submit to the non-exclusive jurisdiction of the
Courts of New Zealand and all courts competent to hear appeals
therefrom.
6.4 The Parties will bear their own legal costs arising out of
the preparation of this Deed, but BERL will bear all stamp duty
and registration fees payable on this Deed and any document
directly related to or consequential upon this Deed.
6.5 Each of the Parties must take all such steps, execute all
such documents and do all such acts and things as may be
reasonably required by any other Party to give effect to the
intent of this Deed.
6.6 Each attorney executing this Deed states that he has not
notice of the revocation of his power of attorney.
EXECUTED by the parties as a Deed.
Executed for and on behalf of
INDO-PACIFIC ENERGY (NZ) LIMITED
By its duly authorised representative
In the presence of:
/s/ Jenni Lean /s/ D.J. Bennett
Signature of witness Signature of representative
THE COMMON SEAL OF BORAL ENERGY
RESOURCES NZ LIMITED was affixed
In the presence of:
/s/ R.J. Willinck /s/ Owen W. Poole
Signature Signature
Director Director
Office held Office held
THE COMMON SEAL OF BORAL ENERGY
RESOURCES LIMITED was affixed in
The presence of:
/s/ W. Fowler /s/ R.J. Willinck
Signature Signature
Secretary Director
Office held Office held
<PAGE> 181
Executed for an on behalf of TRANS
NEW ZEALAND OIL COMPANY (NZ) LIMITED
By its duly authorised representative
In the presence of:
/s/ D.J. Bennett /s/ Jenni Lean
Signature of witness Signature of representative
<PAGE> 182
EXHIBIT 10.47
PERMIT ENDORSEMENT
Permit Petroleum Exploration Permit (PEP) 38332
Action In terms of section 41 of the Crown Minerals Act 1991,
and in accordance with a delegation from the Minister of Energy
of 4 November 1997, the Secretary of Commerce approved a Deed of
Assignment and Assumption whereby Boral Energy Resources Limited
assigned its interest in the permit to Boral Energy Resources NZ
Limited.
Date 12 January 1998
Details The participating interests in this permit are now as
follows:
Indo-Pacific Energy (NZ) Limited 42.50 percent
Boral Energy Resources NZ Limited 27.50 percent
Trans New Zealand Oil Company (NZ) 20.00 percent
Certified true and correct
/s/ Clyde Bennett For Unit Manager Permitting
14/1/1998
<PAGE> 183
EXHIBIT 10.48
Dated April 1, 1998
INDO-PACIFIC ENERGY (NZ) LIMITED
BORAL ENERGY RESOURCES NZ LIMITED
TRANS NEW ZEALAND OIL COMPANY (NZ) LIMITED
TRANS-ORIENT PETROLEUM COMPANY (NZ) LIMITED
DEED OF ASSIGNMENT AND ASSUMPTION - PEP 38332
THIS DEED is made April 1, 1998
BETWEEN TRANS NEW ZEALAND OIL COMPANY (NZ) LIMITED of 284
Karori Road, Wellington, New Zealand ("TNZO")
AND TRANS-ORIENT PETROLEUM COMPANY (NZ) LIMITED of 284 Karori
Road, Wellington, New Zealand ("TOP(NZ)")
AND BORAL ENERGY RESOURCES NZ LIMITED of 38 Bruce Mclaron Road,
Henderson, Auckland, New Zealand ("Boral")
AND INDO-PACIFIC ENERGY (NZ) LIMITED of 284 Karori Road,
Wellington, New Zealand ("Indo-Pacific")
RECITALS
A. As at the date of this Deed Indo-Pacific, Boral and TNZO are
parties to an unincorporated joint venture for the purpose of
holding their respective Participating Interests in PEP 38332 in
the percentages set out as follows;
Indo-Pacific 42.50%
Boral 37.50%
TNZO 20%
B. TNZO has agreed to sell to TOP(NZ) the Assigned Interest and
in order to comply with the terms of the joint venture the
Parties have entered into this Deed.
AGREEMENT
1.1 DEFINITIONS AND INTERPRETATION
Definitions: In this Deed (including the Recitals) unless the
context otherwise requires:
"Act" means the Crown Minerals Act (NZ) 1991 and any regulations
made thereto.
<PAGE> 184
"Assigned Interest" means a 20% Participating Interest owned by
TNZO.
"Continuing Parties" means Indo-Pacific and Boral
"Deed" means this deed between the Parties.
"Effective Date" means 00.01 hours on 1 April 1998
"Minister" means the Minister of Energy as defined under the Act
who administers the approval and registration procedure under the
Act.
"Parties" means each of Indo-Pacific, Boral, TOP(NZ), and TNZO.
"Participating Interest" means a percentage interest of a Party
in the Permit.
"Permit" means petroleum exploration permit PEP 38332 or any
renewal or extension thereof and any mining permit granted
pursuant thereto.
1.2 Interpretation: In this Deed, unless a contrary intention
appears:
(a) a reference to this Deed is a reference to this Deed as
amended, varied, novated or substituted from time to time;
(b) a reference to any legislation or any provision of any
legislation includes:
(i) all regulations, orders or instruments issued
under the legislation or provision; and
(ii) any modification, consolidation, amendment,
re-enactment, replacement or codification of such legislation or
provision;
(c) a word:
(i) importing the singular includes the plural and
vice versa; and
(ii) denoting an individual includes corporations,
firms, unincorporated bodies, authorities and instrumentalities;
(d) a reference to a Party to this Deed or any other
instrument includes that Party's executors, administrators,
successors and permitted assigns;
(e) where a word or phrase is given meaning, any other part
of speech or grammatical form has a corresponding meaning; and
<PAGE> 185
(f) a reference to a clause number, schedule number or
annexure number (or letter) is a reference to a clause, schedule
or annexure of this Deed;
(g) words and expressions used in this Deed which are used
in the Act shall where the context admits have the same meaning
as they have in the Act.
2. APPROVAL
2.1 This Deed and the assignments provided for by it are
conditional upon the consent of the Minister being given to this
Deed and the assignment pursuant to the Act. The assignment
evidenced by this Deed to which the Act applies will relate back
to and take effect on and from the Effective Date upon the date
of obtaining approval for such dealing in accordance with the
Act.
2.2 The Parties must use all reasonable endeavours to have
all dealings evidenced by this Deed approved as contemplated by
clause 2.1 as expeditiously as possible.
2.3 If any dealing evidenced by this Deed is not approved
and registered in accordance with clause 2.1 within 12 months
from the Effective Date (or such other date as the Parties may
agree), any Party may terminate this Deed at any time by notice
to the other Parties and this Deed will terminate on the receipt
of that notice.
2.4 On termination of this Deed under clause 2.3, the
Parties must execute all documents and do all other things
necessary or desirable to place each other in the same position
as they would have been had this Deed not been executed or acted
upon.
3. ASSIGNEE
3.1 With effect on and from the Effective Date, TNZO
assigns to TOP(NZ) and TOP(NZ) assumes the obligations and
liabilities in respect of the Assigned Interest arising on and
from the Effective Date (excluding liabilities and obligations
arising prior to the Effective Date) and shall be entitled to the
full benefit and advantage of Assigned Interest and all rights
thereunder to the same extent to which TNZO would have been so
entitled had the Assigned Interest not been assigned to TOP(NZ).
3.2 TOP(NZ) will indemnify and keep indemnified the
Continuing Parties against all liability which each of them may
incur by reason of any breach or non-observance by TOP(NZ) of any
of the provisions of this Deed.
<PAGE> 186
3.3 With effect on and from the Effective Date, the
Continuing Parties accept the liability of TOP(NZ) as set out in
clause 3.1.
4. ASSIGNOR
4.1 TNZO covenants and agrees with the Continuing Parties
and TOP(NZ) to duly and punctually discharge all liabilities and
perform all obligations incurred in respect of the Assigned
Interest prior to the Effective Date (excluding liabilities and
obligations scheduled for performance on or after the Effective
Date) regardless of whether such liability and obligations arise
before or after the Effective Date.
4.2 TNZO shall indemnify and hold the Continuing Parties
and TOP(NZ) harmless from and against all liability which each of
them may incur by reason of any breach or non-observance by TNZO
of this Deed.
5. PARTICIPATING INTERESTS
5.1 The Parties agree that on and from the Effective Date
their respective Participating Interests shall be as set out
below:
Indo-Pacific 42.50%
Boral 37.50%
TOP(NZ) 20%
6. MISCELLANEOUS
6.1 This Deed will be binding upon and enure to the benefit
of the Parties, their respective successors and each person who
derives from them title to a Participating Interest.
6.2 This Deed will be governed by and construed in
accordance with laws of New Zealand for the time being in force.
6.3 The Parties submit to the non-exclusive jurisdiction of
the Courts of New Zealand and all courts competent to hear
appeals therefrom.
6.4 The Parties will bear their own legal costs arising out
of the preparation of this Deed, but TOP(NZ) will bear all stamp
duty and consent fees payable on this Deed and any document
directly related to or consequential upon this Deed.
6.5 Each of the Parties must take all such steps, execute
all such documents and do all such acts and things as may be
reasonably required by any other Party to give effect to the
intent of this Deed.
<PAGE> 187
6.6 If any party executes this Deed by means of an attorney
then such attorney states that he or she has no notice of the
revocation of that power of attorney.
EXECUTED by the parties as a Deed.
Executed for and on behalf of INDO-PACIFIC ENERGY (NZ) LIMITED by
its
duly authorised representatives in the presence of:
/s/ John Burt /s/ D.J. Bennett
Signature of witness Signature of representative
John Burt D.J. Bennett
Name of witness Name of representative
The Common Seal of BORAL ENERGY RESOURCES NZ LIMITED was affixed
in the presence of:
/s/ Robert Willink /s/ Owen Poole
Signature of director Signature of director
Executed for and on behalf of TRANS NEW ZEALAND OIL COMPANY (NZ)
LIMITED
by its duly authorised representative in the presence of:
/s/ John Burt /s/ Jenni Lean
Signature of witness Signature of representative
John Burt Jenni Lean
Name of witness Name of representative
Executed for and on behalf of TRANS-ORIENT PETROLEUM COMPANY
(NZ) LIMITED
by its duly authorised representative in the presence of:
/s/ John Burt /s/ Jenni Lean
Signature of witness Signature of representative
John Burt Jenni Lean
Name of witness Name of representative
<PAGE> 188
EXHIBIT 10.49
WA-199-P
FARMIN AGREEMENT
DATED 26 March 1998
BORAL ENERGY RESOURCES LIMITED
(ACN 007 845 338)
AND
INDO-PACIFIC ENERGY PTY LIMITED
AND
INDO-PACIFIC ENERGY LIMITED
CONTENTS
RECITALS 1
1. INTERPRETATION 1
1.1 Definitions 2
1.2 Interpretation Rules 3
1.3 Entire Agreement 3
1.4 Amendments 3
1.5 Headings 3
1.6 Recitals 3
2. APPROVALS 3
3. ASSIGNMENT 4
4. CONSIDERATION 4
5. VOTING 4
6. DEFAULT 4
7. BORAL ENERGY'S REPRESENTATIONS WARRANTIES AND INDEMNITY 5
8. INDO-PACIFIC'S REPRESENTATIONS, WARRANTIES AND INDEMNITY 5
9. FURTHER ASSURANCES 5
10. GUARANTEE 6
11. TAX CONSIDERATIONS 6
12. COSTS AND STAMP DUTY 6
13. GOVERNING LAW 6
14. NOTICES 7
15. WAIVER 8
16. REMEDIES 8
17. SEVERANCE 8
18. EXECUTION 8
19. CONFIDENTIALITY 8
<PAGE> 189
Agreement dated 26 March 1998.
Between:
BORAL ENERGY RESOURCES LIMITED (ACN 007 845 338) of 60 Hindmarsh
Square, Adelaide South Australia ("Boral Energy")
AND
INDO-PACIFIC ENERGY PTY LIMITED of 1 King William Street,
Adelaide ("Indo- Pacific")
AND
INDO-PACIFIC ENERGY LTD of 1200-1090 West Pender Street,
Vancouver, British Columbia V6E 2N7 ("Guarantor")
(together the "Parties" and separately "Party")
RECITALS
A. Boral Energy together with Petroz NL and Santos (BOL) Pty
Ltd are the registered holders of the Permit issued pursuant to
the Act and are parties to the WA-199-P Joint Venture.
B. Pursuant to a letter agreement dated 15 September 1997 Boral
Energy agreed to assign to Indo-Pacific the Assigned Interest,
which Indo-Pacific agreed to acquire and the Parties have set out
the terms and conditions of the assignment in this Agreement.
C. The Guarantor is the ultimate parent company of Indo-Pacific
and has agreed to guarantee the obligations of Indo-Pacific under
this Agreement and the WA-199-P JOA.
OPERATIVE PART
1 DEFINITIONS AND INTERPRETATIONS
1.1 Definitions
In this Agreement (including the Recitals), unless the
context otherwise requires:
1.1.1 Act means the Petroleum (Submerged Lands) Act 1967
(Cwth).
1.1.2 "Affiliate" has the meaning ascribed to the term under
the Corporations Law.
1.1.3 "Agreement" means this agreement between Boral Energy
and Indo-Pacific.
<PAGE> 190
1.1.4 "Assigned Interest" means a 5% Participating Interest
in the Permit.
1.1.5 "Authority" means, as the context requires, the Joint
Authority or the Designated Authority.
1.1.6 "Deed of Assumption" means the deed referred to in
clause 9.
1.1.7 "Designated Authority" has the meaning ascribed to that
term in the Act.
1.1.8 "Effective Date" means 15 September 1997.
1.1.9 "Joint Authority" has the meaning ascribed to that term
in the Act.
1.1.10 "Permit" means petroleum exploration license WA-199-P
or any renewal or extension thereof and any production license or
title or other license granted pursuant thereto.
1.1.11 "Operator" means the operator of the WA-199-P Joint
Venture appointed pursuant to the WA-199-P JOA.
1.1.12 "Participating Interest" means a participating interest
of a party under the WA-199-P JOA.
1.1.13 "Transfer" means the transfer refereed to in clause 9.
1.1.14 "WA-199-P Joint Venture" means the joint venture
constituted by the parties referred to in Recital A.
1.1.15 "WA-199-P JOA" means the joint venture operating
agreement dated 22 May 1986 which governs the joint venture
relationship between the WA-199-P Joint Venture parties in
relation to the Permit.
1.1.16 "Kittiwake-1 Well" means the well to be drilled by the
Southern Cross rig in or around March 1998. The well is to
penetrate potential reservoirs in the Plover Formation.
1.1.17 "Kittwake-1 Well Costs" means in respect of the
Kittiwake-1 Well, all direct and indirect costs incurred in the
planning and drilling of the Kittiwake-1 Well, including but not
limited to the following operations and costs:
(a) site surveys;
(b) mobilization and demobilization of the drilling unit and
associated vessels;
<PAGE> 191
(c) running and setting surface and intermediate casing,
cementing, wireline logging, coring and repeat formation testing;
(d) the remedying of any blow out or mechanical failure of the
well including redrilling the well;
(e) plugging and abandoning or suspending; and
(f) analysis of results required for the preparation of
completion reports.
1.2 Interpretation Rules
In this Agreement, unless a contrary intention appears:
1.2.1 a reference to this Agreement is a reference to this
Agreement as amended, varied, novated or substituted from time to
time;
1.2.2 a reference to any legislation or any provision of any
legislation includes:
(a) all regulations, orders or instruments issued under the
legislation or provision; and
(b) any modification, consolidation, amendment, re-enactment,
replacement or codification of such legislation or provision.
1.2.3 a word:
(a) importing the singular includes the plural and vice versa;
and
(b) denoting an individual includes corporations, firms,
unincorporated bodies, authorities and instrumentalities;
1.2.4 a reference to a Party to this Agreement or any other
instrument includes that Party's executors, administrators,
successors and permitted assigns;
1.2.5 where a word or phrase is given meaning, any other part
of speech or grammatical form has a corresponding meaning; and
1.2.6 a reference to a clause number, schedule number or
annexure number (or letter) is a reference to a clause, schedule
or annexure of this Agreement;
1.2.7 words and expressions used in this Agreement which are
used in the Act shall where the context admits have the same
meaning as they have in the Act.
<PAGE> 192
1.3 Entire Agreement
This Agreement is the entire agreement between the Parties
as to its subject matter and supersedes all prior agreements,
representations and understandings.
1.4 Amendments
No amendment of, or addition to this Agreement is binding
unless it is in writing and executed by the Parties
1.5 Headings
Any heading, index, table of contents or marginal note is
for convenience only and does not affect the interpretation of
this Agreement.
1.6 The Recitals of this Agreement form part of the Agreement
and have effect as if set out in full in this Agreement.
2. APPROVALS
2.1 This Agreement (other than this clause 2 and clauses
4,5,6.1,9,10,13,14,15,16,17,18 and 19) is conditional upon;
2.1.1 this Agreement being approved and registered by
the Authority; and
2.1.2 each of the Transfer and Deed of Assumption being
approved and registered by the Authority.
2.2 The Parties must use their best endeavours to ensure that
the conditions referred to in clause 2.1 are satisfied as soon as
practicable after the execution of this Agreement.
2.3 If the conditions set out in clause 2.1 are not satisfied on
the date of being 12 months after the date of this Agreement then
either Party may terminate this Agreement at any time after that
date by giving notice to that effect to the other party and this
Agreement (except for this clause 2.3 and clause 2.4) will
terminate upon receipt of that notice.
2.4 On the termination of this Agreement under clause 2.3;
2.4.1 Boral energy must indemnify Indo-Pacific for all
amounts which Indo-Pacific has paid pursuant to
clause 4; and
2.4.2 the Parties must execute all documents and do all
things necessary or desirable to place each other
in the same position as they would have been in
had this Agreement not been executed or acted
upon.
<PAGE> 193
3. ASSIGNMENT
With effect on and from the Effective Date and subject to
Indo-Pacific complying with its obligations under this Agreement,
Boral Energy assigns to Indo-Pacific the Assigned interest free
and clear of all liens, encumbrances, rights and interests other
than those arising under the WA-199-P JOA, the Permit or the Act
and Indo-Pacific accepts the assignment of the Assigned Interest.
4. CONSIDERATION
4.1 In consideration of Boral Energy agreeing to assign the
Assigned Interest to Indo-Pacific, Indo-Pacific shall bear and
pay ten percent (10%) of the Kittiwake-1 Well costs.
4.2 The obligation under clause 4.1 shall have been met on the
first to occur of any of the following;
(a) the WA-199-P Joint Venture decides in accordance with the
WA-199-P JOA to run production casing in the Kittiwake-1 Well; or
(b) the WA-199-P Joint Venture decides in accordance with the
WA-199-P JOA to plug and abandon the Kittiwake-1 Well; or
(c) the Kittiwake-1 Well costs reach A$8.5 million,
and when the obligation under clause 4.1 has been met
Indo-Pacific shall be liable for the Assigned Interest share of
any
other costs in relation to the Kittiwake-1 Well.
4.3 Other than its liability under clause 4.1, Indo-Pacific
shall be liable on and from the Effective Date for all other
costs and expenses of the Assigned Interest in accordance with
the WA-199-P JOA.
5 VOTING
During the period from the date of this Agreement to the
Date upon which the conditions in clause 2 are satisfied, Boral
Energy shall vote the Assigned Interest in a manner which is
consistent with this Agreement.
6 DEFAULT
6.1 If Indo-Pacific fails to pay any of the costs as required
under clause 4.1 of this Agreement then Boral Energy may after
giving Indo-Pacific 5 days notice to remedy the default, pay such
costs and recover the sum (if applicable) not so paid as a
liquidated debt, together with interest on the amount outstanding
at the rate charged from time to time by Boral Energy's Bankers
on overdrafts in excess of $100,000 such interest being
calculated on a daily basis from the date of payment by Boral
Energy until the date of recovery from Indo-Pacific, capitalized
on the last day of each month.
<PAGE> 194
6.2 In the event that Indo-Pacific fails to remedy the default
in clause 6.1 after a further 5 days then Boral Energy may
require Indo-Pacific to forthwith assign to Boral energy the
Assigned Interest assigned to Indo-Pacific under this Agreement
for no consideration other than the complete discharge of all
liability of Indo-Pacific under, and in respect of, this
Agreement.
6.3 The Parties acknowledge and agree that the provisions of
clause 6.1 and 6.2 arise out of a genuine attempt to compensate
Boral energy for any loss and damage estimated by the Parties to
be suffered by Boral Energy as a result of an unremedied default
of Indo-Pacific.
7. BORAL ENERGY'S REPRESENTATIONS, WARRANTIES AND INDEMNITY
7.1 Boral Energy represents and warrants to Indo-Pacific that:
7.1.1 it has the necessary power and authority, and all
necessary corporate and other action has or will be taken, to
enable it to enter into and perform its obligations under this
Agreement;
7.1.2 the Assigned Interest is free of all liens,
encumbrances, rights and interests other than the interests
imposed under the Act, the WA-199P JOA or the Permit;
7.1.3 it is not engaged in any litigation or arbitration
proceeding in respect of the Permit, and to the best of its
knowledge and belief there are no actions, suits or other
proceedings pending or threatened against it in relation to the
Permit or which affects or may affect the validity of the Permit
or this Agreement;
7.1.4 to the best of its knowledge and belief the Permit is
valid, subsisting and in good standing and all obligations
imposed by the Act in relation thereto have been duly performed
and complied with.
7.2 Boral Energy shall indemnify Indo-Pacific and keep
Indo-Pacific indemnified against all liability, cost, loss and
damage
which Indo-Pacific suffers or incurs as a result of a breach of
any representation and warranty contained in clause 7.1 provided
however that Boral Energy shall not be liable for any indirect or
consequential damages and Boral Energy's total liability for any
and all breaches will not exceed the consideration referred to in
clause 4.
7.3 No claim for breach of any representation or warranty set
out in Clause 7.1 shall be made more than one (1) year after the
date of registration of this Agreement unless prior to the expiry
of such period written notice of the matter complained of (with
<PAGE> 195
such details of the matter as shall then be reasonably
practicable) shall have been given by Indo-Pacific to Boral
Energy.
7.4 Subject to any law to the contrary and except as provided in
clause 7.1, all terms, conditions, warranties, statements,
representations, estimates or opinions whether express, implied,
written or oral are excluded and Boral Energy disclaims all
liability in relation to them to the maximum extent permitted by
the law and Indo-Pacific has independently verified all
information made available by Boral Energy.
8. INDO-PACIFIC'S REPRESENTATIONS, WARRANTIES AND INDEMNITY
8.1 Indo-Pacific represents and warrants to Boral Energy that it
has the necessary power and authority, and all necessary
corporate and other action has been taken, to enable it to enter
into and perform its obligations under this Agreement and each
further document and assurance required under clause 9 hereof.
8.2 Indo-Pacific shall indemnify Boral Energy and keep Boral
Energy indemnified against all liability, cost, loss and damage
which Boral Energy suffers or incurs as a result of any breach of
the representation and warranty contained in clause 8.1 provided
however that Indo-Pacific shall not be liable for any indirect or
consequential damages.
9. FURTHER ASSURANCES
Indo-Pacific and Boral Energy each agree that they will
sign, execute and complete all further documents and assurances
(which includes a Deed of Assumption and Transfer), and do all
further acts and things as may be reasonably required to confirm
or give effect to the intent and object of this Agreement.
10. GUARANTEE
10.1 Execution of Guarantee
In consideration of the respective covenants of Boral Energy
and Indo-Pacific the Guarantor, at the request of Indo-Pacific,
agrees to execute and deliver the Deed of Guarantee immediately
upon the execution of this Agreement.
10.2 Default by Guarantor
If the Guarantor fails to execute the Deed of Guarantee as
required by Clause 10.1 or defaults in the performance of any of
its obligations under the Deed of Guarantee Boral Energy shall
forthwith give notice of the default to the Guarantor and
Indo-Pacific and request the Guarantor to remedy forthwith the
same.
For so long as the Guarantor continues to be in default, the
<PAGE> 196
amount in default shall bear interest (as defined in the WA-199P
JOA) calculated on a daily basis from but not including the due
date for payment, until such time as the Guarantor shall have
paid the total amount in default together with all interest
accrued in respect thereof.
11. TAX CONSIDERATIONS
11.1 Resource Rent Tax
Boral Energy agrees to provide to Indo-Pacific relevant
information required to enable Indo-Pacific to assume and obtain
the benefit of allowable deductions in respect of the Assigned
interest pursuant to the Petroleum Resource Rent Tax Assessment
Act 1987.
11.2 Value of Assigned Interest
For the purposes of Part 111A of the Income Tax Assessment
Act 1936 of the Commonwealth of Australia, the Parties
acknowledge and agree that the Permit is a wildcat exploration
area with no proven economic reserves of petroleum and that the
value of the rights and interest assigned is nil.
12 COSTS AND STAMP DUTY
12.1 Each of the Parties shall bear its own costs and expenses
(including, without limitation, all legal costs and expenses) in
relation to the preparation, negotiation and execution of this
Agreement and each of the documents which this Agreement requires
any of the Parties to execute.
12.2 Indo-Pacific shall bear all stamp duty and registration fees
payable under the Act on this Agreement and each of the documents
which this Agreement requires any of the Parties to execute.
13. GOVERNING LAW
This Agreement shall be deemed to be a contract under, and
shall be governed by and interpreted in accordance with, the laws
of South Australia.
14. NOTICES
14.1 How notices may be given
A notice approval, direction, consent, offer, demand or
other communication in connection with this Agreement must be:
14.1.1 in writing;
14.1.2 signed by an authorised officer of the relevant Party;
and
<PAGE> 197
14.1.3 given to the recipient Party;
(a) by hand delivery;
(b) by pre-paid mail or courier sent to that Party; or
(c) by facsimile transmission to that Party.
14.2 Where notices must be sent
For the purposes of clause 14.1:
14.2.1 deliveries must be delivered to the address of the
recipient Party set out below;
14.2.2 mail must be sent to the address of the recipient party
set out below;
14.2.3 facsimile messages must be transmitted to the facsimile
number of the recipient Party set out below; and in each case
14.2.4 must be marked for the attention of the person
specified below in relation to the recipient Party:
Name: Boral Energy Resources Limited
Address: Level 3
60 Hindmarsh Square
ADELAIDE SOUTH AUSTRALIA 5000
Attention: Dr. R. Willink
Facsimile: (+618)8223 1851
Name: Indo-Pacific Energy Ltd.
Address: 284 Karori Road
Wellington, New Zealand
Attention: Mr. D. Bennett
Facsimile: 64 4476 0120
14.3 Change of Details
14.3.1 A Party may from time to time change any of the details
specified in clause 14.2.4 by giving not less than 5 business
days notice to each other party.
14.3.2 If details are changed in accordance with clause
14.3.1, clause 14.2.4 applies as it those changed details were
set out in clause 14.2.4.
14.4 Proof of Notices
14.4.1 Proof of posting by pre-paid mail is proof of receipt
on the fifth clear business day after courier delivery or the
eighth clear business day in the case of posting.
<PAGE> 198
14.4.2 Proof of transmission of a facsimile message is proof
of receipt on the date of transmission, but it a transmission is
not made on a business day or not made before 4:00, then it will
be deemed to have been received at 10:00am on the next business
day in the time zone of the recipient after transmission.
15. WAIVER
A Party's failure to exercise or delay in exercising a power
or right is not a waiver of that power or right, and the exercise
of a power or right does not preclude the future exercise of that
or any other power or right.
16. REMEDIES
16.1 All remedies, rights, undertakings, obligations or
agreements of the Parties under this Agreement arising by law in
respect of this Agreement shall be cumulative and none thereof
shall be in limitation of any other rights, remedies,
undertakings, obligations or agreements of the Parties.
16.2 Each of the Parties may follow any such remedy to which it
is entitled by law or otherwise, either concurrently or
successively at its option.
17. SEVERANCE
Each provision of this Agreement shall be deemed to be
separate and severable from the others of them. If any provision
of this Agreement is determined to be invalid or unenforceable in
any jurisdiction, it shall be severed from this Agreement and not
invalidate the rest of this Agreement which shall remain of full
force and effect as it such provision had not been made a part
thereof. Such a determination of invalidity or enforceability
shall not affect the validity or enforceability of that provision
in any other jurisdiction.
18. EXECUTION
This Agreement may be executed by the separate execution and
delivery of counterparts and proof of execution and delivery of
those counterparts may be achievable by the transmission of
executed copies by facsimile.
19. CONFIDENTIALITY
The Parties agree and undertake to keep the terms of this
Agreement confidential subject to their respective obligations
and rights to disclose to Affiliates and as may be required by
law or rule of stock exchange.
<PAGE> 199
EXECUTED as an Agreement.
THE COMMON SEAL of )
BORAL ENERGY RESOURCES LIMITED )
was affixed in accordance with )
its articles of association: )
/s/ W. Fowler /s/ Robbert Willinck
Signature of Authorised Person Signature of Authorised Person
Secretary Director
Office Held Office Held
W. Fowler Robbery Willinck
Name of authorised person Name of authorised person
THE COMMON SEAL of )
INDO-PACIFIC ENERGY PTY LIMITED )
was affixed in accordance with )
its articles of association: )
Jeffery Phillip Lean
Name of Authorised Person
/s/ J.P. Lean
I confirm that I have witnessed the affixing of
The Seal in the capacity of sole Director and
Sole Secretary of the company.
SIGNED for and on behalf of )
INDO-PACIFIC ENERGY LIMITED )
by its duly authorised attorney under )
power in the presence of: )
/s/ Jenni Lean /s/ D.J. Bennett
Witness Director
<PAGE> 200
EXHIBIT 10.50
Deed of Guarantee
DATED the 26th day of March 1998.
BETWEEN
INDO-PACIFIC ENERGY LTD a company with an office at 1200-1090
West Pender Street, Vancouver, British Columbia V6E 2N7 ("the
Guarantor")
AND
INDO-PACIFIC ENERGY PTY LTD (ACN 012 556 310) a company with an
office at 15th Floor, 1 King William Street, Adelaide, South
Australia 5000 ("the Company")
AND
BORAL ENERGY RESOURCES LIMITED (ACN 007 845 338) a company with
an office at 60 Hindmarsh Square, Adelaide, South Australia
("Boral")
(Boral being referred to as "the Principal")
RECITALS
A. The Principal together with Petroz NL and Santos (BOL) Pty
Ltd. are the registered holders of Exploration Permit WA-199-P
("Permit") issued pursuant to the Act.
B. The Principal is party to the Joint Venture Operating
Agreement dated 22 May 1986 ("JVOA") which governs activities in
the Permit.
C. The Company has acquired an interest in the Permit and the
JVOA pursuant to a Farmin Agreement dated 26 March 1998 ("Farmin
Agreement").
D. The Guarantor is the ultimate parent company of the Company.
E. Under the Farmin Agreement, the Guarantor has agreed to
enter into this Deed.
NOW THIS DEED WITNESS that the Guarantor, in consideration of the
promises and with the concurrence of the Company, GUARANTEES to
the Principal the due and proper performance and observance by
the Company of the obligations of the Company under the JVOA, the
Farmin Agreement, the Permit and the discharge of the liabilities
of the Company under the JVOA AND in pursuance of this Guarantee
UNDERTAKES AND AGREES with the Principal as follows:
<PAGE> 201
1. In the event of any breach by the Company of the provisions
of the Farmin Agreement, the Guarantor will in accordance with
the Farmin Agreement:
(a) Pay to the Principal on demand any and all sums of money
then due under the JVOA on account of its Percentage interests;
and
(b) if and to the extent requested by the Principal, undertake,
carry out and complete the obligations of the Company under the
Farmin Agreement as insofar as the Company has failed to do so;
and
(c) pay to the Principal any sum due to it by way of
compensation arising from or caused by or connected with the
breach of the Farmin Agreement.
2. For the purposes of clause 1(b), the Guarantor shall be
substituted for the Company as the party to the JVOA to the
intent that the Guarantor shall be subject to the obligations and
liabilities and entitled to the rights of the Company as that
party (including liability in respect of any breach of the of the
provisions of the JVOA whether occurring before or after the
substitution) in all respects as if the Guarantor had been named
as the party to the JVOA instead of the Company.
3. This Deed of Guarantee shall be a continuing guarantee until
the obligations and liabilities of the Company under the JVOA or
the Farmin Agreement shall in all respects have been performed,
observed and discharged.
4. The liability of the Guarantor under this Deed of Guarantee
shall not in any way be discharged, affected or impaired for any
reason whatsoever whether by variation of any of the provisions
of the JVOA or the granting of time or indulgence to the Company
or the waiving by or on behalf of the Principal or any breach,
failure or default whatsoever on the part of the Company or the
Guarantor or otherwise howsoever.
5. Any demand or request to be made on the Guarantor shall be
deemed to have been duly made if it is in writing signed by or on
behalf of the Principal delivered by hand or sent by prepaid post
or by facsimile transmission addressed to the Guarantor at its
address hereinbefore referred. The provisions of the Farmin
Agreement dealing with giving of notices shall apply under this
Deed of Guarantee.
6. The Guarantor shall pay all stamp duty payable in respect of
this Deed of Guarantee.
<PAGE> 202
7. This Deed of Guarantee shall in all respects be governed by
and construed in accordance with the laws of the State of South
Australia and each party submits to the jurisdiction of the
Courts of that State.
8. Words used in this Deed of Guarantee which are defined in
the JVOA shall have the same meaning given to them in the JVOA.
9. This Deed may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute one
and the same instrument. Any signature page of a counterpart may
be detached from it without impairing the legal effect of the
signature on it and attached to another counterpart identical in
form but having attached to it one or more additional signature
pages signed by the other Parties.
Forthwith upon execution by it of a counterpart of this
Deed, each Party shall cause a facsimile copy of the signature
page of the counterpart to be transmitted to each of the other
Parties and each Party shall:
(a) be bound by this Deed from the time the last of the said
counterparts has been successfully transmitted; and
(b) forthwith post an originally executed signature page to each
other Party of the counterpart executed by it.
EXECUTED as an Agreement.
THE COMMON SEAL of )
BORAL ENERGY RESOURCES LIMITED )
was affixed in accordance with )
its articles of association: )
/s/ W. Fowler /s/ Robbert Willinck
Signature of Authorised Person Signature of Authorised Person
Secretary Director
Office Held Office Held
W. Fowler Robbery Willinck
Name of authorised person Name of authorised person
THE COMMON SEAL of )
INDO-PACIFIC ENERGY PTY LIMITED )
was affixed in accordance with )
its articles of association: )
Jeffery Phillip Lean
Name of Authorised Person
/s/ J.P. Lean
<PAGE> 203
I confirm that I have witnessed the affixing of
The Seal in the capacity of sole Director and
Sole Secretary of the company.
SIGNED for and on behalf of )
INDO-PACIFIC ENERGY LIMITED )
by its duly authorised attorney under )
power in the presence of: )
/s/ Jenni Lean /s/ D.J. Bennett
Witness Director
<PAGE> 204
EXHIBIT 10.51
Boral Energy Resources Limited
GPO Box 2576
ADELAIDE SA 5001
Attention: A.J. Wright
Dear Sir
APPLICATION FOR APPROVAL OF DEALING 78SL/97-8
Thank you for your letter dated 30 April 1998 and enclosures.
I advise that the Dealing was received on 12 May 1998 and has
been
recorded in the register as follows:
Dealing Instrument Date Title Affected
78SL/97-8 26/3/98 WA-199-P
The Dealing and file reference numbers should be used for future
correspondence in these matters.
Yours faithfully
/s/ I. Scott for Ian Fraser
DIRECTOR
12 May, 1998
<PAGE> 205
EXHIBIT 10.52
COMMONWEALTH OF AUSTRALIA
Petroleum (Submerged Lands) Act 1967
EXPLORATION PERMIT FOR PETROLEUM VIC/P39
I, PATRICK McNAMARA, the Designed Authority in respect of the
area specified as being adjacent to the State of Victoria acting
for and on behalf of the Commonwealth Victoria Offshore
Petroleum Joint Authority, hereby, subject to the conditions set
out hereunder, grand to:
MOSAIC OIL NL
11th Floor
15-17 Young Street
SYDNEY NSW 2000
EURO PACIFIC ENERGY PTY LTD.
133 Edward Street
PERTH WA 6000
INDO PACIFIC ENERGY PTY LTD.
249 Karori Road
Wellington
NEW ZEALAND
an exploration permit for petroleum numbered VIC/P39
a) in respect of each of the blocks that is at the date of this
permit constituted by a graticular section, or by part of a
graticular section, described hereunder; and
b) where, at any time during the term of this permit, a
graticular section, or part of a graticular section, so described
hereunder constitutes a block.
This permit has an effect for a period of six (6) years from the
date hereof.
INTERPRETATION
In this Permit, "the Act" means the Act under which this Permit
is granted and includes any Act with which that Act is
incorporated and words used in this Permit have the same
respective meanings as in the Act.
<PAGE> 206
DESCRIPTION OF BLOCKS
In the adjacent area of the State of Victoria
MELBOURNE Sheet SJ55 prepared and published for the purposes of
the Petroleum (Submerged Lands) Act 1967.
A. BLOCKS
MELBOURNE MAP SHEET
BLOCK NO. BLOCK NO. BLOCK NO. BLOCK NO.
1992 2061 2062 2063
2064 2065 2066 2136
2137 2138 2139
Assessed to contain 11 blocks
CONDITIONS
1. (1) Subject to sub-clause (2), during a year of the term of
the permit set out in the first column of the following table,
the permittee:
(a) shall carry out in or in relation to the permit area, to a
standard acceptable to the Designated Authority, the work
specified in the minimum work requirements set out opposite that
year in the second column of the table;
(b) may carry out in or in relation to the permit area, to a
standard acceptable to the Designated Authority, all or part of
the work specified in the minimum work requirements of a
subsequent year or years of that term set out opposite that year
or those years in the second column of the table; and
(c) may carry out in or in relation to the permit area, to a
standard acceptable to the Designated Authority, work in addition
to the work specified in the minimum work requirements set out
opposite that year and in the subsequent year or years, if any,
of that term in the second column of the table.
(2) The permittee shall not commence any works or petroleum
exploration operations in the permit area except with, and in
accordance with the approval in writing of the Designated
Authority or of a person authorised by the Designated Authority
to give that approval.
(3) For the purposes of this clause, any work carried out in
accordance with paragraph (1)(b) shall, if the Designated
Authority in his discretion by instrument in writing so approves,
be treated as if it had been carried out in the subsequent year
or years of the term of the permit specified by the Designated
Authority in that instrument.
<PAGE> 207
Estimated
Expenditure
Year of Term In Constant
Of Permit Minimum Work Dollars
Requirements (indicative only)
First Data Review
Seismic Reprocessing 250,000
Second 500 Km 2D Seismic Survey 750,000
Third One (1) Well 6,500,000
Fourth Data Review
Seismic Reprocessing 250,000
Fifth 500 Km 2D Seismic Survey 750,000
Sixth One (1) Well 6,500,000
1A. During the first 3 year period of the term of the permit the
permittee must complete the work specified in the minimum work
requirements for the years in the period.
2. The permittee shall not recover any petroleum from the
permit area except as a result of production testing of a well.
3. The permittee shall not construct any installation or
install any equipment in the permit area except with and in
accordance with the approval in writing of the Designated
Authority or a person authorised in writing by the Designated
Authority to give that approval.
4. The permittee shall not abandon, suspend or complete any
well except with and in accordance with the approval of the
Designated Authority or of a person authorised by the Designated
Authority to give that approval.
5. In carrying out its operations in the permit area the
permittee shall take adequate measures for the protection of the
environment.
6. The permittee shall at all times comply with
(a) the provisions of the Act and of any regulations for the
time being in force under the Act; and
(b) all Directions given to him under the Act or the Regulations
for the time being, in force under the Act.
7. It is a condition of this Exploration Permit for Petroleum
that the Permittee complies with the requirements of Section 97A
of the Act.
Dated at Melbourne this 31st day of July 1997
<PAGE> 208
MADE under the Petroleum (Submerged Lands) Act 1967 of the
Commonwealth of Australia on behalf of the Commonwealth
Victoria Offshore Petroleum Joint Authority.
/s/ P. McNamara
DESIGNATED AUTHORITY
<PAGE> 209
EXHIBIT 10.53
VARIOUS ENDORSEMENTS TO PEP 38716
PERMIT ENDORSEMENT
Permit PEP 38716
Action In terms of section 36 of the Crown Minerals Act
1991, the Secretary of Commerce, acting under delegated authority
from the Minister of Energy of 07 October 1991, has agreed to
amend the Second Schedule work programme.
Date 10 April 1996
Details The Secretary of Commerce has agreed to amend the
Second Schedule work programme whereby the attached work
programme is adopted for the remainder of the term of the permit.
Certified true and correct
/s/ W.P. Player
W.P. Player
For Acting Unit Manager Permitting and Monitoring
11/04/1996
CERTIFICATE OF CHANGE OF CONDITIONS
IN THE MATTER of the Crown
Minerals Act 1991
AND
IN THE MATTER of Petroleum
Exploration Permit 38716
dated 30 January 1996 in
the name of Marabella
Enterprises Limited, Indo
Overseas Exploration
Limited and Euro Pacific
Energy Pty Limited
PURSUANT to section 36 of the Crown Minerals Act 1991, the
conditions specified in the Second Schedule to the above
mentioned permit are hereby replaced with those attached to this
certificate.
DATED at Wellington this 10th day of April 1996.
SIGNED by Howard Edward Fancy, Secretary of Commerce
/s/ Howard Edward Fancy
<PAGE> 210
SECOND SCHEDULE
PETROLEUM EXPLORATION PERMIT (PEP) 38716
1. The permit holder shall make all reasonable efforts to
explore and delineate the petroleum resource potential of the
permit area, in accordance with good exploration and mining
practice.
2. The permit holder shall comply with the work programme as
detailed below.
3. The following programme of work shall be undertaken by the
permit holder:
i reprocess and interpret 250 kilometres of existing seismic
data utilising PMPS/DMO techniques as appropriate;
ii acquire, process and interpret 30 kilometres of new seismic
data;
iii acquire aeromagnetic data sufficient to support 3D
modelling; and
either
make a firm commitment by notice in writing to the Secretary
of Commerce to complete the work programme detailed in (b) below;
or
surrender the permit.
SECOND SCHEDULE
PETROLEUM EXPLORATION PERMIT (PEP) 38716
1. The permit holder shall make all reasonable efforts to
explore and delineate the petroleum resource potential of the
permit area, in accordance with good exploration and mining
practice.
2. The permit holder shall comply with the work programme as
detailed below.
3. The following programme of work shall be undertaken by the
permit holder:
(a) within 18 months of the commencement date of the permit:
i reprocess and interpret 250 kilometres of existing seismic
data utilising PMPS/DMO techniques as appropriate;
ii acquire, process and interpret 30 kilometres of new seismic
data;
iii acquire aeromagnetic data sufficient to support 3D
modelling; and
<PAGE> 211
either
make a firm commitment by notice in writing to the Secretary of
Commerce to complete the work programme detailed in (b) below;
or
surrender the permit
(b) within 30 months of the commencement date of the permit:
i drill on exploration well to a minimum depth of 2,500
metres, or to an approved objective and/or depth unless
geological or engineering constraints encountered whilst drilling
make this unreasonable; and
either
submit, for the approval of the Secretary of Commerce, an ongoing
work programme for the remainder of the permit term;
or
surrender the permit.
PETROLEUM EXPLORATION PERMIT 38716
CROWN MINERALS ACT 1991
Pursuant to Section 25 of the Crown Minerals Act 1991, I
DOUGLAS LORIMER KIDD, Minister of Energy
Do Hereby
Grant Marabella Enterprises Limited 52.80 percent
Indo Overseas Exploration Limited 38.40 percent
Euro Pacific Energy Pty Limited 8.80 percent
The exclusive right to explore for petroleum in
the area described in the First Schedule and more particularly
that delineated on the plan attached hereto.
This Exploration Permit is issued for a term of five years
commencing on the date stated below. The Permit is granted
subject to the Crown Minerals Act 1991 and any regulations made
thereunder, and to the terms and conditions specified in the
Second and Third Schedules hereto.
Dated at Wellington this 30th day of January 1996.
/s/ Doug Kidd
Hon Doug Kidd
Minister of Energy
<PAGE> 212
SECOND SCHEDULE
PETROLEUM EXPLORATION PERMIT (PEP) 38716
1. The permit holder shall make all reasonable efforts to
explore and delineate the petroleum resource potential of the
permit area, in accordance with good exploration and mining
practice.
2. The permit holder shall comply with the work programme as
detailed below.
3. The following programme of work shall be undertaken by the
permit holder:
(a) within 18 months of the commencement date of the permit:
i reprocess and interpret 250 kilometres of existing seismic
data utilising PMPS/DMO techniques as appropriate;
ii acquire, process and interpret 30 kilometres of new seismic
data;
iii acquire detailed precision gravity data sufficient to
support 3D modelling; and
either
make a firm commitment by notice in writing to the Secretary of
Commerce to complete the work programme detailed in (b) below;
or
surrender the permit.
(b) within 30 months of the commencement date of the permit:
i drill one exploration well to a minimum depth of 2,500
metres, or to an approved objective and/or depth unless
geological or engineering constraints encountered whilst drilling
make this unreasonable; and
either
submit, for the approval of the Secretary of Commerce, an ongoing
work programme for the remainder of the permit term;
or
surrender the permit.
<PAGE> 213
THIRD SCHEDULE
PETROLEUM EXPLORATION PERMIT (PEP) 38716
Terms indicated in bold type in the following conditions are
defined in Chapter 7 of the Minerals Programme for Petroleum (1
January 1995).
1. The permit holder shall pay any fees as prescribed in
accordance with the relevant petroleum regulations.
2a The permit holder shall be liable for the calculation and
payment to the Crown of a royalty equal to 5 percent of the NET
SALES REVENUES from the permit, calculated in accordance with
Chapter 7 of the Minerals Programme for Petroleum (1 January
1995), for any period for which a ROYALTY RETURN must be provided
in respect of all petroleum obtained under the permit which is
either sold or used in the production process as fuel or is
otherwise exchanged or removed from the permit without sale, or
remains unsold on the surrender, expiry or revocation of the
permit, except as provided in paragraph (b) below;
b. No royalty shall be payable in respect of:
i any petroleum that, in the opinion of the Minister, has been
unavoidably lost. This includes petroleum that has been flared
for safety reasons, or flared as part of an approved testing
programme, and
ii any petroleum which has been mined or otherwise recovered
from its natural condition, but which has been returned to a
natural reservoir within the area of the permit.
c. Where the exploration permit is exchanged for a mining
permit it shall be a condition of that permit that the permit
holder shall calculate and be liable to pay the higher of either
5 percent of the NET SALES REVENUES or a 20 percent ACCOUNTING
PROFITS ROYALTY in respect of any period for which a ROYALTY
RETURN must be provided in accordance with Chapter 7 of the
Minerals Programme for Petroleum (1 January 1995).
d. The permit holder shall provide to the Secretary a ROYALTY
RETURN for every period within the duration of the permit,
between a date for the commencement of a period and the next
following date for the expiry of a period. The initial period for
which a ROYALTY RETURN must be provided shall not commence before
the initial REPORTING PERIOD commencement date which will be
specified in accordance with paragraph (e) below (refer
paragraphs 7.30 to 7.33, Minerals Programme for Petroleum,
January 1995).
e. If exploration under the permit results in petroleum
production on which a royalty is payable, then the Minister may,
after consultation with the permit holder, amend the conditions
<PAGE> 214
of the permit in accordance with section 36 of the Crown Minerals
Act 1991, to specify a 12 monthly REPORTING PERIOD, except that
the initial period for which the ROYALTY RETURN must be provided
may be a shorter period commencing on a specified date.
f. The ROYALTY RETURN shall be in the prescribed form and in
accordance with paragraphs 7.35 to 7.38 of the Minerals Programme
for Petroleum (1 January 1995). Each ROYALTY RETURN shall be
accompanied by a written statement from an AUDITOR, in the form
prescribed in relevant regulations.
g. The POINT(S) OF VALUATION for calculating NET SALES REVENUES
shall be defined by the Minister, in consultation with the permit
holder, at the time of granting a mining permit or in respect of
an exploration permit, by written notice given by the Minister to
the permit holder within 30 working days, or such other time as
shall be notified to the permit holder, after the time when
production of petroleum under the permit commences. In setting
the POINT(S) OF VALUATION the Minister will Programme for
Petroleum (1 January 1995).
h. All costs and prices used in determining petroleum royalties
liabilities shall be the result of ARM'S LENGTH transactions.
Where any transactions are not at ARM'S LENGTH, the ARM'S LENGTH
VALUE of costs and prices used shall be such amount as is agreed
between the permit holder and the Minister or, in the absence of
agreement within such period as the Minister allows, shall be
such amount as is determined by the Minister to be the value. The
Minister, in determining the ARM'S LENGTH VALUE shall have
regard, but is not limited to the criteria set out in paragraph
7.27 of the Minerals Programme for Petroleum (1 January 1995).
i. Where NET SALES REVENUES for any quarter in a REPORTING
PERIOD, or a lesser period for which a ROYALTY RETURN must be
provided, are $250,000 or more, the permit holder shall make an
interim royalty payment to the Secretary, of 5 percent of the NET
SALES REVENUES for the quarter or lesser period, within thirty
calendar days after the end of the quarter or lesser period.
Where the permit holder is a partnership, joint venture or
otherwise made up of two or more parties, the interim payment due
may be made by each of the parties paying an agreed share.
j. Upon completion of the ROYALTY RETURN for a period, if there
is a balance of royalties payable net of interim payments made in
respect of the period, the permit holder shall be required to pay
the balance within 90 days following the end of the period. If
upon completion of the ROYALTY RETURN, the total of interim
payments exceeds the amount of the royalties due for the period,
the overpayment of royalties shall be refunded or may, at the
request of the permit holder, be applied against future
liabilities.
<PAGE> 215
k. The permit holder shall, for the purposes of supporting the
ROYALTY RETURN, keep for ten years or until the expiry of the
permit, whichever occurs first, proper books of account and
records maintained in accordance with accepted business practice.
The Secretary may require the permit holder to provide detailed
records and supporting information to explain any aspect of the
ROYALTY RETURN.
PETROLEUM EXPLORATION PERMIT 38716
PERMIT ENDORSEMENT
Action: Durum Energy (NZ) Limited changed its name to PEP
38716 Limited.
Date: 24 July 1997.
Certified true and correct
/s/ Clyde Bennett
For Unit Manager Permitting
24/7/1997
PERMIT ENDORSEMENT
Permit: PEP 38716
Action: In terms of section 41 of the Crown Minerals Act
1991, and acting under delegated authority from the Minister of
Energy of 7 October 1991, the Secretary of Commerce has approved
the assignment of Indo Overseas Explorations Limited's entire
interest in the permit to Durum Energy Corporation, Durum Energy
(NZ) Limited and Indo-Pacific Energy (NZ) Limited.
Date: 19 August 1997
Details: The participating interests in this permit are as
follows:
Marabella Enterprises Limited 52.80 percent
Indo-Pacific Energy (NZ) Limited 17.40 percent
Durum Energy (NZ) Limited 15.00 percent
Euro Pacific Energy Pty Limited 8.80 percent
Durum Energy Corporation Limited 6.00 percent
Certified true and correct
/s/ Clyde Bennett
Clyde Bennett
For Unit Manager Permitting
21/8/1997
<PAGE> 216
PETROLEUM EXPLORATION PERMIT 38716
PERMIT ENDORSEMENT
Action: Durum Energy (NZ) Limited changed its name to PEP
38716 Limited.
Date: 24 July 1997
Certified true and correct
/s/ Clyde Bennett
Clyde Bennett
For Unit Manager Permitting
15/10/1997
CERTIFICATE OF CHANGE OF CONDITIONS
IN THE MATTER of the Crown
Minerals Act 1991
AND
IN THE MATTER of Petroleum
Exploration Permit 38716 in the name of
Marabella Enterprises Limited, Indo-
Pacific Energy (NZ) Limited, PEP 38716
Limited, Euro-Pacific Energy Pty Limited
and Durum Energy Corporation Limited.
PURSUANT to section 36(1) of the Crown Minerals Act 1991, and
acting under delegated authority from the Minister of Energy of
20 January 1998, the conditions specified in the second schedule
to the above mentioned permit are hereby replaced with those
attached to this certificate.
DATED at Wellington this 23rd day of April 1998
SIGNED by Barrie John Fowke, Manager Crown Minerals
/s/ Barrie John Fowke
SECOND SCHEDULE
PETROLEUM EXPLORATION PERMIT (PEP) 38716
1. The permit holder shall make all reasonable efforts to
explore and delineate the petroleum resource potential of the
permit area, in accordance with good exploration and mining
practice.
2. The permit holder shall comply with the work programme as
detailed below.
<PAGE> 217
3. The following programme of work shall be undertaken by the
permit holder:
(a) within 18 months of the commencement date of the permit:
i reprocess and interpret 250 kilometres of existing seismic
data utilising PMPS/DMO techniques as appropriate;
ii acquire, process and interpret 30 kilometres of new seismic
data;
iii acquire aeromagnetic data sufficient to support 3D
modelling; and
either
make a firm commitment by notice in writing to the Secretary
of Commerce to complete the work programme detailed in (b) below;
or
surrender the permit.
(b) Prior to 31 October 1998:
i drill one exploration well to a minimum depth of 2,500
metres, or to an approved objective and/or depth unless
geological or engineering constraints encountered whilst drilling
make this unreasonable; and
either
submit, for the approval of the Secretary of Commerce, an ongoing
work programme for the remainder of the permit term;
or
surrender the permit.
<PAGE> 218
EXHIBIT 10.54
PERMIT 38148 AND VARIOUS ENDORSEMENTS
PETROLEUM MINING PERMIT 38148
(NGATORO)
Background
1. The Licences listed below are the holders of Prospecting
Licence 38706.
Licence Interest %
Fletcher Challenge Energy Taranaki Limited 26.50835
Southern Petroleum (Ohanga) Limited 26.50835
Petroleum Resources Limited 18.18330
Australia and New Zealand Petroleum Limited 13.35000
Minora Energy (NZ) Limited 4.45000
Minister of Energy 11.00000
2. The Licensees have applied to the Minister of Energy to
surrender the Prospecting Licence 38706 as to part of the land
comprised in that Licence and described in the Second Schedule to
this Permit. The Licensees listed in the First Schedule to this
Permit have applied to the Minister of Energy to receive in
exchange a mining permit.
NOW THEREFORE
I, MAX BREADFORD, MINISTER OF ENERGY, acting pursuant to section
25 of the Crown Minerals Act 1991 HEREBY GRANT a Mining Permit,
on the conditions in this Permit and Schedules, to the Permit
Holders named in the First Schedule to this permit.
PERMIT CONDITIONS
1. Definitions
1.1 In this Permit:
"Permit" includes the Schedules to this Permit;
"Permit Holder" means the permit holders named in the First
Schedule to this permit and refers to each and all of the permit
holders jointly and severally.
<PAGE> 219
1.2 The headings to the Clauses of this Permit are for
convenience only and have no legal effect.
2. Duration
2.1 This permit is granted for a duration of fourteen (14)
years.
3. Mining
3.1 The Permit Holder shall have the right prospect, explore,
and mine for petroleum in the area described in the Second
Schedule to this Permit, and delineated on that plan in the
Schedule.
4. Compliance
4.1 The Permit Holder will comply with the conditions specified
in this Permit and with every other obligation arising under the
Crown Minerals Act 1991 and any Regulations made under that Act.
5. Work Programme
5.1 The Permit Holder will comply with the work programme in the
Third Schedule to this Permit.
5.2 The Permit Holder is responsible for ensuring that all
appropriate consents are obtained before commencing any of the
works authorised under this Permit.
5.3 The Permit Holder will at all times make all reasonable
efforts to conduct exploration, appraisal and mining operations
as appropriate in accordance with good oilfield practice and will
meet that degree of due diligence and prudence reasonably and
ordinarily exercised by experienced operators engaged in a
similar activity under similar circumstances.
6. Fees
6.1 The Permit Holder will pay all fees payable in relation to
this Permit.
7. Royalties
7.1 The Permit Holder will pay to the Secretary of Commerce a
royalty calculated in accordance with the conditions set out in
the Fourth Schedule to this Permit.
8. Date of Commencement of Production
8.1 Mining operations may commence on the day following the
grant of this Permit.
<PAGE> 220
9. Wells and Production Facilities
9.1 The Permit Holder will produce petroleum from wells in the
Ngatoro Field in the manner described in the approved Work
Programme.
9.2 The Permit Holder will not undertake any works in relation
to the injection of water or gas into any underground reservoir
(except as may be authorised by an amendment to this Permit).
9.3 The Permit Holder shall not flare gas from the Ngatoro field
in the normal course of operations during any twelve month period
commencing on 1 July in any year unless the consent of the
Secretary of Commerce to such flaring has been obtained prior to
the commencement of the period within which flaring is to take
place.
9.4 The Permit Holder may drill additional wells and conduct
initial well testing operations in accordance with the relevant
Crown Minerals (Petroleum) Regulations. Additional wells drilled
into petroleum reservoirs identified in the existing wells
Ngatoro-1, -2, -3, -4, -5, -6, -7, -8 may be placed into
commercial production under this Permit according to the work
programme in the Third Schedule. New petroleum reservoirs
discovered in additional wells shall not be placed in commercial
production except as authorised by an amendment to this permit.
10. Amendments to Permit
10.1 The Permit Holder may request an amendment to this Permit by
forwarding to the Secretary of Commerce, for consideration by the
Minister of Energy, the information referred to in the relevant
Crown Minerals (Petroleum) Regulations.
10.2 An amendment to the Permit will not generally be required
for minor modifications to equipment where such modifications do
not affect the approved production operations. In such cases,
details of any changes to facilities or equipment included in the
Work Programme approved in the Third Schedule are to be provided
to the Secretary within 3 months of installation thereof.
11. Abandonment
11.1 At the completion of production operations in the Permit,
the Permit Holder shall abandon any wells, remove surface
facilities and restore operating sites in accordance with good
oil field practice. Any gas and liquid export lines will be
swabbed free of gas/hydrocarbon liquid and abandoned in-situ.
Prior to the abandonment of any facilities in the Permit, the
Permit Holder will submit a report to the Secretary of Commerce
describing the proposed abandonment and the reasons for the
abandonment.
<PAGE> 221
Dated at Wellington this 23RD day of December 1996
/s/ Doug Kidd
Minister of Energy
PMP 38148
FIRST SCHEDULE
The Permit Holders:
Percentage Interest
Fletcher Challenge Taranaki Limited 29.78465%
32-38 Molesworth Street,
New Plymouth
Southern Petroleum (Ohanga) Limited 29.78465%
32-38 Molesworth Street,
New Plymouth
Petroleum Resources Limited 20.43070%
6th Floor, 234 Wakefield Street,
Wellington
Australia & New Zealand Petroleum Limited 15.00000%
6th Floor, 234 Wakefield Street,
Wellington
Minora Energy (NZ) Limited 5.00000%
3rd Floor, 31 Ventor Avenue
West Perth WA 6872
Australia
PMP 38148
THIRD SCHEDULE
WORK PROGRAM-SEE FILE 2011101301 FOR TEXT OF WORK PROGRAM &
DIAGRAMS
PERMIT ENDORSEMENT
Permit PMP 38148
Action The Secretary of Commerce has granted his consent of
the continued flaring of natural gas from the Ngatoro Mining
Permit, until 23 December 1997.
Date 25 August 1997
<PAGE> 222
Certified true and correct
/s/ Clyde Bennett
For Unit Manager Permitting
8/9/1997
PERMIT ENDORSEMENT
IN THE MATTER of the Crown Minerals Act 1991
AND
IN THE MATTER of Petroleum Mining Permit 38148 in the name of
Fletcher Challenge Energy Taranaki Limited, Southern Petroleum
(Ohanga) Limited, Petroleum Resources Limited, Australia and New
Zealand Petroleum Limited and Ngatoro Energy Limited
PURSUANT to section 3.4 and condition 9.3 of the Ngatoro Mining
Permit (PMP 38148) work programme and subject to the conditions
set out below, I hereby consent to the continued flaring of gas
from the Ngatoro Field until 31 March 1999.
It shall be a condition of this consent that after the
commencement of gas ales, the permit holder shall not flare gas
from the Ngatoro-1 wellsite except:
1. for periods where such sales gas cannot be taken by the
buyer; or
2. where flaring is required as a consequence of effecting an
emergency shutdown; or
3. where flaring is required as a consequence of equipment
failure and the petroleum flaring does not exceed 7 days
duration; or
4. where flaring is in accordance with the mining permit work
programme approved by the Minister.
DATED at Wellington this 21st day of January 1998.
SIGNED by Paul Stephen Carpinter, Secretary of Commerce
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at December 31, 1997 and the Consolidated Loss
and Deficit for the year ended December 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 10,255,407
<SECURITIES> 233,810
<RECEIVABLES> 134,474
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,785,233
<PP&E> 2,242,132
<DEPRECIATION> (197,049)
<TOTAL-ASSETS> 12,830,316
<CURRENT-LIABILITIES> 45,704
<BONDS> 0
0
0
<COMMON> 17,719,726
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,830,316
<SALES> 487,941
<TOTAL-REVENUES> 870,059
<CGS> (371,677)
<TOTAL-COSTS> (371,677)
<OTHER-EXPENSES> (580,009)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (81,627)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81,627)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 224
EXHIBIT 99.5
TERMS AND CONDITIONS ATTACHED TO SHARE PURCHASE WARRANTS
MAY 1, 1998
INDO-PACIFIC ENERGY LTD.
Terms and conditions attached to the share purchase warrants
issued from time to time by Indo-Pacific Energy Ltd. as adopted
by the board of directors of Indo-Pacific Energy Ltd. on May 12,
1998 and dated for reference May 1, 1998.
ARTICLE ONE - INTERPRETATION
Section 1.01 - Definitions
In these terms and conditions, unless there is something in the
subject matter or context inconsistent:
Class means the Warrants of a particular class as designated by
the board in the resolution creating the Warrants of that
particular class;
Company means Indo-Pacific Energy Ltd. or any successor
corporation or its successor, as provided in article 8;
Company's Auditors means an independent firm of accountants duly
appointed as auditors of the Company in which each member of the
firm is a member in good standing of the Canadian Institute of
Chartered Accountants.
Director means a director of the Company for the time being, and
reference, without more, to action by the directors of the
Company as a board, or whenever duly empowered, action by an
executive committee of the board;
Person means an individual, corporation, partnership, trustee or
any unincorporated organization and words importing persons have
a similar meaning;
Share or shares means the common shares of the Company as
constituted at May1, 1998 and any shares resulting from any
subdivision or consolidation of the shares;
Transfer Agent means Pacific Corporate Services Ltd., Suite 830,
625 Howe Street, Vancouver, British Columbia V6C 3B8;
Warrants means the share purchase warrants of the Company issued
and authorized, as set out in section 2.01 and for the time being
outstanding and any other warrants made subject to these terms
and conditions;
<PAGE> 225
Warrant Holders or Holders means the bearers of the share
purchase warrants for the time being;
Warrant Holders' Request means an instrument signed in one or
more counterparts by Warrant Holders entitled to purchase in the
aggregate not less than 25% of the aggregate number of shares
which could be purchased pursuant to all the Warrants of all
Classes outstanding for the time being, requesting the Company to
take some action or proceedings;
Section 1.02 - Reference to Article
The expressions article, section, subsection, paragraph and the
like followed by a number refer to the specified article or
section of these terms and conditions;
Section 1.03 - Gender Neutral
Words importing the singular number include the plural and vice
versa and words importing the masculine gender include the
feminine and neuter genders.
Section 1.04 - Interpretation Not Affected by Headings
The division of these terms and conditions into articles and
sections, and the insertion of headings are for convenience of
reference only and will not affect their construction of
interpretation.
Section 1.05 - Applicable Law
The terms and conditions attached to the Warrants will be
construed in accordance with the laws of British Columbia and
will be treated in all respects as British Columbia contracts and
any action or proceeding commenced or maintained in respect of
the warrants will be commenced and maintained in the court of
appropriate jurisdiction in the County of Vancouver, British
Columbia to which court the Holder irrevocably attorns.
ARTICLE TWO - ISSUE OF SHARE PURCHASE WARRANTS
Section 2.01 - Issue of Share Purchase Warrants
The Directors may at any time and from time to time authorize to
be created and issued by the Company classes of share purchase
warrants on such conditions as to term, price, transferability
and number of shares as the Directors consider appropriate and as
are prescribed by, and not inconsistent with, these terms and
conditions.
<PAGE> 226
Section 2.02 - Additional Warrants
The Company may by resolution of the Directors at any time and
from time to time do further equity or debt financing and may
issue additional shares, warrants or grant options or similar
rights to purchase shares.
Section 2.03 - Issue in Substitution for Lost Warrants
(a) If a Warrant is mutilated, lost, destroyed or stolen,
the Company may issue and deliver a new Warrant of like date and
tenor as the one mutilated, lost, destroyed or stolen, in
exchange for and in place of and upon cancellation of such
mutilated Warrant, or in lieu of, and in substitution for such
lost, destroyed or stolen Warrant and the substituted Warrant
will be entitled to the benefit of these terms and conditions and
rank equally in accordance with its terms with all other Warrants
issued or to be issued by the Company.
(b) The applicant for the issue of a new Warrant will bear
the cost of its issue and in case of loss, destruction or theft
furnish to the Company such evidence of ownership and of loss,
destruction, or theft of the Warrant so lost, destroyed or stolen
as will be satisfactory to the Company in its discretion and such
applicant may also be required to furnish indemnity in amount and
form satisfactory to the Company in its discretion, and will pay
the reasonable charges of the Company.
Section 2.04 - Warrant Holder Not a Shareholder
Ownership of a Warrant will not constitute the Holder a
shareholder of the Company, nor entitle him to any right or
interest except as expressly provided in the Warrant.
ARTICLE THREE - OWNERSHIP AND TRANSFER
Section 3.01 - Exchange of Warrants
(a) Warrants in any authorized denomination may, upon compliance
with the reasonable requirements of the Company, be exchanged
for Warrants in any other authorized denomination, of the same
class and date of expiry entitling the Holder to purchase any
equal aggregate number of shares at the same subscription price
and on the same terms as the Warrants of the class so exchanged.
(b) Warrants may be exchanged only at the office of the Transfer
Agent and any Warrants tendered for exchanged will be surrendered
to the Transfer Agent and canceled.
<PAGE> 227
Section 3.02 - Charges for Exchange
On exchange of Warrants, the Transfer Agent, except as otherwise
herein provided, may charge a sum not exceeding $1.00 for each
new Warrant issued, and payment of such charges and of any
transfer taxes or governmental or other charges required to be
paid will be made by the party requesting such exchange.
Section 3.03 - Ownership and Transfer of Warrants
(a) The Company and Transfer Agent may deem and treat the bearer
of any Warrant as the absolute owner of such Warrant, for all
purposes, and will not be affected by any notice or knowledge to
the contrary.
(b) The bearer of any Warrant will be entitled to the rights
evidenced by such Warrant free from all equities or rights of
set-off or counterclaim between the Company and the original or
any intermediate Holder and all persons may act accordingly and
the receipt of any such bearer for the shares will be a good
discharge to the Company and the Transfer Agent for the same and
neither the Company nor the Transfer Agent will be bound to
enquire into the title of any such bearer.
(c) Unless otherwise provided by the Directors, warrants will
not be negotiable and may not be assigned, set over, mortgaged,
hypothecated or pledged.
Section 3.04 - Notice to Warrant Holders
Any notice to be given to Warrant Holders will be deemed to be
validly given on the date on which it has been published if such
notice is published once in the City of Vancouver, such
publication to be made in a daily newspaper in the English
language of general circulation in such city and if the Company
has in respect of any Class of Warrants maintained a register of
the names and addresses of Holders, the Company give notice by
pre-paid first class mail.
ARTICLE FOUR - EXERCISE OF WARRANTS
Section 4.01 - Method of Exercise of Warrants
The right to purchase shares conferred by the Warrants may be
exercised, before its expiry time, by the Holder of such Warrant
surrendering it, with a duly completed and executed subscription
in the form attached thereto and cash or a certified cheque
payable to, or to the order of, the Company, at par in Vancouver,
British Columbia, for the purchase price applicable at the time
of surrender in respect of the shares subscribed for in lawful
money of Canada, to the Transfer Agent at its principal office in
the City of Vancouver.
<PAGE> 228
Section 4.02 - Effect of Exercise of Warrants
(a) Upon surrender and payment, the shares subscribed for will
be deemed to have been issued and such person or persons will be
deemed to have become the Holder or Holders of record of such
shares on the date of such surrender and payment, and such shares
will be issued at the subscription price in effect on the date of
such surrender and payment.
(b) Within ten business days after surrender and payment, the
Company will forthwith cause to be delivered to the person or
persons in whose name or names the shares subscribed for are to
be issued as specified in such subscription or mailed to him or
them at his or their respective addresses specified in such
subscription, a certificate or certificates for the appropriate
number of shares not exceeding those which the Warrant Holder is
entitled to purchase pursuant to the Warrant surrendered.
Section 4.03 - Subscription for Less than Entitlement
(a) The Holder of any Warrant may subscribe for and purchase a
number of shares less than the number which he is entitled to
purchase pursuant to the surrendered Warrant.
(b) If there is a purchase of a number of shares less than the
number which can be purchased pursuant to a Warrant, the Transfer
Agent will endorse the Warrant, note the number of Warrant
exercised and return the Warrant Certificate to the Holder or may
issue a new Warrant in respect of the balance of the shares which
the Holder was entitled to purchase pursuant to the surrendered
Warrant and which were not then purchased.
Section 4.04 - Warrants for Fractions of Shares
To the extent that the Holder of any Warrant is entitled to
receive on the exercise or partial exercise a fraction of a
common share, such right may be exercised in respect of such
fraction only in combination with another Warrant or other
Warrants which is the aggregate entitle the Holder to receive a
whole number of such shares.
Section 4.05 - Expiration of Warrants
After the expiration of the period within which a Warrant is
exercisable, all rights will wholly cease and terminate and such
Warrant will be void and of no effect.
Section 4.06 - Exercise Price
The price per share which must be paid to exercise a Warrant is
as prescribed by resolution of the Directors and set forth on the
face of the Warrant Certificate.
<PAGE> 229
Section 4.07 - Adjustment of Exercise Price
The exercise price and the number of shares deliverable upon the
exercise of the Warrants will be subject to adjustment in the
events and in the manner following:
(a) In the event of any subdivision or subdivisions of the
shares of the Company as such shares are Company as such shares
are constituted on May 1, 1998, at any time while the Warrants
are outstanding into a greater number of shares, the Company will
deliver at the time of purchase of shares, in addition to the
number of shares in respect of which the right to purchase is
then being exercised, such additional number of shares as result
from such subdivision or subdivisions without the bearer of the
Warrant making any additional payment or giving any other
consideration.
(b) In the event of any consolidation or consolidations of the
shares of the Company as such shares are constituted on May 1,
1998, at any time while the Warrants are outstanding, into a
lesser number of shares, the Company will deliver and the bearer
will accept, at the time of purchase, in lieu of the number of
shares in respect of which the right to purchase is then being
exercised, the lesser number of shares as result from such
consolidation or consolidations.
(c) In the event of any change of the shares of the Company as
such shares are constituted on May 1,1998, at any time while the
Warrants are outstanding, the Company will deliver at the time of
purchase the number of shares of the appropriate class resulting
from such change as the bearer would have been entitled to
receive in respect of the number of shares so purchased had the
right to purchase been exercised before such change.
(d) In the event of any capital reorganization, reclassification
or change of outstanding equity share, of the Company or in the
event of any consolidation, merger or amalgamation of the Company
with or into any other company or in the event of any sale of the
property of the Company as or substantially as an entirety, then
the Holder of each Warrant then outstanding will have the right
to purchase and receive, in lieu of the shares receivable upon
the exercise of the rights represented by the Warrants, the kind
and amount of shares and other securities and property receivable
upon such capital reorganization, reclassification, change,
consolidation, merger, amalgamation or sale which the Holder of a
number of shares equal to the number of shares receivable upon
the exercise of the rights represented by the Warrants would have
received as a result of such event, but the subdivision or
consolidation of shares at any time outstanding into greater or
lesser number of shares, whether with or without par value, will
not be deemed to be a capital reorganization or a
reclassification of the capital of the Company for the purposes
of this paragraph (d).
<PAGE> 230
(e) If the Company at any time while the Warrants are
outstanding pays any stock dividend or stock dividends upon the
shares of the Company in respect of which the right to purchase
is then given, the Company will deliver at the time of purchase
of shares in addition to the number of shares in respect of which
the right of purchase is then being exercised, the additional
number of shares of the appropriate class as would have been
payable on the shares so purchased if they had been outstanding
on the record date for the payment of such stock dividend.
(f) The adjustments provided for in this Section in the
subscription rights pursuant to any Warrants of any Class are
cumulative.
(g) The Company will not be required to issue fractional shares
in satisfaction of its obligations but, if any fractional
interest in a share would, except for the provisions of this
paragraph (g), be deliverable upon the exercise of a Warrant, the
Company will, at its option, in lieu of delivering a fractional
share, satisfy the right to receive such fractional interest by
payment to the Holder of such Warrant of an amount in cash equal,
computed in the case of a fraction of a cent to the next lower
cent, to the current market value of the right to subscribe for
such fractional interest, computed on the basis of the last sale
price of shares of the Company on the principal exchange or
quotation system through which the shares of the Company are
traded preceding the day on which such exercise takes place.
Section 4.08 - Determination of Adjustments
If any questions arise with respect to the exercise price, such
question will be conclusively determined by the Company's
Auditors, or, if they decline to act any other firm of chartered
accountants, in Vancouver, that the Company may designate and who
will have access to all appropriate records and such
determination will be binding upon the Company and the Holders of
the Warrants.
ARTICLE FIVE - COVENANTS BY THE COMPANY
Section 5.01 - Reservation of Shares
The Company will reserve from time to time and there will remain
unissued out of its authorized capital a sufficient number of
shares to satisfy the rights of purchase in the Warrants should
the Holders of all the Warrants from time to time outstanding
determine to exercise such rights in respect of all shares which
they are or may be entitled to purchase pursuant.
<PAGE> 231
ARTICLE SIX - WAIVER OF CERTAIN RIGHTS
Section 6.01 - Immunity of Shareholders, etc.
The Warrant Holder waives and releases any right, cause or action
or remedy now or hereafter existing in any jurisdiction against
any past, present or future incorporator, shareholder, Director
or officer, as such, of the Company for the issue of shares
pursuant to any Warrant or on any covenant, agreement,
representation or warranty by the Company.
ARTICLE SEVEN - MEETING OF WARRANT HOLDERS
Section 7.01 - Right to Convene Meeting
(a) The Company may at any time and from time to time, and will
on receipt of a Warrant Holder's request and upon being
indemnified to its reasonable satisfaction by the Warrant Holders
signing such Warrant Holder's request against the costs which may
be incurred in connection with the calling an holding of such
meeting, convene a meeting of the Warrant Holders.
(b) If the Company fails within 15 days after receipt of such
Warrant Holder's request and indemnity to give notice convening a
meeting, such Warrant Holders may convene such meeting.
(c) Every such meeting will be held in Vancouver, British
Columbia, unless required by law to be held elsewhere in Canada.
Section 7.02 - Notice
At least 21 days' notice of any meeting will be given to the
Warrant Holders and a copy will be sent by post to the Company
unless the meeting has been called by it, stating the time when
and the place where the meeting is to be held and stating briefly
the general nature of the business to be transacted but it will
not be necessary for any such notice to set out the terms of any
resolution to be proposed or any of the provisions of this
article.
Section 7.03 - Chairman
Some person nominated in writing by the Company will be chairman
of the meeting and if no person is so nominated, or if the person
so nominated is not present within fifteen minutes from the time
fixed for the holding of the meeting the Warrant Holders present
in person or by proxy will choose some person present to be
chairman.
<PAGE> 232
Section 7.04 - Quorum
(a) Subject to section 7.12 at any meeting of the Warrant
Holders a quorum will consist of Warrant Holders present in
person or by proxy and entitled to purchase at least 25% of the
aggregate number of shares which could be purchased pursuant to
all the then outstanding Warrants of all Classes of Warrants,
provided that at least two persons entitled to vote are
personally present.
(b) If a quorum of the Warrant Holders is not present within
half-an-hour from the time fixed for holding any meeting, the
meeting, if summoned by the Warrant Holders, or on a Warrant
Holder's request, will be dissolved; but in any other case the
meeting will be adjourned to the same day in the next week
(unless such day is a non-business day, in which case it will be
adjourned to the next following business day) at the same time
and place.
(c) At the adjoined meeting the Warrant Holders present in
person or by proxy will form a quorum and may transact the
business for which the meeting was originally convened
notwithstanding that they may not be entitled to purchase at
least 25% of the aggregate number of shares which can be
purchased pursuant to all of the then outstanding Warrants.
Section 7.05 - Power to Adjourn
The chairman of any meeting at which a quorum of the Warrant
Holders is present may with the consent of the meeting adjourn
any such meeting and no notice of such adjournment need be given
except such notice, if any, as the meeting may prescribe.
Section 7.06 - Show of Hands
Every question submitted to a meeting will be decided in the
first place by a majority of the votes given on a show of hands
and at any such meeting, unless a poll is demanded, a declaration
by the chairman that a resolution has been carried or carried
unanimously or by a particular majority will be conclusive
evidence of the
fact.
Section 7.07 - Poll
(a) On any question submitted to a meeting and after a vote by
show of hands, when demanded by the Chairman or by one or more of
the Warrant Holders, acting in person or by proxy and entitled to
purchase in the aggregate at least five per cent of the aggregate
number of shares which could be purchased pursuant to all the
Warrants for the time being outstanding, a poll will be taken in
such manner as the Chairman will direct.
<PAGE> 233
(b) Questions other than extraordinary resolutions will be
decided by a majority of the votes cast on the poll.
Section 7.08 - Voting
(a) On a show of hands every person who is present and entitled
to vote, whether as a Warrant Holder or as proxy for one or more
absent Warrant Holders or both, will have one vote.
(b) On a poll each Warrant Holder present in person or
represented by proxy duly appointed by instrument in writing will
be entitled to one vote in respect of each common share which he
is entitled to purchase pursuant to the Warrant or Warrants then
held by him.
(c) A proxy need not be a Warrant Holder
Section 7.09 - Regulations
The Company may from time to time make or vary such regulations
as it will think fit:
(a) for the issue of voting certificates, by any bank, trust
company or other depository certifying that specified Warrants
have been deposited with it by a named Holder and will remain on
deposit until after the meeting, which voting certificate will
entitle the Holders to be present and vote at any such meeting
and at any adjournment thereof, in the same manner and with the
same effect as though the holders so named in such voting
certificates were the actual bearers of the Warrants specified
therein;
(b) for the deposit of voting certificates or instruments
appointing proxies at such place and time as the Company or the
Warrant Holders convening the meeting, as the case may be, may in
the notice convening the meeting direct;
(c) for the deposit of voting certificates or instruments
appointing proxies at some approved place or places other than
the place at which the meeting is to be held and enabling
particulars of such voting certificates or instruments appointing
proxies to be mailed, cabled or telegraphed before the meeting to
the Company at the place where the same is to be held and for the
voting of proxies so deposited as though the instruments
themselves were produced at the meeting; and
(d) for the form of the instrument of proxy.
Any regulations so made will be binding and effective and the
votes given in accordance therewith will be valid and will be
counted. Save as such regulations may provide, the only persons
who will be recognized at any meeting as the Holder of any
<PAGE> 234
Warrants, or as entitled to vote or be present at the meeting in
respect thereof, will be persons who produce Warrants at the
meeting.
Section 7.10 - Company May Be Represented
The Company by its officers and Directors, and the legal advisors
of the Company may attend any meeting of the Warrant Holders, but
will have no vote as such.
Section 7.11 - Powers Exercisable by Extraordinary Resolution
In addition to all other powers conferred upon them by any other
provisions hereof or by law, the Warrant Holders at a meeting
will have the following powers, exercisable from time to time by
extraordinary resolution:
(a) power to enforce any of the covenants on the part of the
Company contained in the Warrants or to enforce any of the rights
of the Warrant Holders in any manner specified in such
extraordinary resolution or to refrain from enforcing any such
covenant or right;
(b) power to waive any default on the part of the Company in
complying with any provision hereof either conditionally or upon
any conditions specified in such extraordinary resolution; and
(c) power to consent to any amendment of the provisions of these
terms and conditions.
Section 7.12 - Meaning of "Extraordinary Resolution"
(a) The Expression "extraordinary resolution" when used herein
means, subject as hereinafter in this section and in section 7.15
provided, a resolution proposed at a meeting of Warrant Holders
duly convened for that purpose and held in accordance with the
provisions in this Article contained at which there are present,
in person or by proxy, Warrant Holders entitled to purchase at
least 25% of the aggregate number of shares which can be
purchased pursuant to all the then outstanding Warrants, and
passed by the affirmative votes of Warrant Holders entitled to
purchase not less than 75% of the aggregate number of shares
which can be purchased pursuant to all the then outstanding
Warrants represented at the meeting and voted upon such
resolution.
(b) If, at any such meeting called for the purpose of passing an
extraordinary resolution, Warrant Holders entitled to purchase
25% of the aggregate number of shares which can be purchased
pursuant to all the then outstanding Warrants are not present in
person or by proxy within half-an-hour after the time appointed
for the meeting, then the meeting, if convened by Warrant Holders
<PAGE> 235
or on a Warrant Holder's request, will be dissolved; but in any
other case it will stand adjourned and the provisions of section
7.04 will mutatis mutandis apply.
Section 7.13 - Powers Cumulative
Any one or more of the powers or any combination of the powers to
be exercisable by the Warrant Holders by extraordinary resolution
or otherwise may be exercised form time to time and the exercise
of any one or more of such powers or any combination of powers
from time to time will not be deemed to exhaust the right of the
Warrant Holders to exercise such power or powers or combination
of powers then or any power or powers or combination of powers
thereafter from time to time.
Section 7.14 - Minutes
Minutes of all resolutions and proceedings at every such meeting
will be made and duly entered in books to be from time to time
provided for that purpose by the Company, and any such minutes,
if signed by the Chairman of the meeting at which such
resolutions were passed or proceedings had, or by the Chairman of
the next succeeding meeting of the Warrant Holders, will be prima
facie evidence of the matters stated and until the contrary is
proved, every such meeting, in respect of the proceedings of
which minutes will have been made, will be deemed to have been
duly convened and held and all resolutions passed or proceedings
taken, to have been duly passed and taken.
Section 7.15 - Binding Effect of Resolutions
Every resolution and every extraordinary resolution passed in
accordance with the provisions of this Article at a meeting of
Warrant Holders will be binding upon all Warrant Holders.
Section 7.16 - Status of Warrant Holders
The Holders of Warrants of a particular class will not be
entitled as such to attend or vote at a meeting of the Holders of
Warrants of another class, and any action taken at a meeting of
the Holders of Warrants of a particular class will in no way
affect the rights of the Holders of the Warrants of another
class.
ARTICLE EIGHT - MODIFICATION OF TERMS, MERGER, SUCCESSORS
Section 8.01 - Modification of Terms and Conditions for Certain
Purposes
From time to time the Company may , and it will, when so directed
by these presents, modify these terms and conditions, for any one
or more or all of the following purposes:
<PAGE> 236
(a) adding such additional covenants and enforcement provisions
as, in the opinion of counsel for the Company, are necessary or
advisable;
(b) giving effect to any extraordinary resolution passed as
provided in article 7;
(c) making such provisions as may be necessary or desirable with
respect to any matters or questions or for the purpose of
obtaining a listing or quotation of the Warrants on any stock
exchange or trading quotation system;
(d) adding to or altering these provisions in respect of the
registration and transfer of Warrants making provision for the
exchange of Warrants of different denominations; and making any
modification in the form of the Warrants which does not affect
their substance;
(e) for any other purpose, including the correction or
rectification of any ambiguous, defective provisions, errors or
omissions herein; and
(f) to evidence any succession of any corporation and the
assumption by any successor of the covenants of the Company and
in the Warrants contained as provided in this Article.
Section 8.02 - Extension of Expiry Date
The Directors may modify the Expiry Date of Warrants without the
prior consent of shareholders in general meeting.
Section 8.03 - Company May Consolidate, etc. on Certain Terms
Nothing will prevent any consolidation, amalgamation or merger of
the Company with or into any other corporation or corporations,
or a conveyance or transfer of all or substantially all the
properties and estates of the Company as an entirety to any
corporation lawfully entitled to acquire and operate same; but
the corporation formed by such consolidation or into which such
has been made or which acquires by conveyance or transfer all or
substantially all the undertaking of the Company as an entirety
will be a corporation organized and existing under the law of
Canada or of the United States of America, or any province,
state, district or territory thereof, and will, simultaneously
with such consolidation, amalgamation, merger, conveyance or
transfer, assume the due and punctual performance and observance
of all the covenants and conditions to be performed or observed
by the Company.
<PAGE> 237
Section 8.04 - Successor Corporation Substituted
If the Company is consolidated, amalgamated or merged with or
into any other corporation or corporations, or conveys or
transfers all or substantially all of the undertaking of the
Company as an entirety to any other corporation, the successor
corporation formed by such consolidation or amalgamation, or into
which the Company has been merged or which will have received a
conveyance or transfer as aforesaid, will succeed to and be
substituted for the company in all respects and such changes in
phraseology and form, but not in substance, may be made in the
Warrants as may be appropriate in view of such consolidation,
amalgamation, merger or transfer.
Indo-Pacific Energy Ltd.
Per:/SIGNED/ Alex Guidi, Chairman
