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EXHIBIT 10.11
August 14, 2000
Contango Oil & Gas Company
ATTN: Mr. Ken Peak
3700 Buffalo Speedway, Suite 960
Houston, TX 77098
RE: AGREEMENT DATED EFFECTIVE SEPTEMBER 1, 1999, BY AND BETWEEN
CONTANGO OIL & GAS COMPANY AND JUNEAU EXPLORATION, L.L.C.
(THE "AGREEMENT," WITH ALL CAPITALIZED TERMS USED BUT NOT DEFINED
HEREIN BEING AS DEFINED IN SUCH AGREEMENT)
Gentlemen:
The purpose of this letter is to formally amend and modify certain terms and
conditions of the subject Agreement as hereinafter set forth.
As of the Effective Date of the Agreement, the Agreement shall be amended as
follows:
1. All existing references to "Juneau Exploration, L.L.C." shall be
amended to "Juneau Exploration Company, LLC."
2. SECTION 1.5 OVERHEAD AND OTHER COSTS. "Allocable Seismic Costs" shall
be redefined as "that portion of the seismic costs incurred by JEX in
the acquisition and interpretation of seismic data allocated to such
Prospect in a manner determined by JEX, which shall include, but not be
limited to, the cost and expense of the seismic data (including
reproduction charges for seismic tape deliveries), synthetic
seismograms, digital logs used for synthetic seismograms and third
party charges for seismic modeling and reprocessing."
Effective as of August 1, 2000 ("Revised Effective Date"), the Agreement shall
be amended as follows:
1. SECTION 2.2 OVERRIDING ROYALTY INTEREST shall be deleted in its
entirety and replaced with, "Upon commencement of operations for the
drilling of the initial well drilled pursuant to this Agreement on each
Prospect in which Contango has elected or is obligated to participate,
JEX shall be entitled to an assignment or reservation of an overriding
royalty interest equal to 3-1/3% of Contango's working interest in each
Prospect, which overriding royalty interest shall be inclusive of and
shall bear the sum of any and all other overriding royalty interests
burdening Contango's interest in such Prospect that were conveyed, or
required to be conveyed, to other persons or entities who were employed
by JEX, or engaged as consultants to JEX, to assist in JEX's
generation, screening, sourcing and/or acquisition of such Prospect
(the "JEX ORRI"). An example calculation of the JEX ORRI is set forth
on Schedule 2.2 attached hereto."
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Amendment to Contango Agreement
August 14, 2000
Page Two
2. SECTION 2.3 BACK-IN AFTER PROGRAM PAYOUT shall be deleted in its
entirety and replaced with, "Section 2.3 BACK-IN AFTER PROSPECT PAYOUT.
The term "Prospect Payout" as used herein shall mean, with regard to
each Prospect, 9:00 a.m. on the first day of the calendar month
following the calendar month during which Contango's share of all
revenues from the sale of oil, gas and other minerals produced from a
Prospect, net of Contango's share of (i) all royalties, overriding
royalties (including the JEX ORRI) and other similar lease burdens,
(ii) severance taxes, production taxes, excise taxes and other similar
taxes levied on or measured by such production and (iii) lease
operating expenses attributable to such Prospect first equals or
exceeds Contango's share of all CAPEX expended for the origination and
acquisition of such Prospect and the conduct of exploration,
development and production operations thereon. At Prospect Payout, JEX
shall be entitled to an assignment or automatic reversion of an
undivided twenty-five percent (25%) of Contango's working interest in
the Prospect (the "JEX Back-in"). Contango shall maintain books and
records tracking the status of Prospect Payout with respect to each
Prospect and shall issue quarterly statements to JEX regarding the
status of Prospect Payout for each Prospect. Simultaneous with JEX's
assignment to Contango of Contango's interest in each Prospect, both
parties shall execute a mutually acceptable form of memorandum of
agreement and record same in the appropriate records of any parish or
county within which the Prospect is located (or in the nearest adjacent
parish or county in the case of oil and gas leases in the Outer
Continental Shelf) to give public notice of the JEX Back-in."
3. SECTION 2.5 OPTIONS and SECTION 2.6 ADJUSTMENT OF OPTION SHARES AND
EXERCISE PRICE shall both be deleted in their entirety.
4. SECTION 4.1 TERM shall be deleted in its entirety and replaced with,
"This Agreement shall commence on the date hereof (the "Effective
Date") and shall remain in effect until terminated by (a) Contango upon
thirty (30) day's prior written notice to JEX or (b) JEX upon one
hundred eighty (180) day's prior written notice to Contango, unless
Contango is in default under this Agreement in which case the notice
period shall be thirty (30) days; provided, however, that this
Agreement shall remain in effect with respect to any transaction(s)
entered into prior to the effective date of the termination until both
Parties have fulfilled their obligations with respect to such
transaction(s)."
5. Add SECTION 4.12 FINAL PROGRAM PAYOUT PROPERTIES. Contango and JEX
agree that only those Prospects set forth on Schedule 4.12 attached
hereto ("Final Program Payout Properties") shall be included in Program
Payout under the terms of this Agreement, and no additional Prospects
shall ever be added thereto."
The parties hereby agree that (i) the above stated modifications and revisions
("Revisions") will apply to any and all future wells drilled under the
Agreement, as amended, and (ii) such Revisions will likewise govern any and all
future wells drilled pursuant to that certain Exploration and Operations
Agreement dated March 21, 2000, by and between Mestena, Inc. and Juneau
Exploration Company, LLC ("Mestena Agreement"), beginning with the Guilita No.
3. Well; provided, however, notwithstanding the foregoing, it is understood and
agreed that Lease "1" #67, Guilita #1, Guilita #2 and Cepres #1 wells, being the
obligatory wells under Phase I of the Mestena Agreement, shall in no way be
affected or governed by such Revisions.
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Amendment to Contango Agreement
August 14, 2000
Page Three
Except as expressly modified by this letter, all other terms and conditions of
the Agreement shall remain unchanged and in full force and effect.
If you accept and agree to the terms of this letter, please sign in the space
provided below and return one (1) original to the undersigned at your earliest
opportunity.
Very truly yours,
/s/ LINDA G. FERSZT
Linda G. Ferszt
Vice President - Land
Cc: Mr. John B. Juneau
AGREED TO AND ACCEPTED
this 18 th day of August, 2000.
CONTANGO OIL & GAS COMPANY
BY: /s/ KENNETH R. PEAK
-------------------------------
Kenneth R. Peak
President
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SCHEDULE 4.12
FINAL PROGRAM PAYOUT PROPERTIES
Buena Vista Hills, LLC, CA
Eugune Island Block 28, Offshore LA
Brazos Area Block 436, Offshore TX
Dominion Acquisition, Colorado & Wharton Counties, TX
Point Six, Point Five & Weanie Prospects, Goliad County, TX
Needville, Fort Bend County, TX
Mestena Ranch, Phase I only (Lse "1" #67, Guilita #1 & #2 and
Cepres #1 Wells), Jim Hogg & Brooks Cos., TX
