U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4
TO
FORM 10-SB12G
General Form for Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
HADRO RESOURCES, INC.
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(Name of Small Business Issuer in its Charter)
Nevada 87-0571853
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
145 Tyee Road #1526
Point Roberts, Washington 98281
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(Address of Principal Executive Offices) (Zip Code)
(604) 943-7515
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
----------------------- --------------------------------------
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
------------------------------
(Title of Class)
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TABLE OF CONTENTS
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PART I Page
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Item 1. Description of Business 3
Item 2. Management's Discussion and Analysis 10
Item 3. Description of Property 14
Item 4. Security Ownership of Certain Beneficial 15
Owners and Management
Item 5. Directors, Executive Officers, Promoters 17
and Control Persons
Item 6. Executive Compensation 18
Item 7. Certain Relationships and Related Transactions 18
Item 8. Description of Securities 19
PART II
Item 1. Market Price of and Dividends on the Company's 19
Common Equity and Other Shareholder Matters
Item 2. Legal Proceedings 20
Item 3. Changes in and Disagreements with Accountants 20
Item 4. Recent Sales of Unregistered Securities 20
Item 5. Indemnification of Officers and Directors 21
Part F/S - FINANCIAL STATEMENTS AND EXHIBITS 23
PART III
Item 1. Index to Exhibits 31
SIGNATURES 31
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PART I
The Company is filing this Form 10-SB on a voluntary basis to provide
current public information to the investment community with a view
toward a future listing of its securities on the Over-The-Counter Bulletin
Board.
ITEM 1. DESCRIPTION OF BUSINESS
General
- -------
Hadro Resources, Inc. (the "Company") was incorporated in the State of
Nevada on December 3, 1997 under the name Hadrosaurus Resources, Inc. On
January 20, 1998, the Company filed an Amendment to its Articles of
incorporation changing the name of the Company to Hadro Resources, Inc. The
Company is engaged in the acquisition of oil and gas leases for future
exploration purposes. The Company intends to enter into joint venture agreements
with established and experienced oil and gas companies to explore and, if
warranted, develop its properties. The distribution of the oil and gas would be
handled by the joint venture oil and gas company.
The Company expects to generate revenues from operations and obtain
additional working capital through future sales of equity and/or financings.
The Company maintains principal business offices at (1) 145 Tyee Road
#1526, Point Roberts, Washington 98281 and (2) 5405 12th Avenue, Suite 204,
Delta, B.C., Canada V4M 2B2. Its statutory office is located at 3230 East
Flamingo Road, Suite 156, Las Vegas, Nevada 89121. The Company's fiscal year end
is December 31.
Business of the Company
- -----------------------
The Company is a natural resource exploration company engaged in the
acquisition of oil and natural gas properties for exploration.
On August 1, 1998, the Company entered into an Option to Purchase
Agreementto acquire an interest in an oil and gas property in Alberta,
Canada from Donn Capital Corp., a privately-held company wholly owned by Frank
W. Donis, President of the Company. On June 15, 1999, the Company terminated the
Option Agreement.
On November 1, 1998, the Company entered into an Agreement and Declaration
of Trust with W.G. Van Bebber, an unrelated third party, whereby Mr.Van Bebber
will research and acquire available oil and gas leases on behalf of the Company.
Pursuant to the terms of the Agreement, leases will be taken in the name of Mr.
Van Bebber, or his designee as Trustee for the exclusive use and benefit of the
Company, and all approved costs and expenses incurred in such leasing and
acquisition will be paid by the Company.
The Company uses Mr. Van Bebber to research and acquire its properties
because of his expertise in the oil and gas industry. He is a Certified
Professional Landman and Environmental Site Assessor, with over 40 years
experience. From 1951 through 1973, he was a scout, landman and land manager
for Mobil Oil Corporation; from 1973 to 1980, he was general manager of the
land department for Rocky Mountain Energy Company, the mining subsidiary of
Union Pacific Corporation; and since 1980, has been an independent petroleum
and mineral landman/consultant.
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In June, 1999, Mr. Van Bebber, on behalf of the Company, entered into an
Assignment Agreement with Ibis Petroleum, Inc., formerly known as Rio Grande
Resources, Inc.(Ibis) whereby Ibis sold, assigned, transferred and conveyed
all of its right, title and interest in and to a total of 35 oil and gas
leases located in the Hadrosaurus Area of Union County, New Mexico, to Mr.
Van Bebber, as Trustee for the Company. The leasehold interests are as
follows:
1. 28 State of New Mexico Leases, covering a total of 6174.23
acres, with an annual rental rate of $.25 per acre until 2002, at
which time the rate increases to $.50 per acre through expiration.
22 of the leases will expire on January 31, 2007 and the
remaining 6 will expire on March 31, 2007. The State of New
Mexico will receive a 12.5% royalty payment on any oil or gas
production on the properties; Ibis will receive a 2% overriding
royalty; and three other unrelated third parties will receive a
total of 2% overriding royalties on any production. The Company's
total royalty burden for these leases is 16.5%. The Company's
working interest in and to these leases is 100% and its net
revenue interest (after royalty payments) is 83.5%.
In addition, in June, 1999, Mr. Van Bebber acquired the following federal
And state leases on behalf of the Company, at public oral auctions:
1. 2 federal leases, covering a total of 2323.33 acres, with an
annual rental rate of $1.50 per acre. These leases will expire on
May 31, 2009. The federal government will receive a 12.5% royal
payment on any oil or gas production on the properties. The
Company's total royalty burden for these leases is 12.5%. The
Company's working interest in and to these leases is 100% and its
net revenue interest (after royalty payments) is 87.5%.
2. 5 State of New Mexico Leases, covering a total of 1252.04 acres,
with an annual rental rate of $.25 per acre until 2004, at which
time the rate increases to $.50 per acre through expiration. The
leases will expire on July 31, 2009. The State of New
Mexico will receive a 12.5% royalty payment on any oil or gas
production on the properties. The Company's total royalty burden
for these leases is 12.5%. The Company's working interest in and
to these leases is 100% and its net revenue interest (after royalty
payments) is 87.5%.
To date, the Company has reimbursed Mr. Van Bebber a total of $32,732.22
in lease payments and $3,344.27 in expenses. In addition, the Company agreed
to pay all future lease payments, charges, costs, fees and other expenses
necessary to the continuation of the Leases on a timely basis and for
the acquisition or any additional leases. The properties subject of the Leases
are exploratory properties only and none has been developed to date.
Location and Background of Area
- -----------------------------------
The Hadrosaurus Area is located along the New Mexico-Colorado state
line in the extreme northeastern corner of Union County, north of the town of
Clayton, which is situated near the northwestern corner of the Texas panhandle.
The properties subject of the Company's current oil and gas leases encompasses
two parallel, northwest-southwest trending structural highs identified mainly
on the basis of outcrop data and photogeologic interpretations. Commercial
production of hydrocarbons has not yet been realized in northeastern New Mexico
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even though, according to documents received from the New Mexico Bureau of
Mines in Socorro, New Mexico, potential favorable source beds for generation
of oil and gas in the area. However, lack of hydrocarbon production has not
deterred exploratory activity in the area. According to records in the Union
County court house in Clayton, New Mexico, and the Bureau of Land Management
Offices in Santa Fe, New Mexico, several companies have purchased oil and gas
leases in the past 2-3 years in this area for future exploration. Petroleum
Information, it its publication, Petroleum Frontiers, lists the Dalhart Basin
as a very promising petroleum frontier and predicts increased exploration and
drilling activities in the near future. The Company's properties lie on the
Western edge of the Dalhart Basin.
While careful review of the reports in the files of the New Mexico
Oil Conservation Division indicate the presence of oil and gas in various
formations in the region, any consideration of the economic value
of the prospects will be examined with a clear understanding of the high
exploratory risks involved. According to well log and card files of Gene D.
Wilson, a director of the Company and Certified Professional Geologist, drill
stem tests on three well in the area have shown minor amounts of gas. The
Company believes there are potentially viable prospects for inert gas
production which warrant exploration of the properties subject of its oil and
gas leases, provided the market for inert gas resources continues to be
commercially viable.
Proposed Exploration Program
- -----------------------------
The Company intends to seek a joint venture partner who is an experienced
oil and gas property operator to perform all exploration and, if warranted,
development of its properties. The Company projects the minimum exploratory
effort will require the drilling of one test well on top of each structural
anomaly, plus two additional flank wells. A structural anomaly is referred
to as an area that appears to be located on a structurally high or anti-
incline area, which is normally a favorable location to prospect for oil and
gas. A flank well is a well drilled on the flank of, or off the side of a
geological structural high. The latter will be intended to augment the
exploratory effort by testing the stratigraphic relationships, that is,
the relative position of one rock type to another, such as a petroleum source
rock (shale) to a reservoir rock (sandstone or limestone), and hydrocarbon
potential within a thicker and more fully developed off-structure sedimentary
section. This consideration becomes particularly important where pinchouts
or erosional processes have reduced the stratigraphic section along
the structural highs. A pinchout is usually referred to as a formation,
generally a reservoir rock, that thins out to zero thickness either as a result
of sedimentary thinning on the flank of a large structural high, or as a shallow
dipping formation that was eroded off then covered with an impervious formation.
Many large, old structural highs, have several large pinchouts on their flanks
that provide excellent opportunity for oil and or gas entrapment. A seismic
survey, conducted by an independent seismographic company will be
completed to help determine the subsurface configuration of a prospect by
recording the time it takes for a sound wave to travel from the surface down to
a formation and back to the surface. This seismic survey is intended to help
the Company and its joint venture operator(s) optimize the location of any
intended test wells.
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Oil and Gas Exploration Risks
- ---------------------------------
Oil and gas exploration involves a high degree of risk and there is no
assurance that expenditures to be made by the Company on prospective oil and gas
properties will result in any discoveries of any natural resource in any
commercial quantities. The Company intends to enter into a joint venture
agreement with an experienced oil and gas operator to explore and, if warranted,
drill exploratory wells on its properties. Exploratory wells have a much
greater dry hole risk than do wells which are drilled offsetting established
production. The marketability of any oil and gas which may be acquired or
discovered will be affected by numerous factors beyond the control of the
Company. These factors include market fluctuations, the proximity and capacity
of oil and gas pipelines and processing equipment, supply and demand for
petroleum and petroleum products, rig availability and government
regulation, including regulations relating to prices, taxes, royalties, land
tenure, allowable production and environmental protection. The extent of these
factors cannot be accurately predicted, but the combination of these factors
may result in the Company not receiving an adequate return on invested
capital.
Permits and Licenses
- -----------------------
Gene Wilson, a director of the Company and Certified Professional
Geologist, will assist the joint venture partner in obtaining all the necessary
permits and licenses for the production and transportation of any oil and gas
found on the Company's properties and for any remedial work that will be
required. The following permits/licenses will be required:
A. BONDING
1. Federal leases
Bonding is required for oil and gas lease operations on federal property
in order to indemnify the U.S. government against any losses associated with
failure to meet royalty obligations, plugging wells not property abandoned on
a lease, and/or surface restoration and cleanup of abandoned operations. A
bond must be obtained before any drilling activity commences and may be
obtained from the Bureau of Land Management (BLM) or other Surface Management
Agency by completing the appropriate forms and posting a minimum $10,000 bond
For one lease; $25,000 bond for a state-wide lease bond; or $150,000 for a
Nationwide lease bond. The bond may be a surety or personal bond, backed by
Cash, negotiable securities, certificates of deposit or letters of credit.
The Company intends to establish a certificate of deposit (CD) in a New Mexico
bank, thereby receiving all interest payments on the CD and retaining ownership
of the CD as an asset. The bond is released when all required work is
completed on the properties.
2. State and/or private leases
According to the rules and regulations of the Energy and Mineral Department
of the Oil Conservation Division of the State of New Mexico, on state or
private leases, a plugging bond must be obtained from the New Mexico Oil and
Conservation Division in Santa Fe, New Mexico. A state-wide blanket plugging
bond can be obtained for a surety bond in the amount of $50,000. Single well
bonds are dependent on the depth of the proposed well as follows:
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Depth Amount of Bond
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Less than 5,000 feet $7,500
5,000 to 10,000 feet 10,000
More than 10,000 feet 12,500
</TABLE>
B. DRILLING PERMITS
1. Federal leases
A proposed drill site must be staked and properly surveyed by a registered
Surveyor and then a Notice of Staking must be filed with the BLM to give the
BLM time to advertise the notice to the general public. Assuming there is no
public or other conflict, the BLM then schedules a field meeting at the proposed
site by members or representatives of the BLM, the operator, an archeologist,
the driller, the dirt contractor and any other interest party to inspect the
proposed site. Thereafter, the Company must complete and file an application
for permission to drill, according to the guidelines of the Oil and Surface
Operating Standards, prepared by the U.S. Department of Interior, Bureau of
Land Management and the U.S. Forest Service. The application must contain the
following:
A certified description of the surveyed location(s)
A map of all access roads and all bore holes drilled within 1 mile
of the location
A surface use program with diagrams of the proposed drill pad
showing rig placement, storage areas, topographic cross section
and mud pits
Proposed drilling program, including disposal program for any
chemicals or drilling mud and the disposal of solid wastes
The approval for an application for permission to drill is generally
completed within 30-45 days and remains valid for one year after approval.
2. State or private owned leases
Prior to commencement of operations, notice must be delivered to the Oil
Conservation Division of the intention to drill any well for oil or gas and
approval must be obtained on a Form C-101 application. A copy of the
approved Form C-101 must be kept at the well site during any drilling
operations. Approval is normally obtained within 24 hours and drilling can
commence immediately after approval.
Competition
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The oil and gas exploration and production industry is highly
competitive. The Company expects to encounter competition from other oil and
gas companies in all areas of its operations, including the acquisition of
leases and properties.
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Competitors include major integrated oil and natural gas companies, natural
Gas pipeline companies, numerous independent oil and natural gas companies,
individuals and drilling and income programs. Many of the Company's competitors
are large, well-established companies with substantially larger operating staffs
and greater capital resources than the Company has and which, in many instances,
have been engaged in the energy and/or natural resource production and develop-
ment business for a much longer time than the Company. These companies may be
able to offer more attractive rates for natural gas gathering commitments and to
pay more for productive oil and natural gas properties and exploratory prospects
than the Company's financial or human resources would permit. The Company's
ability to acquire additional properties, discover reserves and attract
experienced joint venture partners in the future will be dependent on its
ability to evaluate and select suitable properties and to consummate
transactions in this highly competitive environment. In addition, joint venture
partners may not be available to the Company on terms or at prices which the
Company can afford.
Laws and Regulations
- --------------------
The Company's proposed business operations will be affected by extensive
regulation by various federal, state and local laws and regulations relating to
the exploration and possible development, production, gathering and marketing of
oil and gas. Matters subject to regulation include discharge permits for
drilling operations, drilling and abandonment bonds or other financial
responsibility requirements, reports concerning operations, wells, unitization
and pooling of properties, and taxation. From time to time, regulatory
agencies have imposed price controls and limitations on production by
restricting the rate of flow of oil and gas wells below actual production
capacity in order to conserve supplies of oil and gas. The Company
anticipates the main federal, state and local laws, rules and regulations
which will apply to its planned exploration and operation activities will be
mainly environmental and regulatory relating to oil spills, contamination of
aquifers and streams, use of hazardous materials, trash accumulation and
disposal and surface damage. However, at this time, the Company is only
acquiring oil and gas leases for exploration and development, if warranted,
by a yet-to-be engaged or identified, experienced joint venture partner,
who will, as a contractual requirement of any joint venture to be entered
into by the Company, be responsible for securing compliance with all
federal, state and local laws, rules and regulations relating to the proposed
operations.
Compliance with Environmental Regulations
- -----------------------------------------
Operations of the Company are also subject to numerous environmental laws,
Including, but not limited to, those governing management of waste, protection
Of water, air quality, the discharge of materials into the environment, and
preservation of natural resources. Non-compliance with environmental laws and
the discharge of oil, gas, or other materials into the air, soil or water may
give rise to liabilities to the government and third parties, including civil
and criminal penalties, and may require the Company to incur costs to remedy
the discharge. Laws and regulations protecting the environment have become
more stringent in recent years, and may in certain circumstances impose
retroactive, strict, and joint and several liability rendering entities liable
for environmental damage without regard to negligence or fault. From time-to-
time the Company may have to agree to indemnify sellers of producing properties
from whom the Company has acquired reserves against certain liabilities for
environmental claims associated with such properties. There can be no assurance
that new laws or regulations, or modifications of or new interpretations of
existing laws and regulations, will not increase substantially the cost of
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compliance or otherwise adversely affect the Company's operations and financial
condition or that material indemnity claims will not arise against the Company
with respect to properties acquired by or from the Company. While the Company
does not anticipate incurring material costs in connection with environmental
compliance and remediation, it cannot guarantee that material costs will not be
incurred. The Company estimates that any costs of complying with
environmental laws, rules and regulations will mainly be associated with short
delays and minimal costs in time and labor. Some of the most significant
environmental regulations which will affect the Company's proposed operations
will be screening all large open tanks to keep migratory birds from harm,
avoiding archeological sites, avoiding damage to grasslands and avoiding oil
spills. The Company intends to enter into a joint venture with an operator
who has a proven track record of environmental compliance in an effort to
minimize its costs of compliance and remediation.
Conflicts of Interests
- ----------------------
Certain officers, directors and related parties have engaged in business
transactions with the Company which were not the result of arms'-length
negotiations between independent parties. Management believes that the terms
of these transaction were as favorable to the Company as those that could have
been obtained from unaffiliated parties under similar circumstances. All
future transactions between the Company and its affiliates will be on terms no
less favorable than could be obtained from unaffiliated third parties and will
be approved by a majority of the disinterested members of the Board of
Directors of the Company. See "Certain Relationships and Related
Transactions."
Title Risks
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In the oil and gas industry, it is common practice for operators to refrain
from obtaining title opinions to oil and gas properties until commencement of
drilling and, accordingly, ownership of the Company's oil and gas properties
is subject to doubt until the title is confirmed. The Company intends to
follow usual industry practice in obtaining a satisfactory title
opinion prior to drilling a property.
Financing Risks
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The Company has limited financial resources and there can be no assurance
that additional funding will be available for exploration and development of
its projects or to fulfill its obligations under any agreements, as and
when required. Although the Company has been successful in the past in
obtaining financing through the sale of equity securities, there can be no
assurance the Company will be able to obtain adequate financing in the
future, as and when needed, or that the terms of such financing, if any, will
be favorable. Failure to obtain such additional financing could result in delay
Or indefinite postponement of the exploration and development of prospective
properties, resulting in a possible loss of such properties. Such failure to
obtain financing could also materially affect the Company's ability to
continue as a going concern.
No Assurance of a Public Market for the Company's Common Stock
- --------------------------------------------------------------
There is currently no trading market in the Company's Common Stock. Upon
completion of this registration, the Company intends to apply for listing and
trading of its securities on the NASD over-the-counter Bulletin Board; however,
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there is no assurance that an active trading market will ever develop in the
Company's securities. Accordingly, there is a very high risk that purchasers of
Common Stock of the Company may be unable to sell any shares they may own.
Year 2000 Computer Problems
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Like other companies, the Company could be adversely affected if the
computer systems it and/or its suppliers or customers use do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the
"Year 2000" issue. Additionally, this issue could also impact non-
accounting systems.
The Company has implemented a plan to modify its business operations
to be compliant for the Year 2000 and is in the process of converting critical
data processing systems and process control systems associated with its
accounting and office equipment. These projects are expected to be
substantially complete before the end of 1999 and the cost is estimated to be
minimal. The Company does not expect this effort to have a significant effect
on its operations.
The failure to correct a material Year 2000 problem could result
in an interruption in normal business activity. The Company's plan is
expected to significantly reduce the risk associated with this issue. However,
due to the inherent uncertainty of this issue and dependence on third-party
compliance, no assurance can be given that potential failures will not
adversely affect the Company's operations, liquidity and financial position.
Since the Company is currently only acquiring leases and has not yet
commenced any exploration or development activities on any of its properties,
it has no material relationships at this time with third parties who may not
be Year 2000 compliant. When the Company enters into a joint venture and
begins full business operations, it intends to carefully screen all third-
party vendors and suppliers to assure they are Year 2000 compliant before
engaging their services.
Employees
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At present, the Company has no employees, other than its officers and
directors.
Legal Proceedings
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There are no material legal proceedings to which the Company is a party or
to which its property is subject, nor, to the best of the knowledge of
management, are any material legal proceedings contemplated.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
This Registration Statement contains forward-looking statements that
involve risks and uncertainties, including, without limitation, statements
regarding the Company's expectations, beliefs, intentions or strategies
regarding future business operations, which are based on information available
to the Company on the date hereof. The Company assumes no obligation to
update any such forward-looking statements. The Company's actual results
may differ materially as a result of certain factors, including those
set forth hereafter and elsewhere in this Registration Statement.
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Overview
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Since its formation in December, 1997, the Company has been engaged
only in research activities relating to the acquisition of possible
oil and gas properties. Currently, it has a total of 35 oil and gas leases
acquired by and held in the name of its agent, W.G. Van Bebber. The
properties subject of the Leases are located in Union County, New Mexico.
For a complete understanding of these activities, this Management's
Discussion and Analysis should be read in conjunction with Part I. Item 1.
Description of Business and Part F/S-Financial Statements to this Form 10-SB.
Plan of Operation
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During the next 12 months, the Company's proposed plan of operation is as
follows:
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Target Date(s) Proposed Activities
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September - November 1999 Consolidate lease block by (1) purchasing or
optioning leases from land owners or other
companies to fill holes in current lease block
Enter into agreement with an experienced joint
venture partner and commence exploration of
properties
December 2000 Continue research and exploration activities
and, if warranted, drill first well at an
approximate cost of $250,000 U.S.
January 2000 Put first gas well into production, if
warranted
February 2000 Drill second gas well to confirm production
March 2000 Put second well into production
April - August 2000 Drill one gas well per month and put into
production
</TABLE>
Assuming the above plan of operation is successful, the Company estimates
Cash flow at the end of the first 12 months of operation will be approximately
$450,000 per month from 6 producing gas wells.
Results of Operations
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Period Ended May 31, 1999 and for the year ended December 31, 1998:
As of the date of this filing, the Company has yet to generate any revenues
from business operations due to the preliminary nature of such operations and
substantial expenditure in ongoing research efforts relating to the
acquisition of properties. Consequently, the Company has been substantially
dependent on sales of its equity securities to fund its cash requirements.
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The Company's net loss for the period ended May 31, 1999 of $52,603, or
$.004 per share, based on 13,054,200 weighted average shares outstanding, and
$31,038, or $.003 per share, based on 12,300,000 weighted average shares
outstanding for the year ended December 31, 1998 and reflects the costs
expended for research activities relating to property acquisitions and costs
associated with the sale of equity securities to raise the capital required to
support the Company's operations until sufficient revenues are achieved.
Since inception, the Company has sold a total of 13,054,200 shares of
Its Common Stock in private placement transactions to unrelated third
parties, raising a total of $90,048. All stock sales were made offshore
to non-U.S. persons. The Company sold such securities in reliance upon
exemptions from registration provided by Section 4(2) and/or 3(b) of the
Securities Act of 1933, as amended, and/or Regulation D, Rule 504.
Liquidity and Capital Resources
- ----------------------------------
As of the date of this registration statement, the Company has yet to
generate any revenues from its operations due to the preliminary
nature of such operations, substantial ongoing research relating to possible
property acquisition targets and expenditures to build the appropriate
infrastructure to support expected future growth. Consequently, the Company
has been substantially dependent on sales of its equity securities to fund
its cash requirements.
Expenses for the period ended May 31, 1999 were $52,603 and for the year
ended December 31, 1998 were $31,038. Expenditures increased due to increased
research activities relating to the acquisition of potential properties and
expenses related to financing activities.
The Company issued 12,350,000 shares of its Common Stock for cash at
$.001 per share from February through July, 1998, 7,750,000 of which are held
by officers and directors of the Company. The total proceeds were $12,350.
In July 1998, the Company sold 560,000 shares of its Common Stock to
unrelated third parties at a price of $.01 per share, or a total of $5,600.
In July and August 1998, the Company sold a total of 144,200 shares of
its Common Stock to unrelated third parties for $.50 per share, or a total of
$57,000.
As of May 31, 1999, the Company's total assets consisted of cash in the
bank in the amount of $23,416.
The Company's total liabilities as of May 31, 1998 were $8,259,
Consisting of accounts payable consistent with normal office operations.
The Company has cancelled the option agreement entered into on August 1,
1998 with Donn Capital Corp. and has entered into two Oil and Gas Leases with
W.G. Van Bebber, an unrelated third party and agent for the Company.
The Company's auditors, Andersen, Andersen & Strong, L.C., have
deemed that continuation of the Company as a "going concern", as defined by
U.S. generally accepted accounting principles, is dependent upon the Company
obtaining additional working capital. The Company is taking steps to raise
additional capital, as its current cash reserves are only expected to last
for approximately three (3) months. The Company intends to conduct private
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placement sales of its equity securities if and when its cash reserves are
depleted. There can be no assurance that any shares of Common Stock of the
Company can or will be sold or that other sources of loans or funds will be
available to the Company if and when needed. The failure of the Company
to obtain adequate additional capital may require the Company to delay
or cut back some or all of its proposed business operations and, potentially,
to cease its operations. Any additional equity financings may involve
substantial dilution to the Company's then-existing shareholders.
Selected Financial Data
- -------------------------
The following historical financial data for the period from inception to
the year ended December 31, 1998 and at May 31, 1999 was derived from the
historical financial statements of the Company that have been prepared by
Andersen Andersen & Strong, L.C., independent Certified Public Accountants (the
Financial Statements").
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Balance Sheet Data:
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5/31/99 12/31/98
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Cash and cash equivalents $23,416 $59,139
--------- --------
Total assets $23,416 $59,139
Total Liabilities $ 8,259 $ 129
Shareholders' Equity $15,157 $57,010
Statements of Operations Data:
- ------------------------------
Sales $ 0 $ 0
Expenses $52,603 $31,038
Net Loss from operations $(52,603) $(31,038)
Net loss per common share $(.0004) $(.003)
Weighted average common shares
outstanding 13,054,200 12,300,000
</TABLE>
Limited Operating History; Accumulated Deficit; Need for Additional Capital
- -----------------------------------------------------------------------------
There is limited historical financial information about the Company upon
which to base an evaluation of the Company's performance or to make a decision
regarding any investment in shares of the Company's Common Stock. The Company
has an accumulated deficit of ($52,603) through May 31, 1999 and the
Company's cash and equivalents balance at May 31, 1999 was only $23,416.The
Company has not yet realized any revenues from business operations and has
engaged in no active business operations. There can be no assurance the
Company will be successful in its business operations or will achieve any
significant revenues from its proposed operations. The Company's business
13
<PAGE>
could be subject to any or all of the problems, expenses, delays and risks
inherent in the establishment of a new business enterprise, including limited
capital resources, possible delays in the exploration and/or development of
properties, possible cost overruns due to price and cost increases in raw
products and exploration and/or development processes, uncertain marketability
of any oil and gas recovered on its properties and the absence of an
operating history. Therefore, there can be no assurance the Company's business
or proposed ventures will be successful or that the Company will be able to
achieve or maintain profitable operations. Further, there can be no
assurance that the Company will not encounter unforeseen difficulties that
may deplete its capital resources more rapidly than anticipated.
To become and remain profitable and competitive, the Company will likely be
required to make significant investments in the exploration and development of
its properties. The Company is seeking additional equity financing to
provide for the capital required to commence and develop its proposed
business operations.
The timing and total amount of capital requirements cannot be predicted at
this time as the Company has just recently acquired its oil and gas leases
and has not yet commenced operations. The Company is currently seeking a
joint venture partner to perform exploration activities on the properties and,
if warranted, further development. At that time, the Company will be required
to contribute its proportionate share of capital to the joint venture for
exploration costs. There can be no assurance that any financing will be
available on acceptable terms, if at all, as and when the Company requires
cash for its proportionate share of proposed exploration activities. If such
financing is not available on satisfactory terms, the Company may be unable to
continue, explore, develop or expand its business or develop new properties
at the rate desired and its operating results may be adversely affected. Any
equity financing could result in substantial additional dilution to existing
shareholders.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company currently utilizes the offices of its President, Frank W.
Donis, at 145 Tyee Road, Point Roberts, Washington, on a rent-free basis
On August 1, 1998, the Company entered into an Option Agreement to acquire
an interest in an oil and gas property in Alberta, Canada from Donn Capital
Corp., a privately-held company wholly owned by Frank W. Donis, President of
the Company. On June 15, 1999, the Company terminated the Agreement and has
no further right, title and/or interest in or to the property subject of the
Agreement and has no further obligation to Donn Capital regarding the property.
On November 1, 1998, the Company entered into an Agreement and Declaration
of Trust with W.G.Van Bebber, an unrelated third party, whereby Mr. Van Bebber
will Research and acquire available oil and gas leases on behalf of the
Company. Pursuant to the terms of the Agreement, leases will be taken in the
name of W.G Van Bebber, as Trustee for the exclusive use and benefit of the
Company and all approved costs and expenses incurred in such leasing and
acquisition will be paid by the Company.
In June, 1999, Mr. Van Bebber, on behalf of the Company, entered into
an Assignment Agreement with Ibis Petroleum, Inc.("Ibis"), whereby Ibis sold,
assigned, transferred and conveyed all of its right, title and interest in and
14
<PAGE>
to a total of 35 oil and gas leases located in the Hadrosaurus Area of
Union County, New Mexico, to Mr. Van Bebber, as Trustee for the Company. The
leasehold interests are as follows:
1. 28 State of New Mexico Leases, covering a total of 6174.23
acres, with an annual rental rate of $.25 per acre until 2002, at
which time the rate increases to $.50 per acre through expiration.
22 of the leases will expire on January 31, 2007 and the
remaining 6 will expire on March 31, 2007. The State of New
Mexico will receive a 12.5% royalty payment on any oil or gas
production on the properties; Ibis will receive a 2% overriding
royalty; and three other unrelated third parties will receive a
total of 2% overriding royalties on any production. The Company's
total royalty burden for these leases is 16.5%. The Company's
working interest in and to these leases is 100% and its net
revenue interest (after royalty payments) is 83.5%.
2. 2 federal leases, covering a total of 2323.33 acres, with an
annual rental rate of $1.50 per acre. These leases will expire on
May 31, 2009. The federal government will receive a 12.5% royal
payment on any oil or gas production on the properties. The
Company's total royalty burden for these leases is 12.5%. The
Company's working interest in and to these leases is 100% and its
net revenue interest (after royalty payments) is 87.5%.
3. 5 State of New Mexico Leases, covering a total of 1252.04 acres,
with an annual rental rate of $.25 per acre until 2004, at which
time the rate increases to $.50 per acre through expiration. The
leases will expire on July 31, 2009. The State of New
Mexico will receive a 12.5% royalty payment on any oil or gas
production on the properties. The Company's total royalty burden
for these leases is 12.5%. The Company's working interest in and
to these leases is 100% and its net revenue interest (after royalty
payments) is 87.5%.
Any additional properties that may warrant acquisition must, in the
opinion of the Company, be prospective and valuable to the Company's
proposed operations. For example, if the seismographic survey of a prospective
property shows the subsurface configuration of the structural high is not
exactly the same as the surface configuration, then the Company would acquire
the additional properties if the price is reasonable. The Company will also
attempt to acquire additional oil and gas leases to fill in the areas between
its present lease holdings.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
- -----------------------
The following table sets forth certain information regarding the Company's
Common Stock, par value $.001 ("Common Stock") beneficially owned as of May 31,
1999 for (i) each stockholder known by the Company to be the beneficial
owner of five (5%) percent or more of the Company's outstanding Common Stock;
(ii) each of the Company's directors; (iii) each named executive officer (as
defined in Item 402(a)(2) of Regulation S-B); and (iv) all executive officers
and directors as a group. At January 31, 1999, there were 13,054,200 shares of
Common Stock outstanding.
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount and
Nature of
Title of Name of Beneficial Percent of
Class Beneficial Ownership(2) Ownership (2)
Owner(1) - -
- --------------------------------------------------------------------------------
Common Stock Frank W. Donis 7,005,000 (i) (ii) 53.7 %
413 Tsawwassen
Beach Road
Delta, B.C.,
Canada, V4M 2J2
Common Stock Marilyn J. Rafter 255,000 (1)(2) 2%
5268 IA Avenue
Delta, B.C.,
Canada, V4M 1 C 1
Common Stock Gene Wilson 500,000 (1) 3.8%
811 Four Hills Rd. S.E.
Albuquerque, N.M. 87123
Common Stock Bond Mercantile Ltd. 1,000,000 (3) 8%
Principal-Juan Mashburn
Akara Bldg. 24
De Castro St. Road Town
Tortola, British Virgin Islands
Common Stock Commodore Management Corp. 1,000,000 (3) 8%
Principal-Antoinette Stubbs
Saffrey Square, Suite 205
Nassau, Bahamas
Common Stock Douglas Inc. 1,000,000 (3) 8%
Principal-Leticia Montoya
No. 2 Commercial Centre Sq.
Alofi, Niue
Common Stock NNOD Investments Ltd. 1,000,000 (3) 8%
Principal-Tim O'Sullivan
Box 260 Butterfield Sq.
Providenciales
Turks and Caicos Islands
Common Stock Peregrine Corporation 1,000,000 (3) 8%
Principal-Francis Perez
No. 2 Commercial Centre Sq.
Alofi, Niue
- --------------------------------------------------------------------------
All Officers and
Directors as a Group - 7,750,000 59.5%
</TABLE>
16
<PAGE>
(1) Each person named above may be deemed to be a "parent" and "promoter" of
the Company, within the meaning of such terms under the Securities Act of 1933,
as amended, by virtue of his/her direct and indirect holdings in the Company.
These persons are the only "promoters" of the Company.
(2) Frank Donis and Marilyn Rafter's spouses each own 5,000 shares of the
Company's Common Stock included in these shares.
(3) Bond Mercantile Ltd., Commodore Management Corporation, Douglas Inc., NNOD
Investments Ltd. and Peregrine Corporation are all unrelated foreign
corporations which purchased shares of the Company's Common Stock, pursuant to
an exemption provided by Rule 504 of Regulation D. Each listed principal is
the sole officer, director and shareholder of the corporate shareholder. Each
such principal person has sole voting and investment power over the shares held
of record by the corporate owner by virtue of being the sole officer, director
and shareholder of the corporate shareholder.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Each director of the Company is elected by the stockholders to a term of
one (1) year and serves until his or her successor is elected and qualified.
Each officer of the Company is elected by the Board of Directors to a term of
one (1) year and serves until his or her successor is duly elected and
qualified, or until he or she is removed from office. The Board of Directors
has no nominating, auditing or compensation committees. The names,
addresses, ages and positions of the present officers and directors of the
Company are set forth below:
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Age Position(s)
- --------------------- --- ------------
Frank W. Donis 55 President and Director
413 Tsawwassen Beach Road
Delta, British Columbia
Canada, V4M 2J2
Marilyn Rafter 47 Secretary, Treasurer
5268 IA Avenue and Director
Delta, British Columbia
Canada, V4M ICI
Gene D. Wilson 70 Director
8 10 Four Hills Road
Albuquerque, NW
USA, 8712-3
</TABLE>
Background Information of Officers and Directors
- ------------------------------------------------
Frank W. Donis has been the President and a Director of the Company since
inception. Since September 1980, he has also been the President of Epic Oil and
Gas Ltd., a publicly-traded Canadian corporation engaged in oil and gas
exploration. Since June 1968, he has also been a self-employed Dentist. He
graduated from the University of Alberta in 1968 with a Degree in Dentistry.
Mr. Donis currently devotes approximately 5 hours per week to the business of
the Company.
17
<PAGE>
Marilyn Rafter has been the Secretary, Treasurer and a Director of the
Company since inception. Since April 1995, she has also been the Manager of
A.D. Garnet Investments, Ltd., a privately-held Canadian corporation, engaged in
the business of real estate development and management. From October 1991 to
August 1993, she was a Consultant for ExperDent Consulting, Inc., a Canadian
corporation engaged in the business dental consulting. From 1993 to 1995, she
was unemployed. Ms. Rafter currently devotes approximately 5 hours per week to
the business of the Company.
Gene Wilson has been a Director of the Company since inception. Since
1960, he has also been a self-employed Consulting Geologist. He graduated from
Marshall University in Huntington, W. Virginia, in 1950 with a Degree in
Geology and from the University of Illinois in 1954 with a Masters Degree in
Geology. Mr. Wilson currently devotes approximately 5 hours per week to the
business of the Company.
Each of the persons named above has held his/her office/position since
inception of the Company and is expected to hold said office/position until the
next annual meeting of stockholders.
ITEM 6. EXECUTIVE COMPENSATION
None of the Company's officers and directors are currently compensated for
their services as the Company is only in the development stage and has not yet
fully commenced business operations. However, the officers and directors are
reimbursed for any expenses they incur on behalf of the Company.
Employment Agreements
None of the Company's officers or directors are currently party to
employment agreements with the Company. The Company presently has no pension,
health, annuity, insurance, stock options, profit sharing or similar benefit
plans; however, the Company may adopt such plans in the future. There are
presently no personal benefits available for directors, officers or employees of
the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 5, 1998 , Frank Donis and Marilyn Rafter, officers and director
of the Company, purchased a total of 7,250,000 shares of Common Stock, at a
price of $.001 per share, for a total consideration of $7,250.
On February 23, 1998, the Company sold 500,000 shares of Common Stock to
Gene Wilson, a director of the Company, at a price of $.01 per share for a total
consideration of $5,000.
On August 1, 1998, the Company entered into an Option Agreement to acquire
an interest in an oil and gas property in Alberta, Canada from Donn Capital
Corp., a privately-held company wholly owned by Frank W. Donis, President of the
Company. On June 15, 1999, the Agreement was terminated and the Company has no
further right, title or obligations due to Donn Capital.
Certain officers, directors and related parties have engaged in business
transactions with the Company which were not the result of arms'-length
negotiations between independent parties. Management believes that the terms
of these transaction were as favorable to the Company as those that could have
been obtained from unaffiliated parties under similar circumstances. All
18
<PAGE>
future transactions between the Company and its affiliates will be on terms no
less favorable than could be obtained from unaffiliated third parties and will
be approved by a majority of the disinterested members of the Board of Directors
of the Company.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
- -------------
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.001 per share. The holders of Common Stock (i)
have equal ratable rights to dividends from funds legally available therefor,
when, as and if declared by the Board of Directors of the Company; (ii) are
entitled to share ratably in all of the assets of the Company available for
distribution to holders of Common Stock upon liquidation, dissolution or winding
up of the affairs of the Company; (iii) do not have preemptive, subscription or
conversion rights and there are no redemption or sinking fund provisions or
rights applicable thereto; and (iv) are entitled to one non-cumulative vote per
share on all matters on which stockholders may vote. All shares of Common Stock
now outstanding are fully paid for and non-assessable. Reference is made to
the Company's Articles of Incorporation, By-Laws and the applicable statutes
of the State of Nevada for a more complete description of the rights and
liabilities of holders of the Company's securities.
Non-cumulative Voting
- ----------------------
The holders of shares of Common Stock of the Company do not have cumulative
voting rights, which means that the holders of more than 50% of such outstanding
shares, voting for the election of directors, can elect all of the directors to
be elected, if they so choose, and, in such event, the holders of the remaining
shares will not be able to elect any of the Company's directors. The officers
and directors of the Company beneficially own, directly or indirectly,
approximately 58% of the total issued and outstanding shares.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
The Company's Common Stock is not currently listed or trading.
Upon completion of this registration statement, the Company intends to apply
for listing and trading of its Common Stock on the NASD over-the-counter
Bulletin Board. There is, however, no assurance the Company's securities will be
listed or, if listed, that an active trading market will ever develop.(See "Risk
Factors - No Assurance of a Public Market".)
The Company has never paid cash dividends on its Common Stock. The
Company presently intends to retain future earnings, if any, to finance the
development and expansion of its business and does not anticipate that any cash
dividends will be paid in the foreseeable future. The future dividend policy
will depend on the Company's earnings, capital requirements, expansion plans,
financial condition and other relevant factors.
The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined) of less than $5.00 per share, subject to certain
exceptions. The Company's Common Stock may be deemed to be a "penny stock" and
19
<PAGE>
thus, if and when it becomes listed and trading, of which there can be no
assurance, will become subject to rules that impose additional sales practice
requirements on broker/dealers who sell such securities to persons other than
established customers and accredited investors, unless the Common Stock is
listed on The NASDAQ Small Cap Market. Consequently, the "penny stock" rules may
restrict the ability of broker/dealers to sell the Company's securities, and may
adversely affect the ability of holders of the Company's Common Stock to resell
their shares in the secondary market, assuming such market develops, of which
there can be no assurance.
The Company currently has a total of 13,054,000 shares of Common Stock
issued and outstanding, which are held by 38 shareholders.
Reports
- -------
The Company will furnish annual financial reports to stockholders,
certified by its independent accountants, and will furnish unaudited quarterly
financial reports.
Stock Transfer Agent
- ----------------------
The Company's stock transfer agent for its securities is Nevada Agency &
Trust Company, Suite 880, 50 West Liberty Street, Reno, Nevada 89501.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not involved in any legal proceedings that it believes will
result, individually or in the aggregate, in a material adverse effect upon its
financial condition or results of operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Since the Company's inception, there have been no disagreements with
Andersen Andersen & Strong, L.C., Independent Certified Public Accountants,
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On January 5, 1998, pursuant to an exemption provided by Section 4(2) of
the Securities Act of 1933, as amended, Frank Donis and Marilyn Rafter, officers
and directors of the Company, purchased a total of 7,250,000 shares of
restricted Common Stock, at a price of $.001 per share.
On February 23, 1998, pursuant to an exemption provided by Section 4(2) of
the Securities Act of 1933, as amended, the Company sold 500,000 shares of
restricted Common Stock to Gene Wilson, a director of the Company, at a price of
$.01 per share.
On January 5, 1998, pursuant to an exemption provided by Rule 504 of
Regulation D, the Company sold a total of 100,000 shares of Common Stock to
Michelle Koot, an unrelated third party, at a price of $.001 per share.
On December 9, 1997, pursuant to an exemption provided by Rule 504 of
Regulation D, the Company sold a total of 1,000,000 shares of Common Stock of
NNOD Investments Ltd., an unrelated third party, at a price of $.001 per share.
20
<PAGE>
On February 3, 1998, pursuant to an exemption provided by Rule 504 of
Regulation D, the Company sold a total of 4,000,000 shares of Common Stock to
four unrelated corporate entities, at a price of $.001 per share.
On February 15, 1998, pursuant to an exemption provided by Rule 504 of
Regulation D, the Company sold a total of 30,000 shares of Common Stock to
unrelated third parties, at a price of $.01 per share, at a price of $.01 per
share.
On February 15, 1998, pursuant to an exemption provided by Section 4(2) of
the Securities Act of 1933, as amended, four (4) family members of the directors
and officers of the Company purchased a total of 20,000 shares of Common Stock,
at a price of $.01 per share
Between February 27, 1998 and September 11, 1998, pursuant to an exemption
provided by Section 4(2) of the Securities Act of 1933, as amended, the Company
sold, in transactions not involving a public offering a total of 144,200
shares of Common Stock to a total of six unrelated third parties, at a price of
$.50 per share, for investment purposes only. There were a total of 6 investors
- - 4 were accredited and 2 were unaccredited, both of whom were sophisticated
investors The unaccredited investors were provided information relating to
the Hadrosaurus properties and were given full access to the Company's books and
records, including financial data and stock ownership, prior to investing.
There was no general solicitation or advertising involved in the transactions.
None of these corporate investors were related before their respective
acquisitions of securities in the Company.
ITEM 5: INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 78.751 of the Nevada General Corporation Law, provides as follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a Director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a Director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
21
<PAGE>
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a Director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, he must be indemnified by the corporation against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court or
advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper under the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of Directors by majority vote of a quorum consisting of
Directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of Directors who were not parties
to the act, suit or proceeding so orders, by independent legal counsel in a
written opinion; or
(d) If a quorum consisting of Directors who were not parties to the act, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of Officers and Directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the Director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than Directors or
officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered by
a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under the articles of incorporation
or any bylaw, agreement, vote of stockholders or disinterested Directors or
otherwise, for either an action in his official capacity or an action in another
capacity while holding his office, except that indemnification, unless ordered
by a court pursuant to subsection 2 or for the advancement of expenses made
22
<PAGE>
pursuant to subsection 5, may not be made to or on behalf of any Director or
officer if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was material
to the cause of action.
(b) Continues for a person who has ceased to be a Director, officer, employee or
agent and inures to the benefit of the heirs, executors and administrators of
such a person.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as express in the act and is therefore
unenforceable.
PART F/S
FINANCIAL STATEMENTS AND EXHIBITS
Unaudited financial statements of Registrant for the period ended June 30,
1999, prepared by Management and audited financial statements of
Registrant for the period from December 3, 1997 (date of incorporation)
through the year ended December 31, 1998 and May 31, 1999, prepared by
Andersen Andersen & Strong, L.C., Certified Public Accountants,
941 East 3300 South, Suite 202, Salt Lake City, Utah 84106
immediately follow:
23
<PAGE>
<TABLE>
<CAPTION>
HADRO RESOURCES, INC.
(Exploration Stage Company)
BALANCE SHEETS
September 30, 1999 and December 31, 1998
- --------------------------------------------------------------------------
September 30 Dec 31
1999 1998
------- ------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 18,635 $ 59,139
---------- ---------
Total Current Asset 18,635 59,139
OTHER ASSETS
Mineral leases - Note 3 - -
-------- --------
$ 18,635 $ 59,139
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - related parties. . . . .$ 509 $ 115
Accounts payable 8,152 15
-------- --------
Total Current Liabilities 8,661 130
STOCKHOLDERS' EQUITY
Common stock
100,000,000 shares authorized, at $0.001
par value; 13,054,200 shares issued and
outstanding 13,054 13,054
Capital in excess of par value 111,995 76,994
Deficit accumulated during the
development stage (115,075) (31,039)
--------- ---------
Total Stockholders' Equity 9,974 57,009
$ 18,635 $ 57,139
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
HADRO RESOURCES, INC.
(Exploration Stage Company)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 1999, and 1998
and the Period from December 3, 1997 (Date of Inception) to September 30, 1999
- -------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months Dec 3, 1997
Sept 30, Sept 30, Sept 30, Sept 30, to
1999 1998 1999 1998 Sept 30, 1999
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ -
EXPENSES 4,120 1,656 84,036 20,530 115,075
NET LOSS $(4,120) $(1,656) $(84,036) $(20,530) $(115,075)
GAIN (LOSS)
PER COMMON
SHARE -
Basic $ - $ - $ - $ - $ -
AVERAGE
OUTSTANDING
SHARES 13,054,200 12,910,000 13,054,200 12,910,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
HADRO RESOURCES INC.
(Exploration Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from December 3, 1997 (Date of Inception)
to September 30, 1999
- -------------------------------------------------------------------------------
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit
------ ------ ----------- -----------
<S> <C> <C> <C> <C>
Balance December 3, 1997
date of inception) - $ - $ - $ -
Issuance of common stock
for cash at $.001 -
February through July 1998 12,350,000 12,350 - -
Issuance of common stock for
Cash at $.01 - July 1998 560,000 560 5,040 -
Issuance of common stock for
Cash at $.50 - July 1998 114,000 114 56,886 -
Issuance of common stock for
Cash at $.50 - August 1998 30,200 30 15,068 -
Net operating loss for the
Year Ended December 31, 1998 - - - (31,038)
---------- ------- ------- ---------
Balance December 31, 1998 13,054,200 13,054 76,994 (31,038)
Contribution to capital -
expenses paid by officers - - 35,001 -
Net operating loss for the
six months ended September 30, 1999 - - - (84,036)
---------- ------- ------- --------
Balance September 30, 1999 13,054,200 $ 13,054 $111,995 (115,075)
========== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
HADRO RESOURCES, INC.
(Exploration Stage Company)
STATEMENT OF CASH FLOWS
For the Six Months Ended September 30, 1999 and 1998 and the
Period from December 3, 1997 (Date of Inception) to September 30, 1999
- -------------------------------------------------------------------------------
Sept 30 Sept 30 Dec 3, 1998
1999 1998 to Sept 30, 1999
---------- -------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(84,036) $(20,530) $ (111,075)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Contributions to capital -
expenses 35,001 - 35,001
Changes in accounts payable 8,531 10,002 8,661
------- -------- ---------
Net (decrease) in Cash From
Operations (40,504) (10,528) (71,413)
-------- -------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of mineral lease - - -
-------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issuance of
common stock - 68,948 90,048
Net Increase (Decrease) --------- ------- --------
in Cash (40,504) 58,420 18,635
Cash at Beginning of Period 59,139 - -
------- ------- --------
Cash at End of Period $ 18,635 $58,420 $ 18,635
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements
27
<PAGE>
HADRO RESOURCES, INC.
(Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on December
3, 1997 with authorized common stock of 100,000,000 shares at $0.001 par value
with the name "Hadrosaurus Resources, Inc". On January 12, 1998 the name was
changed to Hadro Resources Inc.
The Company was organized for the purpose of acquiring and developing oil and
gas leases.
The Company is in the exploration stage.
Since its inception the Company has completed a Regulation D offering of
4,174,200 shares of its capital stock for cash.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
On December 31, 1998, the Company had a net operating loss carry forward of
$31,039. The tax benefit from the loss carry forward has been fully offset by
a valuation reserve because the use of the future tax benefit is doubtful, since
the Company has no operations and is unable to project any reliable future
net profits.
Earnings (Loss) Per Share
Earnings (loss) per share amounts are computed based on the weighted average
number of shares actually outstanding in accordance with FASB statement No.
128.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity,
at the time of purchase, of less than three months, to be cash equivalents.
Capitalization of Oil Leases Costs
The Company uses the successful efforts cost method for recording its oil
lease interests, which provides for capitalizing the purchase price of the
project and the additional costs directly related to proving the properties and
amortizing these amounts over the life of the reserve when operations begin or a
shorter period if the property is shown to have an impairment in value or
28
<PAGE>
expensing the remaining balance if proven of no value. Expenditures for oil
well equipment are capitalized and depreciated over their useful lives.
Environmental Requirements
At the report date environmental requirements related to the oil and gas
leases acquired (note 3) are unknown and therefore an estimate of any future
cost cannot be made.
Financial Instruments
The carrying amounts of financial instruments, including cash and accounts
payable, are considered by management to be their estimated fair values. These
values are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of the assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing these financial statements.
3. ACQUISITION OF MINERAL LEASES
During September 1999 the Company acquired a 100% working interest in 35 oil
And Gas leases covering 6,174 acres located in Union County, New Mexico with
An Annual rental of $.25 per acre until 2002 and then $.50 per acre until 2007.
The Leases carry a royalty of 16.5%
4. RELATED PARTY TRANSACTIONS
Related parties have acquired 58% of the common stock issued.
5. GOING CONCERN
The Company does not have the necessary assets to be successful in its efforts
to develop its oil and gas properties and will need to acquire additional
working capital.
Continuation of the Company as a going concern is dependent upon obtaining
additional working capital and the management of the Company has developed a
strategy, which it believes will accomplish this objective through additional
equity funding, and long term financing, which will enable the Company to
operate in the future.
29
<PAGE>
ITEM 2. PLAN OF OPERATIONS
During the next 12 months, the Company will acquire additional oil and gas
leases in Union County, New Mexico and Animas County, Colorado and any
additional properties that may warrant acquisition. The Company will have to
raise additional funds either by way of advances from the officers and
directors, institutional borrowing or through the issuance of the Company's
common stock.
The Company is currently seeking a joint venture partner/operator to perform
exploration activities on the properties. Proposed activities include
consolidating lease blocks through purchase or optioning leases, continue
research and exploration to include drilling, if warranted. Successful
completion will result in gas well production by August 2000.
Liquidity and Capital Resources
The Company will need additional working capital to finance its activities on
the New Mexico leases.
Results of Operations
There are no operations at this time.
ANDERSEN ANDERSEN & STRONG, L.C.
Certified Public Accountants and Business Consultants
Member SEC Practice Section of the AICPA
941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
Telephone 801-486-0096
Fax 801-486-0098
E-mail [email protected]
Board of Directors
Hadro Resources, Inc.
Point Roberts, Washington
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheets of Hadro Resources, Inc. (a
development stage company) at May 31, 1999, and December 31, 1998 the
statement of operations, stockholders, equity, and cash flows for the five
months ended May 31, 1999 and the year ended December, 31, 1998 and
the period from December 3, 1997 (date of inception) to January 31, 1999.
These financial statements are the responsibility of the Company's management
Our responsibility is to express an opinion on these financial statements based
On our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hadro Resources, Inc. at
May 31, 1999, and December 31, 1998 and the results of operations, and cash
flows for the five months ended May 31, 1999 and the year ended December 31,
1998 and the period from December 3, 1997 (date of inception) to January
31, 1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is in the development
stage and will need additional working capital for its planned activity, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 4. These
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Salt Lake City, Utah
Andersen Andersen & Strong
June 18, 1999
30
<PAGE>
<TABLE>
<CAPTION>
HADRO RESOURCES, INC.
(A Development Stage Company)
BALANCE SHEET
May 31, 1999 and December 31, 1998
<S> <C> <C>
5/31/99 12/31/98
ASSETS --------- ---------
CURRENT ASSETS
cash $ 23,416 $ 59,139
----------- ----------
Total Current Assets $ 23,416 $ 59,139
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable -
related parties $ 366 $ 114
Accounts payable 7,893 15
----------- ---------
Total Current Liabilities $ 8,259 $ 129
STOCKHOLDERS' EQUITY
Common Stock
100,000,000 shares authorized, at
.001 par value;
13,054,200 shares issued and
outstanding $ 13,054 $ 13,054
Capital in excess of par value 85,744 76,994
Deficit accumulated during the
development stage (83,641) (31,038)
----------- ----------
Total Stockholders' Equity $ 15,157 $ 57,139
<FN>
The accompanying notes are an integral part of these financial
statements.
</FN>
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Five Months Ended May 31, 1999 and the Year Ended December 31,1998
and the Period from December 3, 1997 to December 31, 1997 and the
Period from December 3, 1997 (Date of Inception) to May 31, 1999
<S> <C> <C> <C> <C>
May 31 Dec 31 Dec 31 Dec 3, 1997
1999 1998 1997 to May 31
1999
-------- --------- ------- -----------------
SALES $ - $ - $ - $ -
EXPENSES $ 52,603 $ 31,038 $ - $ 83,641
-------- -------- -------- --------
NET LOSS $(52,603) $(31,038) $ - $(83,641)
======== ========= ========= =========
NET LOSS PER COMMON SHARE
Basic $(.004) $(.003)
AVERAGE OUTSTANDING SHARES
Basic 13,054,200 12,300,000
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from December 3, 1997 (Date of Inception) to May 31, 1999
<S> <C> <C> <C> <C>
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit
----------------- ---------- -----------
Balance -
December 3, 1997
(date of inception) - $ - $ - $ -
Issuance of common
stock for cash
at $.001 February
through July 1998 12,350,000 $12,350 $ - -
Issuance of common
stock for cash at $.01
July 1998 560,000 $ 560 $ 5,040 -
Issuance of common
stock for cash at $.50
July 1998 114,000 $ 114 $56,886 -
Issuance of common
stock for cash at $.50
August 1998 30,200 $ 30 $15,068 -
Net operating loss for
The year ended
December 31, 1998 - $ - $ - $(31,038)
---------- ---------- ----------- ----------
Balance December
31, 1998 13,054,200 $13,054 $76,994 $(31,038)
Capital contributions-
Expenses - - 8,750 -
Net operating loss for
the five months
ended May 31, 1999 - - - $(52,603)
--------- ---------- ---------- ----------
Balance May 31, 1999 13,054,200 $13,054 $85,7444 $(83,641)
========== ======= ======== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
For the Five Months Ended May 31, 1999 and
the Year Ended December 31, 1998
and the Period from December 3, 1997 to December 31, 1997 and the
Period from December 3, 1997 (Date of Inception) to May 31, 1999
<S> <C> <C> <C> <C>
May 31 Dec 31 Dec 31 Dec 3 1997
1999 1998 1997 to May 31,
1999
------ ------ ------ ------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(52,603) $(31,038) $- $(83,641)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Capital contributions-
Expenses 8,750 - - 8,750
Changes in accounts payable 8,130 129- 8,259
-------- -------- ------ --------
Net (decrease) in Cash
from Operations $(35,723) $(30,909) - $(66,632)
-------- -------- ------ --------
CASH FLOWS FROM INVESTING
ACTIVITIES
- - - -
-------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issuance of
common stock $ - $90,048 - $90,048
-------- -------- ------ --------
Net Increase(Decrease) in Cash $(35,723) $59,139 - $23,416
Cash at Beginning of Period $ 59,139 $- - $-
-------- -------- ----- --------
Cash at End of Period $ 23,416 $59,139 - $23,416
======== ======== ==== =======
</TABLE>
34
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on December
3, 1997 with authorized common stock of 100,000,000 shares at $0.001 par value
with the name "Hadrosaurus Resources, Inc". On January 12, 1998 the name was
changed to Hadro Resources Inc.
The Company was organized for the purpose of acquiring and developing mineral
properties.
The Company is in the development stage.
Since its inception the Company has completed a Regulation D offering of
4,174,200 shares of its capital stock for cash.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
At December 31, 1998, the Company had a net operating loss carry forward of
$31,038. The tax benefit from the loss carry forward has been fully offset by a
valuation reserve because the use of the future tax benefit is doubtful, since
the Company has no operations on which to project future net profits.
Earnings (Loss) Per Share
Earnings (loss) per share amounts are computed based on the weighted average
number of shares actually outstanding.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity,
at the time of purchase of less than three months, to be cash equivalents.
Foreign Currency Translation
The transactions of the Company completed in Canadian dollars have been
translated to US dollars. Assets and liabilities are translated at the year end
exchange rates and the income and expenses at the average rates of exchange
prevailing during the period reported on.
Amortization of Capitalized Mining Claim Costs
The Company will use the successful efforts method to amortize the capitalized
costs of any oil and gas claims it acquires, which provides for capitalizing the
purchase price of the project and the additional costs directly related to
35
<PAGE>
<PAGE>
proving the properties, and amortizing these amounts over the life of the
mineral deposit. All other costs will be expensed as incurred. Unamortized
capitalized costs will be expensed if the property is shown to have an
impairment in value or proven to be of no value.
Financial Instruments
The carrying amounts of financial instruments, including cash and accounts
payable, are considered by management to be their estimated fair values. These
values are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of the assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing these financial statements.
3. RELATED PARTY TRANSACTIONS
Related parties have acquired 58% of the common stock issued.
The officers and directors of the Company are involved in other business
activities and they may, in the future, become involved in additional business
ventures which also may require their attention. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between the Company and their other business interests. The Company has
formulated no policy for the resolution of such conflicts.
4. GOING CONCERN
Management is currently seeking oil and gas leases which it believes can be
profitable. To be successful in this effort the Company will need additional
working capital.
Continuation of the Company as a going concern is dependent upon obtaining
additional working capital and the management of the Company has developed a
strategy, which it believes will accomplish this objective through additional
equity funding, and long term financing, which will enable the Company to
operate in the future.
Management recognizes that, if it is unable to raise additional capital, the
Company cannot be successful in its efforts.
36
<PAGE>
PART III
<TABLE>
<CAPTION>
ITEM 1. INDEX TO EXHIBITS
<S> <C> <C>
Exhibit No Description of Document Page
- ------------ ----------------------- ----
2 Articles of Incorporation, Amendments 27
and Bylaws
6.1 Agreement and Declaration of Trust 42
6.2 Assignment of Oil and Gas Leases to 43
W.G. Van Bebber
6.3 Termination of Option to Purchase 45
Agreement
6.4 through 6.39 Oil and Gas Leases 46
10 Consent of Auditors
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company caused this Form 10-SB to be signed on its behalf by the undersigned,
thereunto duly authorized.
HADRO RESOURCES, INC.
Date: November 11, 1999 By: /s/ Frank W. Donis, Chief Executive Officer
Date: November 11, 1999 By: /s/ Marilyn Rafter, Director
37
<PAGE>
ARTICLES OF INCORPORATION
OF
HADROSAURUS RESOURCES, INC.
FILED in the Office of the
Secretary of the State of Nevada
December 3, 1997 - File No. C26970-97
/s/ Dean Heller, Secretary of State
THE UNDERSIGNED natural person of the age of twenty-one (21) years or
more, acting as incorporator of a corporation under the Nevada Business
Corporation Act, adopts the following Articles of Incorporation for such
corporation.
ARTICLE I - NAME
The name of the corporation is HADROSAURUS RESOURCES, INC.
ARTICLE II - DURATION
The duration of the corporation is perpetual.
ARTICLE III - PURPOSES
The corporation is organized to engage in any lawful act or activity for
which corporations may be organized under Nevada's Private Corporations Act.
ARTICLE IV - STOCK
The aggregate number of shares which this corporation shall have authority
to issue is 100,000,000 shares of Common Stock, having a par value of $.001 per
share. All stock of the corporation shall be of the same class, Common, and
shall have the same rights and preferences. Fully-paid stock of this
corporation shall not be liable to any further call or assessment.
ARTICLE V- AMENDMENT
These Articles of Incorporation may be amended by the affirmative vote of
a majority of the shares entitled to vote on each such amendment.
ARTICLE VI - SHAREHOLDERS RIGHTS
The authorized and treasury stock of this corporation may be issued at
such time, upon such terms and conditions and for such consideration as the
Board of Directors shall determine. Shareholders shall not have preemptive
rights to acquire unissued shares of the stock of this corporation.
ARTICLE VII - RESIDENT AGENT
The name of the Corporation's resident agent in the State of Nevada and the
street address of the resident agent where process may be served upon the
Corporation is: Caraway Enterprises, Inc.
3230 East Flamingo Road, Suite 156
Las Vegas, NV. 89121
38
<PAGE>
ARTICLE VIII - DIRECTOR
The directors are hereby given the authority to do any act on behalf of
the corporation by law and in each instance where the Business Corporation Act
provides that the directors may act in certain instances where the Articles of
Incorporation authorize such action by the directors, the directors are hereby
given authority to act in such instances without specifically numerating such
potential action or instance herein.
The directors are specifically given the authority to mortgage or pledge
any or all assets of the business without stockholders' approval.
The number of directors constituting the initial Board of Directors of this
corporation is from 1-9. The initial number of directors constituting the
initial Board of Directors is one. The name and address of this person who is
to serve as Director until the first annual meeting of stockholders or until
successors are elected and qualify is:
Shawnee M. Larrabee
372 East 12600 South
Draper, Utah 84020
ARTICLE IX - INCORPORATOR
The name and address of the incorporator is:
Shawnee M. Larrabee
372 East 12600 South
Draper, Utah 84020
ARTICLE X - COMMON DIRECTORS TRANSACTIONS
BETWEEN CORPORATIONS
No contact or other transaction between this corporation and any one or
more of its directors or officers or any other corporation, firm, association,
or entity in which one or more of its directors or officers are financially
interested, shall be either void or voidable because of such relationship or
interest, or because such person is present at the meeting of the Board of
Directors, or a committee thereof, which authorizes, approves or ratifies such
contract or transaction, or because his or their votes are counted for such
purpose if: (a) the fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves or ratifies
the contract or transaction in good faith by vote or consent sufficient for the
purpose without counting the votes or consents of such interested director; or
(b) the fact of such relationship of interest is disclosed or known to the
stockholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or (c) the fact of the
common directorship, office or financial interest is not disclosed or known to
the director or officer at the time the transaction is brought before the Board
of Directors of the corporation for action; or (d) the contract or transaction
is fair and reasonable to the corporation at the time it is approved.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or committee thereof which
authorizes, approves or ratifies such contract or transaction.
39
<PAGE>
ARTICLE XI - LIABILITY OF DIRECTORS AND OFFICERS
No director or officer shall be personally liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director or officer. Notwithstanding the foregoing sentence, a
director or officer shall be liable to the extend provided by applicable law,
(i) for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (ii) for the payment of dividends in violation of
NRS 78.300.
The provisions hereof shall not apply to or have any effect on the
liability or alleged liability of any officer or director of the corporation for
or with respect to any acts or omissions of such person occurring prior to such
amendment.
Under penalties of perjury, I declare that these Articles of Incorporation
have been examined by me and are, to the best of my knowledge and belief, true,
correct and complete.
Dated this 24th day of November, 1997.
/s/ Shawni M. Larrabee, Incorporator
STATE OF UTAH )
) ss:
COUNTY OF SALT LAKE )
On the 24th day of November, 1997, personally appeared before me Shawni M.
Larrabee, who signed the foregoing Articles of Incorporation.
/s/ Gloria O.W. Kemker, Notary Public
Residing at Salt Lake County
CERTIFICATE OF AMENDMENT OF ARTICLES OF
INCORPORATION OF
HADROSAURUS RESOURCES, INC.
(a Nevada corporation)
The undersigned, Shawni Larrabee, incorporator and Director of Hadrosaurus
Resources, Inc. and representing over 2/3 of the Board of Directors, do hereby
certify as follows:
That on January 12, 1998, the Board of Directors adopted a resolution to
amend the Articles of the Corporation (originally filed December 3, 1997) as
follows:
Article I presently reads as follows:
ARTICLE I - NAME
The name of the Corporation shall be : HADROSAURUS RESOURCES, INC.
Article I is hereby amended to read as follows:
ARTICLE I - NAME
The name of the Corporation shall be: HADRO RESOURCES, INC.
40
<PAGE>
The undersigned do hereby certify that the company has issued no stock as
of January 12, 1998. This amendment is to be effective upon filing with the
State of Nevada.
/s/ Shawni Larabee, Director
and Incorporator
STATE OF UTAH )
) ss:
COUNTY OF SALT LAKE )
On the 12th day of January, 1998, personally appeared before me Shawni M.
Larrabee, who signed the foregoing Articles of Incorporation.
/s/ Janamarie McAllister, Notary Public
EXHIBIT NO. 3.2
- ---------------
BYLAWS
OF
HADROSAURUS RESOURCES, INC.
a Nevada corporation
ARTICLE I
OFFICES
- -------
Section 1. Principal Offices.
The principal office for the transaction of business of the corporation is fixed
and located at 145 Tyee Drive #1526, Point Roberts, Washington 98281-9602. The
Board of Directors may change the principal office from one location to another
as from time to time may be necessary. Any change of this location shall be
noted by the Secretary on these Bylaws opposite this section, or this section
may be amended to state the new location.
Section 2. Other Offices.
The Board of Directors may, at any time, establish branch or subordinate offices
at any place or places.
ARTICLE II
MEETINGS OF SHAREHOLDERS
- --------------------------
Section 1. Annual Meeting.
The annual meeting of the shareholders may be held on a date and time which
may be scheduled by the Board of Directors to the extent that such scheduling is
in compliance with the laws of the state of incorporation of the Company. At
this meeting, Directors shall be elected, and any other proper business within
the power of the shareholders may be transacted. In the event that an annual
meeting is not held in any year, the Board of Directors, as then constituted,
shall continue to perform their duties until such annual or special meeting is
properly called and they, or any of them, are reelected or replaced.
41
<PAGE>
Section 2. Place of Meeting.
All annual shareholders meetings shall be held at the Corporation's principal
office, or a location selected by the Board of Directors and notice to the
shareholders as required by Section 4 of these Articles, and all other
shareholders meeting shall be held either at the principal office or any other
place within or outside the State of Nevada that may be designated either by the
Board of Directors in accordance with these Bylaws, or by the written consent of
all persons entitled to vote at the meeting, given either before or after the
meeting and filed with the Secretary of the Corporation.
Section 3. Shareholder Action Without Meeting.
Pursuant to Nevada law, any action which could be taken at a meeting of the
shareholders may be taken without a meeting, if a written consent thereto is
signed by shareholders holding at least a majority of the voting power of the
corporation, except that if a different proportion of voting power is required
for such action at a meeting, then that proportion of written consent shall be
required.
Section 4. Special Meetings.
A Special shareholders meeting for any purpose whatsoever may be called at any
time by the President, any Vice-President, the Board of Directors, or one or
more shareholders holding not less than one-tenth (1/10) of the voting power or
the Corporation.
Section 5. Notice of Meetings.
Written notices specifying the place, day, and hour of the meeting and, in the
case of a special meeting, the general nature of the business to be transacted,
shall be given not less than ten (10) days, nor more than fifty (50) days before
the date of the meeting. Such notice must be given personally or by mail or by
other means of written communication, addressed to the shareholder at the
address appearing on the books of the corporation or given by the share-holder
to the corporation for the purpose of notice. If no such address appears or is
given by a shareholder of record entitled to vote at the meeting, notice is
given at the place where the principal executive office of the corporation is
located, or by publication at least once in a newspaper of general circulation
in the county where the principal executive office is located.
The notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any notice in accordance with the
provisions of this section executed by the Secretary shall be prima facie
evidence of the giving of notice.
Section 6. Waiver of Notice.
A shareholder may waive notice of any annual or special meeting by signing a
written notice of waiver either before or after the date of such meeting.
Section 7. Quorum.
The presence in person or by proxy of the holders of at least fifty-one percent
(51%) of the outstanding shares entitled to vote at any meeting of the
shareholders shall constitute a quorum for the transaction of business. The
42
<PAGE>
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, any action taken
(other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 8. Proxies.
Every person entitled to vote at a shareholders meeting of the corporation, or
entitled to execute written consent authorizing action in lieu of a meeting, may
do so either in person or by proxy executed in writing by the shareholder or by
his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from the date of its execution unless otherwise provided in the proxy.
Section 9. Voting.
Except as otherwise provided in the Articles of Incorporation or by agreement or
by the general corporation law, shareholders at the close of business on the
record date are entitled to notice and to vote.
Section 10. List of Shareholders.
The Secretary shall prepare, at least ten (10) days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, showing the address of each shareholder
and the number of shares registered in the name of each shareholder. Such list
shall be open to the examination of any shareholder, for any purpose germane to
the meeting. This fist shall be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any shareholder
present.
Section 11. Inspectors.
At each meeting of shareholders, the chairman of the meeting may appoint one or
more inspectors of voting, whose duty it shall be to receive and count the
ballots and make a written report showing the result of the balloting. The
Secretary of the Corporation may perform this function.
Section 12, Election by Ballot.
Election for directors need not be by ballot unless a shareholder demands
election by ballot at the meeting and before the voting begins. The candidates
receiving the highest number of votes, up to the number of directors to be
elected, shall be elected. No cumulative voting shall be allowed.
Section 13. Order of Business.
The order of business at the annual meeting of the shareholders, insofar as
possible, and at all other meetings of shareholders, shall be as follows:
1. Call to order.
2. Proof of notice of meeting.
3. Reading and disposing of any unapproved minutes.
4. Reports of officers.
5. Reports of committees.
6. Election of Directors.
7. Disposition of unfinished business.
8. Disposition of new business.
9. Adjournment.
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ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers.
Subject to the provisions of the Nevada Corporation Act, and any limitations in
the Articles of Incorporation and these Bylaws relating to actions required to
be approved by the shareholders or by the outstanding shares, the business and
affairs of the Corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board of Directors.
Section 2. Enumeration of Directors' Powers.
Without prejudice to these general rules, and subject to the same limitation,
the Board of Directors shall have the power to:
(a) Select and remove all officers, agents and employees of the Corporation;
prescribe any powers and duties for them that are consistent with law, with the
Articles of Incorporation, and these Bylaws; fix their compensation; and require
from them security for faithful service.
(b) Change the principal executive office or the principal business office from
one location to another; cause the Corporation to be qualified to do business in
any other state, territory, dependency, or country and conduct business within
or outside the State of Nevada; and designate any place within or outside the
State of Nevada for the holding of any shareholders meeting of meetings,
including annual meetings.
(c) Adopt, make, or use a corporate seal; prescribe the forms of certificates of
stock; and otter the form of the seal and certificate.
(d) Authorize the issuance of shares of stock of the corporation on any lawful
terms, in consideration of money paid, labor done, services actually rendered,
debts or. securities canceled, or tangible or intangible property actually
received.
(e) Borrow money and incur indebtedness on behalf of the Corporation, and cause
to be executed and delivered for the Corporation's purposes, in the corporate
name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, and other evidences of debt and securities.
(f) Engage in and/or adopt employment agreements, contracts, or other employment
contracts with independent contractors, companies, government agencies, or
individuals.
Section 3. Number, Tenure, Qualification and Elections.
To the extent allowed by the Articles of incorporation, the Board of Directors
shall be fixed from time to time by resolution of the Board, but shall not be
less than one (1). Directors need not be shareholders of the Corporation. The
Directors of the Corporation shall be elected at the annual meeting of the
shareholders and shall serve until the next annual or special meeting is
properly called and they, or any of them, are re-elected and until their
successors have been elected and qualified.
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Section 4. Vacancies.
A vacancy or vacancies on the Board of Directors shall be deemed to exist in
the event of the death, resignation, or removal of any Director, or if the Board
of Directors by resolution declares vacant that office of a Director who has
been declared of unsound mind by an order of court or convicted of a felony, or
if the authorized number of Directors is increased, the shareholders fail at any
meeting of shareholders at which any Director of Directors are elected, to elect
the number of Directors to be voted for at that meeting.
Any Director may resign effective on giving written notice to the Chairman of
the Board, the President, the Secretary, or the Board of Directors, unless a
notice specifies a later time for that resignation to become effective. If the
resignation of a Director is effective at a future time, the Board of Directors
may elect a successor to take office when the resignation becomes effective.
Section 6. Notice of Meetings.
Notice need not be given of regular meetings of the Board of Directors, nor is
it necessary to give notice of adjourned meetings. Notice of special meetings
shall be in writing by mail at least four (4) days prior to the date of the
meeting or forty-eight (48) hours' notice delivered personally or by telephone
or telegraph or telecopier. Neither the business to be transacted at, nor the
purpose of any such meeting need be specified in the notice. Attendance of a
Director at a meeting shall constitute a waiver of notice of that meeting except
when the Director attends for the express purpose of objecting to the
transaction of any business in that the meeting is not lawfully called or
convened.
Section 7. Place of Meetings and Meetings By Telephone.
Regular and special meetings of the Board of Directors may be held at any place
within or outside the State of Nevada that has been designated from time to time
by the Board. In the absence of such designation, meetings shall be held at the
principal executive office of the Corporation. Any meeting, regular or special,
may be held by conference telephone, or similar communication equipment, as long
as all Directors participating in the meeting can hear one another, and ail such
Directors shall be deemed to be present in person at the meeting.
Section 8. Special Meetings.
Special meetings of the Board of Directors for any purpose or purposes may be
called at any time by the Chairman of the Board or the President, any Vice-
President, or the Secretary.
Section 9. Majority or Quorum.
A majority of the authorized number of Directors constitutes a quorum of the
Board for the transaction of business except as hereinafter provided.
Section 10. Transactions of Board.
Except as otherwise provided in the Articles or these Bylaws, or by taw, every
act or decision done or made by a majority of the Directors present at a duly
held meeting at which a quorum is present, is the act of the Board, provided,
however, that any meeting at which a quorum was initially present may continue
to transact business notwithstanding the withdrawal of Directors if any action
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taken is approved by at least a majority of the required quorum for such
meeting.
Section 11. Adjournment.
A majority of Directors present at any meeting, whether or not a quorum is
present, may adjourn the meeting to another time and place. If the meeting is
adjourned for more that twenty-four (24) hours, notice of the adjournment to
another time and place must be given prior to the time of the adjourned meeting
to the Directors who were present at the time of the adjournment.
Section 12. Conduct of Meetings.
The Chairman of the Board, or if there is no such officer, the President, or in
his absence, any Director selected by the Director present shall preside at the
meeting of the Board of Directors. The Secretary of the Corporation or, in the
Secretary's absence any person appointed by the presiding officer, shall act as
Secretary of the Board.
Section 13. Action Without Meeting.
Any action required or permitted to be taken by the Board of Directors may be
taken without a meeting, if all members of the Board shall individually or
collectively consent in writing to such action. Such action by written consent
shall have the same force and effect as a unanimous vote of the Board of
Directors. Such written consent(s) shall be filed with the minutes of the
proceedings of the Board.
Section 14. Fees and Compensation of Directors.
Directors and members of committees may receive such compensation, if any, for
their services, and such reimbursement of expenses, as may be fixed or
determined by resolution of the Board of Directors. Nothing herein contained
shall be construed to preclude any Director from serving the corporation in any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation for such services.
Section 15. Approval of Bonuses for Directors and Officers.
No bonuses or share in the earnings or profits of the Corporation shall be paid
to any of the officers, Directors, or employees of the Corporation except as
approved by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. Officers.
The officers of the Corporation shall be a President, a Vice-President, a
Secretary, and a Chief Financial Officer (Treasurer). The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, one
or more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article IV. Any number of offices may be held by the same person, except
the offices of President and Secretary.
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Section 2. Election of Officers.
The officers of the Corporation, except such officer as may be appointed in
accordance with the provisions of Section 3 or Section 5 of this Article IV
shall be chosen by the Board of Directors, and each shall serve at the pleasure
of the Board, subject to the rights, if any, of an officer under any contract of
employment.
Section 3. Subordinate Officers.
The Board of Directors may appoint, and may empower the President to appoint,
such other officers as the business
meetings or committee meetings, the number of shares present or represented at
share-holders meetings, and the proceedings.
The Secretary shall keep, or cause to be kept, at the principal executive office
or at the office of the Corporation's transfer agent or registrar, as determined
by resolution of the Board of Directors, a record of shareholders, or a
duplicate record of shareholders showing the names of all shareholders and their
addresses, the number of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary or Assistant Secretary, if they are absent or unable to act or
refuse to act, any other officer of the Corporation shall give, or cause to be
given, notice of all meetings of the shareholders, of the Board of Directors,
and of committees of the Board of Directors required by the Bylaws or by law to
be given. The Secretary shall keep the seal of the Corporation, if one is
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by the Bylaws.
Section 9. Chief Financial Officer.
The Chief Financial Officer (Treasurer) shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The book of accounts shall at all reasonable
times be opened to inspection by any Director.
The Chief Financial Officer shall deposit all monies and other valuables in the
name and to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
President and Directors, whenever they request it, an account of ail of his
transactions as Chief Financial Officer and of the financial condition of the
Corporation, and shall have other powers and perform other such duties as may be
prescribed by the Board of Directors or the Bylaws.
ARTICLE V
INDEMNIFICATION OF DIRECTOR, OFFICERS, EMPLOYEES AND OTHER AGENTS
Section 1. Agents, Proceedings and Expenses.
For the purpose of this Article, "agent'.' means any person who is or was. a.
Director, officer, employee, or other agent of this Corporation, or is or was
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serving at the request, of this.
Corporation as a Director, officer, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise, or
was a Director, officer, employee, or agent of a foreign or domestic corporation
which was a predecessor corporation of this corporation or of another enterprise
at the request of such predecessor corporation; "proceeding" means any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative, or investigative; and "expenses" includes, without limitation,
attorneys' fees and any expenses of establishing a right to indemnification
under Section 4 or Section 5(c) of this Article.
Section 2. Actions other than by the Corporation.
This Corporation shall defend and indemnify any person who was or is a party, or
is threatened to be made a party, to any proceeding (other than an action by or
in the right of this Corporation) by reason of the fact that such person is or
was an agent of this Corporation, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with such proceeding if that person acted in good faith and in a manner that
person reasonably believed to be in the best interests of this corporation and,
in the case of a criminal proceeding, had no reasonable cause to believe the
conduct of that person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction, or upon a pleas of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in the best interest of this Corporation or that the person had reasonable cause
to believe that the person's conduct was lawful.
Section 3. Actions by the Corporation.
This Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action by
or in the right of this Corporation to procure a judgment in its favor by reason
of the fact that said person is or was an agent, counsel to the Corporation,
officer or director of this Corporation, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of that action if that person acted in good faith, in a manner that person
believed to be in the best interests of this Corporation and with such care,
including reasonably inquiry, that such action would not be deemed grossly
negligent on the part of such agent (for the purposes of this Article V, the
term "agent" shall mean and include all officers, directors, counsel, and
employees). Indemnification shall be available under this Section 3, conditioned
only upon the following:
(a) In respect of any claim, issue or matter as to which that person may be
liable to this Corporation, the duty and obligation of the Corporation to defend
and indemnify such agent shall be absolute unless and only to the extent that
the court in which that action was brought shall determine, upon application,
that in view of all the circumstances of the case, said person acted with
reckless disregard equated to gross negligence with regard to the specific
claims made against said person;
(b) The indemnification provisions set forth herein are to be interpreted as
broadly as possible in their application to any officer, director, counsel or
agent of the corporation, to include accountants and counsel for the
corporation. Such interpretation shall treat these provisions as continuing
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contractual obligations of the corporation and subsequent modification shall not
limit the effect of these provisions as applied to the covered classes who were
so covered, at any time following adoption hereof.
Section 4. Successful Defense by Agent.
To the extent that an agent of this corporation has been successful on the
merits or otherwise in defense of any proceeding referred to in Section 2 or 3
of this Article, or in defense of any claim, issue, or matter therein, the agent
shall be indemnified against expenses actually and reasonably incurred by the
agent in connection therewith. An agent shall be deemed successful if the Court
fails to make a specific finding regarding the degree of fault as set forth in
Section 3 hereinabove
Section 5. Required Approval.
Except as provided in Section 4 of this Article, any indemnification under this
Article shall be made by this Corporation only if authorized in the specific
case on a determination that indemnification of the agent is proper in the
circumstances because the agent has met the applicable standard of conduct set
forth in Sections 2 or 3 of this Article. by:
(a) A majority vote of a quorum consisting of Directors who are not parties to
the proceeding;
(b) Approval by the affirmative vote of a majority of the shares of this
corporation entitled to vote represented at a duly held meeting at which a
quorum is present or by written consent of holders of a majority of the
outstanding shares entitled to vote; or
(c) The court in which the proceeding is or was pending, on application made by
this corporation or the agent or the attorney or other person rendering services
in connection with the defense, whether or not such application by the agent,
attorney or other person is opposed by this Corporation.
Section 6. Advance of Expenses.
Expenses incurred in defending any proceeding may be advanced by this
Corporation before the final disposition of the proceeding on receipt of an
undertaking by or on behalf of the agent to repay the amount of the advance
unless it shall be determined ultimately that the agent is entitled to be
indemnified as authorized in this Article.
Section 7. Other Contractual Rights.
Nothing contained in this Article shall affect any right to indemnification to
which persons other than Directors and officers of this Corporation or any
subsidiary hereof may be entitled to contract or otherwise.
Section 8. Insurance.
Upon and in the event of a determination by the Board of Directors of this
Corporation to purchase such insurance, this Corporation shall purchase and
maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not this corporation would have the
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power to indemnify the agent against that liability under the provisions of this
section.
Section 9. Fiduciaries of Corporate Employee Benefit Plan.
This Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of the
Corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such trustee,
investment manager, or other fiduciary may be entitled by contract or otherwise,
which shall be enforceable to the extent permitted by applicable law other than
this Article.
ARTICLE VI
STOCK CERTIFICATES
Section 1. Form.
The shares of the Corporation shall be represented by certificates signed by the
President or Vice- President, and the Chief Financial Officer or the Secretary
of the Corporation. Any or all of such signatures may be facsimiles if
countersigned by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. Each such certificate
shall also state:
(a) The name of the record holder of' the shares represented by such
certificate;
(b) The number of shares represented thereby;
(b) A designation of any class or series of which such shares are a part;
(d) That the shares have a par value of $0.001;
(e) That the corporation is organized under the laws of the State of
Nevada.
(f) Any restrictions applicable to the shares shall be so designated on the
face thereof.
Section 2. Transfers.
Transfer of shares of the Corporation shall be made in the manner set forth in
the Nevada Uniform Commercial Code. The Corporation shall maintain stock
transfer books, and any transfers shall be registered thereon only on request
and surrender of the stock certificate representing the transferred shares, duly
endorsed; if transfer is by Power of Attorney, the Power of Attorney shall be
deposited with the Secretary of the Corporation or with the designated Transfer
Agency.
Section 3. Lost, Destroyed and Stolen Certificates
No certificate or shares of stock in the Corporation shall be issued in place of
any certificate alleged to have been lost, destroyed, stolen, or mutilated
except on production of such evidence and provision of such indemnity to the
Corporation as the Board of Directors may prescribe.
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ARTICLE VII
CORPORATE ACTIONS
Section 1. Contracts.
The Board of Directors may authorize any officer or officers, or any agent or
agents of the Corporation, to enter into any contract or to execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans.
No loan shall be made by the Corporation to its officers or Directors, and no
loan shall be made by the Corporation secured by its shares. No loan shal1 be
made or contracted on behalf of the Corporation and no evidences of indebted-
ness shall be issued in its name unless authorized by resolution of the Board of
Directors. Such authority may be general or confined to specific instances.
Section 3. Checks, Drafts or Orders.
All checks, drafts, or other orders for the payment of money by or to the
Corporation and all notes and other evidence of indebtedness issued in the name
of the Corporation shall be signed by such officer or officers, agent or agents
of the Corporation, and in such manner as shall be determined by resolution of
the Board of Directors.
Section 4. Bank Deposits.
All funds of the Corporation not otherwise employed, shall be deposited to the
credit of the Corporation in such banks, trust companies, or other depositories
as the Board of Directors may select.
ARTICLE VIII
MISCELLANEOUS
Section 1. Inspection of Corporate Records.
The stock ledger and minute books may be kept by any information storage device
if readily convertible into legible form. Any shareholder of record, in person
or by an attorney or agent who presents proof of such position with guaranteed
signature on such proof, may, upon written demand under oath, stating purpose,
inspect for any proper purpose, the stock ledger, list of shareholders and make
written extracts of the same. Such extracts shall be made in writing by the
individual preparing or requesting such inspection and such inspection shall be
during normal business hours and shall not be made without at least five (5)
business days written notice thereof. Such notice, to be effective must be
received not at least five (5) business days prior to the proposed inspection
date, a signed receipt from the US Postal Service shall be proof of such notice
and the date of receipt.
Section 2. Inspection of Articles of Incorporation and Bylaws.
The original or a copy of the Articles of Incorporation and Bylaws of the
Corporation, as amended or otherwise altered to date, and certified by the
Secretary of the Corporation, shall at all times be kept at the principal
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executive office of the Corporation. Such Articles and Bylaws shall be open for
inspection to all shareholders of record or holders of voting trust certificates
at all reasonable times during the business hours of the Corporation.
Section 3. Fiscal Year.
The fiscal year of the Corporation shall begin on the first day of January of
each year and end at midnight on the last day of December of the same year or as
otherwise determined by the Board of Directors.
Section 4. Construction and Definition.
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions contained in the applicable Nevada Statutes which
shall govern the construction of these Bylaws.
Without limiting the foregoing, the masculine gender where used included
the feminine and neuter; the singular number includes the plural, and the plural
number includes the singular, "shall" is mandatory and "may" is permissive; and
"person" includes the Corporation as well as a natural person.
ARTICLE IX
AMENDMENTS TO BYLAWS
These Bylaws may be amended at any time by a majority vote of the Board of
Directors or by a majority vote of the outstanding shares held by the share-
holders of the corporation.
CERTIFICATE OF SECRETARY OF ADOPTION BY DIRECTORS
I HEREBY CERTIFY that I am the duly elected, qualified and acting Secretary of
the above-named Corporation and that the above and foregoing Bylaws were adopted
as the Bylaws of said Corporation on the date set forth above by a majority of
vote of the shareholders of said Corporation.
Dated: December 10, 1997 /s/ Shawni M. Larrabee
Incorporator/Initial Director
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AGREEMENT AND DECLARATION OF TRUST
- ---------------------------------------------------------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CERTAIN OIL AND GAS LEASES OR OTHER FORMS OF MINERAL ACQUISITIONS MAY
BE TAKEN BY OR IN THE NAME OF W.G. VAN BEBBER AS LESSEE, GRANTEE, ASSIGNEE (OR
IN OTHER CAPACITIES AS A RECIPIENT OR TRANSFEREE) PERTAINING TO PROPERTIES
LOCATED IN COLORADO, AND NEW MEXICO; AND
WHEREAS, SAID LEASES ARE TO BE TAKEN IN THE NAME OF W.G. VAN BEBBER, OR HIS
DESIGNEE, AS TRUSTEE FOR THE EXCLUSIVE USE AND BENEFIT OF HADRO RESOURCES, INC.
AND ALL APPROVED COST AND EXPENSES INCURRED IN SUCH LEASING AND ACQUISITIONS
HAVE BEEN AND WILL BE PAID BY HADRO, OR ITS NOMINEE(S).
NOW THEREFORE, IN CONSIDERATION OF THE PREMISES, I HEREBY DECLARE THAT I SHALL
ACQUIRE AND HOLD THE AFORESAID LEASES AND OTHER FORMS OF MINERAL CONVEYANCES IN
TRUST FOR HADRO, ITS SUCCESSORS AND ASSIGNS, AND I HEREBY AGREE TO CONVEY AND
ASSIGN SAME TO HADRO OR ITS NOMINEE(S) AT SUCH TIME OR TIMES AND IN SUCH MANNER
AS IT SHALL REQUEST.
IN WITNESS WHEREOF, THIS AGREEMENT AND DECLARATION OF TRUST HAS BEEN DULY
EXECUTED AND DELIVERED EFFECTIVE AS OF THE 1ST DAY OF NOVEMBER, 1998.
/S/ W.G. VAN BEBBER
STATE OF COLORADO )
)SS:
COUNTY OF DENVER )
THE FOREGOING INSTRUMENT WAS ACKNOWLEDGED BEFORE ME BY W.G. VAN BEBBER
WITNESS MY HAND AND NOTARIAL SEAL.
/S/ LAREN PASSAVANTO GROSS, NOTARY PUBLIC
1291 HIGH STREET #H
DENVER, CO 80218
MY COMMISSION EXPIRES: JULY 2, 1999.
53
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ASSIGNMENT
FOR GOOD AND VALUABLE CONSIDERATION, RECEIPTS OF WHICH IS HEREBY ACKNOWLEDGED,
**NAME OMITTED - CONFIDENTIAL INFORMATION** ASSIGNOR, DOES HEREBY SELL,
ASSIGN, TRANSFER AND CONVEY TO W.G. VAN BEBBER, OF DENVER, COLORADO AS
ASSIGNEE, ALL OF ASSIGNOR'S RIGHT, TITLE AND INTEREST IN AND TO THOSE
PARTICULAR LEASEHOLDS LOCATED IN **PROPERTY LOCATION OMITTED-CONFIDENTIAL
INFORMATION** NEW MEXICO, AS MORE PARTICULARLY DESCRIBED IN EXHIBIT A
ATTACHED HERETO AND BY THIS REFERENCE INCORPORATED HEREIN. **EXHIBIT A
OMITTED - CONFIDENTIAL INFORMATION**.
THE ASSIGNMENT AND TRANSFER OF INTERESTS IS SUBJECT TO THE FOLLOWING:
1. ASSIGNOR HEREBY RETAINS, AND ASSIGNEE ACKNOWLEDGES A TWO-PERCENT (2%)
GROSS OVERRIDING ROYALTY INTEREST IN AND TO SAID LEASES, TO BE HELD BY ASSIGNOR.
2. ASSIGNEE ACKNOWLEDGES THE GROSS OVERRIDING ROYALTY INTERESTS SET FORTH IN
EXHIBIT B ATTACHED HERETO AND BY THIS REFERENCE INCORPORATED HEREIN.
3. ASSIGNEE, BY ACCEPTANCE OF THIS ASSIGNMENT COVENANTS AND AGREES THAT ALL
FUTURE LEASE PAYMENTS, CHARGES, COSTS, FEES, OR OTHER SUCH EXPENSE NECESSARY TO
THE CONTINUATION OR DEVELOPMENT OF THE LEASES SHALL BE THE RESPONSIBILITY OF
ASSIGNEE, AND SHALL BE PAID OR PERFORMED ON A TIMELY BASIS.
4. THIS ASSIGNMENT IS WITHOUT WARRANTY OF TITLE OR REPRESENTATION.
5. ASSIGNEE SHALL NOTIFY IN WRITING THE ASSIGNOR OF ANY DESIRE OR INTENTION
TO SURRENDER ANY OR ALL OF THE SAID LEASES 30 DAYS PRIOR TO ANY SURRENDER.
6. THIS ASSIGNMENT IS MADE AND ACCEPTED PURSUANT TO THAT PARTICULAR
AGREEMENT BY AND BETWEEN THE PARTIES DATED THIS 14 DAY OF JUNE, 1999.
ASSIGNOR
/S/ PRESIDENT AND CEO
ASSIGNEE
/S/ W.G. VAN BEBBER
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HADRO RESOURCES, INC.
145 TYEE ROAD #1526
POINT ROBERTS, WA. 20549
JUNE 15, 1999
DONN CAPITAL CORP.
204-5405 12TH AVENUE
DELTA, B.C., CANADA V4M 2B2
RE: TERMINATION OF AGREEMENT TO PURCHASE, DATED AUGUST 1, 1998
DEAR FRANK:
THIS IS TO INFORM YOU THAT THE DIRECTORS OF HADRO RESOURCES, INC. HAVE MADE
THE DECISION AS OF JUNE 15, 1999, NOT TO EXERCISE THE OPTION AS PER THE
AGREEMENT WITH DONN CAPITAL CORP., DATED AUGUST 1, 1998.
YOURS TRULY,
/s MARILYN RAFTER
CC: BOARD OF DIRECTORS
55
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LEASE NO: LH4809 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of SIX HUNDRED
FORTY AND 00/100 dollars ($640.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil,
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter Set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described
as follows:
Subdivisions Section Twp Rge Acres Institution
ALL 16 31N 36E 640.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0084 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4812 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
TWENTY AND 00/100 dollars ($120.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter
Set out, the following described land situated in the count(y)(ies) of Union,
state of New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
SE4SW4, S2SE4 20 32N 34E 120.00 UNIV
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0087 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4813 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
TWENTY AND 00/100 dollars ($120.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter
Set out, the following described land situated in the count(y)(ies) of Union,
state of New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
Lots 1(11.84), 2(11.71),
3(11.59), SE4NE4, NE4SE4 21 32N 34E 115.14 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0088 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4814 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of TWO HUNDRED
AND 00/100 dollars ($200.00), the same being the amount of the tender above
mentioned, and the further sum of $30.00 filing fee, and of the covenants and
agreements hereinafter contained, the lessor does hereby grant, demise, lease
and let unto the said lessee, exclusively, for the sole and only purpose of
exploration, development and production of oil or gas (including carbon dioxide
and helium), or both thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by the lessor under
the terms of the lease, together with rights-of-way, easements and servitude's
for pipelines, telephone lines, tanks, power houses, stations, gasoline plants
and fixtures for producing, treating and caring for such products, and housing
and boarding employees, and any and all rights and privileges necessary,
incident to or convenient for the economical operation of said land, for oil and
gas, with right for such purposes to the free use of oil, gas, casing-head gas
or water from said lands, but not from lessor's water wells, and with the rights
of removing either during or after the term hereof , all and any improvements
placed or erected on the premises by the lessee, including the right to pull all
casing, subject, however, to the covenants and conditions hereinafter set out,
the following described land situated in the count(y)(ies) of Union, state of
New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
W2SW4, SE4SW4, S2SE4 21 32N 34E 200.00 UNIV
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0089 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4815 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of TWO HUNDRED
NINETY AND 00/100 dollars ($290.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
LOTS 4(12.09, SE4NE4,
SW4NW4, W2SW4, SE4SW4, E2SE4 22 32N 34E 292.09 CS, RR
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0090 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4816 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
TWENTY AND 00/100 dollars ($120.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
W2SW4, SE4SW4 23 32N 34E 120.00 MH
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0091 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4817 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
AND 00/100 dollars ($100.00), the same being the amount of the tender above
mentioned, and the further sum of $30.00 filing fee, and of the covenants and
agreements hereinafter contained, the lessor does hereby grant, demise, lease
and let unto the said lessee, exclusively, for the sole and only purpose of
exploration, development and production of oil or gas (including carbon dioxide
and helium), or both thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by the lessor under
the terms of the lease, together with rights-of-way, easements and servitude's
for pipelines, telephone lines, tanks, power houses, stations, gasoline plants
and fixtures for producing, treating and caring for such products, and housing
and boarding employees, and any and all rights and privileges necessary,
incident to or convenient for the economical operation of said land, for oil and
gas, with right for such purposes to the free use of oil, gas, casing-head gas
or water from said lands, but not from lessor's water wells, and with the rights
of removing either during or after the term hereof , all and any improvements
placed or erected on the premises by the lessee, including the right to pull all
casing, subject, however, to the covenants and conditions hereinafter set out,
the following described land situated in the count(y)(ies) of Union, state of
New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
NE4SW4, NW4SE4 24 32N 34E 80.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0092 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4818 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
TWENTY AND 00/100 dollars ($120.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
SE4NE4, N2NW4 26 32N 34E 120.00 MH
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0093 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4819 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
TWENTY AND 00/100 dollars ($120.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil,
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
W2NW4, NW4SW4 27 32N 34E 120.00 UNIV
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0094 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4820 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
SIXTY AND 00/100 dollars ($160.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
N2NE4, NW4NW4, NE4SE4 28 32N 34E 160.00 UNIV
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0095 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4821 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of TWO HUNDRED
EIGHTY AND 00/100 dollars ($280.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil,
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
S2NE4, NE4NW4, S2NW4,
E2SW4 28 32N 34E 280.00 MH
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0096 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4826 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of FOUR HUNDRED
EIGHTY AND 00/100 dollars ($480.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
S2N2,S2 36 32N 34E 480.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0101 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4827 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
AND 00/100 dollars ($100.00), the same being the amount of the tender above
mentioned, and the further sum of $30.00 filing fee, and of the covenants and
agreements hereinafter contained, the lessor does hereby grant, demise, lease
and let unto the said lessee, exclusively, for the sole and only purpose of
exploration, development and production of oil or gas (including carbon dioxide
and helium), or both thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by the lessor under
the terms of the lease, together with rights-of-way, easements and servitude's
for pipelines, telephone lines, tanks, power houses, stations, gasoline plants
and fixtures for producing, treating and caring for such products, and housing
and boarding employees, and any and all rights and privileges necessary,
incident to or convenient for the economical operation of said land, for oil and
gas, with right for such purposes to the free use of oil, gas, casing-head gas
or water from said lands, but not from lessor's water wells, and with the rights
of removing either during or after the term hereof , all and any improvements
placed or erected on the premises by the lessee, including the right to pull all
casing, subject, however, to the covenants and conditions hereinafter set out,
the following described land situated in the count(y)(ies) of Union, state of
New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
LOTS 1(11.36), 2(12.05),
SE4NE4 19 32N 35E 63.41 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0102 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4828 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
AND 00/100 dollars ($100.00), the same being the amount of the tender above
mentioned, and the further sum of $30.00 filing fee, and of the covenants and
agreements hereinafter contained, the lessor does hereby grant, demise, lease
and let unto the said lessee, exclusively, for the sole and only purpose of
exploration, development and production of oil or gas (including carbon dioxide
and helium), or both thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by the lessor under
the terms of the lease, together with rights-of-way, easements and servitude's
for pipelines, telephone lines, tanks, power houses, stations, gasoline plants
and fixtures for producing, treating and caring for such products, and housing
and boarding employees, and any and all rights and privileges necessary,
incident to or convenient for the economical operation of said land, for oil and
gas, with right for such purposes to the free use of oil, gas, casing-head gas
or water from said lands, but not from lessor's water wells, and with the rights
of removing either during or after the term hereof , all and any improvements
placed or erected on the premises by the lessee, including the right to pull all
casing, subject, however, to the covenants and conditions hereinafter set out,
the following described land situated in the count(y)(ies) of Union, state of
New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
LOTS 4(11.02),SW4NW4 20 32N 35E 51.02 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0103 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4829 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
SIXTY AND 00/100 dollars ($160.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
S2NW4, NE4SW4, SW4SW4, 25 32N 35E 160.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0104 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4830 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
SIXTY AND 00/100 dollars ($160.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
W2NE4, SE4NE4, SE4NW4, 26 32N 35E 160.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0105 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4831 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of TWO HUNDRED
FIFTY AND 00/100 dollars ($250.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
LOTS 2(26.63), 3(30.77),
4(34.94), S2NE4, SE4NW4,
SW4SE4 31 32N 35E 252.33 MH
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0106 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4832 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of FOUR HUNDRED
AND 00/100 dollars ($400.00), the same being the amount of the tender above
mentioned, and the further sum of $30.00 filing fee, and of the covenants and
agreements hereinafter contained, the lessor does hereby grant, demise, lease
and let unto the said lessee, exclusively, for the sole and only purpose of
exploration, development and production of oil or gas (including carbon dioxide
and helium), or both thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by the lessor under
the terms of the lease, together with rights-of-way, easements and servitude's
for pipelines, telephone lines, tanks, power houses, stations, gasoline plants
and fixtures for producing, treating and caring for such products, and housing
and boarding employees, and any and all rights and privileges necessary,
incident to or convenient for the economical operation of said land, for oil and
gas, with right for such purposes to the free use of oil, gas, casing-head gas
or water from said lands, but not from lessor's water wells, and with the rights
of removing either during or after the term hereof , all and any improvements
placed or erected on the premises by the lessee, including the right to pull all
casing, subject, however, to the covenants and conditions hereinafter set out,
the following described land situated in the count(y)(ies) of Union, state of
New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
W2NE4, SE4NE4, NE4NW4,
S2NW4, SW4 32 32N 35E 400.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0107 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4833 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
AND 00/100 dollars ($100.00), the same being the amount of the tender above
mentioned, and the further sum of $30.00 filing fee, and of the covenants and
agreements hereinafter contained, the lessor does hereby grant, demise, lease
and let unto the said lessee, exclusively, for the sole and only purpose of
exploration, development and production of oil or gas (including carbon dioxide
and helium), or both thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by the lessor under
the terms of the lease, together with rights-of-way, easements and servitude's
for pipelines, telephone lines, tanks, power houses, stations, gasoline plants
and fixtures for producing, treating and caring for such products, and housing
and boarding employees, and any and all rights and privileges necessary,
incident to or convenient for the economical operation of said land, for oil and
gas, with right for such purposes to the free use of oil, gas, casing-head gas
or water from said lands, but not from lessor's water wells, and with the rights
of removing either during or after the term hereof , all and any improvements
placed or erected on the premises by the lessee, including the right to pull all
casing, subject, however, to the covenants and conditions hereinafter set out,
the following described land situated in the count(y)(ies) of Union, state of
New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
N2NE4 33 32N 35E 80.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0108 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4834 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of THREE HUNDRED
TWENTY AND 00/100 dollars ($320.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
W2NE4, W2NW4, S2SW4, W2SE4 34 32N 35E 320.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0109 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4835 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
TWENTY AND 00/100 dollars ($120.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil,
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
SW4NW4, N2SW4 35 32N 35E 120.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0110 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4836 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated February 01, 1997 between the state of New Mexico, acting
by and through its commissioner of public lands, hereinafter called the
"lessor", and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of FOUR HUNDRED
AND 00/100 dollars ($400.00), the same being the amount of the tender above
mentioned, and the further sum of $30.00 filing fee, and of the covenants and
agreements hereinafter contained, the lessor does hereby grant, demise, lease
and let unto the said lessee, exclusively, for the sole and only purpose of
exploration, development and production of oil or gas (including carbon dioxide
and helium), or both thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by the lessor under
the terms of the lease, together with rights-of-way, easements and servitude's
for pipelines, telephone lines, tanks, power houses, stations, gasoline plants
and fixtures for producing, treating and caring for such products, and housing
and boarding employees, and any and all rights and privileges necessary,
incident to or convenient for the economical operation of said land, for oil and
gas, with right for such purposes to the free use of oil, gas, casing-head gas
or water from said lands, but not from lessor's water wells, and with the rights
of removing either during or after the term hereof , all and any improvements
placed or erected on the premises by the lessee, including the right to pull all
casing, subject, however, to the covenants and conditions hereinafter set out,
the following described land situated in the count(y)(ies) of Union, state of
New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
NE4, N2NW4, SW4SW4,
N2SE4, SE4SE4 36 32N 35E 400.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0111 at public sale held by the commissioner of public lands on January 21,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 15th day of February,
1997, by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta
corporation, on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4862 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated April 01, 1997 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
SIXTY AND 00/100 dollars ($160.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
LOTS 1(40.06), 2(40.16)
3(40.28), 4(40.38) 1 31N 34E 160.88 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0025 at public sale held by the commissioner of public lands on March 18,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 7th day of April, 1997,
by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta corporation,
on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4863 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated April 01, 1997 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of FOUR HUNDRED
FORTY AND 00/100 dollars ($440.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
SE4NE4, S2NW4, S3 2 31N 34E 440.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0026 at public sale held by the commissioner of public lands on March 18,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 7th day of April, 1997,
by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta corporation,
on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4865 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated April 01, 1997 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
SIXTY AND 00/100 dollars ($160.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
SW4 1 31N 35E 160.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0028 at public sale held by the commissioner of public lands on March 18,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 7th day of April, 1997,
by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta corporation,
on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4866 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated April 01, 1997 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of THREE HUNDRED
TWEMTU AND 00/100 dollars ($320.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
S2 2 31N 35E 320.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0029 at public sale held by the commissioner of public lands on March 18,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 7th day of April, 1997,
by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta corporation,
on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4867 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated April 01, 1997 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of TWO HUNDRED
TWEMTY AND 00/100 dollars ($280.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described as
follows:
Subdivisions Section Twp Rge Acres Institution
LOTS 2(39.43), 3(39.79),
4(40.14), SE4 3 31N 35E 279.36 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0030 at public sale held by the commissioner of public lands on March 18,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 7th day of April, 1997,
by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta corporation,
on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH4868 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated April 01, 1997 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
RIO GRANDE RESOURCES INC
202, 1501 17TH AVENUE, SW
CALGARY, ALBERTA, CANADA, XX T
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE HUNDRED
AND 00/100 dollars ($100.00), the same being the amount of the tender above
mentioned, and the further sum of $30.00 filing fee, and of the covenants and
agreements hereinafter contained, the lessor does hereby grant, demise, lease
and let unto the said lessee, exclusively, for the sole and only purpose of
exploration, development and production of oil or gas (including carbon dioxide
and helium), or both thereon and therefrom with the right to own all oil and gas
so produced and saved therefrom and not reserved as royalty by the lessor under
the terms of the lease, together with rights-of-way, easements and servitude's
for pipelines, telephone lines, tanks, power houses, stations, gasoline plants
and fixtures for producing, treating and caring for such products, and housing
and boarding employees, and any and all rights and privileges necessary,
incident to or convenient for the economical operation of said land, for oil and
gas, with right for such purposes to the free use of oil, gas, casing-head gas
or water from said lands, but not from lessor's water wells, and with the rights
of removing either during or after the term hereof , all and any improvements
placed or erected on the premises by the lessee, including the right to pull all
casing, subject, however, to the covenants and conditions hereinafter set out,
the following described land situated in the count(y)(ies) of Union, state of
New Mexico, and more particularly described as follows:
Subdivisions Section Twp Rge Acres Institution
S2NW4 4 31N 35E 80.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0031 at public sale held by the commissioner of public lands on March 18,
1997.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom. Notwithstanding the foregoing
provisions, the lessor may require the payment of royalty for all or part of the
gas produced and saved under this lease and marketed or utilized at a price per
m.c.f. equal to the maximum price being paid for gas of like kind and quality
and under like conditions in the same field or area or may reduce the royalty
value of any such gas (to any amount not less than the net proceeds of sale
thereof, in the field) if the commissioner of public land shall determine such
action to be necessary to the successful operation of the lands for oil or gas
purposes or to encouragement of the greatest ultimate recovery of oil or as or
to the promotion of conservation of oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the
annual rental due by the lessee under the terms of this lease but not less than
two thousand dollars ($2,000) per well per year; provided further that no annual
royalty shall be payable under this section of equivalent amounts are timely
paid pursuant to another lease issued by lessor and if such other lease includes
lands communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall be
approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate. If during the drilling or reworking of any well under this section,
lessee loses or junks the hole or well and after diligent efforts in good faith
is unable to complete said operations, then within twenty days after the
abandonment of said operations, lessee may commence another well within three
hundred thirty feet of the lost or junked hole or well and drill the same with
due diligence. Operations commenced and continued as herein provided shall
extend this lease as to all lands as to which the same is in full force and
effect as of the time said drilling operations are commenced; provided. However,
this lease shall be subject to cancellation in accordance with Paragraph 13
hereof for failure to pay rentals or file reports, which may become due while
operations are being conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ Rio Grande Resources Inc. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
Province of Alberta
Country of Canada
The foregoing instrument was acknowledged before me this 7th day of April, 1997,
by Ray Corbiell, President of Rio Grande Resources Inc., an Alberta corporation,
on behalf of said corporation.
My commission does not expire. /s/ Terrance N. Taylor, Notary Public in and
for the Province of Alberta
LEASE NO: LH5262 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated August 01, 1999 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
W. G. VANBEBBER
P. O. BOX 481742
DENVER, CO. 80248
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of TWO HUNDRED
FIFTY AND 00/100 dollars ($250.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described
as follows:
Subdivisions Section Twp Rnge Acres Institution
SW4NE4, NE4SW4 17 31N 36E 80.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0001 at public sale held by the commissioner of public lands on July 20,
1999.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom.
Notwithstanding the foregoing provisions, the lessor may require the payment of
royalty for all or part of the gas produced and saved under this lease and
marketed or utilized at a price per m.c.f. equal to the maximum price being paid
for gas of like kind and quality and under like conditions in the same field or
area or may reduce the royalty value of any such gas (to any amount not less
than the net proceeds of sale thereof, in the field) if the commissioner of
public land shall determine such action to be necessary to the successful
operation of the lands for oil or gas purposes or to encouragement of the
greatest ultimate recovery of oil or as or to the promotion of conservation of
oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the annual rental due by the
lessee under the terms of this lease but not less than two thousand dollars
($2,000) per well per year; provided further that no annual royalty shall be
payable under this section of equivalent amounts are timely paid pursuant to
another lease issued by lessor and if such other lease includes lands
communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of he assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall
be approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate.
If during the drilling or reworking of any well under this section, lessee loses
or junks the hole or well and after diligent efforts in good faith is unable to
complete said operations, then within twenty days after the abandonment of said
operations, lessee may commence another well within three hundred thirty feet of
the lost or junked hole or well and drill the same with due diligence.
Operations commenced and continued as herein provided shall extend this lease as
to all lands as to which the same is in full force and effect as of the time
said drilling operations are commenced; provided. However, this lease shall be
subject to cancellation in accordance with Paragraph 13 hereof for failure to
pay rentals or file reports, which may become due while operations are being
conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ W. G. VanBebber. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
State of Colorado
City and County of Denver
The foregoing instrument was acknowledged before me this 28th day of July, 1999,
by W. G. VanBebber,
My commission expires. February 16th, 2003 /s/ Shelly L. Bracken, Notary
Public
LEASE NO: LH5264 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated August 01, 1999 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
W. G. VANBEBBER
P. O. BOX 481742
DENVER, CO. 80248
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE THOUSAND
THREE HUNDRED AND 00/100 dollars ($1300.00), the same being the amount of the
Tender above mentioned, and the further sum of $30.00 filing fee, and of the
Covenants and agreements hereinafter contained, the lessor does hereby grant,
demise, lease and let unto the said lessee, exclusively, for the sole and only
purpose of exploration, development and production of oil or gas (including
carbon dioxide and helium), or both thereon and therefrom with the right to own
all oil and gas so produced and saved therefrom and not reserved as royalty by
the lessor under the terms of the lease, together with rights-of-way, easements
and servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described
as follows:
Subdivisions Section Twp Rnge Acres Institution
LOTS 1(13.00), 2(13.01)
3(13.01), 4(13.02), S2N2,
N2SW4, SW4SW4, N2SE4,
SE4SE4 19 32N 37E 452.04 UNIV
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0003 at public sale held by the commissioner of public lands on July 20,
1999.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom.
Notwithstanding the foregoing provisions, the lessor may require the payment of
royalty for all or part of the gas produced and saved under this lease and
marketed or utilized at a price per m.c.f. equal to the maximum price being paid
for gas of like kind and quality and under like conditions in the same field or
area or may reduce the royalty value of any such gas (to any amount not less
than the net proceeds of sale thereof, in the field) if the commissioner of
public land shall determine such action to be necessary to the successful
operation of the lands for oil or gas purposes or to encouragement of the
greatest ultimate recovery of oil or as or to the promotion of conservation of
oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the annual rental due by the
lessee under the terms of this lease but not less than two thousand dollars
($2,000) per well per year; provided further that no annual royalty shall be
payable under this section of equivalent amounts are timely paid pursuant to
another lease issued by lessor and if such other lease includes lands
communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of he assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall
be approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate.
If during the drilling or reworking of any well under this section, lessee loses
or junks the hole or well and after diligent efforts in good faith is unable to
complete said operations, then within twenty days after the abandonment of said
operations, lessee may commence another well within three hundred thirty feet of
the lost or junked hole or well and drill the same with due diligence.
Operations commenced and continued as herein provided shall extend this lease as
to all lands as to which the same is in full force and effect as of the time
said drilling operations are commenced; provided. However, this lease shall be
subject to cancellation in accordance with Paragraph 13 hereof for failure to
pay rentals or file reports, which may become due while operations are being
conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ W. G. VanBebber. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
State of Colorado
City and County of Denver
The foregoing instrument was acknowledged before me this 28th day of July, 1999,
by W. G. VanBebber,
My commission expires. February 16th, 2003 /s/ Shelly L. Bracken, Notary
Public
LEASE NO: LH5265-0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated August 01, 1999 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
W. G. VANBEBBER
P. O. BOX 481742
DENVER, CO. 80248
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of TWO HUNDRED
FIFTY AND 00/100 dollars ($250.00), the same being the amount of
the tender above mentioned, and the further sum of $30.00 filing fee, and of the
covenants and agreements hereinafter contained, the lessor does hereby grant,
demise, lease and let unto the said lessee, exclusively, for the sole and only
purpose of exploration, development and production of oil or gas (including
carbon dioxide and helium), or both thereon and therefrom with the right to own
all oil and gas so produced and saved therefrom and not reserved as royalty by
the lessor under the terms of the lease, together with rights-of-way, easements
and servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described
as follows:
Subdivisions Section Twp Rnge Acres Institution
SE4SW4, SW4SW4 19 32N 37E 80.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0004 at public sale held by the commissioner of public lands on July 20,
1999.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom.
Notwithstanding the foregoing provisions, the lessor may require the payment of
royalty for all or part of the gas produced and saved under this lease and
marketed or utilized at a price per m.c.f. equal to the maximum price being paid
for gas of like kind and quality and under like conditions in the same field or
area or may reduce the royalty value of any such gas (to any amount not less
than the net proceeds of sale thereof, in the field) if the commissioner of
public land shall determine such action to be necessary to the successful
operation of the lands for oil or gas purposes or to encouragement of the
greatest ultimate recovery of oil or as or to the promotion of conservation of
oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the annual rental due by the
lessee under the terms of this lease but not less than two thousand dollars
($2,000) per well per year; provided further that no annual royalty shall be
payable under this section of equivalent amounts are timely paid pursuant to
another lease issued by lessor and if such other lease includes lands
communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of he assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall
be approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate.
If during the drilling or reworking of any well under this section, lessee loses
or junks the hole or well and after diligent efforts in good faith is unable to
complete said operations, then within twenty days after the abandonment of said
operations, lessee may commence another well within three hundred thirty feet of
the lost or junked hole or well and drill the same with due diligence.
Operations commenced and continued as herein provided shall extend this lease as
to all lands as to which the same is in full force and effect as of the time
said drilling operations are commenced; provided. However, this lease shall be
subject to cancellation in accordance with Paragraph 13 hereof for failure to
pay rentals or file reports, which may become due while operations are being
conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ W. G. VanBebber. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
State of Colorado
City and County of Denver
The foregoing instrument was acknowledged before me this 28th day of July, 1999,
by W. G. VanBebber,
My commission expires. February 16th, 2003 /s/ Shelly L. Bracken, Notary
Public
LEASE NO: LH5266 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated August 01, 1999 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
W. G. VANBEBBER
P. O. BOX 481742
DENVER, CO. 80248
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of TWO HUNDRED
FIFTY AND 00/100 dollars ($250.00), the same being the amount of the tender
above mentioned, and the further sum of $30.00 filing fee, and of the covenants
and agreements hereinafter contained, the lessor does hereby grant, demise,
lease and let unto the said lessee, exclusively, for the sole and only purpose
of exploration, development and production of oil or gas (including carbon
dioxide and helium), or both thereon and therefrom with the right to own all oil
and gas so produced and saved therefrom and not reserved as royalty by the
lessor under the terms of the lease, together with rights-of-way, easements and
servitude's for pipelines, telephone lines, tanks, power houses, stations,
gasoline plants and fixtures for producing, treating and caring for such
products, and housing and boarding employees, and any and all rights and
privileges necessary, incident to or convenient for the economical operation of
said land, for oil and gas, with right for such purposes to the free use of oil
gas, casing-head gas or water from said lands, but not from lessor's water
wells, and with the rights of removing either during or after the term hereof ,
all and any improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to the covenants and
conditions hereinafter set out, the following described land situated in the
count(y)(ies) of Union, state of New Mexico, and more particularly described
as follows:
Subdivisions Section Twp Rnge Acres Institution
N2NE4 30 32N 37E 80.00 CS
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0005 at public sale held by the commissioner of public lands on July 20,
1999.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom.
Notwithstanding the foregoing provisions, the lessor may require the payment of
royalty for all or part of the gas produced and saved under this lease and
marketed or utilized at a price per m.c.f. equal to the maximum price being paid
for gas of like kind and quality and under like conditions in the same field or
area or may reduce the royalty value of any such gas (to any amount not less
than the net proceeds of sale thereof, in the field) if the commissioner of
public land shall determine such action to be necessary to the successful
operation of the lands for oil or gas purposes or to encouragement of the
greatest ultimate recovery of oil or as or to the promotion of conservation of
oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the annual rental due by the
lessee under the terms of this lease but not less than two thousand dollars
($2,000) per well per year; provided further that no annual royalty shall be
payable under this section of equivalent amounts are timely paid pursuant to
another lease issued by lessor and if such other lease includes lands
communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of he assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall
be approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate.
If during the drilling or reworking of any well under this section, lessee loses
or junks the hole or well and after diligent efforts in good faith is unable to
complete said operations, then within twenty days after the abandonment of said
operations, lessee may commence another well within three hundred thirty feet of
the lost or junked hole or well and drill the same with due diligence.
Operations commenced and continued as herein provided shall extend this lease as
to all lands as to which the same is in full force and effect as of the time
said drilling operations are commenced; provided. However, this lease shall be
subject to cancellation in accordance with Paragraph 13 hereof for failure to
pay rentals or file reports, which may become due while operations are being
conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ W. G. VanBebber. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
State of Colorado
City and County of Denver
The foregoing instrument was acknowledged before me this 28th day of July, 1999,
by W. G. VanBebber,
My commission expires. February 16th, 2003 /s/ Shelly L. Bracken, Notary
Public
LEASE NO: LH5267 0000
OIL AND GAS LEASE
(Exploratory Form)
THIS AGREEMENT, dated August 01, 1999 between the state of New Mexico, acting by
and through its commissioner of public lands, hereinafter called the "lessor",
and
W. G. VANBEBBER
P. O. BOX 481742
DENVER, CO. 80248
Hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the commissioner of public
lands an application for an oil and gas lease covering the lands hereinafter
described and has tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the application and
tender have been duly complied with;
THEREFORE, in consideration of the premises as well as the sum of ONE THOUSAND
SIX HUNDRED FIFTY AND 00/100 dollars ($250.00), the same being the amount of
the tender above mentioned, and the further sum of $30.00 filing fee, and of
the covenants and agreements hereinafter contained, the lessor does hereby
grant, demise, lease and let unto the said lessee, exclusively, for the sole
and only purpose of exploration, development and production of oil or gas
(including carbon dioxide and helium), or both thereon and therefrom with the
right to own all oil and gas so produced and saved therefrom and not reserved
as royalty by the lessor under the terms of the lease, together with rights-
of-way, easements and servitude's for pipelines, telephone lines, tanks, power
houses, stations, gasoline plants and fixtures for producing, treating and
caring for such products, and housing and boarding employees, and any and all
rights and privileges necessary, incident to or convenient for the economical
operation of said land, for oil and gas, with right for such purposes to the
free use of oil gas, casing-head gas or water from said lands, but not from
lessor's water wells, and with the rights of removing either during or after
the term hereof , all and any improvements placed or erected on the premises
by the lessee, including the right to pull all casing, subject, however, to
the covenants and conditions hereinafter set out, the following described land
situated in the count(y)(ies) of Union, state of New Mexico, and more
particularly described as follows:
Subdivisions Section Twp Rnge Acres Institution
S2NE4, W2,SE4 30 32N 37E 560.00 UNIV
Said lands having been awarded to lessee and designated as Tract No.
LH-0-0006 at public sale held by the commissioner of public lands on July 20,
1999.
To have and to hold said land, and all the rights and privileges granted
hereunder, to and unto the lessee for a primary term of five years from the date
hereof, and as long thereafter as oil and gas, or either of them, is produced in
paying quantities from said land by lessee, subject to all of the terms and
conditions as hereinafter set forth.
In consideration of the premises the parties covenant and agree as follow:
1. Subject to the free use without royalty, as herein before, the lessee
shall pay the lessor as royalty one- eighth part of the oil produced and saved
from the leased premises or the cash value thereof, at the option of the lessor,
such value to be the price prevailing the day oil is run into a pipeline, if the
oil be run into a pipeline, or into storage tanks, if the oil is stored.
2. Subject to the free use without royalty, as herein before provided, at
the option of the lessor at any time and from time to time, the lessee shall pay
the lessor as royalty one- eighth part of the gas produced and saved from the
leased premised, including casing-head gas. Unless said option is exercised by
lessor, the lessee shall pay the lessor as royalty one-eighth of the cash value
of the gas, including casing-head gas, produced and saved from the leased
premises and marketed or utilized, such value to be equal to the net proceeds
derived from the sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of hydrocarbon gas
delivered to a gasoline plant for extraction of liquid hydrocarbons shall be
equal to the net proceeds derived from the sale of such gas, including any
liquid hydrocarbons recovered therefrom.
Notwithstanding the foregoing provisions, the lessor may require the payment of
royalty for all or part of the gas produced and saved under this lease and
marketed or utilized at a price per m.c.f. equal to the maximum price being paid
for gas of like kind and quality and under like conditions in the same field or
area or may reduce the royalty value of any such gas (to any amount not less
than the net proceeds of sale thereof, in the field) if the commissioner of
public land shall determine such action to be necessary to the successful
operation of the lands for oil or gas purposes or to encouragement of the
greatest ultimate recovery of oil or as or to the promotion of conservation of
oil or gas or in the public interest.
This lease shall not expire at the end of either the primary or secondary term
hereof if there is a well capable of producing gas in paying quantities located
upon some part of the lands embraced herein, or upon lands pooled or
communitized herewith, where such well is shut-in due to the inability of the
lessee to obtain a pipeline connection or to market the gas therefrom and if the
lessee timely pays an annual royalty on or before the annual rental paying date
next ensuing after the expiration of ninety days from the date said well was
shut-in and on or before said rental date thereafter. The payment of said
annual royalty shall be considered for all purposes the same as if gas were
being produced in paying quantities and upon the commencement of marketing of
gas from said well or wells the royalty paid for the lease year in which the gas
is first marketed shall be credited upon the royalty payable hereunder to the
lessor for such year. The provisions of this section shall also apply where gas
is being marketed from said leasehold premises and through no fault of the
lessee, the pipeline connection or market is lost or ceases, in which case this
lease shall not expire so long as said annual royalty is paid as herein
provided. The amount of any annual royalty payable under this section shall
equal twice the annual rental due be the lessee under the terms of this lease
but not less than three hundred twenty dollars ($320) per well year, provided,
however, that any such annual royalty for any year beginning on or after ten
years from the date hereof shall equal four times the annual rental due by the
lessee under the terms of this lease but not less than two thousand dollars
($2,000) per well per year; provided further that no annual royalty shall be
payable under this section of equivalent amounts are timely paid pursuant to
another lease issued by lessor and if such other lease includes lands
communitized with lands granted hereunder for the purpose of prorationally
sharing in the shut-in well. Notwithstanding the provisions of this section to
the contrary, this lease shall not be continued after ten years from the date
hereof for any period of more than ten years by the payment of said annual
royalty unless, for good cause shown, the commissioner of public lands, in his
discretion, grants such a continuance.
3. Lessee agrees to make full settlement on the twentieth day of each month
for all royalties due to the lessor for the preceding month, under this lease,
and to permit the lessor or its agents, at all reasonable hours, to examine
lessee' s books relating to the production and disposition of oil and gas
produce. Lessee further agrees to submit to lessor annually upon forms
furnished by lessor, verified reports showing lessee's operations for the
preceding year.
4. An annual rental at the rate of $0.25 per acre shall become due and
payable to the lessor by the lessee upon each acre of the land above described
and then claimed by such lessee, and the same shall be die and payable in
advance to the lessor on successive anniversary dates of this lease, but the
annual rental on any assignment shall in no event be less than forty dollars
($40.00).
In the event the lessee shall elect to surrender any or all of said acreage, he
shall deliver to the lessor a duly executed release thereof, and in event said
lease has been recorded then he shall upon request furnish and deliver to the
lessor a certified copy of a duly recorded release.
5. The lessee may at any time by paying to the lessor all amounts then due
as provided herein and the further sum of forty dollars ($40.00), surrender and
cancel this lease insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligation or liability hereunder, in
the manner as herein before provided. Provided, this surrender clause and the
option herein reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution of any suit in any
court of law or equity by the lessee, lessor or any assignee, to enforce this
lease, or any of its terms expressed or implied.
6. All payments due hereunder shall be made on or before the day such
payment is due, at the office of the commissioner of public lands in Santa Fe,
New Mexico.
7. The lessee with the consent of the lessor shall have the rights to assign
this lease in whole or in part. Provided, however, than no assignment of an
undivided interest in the lease or in any part thereof, nor any assignment of
less than a legal subdivision shall be recognized or approved by the lessor.
Upon approval in writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with respect to the lands
embraced in the assignment and the lessor shall likewise be relieved from all
obligations to the assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of he assignor with respect to such tracts and
shall be held to have assumed all of the duties and obligations of the assignor
to the lessor as to such tracts.
8. In the event a well or wells producing oil or gas in paying quantities
should be brought in on adjacent land which is draining the leased premised,
lessee shall drill such offset well or wells as a reasonably prudent operator
would drill under the same or similar circumstances, provided that no such
offset well shall be required if compensatory royalties are paid pursuant to an
agreement between the lessor and the lessee.
9. Thee lessee agrees to notify the lessor of the location of each well
before commencing drilling thereon, to keep a complete and accurate log of each
well drilled and to furnish a copy thereof, verified by some person having
actual knowledge of the facts, to the lessor upon the completion of any well,
and to furnish the log of any unfinished well at any time when requested to do
so by the lessor
If any lands embrace in this lease shall be included in any deed or contract of
purchase outstanding and subsisting issued pursuant to any sale made of the
surface of such lands prior to the date of this lease, it is agreed and
understood that no drilling operation shall be commenced on any such lands so
sold unless and until the lessee shall have filed a good and sufficient bond
with the lessor as required by law, to secure the payment for such damage to the
livestock, range, water, crops or tangible improvements on such lands as may be
suffered by the purchaser holding such deed or contract of purchase, or his
successors, by reason of the developments, use and occupation of such lands by
such lessee. Provided, however, that no such bond shall be required if such
purchaser shall waive the right to require such bond to be given in the manner
provided by law.
10. In drilling wells all water-bearing strata shall be noted in the log and
the lessor reserves the right to require that all or any part of the casing
shall be left in any nonproductive well when lessor deems it to the interest of
the beneficiaries of the lands granted hereunder to maintain said well or wells
for water. For such casing so left in wells the lessor shall pay to the lessee
the reasonable value thereof.
11. Lessee shall be liable and agree to pay all damages to the range,
livestock, growing crops or improvements caused by lessee's operations on said
lands. When requested by the lessor the lessee shall bury pipelines below plow
depth.
12. The lessee shall not remove any machinery or fixtures placed on said
premised, nor draw the casing from any well unless and until all payments and
obligations due the lessor under the terms of this agreement shall have been
paid or satisfied. The lessee's right to remove the casing is subject to the
provision of Paragraph 10 above.
13. Upon failure or default of the lessee to comply with any of the
provisions or covenants hereof, the lessor is hereby authorized to cancel this
lease and such cancellation shall extend to and include all rights hereunder as
to the whole of the tract so claimed, or possessed by the lessee, but shall not
extend to, nor affect the rights of any other lessee or assignee claiming any
portion of the lands upon which no default has been made; provided, however,
that before any such cancellation shall be made, the lessor shall mail to the
lessee so defaulting by registered or certified mail, addressed to the
post-office address of such lessee as shown by the records of the state land
office, a notice of intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from the date of mailing
said notice the said lessee shall remedy the default specified in said notice,
cancellation shall not be made.
14. If the lessee shall have failed to make discovery of oil or gas in
paying quantities during the primary term hereof or if such discovery shall have
been made and production shall have ceased for any reason, the lessee may
continue this lease in full force and effect for an additional term of five
years and as long thereafter as oil and gas in paying quantities or either of
them is produced for the leased premises by paying each year in advance, as
herein provided, double the rental provided herein for the primary term, or the
highest rental prevailing at the commencement of the secondary term in any
rental district, or districts in which the lands, or any portion thereof, may be
situated, if it be greater than double the rental provided for in the primary
term; provided, however, such rental shall be paid within the time provided by
Section 13 hereof. If oil or gas in paying quantities should be discovered
during the secondary term hereof but oil or gas in paying quantities is being
produced at the end of the secondary term of five years so long thereafter as
oil and gas in paying quantities or either of them is produced from the leased
premises.
15. If this lease shall have been maintained in accordance with the
provisions hereof and if at the expiration of the secondary term provided for
herein oil or gas is not being produced on said land but lessee is then engaged
in bona fide drilling or reworking operations thereon, this lease shall remain
in full force and effect so long as such operations are diligently prosecuted
and, if they result in the production of oil or gas, so long thereafter as oil
and gas in paying quantities, or either of them, is produced from said land;
provided, however, such operations extending beyond the secondary term shall
be approved by the lessor upon written application filed with the lessor on or
before the expiration of said secondary term, and a report of the status of all
such operations shall be made by the lessee to the lessor every thirty days and
a cessation of such operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this lease shall thereupon
terminate.
If during the drilling or reworking of any well under this section, lessee loses
or junks the hole or well and after diligent efforts in good faith is unable to
complete said operations, then within twenty days after the abandonment of said
operations, lessee may commence another well within three hundred thirty feet of
the lost or junked hole or well and drill the same with due diligence.
Operations commenced and continued as herein provided shall extend this lease as
to all lands as to which the same is in full force and effect as of the time
said drilling operations are commenced; provided. However, this lease shall be
subject to cancellation in accordance with Paragraph 13 hereof for failure to
pay rentals or file reports, which may become due while operations are being
conducted hereunder.
16. Should production of oil and gas or either of them in paying quantities
be obtained while this lease is in force and effect and should thereafter cease
from any cause after the expiration of ten years from the date hereof this lease
shall not terminate if lessee commences additional drilling or reworking
operations within sixty days after the cessation of such production and shall
remain in full force and effect so long as such operations are prosecuted in
good faith with no cessation of more than twenty consecutive days, and if such
operations result in the production of oil or gas in paying quantities, so long
thereafter as oil or gas in paying quantities is produced from said land;
provided, however, written notice of intention to commence such operations shall
be filed with the lessor within thirty days after the cessation of such
production, and a report of the status of such operations shall be made by thee
lessee to the lessor every thirty days, and the cessation of such operations for
more than twenty consecutive days shall be considered as an abandonment of such
operations and this lease shall thereupon terminate.
17. Lessee, including their heirs, assigns, agents and contractors shall at
their own expense fully comply with all laws, regulations, rules, ordinances and
requirements of the city, county, state, federal authorities and agencies, in
all matters and things affecting the premises and operations thereon which may
be enacted or promulgated under the governmental police powers pertaining to
public health and welfare, including but not limited to conservation,
sanitation, aesthetics. Pollution, cultural properties, fire and ecology. Such
agencies are not to be deemed third party beneficiaries hereunder, however,
this, clause is enforceable by the lessor in any manner provided in this lease
or by law.
18. Should lessor desire to exercise its rights to take in-kind its royalty
share of oil, gas or associated substances or purchase all or any part of the
oil, gas or associated substances produced from the lands covered by this lease;
the lessee hereby irrevocably consents to the lessor exercising its right. Such
consent is a consent to the termination of any supplier/purchaser relationship
between the lessor and the lessee deemed to exist under federal regulations.
Lessee further agrees that it will require any purchaser of oil, gas or
associated substance to likewise waive any such rights.
19. Lessor reserves a continuing option to purchase at any time and from
time to time, at the market price prevailing in the area on the date of
purchase, all or any part of the minerals (oil and gas) that will be produced
from the lands covered by this lease.
20. Lessor reserves the right to execute leases for geothermal resource
development and operation thereon; the right to sell or dispose of the
geothermal resources of such lands. And the right to grant rights-of-way and
easements for these purposes.
21. All terms of this agreement shall extend to and bind the heirs,
executors, administrator, successors and assigns of the parties hereto.
In witness whereof, the party of the first part has hereunto signed and caused
its name to be signed by its commissioner of public lands thereunto duly
authorized, with the seal of his office affixed, and the lessee has signed this
agreement the day and year first above written.
STATE OF NEW MEXICO
BY: /s/ Commissioner of Public Lands, Lessor
/s/ W. G. VanBebber. Lessee
(ACKNOWLEDGMENT BY CORPORATION)
State of Colorado
City and County of Denver
The foregoing instrument was acknowledged before me this 28th day of July, 1999,
by W. G. VanBebber,
My commission expires. February 16th, 2003 /s/ Shelly L. Bracken, Notary
Public
UNITED STATED
DEPARTMENT OF THE INTERIOR
BUREAU OF LAND MANAGEMENT
OFFER TO LEASE AND LEASE FOR OIL AND GAS
Serial No. NM NM 102861
The undersigned offers to lease all of any of the lands in Item 2 that are
available for lease pursuant to the Mineral Leasing Act of 1920, as
amended and supplemented (30 U.S.C. 181 et. Seq.) the Mineral Leasing Act
for Acquired Lands of 1947, as amended (30 U.S.C. 351-359), the Attorney
General's Opinion of April 2, 1941 (40 Op. Atty. Gen. 41)
1. Name: Van Bebber, W.G.
Street: P.O. Box 481742
City/State: Denver, CO. 80248-1742
- ------------------------------------------------------------------------------
2. This application/offer/lease is for Public Domain Lands
3. Land included in lease:
T 32N, R36E, Meridian NMPM, State of New Mexico, County of Union:
Section: 22 Lots 1,2,3,4
22 S2N2, S2
23 Lots 1,2,3,4
23 S2Nd, S2
24 Lots 1,2,3,4,6,7,8,9,10
24 S2NE, W2SW, N2SW
Total acres in lease: 1,489.2600
Rental retained: $2,235.00
===============================================================================
This lease is issued granting the exclusive right to drill for, mine, extract,
remove and dispose of all the oil and gas (except helium) in the lands described
in Item 3, together with the right to build and maintain necessary improvements
thereupon for the term indicated below, subject to renewal or extension in
accordance with the appropriate leasing authority. Rights granted are subject to
applicable laws, the terms, conditions and attached stipulation of this lease,
the Secretary of the Interior's regulations and formal orders in effect as of
lease issuance, and to regulations and formal orders hereafter promulgated when
not inconsistent with lease rights granted or specific provisions of this lease.
NOTE: This lease is issued to the high bidder pursuant to his/her duly executed
Bid or nomination form submitted under 43 CRF 3120 and is subject to the
Provisions of that bid or nomination and those specified on this form.
Competitive Lease (ten years)
The United State of America
/s/ Angela Trujillo
Law Land Examiner, Fluids Adjudication Team Dated: May 12, 1999
Effective date of Lease: June 1, 1999
UNITED STATED
DEPARTMENT OF THE INTERIOR
BUREAU OF LAND MANAGEMENT
OFFER TO LEASE AND LEASE FOR OIL AND GAS
Serial No. NM NM 102862
The undersigned offers to lease all of any of the lands in Item 2 that are
available for lease pursuant to the Mineral Leasing Act of 1920, as
amended and supplemented (30 U.S.C. 181 et. Seq.) the Mineral Leasing Act
for Acquired Lands of 1947, as amended (30 U.S.C. 351-359), the Attorney
General's Opinion of April 2, 1941 (40 Op. Atty. Gen. 41)
1. Name: Van Bebber, W.G.
Street: P.O. Box 481742
City/State: Denver, CO. 80248-1742
- --------------------------------------------------------------------------------
2. This application/offer/lease is for Public Domain Lands
3. Land included in lease:
T 32N, R36E, Meridian NMPM, State of New Mexico, County of Union:
Section: 24 SWNW
25 Lots 2, 3
25 W2W2
26 N2, N2S2, SESW, S2SE
27 NE, E2NW, N2SE
Total acres in lease: 1,166.4000
Rental retained: $1,750.50
================================================================================
This lease is issued granting the exclusive right to drill for, mine, extract,
remove and dispose of all the oil and gas (except helium) in the lands described
in Item 3, together with the right to build and maintain necessary improvements
thereupon for the term indicated below, subject to renewal or extension in
accordance with the appropriate leasing authority. Rights granted are subject to
applicable laws, the terms, conditions and attached stipulation of this lease,
the Secretary of the Interior's regulations and formal orders in effect as of
lease issuance, and to regulations and formal orders hereafter promulgated when
not inconsistent with lease rights granted or specific provisions of this lease.
NOTE: This lease is issued to the high bidder pursuant to his/her duly executed
Bid or nomination form submitted under 43 CRF 3120 and is subject to the
Provisions of that bid or nomination and those specified on this form.
Competitive Lease (ten years)
The United State of America
/s/ Angela Trujillo
Land Law Examiner, Fluids Adjudication Team Dated: May 12, 1999
Effective date of Lease: June 1, 1999
ANDERSEN ANDERSEN & STRONG, L.C.
Certified Public Accountants and Business Consultants
Member SEC Practice Section of the AICPA
941 East 3300 South, Suite 202x
Salt Lake City, Utah 84106
Telephone: 801-486-0096
Fax: 801-486-0098
E-mail [email protected]
Securities and Exchange Commission
Washington, D.C. 20549
RE: Hadro Resources, Inc.
Form 10-SB
File No. 0-25579
Filed: March 18, 1999
To whom it may concern:
We hereby authorize and consent to the use of our report, dated May 31, 1999 and
December 31, 1998, as an Exhibit to the above-referenced filing and to the use
of our name as it appears therein.
Sincerely,
\s\ L.R. Andersen
A member of ACF International with affiliated offices worldwide
<PAGE>
